As filed with the Securities and Exchange Commission on May 13, 1998.
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
MMH HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 6719 39-1716155
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
4915 South Howell Avenue, 2nd Floor
Milwaukee, Wisconsin 53207
(414) 486-6100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
MICHAEL S. ERWIN
President
MMH HOLDINGS, INC.
4915 South Howell Avenue, 2nd Floor
Milwaukee, Wisconsin 53207
(414) 486-6100
(Name, address, including zip code, and telephone number
including area code, of agent for service)
---------------------
Copies to:
Russell W. Parks, Jr., Esq.
William A. Bianco, Esq.
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
---------------------
Approximate date of commencement of proposed sale of securities to the public:
As soon as practicable after this Registration Statement becomes effective.
---------------------
If any of the securities being registered on this Form are to be 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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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================================================================================================
Title of Each Class of Securities to Amount to be Proposed Maximum Proposed Maximum Aggregate Amount of
be Registered Registered Offering Price Per Share Offering Price Registration Fee
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12% Series A Senior Exchangeable
Preferred Stock, $.01 Par Value Per $1,000 per $1,000
Share 57,710(1) liquidation preference $57,710,000 $17,024.45
- ----------------------------------------------------------------------------------------------------------------------------
12% Exchange Debentures Due 2009 --(2) -- -- --
============================================================================================================================
</TABLE>
(1) The Registration Statement also covers such indeterminable number of
shares of Holdings' 12% Series A Senior Exchangeable Preferred Stock (the
"Series A Senior Preferred Stock") as may be issued and delivered to
holders of Series A Senior Preferred Stock as in-kind dividend payment on
the Series A Senior Preferred Stock.
(2) The Registration Statement covers Holdings' 12% Debentures Due 2009 (the
"Exchange Debentures") to be issued and delivered to holders of Series A
Senior Preferred Stock when and if Holdings exchanges the Exchange
Debentures for the Series A Senior Preferred Stock and such indeterminable
number of Exchange Debentures paid in lieu of cash interest on the
Exchange Debentures. Pursuant to Rule 457(i), no registration fee is
required with respect to the Exchange Debentures.
---------------------
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 Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State 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 MAY 13, 1998
Offer to Exchange
all outstanding
12% Series A Senior Exchangeable Preferred Stock
($57,710,000 aggregate liquidation preference outstanding)
for
12% Series A Senior Exchangeable Preferred Stock
which has been registered under the Securities Act of 1933
of
MMH Holdings, Inc.
---------------------
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 p.m., NEW YORK CITY TIME,
ON , 1998, unless extended
MMH Holdings, Inc., a Delaware corporation ("Holdings" or the "Issuer"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal," and together with this Prospectus, the "Exchange Offer"), to
exchange $1,000 liquidation preference of its 12% Series A Senior Exchangeable
Preferred Stock, par value $.01 per share (the "New Series A Senior Preferred
Stock"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement (as defined herein)
of which this Prospectus is a part, for each $1,000 liquidation preference of
its outstanding 12% Series A Senior Exchangeable Preferred Stock, par value $.01
per share (the "Old Series A Senior Preferred Stock"), of which $57,710,000
aggregate liquidation preference is outstanding. The New Series A Senior
Preferred Stock and the Old Series A Senior Preferred Stock are together
referred to herein as the "Series A Senior Preferred Stock."
Holdings will accept for exchange any and all shares of Old Series A
Senior Preferred Stock that are validly tendered on or prior to 5:00 p.m. New
York City time, on the date the Exchange Offer expires, which will be ,
1998, unless the Exchange Offer is extended (the "Expiration Date"). The
exchange of shares of Old Series A Senior Preferred Stock for shares of New
Series A Senior Preferred Stock will be made (i) with respect to all shares of
Old Series A Senior Preferred Stock validly tendered and not withdrawn on or
prior to 5:00 p.m. New York City time, on (the "Early Exchange Date"),
within two business days following the Early Exchange Date, and (ii) with
respect to all shares of Old Series A Senior Preferred Stock validly tendered
and not withdrawn after the Early Exchange Date and on or prior to the
Expiration Date, within two business days following the Expiration Date. Tenders
of shares of Old Series A Senior Preferred Stock may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date, unless
previously accepted for exchange. The Exchange Offer is not conditioned upon any
minimum number of shares of Old Series A Senior Preferred Stock being tendered
for exchange. However, the Exchange Offer is subject to certain conditions which
may be waived by Holdings. See "The Exchange Offer." Holdings has agreed to pay
the expenses of the Exchange Offer.
For a discussion of certain risks associated with an investment in the New
Series A Senior Preferred Stock, see "Risk Factors," beginning on page 15 of
this Prospectus.
(Continued on next page)
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is May 13, 1998
<PAGE>
The shares of New Series A Senior Preferred Stock will be obligations of
Holdings governed by the Restated Certificate (as defined herein). The form and
terms of the shares of New Series A Senior Preferred Stock are identical in all
material respects to the form and terms of the shares of Old Series A Senior
Preferred Stock except (i) that the shares of New Series A Senior Preferred
Stock have been registered under the Securities Act, (ii) that the shares of New
Series A Senior Preferred Stock are not entitled to certain registration rights
which are applicable to the shares of Old Series A Senior Preferred Stock under
a registration rights agreement (the "Exchange Offer Registration Rights
Agreement") between Holdings and CIBC Oppenheimer Corp., the initial purchaser
of the shares of Old Series A Senior Preferred Stock (the "Initial Purchaser")
and (iii) for certain contingent interest rate provisions. See "The Exchange
Offer."
Dividends on the New Series A Senior Preferred Stock will accrue from
March 30, 1998, the date of issuance of the Old Series A Senior Preferred Stock,
and will be payable semi-annually on each April 1 and October 1, commencing
October 1, 1998, at a rate per annum of 12% of the liquidation preference per
share. Dividends may be paid, at Holdings' option, on any dividend payment date
occurring on or prior to April 1, 2003, either in cash or by the issuance of
additional shares of New Series A Senior Preferred Stock having an aggregate
liquidation preference equal to the amount of such dividends (and, at Holdings'
option, payment of cash in lieu of fractional shares). The liquidation
preference of the New Series A Senior Preferred Stock will be $1,000 per share.
Holders of shares of Old Series A Senior Preferred Stock whose shares of Old
Series A Senior Preferred Stock are accepted for exchange will be deemed to have
waived the right to receive any dividend payment in respect of Old Series A
Senior Preferred Stock accrued from March 30, 1998 to the date of the issuance
of the New Series A Senior Preferred Stock.
The New Series A Senior Preferred Stock, which will rank senior to all
other capital stock of Holdings, will be redeemable, at the option of Holdings,
in whole or in part, at any time on or after April 1, 2003, at the redemption
prices set forth herein, plus accumulated and unpaid dividends to the date of
redemption. Holdings will be required, subject to certain limitations, to redeem
all of the New Series A Senior Preferred Stock outstanding on April 1, 2009, at
a redemption price equal to 100% of the liquidation preference thereof, plus
accumulated and unpaid dividends to the date of redemption. Upon the occurrence
of a Change of Control (as defined herein), Holdings will, subject to certain
conditions, be required to offer to purchase all of the outstanding shares of
New Series A Senior Preferred Stock at a price equal to 101% of the liquidation
preference thereof, plus accumulated and unpaid dividends to the date of
purchase. Holdings may redeem all, but not less than all, of the outstanding
shares of New Series A Senior Preferred Stock at any time prior to April 1, 2001
at a redemption price equal to 112% of the aggregate liquidation price thereof,
plus accumulated and unpaid dividends thereon to the redemption date, with the
Net Proceeds (as defined herein) of one or more Public Equity Offerings (as
defined herein); provided that any such redemption occurs within 90 days
following the closing of any such Public Equity Offering.
Subject to certain conditions, the New Series A Senior Preferred Stock
will be exchangeable, in whole but not in part, at the option of Holdings, on
any dividend payment date, for Holdings' 12% Exchange Debentures due 2009 (the
"Exchange Debentures"). Interest on the Exchange Debentures will be payable at a
rate of 12% per annum and will accrue from the date of issuance thereof.
Interest on the Exchange Debentures will be payable semi-annually in cash or, at
the option of Holdings, on or prior to April 1, 2003, in additional Exchange
Debentures, in arrears on each April 1 and October 1, commencing on the first
such date after the exchange of the New Series A Senior Preferred Stock for
Exchange Debentures. The Exchange Debentures mature on April 1, 2009. The
Exchange Debentures will be redeemable, at the option of Holdings, in whole or
in part, on or after April 1, 2003, at the redemption prices set forth herein,
plus accrued and unpaid interest to the date of redemption. Upon a Change of
Control, Holdings will be required to make an offer to purchase all outstanding
Exchange Debentures at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest thereon to the date of purchase.
Holdings may redeem all, but not less than all, of the Exchange Debentures at
any time prior to April 1, 2001, at a redemption price equal to 112% of the
aggregate principal amount thereof, plus accrued and unpaid interest thereon to
the redemption date, with the Net Proceeds of one or more Public Equity
Offerings; provided that any such redemption occurs within 90 days following the
closing of any such Public Equity Offering. In addition, Holdings will be
obligated in certain instances to make an offer to purchase the Exchange
Debentures at a purchase price equal to 100% of the principal amount thereof
plus accrued and unpaid interest with the net cash proceeds of certain asset
sales.
ii
<PAGE>
The Exchange Debentures will be subordinated in right of payment to all
existing and future Senior Indebtedness (as defined herein) of Holdings and will
rank pari passu with or senior to all future Indebtedness (as defined herein) of
Holdings that expressly provides that it ranks pari passu with or junior to the
Exchange Debentures, as the case may be. As of January 31, 1998, after giving
pro forma effect to the Transactions (as defined herein), Holdings and its
subsidiaries would have had an aggregate of $259.3 million of Indebtedness
outstanding (including $200.0 million principal amount of the Senior Notes (as
defined herein) issued by Morris Material Handling, Inc. (the "Company"), a
wholly-owned subsidiary of Holdings, and $55.0 million of borrowings under the
New Credit Facility (as defined herein)) in respect of which the Exchange
Debentures will be effectively subordinated. Borrowings under the New Credit
Facility are guaranteed by Holdings.
Shares of Old Series A Senior Preferred Stock initially sold to qualified
institutional buyers were initially represented by a global certificate in fully
registered form, without coupons, deposited with a custodian for the Depository
Trust Company ("DTC") and registered in the name of DTC or a nominee of DTC.
Beneficial interests in the global certificate representing the Old Series A
Senior Preferred Stock were shown on, and transfers thereof were effected only
through, records maintained by DTC and its participants. Except as described
herein, shares of New Series A Senior Preferred Stock exchanged for shares of
Old Series A Senior Preferred Stock represented by the global certificate will
be represented by one or more global certificates of New Series A Senior
Preferred Stock in fully registered form, without coupons, registered in the
name of the nominee of DTC. New Series A Senior Preferred Stock in global form
will trade in DTC's Same-Day Funds Settlement System, and secondary market
trading activity in such New Series A Senior Preferred Stock will therefore
settle in immediately available funds. See "Book-Entry, Deliver and Form." New
Series A Senior Preferred Stock issued to non-qualified institutional buyers in
exchange for Old Series A Senior Preferred Stock held by such investors will be
issued only in certificated, fully registered, definitive form.
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to unrelated
third parties, Holdings believes that shares of New Series A Senior Preferred
Stock issued Exchange Offer in exchange for shares of Old Series
A Senior Preferred Stock may be offered for resale, resold and otherwise
transferred by a holder thereof (other than a "Restricted Holder," being (i) a
broker-dealer who purchases such shares of Old Series A Senior Preferred Stock
directly from Holdings to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person that is an affiliate of
Holdings within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that the holder is acquiring shares of New Series A
Senior Preferred Stock in the ordinary course of its business and is not
participating, does not intend to participate and has no arrangement or
understanding with any person to participate, in a distribution of the New
Series A Senior Preferred Stock. Eligible holders wishing to accept the Exchange
Offer must represent to Holdings that such conditions have been met. Each
broker-dealer that receives shares of New Series A Senior Preferred Stock 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 Series A Senior
Preferred Stock. The Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of shares of New Series A Senior
Preferred Stock received in exchange for shares of Old Series A Senior Preferred
Stock only where such shares of Old Series A Senior Preferred Stock were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. Holdings has agreed that it will make this Prospectus
available to any broker-dealer for use in connection with any such resale for a
period from the date of this Prospectus until 180 days after the consummation of
the Exchange Offer, or such shorter period as will terminate when all shares of
Old Series A Senior Preferred Stock acquired by broker-dealers for their own
accounts as a result of market-making activities or other trading activities
have been exchanged for shares of New Series A Senior Preferred Stock and resold
by such broker-dealers. See "The Exchange Offer" and "Plan of Distribution."
Holdings will not receive any proceeds from this offering, and no
underwriter is being utilized in connection with the Exchange Offer. See "Use of
Proceeds."
iii
<PAGE>
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL HOLDINGS ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF SHARES OF OLD SERIES A SENIOR PREFERRED
STOCK IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF
WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH
JURISDICTION.
Prior to the Exchange Offer, there has previously been only a limited
secondary market and no public market for the Old Series A Senior Preferred
Stock. If a market for the New Series A Senior Preferred Stock should develop,
the shares of New Series A Senior Preferred Stock could trade at a discount from
their liquidation preference. Holdings does not intend to list the shares of New
Series A Senior Preferred Stock on a national securities exchange or to apply
for quotation of the shares of New Series A Senior Preferred Stock through the
National Association of Securities Dealers Automated Quotation System. There can
be no assurance that an active public market for the New Series A Senior
Preferred Stock will develop.
This Prospectus includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), including statements
containing the words "believes," "anticipates," "expects" and words of similar
import. All statements other than statements of historical fact included in this
Prospectus, including, without limitation, the statements under "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and elsewhere herein, regarding
Holdings, the Company or any of the transactions described herein, including the
timing, financing, strategies and effects of such transactions, are
forward-looking statements. Although Holdings believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. Important
factors that could cause actual results to differ materially from expectations
are disclosed in this Prospectus, including, without limitation, in conjunction
with the forward-looking statements in this Prospectus and/or under "Risk
Factors." Holdings does not intend to update these forward-looking statements.
iv
<PAGE>
AVAILABLE INFORMATION
Holdings has filed with the Commission a Registration Statement (which
term shall include any amendment, exhibit, schedule and supplement thereto) on
Form S-4 under the Securities Act for the registration of the shares of New
Series A Senior Preferred Stock and Exchange Debentures offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
items of which are omitted as permitted by the rules and regulations of the
Commission. For further information with respect to Holdings and such
securities, reference is hereby made to the Registration Statement, including
the exhibits and schedules thereto. Statements made in this Prospectus
concerning the contents of any contract, agreement or other document referred to
herein are not necessarily complete. With respect to each such contract,
agreement or other document filed with the Commission as an exhibit to the
Registration Statement, reference is hereby made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference. The Registration Statement
and the exhibits and schedules thereto filed by Holdings with the Commission may
be inspected and copied at the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: 7 World Trade Center, Suite 1300, New York, New York
10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such information can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a web site that contains
reports, proxy and other information statements and other materials that are
filed through the Commission's Electronic Data Gathering, Analysis and Retrieval
System. The Web site can be accessed at http://www.sec.gov.
Holdings has agreed that if it is not subject to the informational
requirements of Sections 13 or 15(d) of the Exchange Act at any time while the
New Series A Senior Preferred Stock or Exchange Debentures constitute
"restricted securities" within the meaning of the Securities Act, it will
furnish to holders and beneficial owners of such securities and to prospective
purchasers designated by such holders the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act to permit compliance with
Rule 144A in connection with resales of such securities.
v
<PAGE>
TABLE OF CONTENTS
Page
----
Available Information................................................... v
Prospectus Summary...................................................... 1
Risk Factors............................................................ 15
The Exchange Offer...................................................... 23
The Transactions........................................................ 31
Dividend Policy......................................................... 33
Use of Proceeds......................................................... 34
Capitalization.......................................................... 35
Unaudited Pro Forma Combined Financial Information...................... 37
Selected Historical and Pro Forma Combined Financial Data............... 45
Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................. 47
Business................................................................ 53
Management.............................................................. 64
Security Ownership of Certain Beneficial Owners and Management.......... 72
Certain Relationships and Related Transactions.......................... 73
Description of New Credit Facility...................................... 77
Description of the Surety Arrangement................................... 78
The Senior Note Offering................................................ 79
Description of New Series A Senior Preferred Stock and Exchange
Debentures............................................................. 81
Preferred Stock Exchange Offer; Registration Rights..................... 123
Description of the Other Capital Stock.................................. 125
Book-Entry, Delivery and Form........................................... 130
Certain U.S. Federal Income Tax Consequences............................ 133
Plan of Distribution.................................................... 142
Experts................................................................. 143
Legal Matters........................................................... 143
Index to Financial Statements........................................... F-1
vi
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and combined financial
statements, including notes thereto, appearing elsewhere in this Prospectus. The
"Transactions," which closed on March 30, 1998, consist of the Recapitalization,
the Financings and the October 1997 Drop Down (each as defined herein). Holdings
is a holding company, with no material operating assets, that conducts its
business operations through its direct wholly-owned subsidiary Morris Material
Handling, Inc. ("MMH"). For purposes of this Prospectus, unless the context
requires otherwise, references to the "Company" are to MMH, its subsidiaries and
their predecessors. For periods prior to March 30, 1998, references to the
Company are to the "through-the-air" material handling equipment business (the
"MHE Business") of Harnischfeger Corporation ("HarnCo") and those subsidiaries
and affiliates of HarnCo that were engaged therein. For purposes of this
Prospectus, it is assumed that Holdings has historically owned the capital stock
of MMH, that all of the assets of the MHE Business were owned by subsidiaries
thereof and that, immediately prior to the consummation of the Recapitalization,
the historical combined financial statements of Holdings were identical to those
of the Company which are presented herein. The Company's fiscal year ends
October 31. Consequently, any reference to any particular fiscal year means the
fiscal year ended October 31 of such year.
The Company
The Company is a leading international provider of "through-the-air"
material handling products and services used in most manufacturing industries.
The Company's original equipment operations design and manufacture a
comprehensive line of industrial cranes, hoists and other component products,
sold principally under the P&H and Morris brand names. Through its aftermarket
operations, the Company provides a variety of related products and services,
including replacement parts, repair and maintenance services and product
modernizations. In recent years, the Company has shifted its orientation from an
original equipment-focused United States manufacturer to an international full
service provider with a significant emphasis on the high margin aftermarket
business.
During the past three years, the Company has grown significantly, both
internally and through acquisitions. From fiscal 1994 through fiscal 1997, the
Company's net sales grew from $109.4 million to $353.4 million and EBITDA (as
defined herein) increased from $15.1 million to $45.9 million. Management
believes that this growth is largely attributable to (i) strengthening and
broadening its product line, (ii) building a network of Company-owned
distribution and service centers ("DSCs") which provides a local presence for
product support and a platform for growth and (iii) expanding into attractive
domestic and international markets through internal growth and a disciplined
acquisition strategy.
The Company's core business was founded in 1884 and material handling
machinery and related equipment have been sold under the well-recognized P&H and
Morris brand names since the 1890s. The Company has developed a large global
installed base of equipment, having sold an aggregate of over half a million
cranes and hoists according to management estimates. Management believes that
the Company is one of the leading suppliers of industrial overhead cranes in
North America, the United Kingdom and South Africa. Management also believes
that the Company is one of the largest global providers of aftermarket products
and services to the industrial crane industry. Sales outside of North America
accounted for 39% of fiscal 1997 net sales, with Western Europe representing 22%
and the Pacific Rim representing 8% of net sales.
Industrial cranes and hoists are critical to the operations of most
businesses that require the movement of large or heavy objects. The steel,
aluminum, paper and forest products, aerospace, foundry, and automotive
industries, among others, rely on cranes and hoists as one of the most flexible
and efficient methods of transporting materials within a plant while maximizing
the use of available space. Industrial cranes, which typically last 20 to 50
years, require significant aftermarket support in the form of replacement parts,
machine modernizations and upgrades, repairs, and inspection and maintenance
services.
The current management team has implemented a strategy to capitalize on
the Company's significant global installed base of equipment to generate high
margin aftermarket opportunities. The Company has built its aftermarket
operations in order to become a full service provider and capture additional
revenue. In addition,
1
<PAGE>
management believes that the diversified earnings created by this strategy help
to lessen the effect of economic cycles on the Company. In fiscal 1997,
aftermarket sales accounted for approximately 40% of net sales and 65% of gross
profit on a consolidated basis, while in North America, where the Company has
pursued its full service strategy for a longer period of time, the aftermarket
business accounted for 51% of net sales and 72% of gross profit.
Competitive Strengths
Large Installed Base of Existing Equipment. The Company believes it has
one of the largest installed bases of industrial cranes in North America, the
United Kingdom and South Africa. This installed base provides the Company with
well-established relationships and a strong platform upon which to pursue high
margin aftermarket opportunities. A large portion of the Company's installed
base is used in demanding process industries which require frequent replacement
parts, repairs, inspection services and modernizations.
Stable Aftermarket Demand and Earnings. Material handling products are
critical to customers' operations. As long as industrial plants continue to
operate, the cranes and hoists used in such facilities will require replacement
parts and maintenance services, irrespective of economic cycles. Management has
increased its focus on aftermarket operations, and this more stable business
represented 65% of the Company's gross profit in fiscal 1997.
Diverse Customer Base. The Company sells both original equipment and
aftermarket products and services to thousands of customers operating in various
manufacturing industries in more than 50 countries. Management believes that
this geographic and industry diversity helps to lessen the effect on the Company
of economic cycles that may affect a particular region or industry.
Reputation for Reliability and Engineering Expertise. Over its long
history of providing custom engineered cranes and hoists, the Company has
developed a reputation for engineering expertise and product reliability. As the
Company has developed a number of innovative technologies, it has enhanced its
reputation and built a platform to pursue the higher volume standard crane
market. In addition, the Company has been able to apply its proven technical
skills in the aftermarket business.
Company-Owned Distribution and Service Network. The Company has developed
an international distribution and service network with 61 Company-owned
locations in key industrial markets. This DSC network is central to the
Company's strategy of being a single source provider of original equipment and
aftermarket products and services. Management believes that ownership of its
primary distribution channel provides the following competitive advantages: (i)
a higher level of control over the delivery of its products and services; (ii)
faster service response time; (iii) quicker delivery of standard cranes at a
lower cost; and (iv) increased sales and margins by capturing the incremental
profit that would otherwise be recognized by independent distributors.
Experienced Management Team. The Company is run by an experienced,
entrepreneurial and talented management team led by its President,
Michael Erwin. The top seven executives combined have over 100 years of
experience at the Company. Mr. Erwin has run the Company since December 1994
and, along with the rest of the senior management team, has developed and
implemented the Company's successful growth strategies. In acquiring 12
companies since 1994, management has demonstrated its ability to acquire and
integrate businesses in a disciplined and effective manner. Under current
management's leadership, EBITDA has grown at a compound average annual rate of
approximately 45% from fiscal 1994 through fiscal 1997.
2
<PAGE>
Business Strategy
Management has developed an integrated strategy designed to increase
revenues and profits by capitalizing on the Company's large installed base of
equipment, Company-owned distribution and service network and technical
competencies to capture greater market share and differentiate the Company from
original equipment-focused competitors.
The key components of the Company's strategy are as follows:
Focus on Aftermarket Opportunities. The United States industrial crane and
hoist aftermarket is estimated to be $1.2 billion annually and management
estimates the global aftermarket to be several times that amount. This market is
highly fragmented and a substantial portion of repair and maintenance work is
performed by customers' own maintenance personnel. A recent independent study
indicates that the Company currently captures approximately 25% of the United
States aftermarket potential of its own installed base and less than 10% of the
entire United States aftermarket potential. Management has developed a series of
focused marketing programs and product offerings designed to capture a greater
share of the aftermarket business by taking advantage of the Company's large
installed base, brand recognition, and local DSC network. The Company is
beginning to see the benefits of these efforts and aftermarket sales have
increased in each of the last four years.
Provide High Level of Customer Support. The Company's products and
services are designed to meet its customers' objectives of lowering their
material handling costs and increasing the efficiency of their operations. The
Company's goal is to help its customers reduce costs and increase profitability
through the proper selection, design, manufacture and installation of original
equipment and by providing a wide variety of aftermarket products and services.
Management believes that this ability to provide comprehensive solutions to its
customers' needs is a competitive advantage.
Expand DSC Network. The Company's DSCs are its platform for growth and
central to its strategy of being a single source provider of original equipment
and aftermarket products and services. The Company's North American DSC network
covers a broad territory of geographically dispersed customers. The Company
plans to continue developing this network with the goal of having a DSC in each
key industrial market in North America. The Company has developed similar DSC
networks in the United Kingdom and South Africa, and management plans to
replicate this model in other attractive markets.
Improve Production Efficiency to Reduce Costs. Management has implemented
numerous efficiency initiatives that it believes will improve the Company's
competitiveness while enhancing profit margins. The Company is completing the
re-engineering of various operations to cellular manufacturing. In addition, the
Company has standardized a number of its proprietary components which it
manufactures at specialized facilities for global distribution. Management
believes these initiatives will enable the Company to lower its overall cost
structure by reducing labor, engineering, and fabrication expenses and to
achieve economies of scale and permit faster deliveries. In the United States,
the lead time required to deliver certain original equipment was reduced by as
much as 50% in fiscal 1997.
Increase Sales of High Volume Original Equipment Products. The Company
plans to continue increasing its penetration of the higher volume and more
stable market for standard cranes and hoists by: (i) capitalizing on its brand
equity in engineered cranes; (ii) reducing costs; and (iii) improving delivery
times. The Company has tripled the number of standard cranes it has sold in the
United States during the past three years, yet its share of the United States
standard crane market in fiscal 1997 was still less than 15%.
Expand Through Selected Acquisitions. The global material handling
industry is highly fragmented and is beginning to consolidate as a result of the
scale economies that favor larger competitors. Management believes that the
Company is well positioned to capitalize on this opportunity. Since July 1994,
the Company has acquired 12 businesses, including Morris Mechanical Handling
Ltd.'s ("Morris Ltd.") operations in the United Kingdom and South Africa, which
collectively generated annual revenues in excess of $170.0 million in fiscal
1997. The Company plans to continue making strategic acquisitions to penetrate
new markets and expand the range of its product and service offerings.
3
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The Transactions
On March 30, 1998, in conjunction with the recapitalization (the
"Recapitalization") of Holdings, Holdings sold 57,710 Units (the "Series A
Units"), each consisting of one share of Old Series A Senior Preferred Stock and
0.012476 shares of non-voting common stock (the "Unit Common Stock"), to certain
institutional investors (the "Offering"). In the Recapitalization, MHE
Investments, Inc. ("MHE Investments"), a newly formed affiliate of Chartwell
Investments Inc., together with the purchasers of the Series A Units and HarnCo,
invested new and continuing equity capital of $126.0 million in Holdings (the
"Equity Investment").
The proceeds of the Equity Investment, together with approximately $55.0
million of aggregate borrowings by the Company under a senior secured credit
facility (the "New Credit Facility") entered into in connection with the
consummation of the Recapitalization (the "Recapitalization Closing") and
approximately $200.0 million in aggregate proceeds from the Senior Note Offering
(as defined herein, and together with the Equity Investment and the New Credit
Facility, the "Financings"), were used (i) to finance the Recapitalization, (ii)
to make loans to management to acquire indirect equity interests in Holdings,
(iii) for general corporate purposes and (iv) to pay approximately $23.5 million
of fees and expenses. See "Use of Proceeds." The Recapitalization consideration
consisted of (i) $336.0 million in cash that was paid to HarnCo (subject to
potential post-Recapitalization Closing adjustments as to which an additional
$5.0 million was provided to HarnCo at the Recapitalization Closing) and (ii)
$12.0 million of continuing equity capital that was retained by HarnCo.
The Recapitalization was effectuated pursuant to an agreement (the
"Recapitalization Agreement") among MHE Investments, HarnCo and certain of
HarnCo's affiliates (together with HarnCo, the "HarnCo Parties"). In the
Recapitalization, (i) MHE Investments acquired approximately 88.2% of the voting
power of Holdings, (ii) the Company acquired, directly or indirectly, all of the
equity interests of the entities engaged in the MHE Business that were
previously owned by the HarnCo Parties and (iii) HarnCo received the cash
Recapitalization consideration.
MHE Investments owns approximately 72.6% of the common stock of Holdings
(the "Common Stock") and approximately $28.9 million liquidation preference of
the 12 1/2% Series C Junior Exchangeable Voting Preferred Stock of Holdings (the
"Series C Junior Voting Preferred Stock") and HarnCo owns approximately 20.8% of
the Common Stock and approximately $4.8 million liquidation preference of the 12
1/4% Series B Junior Exchangeable Preferred Stock of Holdings (the "Series B
Junior Preferred Stock"). The Series A Units constitute the remaining equity
interests of Holdings and consist of non-voting stock representing approximately
6.6% of the Common Stock and approximately $57.7 million liquidation preference
of the Old Series A Senior Preferred Stock. See "The Transactions" and
"Capitalization."
In connection with the Recapitalization, the Company entered into a
Trademark License Agreement with an affiliate of HarnCo, pursuant to which the
Company has the right to use the P&H trademark with respect to all MHE Business
products on a worldwide exclusive basis from the date of the Recapitalization
Closing until 15 years after the earlier to occur of a sale of Holdings to a
third party or a public offering of the common stock of Holdings, the Company or
their parents or successors (and for an additional seven years thereafter for
aftermarket products and services). The royalty fee for use of the trademark is
0.75% of the aggregate net sales of the MHE Business for the ten year period
commencing 12 months after the Recapitalization Closing. There will be no
royalty fee for the remainder of the term. The Company also entered into a
number of agreements pursuant to which HarnCo will continue to provide, on an
interim basis, certain supplies, products and services to the Company and its
subsidiaries located in the United States on substantially similar terms and
conditions to those historically provided. See "Certain Relationships and
Related Transactions."
---------------------
Holdings' principal executive offices are located at 4915 South Howell
Avenue, 2nd Floor, Milwaukee, Wisconsin 53207, telephone number (414) 486-6100.
4
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Summary of Terms of the Exchange Offer
The Exchange Offer relates to the exchange of up to $57,710,000 aggregate
liquidation preference of Old Series A Senior Preferred Stock for up to an equal
aggregate liquidation preference of New Series A Senior Preferred Stock. The
shares of New Series A Senior Preferred Stock will be obligations of Holdings
governed by the Restated Certificate. The form and terms of the shares of New
Series A Senior Preferred Stock are identical in all material respects to the
form and terms of the shares of Old Series A Senior Preferred Stock except (i)
that the shares of New Series A Senior Preferred Stock have been registered
under the Securities Act, (ii) that the shares of New Series A Senior Preferred
Stock are not entitled to certain registration rights which are applicable to
the shares of Old Series A Senior Preferred Stock under the Exchange Offer
Registration Rights Agreement and (iii) for certain contingent interest rate
provisions. The shares of Old Series A Senior Preferred Stock and the shares of
New Series A Senior Preferred Stock are together referred to herein as the
"Series A Senior Preferred Stock." See "Description of New Series A Senior
Preferred Stock and Exchange Debentures."
The Exchange Offer .............. $1,000 liquidation preference of New Series A
Senior Preferred Stock will be issued in
exchange for each $1,000 liquidation
preference of Old Series A Senior Preferred
Stock validly tendered pursuant to the
Exchange Offer. As of the date hereof,
$57,710,000 in aggregate liquidation
preference of Old Series A Senior Preferred
Stock is outstanding. The exchange of New
Series A Senior Preferred Stock for Old
Series A Senior Preferred Stock will be made
(i) with respect to all Old Series A Senior
Preferred Stock validly tendered and not
withdrawn on or prior to the Early Exchange
Date, within two business days following the
Early Exchange Date, and (ii) with respect to
all Old Series A Senior Preferred Stock
validly tendered and not withdrawn on or
prior to the Expiration Date, within two
business days following the Expiration Date.
The Old Series A Senior Preferred Stock was
originally issued in a private placement. As
a condition to the purchase of the Old Series
A Senior Preferred Stock, the Initial
Purchaser required that Holdings make a
registered offer to exchange the Old Series A
Senior Preferred Stock for other securities
substantially similar to the Old Series A
Senior Preferred Stock. The Exchange Offer is
being made to satisfy this contractual
obligation of Holdings.
Resale .......................... Based on an interpretation by the staff of
the Commission set forth in no-action letters
issued to unrelated third parties, Holdings
believes that shares of New Series A Senior
Preferred Stock issued pursuant to the
Exchange Offer in exchange for shares of Old
Series A Senior Preferred Stock may be
offered for resale and resold or otherwise
transferred by holders thereof (other than
any Restricted Holder) without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided
that such shares of New Series A Senior
Preferred Stock are acquired in the ordinary
course of such holders' business and such
holders are not participating, do not intend
to participate and have no arrangement or
understanding with any person to participate,
in the distribution of such shares of New
Series A Senior Preferred Stock. See "K-III
Communications Corporation," SEC No Action
Letter (available May 14, 1993); "Mary Kay
Cosmetics, Inc.," SEC No-Action Letter
(available June 5, 1991); "Morgan Stanley &
Co., Incorporated," SEC No-Action Letter
(available June 5, 1991); and "Exxon Capital
Holdings Corporation," SEC No-Action Letter
(available May 13, 1988). Each broker-dealer
that receives shares of New Series A Senior
Preferred Stock for its own account in
exchange for shares of Old Series A Senior
Preferred Stock, where such shares of Old
Series A Senior Preferred Stock were acquired
by such broker-
5
<PAGE>
dealer as a result of market-making
activities or other trading activities, must
acknowledge that it will deliver a prospectus
in connection with any resale of such shares
of New Series A Senior Preferred Stock. See
"Plan of Distribution."
If any person were to participate in the
Exchange Offer for the purpose of
distributing securities in a manner not
permitted by the preceding paragraph, such
person (i) could not rely on the position of
the staff of the Commission enunciated in
"Exxon Capital Holdings Corporation" and (ii)
must comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with a secondary
resale transaction. Therefore, each holder of
shares of Old Series A Senior Preferred Stock
who accepts the Exchange Offer must represent
in the Letter of Transmittal that it meets
the conditions described above. See "The
Exchange Offer--Terms of the Exchange Offer."
Early Exchange Date ............. All shares of Old Series A Senior Preferred
Stock validly tendered and not withdrawn on
or prior to 5:00 p.m. New York City time, on
, 1998 (the "Early Exchange
Date") will be exchanged for shares of New
Series A Senior Preferred Stock within two
business days following the Early Exchange
Date.
Expiration Date ................. 5:00 p.m., New York City time, on ,
1998 unless the Exchange Offer is extended,
in which case the term "Expiration Date"
means the latest date and time to which the
Exchange Offer is extended. See "The Exchange
Offer--Terms of the Exchange
Offer--Expiration Date; Extensions;
Amendments."
Accrued Dividends on the New
Series A Senior Preferred Stock
and the Old Series A Senior
Preferred Stock ................. The shares of New Series A Senior Preferred
Stock will accrue dividends from March 30,
1998, the date of issuance of the Old Series
A Senior Preferred Stock. Holders of shares
of Old Series A Senior Preferred Stock whose
shares of Old Series A Senior Preferred Stock
are accepted for exchange will be deemed to
have waived the right to receive any payment
in respect of interest on such shares of Old
Series A Senior Preferred Stock accrued from
March 30, 1998 until the date of the issuance
of the shares of New Series A Senior
Preferred Stock. See "The Exchange
Offer--Accrual of Dividends on the New Series
A Senior Preferred Stock."
Conditions to the Exchange
Offer ........................... Holdings will not be obligated to consummate
the Exchange Offer if the shares of New
Series A Senior Preferred Stock to be
received will not be tradeable by the holder,
other than in the case of Restricted Holders,
without restriction under the Securities Act
and the Exchange Act and without material
restrictions under the blue sky or securities
laws of substantially all of the states of
the United States. This condition may be
waived by Holdings. See "The Exchange
Offer--Conditions."
No federal or state regulatory requirements
must be complied with or approvals obtained
in connection with the Exchange Offer, other
than the registration provisions of the
Securities Act and any applicable
registration or qualification provisions of
state securities laws.
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<PAGE>
Procedure for Tendering
Shares of Old Series A Senior
Preferred Stock ................. Each holder of shares of Old Series A Senior
Preferred Stock 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 the shares
of Old Series A Senior Preferred Stock
(unless such tender is being effected
pursuant to the procedures for book-entry
transfer described below) to be exchanged and
any other required documentation to the
Exchange Agent (as defined herein) at the
address set forth herein and therein. See
"The Exchange Offer--Procedure for
Tendering."
Special Procedures for
Beneficial Holders .............. Any beneficial holder whose shares of Old
Series A Senior Preferred Stock are
registered in the name of his broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender in the
Exchange Offer should contact such registered
holder promptly and instruct such registered
holder to tender on his behalf. If such
beneficial holder wishes to tender on his own
behalf, such beneficial holder must, prior to
completing and executing the Letter of
Transmittal and delivering his shares of Old
Series A Senior Preferred Stock, either make
appropriate arrangements to register
ownership of the shares of Old Series A
Senior Preferred Stock in such holder's name
or obtain a properly completed bond power
from the registered holder. The transfer of
record ownership may take considerable time.
See "The Exchange Offer--Procedure for
Tendering."
Guaranteed Delivery Procedures .. Holders of shares of Old Series A Senior
Preferred Stock who wish to tender their
shares of Old Series A Senior Preferred Stock
and whose shares of Old Series A Senior
Preferred Stock are not immediately available
or who cannot deliver their shares of Old
Series A Senior Preferred Stock (or who
cannot complete the procedures for book-entry
transfer on a timely basis) and a properly
completed Letter of Transmittal or any other
documents required by the Letter of
Transmittal to the Exchange Agent prior to
the Early Exchange Date or the Expiration
Date, as the case may be, may tender their
shares of Old Series A Senior Preferred Stock
according to the guaranteed delivery
procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."
Withdrawal Rights ............... Tenders of shares of Old Series A Senior
Preferred Stock may be withdrawn at any time
prior to 5:00 p.m., New York City time, on
the Expiration Date, unless previously
accepted for exchange. See "The Exchange
Offer--Withdrawal of Tenders."
Acceptance of Old Series
A Senior Preferred Stock and
Delivery of New Series A
Senior Preferred Stock .......... Subject to certain conditions (as summarized
above in "Conditions to the Exchange Offer"
and described more fully in "The Exchange
Offer-- Conditions"), Holdings will accept
for exchange any and all shares of Old Series
A Senior Preferred Stock which are validly
tendered in the Exchange Offer prior to 5:00
p.m., New York City time, on each of the
Early Exchange Date and the Expiration Date.
The shares of New Series A Senior Preferred
Stock issued pursuant to the Exchange Offer
will be delivered promptly following each of
the Early Exchange Date
7
<PAGE>
and the Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
Certain Tax Considerations ...... The exchange pursuant to the Exchange Offer
will generally not be a taxable event for
federal income tax purposes. See "Certain
U.S. Federal Income Tax Consequences."
Exchange Agent .................. United States Trust Company of New York, the
Transfer Agent for the Series A Senior
Preferred Stock, is serving as exchange agent
(the "Exchange Agent") in connection with the
Exchange Offer. The address of the Exchange
Agent is: United States Trust Company of New
York, 114 West 47th Street, New York, New
York 10036, Attention: Corporate Trust
Administration. For information with respect
to the Exchange Offer, call 1-800-548-6565.
Use of Proceeds ................. Holdings will not receive any proceeds from
the exchange of the New Series A Senior
Preferred Stock for the Old Series A Senior
Preferred Stock pursuant to the Exchange
Offer. The net proceeds from the sale of the
Old Series A Senior Preferred Stock and the
remaining portion of the Equity Investment,
together with the proceeds of the Senior Note
Offering and borrowings under the New Credit
Facility, were used by Holdings and the
Company (i) to finance the Recapitalization,
(ii) to make loans to management to acquire
indirect equity interests in Holdings, (iii)
for general corporate purposes and (iv) to
pay fees and expenses associated with the
Transactions. See "Use of Proceeds."
8
<PAGE>
Summary Description of the Securities to be Registered
The Series A Senior Preferred Stock
Issuer .......................... MMH Holdings, Inc.
Securities Offered .............. 57,710 shares of 12% Series A Senior
Exchangeable Preferred Stock, par value $.01
per share.
Issue Price ..................... $1,000 per share, plus accumulated and unpaid
dividends.
Liquidation Preference .......... $1,000 per share.
Dividends ....................... The New Series A Senior Preferred Stock will
accumulate dividends from March 30, 1998, the
date of issuance of the Old Series A Senior
Preferred Stock (the "Issue Date"), at an
annual rate of 12% of the liquidation
preference per share, payable semi-annually
in arrears. Dividends may be paid, at
Holdings' option, on any dividend date
occurring on or prior to April 1, 2003,
either in cash or additional shares of New
Series A Senior Preferred Stock having an
aggregate liquidation preference equal to the
amount of such dividend (and, at Holdings'
option, payment of cash in lieu of fractional
shares); thereafter, dividends are payable
only in cash. It is contemplated that
Holdings' sole source of funds to pay
dividends will be cash generated by the
Company. The New Credit Facility and the Note
Indenture (as defined herein) will limit the
ability of the Company to advance funds to
Holdings for the purpose of paying dividends
and the ability of Holdings to pay dividends.
No dividends may be paid in cash on any
preferred stock ranking junior to the New
Series A Senior Preferred Stock, unless cash
dividends on the New Series A Senior
Preferred Stock required to be paid have been
so paid. In addition, no dividends may be
paid in cash on any preferred stock ranking
junior to the New Series A Senior Preferred
Stock during any period when cash dividends
(whether or not required to be so paid) are
not paid on the New Series A Senior Preferred
Stock.
Dividend Payment Dates .......... April 1 and October 1, commencing October 1,
1998.
Optional Redemption ............. The New Series A Senior Preferred Stock will
be redeemable at the option of Holdings, in
whole or in part, at any time on or after
April 1, 2003 at the redemption prices set
forth herein, plus accumulated and unpaid
dividends thereon to the redemption date. In
addition, Holdings may redeem all, but not
less than all, of the New Series A Senior
Preferred Stock at any time and from time to
time prior to April 1, 2001, at a redemption
price equal to 112.0% of the aggregate
liquidation preference thereof, plus
accumulated and unpaid dividends thereon to
the redemption date, with the Net Proceeds of
one or more Public Equity Offerings; provided
that such redemption occurs within 90 days
following the closing of any such Public
Equity Offering.
9
<PAGE>
Mandatory Redemption ............ Holdings is required, subject to certain
conditions, to redeem all of the New Series A
Senior Preferred Stock outstanding on April
1, 2009 at a redemption price equal to 100%
of the liquidation preference thereof, plus
accumulated and unpaid dividends to the date
of redemption.
Voting .......................... The New Series A Senior Preferred Stock will
be non-voting, except as otherwise required
by law and except in certain circumstances
described herein, including (i) amending
certain rights of the holders of New Series A
Senior Preferred Stock and (ii) the issuance
of any class or series of capital stock that
ranks on a parity with or senior to the New
Series A Senior Preferred Stock. Upon the
occurrence of a Voting Rights Triggering
Event (as defined herein), the holders of a
majority of the aggregate outstanding shares
of Series A Senior Preferred Stock and Series
B Junior Preferred Stock (to the extent there
exists a Voting Rights Triggering Event with
respect thereto), voting as a single class,
will be entitled to elect the lesser of two
directors and that number of directors
constituting 25% of the members of the board
of directors of Holdings until such time, in
the case of a dividend default, as all
accumulated and unpaid dividends on the
Series A Senior Preferred Stock have been
fully paid in cash, and in all other cases,
any failure, breach or default giving rise to
such voting rights is remedied, cured or
waived by the holders of at least a majority
of the then outstanding shares of Series A
Senior Preferred Stock and Series B Junior
Preferred Stock. A Voting Rights Triggering
Event shall mean: (i) a failure to pay cash
dividends for two or more semi-annual
dividend periods after April 1, 2003; (ii) a
failure to redeem the outstanding shares of
Series A Senior Preferred Stock on or before
April 1, 2009; (iii) a failure to make or
consummate a Change of Control Offer (as
defined herein); or (iv) a breach or
violation of any of the covenants contained
in the Restated Certificate which breach or
violation continues after the expiration of
applicable grace periods.
Exchange Provisions ............. The New Series A Senior Preferred Stock will
be exchangeable for Exchange Debentures, at
Holdings' option, subject to certain
conditions, in whole but not in part, on any
scheduled dividend payment date. The New
Credit Facility will restrict the ability of
Holdings to incur Indebtedness, including the
Exchange Debentures.
Ranking ......................... The New Series A Senior Preferred Stock will,
with respect to dividend rights and rights
upon liquidation, winding-up and dissolution
of Holdings, rank senior to all other classes
or series of capital stock of Holdings.
Change of Control ............... Upon a Change of Control, Holdings will,
subject to certain conditions, be required to
make an offer to purchase all outstanding
shares of New Series A Senior Preferred Stock
at a price equal to 101% of the liquidation
preference thereof, plus accumulated and
unpaid dividends thereon to the purchase
date. There can be no assurance that Holdings
will have sufficient funds to purchase all of
the New Series A Senior Preferred Stock in
the event of a Change of Control or that
Holdings would be able to obtain financing
for such purpose on favorable terms, if at
all. If Holdings fails to make or
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<PAGE>
consummate a Change of Control Offer, the
dividend rate on the New Series A Senior
Preferred Stock will increase by 400 basis
points until such time as the Holdings makes
or consummates a Change of Control Offer.
Certain Restrictive Provisions .. The Restated Certificate contains restrictive
provisions that, among other things, restrict
the ability of Holdings and its Restricted
Subsidiaries (as defined herein) to: (i)
incur additional indebtedness; (ii) pay
dividends and make certain other restricted
payments; (iii) enter into transactions with
affiliates; (iv) issue preferred stock of
subsidiaries; or (v) merge or consolidate, or
otherwise engage, in a transaction involving
all or substantially all of the assets of
Holdings and its Restricted Subsidiaries,
taken as a whole. These restrictive
provisions are subject to a number of
important exceptions.
The Exchange Debentures
Issue ........................... 12% Exchange Debentures due 2009, issuable,
at Holdings' option, in exchange for the New
Series A Senior Preferred Stock in an
aggregate principal amount equal to the
liquidation preference of the New Series A
Senior Preferred Stock so exchanged, plus
accumulated and unpaid dividends to the date
fixed for the exchange thereof (the "Exchange
Date"), plus any additional Exchange
Debentures issued from time to time in lieu
of cash interest.
Maturity ........................ April 1, 2009.
Interest Rate and Payment Dates . The Exchange Debentures will bear interest at
a rate of 12% per annum. Interest will accrue
from the most recent interest payment date to
which interest has been paid or provided for
or, if no interest has been paid or provided
for, from the Exchange Date. Interest will be
payable semi-annually in cash (or, at the
option of Holdings, on or prior to April 1,
2003, in additional Exchange Debentures) in
arrears on each April 1 and October 1,
commencing with the first such date after the
Exchange Date.
Optional Redemption ............. The Exchange Debentures will be redeemable at
the option of Holdings, in whole or in part,
at any time on or after April 1, 2003 at the
redemption prices set forth herein, plus
accrued and unpaid interest thereon to the
redemption date. In addition, Holdings may
redeem all, but not less than all, of the
Exchange Debentures at any time and from time
to time prior to April 1, 2001, at a
redemption price equal to 112% of the
aggregate principal amount thereof, plus
accrued and unpaid interest thereon to the
redemption date with the Net Proceeds of one
or more Public Equity Offerings; provided
that such redemption occurs within 90 days
following the closing of any such Public
Equity Offering.
Ranking ......................... The Exchange Debentures will be subordinated
in right of payment to all existing and
future Senior Indebtedness of Holdings and
will rank pari passu with or senior to all
future Indebtedness of Holdings that
expressly provides that it ranks pari passu
with or junior to the Exchange Debentures, as
the case may be. As of January 31, 1998,
after giving pro forma effect to the
Offering, the application of the net proceeds
therefrom and the Transactions, Holdings and
its
11
<PAGE>
subsidiaries would have had an aggregate of
$259.3 million of Indebtedness outstanding
(including the Company's $200.0 million
principal amount Senior Notes and $55.0
million of borrowings under the New Credit
Facility) in respect of which the Exchange
Debentures will be effectively subordinated.
Borrowings under the New Credit Facility are
guaranteed by Holdings and are secured by
substantially all of the assets of the
Company and its subsidiaries located in the
United States and the United Kingdom, certain
of the assets of the Company's subsidiaries
located in Canada and a pledge of
substantially all of the capital stock of the
Company and its subsidiaries. In addition,
obligations incurred under the Surety
Arrangement are secured by certain assets of
the Company. See "Risk Factors--Substantial
Leverage," "--Ranking of New Series A Senior
Preferred Stock; Subordination of Exchange
Debentures; Pledge of Assets," "--Restrictive
Covenants in the New Credit Facility and Note
Indenture."
Change of Control ............... Upon a Change of Control, Holdings will,
subject to certain conditions, be required to
make an offer to purchase all outstanding
Exchange Debentures at a price equal to 101%
of the principal amount thereof, plus accrued
and unpaid interest thereon to the purchase
date. There can be no assurance that Holdings
will have sufficient funds to purchase all of
the Exchange Debentures in the event of a
Change of Control or that Holdings would be
able to obtain financing for such purpose on
favorable terms, if at all.
Certain Covenants ............... The Exchange Indenture (as defined herein)
will contain covenants that, among other
things, restrict the ability of Holdings and
its Restricted Subsidiaries to: (i) incur
additional indebtedness, including senior
subordinated indebtedness; (ii) pay dividends
and make certain other restricted payments;
(iii) enter into transactions with
affiliates; (iv) transfer or sell assets; (v)
issue stock (including preferred stock) of
subsidiaries; (vi) create dividend or other
payment restrictions affecting Restricted
Subsidiaries; and (vii) merge or consolidate,
or otherwise engage, in a transaction
involving all or substantially all of the
assets of Holdings and its Restricted
Subsidiaries, taken as a whole. These
covenants are subject to a number of
important exceptions.
Asset Sales Proceeds ............ Holdings will be obligated in certain
instances to make offers to purchase the
Exchange Debentures at a purchase price in
cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest to
the date of purchase with the net cash
proceeds of certain asset sales.
For more complete information regarding the New Series A Senior Preferred
Stock and Exchange Debentures, including the definitions of certain capitalized
terms used above, see "Description of New Series A Senior Preferred Stock and
Exchange Debentures."
Risk Factors
Prospective purchasers of the Series A Units should consider carefully the
information set forth under the caption "Risk Factors," and all other
information set forth in this Prospectus, in evaluating an investment in the
Series A Units.
12
<PAGE>
Summary Historical and Pro Forma Combined Financial Data
The summary historical combined financial data as of and for the years
ended October 31, 1997, 1996 and 1995 have been derived from the audited
combined financial statements of the Company. The summary historical combined
financial data as of and for the three months ended January 31, 1998 and 1997
have been derived from the unaudited combined financial statements of the
Company. The summary historical combined financial data as of and for the years
ended October 31, 1994 and 1993 have been derived from unaudited internal
records of the Company. The Company's operations for 1994 and 1993 were
integrated with other Harnischfeger Industries, Inc. ("HII") operations and,
therefore, the financial data for these periods represent management's best
estimate of their operating performance. The unaudited financial data presented
herein, in the opinion of management, includes all necessary adjustments
required for the fair presentation of such data.
The summary pro forma combined financial data of Holdings as of and for
the three months ended January 31, 1998 and for the year ended October 31, 1997
have been prepared to reflect the consummation of the Transactions. The
unaudited pro forma combined balance sheet data of Holdings have been prepared
as if such transactions had occurred as of January 31, 1998 and the unaudited
combined statements of operations of Holdings have been prepared as if such
transactions had occurred on November 1, 1996. The summary pro forma combined
financial data of Holdings are not necessarily indicative of the financial
position or results of operations of Holdings had the Transactions reflected
therein actually been consummated on the dates assumed and are not necessarily
indicative of the financial position or results of operations of Holdings that
may be expected for any future period.
The summary combined financial data should be read in conjunction with
"Unaudited Pro Forma Combined Financial Information," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the Combined
Financial Statements of the Company and notes thereto appearing elsewhere
herein.
13
<PAGE>
Summary Historical and Pro Forma Combined Financial Data
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
Fiscal Year Ended October 31, January 31,
------------------------------------------------------------------ -----------------------------------
Pro Forma Pro Forma
1993(a) 1994(a) 1995 1996 1997 1997 1997 1998 1998
--------- --------- -------- -------- -------- --------- --------- --------- ---------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income statement data:
Net sales .............. $117,032 $109,429 $243,169 $323,735 $353,350 $353,350 $79,982 $76,483 $76,483
Gross profit ........... N/A N/A 56,765 76,176 92,556 92,556 19,190 19,830 19,830
Operating expenses(b) .. N/A N/A 35,043 46,160 57,019 56,157 12,642 14,873 15,270
-------- -------- -------- -------- -------- -------- ------- ------- -------
Operating income ....... $ 4,781 $ 10,437 21,722 30,016 35,537 36,399 6,548 4,957 4,560
Net income/(loss) ...... N/A N/A $ 13,476 $ 18,446 20,853 $ 5,943 $ 4,011 $ 2,139 (1,603)
======== ======== ======== ======== ======== ======= =======
Dividends on preferred
stock ............... (11,460) (3,129)
-------- -------
Net loss attributable
to Common Stock ..... $ (5,517) $(4,732)
======== =======
Other data:
EBITDA(c) .............. $ 9,341 $ 15,075 $ 28,045 $ 38,220 $ 45,859 $ 43,859 $ 8,925 $ 7,538 $ 6,464
Depreciation and
amortization(d) ..... 2,588 2,981 3,800 5,292 6,736 8,536 1,548 1,659 2,109
Capital expenditures ... 1,419 3,935 3,725 6,752 6,498 6,498 1,744 816 816
Cash interest expense .. 24,703 6,234
Ratio of earnings to
fixed charges and
preferred
dividends(e) ........ N/A N/A 23.21x 23.11x 16.46x -- 21.58x 4.40x --
Adjusted data:
Ratio of EBITDA to
cash interest
expense ............. 1.78x 1.70x(f)
Ratio of pro forma debt
to EBITDA ........... 5.91x 6.19x(f)
<CAPTION>
As of October 31, As of January 31,
------------------------------------------------------ -----------------------------------
Pro Forma
1993(a) 1994(a) 1995 1996 1997 1997 1998 1998
--------- --------- -------- -------- -------- --------- --------- ---------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance sheet data:
Working capital ........ N/A N/A $ 17,483 $ 34,523 $ 51,243 $ 37,432 $ 61,552 $ 60,584
Total assets ........... $ 66,667 $126,566 151,168 189,058 199,600 193,633 200,379 290,144
Total debt ............. N/A N/A 4,704 2,044 6,088 3,348 4,289 259,289
Mandatorily redeemable
preferred stock ..... 91,374
</TABLE>
- ----------
(a) Prior to 1995, the Company did not determine its financial position or
results of operations on a stand alone basis as its financial and
management reporting information was commingled with other operating
divisions of HII. As a result, the Company's summary data as of and for
the years ended October 31, 1994 and 1993 is limited and certain
historical financial data is not available.
(b) Operating expenses are shown net of other income.
(c) EBITDA is defined as operating income before depreciation, amortization,
the allocation of certain HII corporate overhead charges (the "HII
Management Fee") and charges related to certain depreciation expenses for
HarnCo assets. For fiscal 1997 and the three months ended January 31,
1998, the HII Management Fee was $2,862 and $677, respectively, and the
charges related to certain depreciation expenses for HarnCo assets were
$724 and $245, respectively. Pro forma EBITDA represents operating income
before depreciation, amortization and the charges related to certain
depreciation expenses for HarnCo assets. EBITDA is not a calculation based
on generally accepted accounting principles. EBITDA should not be
considered as an alternative to net income or operating income, as an
indicator of the operating performance of Holdings or as an alternative to
operating cash flows as a measure of liquidity.
(d) Pro forma includes $1,800 and $450 of amortization of debt issuance costs
for fiscal 1997 and the three months ended January 31, 1998, respectively.
(e) For purposes of calculating the ratio of earnings to fixed charges and
preferred dividends, earnings are defined as net income before tax plus
fixed charges. Fixed charges consist of interest expense (including
amortization of debt issuance costs) and the portion of rental expense
that is representative of the interest factor (deemed to be one third of
annual rent expense). Preferred dividends, for purposes of the ratio,
reflect earnings before tax required to pay preferred stock dividends and
assume that such dividends are paid in kind. For the year ended October
31, 1997 and for the three months ended January 31, 1998 Holdings had a
deficiency of pro forma earnings to fixed charges of $9,204 and $7,339,
respectively.
(f) Reflects a pro forma calculation for the twelve months ended January 31,
1998.
14
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
risk factors should be considered carefully in evaluating Holdings and its
business before making an investment in the New Series A Senior Preferred Stock.
This Prospectus contains forward-looking statements which involve risks and
uncertainties. Holdings' actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere in this
Prospectus.
Substantial Leverage
Holdings and its subsidiaries have incurred significant debt in connection
with the Transactions. As of January 31, 1998, after giving pro forma effect to
the Transactions, including the Senior Note Offering and borrowings incurred
under the New Credit Facility, Holdings and its subsidiaries would have had an
aggregate of approximately $259.3 million of outstanding Indebtedness (all of
which will be direct obligations of substantially all of its subsidiaries). The
New Credit Facility, which is guaranteed by Holdings, also permits additional
Indebtedness by the Company of up to $100.0 million thereunder. In addition, the
Surety Arrangement provides a surety line of $60.0 million to the Company. See
"Description of the New Credit Facility" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources." In addition, subject to certain restrictions in the New Credit
Agreement and the indenture governing the Senior Notes (the "Note Indenture"),
the Company and its subsidiaries may incur additional indebtedness from time to
time to finance acquisitions, provide for working capital or capital
expenditures or other purposes.
The level of Holdings' consolidated indebtedness (including the
Indebtedness of the Company and its subsidiaries) could have important
consequences to holders of the New Series A Senior Preferred Stock, including,
but not limited to, the following: (i) the ability of the Company to obtain
additional financing for acquisitions, working capital, capital expenditures or
other purposes, if necessary, may be impaired or such financing may not be
available on terms favorable to the Company; (ii) the Company will have
significant cash requirements for debt service; (iii) financial and other
covenants and operating restrictions imposed by the terms of the Note Indenture
and by the New Credit Facility will limit, among other things, its ability to
borrow additional funds or to dispose of assets; (iv) the Company may be at a
competitive disadvantage because it will be more highly leveraged than some of
its competitors; and (v) a downturn in the Company's businesses will have a more
significant impact on its results of operations and cash flows.
The ability of the Company to satisfy its obligations, including payment
obligations under the New Credit Facility, as to which principal payments will
commence on June 30, 1998, the Senior Notes and any payments to Holdings to
satisfy its cash needs, will be primarily dependent upon the future financial
and operating performance of the Company's subsidiaries and, if needed, upon the
Company's ability to renew or refinance borrowings or to raise additional equity
capital. In addition, although the New Credit Facility includes the Revolving
Credit Facility (as defined herein), future borrowings thereunder are subject to
satisfaction of certain conditions, including a borrowing base test. Each of
these alternatives is dependent upon financial, business and other general
economic factors affecting the Company and its subsidiaries and the Company's
businesses in particular, many of which are beyond their control. If the Company
and its subsidiaries are unable to generate sufficient cash flow to meet their
debt service obligations and satisfy Holdings' cash requirements, including any
future cash dividend requirements to the holders of its preferred stock, they
will have to pursue one or more alternatives, such as reducing or delaying
capital expenditures, refinancing debt or selling assets. There can be no
assurance that any such alternatives could be accomplished on satisfactory terms
or that such actions would yield sufficient funds to meet the Company's cash
requirements. While management believes that cash flow from operations will
provide an adequate source of long-term liquidity, a decrease in operating cash
flow resulting from economic conditions, competition or other uncertainties
beyond the Company's control would increase the need for alternative sources of
liquidity. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
15
<PAGE>
Holding Company Structure; Reliance and Restrictions on Subsidiaries for Cash
Flow
As a holding company that conducts all of its operations through
subsidiaries, Holdings is dependent on dividends or other payments from its
subsidiaries to satisfy its cash needs, including to pay cash dividends on the
New Series A Senior Preferred Stock, to service any debt including the Exchange
Debentures (if issued) and to redeem the New Series A Senior Preferred Stock or
retire the Exchange Debentures at maturity. Because the subsidiaries are
separate legal entities that have no obligation in respect of the New Series A
Senior Preferred Stock or the Exchange Debentures, in order to pay cash
dividends on the New Series A Senior Preferred Stock, to service the Exchange
Debentures and to redeem the New Series A Senior Preferred Stock or retire the
Exchange Debentures at maturity, Holdings will be required to obtain dividends,
distributions or loans from its subsidiaries, or obtain funds in a public or
private equity or debt offering or enter into a credit facility. However, the
New Credit Facility and the Note Indenture will contain restrictions on the
ability of the Company to pay dividends or make other restricted payments to
Holdings. Moreover, the terms of the New Series A Senior Preferred Stock will
limit Holdings' ability to enter into transactions with affiliates and the New
Credit Facility and the Note Indenture will limit the ability of Holdings to
incur Indebtedness. Any rights of Holdings (and thus the holders of the New
Series A Senior Preferred Stock) and its creditors (including the holders of
Exchange Debentures, if issued) to participate in the assets of any of Holdings'
subsidiaries upon any liquidation or reorganization of any such subsidiary will
be subject to the prior claims of the subsidiary's creditors, including trade
creditors.
Maturity
The $200.0 million principal amount due under the Senior Notes and the
then outstanding borrowings under the New Credit Facility ($55.0 million as of
the Recapitalization Closing) will mature and become due on April 1, 2008 and
April 1, 2005, respectively. Holdings is required, subject to certain
conditions, to redeem the New Series A Senior Preferred Stock on April 1, 2009,
and the Exchange Debentures (if issued) mature on April 1, 2009. Many factors,
certain of which are beyond Holdings' control, will affect its and its
subsidiaries' performance, and, therefore, the ability of Holdings and its
subsidiaries to meet its ongoing obligations to redeem or repay such
obligations.
Ranking of New Series A Senior Preferred Stock; Subordination of Exchange
Debentures; Pledge of Assets
The New Series A Senior Preferred Stock will rank junior in right of
payment to all existing and future liabilities and obligations (whether or not
for borrowed money) of Holdings and senior in right of payment to each other
existing and future classes and series of capital stock issued by Holdings. The
holders of the New Series A Senior Preferred Stock will have no voting rights,
except as otherwise required by law and in certain circumstances described
herein. See "Description of New Series A Senior Preferred Stock and Exchange
Debentures."
The Exchange Debentures will be unsecured obligations of Holdings and will
be subordinated in right of payment to all existing and future Senior
Indebtedness (as defined in the Exchange Indenture) of Holdings. The Exchange
Debentures will also be structurally subordinated to all indebtedness and other
liabilities of Holdings' subsidiaries, including the obligations of the Company
under the New Credit Facility and the Senior Notes. At January 31, 1998, on a
pro forma basis, after giving effect to the Transactions, the aggregate
principal amount of Indebtedness which would have been structurally senior to
the Exchange Debentures would have been $259.3 million. See "--Holding Company
Structure; Reliance and Restrictions on Subsidiaries for Cash Flow."
Restrictive Covenants; Limited Remedies
The Restated Certificate and the Exchange Indenture contain certain
covenants (some of which in the Exchange Indenture may be more restrictive than
those contained in the Restated Certificate) that, among other things, limit the
ability of Holdings, the Company and its subsidiaries to incur additional
indebtedness, pay dividends and make certain other restricted payments, make
investments, repurchase stock, enter into certain
16
<PAGE>
transactions with affiliates, issue capital stock of their subsidiaries,
consolidate or merge with any person in a transaction involving all or
substantially all of the consolidated assets of Holdings, or transfer or sell
all or substantially all of the consolidated assets of Holdings. In addition,
the Exchange Indenture limits the ability of Holdings and its subsidiaries to
consummate certain asset sales and create dividend or other payment restrictions
affecting their subsidiaries. However, in the case of the Series A Senior
Preferred Stock, the only remedies of a holder thereof for any violation of any
of the above covenants will be to elect, voting with the Series B Junior
Preferred Stock as one class, the lesser of two directors and 25% of the board
of directors of Holdings. Holders of the New Series A Senior Preferred Stock
will have no rights to enjoin, accelerate the redemption of the New Series A
Senior Preferred Stock or recover damages arising from, any such breach. MHE
Investments will retain control of Holdings notwithstanding such breach and the
voting rights of the New Series A Senior Preferred Stock arising therefrom. See
"Description of New Series A Senior Preferred Stock and Exchange
Debentures--Certain Covenants."
Restrictive Covenants in the New Credit Facility and Note Indenture
The New Credit Facility and the Note Indenture contain a number of
covenants that, among other things, limit Holdings' and its subsidiaries'
ability to prepay subordinated indebtedness, dispose of certain assets, create
liens, make capital expenditures, make certain investments or acquisitions and
otherwise restrict corporate activities. In addition, the New Credit Facility
limits Holdings' and its subsidiaries' ability to incur indebtedness and the
Note Indenture will limit the Company's and its subsidiaries' ability to incur
indebtedness. The New Credit Facility also requires Holdings and its
subsidiaries to comply with certain financial ratios and tests, under which
Holdings and its subsidiaries are required to achieve and maintain certain
financial and operating results. The ability of Holdings and its subsidiaries to
comply with such provisions may be affected by events beyond Holdings' control.
A breach of any of these covenants would result in a default under the Note
Indenture or the New Credit Facility, or both. In the event of any such default,
the lenders under the New Credit Facility and/or the holders of the Senior Notes
could elect to declare all amounts borrowed under the New Credit Facility and/or
the Senior Notes, as applicable, together with accrued interest thereon, to be
due and payable which would be an event of default under the Surety Arrangement.
There can be no assurance that the Company would have sufficient assets to pay
indebtedness then outstanding under the New Credit Facility, the Senior Notes
and obligations under the Surety Arrangement and have funds remaining to satisfy
any of the dividend payments on, or to redeem, the New Series A Senior Preferred
Stock. Any future refinancing of the New Credit Facility, the Senior Notes or
any future Indebtedness is likely to contain similar restrictive covenants. See
"Description of the New Credit Facility" and "The Senior Note Offering."
Termination of Relationship with Harnischfeger
Historically, the MHE Business operated as one of several operating units
of HII, the owner of all of the capital stock of HarnCo, and accounted for 11%
of net sales and 12% of operating income of HII in fiscal 1997. There can be no
assurance that the change of the relationship with HII will not adversely affect
the Company's ability to attract or retain customers. Additionally, the Company
has been able to draw on the financial, managerial, and administrative resources
of HarnCo and HII, and there can be no assurance that the future unavailability
of such resources will not adversely affect operations of the Company. There can
be no assurance that the Company will not encounter unanticipated problems or
expenses operating as an independent company or that the Company will be able to
achieve results comparable to those achieved by the MHE Business in the past.
HarnCo and its affiliates historically supplied the Company, among other
things, with information services, accounting services, human resources,
warehouse and order processing services. In connection with the
Recapitalization, the Company entered into a Transition Services Agreement,
pursuant to which HarnCo and its affiliates will provide such services to the
Company and its subsidiaries located in the United States for a period of up to
24 months. The Company also entered into a Component and Manufactured Products
Supply Agreement, pursuant to which HarnCo and its affiliates will supply the
Company and its subsidiaries located in the United States with their
requirements for certain manufactured products for a period of up to two years
after the Recapitalization Closing. When these agreements terminate, there can
be no assurance that the Company will be able to enter into
17
<PAGE>
new arrangements on substantially the same terms as those in effect during the
operation of the MHE Business by HarnCo or that the Company will be able to
perform or obtain such services at costs comparable to those currently
anticipated by the Company. See "The Transactions" and "Certain Relationships
and Related Transactions."
Historically, benefits for the Company's employees have been provided by
HII at expense levels lower than expense levels at which the Company would be
able to provide comparable benefits as an independent entity. The Company may be
required to either provide lower benefits to certain segments of its employee
population or incur additional costs to maintain benefit levels, or both. A
reduction in benefits could adversely affect the Company's ability to attract
and retain employees.
The Company also was provided with various forms of credit support by HII
and its affiliates. There can be no assurance that the termination of its
relationship with HarnCo will not adversely affect the Company's ability to
obtain or maintain credit support. See "--Risk of Inability to Obtain Sufficient
Credit Support."
Risk of Inability to Obtain Sufficient Credit Support
Historically, HarnCo and certain affiliates of HarnCo not engaged in the
MHE Business (the "Non-MHE HarnCo Affiliates"), including HII, provided credit
support for the MHE Business. This credit support included HarnCo and the
Non-MHE HarnCo Affiliates: (i) providing working capital; (ii) guaranteeing
financial and performance obligations with respect to customer and supply
contracts and relationships; (iii) providing collateral and credit support with
respect to letters of credit, surety bonds or other arrangements of the MHE
Business; and (iv) otherwise being directly or contingently liable for the MHE
Business's obligations (collectively, the "Credit Support Obligations"). In
addition, prior to the October 1997 Drop Down, a significant portion of the MHE
Business was conducted directly by HarnCo, including the execution of certain
contracts. For the fiscal year ended October 31, 1997, HII had total revenues of
approximately $3.1 billion and operating income of $319.3 million.
HII and the Company have entered into a credit indemnification agreement
(the "Credit Indemnification Agreement") pursuant to which HII will maintain in
place the Credit Support Obligations in existence at the Recapitalization
Closing but have no further duty to extend, renew or enter into any new Credit
Support Obligations (except as to the MHE Business obligations existing at the
Recapitalization Closing). The Company also has entered into a surety
arrangement to provide credit support for the MHE Business (the "Surety
Arrangement"). The Surety Arrangement provides a surety line of $60.0 million,
in the aggregate, with a limit of $20.0 million for any single obligation. See
"Description of the Surety Arrangement."
While Holdings believes that the Surety Arrangement will provide
sufficient credit support to operate the MHE Business, there can be no assurance
that the Surety Arrangement will be sufficient or that the lack of Credit
Support Obligations in the future from HII and its affiliates will not adversely
affect the MHE Business's relationships with existing or potential customers
and, consequently, adversely impact its business plan and operating strategy.
Labor Relations
As of January 31, 1998, the Company had 2,072 employees. Of the Company's
833 hourly employees, approximately 74% are represented by unions, including
approximately 151 employees in the United States. Until the October 1997 Drop
Down, the Company's unionized employees in the United States were represented
under a collective bargaining agreement between HarnCo and the United
Steelworkers of America, Local 1114 ("Local 1114"), which expires August 31,
1998. In conjunction with the restructuring of the MHE Business in anticipation
of its sale, these employees became employees of a newly created subsidiary of
the Company. The Company will honor the collective bargaining agreement as to
its employees through the remainder of its term. Although negotiations with
respect to a new collective bargaining agreement have not yet begun, the Company
contemplates seeking changes in benefit programs. In addition, the Company is a
party to several other agreements with unions representing its international
employees, all of which have one year terms. There can be no assurance that the
Company will be able to successfully negotiate a new collective bargaining
agreement with Local 1114 or any other
18
<PAGE>
collective bargaining agreements upon their expiration without work stoppages.
Management believes that its current relations with its employees are good, and
none of the Company's businesses has experienced a significant strike, slowdown,
or lockout within the last ten years. There can be no assurance, however, that
the Company's relations with its employees will continue to be good or that the
Company will not experience significant work stoppages in the future. See
"Business--Employees."
Product Liability
The Company is periodically subject to product liability claims relative
to its products, which, if successful, could have a material adverse impact on
the Company. The Company has obtained liability insurance coverage that it
believes will be adequate to satisfy claims with respect to events occurring
after the Recapitalization Closing, but there can be no assurance that the
Company will be able to maintain such coverage or obtain alternate coverage in
the future at a reasonable cost, or that such coverage will be sufficient to
satisfy such future claims, if any.
In connection with the October 1997 Drop Down, except as noted below, the
Company assumed all liabilities with respect to product liability claims of the
MHE Business incurred prior to the Recapitalization Closing. While the Company
believes that it will be able to avail itself of HII's third party insurance
with respect to any such product liability damages that exceed the self insured
thresholds, historically (and until the Recapitalization Closing), a significant
level of MHE Business product liability damages (other than with respect to
asbestos damages) has been self insured by HII.
In addition, until the 1980s, HarnCo manufactured brakes that included
lining materials, and used other non-brake components, that contained asbestos.
HarnCo has been and is currently a defendant in numerous asbestos related
lawsuits and, will likely be named in future such actions. The Company has
agreed to indemnify HarnCo and its affiliates with respect to any liabilities in
excess of insurance arising in connection with past and future asbestos
litigation relating to the MHE Business. HII's insurance policies generally
provide insurance coverage for exposures to asbestos through the mid 1980s. To
date, HII's insurer has paid all liabilities relating to asbestos claims (which
amounts have not been material to the MHE Business) but there can be no
assurance such insurers will continue to do so in the future or that there will
be insurance coverage for such claims.
Implementation of Business Strategy; Future Acquisitions
The Company intends to pursue a business strategy of attempting to
increase revenues and cash flow through a combination of expanding its
participation in aftermarket opportunities, expanding its distribution network,
reducing costs and making strategic acquisitions. No assurance can be given that
the Company will be successful in implementing this strategy. See
"Business--Business Strategy." There can be no assurance that the Company will
be able to make acquisitions on terms favorable to the Company. If the Company
completes any such future acquisitions, it may encounter various associated
risks, including the possible inability to integrate an acquired business into
the Company's operations, diversion of management's attention and unanticipated
problems or liabilities, some or all of which could have a material adverse
effect on the Company's operations and financial performance.
Financing of Expansion Program; Capital Expenditures
The Company intends to fund its expansion and other capital expenditures
through a combination of internally generated funds and borrowings under the New
Credit Facility. The Company's expansion may also require additional funds.
There can be no assurance that the Company will be able to obtain such
additional funding. Additionally, the New Credit Facility, the Note Indenture,
the Restated Certificate and the Exchange Indenture (if applicable) contain
certain restrictions on the Company's ability to borrow under the Acquisition
Facility (as defined herein) and the Revolving Credit Facility. If the Company
were unable to borrow under the New Credit Facility or obtain additional
financing, it might have to curtail or halt its expansion program. See
"--Substantial
19
<PAGE>
Leverage," "--Restrictive Covenants in the New Credit Facility and Note
Indenture," "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" and "Description of the
New Credit Facility."
Risks Related to International Markets
The Company has operations and assets located in Canada, Mexico, the
United Kingdom, South Africa, and Singapore and is establishing joint ventures
in Malaysia and Saudi Arabia. The Company also sells its products through
distributors and agents in over 50 countries, some of which are merely ad hoc
arrangements and may be terminated at any time. International operations expose
the Company to a number of risks, including currency exchange rate fluctuations,
trade barriers, exchange controls, risk of governmental expropriation, political
and legal risks and restrictions, foreign ownership restrictions and risks of
increases in taxes. Furthermore, some foreign jurisdictions have laws limiting
the right and ability of entities organized or operating therein to pay
dividends or remit earnings to affiliated companies unless specified conditions
are met. The inability of the Company, or limitations on its ability, to conduct
its foreign operations or distribute its products internationally could
adversely affect the Company's operations and financial performance.
Competition
The markets in which the Company operates are highly competitive. Both
domestically and internationally, the Company faces competition from a number of
different manufacturers in each of its product lines, some of which have greater
financial and other resources than the Company. The principal competitive
factors affecting the Company include performance, functionality, price, brand
recognition, customer service and support, financial strength and stability, and
product availability. There can be no assurance that the Company will be able to
compete successfully with its existing competitors or with new competitors.
Failure to compete successfully could have a material adverse effect on the
Company's financial condition, liquidity and results of operations. See
"Business--Competition."
Sensitivity to Economic Cycles
The Company's business is affected by the state of the United States and
global economy in general, and by the varying economic cycles of the industries
in which its products are used. There can be no assurance that any future
condition of the United States economy or the economies of the other countries
in which the Company does business will not have an adverse effect on the
Company's business, operations or financial performance.
Control by Chartwell
An affiliate ("Chartwell") of Chartwell Investments Inc. controls
approximately 88.2% of the voting stock of Holdings. As a result, Chartwell has
the power to appoint all but one of the members of the Board of Directors of
Holdings and has sufficient voting power to determine (without consent of
Holdings' other stockholders) the outcome of any corporate transaction or other
matter submitted to the stockholders for approval, including any public
offering, merger, consolidation or sale of substantially all of Holdings'
assets. Consequently, circumstances could arise in which the interests of
Chartwell, as an equity holder, could be in conflict with the interests of the
holders of the New Series A Senior Preferred Stock and, if issued, the Exchange
Debentures.
Dependence on Key Personnel
The Company's future success depends to a significant extent on the
efforts and abilities of members of the Company's senior management team. While
members of the senior management team have signed employment
20
<PAGE>
contracts, the loss of the services of these individuals could have a material
adverse effect on the Company's business, financial condition, and results of
operations. The Company believes that its future success will also depend
significantly upon its ability to attract, motivate, and retain additional
highly skilled managerial personnel. Competition for such personnel is intense,
and there can be no assurance that the Company will be successful in attracting,
assimilating, and retaining the personnel it requires to grow and operate
profitably.
Dependence on Principal Facilities
The Company's principal operations are conducted at certain key
facilities, some of which are the only producers of certain components for the
Company. The Company has not experienced any material disruption of operations
at its key facilities (other than a fire in 1994 at its principal United Kingdom
manufacturing facility in Loughborough, England), but if operations at any of
such facilities were disrupted as a result of equipment failures, natural
disasters, work stoppages or other reasons, the Company's business and results
of operations could be adversely affected. Although the Company believes its
property damage insurance and business interruption insurance is adequate to
provide for reconstruction of its facilities and equipment or mitigate losses
resulting from any production shutdown caused by an insured loss, as necessary,
there can be no assurance that such insurance will be adequate to cover losses
that may occur.
Environmental Matters
The Company is subject to various laws and regulations relating to the
protection of the environment in each of the countries in which it operates.
These laws and regulations often mandate compliance with increasingly stringent
and costly requirements. The Company is not aware of any environmental matters
currently relevant to its business, individually or in the aggregate, that could
be expected to have a material adverse effect upon its financial condition,
except that the Company is awaiting the results of tests to determine compliance
with emission limits for air quality at its Loughborough, England facility,
which became effective in April 1998. The risk of environmental costs and
liabilities, however, is inherent in the Company's past and present operations,
and there can be no assurance that continued compliance with existing or future
requirements, the cost of such compliance and claims for damages to property and
person resulting from the Company's operations will not have a material adverse
effect upon the Company's financial condition or results of operations. See
"Business--Governmental Regulation."
Risk of Inability to Finance a Change of Control
Upon a Change of Control, Holdings is required to offer to repurchase all
outstanding New Series A Senior Preferred Stock at 101% of the liquidation
preference thereof, plus accumulated and unpaid dividends to the date of
repurchase, and all of the outstanding Exchange Debentures (if issued) at 101%
of the principal amount thereof, plus accrued and unpaid interest thereon to
date of purchase, and the Company is required to offer to repurchase all Senior
Notes at 101% of the principal amount thereof, plus accrued and unpaid interest
to the date of repurchase. A Change of Control will trigger an event of default
under the New Credit Facility which would permit the lenders thereto and the
lenders under any agreement containing cross-default or similar provisions,
including the Surety Arrangement, to accelerate the debt thereunder. Therefore,
upon the occurrence of a Change of Control, the Company may be required to repay
such other outstanding indebtedness and to repurchase the Senior Notes and any
other indebtedness and preferred stock of the Company containing similar change
of control provisions, which payments must be made prior to making any
distributions to Holdings. Consequently, there can be no assurance that
sufficient funds will be available at the time of any Change of Control for the
Company to pay such other obligations and to make available to Holdings funds
for any required repurchases of New Series A Senior Preferred Stock or Exchange
Debentures (if issued) tendered. Further, the provisions of the Restated
Certificate may not afford holders of the New Series A Senior Preferred Stock,
and the Exchange Indenture may not afford holders of the Exchange Debentures (if
issued), protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction involving Holdings
that may adversely affect holders of the New
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Series A Senior Preferred Stock or Exchange Debentures (if issued), if the
transaction does not result in a Change of Control.
Absence of Public Market; Restrictions on Transfer
There is no existing trading market for the Old Series A Senior Preferred
Stock, and there can be no assurance regarding the future development of a
market for the New Series A Senior Preferred Stock, or the ability of holders
thereof to sell the same or the price at which such holders may be able to sell
the New Series A Senior Preferred Stock. If such a market were to develop, the
New Series A Senior Preferred Stock or Exchange Debentures, if issued, could
trade at prices that may be higher or lower than the initial offering price
depending on many factors, including prevailing interest rates, Holdings'
operating results and the market for similar securities. The Initial Purchaser
has advised Holdings that it is making a market in the Old Series A Prefered
Stock and that it currently intends to make a market in the New Series A Senior
Preferred Stock and, if issued, in the Exchange Debentures. The Initial
Purchaser is not obligated to do so, however, and any market-making with respect
to such securities may be discontinued at any time without notice. Therefore,
there can be no assurance as to the liquidity of any trading market for such
securities, or that a market therefor will develop. Holdings does not intend to
apply for listing or quotation of the securities on any securities exchange or
stock market.
Consequences of the Exchange Offer on Non-Tendering Holders of the Old Series A
Senior Preferred Stock
Holdings intends for the Exchange Offer to satisfy its registration
obligations under the Exchange Offer Registration Rights Agreement. If the
Exchange Offer is consummated, Holdings does not intend to file further
registration statements for the sale of other disposition of Old Series A Senior
Preferred Stock. Consequently, following completion of the Exchange Offer,
holders of shares of Old Series A Senior Preferred Stock seeking liquidity in
their investment would have to rely on an exemption to the registration
requirements under applicable securities laws, including the Securities Act,
with respect to any sale or other disposition of the shares of Old Series A
Senior Preferred Stock.
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THE EXCHANGE OFFER
Terms of the Exchange Offer
General
The shares of Old Series A Senior Preferred Stock were sold by Holdings on
March 30, 1998, in a private placement in reliance on Regulation D under the
Securities Act and/or on Section 4(2) of the Securities Act. The shares of Old
Series A Senior Preferred Stock were sold to the Initial Purchaser who resold
the shares of Old Series A Senior Preferred Stock to "qualified institutional
buyers" within the meaning of Rule 144A under the Securities Act. The Initial
Purchaser required as a condition to the purchase of the shares of Old Series A
Senior Preferred Stock that Holdings grant the purchasers of the shares of Old
Series A Senior Preferred Stock certain registration rights pursuant to the
Exchange Offer Registration Rights Agreement. The Exchange Offer Registration
Rights Agreement required Holdings to file with the Commission following the
closing of the Offering of the shares of Old Series A Senior Preferred Stock on
March 30, 1998 (the "Closing"), a registration statement relating to an exchange
offer pursuant to which shares which are substantially identical to the shares
of Old Series A Senior Preferred Stock would be offered in exchange for the then
outstanding shares of Old Series A Senior Preferred Stock tendered at the option
of the holders thereof. The form and terms of the shares of New Series A Senior
Preferred Stock are identical in all material respects to the form and terms of
the shares of Old Series A Senior Preferred Stock except (i) that the shares of
New Series A Senior Preferred Stock have been registered under the Securities
Act, (ii) that the shares of New Series A Senior Preferred Stock are not
entitled to certain registration rights which are applicable to the shares of
Old Series A Senior Preferred Stock under the Exchange Offer Registration Rights
Agreement, and (iii) certain contingent dividend rate provisions applicable to
the shares of Old Series A Senior Preferred Stock are generally not applicable
to the shares of New Series A Senior Preferred Stock. Exchange Debentures
issuable in exchange for shares of New Series A Senior Preferred Stock will have
the same terms as Exchange Debentures issuable in exchange for shares of Old
Series A Senior Preferred Stock. In the event that the applicable
interpretations of the staff of the Commission do not permit Holdings to effect
the Exchange Offer, or if for any other reason the Exchange Offer is not
consummated within 180 days of the Exchange Offer Registration Rights Agreement,
Holdings agreed to use its best efforts to cause to become effective a shelf
registration statement with respect to the resale of the shares of Old Series A
Senior Preferred Stock and to keep such shelf registration statement effective
for a period of up to two years. The Exchange Offer is being made to satisfy the
contractual obligations of Holdings under the Exchange Offer Registration Rights
Agreement.
Holdings has agreed that if (i) Holdings fails to file the registration
statement relating to the Exchange Offer within 60 days following the Issue
Date, (ii) such registration statement (or, if applicable, the shelf
registration statement) is not declared effective within 135 days following the
Issue Date, (iii) Holdings has not exchanged the New Series A Senior Preferred
Stock for all Old Series A Senior Preferred Stock validly tendered in accordance
with the terms of the Exchange Offer on or prior to 45 days after the date on
which such registration statement was declared effective or (iv) certain other
specified events relating to the effectiveness of such registration statement or
shelf registration statement occur, then the per annum dividend rate on the
shares of Old Series A Senior Preferred Stock will increase by 50 basis points
for the period from the occurrence of such default and the per annum dividend
rate will increase by an additional 25 basis points for each subsequent 90 day
period during which such default remains uncured, up to a maximum of 200 basis
points per annum in excess of the initial dividend rate borne by the Old Series
A Senior Preferred Stock, until such time as no default is in effect (at which
time the dividend rate will revert to its initial rate).
The holders of any shares of Old Series A Senior Preferred Stock not
tendered in the Exchange Offer will not be entitled to require Holdings to file
a shelf registration statement, and the dividend rate on such shares of Old
Series A Senior Preferred Stock will remain at its initial level. See "Preferred
Stock Exchange Offer; Registration Rights."
An exchange offer shall be deemed to have been consummated upon the
earlier to occur of (i) Holdings having exchanged shares of New Series A Senior
Preferred Stock for all outstanding shares of Old Series A Senior Preferred
Stock (other than shares of Old Series A Senior Preferred Stock held by a
Restricted Holder) pursuant to
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such exchange offer and (ii) Holdings having exchanged, pursuant to such
exchange offer, shares of New Series A Senior Preferred Stock for all shares of
Old Series A Senior Preferred Stock that have been validly tendered and not
withdrawn on the Expiration Date. In such event, holders of shares of Old Series
A Senior Preferred Stock seeking liquidity in their investment would have to
rely on exemptions to registration requirements under applicable securities
laws, including the Securities Act.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, Holdings will accept all shares
of Old Series A Senior Preferred Stock validly tendered prior to 5:00 p.m., New
York City time, on the Expiration Date. The exchange of New Series A Senior
Preferred Stock for shares of Old Series A Senior Preferred Stock will be made
(i) with respect to all shares of Old Series A Senior Preferred Stock validly
tendered and not withdrawn on or prior to the Early Exchange Date, within two
business days following the Early Exchange Date, and (ii) with respect to all
shares of Old Series A Senior Preferred Stock validly tendered and not withdrawn
after the Early Exchange Date but on or prior to the Expiration Date, within two
business days following the Expiration Date. The shares of New Series A Senior
Preferred Stock issued pursuant to the Exchange Offer will be delivered promptly
following each of the Early Exchange Date and the Expiration Date. Holdings will
issue $1,000 liquidation preference of New Series A Senior Preferred Stock in
exchange for each $1,000 liquidation preference of outstanding Old Series A
Senior Preferred Stock accepted in the Exchange Offer.
Based on an interpretation by the staff of the Commission set forth in SEC
no-action letters issued to unrelated third parties, Holdings believes that
shares of New Series A Senior Preferred Stock issued pursuant to the Exchange
Offer in exchange for shares of Old Series A Senior Preferred Stock may be
offered for resale, resold and otherwise transferred by the holders thereof
(other than a Restricted Holder) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such shares
of New Series A Senior Preferred Stock are acquired in the ordinary course of
such holders' business and such holders are not participating, do not intend to
participate and have no arrangement or understanding with any person to
participate in the distribution of such shares of New Series A Senior Preferred
Stock. See "KC-III Communications Corporation," SEC No-Action Letter (available
May 14, 1993); "Mary Kay Cosmetics, Inc.," SEC No-Action Letter (available June
5, 1991); "Morgan Stanley & Co., Incorporated," SEC No-Action Letter (available
June 5, 1991); and "Exxon Capital Holdings Corporation," SEC No-Action Letter
(available May 13, 1988). Each broker-dealer that receives shares of New Series
A Senior Preferred Stock for its own account in exchange for shares of Old
Series A Senior Preferred Stock, where such shares of Old Series A Senior
Preferred Stock were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such shares of New Series A Senior
Preferred Stock. See "Plan of Distribution."
If any person were to participate in the Exchange Offer for the purpose of
distributing securities in a manner not permitted by the Commission's
interpretation, such person (i) could not rely on the position of the staff of
the Commission enunciated in "Exxon Capital Holdings Corporation" or similar
interpretive letters and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. Accordingly, each eligible holder wishing to accept the
Exchange Offer must represent to Holdings in the Letter of Transmittal that the
conditions described above have been met.
In connection with the issuance of the shares of Old Series A Senior
Preferred Stock, Holdings arranged for the inclusion of the Old Series A Senior
Preferred Stock initially purchased by qualified institutional buyers on the
Private Offerings, Resales and Trading through Automated Linkages (PORTAL)
Market of the National Association of Securities Dealers, Inc. Holdings also
arranged for the shares of Old Series A Senior Preferred Stock initially
purchased by qualified institutional buyers to be issued and transferable in
book-entry form through the facilities of DTC, acting as depository, and in
DTC's Same-Day Funds Settlement System. The shares of New Series A Senior
Preferred Stock will also be issuable and transferable in book-entry form
through DTC in the Same-Day Funds Settlement System.
As of the date of this Prospectus, $57,710,000 in aggregate liquidation
preference of the Old Series A Senior Preferred Stock is outstanding.
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<PAGE>
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of shares of Old Series A Senior Preferred Stock as of
, 1998 (the "Record Date").
Holdings shall be deemed to have accepted validly tendered shares of Old
Series A Senior Preferred Stock when, as and if Holdings has given oral or
written notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering holders of shares of Old Series A Senior Preferred Stock
for the purpose of receiving shares of New Series A Senior Preferred Stock from
Holdings and delivering shares of New Series A Senior Preferred Stock to such
holders.
If any tendered shares of Old Series A Senior Preferred Stock are not
accepted for exchange because of an invalid tender or the occurrence of certain
other events set forth herein, certificates for any such unaccepted shares of
Old Series A Senior Preferred Stock will be returned, without expense, to the
tendering holder thereof as promptly as practicable after the Expiration Date.
The registration expenses to be incurred in connection with the Exchange
Offer, including fees and expenses of the Exchange Agent and Trustee and
accounting and legal fees, will be paid by Holdings. Holdings has agreed to pay,
subject to the instructions in the Letter of Transmittal, all transfer taxes, if
any, relating to the sale or disposition of such holder's shares of Old Series A
Senior Preferred Stock pursuant to the Exchange Offer. See "--Fees and
Expenses."
Expiration Date; Extensions; Amendments
The term "Expiration Date" shall mean , 1998, unless
Holdings, in its sole discretion, extends the Exchange Offer, in which case the
term "Expiration Date" shall mean the latest date to which the Exchange Offer is
extended.
In order to extend the Expiration Date, Holdings will notify the Exchange
Agent of any extension by oral or written notice and will mail to the record
holders of shares of Old Series A Senior Preferred Stock an announcement
thereof, each prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date. Such announcement may state that
Holdings is extending the Exchange Offer for a specified period of time.
Holdings reserves the right (i) to delay acceptance of any shares of Old
Series A Senior Preferred Stock, to extend the Exchange Offer or to terminate
the Exchange Offer and to refuse to accept shares of Old Series A Senior
Preferred Stock not previously accepted, if any of the conditions set forth
herein under "--Conditions" shall have occurred and shall not have been waived
by Holdings, by giving oral or written notice of such delay, extension or
termination to the Exchange Agent, and (ii) to amend the terms of the Exchange
Offer in any manner deemed by it to be advantageous to the holders of the shares
of Old Series A Senior Preferred Stock. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof. If the Exchange Offer is amended in a manner determined
by Holdings to constitute a material change, Holdings will promptly disclose
such amendment in a manner reasonably calculated to inform the holders of the
shares of Old Series A Senior Preferred Stock of such amendment.
Without limiting the manner in which Holdings may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the Exchange Offer, Holdings shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to a financial news service.
Accrual of Dividends on the New Series A Senior Preferred Stock
The New Series A Senior Preferred Stock will accrue dividends from March
30, 1998, the date of issuance of the Old Series A Senior Preferred Stock,
payable semi-annually in arrears on April 1 and October 1 of each year
commencing on October 1, 1998, at the rate per annum equal to 12% of the
liquidation preference per share of the New Series A Senior Preferred Stock.
Holders of shares of Old Series A Senior Preferred Stock whose shares of
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<PAGE>
Old Series A Senior Preferred Stock are accepted for exchange will be deemed to
have waived the right to receive any payment in respect of dividends on such
shares of Old Series A Senior Preferred Stock accrued from March 30, 1998 until
the date of the issuance of the New Series A Senior Preferred Stock.
Procedure for Tendering
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof and mail or otherwise deliver such
Letter of Transmittal or such facsimile, together with the Old Series A Senior
Preferred Stock (unless such tender is being effected pursuant to the procedure
for book-entry transfer described below) and any other required documents, to
the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration
Date. Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or another eligible institution (an "Eligible Institution") unless
the shares of Old Series A Senior Preferred Stock tendered pursuant thereto are
tendered (i) by a registered holder who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the Letter
of Transmittal or (ii) for the account of an Eligible Institution.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the shares of Old
Series A Senior Preferred Stock by causing DTC to transfer such shares of Old
Series A Senior Preferred Stock into the Exchange Agent's account in accordance
with DTC's procedure for such transfer. Although delivery of shares of Old
Series A Senior Preferred Stock may be effected through book-entry transfer into
the Exchange Agent's account at DTC, 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 or confirmed by the
Exchange Agent at its addresses set forth herein prior to 5:00 p.m., New York
City time, on the Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE
WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a holder of shares of Old Series A Senior Preferred Stock
will constitute an agreement between such holder and Holdings in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
Delivery of all documents must be made to the Exchange Agent at its
address set forth herein. Holders may also request that their respective
brokers, dealers, commercial banks, trust companies or nominees effect such
tender for such holders.
The method of delivery of shares of Old Series A Senior Preferred Stock
and the Letter of Transmittal and all other required documents to the Exchange
Agent is at the election and risk of the holders. Instead of delivery by mail,
it is recommended that holders use an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. No Letter of
Transmittal or shares of Old Series A Senior Preferred Stock should be sent to
Holdings.
Only a holder of shares of Old Series A Senior Preferred Stock may tender
such shares of Old Series A Senior Preferred Stock in the Exchange Offer. The
term "holder" with respect to the Exchange Offer means any person in whose name
shares of Old Series A Senior Preferred Stock are registered on the books of
Holdings or any other person who has obtained a properly completed bond power
from the registered holder or any person whose shares of Old Series A Senior
Preferred Stock are held of record by DTC who desires to deliver such shares of
Old Series A Senior Preferred Stock at DTC.
Any beneficial holder whose shares of Old Series A Senior Preferred Stock
are registered in the name of his broker, dealer, commercial bank, trust company
or other nominee and who wishes to tender his shares of Old Series A Senior
Preferred Stock should contact the registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial holder wishes to
tender on his own behalf, such beneficial holder must, prior to completing and
executing the Letter of Transmittal and delivering his shares of Old Series A
Senior Preferred
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Stock, either make appropriate arrangements to register ownership of the shares
of Old Series A Senior Preferred Stock in such holder's name or obtain a
properly completed bond power from the registered holder. The transfer of record
ownership may take considerable time.
If the Letter of Transmittal is signed by a person other than the
registered holder of any shares of Old Series A Senior Preferred Stock listed
therein, such shares of Old Series A Senior Preferred Stock must be endorsed or
accompanied by appropriate bond powers which authorize such person to tender the
shares of Old Series A Senior Preferred Stock on behalf of the registered
holder, in either case signed as the name of the registered holder or holders
appears on the shares of Old Series A Senior Preferred Stock.
If the Letter of Transmittal or any shares of Old Series A Senior
Preferred Stock or bond powers are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of a corporation or
others acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and unless waived by Holdings, evidence satisfactory to
Holdings of their authority to so act must be submitted with the Letter of
Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered shares of Old Series A
Senior Preferred Stock will be determined by Holdings in its sole discretion,
which determination will be final and binding. Holdings reserves the absolute
right to reject any and all shares of Old Series A Senior Preferred Stock not
validly tendered or any shares of Old Series A Senior Preferred Stock Holdings'
acceptance of which would, in the opinion of counsel for Holdings, be unlawful.
Holdings also reserves the absolute right to waive any irregularities or
conditions of tender as to particular shares of Old Series A Senior Preferred
Stock. Holdings' interpretation of the terms and conditions of the Exchange
Offer (including the instructions in the Letter of Transmittal) will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of shares of Old Series A Senior Preferred Stock must be
cured within such time as Holdings shall determine. Neither Holdings, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of shares of Old Series A
Senior Preferred Stock nor shall any of them incur any liability for failure to
give such notification. Tenders of shares of Old Series A Senior Preferred Stock
will not be deemed to have been made until such irregularities have been cured
or waived. Any shares of Old Series A Senior Preferred Stock received by the
Exchange Agent that are not validly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent without cost to the tendering holder of such shares of Old Series A Senior
Preferred Stock unless otherwise provided in the Letter of Transmittal, as soon
as practicable following the Expiration Date.
By tendering, each holder will represent to Holdings that, among other
things (i) the shares of New Series A Senior Preferred Stock acquired pursuant
to the Exchange Offer are being obtained in the ordinary course of such holder's
business, (ii) such holder is not participating, does not intend to participate
and has no arrangement or understanding with any person to participate, in a
distribution of such shares of New Series A Senior Preferred Stock, (iii) such
holder is not an "affiliate," as defined under Rule 405 of the Securities Act,
of Holdings and (iv) such holder is not a broker-dealer who acquired shares of
Old Series A Senior Preferred Stock directly from Holdings to resell pursuant to
Rule 144A or any other available exemption under the Securities Act.
Guaranteed Delivery Procedures
Holders who wish to tender their shares of Old Series A Senior Preferred
Stock and (i) whose shares of Old Series A Senior Preferred Stock are not
immediately available or (ii) who cannot deliver their shares of Old Series A
Senior Preferred Stock, the Letter of Transmittal or any other required
documents to the Exchange Agent prior to the Early Exchange Date or the
Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Early Exchange Date or the Expiration Date, the Exchange
Agent receives from such Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by telegram, telex, facsimile
transmission, mail, overnight courier or hand delivery) setting forth the name
and address of the holder of the shares of Old Series A Senior Preferred Stock,
the certificate number or numbers of such shares of Old Series A
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Senior Preferred Stock and the principal amount of Old Series A Senior Preferred
Stock tendered, stating that the tender is being made thereby, and guaranteeing
that, within three business days after the date of execution of the Notice of
Guaranteed Delivery, the Letter of Transmittal (or facsimile thereof), together
with the certificate(s) representing the shares of Old Series A Senior Preferred
Stock to be tendered in proper form for transfer and any other documents
required by the Letter of Transmittal, will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all tendered
shares of Old Series A Senior Preferred Stock in proper form for transfer (or
confirmation of a book-entry transfer into the Exchange Agent's account at DTC
of shares of Old Series A Senior Preferred Stock delivered electronically) and
all other documents required by the Letter of Transmittal are received by the
Exchange Agent within three business days after the date of execution of the
Notice of Guaranteed Delivery.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Old Series A Senior
Preferred Stock may be withdrawn at any time prior to 5:00 p.m., New York City
time, on the Expiration Date, unless previously accepted for exchange.
To withdraw a tender of shares of Old Series A Senior Preferred Stock in
the Exchange Offer, a written or facsimile transmission notice of withdrawal
must be received by the Exchange Agent at its address set forth herein prior to
5:00 p.m., New York City time, on the Expiration Date and prior to acceptance
for exchange thereof by Holdings. Any such notice of withdrawal must (i) specify
the name of the person having deposited the shares of Old Series A Senior
Preferred Stock to be withdrawn (the "Depositor"), (ii) identify the shares of
Old Series A Senior Preferred Stock to be withdrawn (including the certificate
number or numbers and principal amount of such shares of Old Series A Senior
Preferred Stock), (iii) be signed by the Depositor in the same manner as the
original signature on the Letter of Transmittal by which such shares of Old
Series A Senior Preferred Stock were tendered (including required signature
guarantees) or be accompanied by documents of transfer sufficient to permit the
transfer agent with respect to the Old Series A Senior Preferred Stock to
register the transfer of such shares of Old Series A Senior Preferred Stock into
the name of the Depositor withdrawing the tender and (iv) specify the name in
which any such shares of Old Series A Senior Preferred Stock are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such withdrawal
notices will be determined by Holdings, whose determination shall be final and
binding on all parties. Any shares of Old Series A Senior Preferred Stock so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no shares of New Series A Senior Preferred Stock will be
issued with respect thereto unless the shares of Old Series A Senior Preferred
Stock so withdrawn are validly retendered. Any shares of Old Series A Senior
Preferred Stock which have been tendered but which are not accepted for exchange
will be returned by the Exchange Agent to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn shares of Old Series A
Senior Preferred Stock may be retendered by following one of the procedures
described above under "--Procedure for Tendering" at any time prior to the
Expiration Date.
Conditions
Notwithstanding any other term of the Exchange Offer, Holdings will not be
obligated to consummate the Exchange Offer if the shares of New Series A Senior
Preferred Stock to be received will not be tradeable by the holder, other than
in the case of Restricted Holders, without restriction under the Securities Act
and the Exchange Act and without material restrictions under the blue sky or
securities laws of substantially all of the states of the United States. Such
condition will be deemed to be satisfied unless a holder provides Holdings with
an opinion of counsel reasonably satisfactory to Holdings to the effect that the
shares of New Series A Senior Preferred Stock received by such holder will not
be tradeable without restriction under the Securities Act and the Exchange Act
and without material restrictions under the blue sky laws of substantially all
of the states of the United States. Holdings may waive this condition.
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If the condition described above exists, Holdings will be entitled to
refuse to accept any shares of Old Series A Senior Preferred Stock and, in the
case of such refusal, will return all tendered shares of Old Series A Senior
Preferred Stock to exchanging holders of the shares of Old Series A Senior
Preferred Stock. See "Preferred Stock Exchange Offer; Registration Rights."
Exchange Agent
United States Trust Company of New York has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance and requests
for additional copies of this Prospectus or of the Letter of Transmittal should
be directed to the Exchange Agent addressed as follows:
By Hand Delivery: United States Trust Company of New York
111 Broadway
Lower Level Corporate Trust Window
New York, New York 10006
Attn: Corporate Trust Services
By Registered or
Certified Mail: United States Trust Company of New York
P.O. Box 843 Cooper Station
New York, New York 10276
Attn: Corporate Trust Services
By Overnight Courier
(or by Hand Delivery
After 4:30 p.m. on the
Expiration Date Only): United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
Attn: Corporate Trust Services
Facsimile Transmission:
(Eligible Institutions and
Withdrawal Notices Only) (212) 780-0592
Attn: Customer Service
Confirm: 1-800-548-6565
For Information Call: 1-800-548-6565
Fees and Expenses
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by Holdings. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of Holdings and its affiliates in person, by
telegraph or telephone.
Holdings will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. Holdings, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith.
The registration expenses to be incurred in connection with the Exchange
Offer, including fees and expenses of the Exchange Agent and the transfer agent
and accounting and legal fees, will be paid by Holdings.
Holdings will pay all transfer taxes, if any, applicable to the exchange
of shares of Old Series A Senior Preferred Stock pursuant to the Exchange Offer.
If, however, certificates representing shares of New Series A Senior Preferred
Stock or shares of Old Series A Senior Preferred Stock for principal amounts not
tendered or
29
<PAGE>
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the shares of Old
Series A Senior Preferred Stock tendered, or if tendered shares of Old Series A
Senior Preferred Stock are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of shares of Old Series A Senior Preferred
Stock pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
Accounting Treatment
No gain or loss for accounting purposes will be recognized by Holdings
upon the consummation of the Exchange Offer. The expenses of the Exchange Offer
will be amortized as a reduction of stockholders' equity over the term of the
New Series A Senior Preferred Stock under generally accepted accounting
principles.
30
<PAGE>
THE TRANSACTIONS
The Recapitalization
The Offering was consummated on March 30, 1998 in conjunction with the
recapitalization of Holdings. In the Recapitalization, MHE Investments, a newly
formed affiliate of Chartwell Investments Inc., together with the purchasers of
the Series A Units and HarnCo, invested new and continuing equity capital of
$126.0 million in Holdings.
The proceeds of the Equity Investment, together with approximately $55.0
million of aggregate borrowings by the Company under the New Credit Facility and
approximately $200.0 million in aggregate proceeds from the Senior Note
Offering, were used (i) to finance the Recapitalization, (ii) to make loans to
management to acquire indirect equity interests in Holdings, (iii) for general
corporate purposes and (iv) to pay approximately $23.5 million of fees and
expenses. See "Use of Proceeds." The Recapitalization consideration consisted of
(i) $336.0 million in cash that was paid to HarnCo (subject to potential
post-Recapitalization Closing adjustments as to which an additional $5.0 million
was provided to HarnCo at the Recapitalization Closing) and (ii) $12.0 million
of continuing equity capital that was retained by HarnCo.
The Recapitalization was effectuated pursuant to the Recapitalization
Agreement, among MHE Investments, HarnCo and certain of HarnCo's affiliates. In
the Recapitalization, (i) MHE Investments acquired approximately 88.2% of the
voting power of Holdings, (ii) Holdings acquired, directly or indirectly, all of
the equity interests of the entities engaged in the MHE Business that were
previously owned by the HarnCo Parties, and (iii) HarnCo received the cash
Recapitalization consideration, comprised of $282.0 million from Holdings and
$54.0 million directly from MHE Investments. Concurrently with the Offering, the
Company sold $200.0 million of its Senior Notes. The net proceeds of the Senior
Note Offering and borrowings under the New Credit Facility were used by the
Company to repurchase a portion of its common stock from Holdings. The proceeds
from such repurchase together with the proceeds of this Offering, were used by
Holdings to finance its portion of the cash Recapitalization consideration.
MHE Investments owns approximately 72.6% of the Common Stock and
approximately $28.9 million liquidation preference of the Series C Junior Voting
Preferred Stock and HarnCo owns approximately 20.8% of the Common Stock and
approximately $4.8 million liquidation preference of the Series B Junior
Preferred Stock. The Series A Units constitute the remaining equity interests of
Holdings and consist of approximately 6.6% of the Common Stock and approximately
$57.7 million liquidation preference of the Old Series A Senior Preferred Stock.
In connection with the Recapitalization, the Company entered into a
Trademark License Agreement with an affiliate of HarnCo, pursuant to which the
Company has the right to use the P&H trademark with respect to all MHE Business
products on a worldwide exclusive basis from the date of the Recapitalization
Closing until 15 years after the earlier to occur of a sale of Holdings to a
third party or a public offering of the common stock of Holdings, the Company or
their parents or successors (and for an additional seven years thereafter for
aftermarket products and services). The royalty fee for use of the trademark is
0.75% of the aggregate net sales of the MHE Business for the ten year period
commencing 12 months after the Recapitalization Closing. There will be no
royalty fee for the remainder of the term. The Company entered into a number of
agreements pursuant to which HarnCo will continue to provide, on an interim
basis, certain supplies, products and services to the Company and its
subsidiaries located in the United States on substantially similar terms and
conditions to those historically provided. See "Certain Relationships and
Related Transactions."
The Equity Investment consisted of: (i) $60.0 million of Series A Units,
which consists of $57.7 million liquidation value of Old Series A Senior
Preferred Stock and $2.3 million of Unit Common Stock, (ii) $12.0 million of
continuing equity capital retained by HarnCo which consists of $4.8 million
liquidation value of Series B Junior Preferred Stock and $7.2 million of Common
Stock and (iii) $54.0 million of equity acquired by MHE Investments which
consists of $28.9 million liquidation value of Series C Junior Voting Preferred
Stock and $25.1 million of Common Stock.
31
<PAGE>
The Pre-Closing Transactions
Immediately prior to the Recapitalization Closing, the HarnCo Parties
effected a number of transactions that resulted in Holdings owning, directly or
indirectly, the equity interests of all of the entities engaged in the MHE
Business that were previously owned by the HarnCo Parties. In connection
therewith, Holdings transferred all of its assets and liabilities, including its
operating assets, to the Company in the form of a capital contribution.
The October 1997 Drop Down
The organizational structure of Holdings and its subsidiaries was
substantially reorganized in connection with the anticipated sale of the
Company. In connection therewith, in October 1997, HarnCo transferred the assets
of its Material Handling Equipment Division (the "MHE Division") to Material
Handling, LLC ("MHLLC"), a newly-created wholly-owned subsidiary of the Company
(the "October 1997 Drop Down"). All non-cash assets held by HarnCo and used
exclusively by the MHE Division were transferred or, in the case of leased
personal property, subleased to MHLLC or to one of its affiliates. In return,
MHLLC assumed substantially all of the liabilities of HarnCo and the Non-MHE
HarnCo Affiliates relating to the MHE Business (other than as described below).
As of the Recapitalization Closing, HarnCo has retained certain income and
other tax liabilities relating to the MHE Business, all environmental
liabilities relating to the ownership or operation of any shared facilities and
of HarnCo's Orchard Street facility, any liabilities for which HarnCo or its
affiliates have been named as potentially responsible parties with respect to
two Superfund sites, and any liabilities arising in connection with claims
alleging exposure to asbestos (to the extent there is insurance coverage
therefor) in connection with the MHE Business prior to the Recapitalization
Closing. In addition, among other matters, the HarnCo Parties have retained all
liability for medical and disability benefit claims for current United States
employees made prior to the Recapitalization Closing, all claims by United
States employees who are on short-term or long-term disability as of the
Recapitalization Closing and all claims with respect to any of the HII benefit
plans for former United States employees of the Company.
New Credit Facility
The Company has entered into the New Credit Facility which consists of a
$70.0 million revolving credit facility (the "Revolving Credit Facility"), a
$30.0 million acquisition facility (the "Acquisition Facility"), a $20.0 million
term loan ("Term Loan A") and a $35.0 million term loan ("Term Loan B" and,
together with Term Loan A, the "Term Loans").
The Revolving Credit Facility permits, subject to compliance with certain
conditions, the Company to borrow, repay and reborrow up to $70.0 million (of
which $15.0 million is required under the Note Indenture to be reserved for
issuance of letters of credit) at any time until the fifth anniversary of the
Recapitalization Closing, the proceeds of which may be used for working capital
and other corporate purposes. The Acquisition Facility, the proceeds of which
may be used for acquisitions, permits, subject to compliance with certain
conditions, the Company to borrow up to $30.0 million at any time until the
third anniversary, and to repay the same in installments on or prior to the
seventh anniversary, of the Recapitalization Closing. Term Loan A will be
repayable in 20 quarterly installments, commencing on June 30, 1998 and Term
Loan B will be repayable in 28 quarterly installments commencing on June 30,
1998.
Borrowings under the New Credit Facility bear interest at various interest
rates based on certain floating reference rates, as selected by the Company,
plus a margin. The New Credit Facility contains customary affirmative and
restrictive covenants on the part of the Company and its subsidiaries.
Borrowings under the New Credit Facility are (i) secured by substantially all of
the present and future assets of the Company and its subsidiaries located in the
United States and the United Kingdom, certain of the Company's subsidiaries'
present and future assets located in Canada and by a pledge of substantially all
of the issued and outstanding shares of capital stock of the Company and its
current and future subsidiaries and (ii) guaranteed by Holdings and
substantially all of the Company's subsidiaries. See "Description of the New
Credit Facility."
32
<PAGE>
Credit Support
Historically, HarnCo and the Non-MHE HarnCo Affiliates, including HII,
provided credit support for the MHE Business. This credit support included: (i)
providing working capital; (ii) guaranteeing financial and performance
obligations with respect to customer and supply contracts and relationships;
(iii) providing collateral and credit support with respect to letters of credit,
surety bonds or other arrangements of the MHE Business; and (iv) otherwise being
directly and contingently liable for the MHE Business's obligations. In
addition, prior to the October 1997 Drop Down, a significant portion of the MHE
Business was conducted directly by HarnCo, including the execution of certain
contracts. For the fiscal year ended October 31, 1997, HII had net sales of
approximately $3.1 billion and operating income of $319.3 million.
HII and the Company have entered into a Credit Indemnification Agreement
pursuant to which HII will maintain in place the Credit Support Obligations in
existence at the Recapitalization Closing but have no further duty to extend,
renew or enter into any new Credit Support Obligations (except as to the MHE
Business Obligations existing at the Recapitalization Closing). The Company will
pay HII an annual fee equal to 1% of the amounts still outstanding under each
letter of credit and bond provided by HarnCo and the Non-MHE HarnCo Affiliates
(approximately $38.4 million as of March 30, 1998), and reimburse HII for
certain future fees and expenses. The Credit Indemnification Agreement also
provides that the Company will reimburse HII on demand for any payment made by
HII or its affiliates under any of the Credit Support Obligations.
The Company entered into the Surety Arrangement to provide credit support
for the MHE Business. The Surety Arrangement provides a surety line of $60.0
million, in the aggregate, with a limit of $20.0 million for any single
obligation. Collateral for the surety line will be letters of credit provided
under the Revolving Credit Facility in the amount of up to 20% of outstanding
surety obligations and a pledge of certain assets of the Company. See
"Description of the Surety Arrangement."
DIVIDEND POLICY
Holdings does not expect to pay any cash dividends on its preferred stock
for the foreseeable future. The ability of Holdings to obtain cash resources to
pay cash dividends on its capital stock is restricted by the terms of the New
Credit Facility and the Note Indenture. See "Risk Factors -- Holding Company
Structure; Reliance and Restrictions on Subsidiaries for Cash Flow; --
Restrictive Covenants; Limited Remedies" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
33
<PAGE>
USE OF PROCEEDS
(dollars in thousands)
Holdings will not receive any cash proceeds from the issuance of the New
Series A Senior Preferred Stock offered hereby. In consideration for issuing the
New Series A Senior Preferred Stock offered hereby, Holdings will receive, in
exchange, Old Series A Senior Preferred Stock in like liquidation preference.
The net proceeds of the Offering and the remaining portion of the Equity
Investment, together with the proceeds of the Senior Note Offering and
borrowings under the New Credit Facility, were used by Holdings and the Company
(i) to finance the Recapitalization, (ii) to make loans to management to acquire
indirect equity interests in Holdings, (iii) for general corporate purposes and
(iv) to pay estimated fees and expenses associated with the Transactions. See
"Capitalization."
The sources and uses of the Recapitalization were as follows:
Sources:
New Credit Facility:
Term Loans ............................................... $ 55,000
Senior Notes .............................................. 200,000
Equity Investment:
Series A Units ........................................... 60,000
HarnCo's Common Stock at its implied
value and Series B Junior Preferred
Stock ................................................... 12,000
MHE Investments' Common Stock and
Series C Junior Voting Preferred
Stock ................................................... 54,000
---------
Total sources .......................................... $ 381,000
=========
Uses:
Cash portion of the Recapitalization consideration ........ $ 336,000
Stock portion of the Recapitalization consideration ....... 12,000
Prepayment of purchase price adjustment ................... 5,000
Prepayment of credit support fee to HII ................... 290
Short-term loan to management to finance purchase
of equity interests ...................................... 900
General corporate purposes ................................ 3,310
Estimated fees and expenses ............................... 23,500
---------
Total uses ............................................. $ 381,000
=========
34
<PAGE>
CAPITALIZATION
(dollars in thousands)
The following table sets forth the combined capitalization of Holdings at
January 31, 1998 and as adjusted to give effect to the Transactions as if they
had occurred as of January 31, 1998. This table should be read in conjunction
with "Unaudited Pro Forma Combined Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
the Combined Financial Statements of the Company and the notes thereto appearing
elsewhere in this Prospectus.
As of January 31, 1998
-------------------------
Actual As Adjusted
-------- ------------
Cash ........................................ $ 6,317 $ 3,310(a)
======== =========
Existing debt ............................... $ 4,289 $ 4,289(b)
New Credit Facility: (c)
Term Loans ................................. 55,000(d)
Senior Notes ................................ 200,000(e)
-------- ---------
Total debt ................................ 4,289 259,289
Mandatorily redeemable preferred stock
stated at liquidation value:
Series A Senior Preferred Stock ............ 57,710(f)
Series B Junior Preferred Stock ............ 4,809(g)
Series C Junior Voting Preferred Stock ..... 28,855(h)
-------- ---------
Total preferred stock ..................... 91,374
Shareholders' equity ........................ 132,684(i) (118,220)(j)
-------- ---------
Total capitalization ...................... $136,973 $ 232,443
======== =========
- ----------
(a) As adjusted cash remaining after giving effect to the Transactions,
including the prepayment of a $5.0 million purchase price adjustment under
the Recapitalization Agreement. According to the terms of the
Recapitalization Agreement, if determined at January 31, 1998, the
purchase price adjustment would have been $2.4 million. The remaining $2.6
million of the prepaid purchase price adjustment would then be refunded
within 60 days of the Recapitalization Closing.
(b) Existing debt of $4.3 million consists of a $2.7 million bank overdraft,
$0.4 million of short-term debt, a $0.7 million mortgage, $0.3 million of
industrial revenue bonds and $0.2 million of capital leases.
(c) The New Credit Facility consists of the Revolving Credit Facility, the
Acquisition Facility and the Term Loans. A portion of the Revolving Credit
Facility may be used to provide letters of credit in connection with the
Surety Arrangement. See "Description of the Surety Arrangement."
(d) The Term Loans consist of a $20.0 million five year term loan and a $35.0
million seven year term loan.
(e) The Senior Notes have a ten year maturity.
(f) The Series A Units consist of Old Series A Senior Preferred Stock and Unit
Common Stock.
(g) HarnCo received Series B Junior Preferred Stock in exchange for certain
Common Stock.
(h) MHE Investments acquired Series C Junior Voting Preferred Stock from
HarnCo.
35
<PAGE>
(i) Reflects Holdings' equity at historical book value of $132.7 million. The
Equity Investment in connection with the Recapitalization totals $126.0
million and consists of the following preferred stock and Common Stock:
Preferred Common Equity
Stock Stock Investments
--------- -------- -----------
Purchasers in the Offering ............. $ 57,710 $ 2,290 $ 60,000
MHE Investments ........................ 28,855 25,145 54,000
HarnCo ................................. 4,809 7,191 12,000
-------- -------- ---------
$ 91,374 $ 34,626 $ 126,000
======== ======== =========
MHE Investments acquired preferred stock and Common Stock directly from
HarnCo for $54.0 million as part of the Recapitalization consideration.
The net proceeds of the Senior Note Offering and borrowings under the New
Credit Facility were used by the Company to repurchase a portion of its
common stock from Holdings. The proceeds from such repurchase together
with the proceeds of this Offering were used by Holdings to finance its
portion of the cash Recapitalization consideration. HarnCo's retained
interest consists of $7.2 million of Common Stock, based on the implied
value of the redemption price, and Series B Junior Preferred Stock of $4.8
million.
(j) Reflects the following adjustments to historical book value:
Cash retained by HarnCo ...................................... $ (6,317)
Intercompany receivable retained by HarnCo ................... (255)
Deferred income tax asset retained by HarnCo ................. (2,720)
Deferred income tax asset (net) arising out of Section
338(h)(10) election under the Internal Revenue Code of
1986, as amended (the "Code") ............................... 73,946
Income taxes payable retained by HarnCo ...................... 2,563
Deferred income tax liability retained by HarnCo ............. 3,142
Proceeds from the sale of Unit Common Stock as part of
the Offering ................................................ 2,290
Conversion of perpetual Series C Junior Voting Preferred
Stock into mandatorily redeemable Series C Junior Voting
Preferred Stock ............................................. (28,855)
Exchange of HarnCo's Common Stock for Series B Junior
Preferred Stock ............................................. (4,809)
Redemption from HarnCo of certain Common Stock and
preferred stock for cash .................................... (282,000)
Estimated purchase price adjustment .......................... (2,389)
Estimated fees and expenses related to the equity portion
of the Financings ........................................... (5,500)
---------
$(250,904)
=========
36
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Balance Sheet of Holdings as of
January 31, 1998 has been prepared to reflect the consummation of the
Transactions as if they had occurred as of January 31, 1998. The Unaudited Pro
Forma Combined Statements of Operations of Holdings for the three months ended
January 31, 1998 and for the year ended October 31, 1997 have been prepared to
reflect the consummation of the Transactions as if they had occurred on November
1, 1996. The Unaudited Combined Pro Forma Financial Information of Holdings does
not purport to be indicative of the operating results and financial position of
Holdings that actually would have been obtained if the Transactions had been
consummated as of and for the dates and periods presented or that may be
obtained in the future. The unaudited pro forma adjustments, as described in the
Notes to Unaudited Pro Forma Combined Financial Information, are based on
available information and upon certain assumptions that management believes are
reasonable. The Unaudited Pro Forma Combined Financial Information should be
read in conjunction with the Combined Financial Statements of the Company and
notes thereto appearing elsewhere herein.
37
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(dollars in thousands )
<TABLE>
<CAPTION>
As of January 31, 1998
----------------------------------------
Historical Adjustments Pro Forma (a)
---------- ----------- -------------
<S> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents ................... $ 6,317 $ (3,007)(b) $ 3,310
Accounts receivable, net .................... 75,545 (255)(c) 75,290
Inventories ................................. 36,509 36,509
Other current assets ........................ 6,348 (2,720)(d)
290(e)
900(f)
2,611(g) 7,429
-------- --------- ---------
Total current assets ..................... 124,719 (2,181) 122,538
-------- --------- ---------
Property, plant and equipment
Land and improvements ....................... 3,328 3,328
Buildings ................................... 20,860 20,860
Machinery and equipment ..................... 36,268 36,268
Less: accumulated depreciation .............. (22,462) (22,462)
-------- --------- ---------
37,994 37,994
-------- --------- ---------
Other assets
Goodwill .................................... 31,792 31,792
Other ....................................... 5,874 91,946(h) 97,820
-------- --------- ---------
37,666 91,946 129,612
-------- --------- ---------
Total assets ............................. $200,379 $ 89,765 $ 290,144
======== ========= =========
Liabilities and Shareholder's Equity
Current liabilities
Short-term notes payable and current portion
of long-term obligations ................... $ 567 $ 1,350 (i) $ 1,917
Bank overdrafts ............................. 2,713 2,713
Trade accounts payable ...................... 26,729 26,729
Accrued expenses ............................ 10,989 10,989
Advance payments and progress billings ...... 8,829 8,829
Income taxes payable ........................ 2,563 (2,563)(j) --
Other current liabilities ................... 10,777 10,777
-------- --------- ---------
Total current liabilities ................ 63,167 (1,213) 61,954
Term Loans, excluding current portion ........ 53,650(k) 53,650
Other term debt .............................. 1,009 1,009
Senior Notes ................................. 200,000(l) 200,000
Deferred income taxes ........................ 3,142 (3,142)(m) --
-------- --------- ---------
Total liabilities ........................ 67,318 249,295 316,613
Minority Interest ............................ 377 377
Mandatorily redeemable preferred stock ....... 91,374(n) 91,374
Shareholder's equity ......................... 132,684 (250,904)(o) (118,220)
-------- --------- ---------
Total liabilities and shareholder's equity $200,379 $ 89,765 $ 290,144
======== ========= =========
</TABLE>
38
<PAGE>
Notes to Unaudited Pro Forma Combined Balance Sheet
(a) Pro forma to give effect to the Transactions as if they had occurred as of
January 31, 1998
(b) Reflects the following:
Cash retained by HarnCo .................................... $ (6,317)
Proceeds from Senior Note Offering ......................... 200,000
Borrowings under the New Credit Facility ................... 55,000
Proceeds from the Offering ................................. 60,000
Redemption from HarnCo of certain Common Stock and
preferred stock for cash .................................. (282,000)
Estimated fees and expenses ................................ (23,500)
Prepayment of credit support fee to HII .................... (290)
Short-term loan to management to finance the
purchase of equity interests .............................. (900)
Prepayment of purchase price adjustment .................... (5,000)(i)
---------
$ (3,007)
=========
(i) Reflects prepayment of a purchase price adjustment under the
Recapitalization Agreement. According to the terms of the
Recapitalization Agreement, if determined at January 31, 1998, the
purchase price adjustment would have been $2.4 million. The
remaining $2.6 million of the prepaid purchase price adjustment
would then be refunded within 60 days of the Recapitalization
Closing.
(c) Reflects elimination of intercompany receivables retained by HarnCo.
(d) Reflects elimination of deferred income tax asset retained by HarnCo.
(e) Reflects the prepayment of credit support fee to HII.
(f) Reflects short-term loan to management to finance the purchase of equity
interests. The Company expects such loan to be repaid within one year.
(g) Reflects the receivable from HarnCo which represents the estimate of the
portion of the $5.0 million prepaid purchase price adjustment under the
Recapitalization Agreement that is anticipated to be refunded within 60 days
of the Recapitalization Closing.
(h) Reflects the following:
Deferred income tax asset (net) arising out of the Code
Section 338(h)(10) election .................................. $73,946(i)
-------
Capitalization of the estimated fees and expenses related
to the debt portion of the Financings ........................ 18,000
-------
$91,946
=======
(i) Reflects the increase in the deferred income tax assets of Holdings
since, for United States federal and state income tax purposes, the
Transactions are treated as a taxable asset sale. As a result there
is a step-up in the tax basis of the net assets which will provide
future income tax deductions of $231.1 million and may reduce future
income tax payments by approximately $73.9 million as shown below:
Holdings' total enterprise value ................... $ 360,178
Less: tax basis of net assets acquired ............. (129,097)
---------
231,081
Estimated corporate tax rate ....................... 40.0%
---------
Deferred income tax asset arising out
of the Code Section 338(h)(10) election ........... $ 92,432
=========
Less: valuation reserve ............................ (18,486)(x)
---------
Deferred income tax asset (net) arising
out of the Code Section 338(h)(10) election ....... $ 73,946
=========
(x) A valuation reserve has been established against the deferred
income tax asset on the assumption that the deferred income
tax asset may not be fully utilized in future years. The
valuation reserve represents 20% of the gross asset.
(i) Reflects the current portion of the Term Loans.
(j) Reflects elimination of income taxes payable retained by HarnCo.
(k) Reflects borrowings under the Term Loans excluding current portion.
39
<PAGE>
(l) Reflects Senior Notes with a ten year maturity.
(m) Reflects elimination of deferred income tax liability retained by HarnCo.
(n) Reflects mandatorily redeemable preferred stock stated at liquidation value:
Series A Senior Preferred Stock............................... $57,710
Series B Junior Preferred Stock............................... 4,809
Series C Junior Voting Preferred Stock........................ 28,855
-------
$91,374
=======
Holdings has the option of paying the cumulative dividends on the
mandatorily redeemable preferred stock either in cash or in kind until
2003; thereafter, the payments must be in cash. Dividends are payable
semi-annually in arrears.
(o) Reflects the following:
Cash retained by HarnCo .................................... $ (6,317)
Intercompany receivable retained by HarnCo ................. (255)
Deferred income tax asset retained by HarnCo ............... (2,720)
Deferred income tax asset (net) arising out of
the Code Section 338(h)(10) election ...................... 73,946
Income taxes payable retained by HarnCo .................... 2,563
Deferred income tax liability retained by HarnCo ........... 3,142
Proceeds from the sale of Unit Common Stock as
part of this Offering ..................................... 2,290
Conversion of perpetual Series C Junior Voting
Preferred Stock into mandatorily redeemable Series
C Junior Voting Preferred Stock ........................... (28,855)
Exchange of HarnCo's Common Stock for Series B
Junior Preferred Stock .................................... (4,809)
Redemption from HarnCo of certain Common Stock and
preferred stock for cash .................................. (282,000)
Estimated purchase price adjustment ........................ (2,389)
Estimated fees and expenses related to the equity
portion of the Financings ................................. (5,500)
---------
$(250,904)
=========
40
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(dollars in thousands)
For the Year Ended October 31, 1997
--------------------------------------------
Historical Adjustments Pro Forma(a)
---------- ----------- ------------
Revenues
Net sales ...................... $ 353,350 $ $ 353,350
Other income--net .............. 2,649 2,649
--------- --------- ---------
355,999 355,999
Cost of sales ................... 260,794 260,794
Product development, selling
and administrative expenses .... 56,806 1,000(b) 57,806
Management fee .................. 2,862 (1,862)(c) 1,000
--------- --------- ---------
Operating income ............... 35,537 862 36,399
Interest expense--net
Affiliates ..................... (394) 394(d) --
Third party .................... (398) (26,105)(e) (26,503)
--------- --------- ---------
Income before income taxes and
minority interest .............. 34,745 (24,849) 9,896
Provision for income taxes ...... (13,874) 9,939(f) (3,935)
Minority interest ............... (18) (18)
--------- --------- ---------
Net income ..................... 20,853 (14,910) 5,943
Dividends on preferred stock .... (11,460)(g) (11,460)
--------- --------- ---------
Net income/(loss) attributable
to Common Stock ............... $ 20,853 $ (26,370) $ (5,517)
========= ========= =========
Other Financial Data:
EBITDA(h) ....................... $ 45,859 $ 43,859
Depreciation and amortization ... 6,736 8,536
Capital expenditures ............ 6,498 6,498
Cash interest expense ........... 792 24,703
41
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(dollars in thousands)
For the Three Months Ended January 31, 1998
-------------------------------------------
Historical Adjustments Pro Forma(a)
---------- ----------- ------------
Revenues
Net sales ................. $76,483 $ $76,483
Other income--net ......... 284 284
------- ------- -------
76,767 76,767
Cost of sales ................... 56,653 56,653
Product development, selling
and administrative expenses .... 14,480 824(b) 15,304
Management fee .................. 677 (427)(c) 250
------- ------- -------
Operating income ............... 4,957 (397) 4,560
Interest expense--net
Affiliates ................ (687) 687(d) --
Third party ............... (158) (6,526)(e) (6,684)
------- ------- -------
Income/(loss) before income
taxes and minority interest .... 4,112 (6,236) (2,124)
(Provision)/benefit for income
taxes .......................... (1,987) 2,494(f) 507
Minority interest ............... 14 14
------- ------- -------
Net income/(loss) .............. 2,139 (3,742) (1,603)
Dividends on preferred stock .... (3,129)(g) (3,129)
------- ------- -------
Net income/(loss) attributable
to Common Stock ............... $ 2,139 $(6,871) $(4,732)
======= ======= =======
Other Financial Data:
EBITDA(h) ....................... $ 7,538 $ 6,464
Depreciation and amortization ... 1,659 2,109
Capital expenditures ............ 816 816
Cash interest expense ........... 845 6,234
42
<PAGE>
Notes to the Unaudited Pro Forma Combined Statements of Operations
<TABLE>
<CAPTION>
Pro Forma
Pro Forma for for the Three
the Year Months
Ended Ended
October 31, January 31,
1997 1998
------------- -------------
<S> <C> <C>
(a) Pro forma gives effect to the Transactions as if they had occurred on
November 1, 1996.
(b) Reflects the following:
Estimated incremental costs attributable to stand alone operations ....................... $ 1,000 $ 250
Royalty payment under the Trademark License Agreement with an
affiliate of HarnCo. The royalty fee, calculated as 0.75% of the
annual aggregate net sales of the MHE Business, will be incurred
for the ten year period commencing 12 months after the
Recapitalization Closing ................................................................. -- 574
-------- -------
$ 1,000 $ 824
======== =======
(c) Reflects the following:
Elimination of HII Management Fee ........................................................ $ (2,862) $ (677)
Chartwell Investments Inc.'s management consulting fee ................................... 1,000 250
-------- -------
$ (1,862) $ (427)
======== =======
(d) Reflects elimination of interest expense paid to affiliates of HII.
(e) Reflects the following:
Estimated change in cash interest expense on debt ........................................ $(24,006) $(6,001)
Estimated fee paid to HII for outstanding credit support ................................. (299) (75)
Estimated amortization of debt financing costs ........................................... (1,800) (450)
-------- -------
$(26,105) $(6,526)
======== =======
<CAPTION>
Principal Interest Cost Interest Cost
--------- ------------- -------------
<S> <C> <C> <C>
Estimated cash interest expense on debt:
Revolving Credit Facility at LIBOR plus 2.25%(i) ........................ $ -- $ 350 $ 87
Acquisition Facility at LIBOR plus 2.75%(i) ............................. -- 150 37
Term Loan A at LIBOR plus 2.25% ......................................... 20,000 1,575 394
Term Loan B at LIBOR plus 2.75% ......................................... 35,000 2,931 733
Senior Notes at 9.50% ................................................... 200,000 19,000 4,750
-------- -------
$ 24,006 $ 6,001
======== =======
</TABLE>
(i) Reflects a 0.50% fee for undrawn commitments under these facilities.
For the purposes of the above, LIBOR is estimated to be 5.625%.
A 1/8th percentage point increase or decrease in the assumed average
interest rate on the debt issued in connection with the Recapitalization
would change the annual pro forma interest expense for the year ended
October 31, 1997 by approximately $0.3 million and the pro forma net
income for the year ended October 31, 1997 by approximately $0.2 million.
A 1/8th percentage point increase or decrease in the assumed average
interest rate on the debt issued in connection with the Recapitalization
would change the pro forma interest expense for the three months ended
January 31, 1998 by approximately $0.1 million and the pro forma net
income for the three months ended January 31, 1998 by approximately $0.1
million.
43
<PAGE>
(f) Reflects the tax effect of all adjustments at an assumed effective tax rate
of 40%.
(g) Reflects the following:
<TABLE>
<CAPTION>
Dividends(i)
Liquidation ---------------------------------
Preference Pro Forma for Pro Forma for
at the Year Ended the Three Months
Recapitalization October 31, Ended January 31,
Coupon Closing 1997 1998
------ ---------------- -------------- -----------------
<S> <C> <C> <C> <C>
Preferred stock dividends:
Series A Senior Preferred Stock ...... 12.00% $ 57,710 $ 7,133 $1,945
Series B Junior Preferred Stock ...... 12.25 4,809 607 166
Series C Junior Voting Preferred
Stock ............................... 12.50 28,855 3,720 1,018
------- ------
$11,460 $3,129
======= ======
</TABLE>
(i) Holdings has the option of paying the cumulative dividends on the
mandatorily redeemable preferred stock either in cash or in kind
until 2003; thereafter, the payments must be in cash. Dividends are
payable semi-annually in arrears. The above noted dividend amounts
assume that the dividends are paid in kind.
(h) EBITDA is defined as operating income before depreciation, amortization,
the HII Management Fee and charges related to certain depreciation
expenses for HarnCo assets. For fiscal 1997 and the three months ended
January 31, 1998, the HII Management Fee was $2,862 and $677,
respectively, and the charges related to certain depreciation expenses for
HarnCo assets were $724 and $245, respectively. Pro forma EBITDA
represents operating income before depreciation, amortization and the
charges related to certain depreciation expenses for HarnCo assets. EBITDA
is not a calculation based on generally accepted accounting principles.
EBITDA should not be considered as an alternative to net income or
operating income, as an indicator of the operating performance of Holdings
or as an alternative to operating cash flows as a measure of liquidity.
44
<PAGE>
SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
The selected historical combined financial data as of and for the years
ended October 31, 1997, 1996 and 1995 have been derived from the audited
combined financial statements of the Company. The selected historical combined
financial data as of and for the three months ended January 31, 1998 and 1997
have been derived from the unaudited combined financial statements of the
Company. The selected historical combined financial data as of and for the years
ended October 31, 1994 and 1993 have been derived from unaudited internal
records of the Company. The Company's operations for 1994 and 1993 were
integrated with other HII operations and, therefore, the financial data for
these periods represent management's best estimate of their operating
performance. The unaudited financial data presented herein, in the opinion of
management, includes all necessary adjustments required for the fair
presentation of such data.
The selected pro forma combined financial data of Holdings as of and for
the three months ended January 31, 1998 and for the year ended October 31, 1997
have been prepared to reflect the consummation of the Transactions. The
unaudited pro forma combined balance sheet data of Holdings have been prepared
as if such transactions had occurred as of January 31, 1998 and the unaudited
pro forma combined statements of operations data of Holdings have been prepared
as if such transactions had occurred on November 1, 1996. The selected pro forma
combined financial data of Holdings are not necessarily indicative of the
financial position or results of operations of Holdings had the Transactions
reflected therein actually been consummated on the dates assumed and are not
necessarily indicative of the financial position or results of operations of
Holdings that may be expected for any future periods.
The selected combined financial data should be read in conjunction with
"Unaudited Pro Forma Combined Financial Information," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the Combined
Financial Statements of the Company and notes thereto appearing elsewhere
herein.
45
<PAGE>
SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
Fiscal Year Ended October 31, January 31,
------------------------------------------------------------------- -------------------------------------
Pro Forma Pro Forma
1993(a) 1994(a) 1995 1996 1997 1997 1997 1998 1998
----------- ----------- -------- -------- -------- ----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income statement data:
Net sales ............... $117,032 $109,429 $243,169 $323,735 $353,350 $353,350 $79,982 $76,483 $76,483
Gross profit ............ N/A N/A 56,765 76,176 92,556 92,556 19,190 19,830 19,830
Operating expenses(b) ... N/A N/A 35,043 46,160 57,019 56,157 12,642 14,873 15,270
-------- -------- -------- -------- -------- -------- ------- ------- -------
Operating income ........ $ 4,781 $ 10,437 21,722 30,016 35,537 36,399 6,548 4,957 4,560
Net income/(loss) ....... N/A N/A $ 13,476 $ 18,446 $ 20,853 $ 5,943 $ 4,011 $ 2,139 (1,603)
======== ======== ======== ======== ======== ======= =======
Dividends on preferred
stock ................ (11,460) (3,129)
-------- -------
Net loss attributable to
Common Stock ......... $ (5,517) $(4,732)
======== =======
Other data:
EBITDA(c) ............... $ 9,341 $ 15,075 $ 28,045 $ 38,220 $ 45,859 $ 43,859 $ 8,925 $ 7,538 6,464
Depreciation and
amortization(d) ...... 2,588 2,981 3,800 5,292 6,736 8,536 1,548 1,659 2,109
Capital expenditures .... 1,419 3,935 3,725 6,752 6,498 6,498 1,744 816 816
Cash interest expense ... 24,703 6,234
Ratio of earnings to
fixed charges and
preferred
dividends(e) ......... N/A N/A 23.21x 23.11x 16.46x -- 21.58x 4.40x --
Adjusted data:
Ratio of EBITDA to
cash interest
expense .............. 1.78x 1.70x(f)
Ratio of pro forma debt
to EBITDA ............ 5.91x 6.19x(f)
</TABLE>
<TABLE>
<CAPTION>
As of October 31, As of January 31,
------------------------------------------------------ -------------------------------------
Pro Forma
1993(a) 1994(a) 1995 1996 1997 1997 1998 1998
----------- ----------- -------- -------- -------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance sheet data:
Working capital.......... N/A N/A $ 17,483 $ 34,523 $ 51,243 $ 37,432 $ 61,552 $ 60,584
Total assets............. $66,667 $126,566 151,168 189,058 199,600 193,633 200,379 290,144
Total debt............... N/A N/A 4,704 2,044 6,088 3,348 4,289 259,289
Mandatorily redeemable
preferred stock....... 91,374
</TABLE>
- ----------
(a) Prior to 1995, the Company did not determine its financial position or
results of operations on a stand alone basis as its financial and
management reporting information was commingled with other operating
divisions of HII. As a result, the Company's summary data as of and for
the years ended October 31, 1994 and 1993 is limited and certain
historical financial data is not available.
(b) Operating expenses are shown net of other income.
(c) EBITDA is defined as operating income before depreciation, amortization,
the allocation of certain HII corporate overhead charges (the "HII
Management Fee") and charges related to certain depreciation expenses for
HarnCo assets. For fiscal 1997 and the three months ended January 31,
1998, the HII Management Fee was $2,862 and $677, respectively, and the
charges related to certain depreciation expenses for HarnCo assets were
$724 and $245, respectively. Pro forma EBITDA represents operating income
before depreciation, amortization and the charges related to certain
depreciation expenses for HarnCo assets. EBITDA is not a calculation based
on generally accepted accounting principles. EBITDA should not be
considered as an alternative to net income or operating income, as an
indicator of the operating performance of Holdings or as an alternative to
operating cash flows as a measure of liquidity.
(d) Pro forma includes $1,800 and $450 of amortization of debt issuance costs
for fiscal 1997 and the three months ended January 31, 1998, respectively.
(e) For purposes of calculating the ratio of earnings to fixed charges and
preferred dividends, earnings are defined as net income before tax plus
fixed charges. Fixed charges consist of interest expense (including
amortization of debt issuance costs) and the portion of rental expense
that is representative of the interest factor (deemed to be one third of
annual rent expense). Preferred dividends, for purposes of the ratio,
reflect earnings before tax required to pay preferred stock dividends and
assume that such dividends are paid in kind. For the year ended October
31, 1997 and for the three months ended January 31, 1998 Holdings had a
deficiency of pro forma earnings to fixed charges of $9,204 and $7,339,
respectively.
(f) Reflects a pro forma calculation for the twelve months ended January 31,
1998.
46
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Combined
Financial Statements of the Company and the related notes thereto included
elsewhere in this Prospectus. The Company's fiscal year ends October 31.
Consequently, for purposes of this section, unless otherwise specified herein,
references to a particular year are to the fiscal year of the Company ended
October 31 of such year.
General
The Company is a leading international provider of "through-the-air"
material handling products and services used in most manufacturing industries.
The Company's original equipment operations design and manufacture a
comprehensive line of industrial cranes, hoists and other component products.
Through its aftermarket operations, the Company provides a variety of related
products and services, including replacement parts, repair and maintenance
services and product modernizations. In recent years, the Company has shifted
its orientation from an original equipment-focused United States manufacturer to
an international full service provider with a significant emphasis on the high
margin aftermarket business. The Company's revenues are derived principally from
the sale of industrial overhead cranes, component products and aftermarket
products and services.
Recapitalization. Historically, the Company conducted its business as one
of several operating units of HII. Until the October 1997 Drop Down, the core
United States operations of the Company were conducted directly by HarnCo, while
the remainder of the Company's operations (including Morris Ltd. since its
acquisition in 1994) were conducted through a number of entities owned, directly
or indirectly, by HII and its affiliates. Since the Recapitalization Closing,
the Company operates independently of HII. As a result, the Company's historical
performance may not be indicative of future results.
Until the Recapitalization Closing, HII and HarnCo performed a number of
functions necessary to the operations of the Company, in accordance with past
practices, including manufacturing certain products and providing certain
information systems, administrative services and credit support. The Company's
historical financial statements include charges allocated to the Company by HII
for these products and services.
At the Recapitalization Closing, the Company entered into a number of
agreements pursuant to which HII and its affiliates will continue to provide to
the Company and to its subsidiaries located in the United States, on an interim
basis and under substantially similar terms and conditions, certain products and
services. See "Certain Relationships and Related Transactions." In addition, HII
and the Company entered into a Credit Indemnification Agreement pursuant to
which HII will maintain in place the Credit Support Obligations in existence at
the Recapitalization Closing but have no further duty to extend, renew or enter
into any new Credit Support Obligations (except as to the MHE Business
Obligations existing at the Recapitalization Closing). The Company will pay HII
an annual fee equal to 1% of the amounts still outstanding under each letter of
credit and bond provided by HarnCo and the Non-MHE HarnCo Affiliates
(approximately $38.4 million as of March 30, 1998), and reimburse HII for
certain future fees and expenses. The Company also entered into the Surety
Arrangement to provide credit support for the future operations of the MHE
Business. See "Description of the Surety Arrangement."
In connection with the Recapitalization, the Company also entered into a
Trademark License Agreement with an affiliate of HarnCo, pursuant to which the
Company has the right to use the P&H trademark with respect to all MHE Business
products on a worldwide exclusive basis from the date of the Recapitalization
Closing until 15 years after the earlier to occur of a sale of Holdings to a
third party or a public offering of the common stock of Holdings, the Company or
their parents or successors (and for an additional seven years thereafter for
aftermarket products and services). The royalty fee for use of the trademark is
0.75% of the aggregate net sales of the MHE Business for the ten year period
commencing 12 months after the Recapitalization Closing.
For income tax purposes, Holdings and the Company were deemed to acquire
the assets of the MHE Business pursuant to Code Section 338(h)(10) in connection
with the Transactions. Accordingly, this transaction increased
47
<PAGE>
the tax basis of certain assets and created deductible goodwill, which will
generate significant future tax deductions to reduce taxable income.
Acquisitions. The Company consummated ten acquisitions during the fiscal
years ended October 31, 1995, 1996 and 1997. These acquisitions have had a
significant impact on the Company's financial position and results of
operations.
Results of Operations
The following table sets forth certain financial data for the periods
indicated:
Supplemental Data
(dollars in millions)
<TABLE>
<CAPTION>
Fiscal Years Ended October 31, Three Months Ended January 31,
---------------------------------------------------------- ------------------------------------
1995 1996 1997 1997 1998
---------------------------------------------------------- ------------------------------------
Percent of Percent of Percent of Percent of Percent of
$ Net Sales $ Net Sales $ Net Sales $ Net Sales $ Net Sales
------ ---------- ------ ---------- ------ ---------- ----- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ................... $243.2 100.0% $323.7 100.0% $353.4 100.0% $80.0 100.0% $76.5 100.0%
Other income net ............ 3.8 1.6 1.1 0.3 2.6 0.7 1.3 1.6 0.3 0.4
Cost of sales ............... 186.4 76.6 247.6 76.5 260.8 73.8 60.8 76.0 56.7 74.1
Product development
selling, and
administrative
expenses ................. 36.9 15.2 45.0 13.9 56.8 16.1 13.2 16.5 14.5 19.0
Parent management
fee ...................... 1.9 0.8 2.3 0.7 2.9 0.8 0.6 0.8 0.7 0.9
Operating income ............ 21.7 8.9 30.0 9.3 35.5 10.0 6.5 8.1 5.0 6.5
Net income .................. 13.5 5.6 18.4 5.7 20.9 5.9 4.0 5.0 2.1 2.7
</TABLE>
Three Months Ended January 31, 1998 as Compared to Three Months Ended January
31, 1997
Net sales for the three months ended January 31, 1998 ("First Quarter
1998") decreased $3.5 million or 4.4% to $76.5 million from $80.0 million for
the three months ended January 31, 1997 ("First Quarter 1997"). The change in
net sales was primarily the result of: (i) a $10.0 million decrease in United
States engineered crane sales as First Quarter 1997 included the completion of
several large projects, (ii) a net $8.3 million decrease in United Kingdom
original equipment sales reflecting a decline in engineered equipment sales (due
to the presence of several large projects in First Quarter 1997) which more than
offset increased sales of standard equipment, (iii) a $12.9 million increase in
sales of standard cranes, parts and service through the Company's North American
DSC network of which $5.6 million was attributable to the acquisition of a large
DSC in Ohio in February 1997 and (iv) a $1.1 million increase in net sales from
modernizations.
Other income--net decreased to $0.3 million in First Quarter 1998 from
$1.3 million in First Quarter 1997. This decrease was due principally to the
recognition of a $1.1 million gain in First Quarter 1997 on an insurance claim
relating to a fire at its Morris Ltd. facility in the United Kingdom in fiscal
1995.
Cost of sales decreased $4.1 million or 6.7% to $56.7 million in First
Quarter 1998 from $60.8 million in First Quarter 1997, primarily due to lower
sales volume in original equipment. Cost of sales represented 74.1% of net sales
in First Quarter 1998, a decrease from 76.0% of net sales in First Quarter 1997.
This improvement was primarily due to a shift in the Company's sales mix in
First Quarter 1998 away from lower margin engineered cranes toward higher margin
standard cranes and aftermarket products and services. As a result, gross profit
increased by $0.6 million to $19.8 million in First Quarter 1998 from $19.2
million in First Quarter 1997, despite lower net sales. Gross profit was 25.9%
of net sales in First Quarter 1998, an improvement from 24.0% of net sales in
First Quarter 1997.
48
<PAGE>
Product development, selling and administrative expenses increased $1.3
million or 9.8% to $14.5 million in First Quarter 1998 from $13.2 million in
First Quarter 1997. This increase was primarily due to the acquisition of a
large DSC in Ohio in February 1997. Product development, selling and
administrative expenses increased to 19.0% of net sales in First Quarter 1998
from 16.5% of net sales in First Quarter 1997 primarily as a result of lower
sales in First Quarter 1998.
Parent management fees allocated by HII, which represent an allocation of
HII's corporate expenses, increased to $0.7 million in First Quarter 1998 from
$0.6 million in First Quarter 1997.
Operating income decreased by $1.5 million or 23.1% to $5.0 million in
First Quarter 1998 from $6.5 million in First Quarter 1997. Operating income
represented 6.5% of net sales in First Quarter 1998 compared to 8.1% of net
sales in First Quarter 1997. This decline was primarily the result of the gain
on the insurance claim in First Quarter 1997 and a decline in engineered crane
sales in both the United States and the United Kingdom, offset, in part, by
growth in sales of standard cranes and aftermarket products and services through
the Company's North American DSC network.
Net income decreased by $1.9 million or 47.5% to $2.1 million in First
Quarter 1998 from $4.0 million in First Quarter 1997. This decrease was
primarily due to lower operating income and increased interest expense, offset,
in part, by lower income taxes.
Fiscal 1997 as Compared to Fiscal 1996
Net sales in fiscal 1997 increased $29.7 million or 9.2% to $353.4 million
from $323.7 million in fiscal 1996. The increase in net sales was primarily the
result of:
(i) the acquisition of a large DSC in Ohio in February 1997 which
contributed sales of $15.7 million, prior to eliminations;
(ii) the full year impact in fiscal 1997 of the acquisition of a
large DSC in Alberta, Canada in May 1996 which contributed
$10.8 million in additional sales, prior to eliminations;
(iii) a $9.7 million increase in sales of standard cranes and
aftermarket products and services through the existing North
American DSC network;
(iv) a $9.7 million increase in engineered crane sales in the
United Kingdom due to several large port crane and warehouse
automation projects; and
(v) a $6.1 million increase in sales of standard cranes and
aftermarket products and services through the United Kingdom
DSC network.
These increases were offset, in part, by:
(i) a $9.3 million decrease in engineered crane sales in the
United States due to the unusually high level of large
projects recorded in 1996; and
(ii) an $11.7 million increase in intercompany sales eliminations
primarily due to the increase in sales of products and
services through the Company's North American DSC network
rather than through independent distributors.
Other income--net increased to $2.6 million in 1997 from $1.1 million in
1996 due principally to a $2.0 million gain in 1997 on the insurance claim
relating to the fire at its Morris Ltd. facility in the United Kingdom in fiscal
1995.
49
<PAGE>
Cost of sales increased $13.2 million or 5.3% to $260.8 million in 1997
from $247.6 million in 1996, primarily as a result of higher sales volume. Cost
of sales represented 73.8% of net sales in 1997, a decrease from 76.5% of net
sales in 1996. This improvement was primarily due to the completion of several
large engineered crane projects at costs lower than previously accrued. In
addition, there was a shift in the Company's sales mix in 1997 toward high
margin aftermarket products and services. As a result, gross profit increased to
$92.6 million or 26.2% of net sales in 1997 from $76.1 million or 23.5% of net
sales in 1996.
Product development, selling and administrative expenses increased by
$11.8 million or 26.2% to $56.8 million in 1997 from $45.0 million in 1996.
These expenses represented 16.1% of net sales in 1997 up from 13.9% in 1996.
This increase was primarily due to costs associated with the continued expansion
of the Company's DSC network in North America and the United Kingdom as well as
an increase in engineering costs that were not allocated to specific projects.
Parent management fees allocated by HII increased to $2.9 million in 1997
from $2.3 million in 1996.
Operating income increased by $5.5 million or 18.3% to $35.5 million in
1997 from $30.0 million in 1996. Operating income represented 10.0% of net sales
in 1997 compared to 9.3% of net sales in 1996. This improvement was primarily
the result of higher margins on certain large original equipment projects and a
change in sales mix toward higher margin aftermarket products and services,
offset, in part, by increased operating expenses associated with the Company's
expanding DSC network.
Net income increased by $2.5 million or 13.6% to $20.9 million in 1997,
from $18.4 million in 1996. This increase resulted principally from higher
operating income, offset, in part, by higher income taxes.
Fiscal 1996 as Compared to Fiscal 1995
Net sales in fiscal 1996 increased $80.5 million or 33.1% to $323.7
million from $243.2 million in fiscal 1995. The increase in net sales was
primarily the result of:
(i) the acquisition of large DSCs in Alabama in October 1995,
South Carolina in December 1995 and Alberta, Canada in May
1996, which contributed $32.3 million in additional sales,
prior to eliminations;
(ii) a $17.9 million increase in United States engineered crane
sales due to several large orders for steel mini-mills;
(iii) a $14.1 million increase in sales of standard cranes and
aftermarket products and services through the existing North
American DSC network; and
(iv) a $13.5 million increase in sales outside North America.
Other income--net decreased to $1.1 million in 1996 from $3.8 million in
1995. Results in 1995 included a gain of $2.3 million associated with an
insurance claim relating to certain assets destroyed by a fire in the United
Kingdom.
Cost of sales increased $61.2 million or 32.8% to $247.6 million in 1996
from $186.4 million in 1995, primarily as a result of higher sales volume. Cost
of sales represented 76.5% of net sales in 1996, compared to 76.6% of net sales
in 1995. Gross profit increased to $76.1 million or 23.5% of net sales in 1996
from $56.8 million or 23.4% of net sales in 1995.
Product development, selling and administrative expenses increased by $8.1
million or 22.0% to $45.0 million in 1996 from $36.9 million in 1995. These
expenses declined to 13.9% of net sales in 1996 from 15.2% of net sales in 1995.
The increased costs were primarily due to the acquisition of DSCs in North
America and the expansion of the Company's DSC network in the United Kingdom.
Parent management fees allocated by HII increased to $2.3 million in 1996
from $1.9 million in 1995.
50
<PAGE>
Operating income increased by $8.3 million or 38.2% to $30.0 million in
1996 from $21.7 million in 1995. Operating income represented 9.3% of net sales
in 1996, an increase from 8.9% of net sales in 1995. This improvement was
principally the result of sales growth in the higher margin aftermarket parts
and service business, offset, in part, by increased operating expenses as the
Company continued to expand its DSC network.
Net income increased by $4.9 million or 36.3% to $18.4 million in 1996
from $13.5 million in 1995. This increase was primarily the result of higher
operating income, offset, in part, by higher income taxes.
Liquidity and Capital Resources
The majority of the Company's sales of products and services are recorded
as products are shipped or services are rendered. Revenue on certain long-term
contracts is recorded using the percentage-of-completion method. Net cash flow
from operations is affected by the volume of, and the timing of payments under,
percentage-of-completion long-term contracts.
Net cash flow provided by operations was $5.3 million and $0.4 million in
First Quarter 1998 and 1997, respectively. The increase in net cash flow
provided by operations was primarily due to an increase in cash provided from
HII and its affiliates in First Quarter 1998 as compared to First Quarter 1997.
Net cash flow provided by operations was $3.8 million, $23.5 million and
$12.9 million in 1995, 1996 and 1997, respectively. The decrease from 1996 to
1997 was primarily due to a larger increase in net working capital. The increase
from 1995 to 1996 was primarily due to an increase in net income, an increase in
cash provided from HII and its affiliates and a smaller increase in net working
capital. The Company's cash flow provided by operations was largely affected by
changes in working capital, primarily due to the presence of an unusually large
number of percentage of completion contracts in 1996.
Net cash used for investment and other transactions for the First Quarter
1998 and 1997 was $0.4 million and $0.9 million, respectively. This decrease was
primarily due to a lower level of capital expenditures. The Company currently
anticipates that 1998 capital expenditure requirements for the maintenance and
improvement of existing operations and for the implementation of systems
projects will be approximately $8.4 million.
Net cash used for investment and other transactions for the years ended
1995, 1996, and 1997 was $2.5 million, $21.2 million and $14.9 million,
respectively. The decrease from 1996 to 1997 was primarily due to a lower level
of acquisition expenditures and the receipt in 1997 of insurance proceeds
related to an earlier fire. The increase from 1995 to 1996 was primarily due to
(i) increased expenditures on acquisitions, (ii) increased capital expenditures
in 1996 and (iii) the receipt in 1995 of proceeds from the sale of a facility in
Florida. The Company has completed 10 acquisitions since the beginning of 1995
for a total of $30.9 million.
Concurrent with the Offering, MMH offered its $200,000,000 principal
amount of 9 1/2% Senior Notes due 2008. Interest will accrue on the Senior Notes
from March 30, 1998, the date of issuance of the Senior Notes, and will be
payable semi-annually on each April 1 and October 1, commencing October 1,
1998. The Senior Notes will mature on April 1, 2008.
As part of the Transactions, the Company entered into the New Credit
Facility which includes $55.0 million of term loans, the Revolving Credit
Facility and the Acquisition Facility. The Revolving Credit Facility provides
the Company with up to $70.0 million of available borrowings (of which $15.0
million is required under the Note Indenture to be reserved for issuance of
letters of credit) until the fifth anniversary of the Recapitalization Closing
for working capital, acquisitions and other corporate purposes, subject to
compliance with certain conditions, including a borrowing base test. Up to $20.0
million of the Revolving Credit Facility (of which $15.0 million will not be
subject to a borrowing base) is available for the issuance of documentary and
standby letters of credit. The Acquisition Facility permits the Company to
borrow up to $30.0 million until the third anniversary of the Recapitalization
Closing (and to repay the same in installments prior to the seventh anniversary
of the Recapitalization Closing) to finance acquisitions, subject to compliance
with certain conditions. See "Description of
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the New Credit Facility." Term Loan A will be payable in 20 quarterly
installments, commencing on June 30, 1998 and Term Loan B will be payable in 28
quarterly installments, commencing on June 30, 1998.
Aggregate yearly term loan principal payments under the New Credit
Facility will be as follows: (i) $675,000 in 1998; (ii) $2,100,000 in 1999;
(iii) $3,600,000 in 2000; (iv) $5,100,000 in 2001; (v) $6,600,000 in 2002; (vi)
$11,988,000 in 2003; (vii) $16,625,000 in 2004; and (viii) $8,313,000 in 2005.
Historically, the Company's interest expense has not been material. On a pro
forma basis, assuming the Transactions had occurred on November 1, 1996, the
Company's cash interest expense for 1997 would have been $24,681,000.
Borrowings under the New Credit Facility are (i) secured by substantially
all of the present and future assets of the Company and its subsidiaries located
in the United States and the United Kingdom, certain of the Company's
subsidiaries' present and future assets located in Canada and by a pledge of
substantially all of the issued and outstanding shares of capital stock of the
Company and its current and future subsidiaries and (ii) guaranteed by Holdings
and substantially all of the Company's subsidiaries. See "Description of the New
Credit Facility."
As of January 31, 1998, after giving pro forma effect to the Offering, the
application of the net proceeds thereof and the Transactions, Holdings and its
subsidiaries would have had an aggregate of $259.3 million of Indebtedness
outstanding, including the $200.0 million principal amount of the Senior Notes
issued by the Company and $55.0 million of borrowings under the New Credit
Facility.
At January 31, 1998, the Company would have, subject to compliance with
certain conditions, had approximately $70.0 million of availability (of which
$15.0 million is required under the Note Indenture to be reserved for issuance
of letters of credit) under the Revolving Credit Facility, after giving effect
to the Transactions. See "Capitalization." Management believes that cash flow
from operations, together with borrowings under the Revolving Credit Facility
will be sufficient to meet its anticipated cash requirements for interest and
principal payments, working capital, the payments to be made to Holdings
described below and capital expenditures for the foreseeable future. The Company
also expects that expansion and future acquisitions will be financed from funds
generated from operations and borrowings under the Revolving Credit Facility and
the Acquisition Facility.
Holdings' primary cash needs are for administrative expenses and for the
payment of income taxes of Holdings and its affiliates related to the MHE
Business. Holdings is a holding company that conducts all of its operations
through its subsidiaries. Consequently, Holdings is dependent on payments from
its subsidiaries to meet its cash needs. The New Credit Agreement and the Note
Indenture generally restrict the ability of Holdings' subsidiaries to transfer
funds to Holdings, other than for administrative fees and expenses (subject to a
general limit) and other than for the payment of income taxes. Under the terms
of the Note Indenture, the Company is generally restricted from paying dividends
or making other restricted payments to Holdings unless, among other things, the
ratio of the Company's EBITDA to Consolidated Interest Expense (as defined in
the Note Indenture) for the four most recent consecutive fiscal quarters is at
least 2 to 1. Moreover, the terms of the Series A Senior Preferred Stock, as
well as the Series B Junior Preferred Stock and the Series C Junior Voting
Preferred Stock, restrict the ability of Holdings and its subsidiaries to incur
additional indebtedness. As a result of these restrictions, among others, there
can be no assurance that Holdings will have available to it sufficient cash
resources to pay cash dividends on the New Series A Senior Preferred Stock
commencing October 1, 2003.
The Company's products are sold in over 50 countries around the world.
Although revenues of the Company are generated in foreign currencies, the vast
majority of both sales and associated costs are in United States dollars, Pounds
Sterling and Canadian Dollars. The Company may, from time to time, hedge
specifically identified committed cash flows in foreign currencies using forward
currency sale or purchase contracts. Such foreign currency contracts
historically have not been material in amount.
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BUSINESS
The Company is a leading international provider of "through-the-air"
material handling products and services used in most manufacturing industries.
The Company's original equipment operations design and manufacture a
comprehensive line of industrial cranes, hoists and other component products,
sold principally under the P&H and Morris brand names. Through its aftermarket
operations, the Company provides a variety of related products and services,
including replacement parts, repair and maintenance services and product
modernizations. In recent years, the Company has shifted its orientation from an
original equipment-focused United States manufacturer to an international full
service provider with a significant emphasis on the high margin aftermarket
business.
During the past three years, the Company has grown significantly, both
internally and through acquisitions. From fiscal 1994 through fiscal 1997, the
Company's net sales grew from $109.4 million to $353.4 million and EBITDA
increased from $15.1 million to $45.9 million. Management believes that this
growth is largely attributable to (i) strengthening and broadening its product
line, (ii) building a network of Company-owned distribution and service centers
which provides a local presence for product support and a platform for growth
and (iii) expanding into attractive domestic and international markets through
internal growth and a disciplined acquisition strategy.
The Company's core business was founded in 1884 and material handling
machinery and related equipment have been sold under the well-recognized P&H and
Morris brand names since the 1890s. The Company has developed a large global
installed base of equipment, having sold an aggregate of over half a million
cranes and hoists according to management estimates. Management believes that
the Company is one of the leading suppliers of industrial overhead cranes in
North America, the United Kingdom and South Africa. Management also believes
that the Company is one of the largest global providers of aftermarket products
and services to the industrial crane industry. Sales outside of North America
accounted for 39% of fiscal 1997 net sales, with Western Europe representing 22%
and the Pacific Rim representing 8% of net sales. For additional geographical
information, see the Combined Financial Statements of the Company and notes
thereto appearing elsewhere herein.
Industrial cranes and hoists are critical to the operations of most
businesses that require the movement of large or heavy objects. The steel,
aluminum, paper and forest products, aerospace, foundry, and automotive
industries, among others, rely on cranes and hoists as one of the most flexible
and efficient methods of transporting materials within a plant while maximizing
the use of available space. Industrial cranes, which typically last 20 to 50
years, require significant aftermarket support in the form of replacement parts,
machine modernizations and upgrades, repairs and inspection and maintenance
services.
The current management team has implemented a strategy to capitalize on
the Company's significant global installed base of equipment to generate high
margin aftermarket opportunities. The Company has built its aftermarket
operations in order to become a full service provider and capture additional
revenue. In addition, management believes that the diversified earnings created
by this strategy help to lessen the effect of economic cycles on the Company. In
fiscal 1997, aftermarket sales accounted for approximately 40% of net sales and
65% of gross profit on a consolidated basis, while in North America, where the
Company has pursued its full service strategy for a longer period of time, the
aftermarket business accounted for 51% of net sales and 72% of gross profit.
Prior to the acquisition of Morris Ltd. in 1994, the Company's operations
were primarily conducted in the United States. The acquisition of Morris Ltd.
provided the Company with major manufacturing facilities in the United Kingdom
and South Africa and access to many other markets around the world. The Company
has since expanded its international manufacturing operations by acquiring
Mondel Engineering Ltd.'s brake manufacturing operations in Canada in 1995. In
addition, the Company has acquired regional crane assemblers and large
distributors in Alabama, Ohio, South Carolina, Canada, Mexico, Scotland and
Singapore. Since July 1994, the Company has acquired a total of 12 businesses
that collectively generated annual revenues in excess of $170.0 million in
fiscal 1997.
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Industry Overview
Industrial cranes and hoists provide "through-the-air" material handling
for a broad range of industrial applications. Within the industrial setting,
through-the-air material handing equipment continues to be one of the most
flexible, effective and reliable means of transferring materials while
maximizing the use of available space. Through-the-air material handling
equipment provides more efficient space and capacity utilization than fixed
conveyors and traditional forklifts. These tools are widely used in
manufacturing industries with no practical alternative or substitute. The
industry is comprised of original equipment cranes and hoists, and aftermarket
parts, service and modernizations. Despite global demand, the industrial crane
and hoist industry remains highly fragmented, with three global participants and
a large number of regional and local players.
The United States market for industrial overhead cranes and hoist products
is estimated to be approximately $600 million per year and the potential
aftermarket for such products is estimated to be approximately $1.2 billion per
year. Management estimates that the global market is several times larger. In
mature industrialized economies, original equipment growth is driven by the need
for upgrades and replacements as well as capacity expansion. Technological
innovations such as more compact, space efficient cranes, built in diagnostic
systems and sophisticated motors and transmissions, improve operating efficiency
and fuel the replacement/upgrade market. In emerging economies, however, the
market for overhead cranes is tied principally to industrial development. Demand
for aftermarket products and services is driven by general wear and tear of
equipment and increases as a result of growth in the installed base of cranes
and hoists. Management believes that the global market for outsourced crane
maintenance and repair services is continuing to grow as more companies focus on
core competencies and use outsourced suppliers.
Competitive Strengths
Large Installed Base of Existing Equipment. The Company believes it has
one of the largest installed bases of industrial cranes in North America, the
United Kingdom and South Africa. This installed base provides the Company with
well-established relationships and a strong platform upon which to pursue high
margin aftermarket opportunities. A large portion of the Company's installed
base is used in demanding process industries which require frequent replacement
parts, repairs, inspection services and modernizations.
Stable Aftermarket Demand and Earnings. Material handling products are
critical to customers' operations. As long as industrial plants continue to
operate, the cranes and hoists used in such facilities will require replacement
parts and maintenance services, irrespective of economic cycles. Management has
increased its focus on aftermarket operations, and this more stable business
represented 65% of the Company's gross profit in fiscal 1997.
Diverse Customer Base. The Company sells both original equipment and
aftermarket products and services to thousands of customers operating in various
manufacturing industries in more than 50 countries. Management believes that
this geographic and industry diversity helps to lessen the effect on the Company
of economic cycles that may affect a particular region or industry.
Reputation for Reliability and Engineering Expertise. Over its long
history of providing custom engineered cranes and hoists, the Company has
developed a reputation for engineering expertise and product reliability. As the
Company has developed a number of innovative technologies, it has enhanced its
reputation and built a platform to pursue the higher volume standard crane
market. In addition, the Company has been able to apply its proven technical
skills in the aftermarket business.
Company-Owned Distribution and Service Network. The Company has developed
an international distribution and service network with 61 Company-owned
locations in key industrial markets. This DSC network is central to the
Company's strategy of being a single source provider of original equipment and
aftermarket products and services. Management believes that ownership of its
primary distribution channel provides the following competitive advantages: (i)
a higher level of control over the delivery of its products and services; (ii)
faster service response time; (iii) quicker delivery of standard cranes at a
lower cost; and (iv) increased sales and margins by capturing the incremental
profit that would otherwise be recognized by independent distributors.
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Experienced Management Team. The Company is run by an experienced,
entrepreneurial and talented management team led by its President, Michael
Erwin. The top seven executives combined have over 100 years of experience at
the Company. Mr. Erwin has run the Company since December 1994 and, along with
the rest of the senior management team, has developed and implemented the
Company's successful growth strategies. In acquiring 12 companies since 1994,
management has demonstrated its ability to acquire and integrate businesses in a
disciplined and effective manner. Under current management's leadership, EBITDA
has grown at a compound average annual rate of approximately 45% from fiscal
1994 through fiscal 1997.
Business Strategy
Management has developed an integrated strategy designed to increase
revenues and profits by capitalizing on the Company's large installed base of
equipment, Company-owned distribution and service network and technical
competencies to capture greater market share and differentiate the Company from
original equipment-focused competitors.
The key components of the Company's strategy are as follows:
Focus on Aftermarket Opportunities. The United States industrial crane and
hoist aftermarket is estimated to be $1.2 billion annually and management
estimates the global aftermarket to be several times that amount. This market is
highly fragmented and a substantial portion of repair and maintenance work is
performed by customers' own maintenance personnel. A recent independent study
indicates that the Company currently captures approximately 25% of the United
States aftermarket potential of its own installed base and less than 10% of the
entire United States aftermarket potential. Management has developed a series of
focused marketing programs and product offerings designed to capture a greater
share of the aftermarket business by taking advantage of the Company's large
installed base, brand recognition, and local DSC network. The Company is
beginning to see the benefits of these efforts and aftermarket sales have
increased in each of the last four years.
Provide High Level of Customer Support. The Company's products and
services are designed to meet its customers' objectives of lowering their
material handling costs and increasing the efficiency of their operations. The
Company's goal is to help its customers reduce costs and increase profitability
through the proper selection, design, manufacture and installation of original
equipment and by providing a wide variety of aftermarket products and services.
Management believes that this ability to provide comprehensive solutions to its
customers' needs is a competitive advantage.
Expand DSC Network. The Company's DSCs are its platform for growth and
central to its strategy of being a single source provider of original equipment
and aftermarket products and services. The Company's North American DSC network
covers a broad territory of geographically dispersed customers. The Company
plans to continue developing this network with the goal of having a DSC in each
key industrial market in North America. The Company has developed similar DSC
networks in the United Kingdom and South Africa, and management plans to
replicate this model in other attractive markets.
Improve Production Efficiency to Reduce Costs. Management has implemented
numerous efficiency initiatives that it believes will improve the Company's
competitiveness while enhancing profit margins. The Company is completing the
re-engineering of various operations to cellular manufacturing. In addition, the
Company has standardized a number of its proprietary components which it
manufactures at specialized facilities for global distribution. Management
believes these initiatives will enable the Company to lower its overall cost
structure by reducing labor, engineering, and fabrication expenses and to
achieve economies of scale and permit faster deliveries. In the United States,
the lead time required to deliver certain original equipment was reduced by as
much as 50% in fiscal 1997.
Increase Sales of High Volume Original Equipment Products. The Company
plans to continue increasing its penetration of the higher volume and more
stable market for standard cranes and hoists by: (i) capitalizing on its brand
equity in engineered cranes; (ii) reducing costs; and (iii) improving delivery
times. The Company has tripled
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the number of standard cranes it has sold in the United States during the past
three years, yet its share of the United States standard crane market in fiscal
1997 was still less than 15%.
Expand Through Selected Acquisitions. The global material handling
industry is highly fragmented and is beginning to consolidate as a result of the
scale economies that favor larger competitors. Management believes that the
Company is well positioned to capitalize on this opportunity. Since July 1994,
the Company has acquired 12 businesses which collectively generated annual
revenues in excess of $170.0 million in fiscal 1997. The Company plans to
continue making strategic acquisitions to penetrate new markets and to expand
its range of product and service offerings.
Products and Services
The Company operates through two distinct but interrelated business
groups: (i) original equipment and (ii) aftermarket products and services.
Original Equipment
The Company's original equipment operations design, manufacture and
distribute a broad range of standard and engineered overhead and gantry cranes,
hoists and related products. The Company's original equipment products have a
reputation for quality, durability and technological innovation.
Engineered Cranes. Management attributes the Company's position as a
leading manufacturer of industrial cranes to its reputation for reliability and
engineering sophistication. The Company's engineered cranes are used by
customers with unique performance requirements that cannot be achieved with a
standard overhead crane. The Company's engineered cranes are individually
designed for specific applications in a wide variety of demanding environments
and typically have a high load capacity. Each unit is highly engineered,
incurring between 300 and 4,500 hours of engineering, and is generally priced
between $60,000 and $6.0 million. The Company markets engineered cranes under
the P&H (North and South America and Southeast Asia) and Morris (United Kingdom,
South Africa, Scandinavia, the Middle East and Southeast Asia) brand names.
Within the engineered crane market, performance is often the most critical
purchase criterion for a customer. Given the premium placed on technological
sophistication and specific product performance, customers purchasing highly
engineered cranes tend to be less sensitive to the length of time between order
and delivery than most standard overhead crane customers. Overall lead times for
engineered cranes typically range between 20 and 40 weeks and include on-site
inspection of customer needs, in-house engineering and development,
manufacturing, product testing and installation. Many engineered crane projects
are completed pursuant to contracts on which the Company receives progress
payments and for which the Company occasionally must post performance bonds.
Engineered cranes provide particularly valuable aftermarket opportunities
since they often operate in harsh environments and require frequent replacement
parts and a high degree of ongoing inspection and maintenance services.
Management believes that the Company is well positioned to provide these
services for its customers as a result of its product knowledge, expertise and
local technical support.
Due to the advanced design of an engineered crane, these products are
generally manufactured at one of the Company's facilities located in Oak Creek,
Wisconsin, Loughborough, England or Johannesburg, South Africa. Each of these
facilities maintains advanced manufacturing capabilities, sophisticated
engineering skills, project management and inspection capabilities.
Standard Cranes. The Company's standard cranes, which utilize
pre-engineered components, are adaptable to a wide variety of uses. While the
cranes are configured to meet each customer's particular needs, the degree of
specific engineering is typically limited to less than 100 hours and most often
falls within the 20 to 60 hour range. These cranes typically range in price from
$10,000 to $200,000. The Company markets various standard cranes under the P&H
(North and South America and Southeast Asia), Morris (United Kingdom, South
Africa, Scandinavia, the Middle East and Southeast Asia), Kaverit (Canada) and
Hercules (Mexico) brand names.
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While engineered cranes have typically been produced by larger
manufacturers, local crane builders have historically supplied significant
numbers of standard cranes. Delivery time and price are key purchase criteria.
The Company has successfully grown its standard crane sales by expanding local
assembly operations to shorten delivery times and reduce costs.
Hoists. The Company manufactures electric wire rope and chain hoists,
manual chain hoists and ratchet lever hoists. The Company's hoists range in
capacity from 1/8 of a ton to 60 tons and feature a variety of electrical
control technologies. Customers select a specific type of hoist based on the
number of lifts to be performed per day and the average load capacity. Hoist
product prices range from $100 to $150,000, with most sold in the $1,000 to
$8,000 range. The Company markets its industrial hoists under the Redi-Lift and
Hevi-Lift brand names in North and South America and under the Morris brand name
in the United Kingdom, South Africa, South America and Southeast Asia. Through
the acquisition of Morris Ltd. in 1994, the Company significantly strengthened
its position in the hoist marketplace. In 1994, a portion of the Company's
Loughborough, England facility used to manufacture electric hoists was destroyed
by a fire. The Company rebuilt the facility as a state-of-the-art hoist
manufacturing and assembly plant.
Other Components. Over the past several years, the Company has
significantly expanded its product breadth through strategic acquisitions and
the focused application of its technical expertise to complementary component
products. Industrial brakes and winches represent two important component
products manufactured by the Company and marketed to end-users and/or to other
industrial equipment manufacturers.
Aftermarket Products and Services
The Company's aftermarket business consists of replacement parts, repairs,
inspection and maintenance services, and modernizations for products
manufactured by both the Company and its competitors. The Company's network of
DSCs and independent distributors located around the world is the platform for
the Company's aftermarket sales activities, serving as distribution centers for
its original equipment and replacement parts as well as the focal point for
service activities. While aftermarket sales accounted for approximately 40% of
net sales in fiscal 1997, they accounted for 65% of gross profit. While the
Company's share of the aftermarket business on its United States installed base
is approximately 25%, where proprietary parts or product knowledge is important,
the Company has a significantly higher share of the aftermarket business.
Parts and Components. The Company manufactures a wide range of replacement
parts and components necessary to maintain cranes and hoists manufactured by
both the Company and its competitors. These parts are sold through both DSCs and
independent distributors and agents.
Given the long useful life of an overhead crane, which ranges from 20 to
50 years, the Company's installed base of equipment provides a strong foundation
for the Company's aftermarket business. Parts sales are generated by customer
requests and through service personnel during scheduled inspections, appraisals
and service calls.
The Company markets both proprietary and commercially available parts for
its equipment. Proprietary parts command premium prices because they either have
unique design attributes that make them prohibitively expensive to reverse
engineer or are critical parts where an inadequate substitute could have
catastrophic consequences.
Service. The Company provides installation, repair, inspection and
maintenance services, primarily through its DSC network. The Company provides
these services under highly recognized trade names including ProCare (United
States, Canada), Crane Aid (South Africa) and UK Crane Service (United Kingdom).
The Company has expanded its service offerings as a strategic response to
customers' increased interest in outsourcing the repair, inspection and
maintenance of overhead cranes and hoists. Currently, management estimates that
more than 30% of the Company's total repair and maintenance net sales are from
services performed upon cranes and hoists manufactured by its competitors.
Management believes that there is significant opportunity to leverage its
growing service operations to provide similar services on significantly more of
the cranes and hoists manufactured by its competitors.
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In addition to responding to service calls from clients, the Company has
expanded its portfolio of services to include inspections for regulatory
compliance purposes (such as OSHA) as well as an innovative Crane
Appraisal/Repair Evaluation (CARE) program. The CARE program thoroughly assesses
the condition and performance of a crane and provides a concise reference
document for restoring the equipment to optimal operating performance. Each of
these inspection programs sends a highly-trained service technician into
customers' factories to evaluate the overall condition of the crane or hoist,
and allows the technician to recommend preventive maintenance and replacement
components. See "--Sales, Marketing and Distribution."
Modernizations. Crane modernizations provide an attractive opportunity for
the Company to generate additional revenue from the entire installed base of
equipment. By upgrading the electrical and mechanical systems on existing
cranes, the Company can help its customers to optimize crane performance and
improve the capacity and efficiency of their operations. The cost of modernizing
an older crane typically ranges between 10% and 60% of the cost of a new
product.
Sales, Marketing and Distribution
Due to the diverse nature of its product lines and customer requests, the
Company uses multiple sales approaches to serve its large customer base. A
majority of sales are generated by Company employees and DSCs. In addition, the
Company utilizes a number of independent agents and distributors in certain
markets. In many markets, the members of the Company's sales staff specialize in
either original equipment or aftermarket products and services. These employees
have the ability to effectively identify and service the original equipment and
aftermarket needs of the customer, thereby positioning the Company as a single
source provider.
With the exception of very sophisticated original equipment projects, the
Company's selling efforts occur primarily at the regional level. For
sophisticated original equipment, the Company uses dedicated worldwide product
or engineering specialists to "team sell" the products. In this process, the
team provides written specifications, design concept consulting, project scope
development and project financial planning.
In order to develop stronger and more knowledgeable customer
relationships, the Company has developed a DSC network, bringing the Company's
parts and service operations closer to the customer. The Company's DSC network
provides three distinct yet integrated functions: (i) a distribution network for
parts; (ii) a sales organization for original equipment; and (iii) an
installation, repair, inspection and maintenance service operation. The Company
has significantly expanded its DSC network in recent years through both
acquisitions of previously independent distributors as well as the start-up of
new DSCs.
The Company's DSC network consists of 61 locations, including 38 in North
America. In 1994, the Company opened its first DSC in the United Kingdom and,
over the past three years, has built a DSC network with 12 locations that
operate under the UK Crane Service trade name. The Company's DSC network in
South Africa presently consists of 10 locations that operate under the Crane Aid
trade name.
The DSC network maintains an inventory of fast-moving parts and deploys
fully equipped service technicians, to provide product support to local
customers. Certain of the Company's DSCs also build small, standardized original
equipment cranes, which has enabled the Company to increase its penetration of
the standard crane market. The Company's goal is to have a DSC in each key
industrial market in North America. In certain customer locations, the Company
has technicians permanently on site to provide immediate technical support or
routine preventive maintenance.
<TABLE>
<CAPTION>
The following table outlines the Company's current DSC network:
Location Principal Trade Names Number
- --------------------------------------------------------------------------------
<S> <C> <C>
North America P&H Material Handling Center 38
United Kingdom UK Crane Service 12
South Africa Crane Aid 10
Southeast Asia Morris Blooma 1
</TABLE>
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The Company's distribution and service operations are also supported by
distributor and agent relationships in more than 50 countries, many of which are
unwritten arrangements that may be terminated at any time.
Manufacturing
The Company employs high-quality, technically advanced manufacturing at
its core facilities. The Company utilizes specialized manufacturing facilities
in combination with regional assembly to balance the different operational
requirements faced by a full service participant in the overhead crane and hoist
industry.
The specialized manufacturing facilities build highly engineered cranes
and utilize advanced technology throughout the manufacturing process. These
facilities support the regional DSC crane assembly operations by providing
high-quality, standardized components which are manufactured using processes
which are not economical for smaller, regional facilities. For example, due to
the specialized nature of the machining and assembly processes associated with
hoists and brake systems, focused manufacturing facilities located in
Loughborough (hoists) and Toronto (brakes) are used to produce the majority of
these components for distribution to the Company's facilities throughout the
world. This centralization allows the Company to take advantage of economies of
scale and focused engineering resources while supporting the Company's objective
of standardizing component design and manufacturing.
By providing light manufacturing and assembly of standardized overhead
crane products on a regional basis, the Company addresses customers' demand for
cost effective products and shorter lead-times. This regional manufacturing
strategy also benefits the Company's new product development efforts since the
regional DSC manufacturers have a better understanding of end-users' performance
needs.
Raw Materials
The Company maintains strong relationships with a large number of
suppliers both domestically and abroad. Typically, the Company will source raw
materials from a local supplier in the region of the manufacturing facility,
often entering into a blanket purchase order or an equivalent arrangement to
reduce costs. Under certain circumstances, however, the Company will establish a
long-term supply arrangement, either in an attempt to secure product consistency
or to take advantage of volume discounts. Some of the materials most frequently
purchased by the Company include steel, electric motors, castings and forgings,
electrical controls and components, and power transmission and related
components. Substantially all of the materials purchased by the Company are
available from a variety of sources within the country of manufacture or abroad.
Backlog
The Company's backlog of orders at January 31, 1998 was approximately
$99.8 million compared to approximately $111.9 million at January 31, 1997.
However, bookings in the quarter ended January 31, 1998 increased by $19.2
million or 32.4% as compared to the quarter ended January 31, 1997. The change
in backlog is primarily attributable to reduced through-put time as the Company
has improved its manufacturing operations. In the United States, the lead time
required to deliver certain original equipment was reduced by as much as 50% in
fiscal 1997. The Company's orders for standard hoist products are usually
shipped within 3 to 12 weeks. Overall lead times for products that are
manufactured to customer's specifications typically range between 12 and 40
weeks.
Warranties
The Company generally provides a warranty on its products for periods of
one to two years. At January 31, 1998, the Company had accrued warranties of
approximately $3.5 million.
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<PAGE>
Trademarks and Brand Names
The Company offers its equipment and services primarily under the P&H and
Morris brand names. The P&H and Morris trademarks, which have been consistently
used for over 100 years, are recognized in important markets around the world.
P&H is currently used on above-ground mining equipment manufactured by HarnCo,
as well as on the crane and hoist products manufactured by the Company for
related services offered by the Company. HarnCo has licensed to the Company the
sole and exclusive right to use the P&H trademark on a worldwide basis in
connection with "through-the-air" material handling original equipment from the
date of the Recapitalization Closing until 15 years after the earlier to occur
of a sale of Holdings to a third party or a public offering of the common stock
of Holdings, the Company or their parents or successors, and for an additional
seven years in connection with aftermarket products and services. The royalty
fee for use of the trademark is 0.75% of the aggregate net sales of the MHE
Business for the ten year period commencing 12 months after the Recapitalization
Closing. See "Certain Relationships and Related Transactions."
The Company also sells products under the Kaverit and Mondel trademarks in
Canada, and the Hercules trademark in Mexico. It provides aftermarket service
under the ProCare trademark in the United States, the UK Crane Service trademark
in the United Kingdom, and the Crane Aid trademark in South Africa. The Company
also uses a variety of other marks in different countries. There are no known
conflicts or third party rights which would materially impact the Company's
limited use of the P&H trademark in connection with the Company's business
activities for the life of the license agreement or use of its other trademarks.
Patents
The Company owns approximately 60 United States patents and pending patent
applications and approximately 120 foreign patents and pending patent
applications, primarily in Brazil, Canada, Japan, Mexico and the United Kingdom.
The Company has acquired patents pertaining to improvements in stacker cranes,
portal cranes, anti-sway cable reeving systems for cranes, automation and
controls, and crane wheel and rail configurations to prevent skewing of
rail-mounted cranes. Most of the products manufactured by the Company are
proprietary in design and the Company is not aware of any subsisting patents
held by others which would be infringed by the manufacture and sale of the
Company's current lines of crane and hoist products.
Competition
The industrial crane and hoist industry is highly fragmented, with three
global participants and many regional and local players. Therefore, the markets
in which the Company operates are highly competitive, and the Company faces
competition from a number of different manufacturers in each of its product
areas and geographic markets, both domestic and foreign. Globally, the Company
believes it is one of the three largest manufacturers of industrial overhead
cranes and one of the largest providers of related aftermarket products and
services. Other global competitors include Mannesmann Dematic AG, a subsidiary
of Mannesmann AG, and KCI Konecranes International Corp. Within specific
geographic and product markets, the market share of the top participants often
varies.
Governmental Regulation
Environmental Regulation
The Company's operations and properties worldwide are subject to extensive
and changing legal requirements and regulations pertaining to environmental
matters. In 1997, expenditures in connection with the Company's compliance with
federal, state, local and foreign environmental laws and regulations did not
have a material adverse effect on the Company's earnings or competitive
position.
The principal environmental compliance issues that arise in connection
with the Company's manufacturing facilities are hazardous/solid waste disposal
and air emissions (primarily paint and welding). The Company's DSCs do not
create environmental conditions that materially affect the Company's operations.
60
<PAGE>
The Resource Conservation and Recovery Act ("RCRA") requires the Company
to manage and recycle or dispose properly of the wastes it generates from its
manufacturing operations. Similar foreign hazardous waste laws and regulations
apply to the Company's facilities outside the United States. RCRA and these
other hazardous waste laws and regulations include storage, management and
manifest provisions, among others. The Company also has embarked on a pollution
prevention program, for example, reducing the hazardous waste generated at its
Oak Creek, Wisconsin facility by 63 percent in 1996 from the prior year, while
at the same time increasing production. The Company has agreements worldwide
with hazardous waste management firms to recycle or dispose properly of
generated hazardous wastes. Many of the Company's regional distribution centers
have a "parts washer sink" on-site, and the spent solvents generated from these
minor cleaning activities are managed, collected and recycled under contracts
with waste management firms. The Company is not aware of any material
non-compliance with applicable hazardous waste laws and regulations at its
facilities or operations.
Under the Clean Air Act, the States have adopted an array of control
measures and programs to minimize certain hazardous air pollutants and
particulate matter. The Company has obtained necessary permits for any affected
facilities. Foreign clean air laws and regulations address many of the same
pollutants and issues. Considerable regulatory activity is expected in the next
ten years with the implementation of 1997 changes to the national ambient air
quality standards for ozone and particulate matter. The Company has made a
number of select investments in equipment at its primary manufacturing sites in
anticipation of these changes. The adoption of some of these additional clean
air regulations might require the Company to make further capital expenditures
not currently anticipated and that may be material.
In connection with the ownership of its properties and operation of its
business, the Company may also be subject to liability under various federal,
state, local and foreign laws, regulations and ordinances relating to clean-up
and removal of hazardous substances on, under or in such properties. Certain
laws, such as the Comprehensive Environmental Response, Compensation and
Liability Act, typically impose liability whether or not the owner or operator
knew of, or was responsible for, the presence of such hazardous substances.
Persons who arrange, or are deemed to have arranged, for the disposal or
treatment of hazardous substances also may be liable for the costs of removal
and remediation of such substances at the treatment or disposal site, regardless
of whether such site is owned or operated by such person. Under the terms of the
Recapitalization Agreement, HarnCo retained all liability for the only two, open
environmental clean-up claims brought against HarnCo in the Milwaukee area. The
Company and its management are not aware of any other material environmental
clean-up claim which is pending or is threatened against the Company, but there
can be no assurance that any such claim will not be asserted against the Company
in the future.
The Company has undergone significant expansion in recent years through
acquisitions, and management has decided that it is important for the Company's
operations to adopt a "proactive" compliance management approach to
environmental matters. The Company hired a manager of safety, health and
environmental affairs in September 1996 to oversee worldwide compliance, and
staff have been designated to lead compliance activities at each facility. The
Company also is developing an "Annual Compliance Calendar" matrix for all
required facility reports and an audit system for all environmental, safety and
health issues. A key component of the Company's environmental strategic
management plan is training for managers and employees. Once fully implemented
in 1998, the Company believes its compliance program will be in conformance with
ISO 14000 standards.
It is likely that situations will arise from time to time requiring the
Company to incur expenditures in order to ensure continuing regulatory
compliance. The Company is not aware of any environmental condition or any
operation at any of its properties or facilities, either individually or in the
aggregate, which would cause expenditures that would result in a material
adverse effect on the Company's results of operations, financial condition, or
competitive position. There could be future, unknown environmental regulatory
changes that could have a material effect.
In connection with the Transactions, an environmental assessment of
certain of the Company's properties and operations at which the Company may have
potential environmental liabilities has been conducted. This environmental
assessment has indicated that no environmental matters or compliance issues
exist at the Company's
61
<PAGE>
United States properties and operations that would have a material adverse
effect on the Company's earnings or competitive position. At some of the
Company's foreign properties and operations, however, the environmental
assessment has indicated a need for the Company to conduct certain follow-up
measures in order to reduce potential environmental liabilities. The Company
intends to follow up on certain of the recommendations made in the environmental
assessment with respect to both United States and foreign properties. There can
be no assurance that unknown conditions at the Company's facilities will not
result in potential liabilities that may be material.
The Loughborough, England facility is subject to an air emissions permit,
the limits of which became enforceable in April 1998. The Company has retained
a consultant who has conducted tests to determine if the facility complies with
such limits. However, the results of the consultant's tests have not been
received to date. Further, the Company is currently evaluating the purchase of
insurance to cover some or all potential environmental liabilities.
Other Regulation
The Company's operations also are subject to many other laws and
regulations, including those relating to workplace safety and worker health
(principally OSHA and regulations thereunder in the United States and similar
laws in most other countries). The Company believes it is in material compliance
with these laws and regulations and does not believe that future compliance with
such laws and regulations will have a material adverse effect on its cash flow,
results of operations or financial condition.
Properties
The Company maintains its corporate headquarters in Oak Creek, Wisconsin
and conducts its principal operations at the following facilities:
<TABLE>
<CAPTION>
Square
Location Utilization Footage Owned/Leased
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Loughborough, U.K. Crane/hoist manufacturing 420,000 Owned(a)
Oak Creek, WI Crane/hoist/winch manufacturing 277,000 Owned
Johannesburg, S.A. Crane/hoist manufacturing 124,000 Owned
Franklin, OH Regional fabrication/remanufacturing 75,000 Owned
Mexico City, Mexico Crane/hoist manufacturing/distribution/service 65,000 Owned
Edmonton, Canada Crane/hoist regional manufacturing/service 58,300 Owned
Windsor/Madison, WI Crane/hoist remanufacturing 55,000 Leased(b)
Mauldin/Greenville, SC Regional crane assembly/service 40,400 Leased(c)
Birmingham, AL Regional crane assembly/service 36,500 Owned/Leased(d)
Singapore, Singapore Parts warehouse/crane assembly/hoist distribution 21,200 Land Leased(e)
Toronto, Canada Brake systems and parts manufacturing 17,600 Leased
</TABLE>
- ----------
(a) Unused portions are subleased.
(b) Lease expires May 31, 2002.
(c) Lease expires December 31, 2004.
(d) The Company owns the property with the exception of a portion thereof
leased (with an option to purchase) from the Industrial Revenue Board of
Birmingham.
(e) The building is owned while the land underneath the building is to be
leased pursuant to a thirty-year lease.
The Company also owns and leases a number of other properties as DSCs in
the United States, Canada, the United Kingdom, South Africa and Mexico.
The Company believes that its properties have been adequately maintained,
are in generally good condition, and are suitable for the Company's business as
presently conducted. The Company believes its existing facilities provide
sufficient production capacity for its present needs and for its anticipated
needs in the foreseeable future.
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<PAGE>
The Company also believes that upon the expiration of its current leases, it
either will be able to secure renewal terms or enter into leases for alternative
locations at market terms.
Employees
At January 31, 1998, the Company had a total of 2,072 full-time employees,
of which 833 were hourly and 1,239 were salaried personnel. Approximately 74% of
the Company's hourly employees are represented by unions. The Company's United
States operations employ approximately 904 employees, of which 151 production
and maintenance employees at the facility in Oak Creek, Wisconsin are unionized.
Until the October 1997 Drop Down, the Company's unionized employees in the
United States were covered by a collective bargaining agreement between HarnCo
and the United Steelworkers of America, Local 1114, which expires August 31,
1998. In connection with the October 1997 Drop Down, these employees became
employees of MHLLC, a newly-created wholly-owned subsidiary of the Company. The
Company will honor the collective bargaining agreement as to its employees
through the remainder of its term. Although negotiations with respect to a new
collective bargaining agreement have not yet begun, the Company contemplates
seeking changes in benefit programs. In addition, the Company is a party to
several agreements with unions representing certain of its employees in Mexico,
South Africa and the United Kingdom. These agreements all have a one year term.
There can be no assurance that the Company will be able to successfully
negotiate a new collective bargaining agreement with Local 1114 or any other
collective bargaining agreements upon their expiration without work stoppages.
None of the Company's businesses has experienced a significant strike,
slowdown, or lockout within the last ten years. The Company believes that its
relationship with its employees is good and that it provides working conditions,
wages, and benefits that are competitive with other providers of the kinds of
products and services offered by the Company.
Legal Proceedings
From time to time, the Company is involved in routine litigation incident
to its operations. The Company believes that any pending or threatened
litigation will not have a material adverse effect on its consolidated results
of operations and financial condition.
63
<PAGE>
MANAGEMENT
The following sets forth certain information with respect to the persons
who are members of Holdings' Board of Directors or the senior management team of
the Company and/or Holdings.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Michael S. Erwin................ 45 President, Chief Executive Officer and Director
David D. Smith.................. 43 Vice President--Finance and Director
Peter A. Kerrick................ 41 Vice President--Equipment
Richard J. Niespodziani......... 46 Vice President--Aftermarket Products
Edward J. Doolan................ 46 Vice President--Distribution & Service
K. Bruce Norridge............... 51 Vice President--Europe & Africa
Michael J. Maddock.............. 55 Vice President--Pacific Rim & Middle East
Martin L. Ditkof................ 40 General Counsel and Secretary
Todd R. Berman.................. 40 Chairman of the Board
Jay R. Bloom.................... 42 Director
Robert W. Hale.................. 51 Director
Michael S. Shein................ 34 Director
Michael R. Young................ 53 Director
Larry Zine...................... 43 Director
</TABLE>
Michael S. Erwin--Michael Erwin serves as President and Chief Executive Officer
of Holdings and the Company. He has run the Company since December 1994 and has
served as a director of Holdings since 1995. Since joining the Company in 1974,
he has held a variety of positions, including General Manager, Equipment
Division; Operations Manager, Oak Creek; Marketing Manager, Hoist Division; and
Material Handling Regional Manager, Chicago. Mr. Erwin holds a Bachelor of
Science degree in Business Management, System/Operations Management from
Milwaukee School of Engineering and an Associate's Degree in Mechanical
Technology from Milwaukee Area Technical College.
David D. Smith--David Smith has been serving as Vice President--Finance of
the Company since March 30, 1998 and as a director and Vice President of
Holdings since 1997. Previously, he served as Vice President and Controller of
the Company since 1993. Mr. Smith joined the Company in 1988 as a Senior
Operations Auditor. Mr. Smith received his Bachelor of Science in Business
Administration from Bucknell University and his M.B.A. from the University of
Pittsburgh. Mr. Smith is a Certified Public Accountant.
Peter A. Kerrick--Peter Kerrick assumed his current position as Vice
President--Equipment of the Company in 1995. Since joining the Company in 1978
as a Design & Project Engineer, Mr. Kerrick has held numerous positions with the
Company, primarily in the sales capacity. Mr. Kerrick obtained a Bachelor of
Science degree in Mechanical Engineering from Purdue University.
Richard J. Niespodziani--Richard Niespodziani has served as Vice
President--Aftermarket Products of the Company since 1994. Prior to his current
position, Mr. Niespodziani served as General Manager for five different business
areas at the Company. He also has held multiple positions related to the
Company's aftermarket operations since joining the Company in 1974. Mr.
Niespodziani received his Bachelor of Science degree in Business Administration
from the University of Wisconsin Stevens Point and his M.B.A. from the
University of Wisconsin Whitewater.
Edward J. Doolan--Edward Doolan serves as Vice President--Distribution &
Service of the Company. Prior to being promoted to his current position in 1994,
Mr. Doolan served in a variety of positions in the aftermarket products and
service groups. He joined the Harnischfeger team in 1979 and became Director of
Product Support for the Company in 1985. Mr. Doolan has a Bachelor of Science in
Industrial Engineering from Georgia Tech and an M.B.A. from Marquette
University.
64
<PAGE>
K. Bruce Norridge--Bruce Norridge has been Vice President--Europe & Africa
of the Company since September 1997. Prior to that, he was Managing Director of
Morris Ltd.'s Engineered Products Division from 1992 to 1997. Mr. Norridge has
been employed with Morris Ltd. since 1979. Mr. Norridge received a National
Diploma in Structural Engineering and an Advanced Diploma in Production
Management and is a graduate fellow of the Production Management Institute of
South Africa. Mr. Norridge is a Registered Professional Technologist in
Engineering and a Registered Professional Production Manager.
Michael J. Maddock--Michael Maddock has been Vice President--Pacific Rim &
Middle East of the Company since September 1997. Previously, Mr. Maddock held a
number of positions at Morris Ltd., including Director and General Manager,
Hoist Division, and Managing Director, Standard Products Division. He joined
Morris Ltd. in 1989. Mr. Maddock received his M.I. in Mechanical Engineering
from the Institute of Mechanical Engineers, a Bachelor of Science in Metallurgy
from the University of Surrey, a Higher National Diploma in Mechanical
Engineering and a Higher National Certificate in Production Engineering. He
received his Membership from the Institute of Mechanical Engineers.
Martin L. Ditkof--Martin Ditkof currently serves as General Counsel of the
Company and as Secretary of Holdings. He joined the Harnischfeger team as a
Corporate Attorney in 1988 and assumed his current position at the Company in
November 1995. Mr. Ditkof received a Bachelors degree in Business Administration
from the University of Michigan and his Juris Doctorate from Cornell Law School.
Todd R. Berman--Todd Berman has been Chairman of the Board of Holdings
since March 30, 1998. Mr. Berman is the founder and President of Chartwell
Investments Inc. He has served as Chairman of the Board of Griffith Consumers
Company, one of the nation's largest independent distributors of heating oil and
other petroleum products, since December 1994; as Chairman of Carl King, Inc.,
the leading operator of gas stations and convenience stores in the Delmarva
peninsula (Delaware, Maryland, Virginia), since December 1994; and as a director
of Petro Stopping Centers, L.P., a leading operator of large, full-service truck
stops, since January 1997. Mr. Berman has been with Chartwell Investments Inc.
or its predecessor since 1992. He received his A.B. from Brown University and an
M.B.A. from Columbia University Graduate School of Business.
Jay R. Bloom--Jay Bloom has been a director since March 30, 1998. Mr.
Bloom is a Managing Director and co-head of the High Yield Group of CIBC
Oppenheimer. In addition, he is the co-head of CIBC High Yield Merchant Banking
Funds. At CIBC Oppenheimer, he has been responsible for overall portfolio
strategy, numerous high yield financings and investments in numerous companies
through the merchant banking funds. Prior to joining CIBC Oppenheimer in 1995,
Mr. Bloom was a founder and managing director of The Argosy Group L.P. Before
Argosy, Mr. Bloom was a managing director in the Mergers and Acquisitions Group
of Drexel Burnham Lambert Incorporated. Mr. Bloom serves on the board of
directors of GT Crossing Limited, Global Telesystems Limited, Heating Oil
Partners, L.P., Consolidated Advisers Limited, L.L.C., and Riverside Millwork
Company, Inc. and is on the Board of Advisors of Oak Hill Securities Fund, L.P.
Mr. Bloom received his B.S. and M.B.A. degrees from Cornell University,
graduating summa cum laude, and his Juris Doctorate from Columbia University
School of Law.
Robert W. Hale--Robert Hale has served as a director since March 30, 1998.
Mr. Hale is President of HII's P&H Mining Equipment division, a position he has
held since 1994. Previously, Mr. Hale ran the Company, serving as Senior Vice
President and General Manager of HII's P&H Material Handling division from 1988
to 1994. Mr. Hale received a Bachelor of Science in civil engineering from
Marshall University and is a graduate of Harvard's AMD Program.
Michael S. Shein--Michael Shein has been a director and Vice-President of
Holdings since March 30, 1998. Mr. Shein is a Managing Director and co-founder
of Chartwell Investments Inc. and has been with Chartwell Investments Inc. or
its predecessor since 1992. Mr. Shein has served as a director of Griffith
Consumers Company, one of the nation's largest independent distributors of
heating oil and other petroleum products, since December 1994; a director of
Carl King, Inc., the leading operator of gas stations and convenience stores in
the Delmarva peninsula (Delaware, Maryland, Virginia), since December 1994; and
a director of Petro Stopping Centers, L.P., a leading operator of large,
full-service truck stops, since January 1997. Mr. Shein received a B.S. summa
cum laude from The Wharton School at the University of Pennsylvania.
65
<PAGE>
Michael R. Young--Michael Young has served as a director since March 30,
1998. Mr. Young has served as the Chairman, Chief Executive Officer and
President of Bristol Compressors from 1983 to 1987 and since 1996. Mr. Young was
the Chairman and Chief Executive Officer of Evcon Industries from 1991 to 1995
and was integrally involved in selling the company to York International. Mr.
Young was the President and Chief Operating Officer of York International from
1988 to 1989. From 1976 to 1983, Mr. Young was Director of Product Development
for Rockwell International's Automotive Operations and prior to that was Chief
Engineer of Eaton Corporation's Engineering & Research Center. Mr. Young
received B.S., M.S. and Doctorate degrees from the University of Detroit.
Larry Zine--Larry Zine serves as a director since March 30, 1998. Mr. Zine
has been Executive Vice President and Chief Financial Officer of Petro Stopping
Centers, L.P., a leading operator of large full-service truck stops since
December 1996. Mr. Zine served as the Executive Vice President and Chief
Financial Officer for The Circle K Corporation, the second largest chain of
convenience stores in the United States, from 1988 to 1996. Mr. Zine was an
integral part of The Circle K Corporation's reorganization from bankruptcy in
July 1993, its initial public offering in March 1995 and subsequent sale in June
1996. Mr. Zine has worked for The Circle K Corporation for 15 years in various
capacities. Mr. Zine was educated at the University of North Dakota and holds an
M.S. degree in accounting and a B.S.B.A. in marketing.
Director Compensation
Holdings contemplates that it will not pay directors fees to any of its
directors. Holdings will reimburse its directors for all reasonable
out-of-pocket expenses incurred in connection with attending Board meetings.
Executive Compensation
Holdings does not contemplate that it will compensate its officers for
their services as officers of Holdings.
Arrangements After Consummation of the Transactions
Employment Agreements
On March 30, 1998, the Company entered into new employment agreements with
certain senior managers of the Company, including the Named Executive Officers.
The agreements with Messrs. Erwin, Smith and Niespodziani provide for their
employment in their current capacities for three years, and for additional one
year periods thereafter unless canceled by either party on 60 days notice prior
to such renewal date. They provide Messrs. Erwin, Smith and Niespodziani a base
salary (subject to annual review by the Board of Directors) of $180,000,
$111,300 and $111,540, respectively, and an annual performance-based bonus plan
(based on Economic Value Added for 1998 and on EBITDA for years thereafter), the
terms of which are to be agreed upon by the Compensation Committee of the Board
of Directors and the Company's Chief Executive Officer. The agreements also
provide for the indemnification of the executives, and include non-competition
and confidentiality provisions. If the executive resigns for Good Reason (as
defined therein), the executive is entitled to continuance of his then current
base salary for 12 months, continuation of health and life insurance benefits
for 24, a pro-rated bonus, the continuation of other perquisites for six months
and payment, if requested, for all equity in Holdings or the Company held by the
executive or his family. If the executive is terminated without Cause (as
defined therein) by the Company, he is entitled to a lump sum payment equal to
his then current annual base salary plus a lump sum payment equal to the base
salary which would otherwise have been payable for the balance of the fiscal
year in which termination occurs, and the same benefits as if he resigned for
Good Reason (as outlined above).
The Company also entered into new employment agreements with Messrs.
Norridge and Maddock on March 30, 1998. These agreements generally continue in
effect until the death of the executive, the executive's reaching normal
retirement age, termination for Cause by the Company, termination for Good
Reason by the Executive, or until terminated by either party upon 12 months
notice. Messrs. Maddock and Norridge are entitled to (pound)80,900 and
(pound)79,000 base salary, respectively, subject to review annually, a bonus
calculated and paid in accordance with the
66
<PAGE>
provisions of the management bonus scheme, an additional payment of
(pound)56,250 for each of 1998 and 1999, pension benefits at least equal in
value to the benefits the executive would have been entitled to under the
previous benefit plan in which such executive participated, and various other
benefits. The executive may terminate the agreement at any time for Good Reason
(as defined therein), in which case the executive is entitled to receive his
annual base salary immediately prior to termination for an additional 12 months
and a lump sum of (pound)56,250 multiplied by two minus the number of times the
executive received this additional payment. The executive is also entitled to
continue participating in the medical, dental and life insurance plans for one
year or until he receives equivalent benefits from a new employer.
Equity Incentive Plan
In connection with the Recapitalization, the Company established a new
equity incentive plan to attract and retain key personnel, including senior
management, and to enhance their interest in the Company's continued success.
Holdings has reserved 1,186.0849 shares of Common Stock and 4,328.25 shares of
Series C Junior Voting Preferred Stock with a value of $8.1 million on March 30,
1998 for this plan (such shares to be denominated in 8,100 units consisting of
0.1464 shares of Common Stock and 0.5344 shares of Series C Junior Voting
Preferred Stock (the "Equity Units")). The Company made an initial option grant
to each member of the Company's senior management on March 30, 1998 under such
executive's employment agreement. The Company does not anticipate making
additional option grants to these executives under the plan, but does anticipate
making grants to other or to new members of management. Options not previously
exercised or terminated expire ten years from the date of grant. Approximately
one-third of the total number of Equity Units subject to the initial grant vest
ratably on each of the first through fourth anniversaries of the date of grant
provided the executive is in the employ of the Company. Approximately one third
of the Equity Units vest 25% a year at the end of each of 1999, 2000, 2001 and
2002, subject to satisfaction of the applicable EBITDA-based Performance Hurdle
(as defined therein) for such year ("B Options"), and approximately one third of
the Equity Units (plus any B Options that did not vest and have been carried
forward) vest if the Internal Rate of Return (as defined therein) earned by the
Company exceeds 40% on the closing date of a Change of Control (as defined
therein) and the executive is in the employ of the Company on such date. The
executives will be permitted to exercise their vested options and sell their
Equity Units after an initial public offering (subject to approval of the
Compensation Committee).
Arrangements Prior to Consummation of the Transactions
The following describes certain compensation and benefit arrangements
applicable to members of the senior management team of the Company for periods
prior to March 30, 1998. Such employees' participation in such plans and
programs, except as otherwise noted, terminated on March 30, 1998, except with
respect to vested benefits.
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<PAGE>
1997 Summary Compensation Table
The following table presents information concerning compensation paid for
services to the Company during fiscal year 1997 to the Chief Executive Officer
of the Company and the four other most highly paid executive officers employed
by the Company at the end of fiscal year 1997, collectively, the "Named
Executive Officers."
<TABLE>
<CAPTION>
Long-Term Compensation
------------------------------------------
Annual Compensation Awards Payouts
------------------------------- ---------------------- ------------------
Other Securities All
Annual Restricted Underlying Other
Compen- Stock Options/ LTIP Compen-
Name and Salary Bonus sation Award(s) SARs Payouts sation
Principal Position ($) ($)(a) ($) ($) (#) ($)(b) ($)(a)(c)
------------------ ------- ------- -------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael S. Erwin ........................ 155,850 109,192 12,358(a) -- -- 12,220 30,146
President and Chief Executive Officer
David D. Smith .......................... 104,980 47,644 5,705(a) -- -- 6,863 14,705
Vice President--Finance
Richard J. Niespodziani ................. 106,250 61,926 1,967(a) -- -- 1,755 9,052
Vice President--Aftermarket
Products
Michael J. Maddock ...................... 125,300 55,196 -- -- -- -- 95,605(d)
Vice President--Pacific Rim &
Middle East
K. Bruce Norridge ....................... 125,042 55,112 71,932(e) -- -- -- 95,605(d)
Vice President--Europe & Africa
</TABLE>
- ----------
(a) Certain participants in HII's Executive Incentive Plan may elect to defer
up to 100% of their cash bonuses by converting such bonuses into HII
common stock at a 25% discount from the average closing price of the HII
common stock for the last month of the HII fiscal year. All such stock is
held in the HII Deferred Compensation Trust and may not be withdrawn by a
participant as long as the participant remains an employee of HII. Mr.
Erwin, Mr. Smith and Mr. Niespodziani elected to defer 25%, 25% and 10% of
their respective fiscal 1997 cash bonuses into HII common stock under this
plan. The HII Executive Incentive Plan also provides that dividends on
shares held in participants' accounts are reinvested in HII common stock
at a 25% discount from market prices. The dollar values of the differences
between (i) the bonus amount converted and the market value of the shares
purchased and (ii) the dollar amounts attributable to the discount upon
the reinvestment of dividends are included in the "Other Annual
Compensation" column. The dollar value of the bonus amounts that have been
converted into stock and deferred are reported in the "LTIP Payouts" and
"All Other Compensation" columns. The "banked" portion of any bonus is not
reported in the Summary Compensation Table but is reported in the
Long-Term Incentive Plans--Awards Table.
(b) Represents the portion of the bonus earned in 1997 that resulted from
bonuses that were "banked" in prior years under the EVA Bonus Program
described in connection with the Long-Term Incentive Plans--Awards Table.
Mr. Erwin, Mr. Smith and Mr. Niespodziani elected to defer 25%, 25% and
10% of their respective 1997 cash bonuses into HII common stock under the
HII Executive Incentive Plan.
(c) Includes the following amounts which represent bonuses earned in 1997 (net
of amounts reported under LTIP Payouts) and deferred and converted into
HII common stock by the Named Executive Officers under the HII Executive
Incentive Plan as described in footnote (a) above: Mr. Erwin $24,611; Mr.
Smith $10,131; and Mr. Niespodziani $4,123. Also includes $4,080 for Mr.
Erwin, Mr. Smith and Mr. Niespodziani which represents cash payments under
the HII Profit Sharing Plan and the following amounts paid by HII during
fiscal 1997 for group term life insurance premiums for the benefit of the
executives: Mr. Erwin, $1,455; Mr. Smith, $494; and Mr. Niespodziani,
$849.
(d) Represents an annual earn-out paid to Messrs. Maddock and Norridge
pursuant to the terms of their employment agreements.
(e) Includes $13,750 in car allowance and $51,063 for various expatriate
expenses incurred by Mr. Norridge, paid by the Company pursuant to the
terms of his employment agreement.
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Aggregate Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values (a)
The following table sets forth information with respect to the Named
Executive Officers concerning the number of shares of HII common stock acquired
on exercise of options by the Named Executive Officers during fiscal 1997, the
value realized and the number and value of options outstanding at October 31,
1997.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Options
Shares Options at Fiscal at Fiscal Year-End
Acquired Value Year-End (#) ($)(c)
on Exercise Realized ---------------------------- ----------------------------
Name (#) ($)(b) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael S. Erwin.......... 1,625 21,865 5,250 6,000 52,459 27,013
David D. Smith............ 2,875 31,150 0 2,375 0 15,551
Richard J. Niespodziani... 1,750 17,453 0 2,250 0 13,166
Michael J. Maddock........ 1,500 29,250 1,875 2,625 17,436 18,557
K. Bruce Norridge......... 1,875 24,561 0 2,625 0 18,557
</TABLE>
- ----------
(a) No Stock Appreciation Rights (SARs) are outstanding.
(b) Based on the market value of the stock on the date of exercise less the
exercise price and withholding tax paid by the recipient, if any.
(c) Based on the closing price of HII common stock on the New York Stock
Exchange on October 31, 1997 of $39.375.
Until the Recapitalization Closing, a portion of the incentive
compensation for senior executives was paid in cash and a portion was deferred
based on future results.
For those executives who have elected to defer their cash bonuses by
converting such bonuses into HII common stock under the terms of the HII
Executive Incentive Plan, the "banked" portion of any bonus is converted into
HII common stock on the same terms as the "unbanked" portion of the bonus.
Long Term Incentive Plans--Awards in Last Fiscal Year
Number of Shares, Estimated Future
Units or Other Payouts Under
Rights Non-Stock Price
Name (#)(a) Based Plans ($)(b)
---- ----------------- ------------------
Michael S. Erwin......................... 17 1,558
David D. Smith........................... 18 1,732
Richard J. Niespodziani.................. 9 2,486
Michael J. Maddock....................... -- --
K. Bruce Norridge........................ -- --
- ----------
(a) Reflects HII common stock purchased through conversion of each executive's
banked bonus at a 25% discount on the purchase price of $41.78 in
accordance with the provisions of the HII Executive Incentive Plan. The
amount so converted by each of the executive officers is as follows:
Michael Erwin $693; David Smith $770; and Richard Niespodziani $368.
(b) Reflects cash portion of "banked bonus."
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<PAGE>
Pension Plan Table
The following table sets forth the estimated annual benefits payable upon
retirement at normal retirement age for the years of service indicated under
HII's defined benefit pension plan (and excess benefit arrangements defined
below) at the indicated remuneration levels.
Remuneration covered by the plan includes the following amounts reported
in the 1997 Summary Compensation Table: salary and bonus (including the cash
value of bonuses foregone for stock under the Executive Incentive Plan).
"Banked" bonuses are not included.
The years of service credited for each of the Named Executive Officers
are: Michael Erwin 24 years, David Smith 15 years, and Richard Niespodziani 23
years.
Benefits are based upon years of service and the highest consecutive five
year average annual salary and incentive compensation during the last ten
calendar years of service. Estimated benefits under the retirement plan are
subject to the provisions of the Code which limit the annual benefits which may
be paid from a tax qualified retirement plan. Amounts in excess of such
limitations will either be paid from the general funds of HII or funded with HII
common stock under the terms of the HII Supplemental Retirement and Stock
Funding Plan. The estimated benefits in the table above do not reflect offsets
under the plan of 1.25% per year of service (up to a maximum of 50%) of the
Social Security benefit.
Years of Service
-------------------------------------------------
Remuneration 5 10 15 20 25 30
- ------------ ------ ------ ------ ------- ------- -------
$140,000 10,500 21,000 31,500 42,000 52,500 63,000
180,000 13,500 27,000 40,500 54,000 67,500 81,000
220,000 16,500 33,000 49,500 66,000 82,500 99,000
260,000 19,500 39,000 58,500 78,000 97,500 117,000
300,000 22,500 45,000 67,500 90,000 112,500 135,000
340,000 25,500 51,000 76,500 102,000 127,500 153,000
380,000 28,500 57,000 85,500 114,000 142,500 171,000
Until March 30, 1998, executive officers of the Company located in the
United Kingdom were eligible to participate in an executive section of the
Harnischfeger Industries Pension Scheme (the "UK Scheme"), which provides
defined benefits. Pension income in the UK Scheme at normal retirement age is
based on the employee's years of service and his last twelve months' taxable
earnings (excluding certain benefits in kind and fluctuating payments), or on an
average of those taxable earnings over the last 24 months, if greater. There is
no offset for United Kingdom social security benefits.
In addition to United Kingdom social security benefits to which such a
person may be entitled, the following table illustrates the amount of annual
pension benefits (in pounds sterling) payable from the UK Scheme to an
individual with the indicated earnings and years of service at the individual's
normal retirement age of 65.
Years of Service
--------------------------------------------------
Remuneration 10 15 20 25 30 35
- -------------- ------ ------ ------- ------- ------- -------
(pounds)50,000 16,667 25,000 33,333 33,333 33,333 33,333
75,000 25,000 37,500 50,000 50,000 50,000 50,000
100,000 33,333 50,000 66,667 66,667 66,667 66,667
125,000 41,667 62,500 83,333 83,333 83,333 83,333
150,000 50,000 75,000 100,000 100,000 100,000 100,000
Mr. Maddock and Mr. Norridge were members of the UK Scheme until March 30,
1998. At December 31, 1997, Mr. Maddock had 8.75 years of service and Mr.
Norridge had 3.42 years of service for purposes of this plan.
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<PAGE>
Because Mr. Norridge joined the plan after June 1, 1989, as a matter of United
Kingdom law, his benefits after 20 or more years of service would be capped at
(pound)56,000.
Divestiture Bonus Agreements
In September and October 1997, Michael S. Erwin, David D. Smith, Richard
J. Niespodziani, Michael J. Maddock, K. Bruce Norridge and certain other
employees of the Company entered into divestiture bonus agreements with HarnCo
(the "Divestiture Bonuses"). These agreements provide for bonuses to be paid to
such employees in the event of a purchase by a third party not affiliated with
HarnCo of substantially all of the assets and liabilities of the MHE Business
which occurs within one year of the date of the agreement. The Divestiture
Bonuses for Messrs. Erwin, Smith, Niespodziani, Maddock and Norridge are to be
$375,000, $125,000, $125,000, $125,000 and $125,000, respectively. Under these
agreements, each employee agreed to release HarnCo and its affiliates from
certain claims and agreed not to voluntarily terminate his employment with the
MHE Business within the first six months following any such divestiture unless
there is a substantial change in the employee's duties, functions and
responsibilities or the employee is required to perform the principal portion of
his duties outside his current locale.
Employment Agreements
In September and October 1997, HarnCo entered into employment agreements
with Michael Erwin, David Smith, Richard Niespodziani and certain other
employees of the Company which were to be effective upon closing of the sale of
the MHE Business to a third-party buyer. These agreements, which HarnCo assigned
to the Company, were terminated on March 30, 1998 and replaced by new employment
agreements. Morris entered into employment agreements with K. Bruce Norridge,
Vice President--Europe & Africa, and Michael J. Maddock, Vice President--Pacific
Rim & Middle East in connection with the sale of Morris to the Company in 1994.
These agreements also were terminated and replaced by new employment agreements
on March 30, 1998.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of outstanding
shares of voting stock of Holdings beneficially owned by: (i) each executive
officer of Holdings and the Company and each director of Holdings; (ii) all
directors of Holdings and all executive officers of Holdings and the Company as
a group; and (iii) each person known by Holdings to own beneficially more than
five percent of Holdings voting stock, respectively. Holdings believes that each
individual or entity named has sole investment and voting power with respect to
shares of voting stock of Holdings indicated as beneficially owned by them,
except as otherwise noted.
<TABLE>
<CAPTION>
Voting Percent Series C Percent
Name and Address of Beneficial Owner Common Stock of Class Preferred Stock of Class
- ------------------------------------ ------------ -------- --------------- --------
<S> <C> <C> <C> <C>
5% Owners:
Chartwell L.P. (a)...................................... 7,907 77.8% 28,855 100.0%
c/o KPMG
Genesis Building
448 GT
Grand Cayman
Cayman Islands
Harnischfeger Corporation............................... 2,261 22.2% -- --
3600 South Lake Drive
St. Francis, Wisconsin 53235
Executive Officers and Directors:
Todd R. Berman (b)...................................... 7,907 77.8% 28,855 100.0%
Michael S. Shein (b).................................... 7,907 77.8% 28,855 100.0%
All directors and officers as a group (14 persons) (c).. 7,907 77.8% 28,855 100.0%
</TABLE>
- ----------
(a) Chartwell L.P., a Cayman Islands limited partnership, is the managing
member of Frasier L.L.C., a Delaware limited liability company and of
Niles L.L.C., a Delaware limited liability company, which together own
100.0% of the shares of common stock of MHE Investments, a Delaware
corporation. MHE Investments, in turn, owns 77.8% of the shares of voting
common stock of Holdings and 100.0% of the Series C Junior Voting
Preferred Stock. The general partner of Chartwell L.P. is Chartwell G.P.
Corp., a Cayman Islands company. Chartwell G.P. Corp. may be deemed to
beneficially own all of the shares of Holdings beneficially owned by
Chartwell L.P. Mr. Donald Gales owns all of the issued and outstanding
capital stock of Chartwell G.P. Corp. and, consequently, may be deemed to
beneficially own all of the shares of Holdings beneficially owned by
Chartwell G.P. Corp. However, Holdings has been advised by each of
Chartwell L.P., Chartwell G.P. Corp. and Mr. Gales that each disclaims
beneficial ownership of such Holdings shares. Todd R. Berman, who is
Chairman of the Board of Holdings, is a limited partner of Chartwell L.P.
Michael S. Shein, who serves as a director and Vice President of Holdings,
is also a limited partner of Chartwell L.P. Mr. Berman and Mr. Shein are
the managers of Frasier L.L.C. and Niles L.L.C. Concurrent with the
Recapitalization Closing, an affiliate of CIBC Oppenheimer Corp., the
Initial Purchaser in the Offering, became a minority interest holder of
Frasier L.L.C. and Niles L.L.C. Jay R. Bloom, who is a director of
Holdings, is a Managing Director of CIBC Oppenheimer Corp.
(b) Chartwell L.P., a Cayman Islands limited partnership, is the managing
member of Frasier L.L.C., a Delaware limited liability company and of
Niles L.L.C., a Delaware limited liability company, which together own
100.0% of the shares of common stock of MHE Investments, a Delaware
corporation. MHE Investments, in turn, owns 77.8% of the shares of voting
common stock of Holdings and 100.0% of the Series C Junior Voting
Preferred Stock. Todd R. Berman, who is Chairman of the Board of Holdings,
is a limited partner of Chartwell L.P. Michael S. Shein, who serves as a
director and Vice President of Holdings, is also a limited partner of
Chartwell L.P. Mr. Berman and Mr. Shein are the managers of Frasier L.L.C.
and Niles L.L.C. The address of each of Mr. Berman and Mr. Shein is c/o
Chartwell Investments Inc., 717 Fifth Avenue, 23rd Floor, New York, New
York 10022.
(c) Members of the Company's senior management purchased $900,000 of equity
interests of Niles L.L.C. concurrent with the Recapitalization Closing.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Relationship with Harnischfeger
Historically, the Company operated as one of several operating units of
HII. Until the reorganization of the Company in October 1997, the core United
States operations of the Company (including all centralized operations and the
Oak Creek manufacturing facility) were conducted directly by HarnCo, which is a
wholly-owned subsidiary of HII, while the rest of the Company's operations
(including Morris Ltd. since its acquisition in 1994) were conducted through a
number of entities, all of which were wholly-owned, directly or indirectly, by
HII and its affiliates, with the exception of the Company's Singapore
operations, which are conducted through an entity in which the Company has an
85% interest. HarnCo continues to own approximately 20.8% of the Common Stock.
HII's two other current operating units consist of mining equipment operations
("Mining"), which are conducted through HarnCo and through another subsidiary of
HII, and paper production equipment operations ("Paper"), which are conducted
through a separate subsidiary of HII.
Previously (and until the Recapitalization Closing), HII and/or HarnCo
performed centrally a number of functions necessary for the operations of the
Company. Under a management services arrangement with HII, the Company was
provided with certain services, including, but not limited to, matters of
organization and administration, cash management, labor relations, employee
benefits, public relations, financial policies and practices, taxation and legal
affairs (intellectual property, environmental, labor, securities and ERISA
compliance, as well as assistance with product liability cases). The annual fee
charged the Company for these services was based upon a pro rata share of
corporate administration costs using an allocation methodology based on
consolidated worldwide sales. Such fees totaled approximately $2.9 million, $2.3
million and $1.9 million in fiscal 1997, 1996 and 1995, respectively.
HarnCo provided information systems services to the Company for which the
Company was charged approximately $1.9 million, $1.0 million and $1.1 million in
fiscal 1997, 1996 and 1995, respectively. HarnCo provided support to the Company
for accounting, credit, traffic, vendor identification numbers and human
resource services for which it charged the Company approximately $756,000,
$784,000 and $776,000 in fiscal 1997, 1996 and 1995, respectively. The Company
also shared a parts warehouse with HarnCo, for which the Company was charged
approximately $1.4 million, $1.3 million and $1.2 million in fiscal 1997, 1996
and 1995, respectively, and leased office space from HarnCo at a cost of
approximately $120,000 per year in fiscal 1997, 1996 and 1995.
In addition, computer hardware, software licenses and other technology
necessary to operate the Company were owned and/or held by HII and/or HarnCo and
were used by HarnCo. Virtually all information systems necessary to the United
States operations of the Company were shared with HarnCo. Furthermore, the
Company (including all of its foreign operations) was insured pursuant to HII's
insurance program. The Company had a number of other arrangements with HII,
HarnCo and/or their affiliates, including tax allocation agreements and
inter-company notes, all of which terminated upon consummation of the
Transactions.
The Company also sold certain products and services to Paper and Mining at
negotiated rates and has performed certain administrative functions for HarnCo
in Mexico. Sales to Mining and Paper amounted to $4.9 million in fiscal 1997,
and to $0.9 million and $0.7 million in fiscal 1996 and 1995, respectively. In
addition, Mining and Paper provided certain products and services to the Company
which management estimates amounted to approximately $10.0 million per year, in
fiscal 1997, 1996 and 1995. HarnCo manufactured electric motors, fabricated
larger steel girders and did machining on certain cranes for the Company at cost
or at cost plus a percentage. In addition, Mining and Paper have acted as motor
rewind subcontractors for the Company. Paper is negotiating a preferred supplier
contract with the Company which provides for the Company to act as a
subcontractor for Paper's service unit. It is contemplated that these
transactions, none of which individually or in the aggregate are significant to
the Company, will continue in the future.
The Company obtained volume discounts by entering into joint purchase
agreements in the United States with HII, Mining and Paper for items such as
bearings, motors, steel, maintenance, repair and operational supplies, domestic
telephone service and rates and fleet and equipment leases (including master
capital leases for vehicles and
73
<PAGE>
other equipment). In the United Kingdom, the Company, Mining and Paper entered
into joint purchase agreements for energy, steel and automobile leases. The
Company also had a joint banking program with the other HII affiliates and
participated in a consolidated pension plan in the United Kingdom. The Company's
hourly employees at its Oak Creek, Wisconsin facility are covered by a
collective bargaining agreement between HarnCo and the United Steelworkers of
America, Local 1114 that also covers certain employees of Mining.
In a number of instances, HII and/or HarnCo provided contracting credit
support in connection with the Company's business. Certain customers for large
crane supply contracts require the supplier to provide contracting credit
support and/or parent guarantees of performance. In addition, HII and/or HarnCo
guaranteed Company debt and the Company's performance under certain real estate,
vehicle and equipment leases. At March 30, 1998, there was approximately $38.4
million outstanding under the letters of credit and bonds provided by HarnCo and
the Non-MHE HarnCo Affiliates. See "The Transactions--Credit Support."
Management believes that in the aggregate these products and services can
be obtained on comparable terms from third parties.
Harnischfeger Separation Agreement
The organizational structure of Holdings and its subsidiaries was
substantially reorganized in connection with the anticipated sale of the MHE
Business. In connection therewith, in October 1997 HarnCo transferred the assets
of its Material Handling Equipment Division to MHLLC, a newly-created
wholly-owned subsidiary of the Company. All non-cash assets held by HarnCo and
used exclusively by the MHE Division were transferred or, in the case of leased
personal property, subleased to MHLLC or to one of its affiliates. In return,
MHLLC assumed substantially all of the liabilities of HarnCo and the Non-MHE
HarnCo Affiliates relating to the MHE Business (other than as described below).
HarnCo has retained certain income and other tax liabilities relating to
the MHE Business, all environmental liabilities relating to the ownership or
operation of any shared facilities and of HarnCo's Orchard Street facility, any
liabilities for which HarnCo or its affiliates have been named as potentially
responsible parties with respect to two Superfund sites, and any liabilities
arising in connection with claims alleging exposure to asbestos (to the extent
there is insurance coverage therefor) in connection with the MHE Business prior
to the Recapitalization Closing. In addition, among other matters, the HarnCo
Parties have retained all liability for medical and disability benefit claims
for current United States employees made prior to the Recapitalization Closing,
all claims by United States employees who are on short-term or long-term
disability as of the Recapitalization Closing and all claims with respect to any
of the HII benefit plans for former United States employees of the Company.
Trademark License Agreement
On March 30, 1998, the Company entered into a trademark licensing
agreement with Harnischfeger Technologies, Inc. ("HTI"), a subsidiary of HarnCo,
pursuant to which it was granted a sole and exclusive worldwide license to use
the "P&H" trade name, trademark and service mark on or in connection with the
MHE Business. The term of the license for original equipment is 15 years after
the earlier to occur of (i) the sale of Holdings to an unaffiliated third party
or (ii) the consummation of a public offering of the common stock of Holdings,
the Company or their parents or successors. The term of the license for
aftermarket parts and services is for an additional seven years. The license
agreement provides for a royalty payment to HTI during the ten year period
commencing 12 months after the Recapitalization Closing equal to 0.75% of the
total net sales of the MHE Business. There will be no royalty fee for the
remainder of the term.
Component and Manufactured Products Supply Agreement
The Company has entered into a two year agreement with HarnCo pursuant to
which HarnCo is to sell, or have its affiliates sell, to the Company and to its
subsidiaries located in the United States, at cost, certain products, repair
parts and rebuilds as have been previously manufactured by HarnCo for the
Company. The price for these products
74
<PAGE>
is the fully absorbed standard cost for normal production products and repair
parts, and the fully absorbed job cost for rebuilds and repairs.
Transition Services Agreement
On March 30, 1998, the Company entered into a Transition Services
Agreement with HarnCo pursuant to which HarnCo and/or its affiliates will
provide the Company and the Company's subsidiaries located in the United States
certain specified transition services for a set monthly price per service, plus
cost sharing in certain instances, for periods ranging up to three years. These
services include financial support (including payroll, accounts payable and some
accounting), MIS support (including mainframe applications, PC support,
engineering applications, maintenance, shared products and telephone system
support), human resources support (including assistance in union negotiations,
processing support for workers' compensation, screening and hiring of hourly
employees and benefits administration), shared space, warehouse services for
repair parts at one of HarnCo's facilities, order processing, office space and
lobby services at HarnCo's offices, employee communications, use of corporate
aircraft owned by HarnCo or its affiliates, and all traffic functions and
transportation of materials between Milwaukee area operations. The Company
estimates it will be charged $2.6 million for such services in the seven
remaining months of fiscal 1998 and $1.6 million in fiscal 1999.
Health and Welfare Arrangements
Under the terms of the Recapitalization Agreement, the current United
States employees of the Company continue to participate, from the
Recapitalization Closing until the earlier of the Company's notice of
termination or December 31, 1998, in the medical, dental, life and long-term
disability insurance benefit plans that are sponsored by HarnCo for the benefit
of these employees as of the Recapitalization Closing. The Company pays HarnCo
the cost of all benefits provided under these plans.
Stockholders Agreement
Holdings has entered into a stockholders' agreement and registration
rights agreement with HarnCo and MHE Investments (the "Stockholders' Agreement")
pursuant to which HarnCo has the right to appoint a representative to the board
of directors of Holdings, so long as HarnCo owns at least 5% of the outstanding
Common Stock. Certain actions by Holdings require HarnCo's approval, including
non-pro rata redemptions, certain post-closing affiliate and insider
transactions, granting of conflicting rights or entering into conflicting
agreements, and dividends or distributions on, or redemptions or purchases of,
any junior equity stock at any time when dividends are in arrears on the Series
B Junior Preferred Stock owned by HarnCo. The Stockholders' Agreement also
provides that HarnCo has the right to purchase its pro rata share of future
issuances of Common Stock except for issuances of management stock and options
and common stock sold in an underwritten public offering. HarnCo's shares are
subject to a right of first refusal in favor of Holdings and its designees and
certain other rights.
Credit Indemnification Agreement
On March 30, 1998, HII and the Company entered into a Credit
Indemnification Agreement pursuant to which HII will maintain in place the
Credit Support Obligations in existence on March 30, 1998 but have no further
duty to extend, renew or enter into any new Credit Support Obligations, other
than with respect to the MHE Business obligations existing at the
Recapitalization Closing. The Company has agreed to pay in advance an annual fee
equal to 1% of the amounts outstanding under each letter of credit and bond
provided by HarnCo and the Non-MHE HarnCo Affiliates (approximately $38.4
million as of March 30, 1998). The Company paid a pro-rated fee of $290,106 for
calendar year 1998 at the Recapitalization Closing. HII will refund the Company
on a quarterly basis a pro-rata portion of the annual fee for any reductions in
the outstanding amount of credit that occurred during such quarter. In addition,
the Company will pay HII the full amount of future fees and other expenses that
may be paid by HII or its affiliates to third parties in connection with
maintaining the Credit Support Obligations. The Credit Indemnification Agreement
provides that the Company is to reimburse HII on demand for any payment made by
HII or its affiliates under any of the Credit Support Obligations.
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<PAGE>
Confidentiality and Non-Competition Agreement
At the Recapitalization Closing, Holdings and HII entered into a
Confidentiality and Non-Competition Agreement, pursuant to which HII agreed, on
behalf of itself and of its subsidiaries, not to, directly or indirectly,
participate or engage in, or assist any person that is engaged in, any business
or enterprise that is competitive with the MHE Business as conducted at the
Recapitalization Closing. In addition, the agreement provides for HII and its
affiliates to maintain in confidence and not use any confidential information of
the MHE Business. The non-compete covenants, which apply worldwide, will be in
effect until the later of (i) the fourth anniversary of the Recapitalization
Closing or (ii) the third anniversary of the date on which a director designated
by HII or its affiliates ceases to serve on the board of directors of Holdings.
HII and its affiliates also agreed not to induce or encourage any current
employee of the Company or any of its affiliates to leave the Company or its
affiliates, and not to employ certain specified officers and employees of the
MHE Business for 18 months after the Recapitalization Closing.
Tax Sharing Agreement
Holdings, its subsidiaries and MHE Investments have entered into a tax
sharing agreement (the "Tax Sharing Agreement") which provides for, among other
things, the allocation of federal, state and local tax liabilities between
Holdings, its subsidiaries and MHE Investments. In general, under the Tax
Sharing Agreement, Holdings and its subsidiaries will be responsible for paying
their allocable share of all income taxes shown to be due on the consolidated
federal (and any comparable state or local) income tax return filed by MHE
Investments.
Loans to Management
At the Recapitalization Closing, the Company made short-term loans in an
aggregate principal amount of $900,000 to members of the Company's senior
management to purchase equity interests in Niles L.L.C., an indirect minority
shareholder of Holdings, in accordance with the terms of certain promissory
notes, with proceeds from the debt portion of the Financings. The principal
amounts of the loans to Messrs. Erwin, Smith, Kerrick, Niespodiziani, Doolan,
Maddock, Norridge and Ditkof are $250,000, $110,000, $70,000, $70,000, $100,000,
$125,000, $125,000 and $50,000, respectively. In the case of Messrs. Erwin,
Smith and Doolan, the principal amount of the notes will be payable in part upon
their receipt of their respective Divestiture Bonuses (which is expected to
occur within six months of the Recapitalization Closing) and in part upon
payment of previously deferred amounts from the Harnischfeger Rabbi Trust or on
March 30, 1999 (whichever is earlier). In the case of Messrs. Kerrick,
Niespodziani, Maddock, Norridge and Ditkof, the principal amount of the notes
will be payable as a lump sum upon their receipt of their respective Divestiture
Bonuses (which is expected to occur within six months of the Recapitalization
Closing). Interest on each of the notes, at a rate per annum equal at all times
to the Federal Short-Term Rate in effect from time to time, from the date of
issuance until such note is repaid in full will be payable in arrears as a lump
sum on the date the remaining unpaid principal amount of such note is due in
full. The principal amounts of the loans and interest thereon will be payable in
full in the event the executive ceases to be employed by the Company as a result
of termination for Cause (as defined therein), or by reason of the executive's
death or resignation for other than Good Reason (as defined therein), or upon an
Event of Default (as defined therein). As collateral for the notes, each of the
executives granted to the Company a security interest in the equity interests in
Niles L.L.C. each of them acquired with the proceeds of the loans, in their
respective Divestiture Bonuses and in any proceeds therefrom.
Chartwell Financial Advisory Agreement
The Company entered into an agreement with Chartwell Investments Inc.,
providing for the payment of fees and reimbursement of expenses to Chartwell
Investments Inc. for acting as financial advisor with respect to the
Transactions, including soliciting, structuring and arranging the financing of
the Transactions. The fees, totaling $5.0 million, equal to 1% of the
consolidated capitalization of Holdings and the reimbursement of expenses, were
paid at the Recapitalization Closing. Mr. Berman and Mr. Shein are,
respectively, Chairman of the Board and a director of each of Holdings and the
Company and both are officers and directors of Chartwell Investments Inc.
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Chartwell Management Consulting Agreement
The Company has entered into a management consulting agreement with
Chartwell Investments Inc. pursuant to which Chartwell Investments Inc. provides
the Company with certain management, advisory and consulting services for a fee
of $1.0 million for each fiscal year of the Company during the term of the
agreement, plus reimbursement of expenses. The term of the management consulting
agreement is 10 years commencing at the Recapitalization Closing and is
renewable for additional one year periods unless the Board of Directors of the
Company gives prior written notice of non-renewal to Chartwell Investments Inc.
Mr. Berman and Mr. Shein are, respectively, Chairman of the Board and a director
of each of Holdings and the Company and both are officers and directors of
Chartwell Investments Inc.
DESCRIPTION OF THE NEW CREDIT FACILITY
Commitment
The Company has entered into the New Credit Facility dated March 30, 1998
with Credit Agricole Indosuez and Canadian Imperial Bank of Commerce
individually and as agents (the "Agents") for a group of lenders (the
"Lenders"), pursuant to which the Company has a $70.0 million Revolving Credit
Facility, a $30.0 million Acquisition Facility, a $20.0 million Term Loan A and
a $35.0 million Term Loan B.
The New Credit Facility contains representations and warranties, funding
and yield protection provisions, conditions precedent, financial and other
covenants and restrictions, events of default and other provisions customary for
bank credit agreements of this type. The following summaries of the material
provisions of the New Credit Facility do not purport to be complete, and such
provisions, including definitions of certain terms, are qualified in their
entirety by reference to the New Credit Facility.
General
The Revolving Credit Facility permits the Company to borrow, repay and
reborrow, subject to compliance with certain conditions, including a borrowing
base test, up to $70.0 million (of which $15.0 million is required under the
Note Indenture to be reserved for issuance of letters of credit) at any time
until the fifth anniversary of the Recapitalization Closing, the proceeds of
which may be used for working capital, acquisitions and other corporate
purposes. Up to $20.0 million of the Revolving Credit Facility (of which $15.0
million would not be subject to a borrowing base) is available for the issuance
of standby and documentary letters of credit. The Acquisition Facility, the
proceeds of which will be used for acquisitions, permits the Company to borrow,
subject to compliance with certain conditions, up to $30.0 million at any time
until the third anniversary, and to repay the same in installments on or prior
to the seventh anniversary, of the Recapitalization Closing. Term Loan A will be
repayable in 20 quarterly installments, commencing on June 30, 1998, and Term
Loan B will be repayable in 28 quarterly installments commencing on June 30,
1998.
Mandatory Prepayments
The Company is required to make mandatory prepayments in an amount equal
to 50% of excess cash flow after permitted capital expenditures for the first
fiscal year after the Recapitalization Closing and 75% thereafter, subject to
reduction thereafter based on the ratio of total debt to EBITDA. In addition,
the Company is required to make mandatory prepayments in the amount of 100% of
net proceeds from certain assets sales, equity issuances, certain permitted new
debt issuances and insurance claims not reinvested. The Company is permitted to
make voluntary prepayments at any time.
Interest Rate and Fees
Borrowings under the Revolving Credit Facility and Term Loan A bear
interest at floating rates equal to: (i) 0.75% per annum over the higher of the
Agents' base rate or the Federal Funds Rate plus 0.50%; or (ii) 2.25% per
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annum over the Eurodollar Rate. Borrowings under Term Loan B and the Acquisition
Facility bear interest at rates equal to: (i) 1.25% per annum over the higher of
the Agents' base rate or the Federal Funds Rate plus 0.50%; or (ii) 2.75% per
annum over the Eurodollar Rate. Eurodollar Rates will be calculated for interest
periods of one, two, three or six months, as applicable.
The New Credit Facility provides that the Company is to pay certain fees
and commissions to the Agents and Lenders, including an annual administrative
fee, a Revolving Credit Facility and Acquisition Facility unused commitment fee
and letter of credit fee.
Amortization
Aggregate yearly term loan principal payments under the New Credit
Facility are as follows: (i) $675,000 in fiscal 1998; (ii) $2,100,000 in fiscal
1999; (iii) $3,600,000 in fiscal 2000 (iv) $5,100,000 in fiscal 2001; (v)
$6,600,000 in fiscal 2002; (vi) $11,988,000 in fiscal 2003; (vii) $16,625,000 in
fiscal 2004 and (viii) $8,313,000 in fiscal 2005.
Guarantees and Security
Borrowings under the New Credit Facility are (i) secured by substantially
all of the present and future assets of the Company and its subsidiaries located
in the United States and the United Kingdom, certain of the Company's
subsidiaries' present and future assets located in Canada and by a pledge of all
of the issued and outstanding shares of capital stock of the Company and its
current and future subsidiaries and (ii) guaranteed by Holdings and
substantially all of the Company's subsidiaries.
Covenants; Events of Default
The New Credit Facility contains a number of customary covenants affecting
Holdings and its subsidiaries, including, among other things (i) prohibitions
and/or limitations on the incurrence of debt, liens, payment of dividends,
redemption of securities, investments, transactions with affiliates, mergers,
acquisitions and asset dispositions and (ii) financial covenants, including
interest coverage, leverage and capital expenditures. The New Credit Facility
also contains customary events of default, including a change of control (which
is defined to include the definition of Change of Control in the Restated
Certificate and Exchange Indenture).
Conditions
The New Credit Facility contains a number of conditions to any subsequent
funding by the Lenders, including, among other things, satisfactory appraisals
and environmental reports and the Company's entry into interest rate protection
agreements satisfactory to the Agents.
DESCRIPTION OF THE SURETY ARRANGEMENT
The Company has entered into the Surety Arrangement dated March 30, 1998
with Reliance Insurance Company and certain of its affiliates (collectively,
"Reliance") pursuant to which Reliance will provide up to $60.0 million of bid
bond, completion bond, warranty and other bonds on behalf of the Company, which
bonds will guarantee the obligations of the Company under bid and contract
arrangements with potential and existing customers of the Company. The Surety
Arrangement provides that the Company will reimburse Reliance for any payments
made by Reliance with respect to bonds issued by it.
Collateral for the surety lien will be a letter of credit issued pursuant
to the New Credit Facility and by a pledge of certain assets of the Company.
Obligations under the Surety Arrangement rank pari passu with the Notes.
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THE SENIOR NOTE OFFERING
Concurrently with the Offering, MMH sold, on March 30, 1998, $200,000,000
principal amount of its 9 1/2% Senior Notes due 2008.
General. Interest accrues on the Senior Notes from March 30, 1998, the
date of issuance of the Senior Notes (the "Senior Notes Issue Date"), and is
payable semi-annually on each April 1 and October 1, commencing October 1, 1998.
The Senior Notes will mature on April 1, 2008. The Senior Notes are senior
unsecured obligations of the Company and rank pari passu in right of payment
with all existing and future unsubordinated obligations of the Company and
senior in right of payment to all existing and future subordinated indebtedness
of the Company.
Guarantees. The Senior Notes are unconditionally guaranteed on a senior
unsecured basis, as to payment of principal, premium, if any, and interest,
jointly and severally, by substantially all of the Company's subsidiaries (the
"Guarantors"). Each guarantee ranks pari passu with all existing and future
senior indebtedness of such Guarantor.
Optional Redemption. The Senior Notes are redeemable at the option of the
Company, in whole or in part, at any time on or after April 1, 2003 at the
redemption prices set forth in the Note Indenture under which the Senior Notes
were issued, plus accrued and unpaid interest thereon to the redemption date. In
addition, the Company may redeem in the aggregate up to 35% of the original
principal amount of the Senior Notes at any time and from time to time prior to
April 1, 2001, at a redemption price equal to 109.5% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon to the redemption date,
with the net proceeds of one or more public equity offerings; provided, that at
least $130.0 million aggregate principal amount of the Senior Notes originally
issued remain outstanding immediately after the occurrence of any such
redemption and that any such redemption occurs within 90 days following the
closing of any such public equity offering.
Change of Control. Upon the occurrence of a change of control, the Company
will be required to make an offer to purchase all outstanding Senior Notes at a
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest thereon to the purchase date.
Covenants. The Note Indenture contains covenants for the benefit of the
holders of the Senior Notes that, among other things, restrict the ability of
the Company and its restricted subsidiaries to: (i) incur additional
indebtedness; (ii) pay dividends and make distributions; (iii) issue stock of
subsidiaries; (iv) make certain investments; (v) repurchase stock; (vi) create
liens; (vii) enter into transactions with affiliates; (viii) enter into sale and
leaseback transactions; (ix) create dividend or other payment restrictions
affecting Restricted Subsidiaries; (x) merge or consolidate in a transaction
involving all or substantially all of the assets of the Company and its
restricted subsidiaries, taken as a whole; and (xi) transfer or sell assets.
These covenants are subject to a number of important exceptions.
Asset Sale Proceeds. The Company will be obligated in certain instances to
make offers to purchase the Senior Notes at a purchase price in cash equal to
100% of the principal amount thereof plus accrued and unpaid interest to the
date of purchase with the net cash proceeds of certain asset sales.
Exchange Offer, Registration Rights. Pursuant to a registration rights
agreement, the Company and the Guarantors must use their best efforts to file
within 60 days and cause to become effective within 135 days of the Senior Notes
Issue Date an exchange offer registration statement (the "Senior Notes Exchange
Offer Registration Statement") with respect to an offer to exchange the Senior
Notes (the "Senior Notes Exchange Offer") for senior notes of the Company with
terms substantially identical to the Senior Notes. In addition, under certain
circumstances the Company and the Guarantors may be required to file a shelf
registration statement (the "Senior Notes Shelf Registration Statement"). Among
other provisions, in the event that (i) the Senior Notes Exchange Offer
Registration Statement or the Senior Notes Shelf Registration Statement has not
been filed with the
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Commission within 60 days after the Senior Notes Issue Date, (ii) the Senior
Notes Exchange Offer Registration Statement or the Senior Notes Shelf
Registration Statement is not declared effective within 135 days after the
Senior Notes Issue Date, or (iii) the Senior Notes Exchange Offer is not
consummated within 45 days after the Senior Notes Exchange Offer Registration
Statement is declared effective (each event referred to in clauses (i) through
(iii) above is a "Senior Notes Registration Default"), the sole remedy available
to holders of the Senior Notes will be the immediate assessment of additional
interest ("Additional Interest") as follows: the per annum interest rate on the
Senior Notes will increase by 50 basis points, and the per annum interest rate
will increase by an additional 25 basis points for each subsequent 90-day period
during which the Senior Notes Registration Default remains uncured, up to a
maximum additional interest rate of 200 basis points per year in excess of the
interest rate set forth on the cover page hereof. All Additional Interest will
be payable to holders of the Senior Notes in cash on each interest payment date,
commencing with the first such date occurring after any such Additional Interest
commences to accrue. On the date on which such Senior Notes Registration Default
is cured, the interest rate on the Senior Notes will revert to the interest rate
originally borne by the Senior Notes.
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DESCRIPTION OF NEW SERIES A SENIOR
PREFERRED STOCK AND EXCHANGE DEBENTURES
The New Series A Senior Preferred Stock
The following is a summary of the material terms and provisions of the New
Series A Senior Preferred Stock to be issued by Holdings in exchange for the Old
Series A Senior Preferred Stock in the Exchange Offer. This summary does not
purport to be a complete description of the New Series A Senior Preferred Stock
and is subject to the detailed provisions of, and qualified in its entirety by
reference to, the provisions of the Second Amended and Restated Certificate of
Incorporation of the Issuer and the Certificate of Designations establishing the
powers, preferences and relative, participating, optional and other special
rights of the Series A Senior Preferred Stock (collectively, the "Restated
Certificate"). The form of the Restated Certificate is filed as an Exhibit to
the Registration Statement of which this Prospectus is a part and a copy may be
obtained from the Issuer by a holder or prospective investor upon request.
Definitions relating to certain capitalized terms are set forth under "--Certain
Definitions" and throughout this description. Capitalized terms that are used
but not otherwise defined herein have the meanings assigned to them in the
Restated Certificate and such definitions are incorporated herein by reference.
For purposes of this section, references to the "Issuer" mean MMH Holdings,
Inc., excluding its Subsidiaries, references to the "Company" mean Morris
Material Handling, Inc., excluding its Subsidiaries, and references to Surety
Arrangements refer to all such arrangements as defined in this section including
those described in "Description of the Surety Arrangement."
General
The Old Series A Senior Preferred Stock was issued, and the New Series A
Senior Preferred Stock will be issued, pursuant to the terms of the Restated
Certificate. The shares of New Series A Senior Preferred Stock will be issued
solely in exchange for an equal liquidation preference of the outstanding shares
of Old Series A Senior Preferred Stock pursuant to the Exchange Offer. The terms
of the New Series A Senior Preferred Stock will be identical in all material
respects to the form and terms of the Old Series A Senior Preferred Stock except
that: (i) the shares of New Series A Senior Preferred Stock will have been
registered under the Securities Act and will generally be freely transferable by
holders thereof who are not a Restricted Holder; and (ii) the registration
rights and contingent interest rate provisions applicable to the shares of Old
Series A Senior Preferred Stock are generally not applicable to the New Series A
Senior Preferred Stock.
The Issuer is authorized to issue 500,000 shares of preferred stock, $0.01
par value per share. The Restated Certificate of the Issuer authorizes its Board
of Directors, without stockholder approval, to issue classes of preferred stock
from time to time in one or more series, with such designations, preferences and
relative, participating, optional or other special rights, qualifications,
limitations or restrictions as may be determined by the Board of Directors of
the Issuer, subject to certain limitations. See "--Ranking." The Board of
Directors of the Issuer has adopted resolutions creating a maximum of 120,000
shares of Series A Senior Preferred Stock and the Issuer has filed the Restated
Certificate with the Secretary of State of the State of Delaware as required by
Delaware law. Of the 120,000 authorized shares of Series A Senior Preferred
Stock, 57,710 shares were issued in the Series A Unit Offering and may be
reissued in the Exchange Offer, and 62,290 shares of Series A Senior Preferred
Stock are reserved for issuance as dividends in the event the Issuer elects to
pay dividends on the Series A Senior Preferred Stock by issuing additional
shares of Series A Senior Preferred Stock. See "--Dividends" below. Subject to
certain conditions, the New Series A Senior Preferred Stock is exchangeable for
Exchange Debentures at the option of the Issuer on any dividend payment date.
The New Series A Senior Preferred Stock, when issued in accordance with the
terms and conditions of the Exchange Offer, will be fully paid and
nonassessable, and the holders thereof will not have any subscription or
preemptive rights.
Ranking
The New Series A Senior Preferred Stock will, with respect to dividend
distributions and distributions upon the liquidation, dissolution or winding-up
of the Issuer, (i) rank senior to all classes of Common Stock of the Issuer and
to each other class of Capital Stock or series of Preferred Stock existing on or
established after the Issue Date,
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including, without limitation, Junior Capital Stock and (ii) on a parity with
the Old Series A Senior Preferred Stock, if any is not exchanged in the Exchange
Offer. The Issuer may not issue (i) any class or series of Capital Stock ranking
senior to or on a parity with the Series A Senior Preferred Stock (or amend the
provisions of any existing class of Capital Stock or series of Preferred Stock
to make such class or series rank senior to or on a parity with the Series A
Senior Preferred Stock) with respect to dividends or distributions upon
liquidation, dissolution or winding-up of the Issuer; provided, that the Issuer
can issue, from time to time, additional shares of Series A Senior Preferred
Stock to satisfy dividend payments on outstanding shares of Series A Senior
Preferred Stock; or (ii) any shares of Series B Junior Preferred Stock (other
than shares of Series B Junior Preferred Stock issued on the Issue Date and
shares of Series B Junior Preferred Stock issued as dividends thereon), in each
case, without the approval of the holders of at least a majority of the shares
of Series A Senior Preferred Stock then outstanding, voting or consenting, as
the case may be, together as one class.
Dividends
Holders of the New Series A Senior Preferred Stock will be entitled to
receive, when, as and if declared by the Board of Directors of the Issuer, out
of funds legally available therefor, dividends on the New Series A Senior
Preferred Stock at a rate per annum equal to 12% of the liquidation preference
per share of New Series A Senior Preferred Stock, payable semiannually. All
dividends will be cumulative, whether or not earned or declared, on a daily
basis from the Issue Date and will be payable semiannually in arrears on April 1
and October 1 of each year, commencing on October 1, 1998, to holders of record
on the March 15 and September 15 immediately preceding the relevant dividend
payment date. Dividends may be paid, at the Issuer's option, on any dividend
payment date occurring on or prior to April 1, 2003 either in cash or by the
issuance of additional shares of New Series A Senior Preferred Stock (and, at
the Issuer's option, payment of a whole share (after rounding up) or cash in
lieu of a fractional share) having an aggregate liquidation preference equal to
the amount of such dividends. In the event that on or prior to April 1, 2003,
dividends are declared and paid through the issuance of additional shares of New
Series A Senior Preferred Stock, as provided in the previous sentence, such
dividends shall be deemed paid in full and will not accumulate. After April 1,
2003, dividends must be paid in cash. The Restated Certificate prohibits the
Issuer from paying dividends in cash on any Junior Capital Stock unless
dividends on the Series A Senior Preferred Stock were paid in cash when required
to be so paid. In addition, the Restated Certificate prohibits the Issuer from
paying dividends in cash on any Junior Capital Stock during any period when cash
dividends (whether or not required to be paid) are not paid on the Series A
Senior Preferred Stock. The Indenture and the New Credit Facility restrict the
Company's and its Subsidiaries' ability to pay cash dividends on their Capital
Stock to the Issuer and will prohibit such payments in certain instances and
future agreements may provide the same. See "The Senior Note Offering" and
"Description of the New Credit Facility."
Unpaid dividends accumulating after April 1, 2003 on the New Series A
Senior Preferred Stock for any past dividend period and dividends in connection
with any optional redemption may be declared and paid at any time, without
reference to any regular dividend payment date, to holders of record on such
date, not more than 45 days prior to the payment thereof, as may be fixed by the
Board of Directors of the Issuer.
Redemption
Optional Redemption. The New Series A Senior Preferred Stock may be
redeemed (subject to contractual and other restrictions with respect thereto and
to the legal availability of funds therefor) at any time or from time to time on
or after April 1, 2003, in whole or in part, at the option of the Issuer, at the
redemption prices (expressed in percentages of the then effective liquidation
preference thereof) set forth below, plus, without duplication, an amount in
cash equal to all accumulated and unpaid dividends (including an amount in cash
equal to a prorated dividend for the period from the dividend payment date
immediately prior to the redemption date to the redemption date), if redeemed
during the 12-month period beginning on April 1 of each of the years set forth
below:
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Year Percentage
- ---- ----------
2003............................................................. 106.000%
2004............................................................. 104.000%
2005............................................................. 102.000%
2006 and thereafter.............................................. 100.000%
Notwithstanding the foregoing, the Issuer may redeem in the aggregate all,
but not less than all, of the New Series A Senior Preferred Stock then
outstanding, at any time prior to April 1, 2001, at a redemption price equal to
112.000% of the then effective liquidation preference thereof, plus, without
duplication, an amount in cash equal to all accumulated and unpaid dividends
(including an amount in cash equal to a prorated dividend for the period from
the dividend payment date immediately prior to the redemption date to the
redemption date) out of the Net Proceeds of one or more Public Equity Offerings;
provided, that any such redemption occurs within 90 days following the closing
of any such Public Equity Offering.
Mandatory Redemption. The New Series A Senior Preferred Stock will also be
subject to mandatory redemption (subject to contractual and other restrictions
with respect thereto and to the legal availability of funds therefor) in whole
on April 1, 2009 at a price equal to 100% of the liquidation preference thereof,
payable in cash, plus, without duplication, all accumulated and unpaid
dividends, which will also be paid in cash (whether or not otherwise payable in
cash) to the date of redemption.
In the event of redemption of fewer than all of the outstanding shares of
New Series A Senior Preferred Stock, the New Series A Senior Preferred Stock
will be redeemed on a pro rata basis, except that the Issuer may redeem such
shares held by holders of fewer than ten shares (or shares held by holders who
would hold less than ten shares as a result of such redemption). The New Series
A Senior Preferred Stock will be redeemable upon not less than 30 nor more than
60 days' prior written notice, mailed by first class mail to a holder's last
address as it shall appear on the register maintained by the Exchange Agent of
the New Series A Senior Preferred Stock. On and after any redemption date,
dividends will cease to accumulate on the New Series A Senior Preferred Stock or
portions thereof called for redemption unless the Issuer shall fail to redeem
any such New Series A Senior Preferred Stock. The Note Indenture and the New
Credit Facility restrict the ability of the Issuer to redeem the New Series A
Senior Preferred Stock and will prohibit any such redemption in certain
instances.
Exchange
The Issuer may at its option on any dividend payment date exchange, in
whole but not in part, the then outstanding shares of New Series A Senior
Preferred Stock for Exchange Debentures (including any shares of New Series A
Senior Preferred Stock issuable on such dividend payment date on the then
outstanding shares of New Series A Senior Preferred Stock); provided, that (i)
on the date of such exchange there are no accumulated and unpaid dividends on
the New Series A Senior Preferred Stock (including the dividend payable on such
date) or contractual impediments to such exchange; (ii) there shall be legally
available funds sufficient therefor; (iii) immediately after giving effect to
such exchange, no Default or Event of Default (each as defined in the Exchange
Indenture) would exist under the Exchange Indenture as if the Exchange Indenture
had been in effect as of the Issue Date and no default or event of default under
any other material instrument governing Indebtedness outstanding at the time of
such exchange would be caused thereby; and (iv) the Exchange Indenture has been
qualified under the Trust Indenture Act, if such qualification is required at
the time of exchange.
The Issuer will comply with the provisions of Rule 13e-4 promulgated
pursuant to the Exchange Act in connection with any exchange, to the extent
applicable.
The holders of outstanding shares of New Series A Senior Preferred Stock
will be entitled to receive, subject to the second succeeding sentence, $1.00
principal amount of Exchange Debentures for each $1.00 liquidation preference of
New Series A Senior Preferred Stock held by them. The Exchange Debentures will
be issued in registered form, without coupons. Exchange Debentures issued in
exchange for New Series A Senior Preferred Stock will be issued in principal
amounts of $1,000 and integral multiples thereof to the extent possible, and
will also be issued in principal amounts less than $1,000 so that each holder of
New Series A Senior Preferred Stock will
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receive certificates representing the entire amount of Exchange Debentures to
which such holder's shares of New Series A Senior Preferred Stock entitle such
holder; provided that the Issuer may pay cash in lieu of issuing an Exchange
Debenture in a principal amount less than $1,000. The Issuer will send a written
notice of exchange by mail to each holder of record of shares of New Series A
Senior Preferred Stock not less than 30 nor more than 60 days before the date
fixed for such exchange. On and after the exchange date, dividends will cease to
accumulate on the outstanding shares of New Series A Senior Preferred Stock, and
all rights of the holders of New Series A Senior Preferred Stock (except the
right to receive the Exchange Debentures, an amount in cash equal to the
accumulated and unpaid dividends to the exchange date and, if the Issuer so
elects, cash in lieu of any Exchange Debenture which is in an amount that is not
an integral multiple of $1,000) will terminate. The person entitled to receive
the Exchange Debentures issuable upon such exchange will be treated for all
purposes as the registered holder of such Exchange Debentures. See "--The
Exchange Debentures."
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding-up
of the Issuer, holders of shares of New Series A Senior Preferred Stock then
outstanding will initially be entitled to be paid, out of the assets of the
Issuer available for distribution, $1,000 per share, plus, without duplication,
an amount in cash equal to accumulated and unpaid dividends thereon to the date
fixed for liquidation, dissolution or winding-up (including an amount equal to a
prorated dividend for the period from the immediately preceding dividend payment
date to the date fixed for liquidation, dissolution or winding-up), before any
distribution is made on any Junior Capital Stock. If upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Issuer, the amounts
payable with respect to the New Series A Senior Preferred Stock (and the Old
Series A Senior Preferred Stock, if any is not exchanged in the Exchange Offer)
are not paid in full, the holders of the Series A Senior Preferred Stock will
share equally and ratably in any distribution of assets of the Issuer first in
proportion to the full liquidation preference to which each is entitled until
such preferences are paid in full, and then in proportion to their respective
amounts of accumulated but unpaid dividends. After payment of the full amount of
the liquidation preference and accumulated and unpaid dividends to which they
are entitled, the holders of shares of New Series A Senior Preferred Stock will
not be entitled to any further participation in any distribution of assets of
the Issuer. However, neither the sale, conveyance, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the Issuer nor the consolidation
or merger of the Issuer with one or more entities shall be deemed to be a
liquidation, dissolution or winding-up of the Issuer.
Voting Rights
Holders of the Series A Senior Preferred Stock will have no voting rights
with respect to general corporate matters except as provided by Delaware law or
as set forth in the Restated Certificate. The Restated Certificate provides that
if (i) after April 1, 2003, cash dividends on the Series A Senior Preferred
Stock are in arrears and unpaid for two or more semiannual dividend periods
(whether or not consecutive); (ii) the Issuer fails to redeem the Series A
Senior Preferred Stock on or before April 1, 2009; (iii) the Issuer fails to
make or consummate a Change of Control Offer in the event of a Change of
Control; or (iv) a breach or violation of any of the provisions described under
the captions "--Certain Covenants," "--Merger, Consolidation or Sale of Assets"
or "Reports to Holders" below occurs, which breach or violation continues for a
period of 60 days or more after the Issuer receives notice thereof specifying
the default from the holders of at least 25% of the then outstanding shares of
Series A Senior Preferred Stock; then the number of directors constituting the
Board of Directors of the Issuer will be adjusted to permit the holders of a
majority of the aggregate outstanding shares of Series A Senior Preferred Stock
and Series B Junior Preferred Stock (to the extent there exists a voting rights
triggering event with respect to the certificate of designations therefor),
voting as a single class, to elect the lesser of two directors and that number
of directors constituting at least 25% of the members of the Board of Directors
of the Issuer until such time as, in the case of a dividend default, all
accumulated and unpaid dividends on the Series A Senior Preferred Stock have
been fully paid in cash and, in all other cases, any failure, breach or default
giving rise to such voting rights is remedied, cured or waived by the holders of
at least a majority of the then outstanding shares of the Series A Senior
Preferred Stock and, with respect to a voting rights triggering event relating
to the Series B Junior Preferred Stock, the Series A Senior Preferred Stock and
the Series B Junior Preferred Stock, voting as a single class, at which time the
term of any directors elected pursuant to the provisions of this paragraph shall
terminate. Each such event described in
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clauses (i) through (iv) above is referred to herein as a "Voting Rights
Triggering Event"; provided, that if the Issuer breaches or violates more than
one of the provisions constituting a Voting Rights Triggering Event, all such
breaches or violations shall not constitute more than one Voting Rights
Triggering Event. In addition, upon the occurrence and during the continuance of
a Voting Rights Triggering Event described in clause (iii) above, the per annum
dividend rate on the Series A Senior Preferred Stock will increase by 400 basis
points per annum ("Special Dividends") in excess of the dividend rate originally
borne by the Series A Senior Preferred Stock as set forth under "--Dividends."
Except as set forth in the immediately preceding sentence, the voting rights
provided above shall be the holder's exclusive remedy at law or in equity.
The Restated Certificate provides that the Issuer will not authorize any
additional shares of Series A Senior Preferred Stock or any class or series of
capital stock ranking prior to or on a parity with the Series A Senior Preferred
Stock with respect to dividend distributions or distributions upon liquidation,
dissolution or winding-up without the affirmative vote or consent of holders of
at least a majority of the then outstanding shares of Series A Senior Preferred
Stock of the Issuer which are entitled to vote thereon, voting or consenting, as
the case may be, as one class. The Restated Certificate also provides that the
Issuer may not amend the Restated Certificate so as to affect adversely the
specified rights, preferences, privileges or voting rights of the holders of
shares of Series A Senior Preferred Stock, without the affirmative vote or
consent of the holders of at least a majority of the then outstanding shares of
Series A Senior Preferred Stock which are entitled to vote thereon, voting or
consenting, as the case may be, as one class; provided, that any increase in the
amount of authorized preferred stock or the creation and issuance (other than
the Series A Senior Preferred Stock and Series B Junior Preferred Stock as
provided under "--Ranking") of any other class of preferred stock or any
increase in the amount of authorized shares of such class or any other class of
Junior Capital Stock, including Junior Capital Stock which is preferred stock,
will not be deemed to affect adversely such rights, preferences or voting
powers.
Under Delaware state law, holders of Series A Senior Preferred Stock,
under certain circumstances, are entitled to vote as a class upon a proposed
amendment to the certificate of incorporation of the Issuer, whether or not
entitled to vote thereon by the certificate of incorporation, if the amendment
would alter or change the powers, preferences, or special rights of the shares
of such class so as to affect them adversely.
Certain Covenants
The Restated Certificate contains, among others, the following covenants:
Limitation on Additional Indebtedness
The Issuer will not, and will not cause or permit any Restricted
Subsidiary of the Issuer to, directly or indirectly, incur (as defined) any
Indebtedness (including any Acquired Indebtedness); provided, that if no Voting
Rights Triggering Event shall have occurred and be continuing at the time or as
a consequence of the incurrence of such Indebtedness, the Issuer or any
Restricted Subsidiary may incur Indebtedness (including any Acquired
Indebtedness) if the Issuer's Consolidated Interest Coverage Ratio is greater
than 2.0 to 1.
Notwithstanding the foregoing, the Issuer and its Restricted Subsidiaries
may incur Permitted Indebtedness.
Limitation on Restricted Payments
The Issuer will not make, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make, any Restricted Payment after the
Issue Date, unless:
a) no Voting Rights Triggering Event shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
b) immediately after giving pro forma effect to such Restricted
Payment, the Issuer could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under "--Limitation on Additional
Indebtedness" covenant above; and
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c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
does not exceed the sum (without duplication) of (1) 50% of the cumulative
Consolidated Net Income of the Issuer (or minus 100% of any cumulative
deficit in Consolidated Net Income) for the period (treated as one
accounting period) from the first day of the fiscal quarter in which the
Issue Date occurs through the last day of the fiscal quarter immediately
preceding such Restricted Payment, (2) 100% of the aggregate Net Proceeds
in cash received by the Issuer from the issuance or sale, after the Issue
Date (other than to a Restricted Subsidiary), of (A) Junior Capital Stock
(other than Disqualified Capital Stock) of the Issuer or (B) any
Indebtedness or other securities of the Issuer that are convertible into
or exercisable or exchangeable for Junior Capital Stock (other than
Disqualified Capital Stock) of the Issuer which have been so converted or
exercised or exchanged (other than by a Restricted Subsidiary of the
Issuer) and (3) 100% of the net reduction in Investments (other than
Permitted Investments), subsequent to the Issue Date, in any Person,
resulting from payments of interest on Indebtedness, dividends, repayments
of loans or advances or other transfers or distributions of Property or
return of capital (but only to the extent such interest, dividends or
repayments or other transfers or distributions of Property or return of
capital are not included in the calculation of Consolidated Net Income),
in each case, to the Issuer or any Restricted Subsidiary from any Person
(including Unrestricted Subsidiaries) or from redesignations (the
designation of which did not constitute a Permitted Investment) of
Unrestricted Subsidiaries as Restricted Subsidiaries in accordance with
the Restated Certificate, not to exceed in the case of any Person the
amount of Investments (other than Permitted Investments) previously made
by the Issuer or any Restricted Subsidiary in such Person. For purposes of
determining the amount expended for Restricted Payments under this clause
(c), Property other than cash (including a distribution of assets) shall
be valued at its Fair Market Value.
The provisions of this covenant shall not prohibit:
(i) the payment of any distribution within 60 days after the date of
declaration thereof, if at such date of declaration such payment would
comply with the provisions of the Restated Certificate;
(ii) the retirement of any shares of Junior Capital Stock of the
Issuer by conversion into, or by or in exchange for, shares of Junior
Capital Stock (other than Disqualified Capital Stock) of the Issuer, or
out of, the Net Proceeds of the substantially concurrent sale (other than
to a Restricted Subsidiary of the Issuer) of other shares of Junior
Capital Stock of the Issuer (other than Disqualified Capital Stock)
provided, that any such Net Proceeds are excluded from clause (c)(2) of
the immediately preceding paragraph for the purposes of this calculation
(and were not included therein at any time);
(iii) the retirement of any shares of Junior Capital Stock that is
Disqualified Capital Stock by conversion into, or by exchange for, shares
of Junior Capital Stock that is Disqualified Capital Stock of the Issuer,
or out of the Net Proceeds of the substantially concurrent sale (other
than to a Restricted Subsidiary of the Issuer) of other shares of Junior
Capital Stock that are Disqualified Capital Stock of the Issuer;
(iv) payments to MHE Investments or any other Person in respect of
which MHE Investments or such other Person is a member of the consolidated
tax group of the Issuer, for so long as MHE Investments or such other
Person owns such amount of the Capital Stock of the Issuer as will permit
it or a member of the consolidated tax group of MHE Investments or such
other Person to be entitled to file consolidated federal tax returns with
the Issuer, for income taxes pursuant to the Tax Allocation Agreement or
for the purpose of enabling MHE Investments or such other Person or any
such members to pay taxes other than income taxes, to the extent actually
owed and attributable to the operations of the Issuer and its Subsidiaries
or to MHE Investments' or such other Person's ownership thereof;
(v) payments to MHE Investments, for so long as it owns not less
than a majority of the outstanding Common Stock of the Issuer, in amounts
sufficient to pay the ordinary operating and administrative expenses of
MHE Investments (including all reasonable professional fees and expenses),
including in connection with its complying with the Issuer's reporting
obligations (including filings with the Commission and any exchange on
which the Issuer's securities are traded) and obligations to prepare and
distribute business records in the
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ordinary course of business and the Issuer's costs and expenses relating
to taxes, other than those referred to in clause (iv) (which taxes are
attributable to the operations of the Issuer and its Restricted
Subsidiaries or to MHE Investments' ownership thereof); provided, that the
aggregate payments paid in each fiscal year pursuant to this clause (v)
will not exceed 0.20% of the consolidated net sales of the Issuer and its
Restricted Subsidiaries for such fiscal year;
(vi) the purchase, redemption, retirement or other acquisition for
value of Capital Stock of the Issuer or of any Person that directly or
indirectly controls (as defined in the definition of Affiliate) the Issuer
held by employees or former employees of the Issuer or any Restricted
Subsidiary (or their estates or beneficiaries under their estates) upon
death, disability, retirement, termination of employment and pursuant to
the terms of any agreement under which such Capital Stock was issued,
provided, that the aggregate Fair Market Value of the consideration paid
for such purchase, redemption, retirement or other acquisition of such
Capital Stock does not exceed $500,000 in any fiscal year;
(vii) payments due under the Permitted Affiliate Agreements (other
than payments pursuant to paragraph (iv) above) that would otherwise
constitute Restricted Payments; and
(viii) payments that would otherwise constitute Restricted Payments,
not to exceed $750,000 in the aggregate;
provided, that in calculating the aggregate amount of Restricted Payments made
subsequent to the Issue Date for purposes of clause (c) of the immediately
preceding paragraph, amounts expended pursuant to clause (i) (but only if the
declaration thereof has not been counted in a prior period), (v) (other than to
the extent otherwise reducing Consolidated Net Income), (vi) and (viii) shall be
included, without duplication, in such calculation and (ii), (iii), (iv) and
(vii) shall not be included in such calculation. Nothing in the immediately
preceding proviso is meant to affect whether any amount expended pursuant to
clause (iv) should be reflected in Consolidated Net Income. Notwithstanding any
other provision of this covenant, no dividends or distributions may be paid on
any class of Common Stock of the Issuer unless the Issuer has paid in cash all
accumulated dividends due on the two dividend payment dates on or immediately
preceding such proposed date of such dividend or distribution.
If the Issuer or any Restricted Subsidiary makes a Restricted Payment
which, at the time of the making of such Restricted Payment, in the good faith
determination of the Board of Directors of the Issuer or the Company, would be
permitted under the requirements of the Restated Certificate, such Restricted
Payment shall be deemed to have been made in compliance with the Restated
Certificate notwithstanding any subsequent adjustment made in good faith to the
Issuer's or such Restricted Subsidiary's financial statements affecting
Consolidated Net Income.
Limitation on Transactions with Affiliates
The Issuer will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, Property or services) with any
Affiliate (each, an "Affiliate Transaction") or extend, renew, waive or
otherwise modify the terms of any Affiliate Transaction entered into prior to
the Issue Date unless (i) such Affiliate Transaction is between or among the
Issuer and the Restricted Subsidiaries or between or among Restricted
Subsidiaries; or (ii) the terms of such Affiliate Transaction are fair to the
Issuer or such Restricted Subsidiary, as the case may be, and the terms of such
Affiliate Transaction are at least as favorable as the terms which could be
obtained by the Issuer or such Restricted Subsidiary, as the case may be, in a
comparable transaction made on an arm's-length basis between unaffiliated
parties. In any Affiliate Transaction (or any series of related Affiliate
Transactions) involving an amount or having a Fair Market Value in excess of $2
million which is not permitted under clause (i) of the immediately preceding
sentence, the Issuer shall first obtain a resolution of a majority of the
disinterested members of its Board of Directors which reflects the approval of
such Affiliate Transaction and a determination that such Affiliate Transaction
complies with clause (ii) of the immediately preceding sentence. In any
Affiliate Transaction (or series of related Affiliate Transactions) which
includes the payment of fees of $1 million or more to Chartwell, the Issuer
shall obtain a resolution of a majority of the disinterested members of its
Board of Directors which reflects the approval of such Affiliate Transaction. In
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addition, in any Affiliate Transaction (or any series of related Affiliate
Transactions) involving an amount or having a Fair Market Value in excess of $10
million which is not permitted under clause (i) of the immediately preceding
sentence, the Issuer must obtain, prior to the consummation of the transaction
or transactions, a written opinion from a nationally recognized investment
banking firm or other expert stating that such transaction or transactions are
fair to the Issuer or such Restricted Subsidiary, as the case may be, from a
financial point of view; provided, that no such opinion shall be required in
respect of the provision of services or sales of inventory or products by the
Issuer or any of its Restricted Subsidiaries to a Joint Venture in the ordinary
course of business.
The foregoing provisions will not apply to: (i) any transaction or series
of related transactions pursuant to the terms of the Permitted Affiliate
Agreements; (ii) reasonable fees and compensation paid to and indemnity provided
on behalf of officers, directors or employees of the Issuer or any Restricted
Subsidiary of the Issuer as determined in good faith by the Issuer's Board of
Directors or senior management; (iii) any payment that would be permitted under
the first paragraph or clauses (iv) or (v) of the second paragraph of the
Limitations on Restricted Payments covenant; (iv) any Permitted Investment
(other than Permitted Investments made pursuant to clause (x) of the definition
of Permitted Investments); or (v) loans or advances to employees and officers of
the Issuer or any of its Subsidiaries in the ordinary course of business to
provide for the payment of reasonable expenses incurred by such persons in the
performance of their responsibilities to the Issuer or such Subsidiary or in
connection with any relocation. The aggregate management, consulting and similar
fees paid by the Issuer or its Subsidiaries (excluding expenses and amounts paid
pursuant to the last sentence of this covenant or pursuant to clause (iii) of
this paragraph) to Chartwell shall not exceed $1 million during any fiscal year;
provided, that any such fees may accrue but shall not be paid by the Issuer at
any time after the occurrence and during the continuance of a Voting Rights
Triggering Event until such Voting Rights Triggering Event is cured, whereupon
such accrued and unpaid fees may be paid in addition to other permitted fees. In
addition, the Issuer may pay advisory fees to an Affiliate of the Issuer
(including Chartwell) with respect to specific transactions, provided, that such
payments would be permitted under the first paragraph of the covenant under
"--Limitation on Restricted Payments." In addition, for purposes of this
"--Limitation on Transactions with Affiliates" covenant, any transaction or
series of related transactions between the Issuer or any Restricted Subsidiary
and an Affiliate of the Issuer that is approved by a majority of the
disinterested members of its Board of Directors shall be deemed to comply with
clause (ii) of the first sentence of the preceding paragraph. Notwithstanding
the provisions of this covenant, the Issuer may pay fees and expenses to
Affiliates of the Issuer on the Issue Date in connection with the consummation
of the Transactions as described in this Prospectus.
Limitation on Preferred Stock of Restricted Subsidiaries
The Issuer will not permit any of its Restricted Subsidiaries to issue any
Preferred Stock (other than to the Issuer or a Wholly-Owned Subsidiary), other
than Permitted Foreign Restricted Subsidiary Preferred Stock, or permit any
Person (other than the Issuer or a Wholly-Owned Subsidiary) to hold any such
Preferred Stock unless the Issuer or such Restricted Subsidiary would be
entitled to incur or assume Indebtedness under the covenant described under
"--Limitation on Additional Indebtedness" in the aggregate principal amount
equal to the aggregate liquidation value of the Preferred Stock to be issued or
so held.
Change of Control Offer
Upon the occurrence of a Change of Control, the Issuer shall be obligated
to make an offer to purchase (the "Change of Control Offer") the outstanding New
Series A Senior Preferred Stock at a purchase price (the "Change of Control
Purchase Price") equal to 101% of the liquidation preference thereof plus,
without duplication, an amount in cash equal to all accumulated and unpaid
dividends thereon (including an amount in cash equal to a prorated dividend for
the period from the immediately preceding dividend payment date to the Change of
Control Payment Date (as hereinafter defined)) in accordance with the procedures
set forth in this covenant.
Within 30 days of the occurrence of a Change of Control, the Issuer shall
(i) cause a notice of the Change of Control Offer to be sent at least once to
the Dow Jones News Service or similar business news service in the United
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States and (ii) send by first-class mail, postage prepaid, to each holder of New
Series A Senior Preferred Stock, at the address appearing in the register
maintained by the Exchange Agent, a notice stating:
(a) that the Change of Control Offer is being made pursuant to this
covenant and that all New Series A Senior Preferred Stock validly tendered
will be accepted for payment;
(b) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day not earlier than 30 days nor later than 60
days from the date such notice is mailed (the "Change of Control Payment
Date"));
(c) that any New Series A Senior Preferred Stock not validly
tendered will continue to accumulate dividends;
(d) that, unless the Issuer defaults in the payment of the Change of
Control Purchase Price, any New Series A Senior Preferred Stock accepted
for payment pursuant to the Change of Control Offer shall cease to
accumulate dividends after the Change of Control Payment Date;
(e) that holders accepting the offer to have their New Series A
Senior Preferred Stock purchased pursuant to a Change of Control Offer
will be required to surrender their certificates representing New Series A
Senior Preferred Stock to the Issuer at the address specified in the
notice prior to the close of business on the Business Day preceding the
Change of Control Payment Date;
(f) that holders will be entitled to withdraw their acceptance if
the Issuer receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the number of shares of New Series A Senior Preferred Stock
delivered for purchase, and a statement that such holder is withdrawing
his election to have such New Series A Senior Preferred Stock purchased;
(g) that holders whose New Series A Senior Preferred Stock is being
purchased only in part will be issued new certificates representing the
number of shares of New Series A Senior Preferred Stock equal to the
unpurchased portion of the certificates surrendered; and
(h) any other procedures that a holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance.
On the Change of Control Payment Date, the Issuer shall, to the extent
lawful, accept for payment the number of shares of New Series A Senior Preferred
Stock validly tendered pursuant to the Change of Control Offer and promptly mail
to each holder of New Series A Senior Preferred Stock so accepted payment in an
amount equal to the purchase price for such New Series A Senior Preferred Stock,
and the Issuer shall execute and issue a new New Series A Senior Preferred Stock
certificate representing the number of shares of New Series A Senior Preferred
Stock equal to any unpurchased shares represented by a certificate surrendered.
The Restated Certificate provides that if any Credit Facility is in effect
or if the Senior Notes are outstanding or if any other Indebtedness of the
Issuer or its Restricted Subsidiaries that requires a payment upon a Change of
Control is outstanding, or any amounts are owing thereunder or in respect
thereof, at the time of the occurrence of a Change of Control, prior to the
mailing of the notice to holders described in the second preceding paragraph,
but in any event within 30 days following any Change of Control, the Issuer
shall be required to (i) cause the borrowers thereunder to repay in full all
obligations under or in respect of such Credit Facility or such other
Indebtedness or offer to repay in full all obligations under or in respect of
such Credit Facility or such other Indebtedness and repay within such 30-day
period the obligations under or in respect of such Credit Facility or such other
Indebtedness of each lender who has then irrevocably accepted such offer and
cause the Company to repay within such 30-day period in full all obligations in
respect of the Senior Notes or offer to repay in full all obligations in respect
of the Senior Notes of each holder who has then irrevocably accepted such offer
or (ii) cause such borrowers and the Company to obtain the requisite consent
under such Credit Facility or such other Indebtedness, the holders of such
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other Indebtedness and from the holders of the Senior Notes, respectively, to
permit the repurchase of the New Series A Senior Preferred Stock as described
above. The Issuer must first comply with the covenant described in the preceding
sentence before it shall be required to purchase New Series A Senior Preferred
Stock in the event of a Change of Control; provided, that the Issuer's failure
to comply with the covenant described in the preceding sentence constitutes a
Voting Rights Triggering Event described in clause (iii) under "--Voting Rights"
above. There can be no assurance that the Issuer will have adequate resources to
refinance or fund the repurchase of the New Series A Senior Preferred Stock in
the event of a Change of Control. The failure of the Issuer, following a Change
of Control, to make a Change of Control Offer or to pay when due the Change of
Control Purchase Price for shares of New Series A Senior Preferred Stock
tendered in conformity with any such Change of Control Offer will give the
holders of the New Series A Senior Preferred Stock the rights described under
"--Voting Rights." As a result of the foregoing, a holder of the New Series A
Senior Preferred Stock may not be able to compel the Issuer to purchase the New
Series A Senior Preferred Stock unless the Issuer, or such borrower or the
Company is able at the time to refinance all of the obligations under or in
respect of such Credit Facility, such Senior Notes or such other Indebtedness or
obtain requisite consent thereunder.
The Restated Certificate further provides that, (A) if the Issuer has
issued any outstanding Preferred Stock (other than the Series A Senior Preferred
Stock), and the Issuer is required to make a Change of Control Offer or to make
a distribution with respect to such Preferred Stock (other than the Series A
Senior Preferred Stock) in the event of a Change of Control, the Issuer shall
not consummate any such offer or distribution with respect to such Preferred
Stock (other than the Series A Senior Preferred Stock) until such time as the
Issuer shall have paid the Change of Control Purchase Price in full to the
holders of Series A Senior Preferred Stock that have validly accepted the
Issuer's Change of Control Offer and shall otherwise have consummated the Change
of Control Offer made to holders of the Series A Senior Preferred Stock and (B)
the Issuer will not issue Preferred Stock with change of control provisions
requiring the payment of such Preferred Stock prior to the payment of the Series
A Senior Preferred Stock in the event of a Change in Control under the Restated
Certificate.
In the event that a Change of Control occurs and the holders of Series A
Senior Preferred Stock exercise their right to require the Issuer to purchase
Series A Senior Preferred Stock, if such purchase constitutes a "tender offer"
for purposes of Rule l4e-1 under the Exchange Act at that time, the Issuer will
comply with the requirements of Rule l4e-1 as then in effect with respect to
such repurchase.
The Issuer will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes such Change of Control Offer
contemporaneously with or upon a Change of Control in the manner, at the times
and otherwise in compliance with the requirements of the Restated Certificate
and purchases all Series A Senior Preferred Stock validly tendered and not
withdrawn under such Change of Control Offer.
Merger, Consolidation or Sale of Assets
The Issuer will not consolidate or merge with or into any Person, or sell,
assign, lease, convey or otherwise dispose of (or cause or permit any of its
Restricted Subsidiaries to sell, assign, lease, convey or otherwise dispose of
(however effected, including, without limitation, by merger or consolidation))
all or substantially all of the Issuer's assets (determined on a consolidated
basis for the Issuer and its Restricted Subsidiaries), whether as an entirety or
substantially an entirety in one transaction or a series of related
transactions, including by way of liquidation or dissolution, to any Person
unless, in each such case: (i)(x) the Issuer shall be the continuing Person, or
(y) the Person (if other than the Issuer) formed by such consolidation or into
which the Issuer or the Restricted Subsidiary, as the case may be, is merged or
to which the Properties and assets of the Issuer or any Restricted Subsidiary,
as the case may be, are transferred (such Person, the "Surviving Entity") (1)
shall be a corporation organized and existing under the laws of the United
States or any State thereof or the District of Columbia and (2) the New Series A
Senior Preferred Stock shall be converted into or exchanged for and shall become
shares of such successor, transferee or resulting Person, having in respect of
such successor, transferee or resulting Person the same powers, preferences and
relative participating, optional or other special rights and the qualifications,
limitations or restrictions thereon, that the New Series A Senior Preferred
Stock had immediately prior to such transaction; (ii) immediately before and
immediately after giving effect to such transaction on a pro forma basis
(including, without limitation, giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred in connection with or in
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respect of the transaction), no Voting Rights Triggering Event shall have
occurred and be continuing; and (iii) immediately after giving effect to such
transaction on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions) the Issuer (or the
Surviving Entity if the Issuer is not continuing) (A) shall have a Consolidated
Net Worth equal to or greater than the Consolidated Net Worth of the Issuer
immediately prior to such transaction and (B) could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under the covenant
set forth under "--Certain Covenants--Limitation on Additional Indebtedness"
above; provided, that a Restricted Subsidiary may merge with and into the Issuer
without complying with this clause (iii)(B).
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the Properties or assets of one or more Subsidiaries of the
Issuer, the Capital Stock of which constitutes all or substantially all of the
Properties and assets of the Issuer, shall be deemed to be the transfer of all
or substantially all of the assets of the Issuer. In addition, the phrase "all
or substantially all" of the assets of the Issuer will likely be interpreted
under applicable law and will be dependent upon particular facts and
circumstances. As a result, there may be a degree of uncertainty in ascertaining
whether a sale or transfer of "all or substantially all" of the assets of the
Issuer or any Restricted Subsidiary has occurred.
For all purposes of the Restated Certificate and the New Series A Senior
Preferred Stock, Subsidiaries of any Surviving Entity will, upon such
transaction or series of transactions, become Restricted Subsidiaries or
Unrestricted Subsidiaries, to the extent and as provided pursuant to the
Restated Certificate.
Exchange Agent and Registrar
United States Trust Company of New York is the exchange agent (the
"Exchange Agent") and registrar for the New Series A Senior Preferred Stock.
Reports to Holders
The Restated Certificate provides that whether or not required by the
rules and regulations of the Commission, so long as any shares of Series A
Senior Preferred Stock are outstanding, the Issuer shall furnish to the holders
of the Series A Senior Preferred Stock within 10 days after it is or would have
been required to file them with the Commission, (i) all annual and quarterly
financial information that would be required to be contained in a filing with
the Commission on Forms 10-K and 10-Q (without exhibits) if the Issuer were
required to file such forms, including a section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Issuer's
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K (without exhibits) if the
Issuer were required to file such reports. In addition, whether or not required
by the rules and regulations of the Commission, the Issuer will file a copy of
all such information and reports with the Commission for public availability
(unless the Commission will not accept such a filing). In addition, the Issuer
shall furnish to the holders of the Series A Senior Preferred Stock and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144(d)(4) under the
Securities Act and the exhibits omitted from the information furnished pursuant
to the preceding sentence, for so long as the Series A Senior Preferred Stock is
not freely transferable under the Securities Act.
The Exchange Debentures
The Exchange Debentures, if issued, will be issued under an Indenture (the
"Exchange Indenture"), among the Issuer and United States Trust Company of New
York, as Trustee (the "Debenture Trustee"). The terms of the Exchange Debentures
include those stated in the Exchange Indenture and those made a part of the
Exchange Indenture by reference to the Trust Indenture Act as in effect on the
date of the Exchange Indenture. The Exchange Debentures are subject to all such
terms, and holders are referred to the Exchange Indenture and the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act") for a statement of
the provisions of the Exchange Debentures. The following is a summary of the
material terms and provisions of the Exchange Debentures and the Exchange
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Indenture. This summary does not purport to be a complete description thereof
and is subject to the detailed provisions of, and qualified in its entirety by
reference to, the Exchange Debentures and the Exchange Indenture (including the
definitions contained therein). A copy of the form of Exchange Indenture may be
obtained from the Issuer by any holder or prospective investor upon request.
Definitions relating to certain capitalized terms are set forth under "--Certain
Definitions" and throughout this description. Capitalized terms that are used
but not otherwise defined herein have the meanings assigned to them in the
Exchange Indenture and such definitions are incorporated by reference herein.
For purposes of this section, references to the "Issuer" mean MMH Holdings,
Inc., excluding its Subsidiaries, references to the "Company" mean Morris
Material Handling, Inc., excluding its Subsidiaries, and references to Surety
Arrangements refer to all such arrangements as defined in this section including
those described in "Description of the Surety Arrangement."
General
The Exchange Debentures will be general unsecured obligations of the
Issuer and will be limited in aggregate principal amount to the liquidation
preference of the New Series A Senior Preferred Stock, plus, without
duplication, accumulated and unpaid dividends, on the date or dates on which it
is exchanged for Exchange Debentures (plus any additional Exchange Debentures
issued in lieu of cash interest as described herein). The Exchange Debentures
will be issued in fully registered form only, in denominations of $1,000 and
integral multiples thereof (other than as described in "--The New Series A
Senior Preferred Stock" or with respect to additional Exchange Debentures issued
in lieu of cash interest as described herein). The Exchange Debentures will be
subordinated in right of payment to all existing and future Senior Indebtedness
of the Issuer and will rank pari passu with or senior to all future Indebtedness
of the Issuer that expressly provides that it ranks pari passu with or junior to
the Exchange Debentures, as the case may be.
All of the operations of the Issuer are conducted through its Subsidiaries
and, therefore, the Issuer is dependent upon the cash flow of its Subsidiaries
to meet its obligations, including its obligations under the Exchange
Debentures. The Exchange Debentures will be effectively subordinated to all
Indebtedness and other liabilities (including trade payables, tort claims and
tax claims) of the Issuer's present and future Subsidiaries, including present
and future Unrestricted Subsidiaries. Any right of the Issuer to receive assets
of any of its Subsidiaries upon such Subsidiary's liquidation or reorganization
(and the consequent right of the holders of the Exchange Debentures to
participate in those assets) will be effectively subordinated to the claims of
that Subsidiary's third-party creditors, except for any Indebtedness validly
owed to the Issuer.
As of January 31, 1998, after giving pro forma effect to the Offering, the
application of the net proceeds therefrom and the Transactions, the Issuer and
its Subsidiaries would have had an aggregate of $259.3 million of Indebtedness
outstanding (including $200.0 million aggregate principal amount of Senior Notes
and $55.0 million of borrowings under the New Credit Facility) in respect of
which the Exchange Debentures will be effectively subordinated.
Maturity, Interest and Principal
The Exchange Debentures will mature on April 1, 2009. The Exchange
Debentures will bear interest at the rate of 12% per annum from the date of
exchange for the New Series A Senior Preferred Stock (the "Exchange Date") until
maturity. Interest will be payable semi-annually in cash (or, on or prior to
April 1, 2003, in additional Exchange Debentures, at the option of the Issuer)
in arrears on each April 1 and October 1, commencing with the first such date
after the Exchange Date, to holders of record of the Exchange Debentures at the
close of business on the immediately preceding March 15 and September 15,
respectively. Interest on the Exchange Debentures will be computed on the basis
of a 360-day year of twelve 30-day months.
Optional Redemption
The Exchange Debentures will be redeemable, at the option of the Issuer,
in whole or in part, at any time or from time to time on or after April 1, 2003,
at the following redemption prices (expressed as percentages of
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principal amount), together, in each case, with accrued and unpaid interest to
the redemption date, if redeemed during the twelve-month period beginning on
April 1 of each year listed below:
Year Percentage
- ---- ----------
2003................................................................ 106.000%
2004................................................................ 104.000%
2005................................................................ 102.000%
2006 and thereafter................................................. 100.000%
Notwithstanding the foregoing, the Issuer may redeem in the aggregate all,
but not less than all, of the Exchange Debentures then outstanding at any time
prior to April 1, 2001, at a redemption price equal to 112.000% of the aggregate
principal amount so redeemed, plus accrued interest to the redemption date out
of the Net Proceeds of one or more Public Equity Offerings; provided, that any
such redemption occurs within 90 days following the closing of any such Public
Equity Offering.
In the event of redemption of fewer than all of the Exchange Debentures,
the Debenture Trustee shall select by lot or on a pro rata basis or in such
other manner as it shall deem appropriate the Exchange Debentures to be
redeemed. The Exchange Debentures will be redeemable in whole or in part upon
not less than 30 nor more than 60 days' prior written notice, mailed by first
class mail to a holder's last address as it shall appear on the register
maintained by the Registrar of the Exchange Debentures. On and after any
redemption date, interest will cease to accrue on the Exchange Debentures or
portions thereof called for redemption unless the Company shall fail to redeem
any such Exchange Debentures.
Subordination
The Indebtedness represented by, and all obligations under, the Exchange
Debentures are, to the extent and in the manner provided in the Exchange
Indenture, subordinated in right of payment to the prior indefeasible payment
and satisfaction in full in cash or Cash Equivalents of all existing and future
Senior Indebtedness of the Issuer.
In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, arrangement, reorganization or other similar case or
proceeding in connection therewith, relative to the Issuer or to its creditors,
as such, or to its assets, whether voluntary or involuntary, or any liquidation,
dissolution or other winding-up of the Issuer, whether voluntary or involuntary
and whether or not involving insolvency or bankruptcy, or any general assignment
for the benefit of creditors or other marshalling of assets or liabilities of
the Issuer (except in connection with the merger or consolidation of the Issuer
or its liquidation or dissolution following the transfer of substantially all of
its assets, upon the terms and conditions permitted under the circumstances
described under "--Merger, Consolidation or Sale of Assets") (all of the
foregoing referred to herein individually as a "Bankruptcy Proceeding" and
collectively as "Bankruptcy Proceedings"), the holders of Senior Indebtedness of
the Issuer will be entitled to receive payment and satisfaction in full in cash
or Cash Equivalents of, or such payment provided for, all amounts due on or in
respect of all Senior Indebtedness of the Issuer before the holders of the
Exchange Debentures are entitled to receive or retain any payment or
distribution of any kind (other than a payment or distribution in the form of
Permitted Junior Securities) on account of the Exchange Debentures. In the event
that, notwithstanding the foregoing, the Debenture Trustee or any holder of
Exchange Debentures receives any payment or distribution of assets of the Issuer
of any kind, whether in cash, property or securities, including, without
limitation, by way of set-off or otherwise, in respect of the Exchange
Debentures before all Senior Indebtedness of the Issuer is paid and satisfied in
full, then such payment or distribution (other than a payment or distribution in
the form of Permitted Junior Securities) will be held by the recipient in trust
for the benefit of holders of Senior Indebtedness and will be immediately paid
over or delivered to the holders of Senior Indebtedness or their representative
or representatives to the extent necessary to make payment in full of all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution, or provision therefor, to or for the holders of Senior
Indebtedness. By reason of such subordination, in the event of liquidation or
insolvency, creditors of the Issuer who are holders of Senior Indebtedness may
recover more, ratably, than other creditors of the Issuer, and creditors of the
Issuer who are not holders of Senior Indebtedness or of the Exchange Debentures
may recover more, ratably, than holders of the Exchange Debentures.
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No payment or distribution (other than a payment or distribution in the
form of Permitted Junior Securities) of any assets or securities of the Issuer
of any kind or character (including, without limitation, cash, property and any
payment or distribution which may be payable or deliverable by reason of the
payment of any other Indebtedness of the Issuer being subordinated to the
payment of the Exchange Debentures by the Issuer) may be made by or on behalf of
the Issuer, including, without limitation, by way of set-off or otherwise, for
or on account of the Exchange Debentures, or for or on account of the purchase,
redemption or other acquisition of the Exchange Debentures, and neither the
Debenture Trustee nor any holder or owner of any Exchange Debentures shall take
or receive from the Issuer, directly or indirectly in any manner, payment in
respect of all or any portion of Exchange Debentures following the delivery by
the representative of the holders of Designated Senior Indebtedness (the
"Representative") to the Debenture Trustee of written notice of the occurrence
of a Payment Default, and in any such event, such prohibition shall continue
until such Payment Default is cured, waived in writing or ceases to exist. At
such time as the prohibition set forth in the preceding sentence shall no longer
be in effect, subject to the provisions of the following paragraph, the Issuer
shall resume making any and all required payments in respect of the Exchange
Debentures, including any missed payments.
Upon the occurrence of a Non-Payment Event of Default, no payment or
distribution (other than a payment or distribution in the form of Permitted
Junior Securities) of any assets of the Issuer of any kind may be made by the
Issuer, including, without limitation, by way of set-off or otherwise, on
account of the Exchange Debentures, or on account of the purchase or redemption
or other acquisition of Exchange Debentures, for a period (a "Payment Blockage
Period") commencing on the date of receipt by the Debenture Trustee of written
notice from the Representative of such Non-Payment Event of Default unless and
until (subject to any blockage of payments that may then be in effect under the
preceding paragraph) the earliest of (w) more than 179 days shall have elapsed
since receipt of such written notice by the Debenture Trustee, (x) such
Non-Payment Event of Default shall have been cured or waived in writing or shall
have ceased to exist, (y) such Designated Senior Indebtedness shall have been
paid in full or (z) such Payment Blockage Period shall have been terminated by
written notice to the Issuer or the Debenture Trustee from such Representative,
after which, in the case of clause (w), (x), (y) or (z), the Issuer shall resume
making any and all required payments in respect of the Exchange Debentures,
including any missed payments. Notwithstanding any other provision of the
Exchange Indenture, in no event shall a Payment Blockage Period commenced in
accordance with the provisions of the Exchange Indenture described in this
paragraph extend beyond 179 days from the date of the receipt by the Debenture
Trustee of the notice referred to above (such period, an "Initial Blockage
Period"). Any number of additional Payment Blockage Periods may be commenced
during the Initial Blockage Period; provided, however, that no such additional
Payment Blockage Period shall extend beyond the Initial Blockage Period. After
the expiration of the Initial Blockage Period, no Payment Blockage Period may be
commenced until at least 360 consecutive days have elapsed since the
commencement date of the Initial Blockage Period. Notwithstanding any other
provision of the Exchange Indenture, no Non-Payment Event of Default with
respect to Designated Senior Indebtedness which existed or was continuing on the
date of the commencement of any Payment Blockage Period initiated by the
Representative shall be, or be made, the basis for the commencement of a second
Payment Blockage Period initiated by the Representative, whether or not within
the Initial Blockage Period, unless such Non-Payment Event of Default shall have
been waived for a period of not less than 90 consecutive days.
If the Issuer fails to make any payment on the Exchange Debentures when
due or within any applicable grace period, whether or not on account of payment
blockage provisions, such failure would constitute an Event of Default under the
Exchange Indenture and would enable the holders of the Exchange Debentures to
accelerate the maturity thereof. See "--Events of Default."
By reason of the subordination provisions described above, in the event of
insolvency of the Issuer, funds which would otherwise be payable to holders of
the Exchange Debentures will be paid to holders of Senior Indebtedness of the
Issuer to the extent necessary to repay such Senior Indebtedness in full, and
the Issuer may be unable to fully meet its obligations with respect to the
Exchange Debentures. Subject to the restrictions set forth in the Exchange
Indenture, in the future the Issuer may incur additional Senior Indebtedness.
See "Risk Factors--Ranking of New Series A Senior Preferred Stock; Subordination
of the Exchange Debentures; Pledge of Assets." The subordination provisions
described above will cease to be applicable to the Exchange Debentures upon any
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defeasance or covenant defeasance described under "--Satisfaction and Discharge
of the Exchange Indenture; Defeasance."
A holder of Exchange Debentures by his acceptance of Exchange Debentures
agrees to be bound by such provisions and authorizes and expressly directs the
Debenture Trustee, on his behalf, to take such action as may be necessary or
appropriate to effectuate the subordination provided for in the Exchange
Indenture and appoints the Debenture Trustee his attorney-in-fact for such
purpose.
Certain Covenants
The Exchange Indenture contains, among others, the following covenants:
Limitation on Other Senior Subordinated Indebtedness
The Issuer will not incur, contingently or otherwise, any Indebtedness
that is both (i) subordinate in right of payment to any Senior Indebtedness of
the Issuer and (ii) senior in right of payment to the Exchange Debentures. For
purposes of this covenant, Indebtedness is deemed to be senior in right of
payment to the Exchange Debentures if it is not explicitly subordinate in right
of payment to Senior Indebtedness at least to the same extent as the Exchange
Debentures are subordinate to Senior Indebtedness.
Limitation on Additional Indebtedness
The Issuer will not, and will not cause or permit any Restricted
Subsidiary of the Issuer to, directly or indirectly, incur (as defined) any
Indebtedness (including any Acquired Indebtedness); provided, that if no Default
or Event of Default shall have occurred and be continuing at the time or as a
consequence of the incurrence of such Indebtedness, the Issuer or any Restricted
Subsidiary may incur Indebtedness (including any Acquired Indebtedness) if the
Issuer's Consolidated Interest Coverage Ratio is greater than 2.0 to 1.
Notwithstanding the foregoing, the Issuer and its Restricted Subsidiaries
may incur Permitted Indebtedness.
Limitation on Restricted Payments
The Issuer will not make, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make, any Restricted Payment after the
Issue Date, unless:
a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
b) immediately after giving pro forma effect to such Restricted
Payment, the Issuer could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under "--Limitation on Additional
Indebtedness" covenant above; and
c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
does not exceed the sum (without duplication) of (1) 50% of the cumulative
Consolidated Net Income of the Issuer (or minus 100% of any cumulative
deficit in Consolidated Net Income) for the period (treated as one
accounting period) from the first day of the fiscal quarter in which the
Issue Date occurs through the last day of the fiscal quarter immediately
preceding such Restricted Payment, (2) 100% of the aggregate Net Proceeds
in cash received by the Issuer from the issuance or sale, after the Issue
Date (other than to a Restricted Subsidiary), of (A) Capital Stock (other
than Disqualified Capital Stock) of the Issuer or (B) any Indebtedness or
other securities of the Issuer that are convertible into or exercisable or
exchangeable for Capital Stock (other than Disqualified Capital Stock) of
the Issuer which have been so converted or exercised or exchanged (other
than by a Restricted Subsidiary of the Issuer) and (3) 100% of the net
reduction in Investments (other than Permitted Investments), subsequent to
the Issue Date, in any Person, resulting from payments of interest on
Indebtedness, dividends, repayments of loans or advances or other
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transfers or distributions of Property or return of capital (but only to
the extent such interest, dividends or repayments or other transfers or
distributions of Property or return of capital are not included in the
calculation of Consolidated Net Income), in each case to the Issuer or any
Restricted Subsidiary from any Person (including Unrestricted
Subsidiaries) or from redesignations (the designation of which did not
constitute a Permitted Investment) of Unrestricted Subsidiaries as
Restricted Subsidiaries in accordance with the Exchange Indenture, not to
exceed in the case of any Person the amount of Investments (other than
Permitted Investments) previously made by the Issuer or any Restricted
Subsidiary in such Person. For purposes of determining the amount expended
for Restricted Payments under this clause (c), Property other than cash
(including a distribution of assets) shall be valued at its Fair Market
Value.
The provisions of this covenant shall not prohibit:
(i) the payment of any distribution within 60 days after the date of
declaration thereof, if at such date of declaration such payment would
comply with the provisions of the Exchange Indenture;
(ii) the retirement of any shares of Capital Stock of the Issuer or
Subordinated Indebtedness by conversion into, or by or in exchange for,
shares of Capital Stock (other than Disqualified Capital Stock) of the
Issuer, or out of, the Net Proceeds of the substantially concurrent sale
(other than to a Restricted Subsidiary of the Issuer) of other shares of
Capital Stock of the Issuer (other than Disqualified Capital Stock)
provided, that any such Net Proceeds are excluded from clause (c)(2) of
the immediately preceding paragraph for the purposes of this calculation
(and were not included therein at any time);
(iii) the redemption, repayment or retirement of Subordinated
Indebtedness in exchange for, by conversion into, or out of the Net
Proceeds of, (x) a substantially concurrent sale or incurrence of
Subordinated Indebtedness (other than any Indebtedness owed to a
Restricted Subsidiary) or (y) a substantially concurrent sale (other than
to a Restricted Subsidiary of the Issuer) of shares of Capital Stock of
the Issuer provided, that any such Net Proceeds are excluded from clause
(c)(2) of the immediately preceding paragraph (and were not included
therein at any time);
(iv) the retirement of any shares of Disqualified Capital Stock by
conversion into, or by exchange for, shares of Disqualified Capital Stock
of the Issuer, or out of the Net Proceeds of the substantially concurrent
sale (other than to a Restricted Subsidiary of the Issuer) of other shares
of Disqualified Capital Stock of the Issuer;
(v) payments to MHE Investments or any other Person in respect of
which MHE Investments or such other Person is a member of the consolidated
tax group of the Issuer, for so long as MHE Investments or such other
Person owns such amount of the Capital Stock of the Issuer as will permit
it or a member of the consolidated tax group of MHE Investments or such
other Person to be entitled to file consolidated federal tax returns with
the Issuer, for income taxes pursuant to the Tax Allocation Agreement or
for the purpose of enabling MHE Investments or such other Person or any
such members to pay taxes other than income taxes, to the extent actually
owed and attributable to the operations of the Issuer and its Subsidiaries
or to MHE Investments' or such other Persons' ownership thereof;
(vi) payments to MHE Investments, for so long as it owns not less
than a majority of the outstanding Common Stock of the Issuer, in amounts
sufficient to pay the ordinary operating and administrative expenses of
MHE Investments (including all reasonable professional fees and expenses),
including in connection with its complying with the Issuer's reporting
obligations (including filings with the Commission and any exchange on
which the Issuer's securities are traded) and obligations to prepare and
distribute business records in the ordinary course of business and the
Issuer's costs and expenses relating to taxes, other than those referred
to in clause (v) (which taxes are attributable to the operations of the
Issuer and its Restricted Subsidiaries or to MHE Investments' ownership
thereof); provided, that the aggregate payments paid in each fiscal year
pursuant to this clause (vi) will not exceed 0.20% of the consolidated net
sales of the Issuer and its Restricted Subsidiaries for such fiscal year;
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(vii) the purchase, redemption, retirement or other acquisition for
value of Capital Stock of the Issuer or of any Person that directly or
indirectly controls (as defined in the definition of Affiliate) the Issuer
held by employees or former employees of the Issuer or any Restricted
Subsidiary (or their estates or beneficiaries under their estates) upon
death, disability, retirement, termination of employment and pursuant to
the terms of any agreement under which such Capital Stock was issued,
provided, that the aggregate Fair Market Value of the consideration paid
for such purchase, redemption, retirement or other acquisition of such
Capital Stock does not exceed $500,000 in any fiscal year;
(viii) payments due under the Permitted Affiliate Agreements (other
than payments pursuant to paragraph (v) above) that would otherwise
constitute Restricted Payments; and
(ix) payments that would otherwise constitute Restricted Payments,
not to exceed $750,000 in the aggregate;
provided, that in calculating the aggregate amount of Restricted Payments made
subsequent to the Issue Date for purposes of clause (c) of the immediately
preceding paragraph, amounts expended pursuant to clause (i) (but only if the
declaration thereof has not been counted in a prior period), (vi) (other than to
the extent otherwise reducing Consolidated Net Income), (vii) and (ix) shall be
included, without duplication, in such calculation and (ii), (iii), (iv), (v)
and (viii) shall not be included in such calculation. Nothing in the immediately
preceding proviso is meant to affect whether any amount expended pursuant to
clause (v) should be reflected in Consolidated Net Income.
If the Issuer makes a Restricted Payment which, at the time of the making
of such Restricted Payment, in the good faith determination of the Board of
Directors of the Issuer, would be permitted under the requirements of the
Exchange Indenture, such Restricted Payment shall be deemed to have been made in
compliance with the Exchange Indenture notwithstanding any subsequent adjustment
made in good faith to the Issuer's financial statements affecting Consolidated
Net Income.
Limitation on Transactions with Affiliates
The Issuer will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, Property or services) with any
Affiliate (each, an "Affiliate Transaction") or extend, renew, waive or
otherwise modify the terms of any Affiliate Transaction entered into prior to
the Issue Date, unless (i) such Affiliate Transaction is between or among the
Issuer and the Restricted Subsidiaries or between or among Restricted
Subsidiaries; or (ii) the terms of such Affiliate Transaction are fair to the
Issuer or such Restricted Subsidiary, as the case may be, and the terms of such
Affiliate Transaction are at least as favorable as the terms which could be
obtained by the Issuer or such Restricted Subsidiary, as the case may be, in a
comparable transaction made on an arm's-length basis between unaffiliated
parties. In any Affiliate Transaction (or any series of related Affiliate
Transactions) involving an amount or having a Fair Market Value in excess of $2
million which is not permitted under clause (i) of the immediately preceding
sentence, the Issuer shall deliver to the Debenture Trustee a resolution of a
majority of the disinterested members of the Board of Directors of the Issuer
which reflects the approval of such Affiliate Transaction and a determination
that such Affiliate Transaction complies with clause (ii) of the immediately
preceding sentence. In any Affiliate Transaction (or series of related Affiliate
Transactions) which includes the payment of fees of $1 million or more to
Chartwell, the Issuer shall deliver to the Debenture Trustee a resolution of a
majority of the disinterested members of its Board of Directors which reflects
the approval of such Affiliate Transaction. In addition, in any Affiliate
Transaction (or any series of related Affiliate Transactions) involving an
amount or having a Fair Market Value in excess of $10 million which is not
permitted under clause (i) of the immediately preceding sentence, the Issuer
must deliver to the Debenture Trustee, prior to the consummation of the
transaction or transactions, a written opinion from a nationally recognized
investment banking firm or other expert stating that such transaction or
transactions are fair to the Issuer or such Restricted Subsidiary, as the case
may be, from a financial point of view; provided, that no such opinion shall be
required in respect of the provision of services or sales of inventory or
products by the Issuer or any of its Restricted Subsidiaries to a Joint Venture
in the ordinary course of business.
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The foregoing provisions will not apply to: (i) any transaction or series
of related transactions pursuant to the terms of the Permitted Affiliate
Agreements; (ii) reasonable fees and compensation paid to and indemnity provided
on behalf of officers, directors or employees of the Issuer or any Restricted
Subsidiary of the Issuer as determined in good faith by the Issuer's Board of
Directors or senior management; (iii) any payment that would be permitted under
the first paragraph or clauses (v) or (vi) of the second paragraph of the
Limitations on Restricted Payments covenant; (iv) any Permitted Investment
(other than Permitted Investments made pursuant to clause (x) of the definition
of Permitted Investments); or (v) loans or advances to employees and officers of
the Issuer or any of its Subsidiaries in the ordinary course of business to
provide for the payment of reasonable expenses incurred by such persons in the
performance of their responsibilities to the Issuer or such Subsidiary or in
connection with any relocation. The aggregate management, consulting and similar
fees paid by the Issuer or its Subsidiaries (excluding expenses and amounts paid
pursuant to the last sentence of this covenant or pursuant to clause (iii) of
this paragraph) to Chartwell shall not exceed $1 million during any fiscal year;
provided, that any such fees may accrue but shall not be paid by the Issuer at
any time after the occurrence and during the continuance of a Default or Event
of Default until such Default or Event of Default is cured, whereupon such
accrued and unpaid fees may be paid in addition to other permitted fees. In
addition, the Issuer may pay advisory fees to an Affiliate of the Issuer
(including Chartwell) with respect to specific transactions, provided, that such
payments would be permitted under the first paragraph of the covenant under
"--Limitation on Restricted Payments." In addition, for purposes of this
"--Limitation on Transactions with Affiliates" covenant, any transaction or
series of related transactions between the Issuer or any Restricted Subsidiary
and an Affiliate of the Issuer that is approved by a majority of the
disinterested members of its Board of Directors shall be deemed to comply with
clause (ii) of the first sentence of the preceding paragraph. Notwithstanding
the provisions of this covenant, the Issuer may pay fees and expenses to
Affiliates of the Issuer on the Issue Date in connection with the consummation
of the Transactions as described in this Prospectus.
Limitation on Certain Asset Sales
The Issuer will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Issuer or any of its
Restricted Subsidiaries, as the case may be, receives consideration at the time
of such sale or other disposition at least equal to the Fair Market Value
thereof; (ii) not less than 85% of the consideration received by the Issuer or
any of its Restricted Subsidiaries, as the case may be, is in the form of (a)
cash or Cash Equivalents; provided, that the amount of 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 contingent liabilities or
liabilities (including Subordinated Indebtedness) subordinated to the Exchange
Debentures or Indebtedness without general recourse to the obligor thereof) that
are assumed or forgiven by the transferee of any such assets will be deemed to
be cash for the purposes of this clause (ii) if the Issuer or such Restricted
Subsidiary is released from any liability for such liabilities and (b)
Replacement Assets; and (iii) the Asset Sale Proceeds received by the Issuer or
such Restricted Subsidiaries are applied (a) either (x) to the extent the Issuer
elects, or is required, to the prepayment, repayment or purchase of Senior
Indebtedness of the Issuer or Indebtedness or Capital Stock of any Restricted
Subsidiary within 360 days following the receipt of the Asset Sale Proceeds from
any Asset Sale, provided, that any such repayment shall result in a permanent
reduction of the commitments thereunder in an amount equal to the principal
amount so repaid; or (y) to the extent the Issuer elects, to acquisitions of
assets (and Investments otherwise permitted to be made in accordance with the
terms of the Exchange Indenture) used or useful in businesses similar or
reasonably related to the business of the Issuer or its Restricted Subsidiaries
as conducted at the time of such Asset Sale, provided, that such acquisitions or
Investments occur on or prior to the 365th day following receipt of such Asset
Sale Proceeds (the "Reinvestment Date"); and (b) if on the Reinvestment Date
with respect to any Asset Sale, the Available Asset Sale Proceeds exceed $10
million, the Issuer shall apply an amount equal to such Available Asset Sale
Proceeds to an offer to repurchase the Exchange Debentures (and at its option,
to an offer to repurchase other pari passu Indebtedness; provided, that the
stated maturity date of such Indebtedness is no later than the stated maturity
date of the Exchange Debentures), at a purchase price in cash equal to 100% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of repurchase (an "Excess Proceeds Offer"). To the extent that any amount
of Available Asset Sale Proceeds remains after the completion of such Excess
Proceeds Offer, the Issuer may use such remaining amount in any manner permitted
by the Exchange Indenture and the amount of Available Asset Sale Proceeds then
required to be otherwise applied in accordance with this covenant shall be reset
to zero.
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If the Issuer is required to make an Excess Proceeds Offer, the Issuer
shall mail, within 30 days following the Reinvestment Date, a notice to the
holders stating, among other things: (1) that such holders have the right to
require the Issuer to apply the Available Asset Sale Proceeds to purchase such
Exchange Debentures (and stating whether the Issuer has elected to offer to
repurchase other pari passu Indebtedness described in clause (iii) (b) of the
immediately preceding paragraph) at a purchase price in cash equal to 100% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
purchase date; (2) the purchase date, which shall be not earlier than 30 days
and not later than 60 days from the date such notice is mailed; (3) the
instructions, determined by the Issuer, that each holder must follow in order to
have such Exchange Debentures purchased; and (4) the calculations used in
determining the amount of Available Asset Sale Proceeds to be applied to the
purchase of such Exchange Debentures. If at any time the Issuer is required to
make an Excess Proceeds Offer, the Issuer is also required to make one or more
similar offers (each, an "Additional Excess Proceeds Offer") for any of its
securities or those of any of its Affiliates, the Issuer shall be entitled to
make any such Additional Excess Proceeds Offers simultaneously with such Excess
Proceeds Offer; provided, that, to the extent the Issuer is required to purchase
any such other securities pursuant to such Additional Excess Proceeds Offers,
Available Asset Sale Proceeds shall be reduced by an amount equal to the
aggregate purchase price of all such other securities purchased pursuant to such
Additional Excess Proceeds Offers.
In the event that the Issuer makes an Excess Proceeds Offer, the Issuer
shall comply with any applicable securities laws and regulations, including any
applicable requirements of Section 14(e) of, and Rule 14e-1 under, the Exchange
Act.
Limitation on Preferred Stock of Restricted Subsidiaries
The Issuer will not permit any of its Restricted Subsidiaries to issue any
Preferred Stock (other than to the Issuer or a Wholly-Owned Subsidiary), other
than Permitted Foreign Restricted Subsidiary Preferred Stock, or permit any
Person (other than the Issuer or a Wholly-Owned Subsidiary) to hold any such
Preferred Stock unless the Issuer or such Restricted Subsidiary would be
entitled to incur or assume Indebtedness under the covenant described under
"--Limitation on Additional Indebtedness" in the aggregate principal amount
equal to the aggregate liquidation value of the Preferred Stock to be issued or
so held.
Limitation on Capital Stock of Restricted Subsidiaries
The Issuer will not (i) sell or otherwise convey or dispose of any Capital
Stock of a Restricted Subsidiary other than to a Wholly-Owned Subsidiary, (ii)
permit any of its Restricted Subsidiaries to sell or otherwise convey or dispose
of any Capital Stock of a Restricted Subsidiary of the Issuer other than to the
Issuer or a Wholly-Owned Subsidiary or (iii) permit any of its Restricted
Subsidiaries to issue any Capital Stock, other than to the Issuer or a
Wholly-Owned Subsidiary of the Issuer. The foregoing restrictions shall not
apply to (a) an Asset Sale consisting of not less than 85% of the Capital Stock
of a Restricted Subsidiary owned by the Issuer made in compliance with
"--Limitation on Certain Asset Sales," (b) the issuance of Preferred Stock in
compliance with the covenant described under "--Limitation on Preferred Stock of
Restricted Subsidiaries," (c) the issuance of director's qualifying shares if
required by applicable law or (d) the issuance of Capital Stock of a Foreign
Restricted Subsidiary to third parties; provided, that, immediately after such
transaction such Foreign Restricted Subsidiary remains a Foreign Restricted
Subsidiary or (e) the pledge or hypothecation of, or creation of any security
interest on, any Capital Stock by the Issuer or any of its Restricted
Subsidiaries.
Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries
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 encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions to
the Issuer or any of its Restricted Subsidiaries (A) on its Capital Stock or (B)
with respect to any other interest or participation in, or measured by, its
profits, (ii) pay any Indebtedness owed to the Issuer or any of its Restricted
Subsidiaries, (iii) make loans or advances or capital contributions to the
Issuer or any of its Restricted Subsidiaries that is a stockholder of such
Person or (iv) transfer
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any of its Properties or assets to the Issuer or any of its Restricted
Subsidiaries that is a stockholder of such Person, except for such encumbrances
or restrictions existing under or by reason of:
(i) encumbrances or restrictions as in effect on the Issue Date;
(ii) any Credit Facility (existing on the Issue Date), the Exchange
Indenture, the Exchange Debentures, the Indenture, the Senior Notes, the
Guarantees and any Surety Arrangement (existing on the Issue Date) or any Surety
Arrangement arising after the Issue Date which, in the good faith judgment of
the Board of Directors of the Issuer, contains substantially the same or less
restrictive encumbrances or restrictions than those contained in any Surety
Arrangements existing on the Issue Date and any permitted amendment,
modification or supplement thereto and any permitted renewal, refinancing,
replacement or refunding thereof provided, that, in the good faith judgment of
the Board of Directors of the Issuer, such encumbrances or restrictions are in
the aggregate no more restrictive than those contained in the agreements
governing the Indebtedness being amended, modified, supplemented, extended,
refinanced, renewed, replaced, defeased or refunded;
(iii) applicable law;
(iv) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Issuer or any of its Restricted Subsidiaries or of any Person
that becomes a Restricted Subsidiary as in effect at the time of such
acquisition or such Person becoming a Restricted Subsidiary (except to the
extent such Indebtedness was incurred in connection with or in contemplation of
such acquisition of such Person becoming a Restricted Subsidiary), 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 of assets of the
Person (including any Subsidiary of the Person), so acquired;
(v) customary non-assignment provisions in leases, licenses or other
agreements entered into in the ordinary course of business and consistent with
past practices;
(vi) Refinancing Indebtedness; provided, that, in the good faith judgment
of the Board of Directors of the Issuer, such encumbrances or restrictions are
in the aggregate no more restrictive than those contained in the agreements
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded;
(vii) Indebtedness having restrictions and encumbrances no more
restrictive than those contained in the Exchange Indenture and the Exchange
Debentures or the Indenture, the Senior Notes and the Guarantees; provided, that
the Issuer or the Company is the primary obligor under such Indebtedness;
(viii) customary restrictions in security agreements or mortgages securing
Indebtedness of the Issuer or a Restricted Subsidiary to the extent such
restrictions restrict the transfer of the Property subject to such security
agreements and mortgages;
(ix) customary restrictions in stock or asset purchase agreements to the
extent such restrictions apply to the Person selling stock or assets (and/or
such Person's Subsidiaries) solely during the period prior to the closing under
such agreements; or
(x) any encumbrance or restriction pursuant to an agreement relating to an
acquisition of Property, so long as the encumbrances or restrictions in any such
agreement relate solely to the Property so acquired (and are not or were not
created in anticipation of or in connection with the acquisition thereof).
Nothing contained in this covenant shall prevent the Issuer or any
Restricted Subsidiary from (i) creating, incurring, assuming or suffering to
exist any Liens or (ii) restricting the sale or other disposition of property or
assets of the Issuer or any of its Restricted Subsidiaries that secure
Indebtedness of the Issuer or any of its Restricted Subsidiaries incurred in
accordance with the Exchange Indenture.
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Payments for Consent
Neither the Issuer nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Exchange Debentures for or as
an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Exchange Indenture or the Exchange Debentures unless such
consideration is offered to be paid or agreed to be paid to all holders of the
Exchange Debentures which so consent, waive or agree to amend in the time frame
set forth in solicitation documents relating to such consent, waiver or
agreement.
Change of Control Offer
Upon the occurrence of a Change of Control, the Issuer shall be obligated
to make an offer to purchase (the "Change of Control Offer") the outstanding
Exchange Debentures at a purchase price (the "Change of Control Purchase Price")
equal to 101% of the principal amount thereof plus any accrued and unpaid
interest thereon to the Change of Control Payment Date (as hereinafter defined)
in accordance with the procedures set forth in this covenant.
Within 30 days of the occurrence of a Change of Control, the Issuer shall
(i) cause a notice of the Change of Control Offer to be sent at least once to
the Dow Jones News Service or similar business news service in the United States
and (ii) send by first-class mail, postage prepaid, to the Debenture Trustee and
to each holder of the Exchange Debentures, at the address appearing in the
register maintained by the Registrar of the Exchange Debentures, a notice
stating:
(a) that the Change of Control Offer is being made pursuant to this
covenant and that all Exchange Debentures validly tendered will be
accepted for payment;
(b) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day not earlier than 30 days nor later than 60
days from the date such notice is mailed (the "Change of Control Payment
Date"));
(c) that any Exchange Debenture not validly tendered will continue
to accrue interest;
(d) that, unless the Issuer defaults in the payment of the Change of
Control Purchase Price, any Exchange Debentures accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
(e) that holders accepting the offer to have their Exchange
Debentures purchased pursuant to a Change of Control Offer will be
required to surrender the Exchange Debentures to the Paying Agent at the
address specified in the notice prior to the close of business on the
Business Day preceding the Change of Control Payment Date;
(f) that holders will be entitled to withdraw their acceptance if
the Paying Agent receives, not later than the close of business on the
third Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name
of the holder, the principal amount of the Exchange Debentures delivered
for purchase, and a statement that such holder is withdrawing his election
to have such Exchange Debentures purchased;
(g) that holders whose Exchange Debentures are being purchased only
in part will be issued new Exchange Debentures equal in principal amount
to the unpurchased portion of the Exchange Debentures surrendered,
provided, that each Exchange Debenture purchased and each such new
Exchange Debenture issued shall be in an original principal amount in
denominations of $1,000 and integral multiples thereof;
(h) any other procedures that a holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance; and
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(i) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Issuer shall, to the extent
lawful, (i) accept for payment Exchange Debentures or portions thereof validly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent money sufficient to pay the purchase price of all Exchange Debentures or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Debenture Trustee Exchange Debentures or portions thereof so accepted for
cancellation. The Paying Agent shall promptly mail to each holder of Exchange
Debentures so accepted payment in an amount equal to the purchase price for such
Exchange Debentures, and the Issuer shall execute and issue, and the Debenture
Trustee shall promptly authenticate and mail to such holder, a new Exchange
Debenture equal in principal amount to any unpurchased portion of the Exchange
Debentures surrendered; provided, that each such new Exchange Debenture shall be
issued in an original principal amount in denominations of $1,000 and integral
multiples thereof.
The Exchange Indenture will require that if any Credit Facility is in
effect or if the Senior Notes are outstanding or if any other Indebtedness of
the Issuer or its Restricted Subsidiaries that requires a payment upon a Change
of Control is outstanding, or any amounts are owing thereunder or in respect
thereof, at the time of the occurrence of a Change of Control, prior to the
mailing of the notice to holders described in the second preceding paragraph,
but in any event within 30 days following any Change of Control, the Issuer
shall be required to (i) cause the borrowers thereunder to repay in full all
obligations under or in respect of such Credit Facility or such other
Indebtedness or offer to repay in full all obligations under or in respect of
such Credit Facility or such other Indebtedness and repay within such 30-day
period the obligations under or in respect of such Credit Facility or such other
Indebtedness of each lender who has then irrevocably accepted such offer and
cause the Company to repay within such 30-day period in full all obligations in
respect of the Senior Notes or offer to repay in full all obligations in respect
of the Senior Notes of each holder who has then irrevocably accepted such offer
or (ii) cause such borrowers and the Company to obtain the requisite consent
under such Credit Facility or such other Indebtedness, the holders of such other
Indebtedness and from the holders of the Senior Notes, respectively, to permit
the repurchase of the Exchange Debentures as described above. The Issuer must
first comply with the covenant described in the preceding sentence before it
shall be required to purchase Exchange Debentures in the event of a Change of
Control; provided, that the Issuer's failure to comply with the covenant
described in the preceding sentence constitutes an Event of Default described in
clause (iii) under "Events of Default" below. There can be no assurance that the
Issuer will have adequate resources to refinance or fund the repurchase of the
Exchange Debentures in the event of a Change of Control. The failure of the
Issuer, following a Change of Control, to make a Change of Control Offer or to
pay when due the Change of Control Purchase Price of Exchange Debentures
tendered in conformity with any such Change of Control Offer will give the
Debenture Trustee and the holders of the Exchange Debentures the rights
described under "--Events of Default." As a result of the foregoing, a holder of
the Exchange Debentures may not be able to compel the Issuer to purchase the
Exchange Debentures unless the Issuer, or such borrower or the Company, is able
at the time to refinance all of the obligations under or in respect of such
Credit Facility, such Senior Notes or other such Indebtedness or obtain
requisite consent thereunder.
The Exchange Indenture will provide that, if the Issuer has issued any
outstanding (i) Subordinated Indebtedness or (ii) Capital Stock, and the Issuer
is required to make a Change of Control Offer or to make a distribution with
respect to such Subordinated Indebtedness or Capital Stock in the event of a
Change of Control, the Issuer shall not consummate any such offer or
distribution with respect to such Subordinated Indebtedness or Capital Stock
until such time as the Issuer shall have paid the Change of Control Purchase
Price in full to the holders of Exchange Debentures that have validly accepted
the Issuer's Change of Control Offer and shall otherwise have consummated the
Change of Control Offer made to holders of the Exchange Debentures.
In the event that a Change of Control occurs and the holders of Exchange
Debentures exercise their right to require the Issuer to purchase Exchange
Debentures, if such purchase constitutes a "tender offer" for purposes of Rule
14e-1 under the Exchange Act at that time, the Issuer will comply with the
requirements of Rule l4e-1 as then in effect with respect to such repurchase.
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The Issuer will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes such Change of Control Offer
contemporaneously with or upon a Change of Control in the manner, at the times
and otherwise in compliance with the requirements of the Exchange Indenture and
purchases all Exchange Debentures validly tendered and not withdrawn under such
Change of Control Offer.
Merger, Consolidation or Sale of Assets
The Issuer will not consolidate or merge with or into any Person, or sell,
assign, lease, convey or otherwise dispose of (or cause or permit any of its
Restricted Subsidiaries to sell, assign, lease, convey or otherwise dispose of
(however effected, including, without limitation, by merger or consolidation))
all or substantially all of the Issuer's assets (determined on a consolidated
basis for the Issuer and its Restricted Subsidiaries), whether as an entirety or
substantially an entirety in one transaction or a series of related
transactions, including by way of liquidation or dissolution, to any Person
unless, in each such case: (i)(x) the Issuer shall be the continuing Person, or
(y) the Person (if other than the Issuer) formed by such consolidation or into
which the Issuer or the Restricted Subsidiary, as the case may be, is merged or
to which the Properties and assets of the Issuer or any Restricted Subsidiary,
as the case may be, are transferred (such Person, the "Surviving Entity") (1)
shall be a corporation organized and existing under the laws of the United
States or any State thereof or the District of Columbia and (2) shall expressly
assume, by a supplemental indenture, executed and delivered to the Debenture
Trustee, in form satisfactory to the Debenture Trustee, all of the obligations
of the Issuer under the Exchange Debentures, the Exchange Indenture and the
Exchange Offer Registration Rights Agreement, as the case may be (upon which
assumption the Issuer shall be discharged of any and all obligations on the
Exchange Debentures, the Exchange Indenture and the Exchange Offer Registration
Rights Agreement), and the obligations under the Exchange Indenture shall remain
in full force and effect; (ii) immediately before and immediately after giving
effect to such transaction (including, without limitation, giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in
connection with or in respect of the transaction), no Default or Event of
Default shall have occurred and be continuing; and (iii) immediately after
giving effect to such transaction on a pro forma basis (including, without
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions) the
Issuer (or the Surviving Entity if the Issuer is not continuing) (A) shall have
a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of
the Issuer immediately prior to such transaction and (B) could incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) under the
covenant set forth under "--Certain Covenants--Limitation on Additional
Indebtedness" above; provided, that a Restricted Subsidiary may merge with and
into the Issuer without complying with this clause (iii)(B).
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Issuer shall deliver, or cause to be
delivered, to the Debenture Trustee, in form and substance reasonably
satisfactory to the Debenture Trustee, an Officers' Certificate and an opinion
of counsel, each stating that such consolidation, merger or transfer and the
supplemental indenture in respect thereto comply with this provision and that
all conditions precedent herein provided for relating to such transaction or
transactions have been complied with.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the Properties or assets of one or more Subsidiaries of the
Issuer, the Capital Stock of which constitutes all or substantially all of the
properties and assets of the Issuer, shall be deemed to be the transfer of all
or substantially all of the assets of the Issuer. In addition, the phrase "all
or substantially all" of the assets of the Issuer will likely be interpreted
under applicable law and will be dependent upon particular facts and
circumstances. As a result, there may be a degree of uncertainty in ascertaining
whether a sale or transfer of "all or substantially all" of the assets of the
Issuer or any Restricted Subsidiary has occurred.
For all purposes of the Exchange Indenture and the Exchange Debentures,
Subsidiaries of any Surviving Entity will, upon such transaction or series of
transactions, become Restricted Subsidiaries or Unrestricted Subsidiaries, to
the extent and as provided pursuant to the Exchange Indenture.
Upon any transaction or series of transactions that are of the type
described in, and are effected in accordance with, conditions described in the
immediately preceding paragraphs, the Surviving Entity shall succeed to, and be
substituted for, and may exercise every right and power of, the Issuer under the
Exchange Indenture with the same
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effect as if such Surviving Entity had been named as the Issuer therein; and
when a Surviving Entity duly assumes all of the obligations and covenants of the
Issuer pursuant to the Exchange Indenture and the Exchange Debentures, except in
the case of a lease, the predecessor Person shall be relieved of all such
obligations.
Events of Default
The following events are defined in the Exchange Indenture as "Events of
Default":
(i) default in payment of any principal of, or premium, if any, on
the Exchange Debentures when due (whether or not prohibited by the
provisions of the Exchange Indenture described under "Subordination");
(ii) default in the payment of any interest on any Exchange
Debentures when due, which default continues for 30 days or more (whether
or not prohibited by the provisions of the Exchange Indenture described
under "Subordination");
(iii) default by the Issuer in the observance or performance of any
other covenant in the Exchange Debentures or the Exchange Indenture for 60
days after written notice from the Debenture Trustee or the holders of not
less than 25% in aggregate principal amount of the Exchange Debentures
then outstanding (except in the case of a default with respect to the
"--Certain Covenants--Limitation on Certain Asset Sales," "--Change of
Control Offer" or "--Merger, Consolidation or Sale of Assets" covenants,
which shall constitute an Event of Default with such notice requirement
but without such passage of time requirement) (whether or not prohibited
by the provisions of the Exchange Indenture described under
"Subordination");
(iv) failure to pay when due (within any applicable grace period)
principal, interest or premium with respect to any Indebtedness of the
Issuer or any Restricted Subsidiary thereof in an aggregate principal
amount of $5 million of more, or the acceleration of any such Indebtedness
in an aggregate principal amount of $5 million or more which default shall
not be cured or waived;
(v) any final judgment or judgments which can no longer be appealed
for the payment of money in excess of $5 million shall be rendered against
the Issuer or any Restricted Subsidiary thereof (in excess of amounts
covered by insurance and as to which the insurance company has
acknowledged coverage) by a court of competent jurisdiction, and shall not
be bonded (such that a judgment creditor cannot proceed against assets of
the Issuer or any Subsidiary), vacated, discharged or satisfied for any
period of 60 consecutive days during which a stay of enforcement shall not
be in effect; or
(vi) certain events involving bankruptcy, insolvency or
reorganization of the Issuer or any Significant Subsidiary thereof.
For purposes of clause (vi) above, any Restricted Subsidiary which, when
aggregated with all other Restricted Subsidiaries that are not otherwise
Significant Subsidiaries and as to which any event described in clause (vi)
above has occurred, would constitute a Significant Subsidiary.
The Exchange Indenture provides that the Debenture Trustee may withhold
notice to the holders of the Exchange Debentures of any default (except in
payment of principal or premium, if any, or interest on the Exchange Debentures
or a default in the observance or performance of the "Merger, Consolidation or
Sale of Assets" covenant) if the Debenture Trustee considers it to be in the
best interest of the holders of the Exchange Debentures to do so.
The Exchange Indenture provides that if an Event of Default (other than an
Event of Default resulting from certain events of bankruptcy, insolvency or
reorganization) shall have occurred and be continuing, then the Debenture
Trustee or the holders of not less than 25% in aggregate principal amount of the
Exchange Debentures then outstanding may declare to be immediately due and
payable, the entire principal amount of all the Exchange Debentures then
outstanding plus accrued interest to the date of acceleration, and such amounts
shall immediately become due and payable; provided, that after such acceleration
but before a judgment or decree based on
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acceleration is obtained by the Debenture Trustee, the holders of a majority in
aggregate principal amount of outstanding Exchange Debentures may, under certain
circumstances, rescind and annul such acceleration if (i) all Events of Default,
other than nonpayment of principal, premium or interest, that has become due
solely because of acceleration, have been cured or waived as provided in the
Exchange Indenture, (ii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has been paid,
(iii) if the Issuer has paid the Debenture Trustee its reasonable compensation
and reimbursed the Debenture Trustee for its expenses, disbursements and
advances and (iv) in the event of the cure or waiver of an Event of Default of
the type described in clause (vi) of the first paragraph above, the Debenture
Trustee shall have received an Officers' Certificate and an opinion of counsel
that such Event of Default has been cured or waived. In case an Event of Default
resulting from certain events of bankruptcy, insolvency or reorganization shall
occur, the principal, premium and interest amount with respect to all of the
Exchange Debentures shall be due and payable immediately without any declaration
or other act on the part of the Debenture Trustee or the holders of the Exchange
Debentures. If, after the delivery of any such notice of acceleration with
respect to an Event of Default under clause (iv) of the first paragraph above,
any such payment default or acceleration relating to such other Indebtedness
shall have been cured or rescinded or such Indebtedness shall have been
discharged within 30 days of such default or acceleration in respect of such
Indebtedness, then such Event of Default specified in clause (iv) shall be
deemed cured for all purposes of the Exchange Indenture.
The holders of a majority in principal amount of the Exchange Debentures
then outstanding shall have the right to waive any existing Default or Event of
Default or compliance with any provision of the Exchange Indenture or the
Exchange Debentures and to direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, subject to certain
limitations specified in the Exchange Indenture and under the Trust Indenture
Act.
No holder of any Exchange Debenture will have any right to institute any
proceeding with respect to the Exchange Indenture or for any remedy thereunder,
unless such holder shall have previously given to the Debenture Trustee written
notice of a continuing Event of Default and unless also the holders of at least
25% in aggregate principal amount of the outstanding Exchange Debentures shall
have made written request and offered reasonable indemnity to the Debenture
Trustee to institute such proceeding as a trustee, and unless the Debenture
Trustee shall not have received from the holders of a majority in aggregate
principal amount of the outstanding Exchange Debentures a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. Notwithstanding the foregoing, such limitations do not apply to a suit
instituted on such Exchange Debenture on or after the respective due dates
expressed in such Exchange Debenture.
Satisfaction and Discharge of the Exchange Indenture; Defeasance
The Issuer may terminate its obligations under the Exchange Indenture,
when (1) either: (A) all Exchange Debentures theretofore authenticated and
delivered have been delivered to the Debenture Trustee for cancellation, or (B)
all such Exchange Debentures not theretofore delivered to the Debenture Trustee
for cancellation (i) have become due and payable, or (ii) will become due and
payable within 60 days or are to be called for redemption within 60 days (a
"Discharge") under irrevocable arrangements satisfactory to the Debenture
Trustee for the giving of notice of redemption by the Debenture Trustee in the
name, and at the expense, of the Issuer, and the Issuer has irrevocably
deposited or caused to be deposited with the Debenture Trustee funds in an
amount sufficient to pay and discharge the entire indebtedness on the Exchange
Debentures, not theretofore delivered to the Debenture Trustee for cancellation,
for principal of, premium, if any, on and interest to the date of deposit or
stated maturity or date of redemption, whichever is later; (2) the Issuer has
paid or caused to be paid all other sums then due and payable hereunder by the
Issuer; and (3) the Issuer has delivered to the Debenture Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent under the Exchange Indenture relating to the satisfaction and
discharge of the Exchange Indenture have been complied with.
The Issuer may elect, at its option, to have its obligations discharged
with respect to the outstanding Exchange Debentures ("defeasance"). Such
defeasance means that the Issuer will be deemed to have paid and discharged the
entire indebtedness represented by the outstanding Exchange Debentures and its
obligations under the Exchange Indenture, except for (1) the rights of holders
of such Exchange Debentures to receive payments in respect of the
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principal of and any premium and interest on such Exchange Debentures when
payments are due, (2) the Issuer's obligations with respect to such Exchange
Debentures concerning issuing temporary Exchange Debentures, registration of
Exchange Debentures, mutilated, destroyed, lost or stolen Exchange Debentures
and the maintenance of an office or agency for payment and money for security
payments held in trust, (3) the rights, powers, trusts, duties and immunities of
the Debenture Trustee, (4) the Issuer's right of optional redemption, and (5)
the defeasance provisions of the Exchange Indenture. In addition, the Issuer may
elect, at its option, to have its obligations released with respect to certain
covenants, including without limitation their obligation to make Excess Proceeds
Offers in connection with Available Asset Sale Proceeds and Change of Control
Offers in connection with any Change of Control, in the Exchange Indenture
("covenant defeasance") and any omission to comply with such obligation shall
not constitute a Default or an Event of Default with respect to the Exchange
Debentures. In the event covenant defeasance occurs, certain events (not
including non-payment, bankruptcy and insolvency events) described under "Events
of Default" will no longer constitute an Event of Default with respect to the
Exchange Debentures.
In order to exercise either defeasance or covenant defeasance with respect
to outstanding Exchange Debentures: (1) the Issuer must irrevocably have
deposited or caused to be deposited with the Debenture Trustee (or other
qualifying trustee) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to the benefits of the holders of such Exchange Debentures: (A) money in an
amount, or (B) U.S. government obligations which through the scheduled payment
of principal and interest in respect thereof in accordance with their terms will
provide, not later than the due date of any payment, money in an amount, or (C)
a combination thereof, in each case sufficient without reinvestment, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Debenture Trustee,
to pay and discharge, and which shall be applied by the Debenture Trustee (or
other qualifying trustee) to pay and discharge the entire indebtedness in
respect of the principal of, and premium, if any, and interest on, such Exchange
Debentures on the stated maturity thereof or (if the Issuer has made irrevocable
arrangements satisfactory to the Debenture Trustee for the giving of notice of
redemption by the Debenture Trustee in the name and at the expense of the
Issuer) the redemption date thereof, as the case may be, in accordance with the
terms of the Exchange Indenture and such Exchange Debentures; (2) in the case of
defeasance, the Issuer shall have delivered to the Debenture Trustee an opinion
of counsel stating that (A) the Issuer has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date of the
Exchange Indenture, there has been a change in the applicable federal income tax
law, in either case (A) or (B) to the effect that, and based thereon such
opinion shall confirm that, the holders of such Exchange Debentures will not
recognize gain or loss for federal income tax purposes as a result of the
deposit, defeasance and discharge to be effected with respect to such Exchange
Debentures and will be subject to federal income tax on the same amount, in the
same manner and at the same times as would be the case if such deposit,
defeasance and discharge were not to occur; (3) in the case of covenant
defeasance, the Issuer shall have delivered to the Debenture Trustee an opinion
of counsel to the effect that the holders of such outstanding Exchange
Debentures will not recognize gain or loss for federal income tax purposes as a
result of the deposit and covenant defeasance to be effected with respect to
such Exchange Debentures and will be subject to federal income tax on the same
amount, in the same manner and at the same times as would be the case if such
deposit and covenant defeasance were not to occur; (4) no Default or Event of
Default with respect to the outstanding Exchange Debentures shall have occurred
and be continuing at the time of such deposit after giving effect thereto or, in
the case of defeasance, either: (A) the Issuer shall have delivered to the
Debenture Trustee an opinion of counsel to the effect that, based upon existing
precedents, if the matter were properly briefed, a court should hold that the
deposit of moneys and/or U.S. government obligations as provided in clause (1)
would not constitute a preference voidable under Section 547 or 548 of the
federal bankruptcy laws; or (B) no Default or Event of Default relating to
bankruptcy or insolvency shall have occurred and be continuing at any time on or
prior to the 91st day after the date of such deposit (it being understood that
this condition shall not be deemed satisfied until after such 91st day); (5)
such defeasance or covenant defeasance shall not cause the Debenture Trustee to
have a conflicting interest within the meaning of the Trust Indenture Act
(assuming all Exchange Debentures are in default within the meaning of the Trust
Indenture Act); (6) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any other agreement or
instrument to which the Issuer is a party or by which it is bound, (7) such
defeasance or covenant defeasance shall not result in the trust arising from
such deposit constituting an investment company within the meaning of the
Investment Company Act of 1940, as amended, unless such trust shall be
registered under such Act or exempt from registration thereunder; and (8) the
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Issuer shall have delivered to the Debenture Trustee an Officers' Certificate
and an opinion of counsel, each stating that all conditions precedent with
respect to such defeasance or covenant defeasance have been complied with.
In the event of a defeasance or a Discharge, a holder whose taxable year
straddles the deposit of funds and the distribution in redemption to such holder
would be subject to tax on any gain (whether characterized as capital gain or
market discount) in the year of deposit rather than in the year of receipt. In
connection with a Discharge, in the event the Issuer becomes insolvent within
the applicable preference period after the date of deposit, monies held for the
payment of the Exchange Debentures may be part of the bankruptcy estate of the
Issuer, disbursement of such monies may be subject to the automatic stay of the
bankruptcy code and monies disbursed to holders of the Exchange Debentures may
be subject to disgorgement in favor of the estate of the Issuer. Similar results
may apply upon the insolvency of the Issuer during the applicable preference
period following the deposit of monies in connection with covenant defeasance.
Amendment, Supplement and Waiver
Without the consent of any holders of the Exchange Debentures, the Issuer
and the Debenture Trustee, at any time and from time to time, may enter into one
or more indentures supplemental to the Exchange Indenture for any of the
following purposes: (1) to evidence the succession of another Person to the
Issuer and the assumption by any such successor of the covenants of the Issuer
in the Exchange Indenture and in the Exchange Debentures; or (2) to add to the
covenants of the Issuer for the benefit of the holders of the Exchange
Debentures, or to surrender any right or power herein conferred upon the Issuer;
or (3) to add additional Events of Default; or (4) to provide for uncertificated
Exchange Debentures in addition to or in place of certificated Exchange
Debentures; or (5) to evidence and provide for the acceptance of appointment
under the Exchange Indenture by a successor Debenture Trustee; or (6) to secure
the Exchange Debentures; or (7) to cure any ambiguity, to correct or supplement
any provision in the Exchange Indenture which may be defective or inconsistent
with any other provision in the Exchange Indenture, or to make any other
provisions with respect to matters or questions arising under the Exchange
Indenture, provided, that such actions pursuant to this clause shall not
adversely affect the interests of the holders of the Exchange Debentures in any
material respect; or (8) to comply with any requirements of the Commission in
order to effect and maintain the qualification of the Exchange Indenture under
the Trust Indenture Act.
With the consent of the holders of not less than a majority in aggregate
principal amount of the outstanding Exchange Debentures, the Issuer and the
Debenture Trustee may enter into an indenture or indentures supplemental to the
Exchange Indenture for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the Exchange Indenture or of
modifying, in any manner the rights of the holders of the Exchange Debentures
under the Exchange Indenture including the definitions therein; provided, that
no such supplemental indenture shall, without the consent of the holder of each
outstanding Exchange Debenture affected thereby, (1) change the stated maturity
of any Exchange Debenture or of any installment of interest on any Exchange
Debenture, or reduce the amount payable in respect of the principal thereof or
the rate of interest thereon or any premium payable thereon, or reduce the
amount that would be due and payable on acceleration of the maturity thereof, or
change the place of payment where, or the coin or currency in which, any
Exchange Debenture or any premium or interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment on or after the
stated maturity thereof, or (2) reduce the percentage in aggregate principal
amount of the outstanding Exchange Debentures, the consent of whose holders is
required for any such supplemental indenture, or the consent of whose holders is
required for any waiver (of compliance with certain provisions of the Exchange
Indenture or certain defaults thereunder and their consequences) provided for in
the Exchange Indenture, or (3) modify in any material respect the obligations of
the Issuer to make Change of Control Offers upon a Change of Control or Excess
Proceeds Offers from the Available Asset Sale Proceeds, or (4) modify or change
any provision of the Exchange Indenture affecting the contractual ranking in
right of payment of the Exchange Debentures in a manner adverse to the holders
of the Exchange Debentures, or (5) modify any of the provisions of this
paragraph or provisions relating to waiver of defaults or certain covenants,
except to increase any such percentage required for such actions or to provide
that certain other provisions of the Exchange Indenture cannot be modified or
waived without the consent of the holder of each outstanding Exchange Debenture
affected thereby.
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The holders of not less than a majority in aggregate principal amount of
the outstanding Exchange Debentures may on behalf of the holders of all the
Exchange Debentures waive any past default under the Exchange Indenture and its
consequences, except a default (1) in any payment in respect of the principal of
(or premium, if any, on) or interest on any Exchange Debentures (including any
Exchange Debenture which is required to have been purchased pursuant to a Change
of Control Offer or an Excess Proceeds Offer which has been made by the Issuer),
or (2) in respect of a covenant or provision hereof which under the Exchange
Indenture cannot be modified or amended without the consent of the holder of
each outstanding Exchange Debenture affected.
Reports to Holders
The Exchange Indenture provides that whether or not required by the rules
and regulations of the Commission, so long as any Exchange Debentures are
outstanding, the Issuer shall furnish to the Debenture Trustee and to the
holders of the Exchange Debentures within 10 days after it is or would have been
required to file them with the Commission, (i) all annual and quarterly
financial information that would be required to be contained in a filing with
the Commission on Forms 10-K and 10-Q (without exhibits) if the Issuer were
required to file such forms, including a section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Issuer's
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K (without exhibits) if the
Issuer were required to file such reports. In addition, whether or not required
by the rules and regulations of the Commission, the Issuer will file a copy of
all such information and reports with the Commission for public availability
(unless the Commission will not accept such a filing). In addition, the Issuer
shall furnish to the Debenture Trustee, the holders of the Exchange Debentures
and to securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144(d)(4) under the
Securities Act and the exhibits omitted from the information furnished pursuant
to the preceding sentence, for so long as the Exchange Debentures are not freely
transferable under the Securities Act.
Compliance Certificate
The Issuer will deliver to the Debenture Trustee on or before 90 days
after the end of the Issuer's fiscal year and on or before 45 days after the end
of each of the first, second and third fiscal quarters in each year an Officers'
Certificate stating whether or not the signers know of any Default or Event of
Default that has occurred. If they do, the certificate will describe the Default
or Event of Default, its status and the intended method of cure, if any.
The Debenture Trustee
The Debenture Trustee under the Exchange Indenture will be the Registrar
and Paying Agent with regard to the Exchange Debentures. The Exchange Indenture
provides that, except during the continuance of an Event of Default, the
Debenture Trustee will perform only such duties as are specifically set forth in
the Exchange Indenture. During the existence of an Event of Default, the
Debenture Trustee will exercise such rights and powers vested in it under the
Exchange Indenture and use the same degree of care and skill in its exercise as
a prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
Transfer and Exchange
Holders of the Exchange Debentures may transfer or exchange Exchange
Debentures in accordance with the Exchange Indenture. The Registrar under the
Exchange Indenture may require a holder, among other things, to furnish
appropriate endorsements and transfer documents, and to pay any taxes and fees
required by law or permitted by the Exchange Indenture. The Registrar is not
required to transfer or exchange any Exchange Debenture selected for redemption.
Also, the Registrar is not required to transfer or exchange any Exchange
Debenture for a period of 15 days before selection of the Exchange Debentures to
be redeemed.
The registered holder of an Exchange Debenture may be treated as the owner
of it for all purposes.
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Governing Law
The Exchange Indenture provides that the Exchange Indenture and the
Exchange Debentures will be governed by and construed in accordance with the
internal laws of the State of New York, without giving effect to the principles
of conflicts of laws to the extent the application of the laws of another
jurisdiction would be required thereby.
Certain Definitions
Set forth below is a summary of certain of the defined terms used in the
Restated Certificate and the Exchange Indenture. Reference is made to the
Restated Certificate and the Exchange Indenture for the full definition of all
such terms as well as any other capitalized terms used herein for which no
definition is provided.
"Acquired Indebtedness" means (a) Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person and (b) any Seller Note.
"Affiliate" of any specified Person means any other Person (including,
without limitation, such Person's issue, siblings and spouse) that directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, such specified Person. For the 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, means 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. For purposes of the Exchange Indenture and the Restated Certificate,
the term "Affiliate," as it relates to the Issuer, shall (a) include HarnCo for
so long as HarnCo is entitled to designate at least one member of the Board of
Directors of the Issuer or any successor to the Issuer and (b) not include CIBC
Oppenheimer Corp. or Indosuez Capital or their respective Affiliates.
"Asset Acquisition" means (a) an Investment by the Issuer or any
Restricted Subsidiary of the Issuer in any other Person pursuant to which such
Person becomes a Restricted Subsidiary of the Issuer, or is merged with or into
the Issuer or any Restricted Subsidiary of the Issuer or (b) the acquisition by
the Issuer or any Restricted Subsidiary of the Issuer of the assets of any
Person (other than a Restricted Subsidiary of the Issuer) which constitute all
or substantially all of the assets of such Person or comprise any division or
line of business of such Person or any other properties or assets of such Person
other than in the ordinary course of business.
"Asset Sale" means the sale, transfer or other disposition (including,
without limitation, by merger or consolidation) (other than to the Issuer or any
of its Restricted Subsidiaries) in any single transaction or series of related
transactions of (a) any Capital Stock of or other equity interest in any
Restricted Subsidiary of the Issuer (other than directors' qualifying shares to
the extent required by applicable law), (b) all or substantially all of the
assets of the Issuer or of any Restricted Subsidiary thereof, (c) real property
or (d) all or substantially all of the assets, or any Property, or part thereof,
owned by the Issuer or any Restricted Subsidiary thereof, or a division, line of
business or comparable business segment of the Issuer or any Restricted
Subsidiary thereof; provided, that Asset Sales shall not include (i) sales,
leases, conveyances, transfers or other dispositions to the Issuer or to a
Restricted Subsidiary or to any other Person if after giving effect to such
sale, lease, conveyance, transfer or other disposition such other Person becomes
a Restricted Subsidiary, (ii) the sale, lease, conveyance, disposition or other
transfer of all or substantially all of the assets of the Issuer and its
Restricted Subsidiaries taken as a whole as permitted under "--Merger,
Consolidation or Sale of Assets," (iii) any transfer, conveyance, sale, lease or
other disposition of property or assets, the gross proceeds of which (exclusive
of indemnities) do not exceed $500,000, (iv) any sales, leases, conveyances,
transfers or other dispositions of Property or equipment that has become worn
out, obsolete or damaged or otherwise unsuitable for use in connection with the
business of the Issuer or any Restricted Subsidiary, as the case may be, (v) the
incurrence of any Liens, (vi) the making of any Restricted Payment permitted by
the covenant "--Certain Covenants--Limitation on Restricted Payments," (vii)
transfers of cash and sales of Cash Equivalents and (viii) sales, leases,
conveyances, transfers or other dispositions of Property or equipment in the
ordinary course of business.
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"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash or
Cash Equivalents received by the Issuer or any Restricted Subsidiary from such
Asset Sale, after (a) provision for all income or other taxes measured by or
resulting from such Asset Sale, (b) payment of all brokerage commissions,
underwriting and other fees and expenses related to such Asset Sale, (c)
provision for minority interest holders in any Restricted Subsidiary as a result
of such Asset Sale and (d) deduction of appropriate amounts to be provided by
the Issuer or a Restricted Subsidiary as a reserve, in accordance with GAAP,
against any liabilities associated with the assets sold or disposed of in such
Asset Sale and retained by the Issuer or a Restricted Subsidiary after such
Asset Sale, including, without limitation, pension and other post employment
benefit liabilities and liabilities related to environmental matters or against
any indemnification obligations associated with the assets sold or disposed of
in such Asset Sale, provided, that at such time as such amounts are no longer
reserved or such reserve is no longer necessary, any remaining amounts shall
become Asset Sale Proceeds to be allocated in accordance with the covenant
"--Certain Covenants--Limitation on Certain Asset Sales," and (ii) promissory
notes and other noncash consideration received by the Issuer or any Restricted
Subsidiary from such Asset Sale or other disposition upon the liquidation or
conversion of such notes or noncash consideration into cash.
"Available Asset Sale Proceeds" means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sales that have not been applied
in accordance with clauses (iii) (a), and which has not yet been the basis for
an Excess Proceeds Offer in accordance with clause (iii)(b), of the first
paragraph of "--Certain Covenants--Limitation on Certain Asset Sales."
"Average Life" means, as of any date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (i) the sum of the products of
(x) the number of years from the date of determination to the dates of each
successive scheduled principal payment (including any sinking fund or mandatory
redemption payment requirements) of such Indebtedness multiplied by (y) the
amount of such principal payment by (ii) the sum of all such principal payments.
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents (however designated and whether or not voting) of capital
stock, partnership interests or any other participation, right or other interest
in the nature of an equity interest in such Person or any option, warrant or
other security convertible into any of the foregoing.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Cash Equivalents" means any of the following Investments: (i) marketable
direct obligations issued by, or unconditionally guaranteed by, the United
States Government or issued by any agency thereof and backed by the full faith
and credit of the United States maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any foreign country recognized by the United
States or any political subdivision of any such state or foreign country, as the
case may be, or any public instrumentality thereof (including any taxing
authority) maturing within one year from the date of acquisition thereof and, at
the time of acquisition, having one of the two highest ratings obtainable from
either Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service,
Inc. ("Moody's"); (iii) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit,
time deposit accounts, operating accounts or bankers' acceptances maturing
within one year from the date of acquisition thereof issued or guaranteed by any
commercial banking institution organized under the laws of any jurisdiction
recognized by the United States of America and in which the Issuer or its
Subsidiaries actively conduct business, having at the date of acquisition
thereof combined capital and surplus of not less than U.S. $250,000,000 or the
foreign currency equivalent thereof; (v) repurchase obligations with a term of
not more than 30 days for underlying securities of the types described in clause
(i) above entered into with any bank meeting the qualifications specified in
clause (iv) above; (vi) investments in money market funds which invest
substantially all their assets in securities of the types described in clauses
(i) through (v) above; and (vii) foreign bank deposits and cash equivalents in
jurisdictions where the Issuer
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or its Subsidiaries are then actively conducting business, provided, that (a)
all such deposits are required to be made in the ordinary course of business,
(b) such deposits do not exceed $1,000,000 in the aggregate, and (c) the funds
so deposited do not remain in such bank for more than 10 days.
A "Change of Control" of the Issuer will be deemed to have occurred at
such time as (i) any Person (including a Person's Affiliates) or any Persons
acting together that would constitute a group (for purposes of Section 13(d) of
the Exchange Act, or any successor provision thereto) (a "Group"), other than a
Permitted Holder, becomes the beneficial owner (as defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of (a) 50%
or more of the total Voting Stock of the Issuer or (b) 50% of all classes of
Common Stock (whether voting or non-voting), taken as a whole, of the Issuer,
(iii) any Person (including a Person's Affiliates) or Group, other than a
Permitted Holder, becomes the beneficial owner of more than 30% of the total
Voting Stock of the Issuer, and the Permitted Holders beneficially own, in the
aggregate, a lesser percentage of the total Voting Stock of the Issuer than such
other Person or Group and the Permitted Holders do not have the right or ability
by voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors of the Issuer, (iv) there shall be
consummated any consolidation or merger of the Issuer in which the Issuer is not
the continuing or surviving corporation or pursuant to which the Common Stock of
the Issuer would be converted into cash, securities or other Property, other
than a merger or consolidation of the Issuer in which the holders of the Common
Stock of the Issuer outstanding immediately prior to the consolidation or merger
hold, directly or indirectly, at least a majority of the Common Stock of the
surviving corporation immediately after such consolidation or merger, or (v)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors of the Issuer (together with any
new directors whose election by such Board of Directors or whose nomination for
election by the shareholders of the Issuer has been approved by 66 2/3% of the
directors then still in office who either were directors at the beginning of
such period or whose election or recommendation for election was previously so
approved) cease to constitute a majority of the Board of Directors of the
Issuer.
"Chartwell" means Chartwell Investments Inc. and its Affiliates.
"Commission" means the Securities and Exchange Commission.
"Common Stock" of any Person means all Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding-up
of such Person, to any other class of Capital Stock of such Person.
"Consolidated Interest Coverage Ratio" of any Person means the ratio of
(i) EBITDA of such Person for the four most recent consecutive fiscal quarters
for which financial statements are available or, if the Issuer is not in
compliance with its obligations under "--Reports to Holders" on the date of
determination, the four most recent consecutive quarters ending on or prior to
the date of determination (in either such case, the "Four Quarter Period") to
(ii) Consolidated Interest Expense of such Person for such Four Quarter Period.
In addition to and without limitation of the foregoing, for purposes of this
definition, "EBITDA" and "Consolidated Interest Expense" shall be calculated
after giving effect on a pro forma basis to (i)(a) the incurrence of any
Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and (b) any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), occurring on or after the first day of the
Four Quarter Period and on or prior to the date of determination, in each case
set forth in clauses (i)(a) and (b), as if such incurrence or repayment, as the
case may be (and the application of the proceeds thereof), occurred on the first
day of the Four Quarter Period (except that Indebtedness under any revolving
credit facility shall be deemed to be the average daily balance of such
Indebtedness during such Four Quarter Period) and (ii) any Asset Sales or Asset
Acquisitions (including (x) any Person who becomes a Restricted Subsidiary as a
result of any such Asset Acquisition and including any Asset Sale or Asset
Acquisition during such Four Quarter Period by any such Person determined as if
such Person had been a Restricted Subsidiary at the time of such transaction;
provided, that all Indebtedness of such Person and any such Restricted
Subsidiaries shall be deemed to have been incurred on the first day of the Four
Quarter Period and (y) the increase or decrease, as the case may be, in EBITDA
directly attributable to such Asset Sale or Asset Acquisition, as the case may
be) occurring on or after the first day of the Four Quarter Period and on or
prior to the date of determination, as if such Asset Sale
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or Asset Acquisition, as the case may be, (including the incurrence, assumption
or liability for any such Acquired Indebtedness) occurred on the first day of
the Four Quarter Period. For purposes of this definition, whenever pro forma
effect is to be given to an Asset Acquisition, the amount of income or earnings
relating thereto and the amount of Consolidated Interest Expense associated with
any Indebtedness incurred in connection therewith shall be determined in good
faith by a responsible financial or accounting officer of the Issuer.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, without duplication, (i) the aggregate amount of interest charges
(excluding fees and expenses incurred in connection with the Transactions),
whether expensed or capitalized, incurred or accrued by such Person and its
Restricted Subsidiaries, determined on a consolidated basis in conformity with
GAAP for such period, plus (ii) to the extent not included in clause (i) above,
an amount equal to the sum of: (A) imputed interest included in Capitalized
Lease Obligations, (B) all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing, (C)
the net costs associated with Interest Rate Agreements, Currency Agreements and
other hedging obligations, (D) the interest portion of any deferred payment
obligations, (E) amortization of discount or premium on Indebtedness, if any,
(F) all capitalized interest and all accrued interest, (G) all other non-cash
interest expense, (H) all interest incurred or paid under any guarantee of
Indebtedness (including a guarantee of principal, interest or any combination
thereof) of any Person, and (I) all dividends or distributions on Disqualified
Capital Stock if payable to a Person other than the Issuer or a Restricted
Subsidiary (other than dividends paid or payable in shares of Capital Stock
(other than Disqualified Capital Stock) of the Issuer, in the case of Exchange
Indenture, and Junior Capital Stock (other than Disqualified Capital Stock) of
the Issuer, in the case of the Restated Certificate) declared and payable in
cash, minus (iii) to the extent included in clause (i) or (ii) above,
amortization or write-off of deferred financing costs (and original issue
discount to the extent it arises from the issuance of Capital Stock (other than
Disqualified Capital Stock) of the Issuer, in the case of the Exchange
Indenture, and Junior Capital Stock (other than Disqualified Capital Stock) of
the Issuer, in the case of the Restated Certificate) during such period and,
without duplication, any charge related to any premium or penalty paid in
connection with redeeming or retiring any Indebtedness of the Issuer or its
Restricted Subsidiaries prior to the stated maturity thereof. If any
Indebtedness outstanding or to be incurred (x) bears a floating rate of
interest, the interest expense on such Indebtedness shall be calculated as if
the rate in effect on the date of determination had been the applicable rate for
the entire Four Quarter Period (taking into account on a pro forma basis any
Interest Rate Agreement that has a remaining term as of the date of
determination in excess of 12 months), and/or (y) was incurred under a revolving
credit facility, the interest expense on such Indebtedness shall be computed
based upon the average daily balance of such Indebtedness during the applicable
period. If any Indebtedness to be incurred bears, at the option of the Issuer or
a Restricted Subsidiary, a fixed or floating rate of interest, the interest
expense on such Indebtedness shall be computed by applying, at the option of the
Issuer or such Restricted Subsidiary, such fixed or floating rate.
"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 (a) the Net Income of any Person that is not a
Restricted Subsidiary shall be included only to the extent of the amount of
dividends or other distributions representing the Issuer's proportionate share
of such Person's Net Income for such period actually paid in cash to the Issuer
or a Restricted Subsidiary (subject to clause (b) below) by such Person during
such period, (b) the Net Income of any Subsidiary of the Person in question that
is subject to any restriction or limitation on the payment of dividends or the
making of other distributions (other than pursuant to the New Credit Facility,
the Senior Notes, the Indenture, or any other Indebtedness of the Issuer or any
Restricted Subsidiary of the Issuer containing, in the good faith judgment of
the Board of Directors of the Issuer, substantially the same or less restrictive
limitations on the payment of dividends or the making of other distributions
than those contained in such New Credit Facility, the Senior Notes or the
Indenture or the Exchange Debentures or the Exchange Indenture) shall be
excluded to the extent of such restriction or limitation (regardless of any
waiver thereof), (c)(i) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition and
(ii) any net after tax gain (but not loss) resulting from an Asset Sale by the
Person in question or any of its Subsidiaries other than in the ordinary course
of business shall be excluded, (d) non-cash gains and losses due solely to
fluctuations in currency values shall be excluded, (e) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, any earnings (or losses) of the successor
corporation prior to such consolidation, merger or transfer of assets shall be
excluded, and (f) all items classified as extraordinary, unusual or
nonrecurring, including all items relating to the
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Transactions and the pre-closing events relating thereto shall be excluded
(including the fees and expenses incurred in connection with the Transactions
and write-offs or other costs associated or arising in connection with the
Transactions). In computing Consolidated Net Income under clause (c) under the
"--Certain Covenants--Limitations on Restricted Payments" covenant, the Issuer
or such Restricted Subsidiary (i) shall use audited financial statements for the
portion of the relevant period for which such statements are available on the
date of determination and unaudited financial statements and other current
financial data based on the books and records of the Issuer for the remaining
portion of such period and (ii) shall be permitted to rely in good faith for the
balance of the relevant period for which audited financial statements are not
available on the financial statements and other financial data derived from the
books and records of the Issuer or such Restricted Subsidiary that are available
on the date of determination.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person and its Restricted Subsidiaries determined
on a consolidated basis in accordance with GAAP, less (to the extent included)
amounts attributable to Disqualified Capital Stock of such Person.
"Consolidated Tangible Assets" of any Person means the consolidated
tangible assets of such Person and its Restricted Subsidiaries determined on a
consolidated basis in accordance with GAAP as of the end of the most recent
fiscal quarter for which financial statements are available or, if the Issuer is
not in compliance with its obligations under "--Reports to Holders" on the date
of determination, the end of the most recent quarter ending on or prior to the
date of determination.
"Credit Facilities" means one or more senior secured or unsecured credit
facilities providing, inter alia, for revolving credit loans, term loans,
bankers' acceptances and/or letters of credit between the Issuer or its
Restricted Subsidiaries and one or more lenders, including, in each case, any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced, restated 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 designed to protect the
Issuer or any Restricted Subsidiary of the Issuer against fluctuations in
currency values.
"Designated Senior Indebtedness" as to the Issuer or any Subsidiary, as
the case may be, means any Senior Indebtedness (a) under the Credit Facilities,
(b) under any Surety Arrangements or (c) which has at the time of initial
issuance an aggregate principal amount outstanding or available under a
committed facility in excess of $10 million and which has been so designated as
Designated Senior Indebtedness by the Board of Directors of the Issuer at the
time of initial issuance in a resolution delivered to the Debenture Trustee.
"Disqualified Capital Stock" means any Capital Stock of the Issuer or a
Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to (i) the mandatory redemption date of the Series A Senior Preferred
Stock or (ii) the maturity date of the Exchange Debentures, as the case may be,
for any consideration other than Capital Stock of the Issuer which is not
Disqualified Capital Stock; provided, that the Series A Senior Preferred Stock
shall not be deemed to be Disqualified Capital Stock and Preferred Stock of the
Issuer that is issued with the benefit of provisions requiring a change of
control offer to be made for such Preferred Stock in the event of a change of
control of the Issuer, which provisions have substantially the same effect as
the provisions of the Exchange Indenture or the Restated Certificate, as
applicable, described under "--Change of Control Offer" shall not be deemed to
be Disqualified Capital Stock solely by virtue of such provisions. Without
limitation of the foregoing, Disqualified Capital Stock shall be deemed to
include any Preferred Stock of a Restricted Subsidiary of the Issuer except for
Permitted Foreign Restricted Subsidiary Preferred Stock.
"EBITDA" means, for any Person, for any period, an amount equal to (a) the
sum of (i) Consolidated Net Income for such period, plus (ii) the provision for
taxes for such period based on income or profits to the extent
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such income or profits were included in computing Consolidated Net Income (minus
any provision for taxes utilized in computing net loss under clause (i) hereof
to the extent such provision reduced the net loss), plus (iii) Consolidated
Interest Expense for such period, plus (iv) depreciation for such period on a
consolidated basis to the extent reducing Consolidated Net Income, plus (v)
amortization of intangibles for such period on a consolidated basis to the
extent reducing Consolidated Net Income, plus (vi) amortization of original
issue discount to the extent it arises from the issuance of Capital Stock (other
than Disqualified Capital Stock) of the Issuer, in the case of the Exchange
Indenture, and Junior Capital Stock (other than Disqualified Capital Stock) of
the Issuer, in the case of the Restated Certificate, to the extent reducing
Consolidated Net Income, plus (vii) any charge related to any premium or penalty
paid in connection with redeeming or retiring any Indebtedness prior to its
stated maturity to the extent reducing Consolidated Net Income, plus (viii) any
other non-cash items reducing Consolidated Net Income for such period, minus (b)
all non-cash items increasing Consolidated Net Income for such period, minus (c)
all cash payments during such period relating to non-cash charges that were
added back in determining EBITDA in any prior period, (provided that payment of
such cash amounts did not reduce Consolidated Net Income) all for such Person
and its Restricted Subsidiaries determined in accordance with GAAP.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset or Property, the
price which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair Market
Value shall be determined by the Board of Directors of the Issuer acting in good
faith and, in the case of determination involving assets or property in excess
of $2 million, shall be evidenced by a resolution of the Board of Directors of
the Issuer delivered to the Trustee.
"Foreign Restricted Subsidiary" of any specified Person means any
Restricted Subsidiary the jurisdiction of incorporation, organization or
formation of which is outside of the United States, Canada, the United Kingdom
and South Africa.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States from time to time.
"Guarantee" means a guarantee of the Senior Notes by a guarantor under the
Indenture, as in effect from time to time.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the performance
(or payment of damages in the event of non-performance) of all or any part of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit. A guarantee shall include, without
limitation, any agreement to preserve or maintain any other Person's financial
condition or to cause any other Person to achieve certain levels of operating
results.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such Person (and
"incurrence," "incurred," "incurrable," and "incurring" shall have meanings
correlative to the foregoing); provided, that a change in GAAP that results in
an obligation of such Person that exists at such time becoming Indebtedness
shall not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person,
any indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
Property (excluding, without limitation, any balances that constitute accounts
payable or trade payables
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or liabilities arising from advance payments or customer deposits for goods and
services sold by such Person or its Restricted Subsidiaries in the ordinary
course of business, and other accrued liabilities, in each case, arising in the
ordinary course of business) if and to the extent any of the foregoing
indebtedness would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, and shall also include, to the extent not
otherwise included (i) any Capitalized Lease Obligations, (ii) guarantees of
items of other Persons which would be included within this definition for such
other Persons (whether or not such items would appear upon the balance sheet of
the guarantor), including, without limitation, guarantees of dividends for which
such Person may be liable directly or indirectly, (iii) all obligations for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (provided that in the case of any such letters of
credit, the items for which such letters of credit provide credit support are
those of other Persons which would be included within this definition for such
other Persons), (iv) Disqualified Capital Stock of the Issuer or any Restricted
Subsidiary thereof, including, without limitation, any liquidation preference
and mandatory redemption payment obligations in respect thereof and (v)
obligations of any such Person under any Interest Rate Agreement or Currency
Agreement applicable to any of the foregoing (if and to the extent such Interest
Rate Agreement or Currency Agreement obligations would appear as a liability
upon a balance sheet of such Person prepared in accordance with GAAP). The
amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations included within the definition of
Indebtedness, the maximum liability upon the occurrence of the contingency
giving rise to the obligation, provided, that (i) the amount outstanding at any
time of any Indebtedness issued with original issue discount is the principal
amount of such Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at such time as determined in
conformity with GAAP but such Indebtedness shall only be deemed to have been
incurred on the date of original issuance thereof and, in the case of any
securities constituting Indebtedness, the payment of interest upon which is in
such securities, such Indebtedness shall only be deemed to have been incurred on
the date of issuance of the original securities constituting such Indebtedness,
(ii) Indebtedness shall not include any liability for federal, state, local,
foreign or other taxes and (iii) contingent obligations of the Issuer or any of
its Restricted Subsidiaries under any Surety Obligation will be deemed to be
Indebtedness only upon the earlier of (a) the Issuer's or any Restricted
Subsidiary's obtaining knowledge of any payment by or in respect of any provider
in respect of any Surety Obligation, (b) the demand by any provider for any
reimbursement by the Issuer or any of its Restricted Subsidiaries of any Surety
Obligation or (c) the time at which the Issuer or any of its Restricted
Subsidiaries becomes obligated to make payment in respect of any Surety
Obligation as a result of the provider having made a payment in respect of such
Surety Obligation or as a result of such payment being required to be made by
such provider. Notwithstanding any other provision of the foregoing definition,
any trade or accounts payable arising from the purchase of goods or materials or
for services obtained in the ordinary course of business shall not be deemed to
be "Indebtedness" of the Issuer or any Restricted Subsidiaries for purposes of
this definition. Furthermore, guarantees of (or obligations with respect to
letters of credit supporting) Indebtedness otherwise included in the
determination of such amount shall not also be included.
"Indenture" means the Indenture relating to the Senior Notes, as in effect
on the Issue Date.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance (or other
extension of credit), loan or capital contribution to (by means of transfers of
Property to others, payments for Property or services for the account or use of
others or otherwise), any guarantee of any obligations or Indebtedness of any
other Person, the purchase of any stock, bonds, notes, debentures, partnership
or joint venture interests or other securities of, the acquisition, by purchase
or otherwise, of any evidence of beneficial ownership of, or interest in, any
Person. Upon the designation of an Unrestricted Subsidiary as a Restricted
Subsidiary or the acquisition by the Issuer or a Restricted Subsidiary of an
interest in any Person that, as a result thereof, becomes a Restricted
Subsidiary, the Issuer shall be deemed to have made an Investment equal to the
Fair Market Value of all Investments owned by such new Restricted Subsidiary.
Investments shall exclude (i) accounts receivable and other extensions of trade
credit, in each case, on commercially reasonable terms in accordance with normal
trade practices, (ii) prepaid expenses and workers'
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compensation, utility, lease and similar deposits, in the ordinary course of
business and (iii) acquisitions of Property or assets paid for solely by the
issuance of Capital Stock (other than Disqualified Capital Stock) of the Issuer.
"Issue Date" means March 30, 1998, the date of original issuance of the
Old Series A Senior Preferred Stock.
"Joint Venture" of any specified Person means any corporation,
partnership, joint venture, limited liability company, association or other
business entity, whether now existing or hereafter organized or acquired, and
(a) which is engaged in a similar line of business as the Issuer or any
Restricted Subsidiary at the date of determination and (b)(i) in the case of a
corporation, of which not more than 50% of the total voting power of the Capital
Stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, officers or trustees thereof is held by the Issuer or
any of its Restricted Subsidiaries, or (ii) in the case of a partnership, joint
venture, limited liability company, association or other business entity, with
respect to which the Issuer or any of its Restricted Subsidiaries has not more
than 50% of the ownership and voting power relating to the policies, management
and affairs thereof.
"Junior Capital Stock" means Capital Stock of the Issuer, including the
Series B Junior Preferred Stock and the Series C Junior Voting Preferred Stock,
that does not rank, as to the payment of dividends or other comparable
distributions or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Issuer, prior to or on
a parity with the Series A Senior Preferred Stock.
"Lien" means with respect to any Property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such Property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"MHE Investments" means MHE Investments, Inc., a Delaware corporation.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP, plus the amount
of any decrease in the deferred tax asset for such period relating to the actual
cash tax benefit realized by such Person or the consolidated tax group of which
such Person is a member resulting from the election under Section 338(h)(10) of
the Code in respect of the Transactions.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by the
Issuer, the aggregate net proceeds received by the Issuer, after payment of
expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in Property (valued at the Fair Market Value
thereof at the time of receipt) and (b) in the case of any exchange, exercise,
conversion or surrender of outstanding securities of any kind for or into shares
of Capital Stock of the Issuer which is not Disqualified Stock, the net book
value of such outstanding securities on the date of such exchange, exercise,
conversion or surrender (plus any additional amount required to be paid by the
holder to the Issuer upon such exchange, exercise, conversion or surrender) less
any and all payments made to the holders, e.g., on account of fractional shares
and less all expenses incurred by the Issuer in connection therewith.
"Non-Payment Event of Default" means any event (other than a Payment
Default) the occurrence of which entitles one or more Persons to accelerate the
maturity of any then outstanding Designated Senior Indebtedness.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chairman of the Board, the Chief Executive Officer, the President
or any Vice President and the Chief Financial Officer or any Treasurer of such
Person that shall comply with applicable provisions of the Exchange Indenture.
"Payment Default" means any default in the payment of principal of (or
premium, if any) or interest on or any other amount payable in connection with
Designated Senior Indebtedness.
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"Permitted Affiliate Agreements" means the agreements between or among the
Issuer and each of MHE Investments, HarnCo, Chartwell and their respective
Affiliates, listed in the Restated Certificate or the Exchange Indenture, as the
case may be, in effect immediately after the initial issuance of the Old Series
A Senior Preferred Stock on the Issue Date, and as the same may be amended from
time to time subject to the provisions of the covenant described under
"--Certain Covenants--Limitation on Transactions with Affiliates," provided,
that notwithstanding such covenant, such agreements may be extended from time to
time or otherwise amended, to the extent that a majority of the disinterested
members of the Board of Directors of the Issuer has determined in good faith
that no material adverse effect on the creditworthiness of the Issuer and its
Restricted Subsidiaries, taken as a whole, shall result as a consequence
thereby. See "Certain Relationships and Related Transactions" above.
"Permitted Foreign Restricted Subsidiary Preferred Stock" means securities
of Foreign Restricted Subsidiaries of the Issuer denominated in Preferred Stock
that (a) otherwise have substantially the same characteristics of voting or
non-voting Common Stock of a Delaware corporation, (b) do not obligate the
issuer to pay current dividends or distributions in cash or otherwise and (c)
are not subject to any requirement of redemption or repurchase.
"Permitted Holders" means Chartwell.
"Permitted Indebtedness" means:
(i) Indebtedness of the Issuer or any Restricted Subsidiary arising
under or in connection with the Credit Facilities or Acquired Indebtedness
in an aggregate principal amount at any one time outstanding not to exceed
the sum of (a) $55 million, less the aggregate amount of all Net Proceeds
of Asset Sales applied to permanently reduce the outstanding amount of
such Indebtedness, and (b) the greater of (1) $75 million, less the
aggregate amount of all Net Proceeds of Asset Sales applied to permanently
reduce the outstanding amount of such Indebtedness or (2) the sum of (x)
80% of the book value of accounts receivable of the Issuer and its
Restricted Subsidiaries and (y) 45% of the book value of consolidated
inventory of the Issuer and its Restricted Subsidiaries, in each case,
determined at the time of such incurrence, less the aggregate amount of
all Net Proceeds of Asset Sales applied to permanently reduce the
outstanding amount of such Indebtedness; provided, that $15 million of the
Indebtedness incurred under this clause (b) may be incurred solely to
obtain letters of credit and to fund draws thereunder to provide credit
support for the Surety Arrangement or other Surety Obligations or other
letters of credit reasonably necessary in the ordinary course of business;
(ii) Indebtedness under Surety Obligations and under the Surety
Arrangement, in either case, that are due not later than 10 days after the
earlier of (a) the Issuer's or any Restricted Subsidiary's obtaining
knowledge of any payment by or in respect of any provider in respect of
any Surety Obligation, (b) the demand by any provider for any
reimbursement by the Issuer or any of its Restricted Subsidiaries of any
Surety Obligation or (c) the time at which the Issuer or any of its
Restricted Subsidiaries becomes obligated to make payment in respect of
any Surety Obligation as a result of the provider having made a payment in
respect of such Surety Obligation or as a result of such payment being
required to be made by such provider;
(iii) Indebtedness under the Exchange Debentures, the Exchange
Indenture, the Senior Notes, the Indenture and the Guarantees;
(iv) Indebtedness not covered by any other clause of this definition
which is outstanding on the Issue Date other than under the South African
Credit Facility;
(v) Indebtedness of the Issuer to any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary to the Issuer or another
Restricted Subsidiary, provided that Indebtedness of the Issuer or any
Wholly-Owned Subsidiary to any Restricted Subsidiary (other than a
Wholly-Owned Subsidiary) is incurred for borrowed money; provided,
further, that any Indebtedness otherwise referred to in this clause (v)
that is no longer held by a Restricted Subsidiary or the Issuer (whether
(i) as a result of a sale or transfer of such Indebtedness, (ii) as a
result of such Person no longer being the Issuer or a Restricted
Subsidiary or (iii) otherwise), shall, in each case, be deemed incurred at
such time;
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(vi) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire Property in the ordinary course of business, which
Indebtedness and Capitalized Lease Obligations, in the aggregate,
outstanding on any date of incurrence (and any Refinancing Indebtedness in
respect thereof), do not exceed 4% of the Consolidated Tangible Assets of
the Issuer and its Restricted Subsidiaries;
(vii) Interest Rate Agreements and Currency Agreements;
(viii) guarantees of obligations of the Issuer or its Restricted
Subsidiaries;
(ix) additional Indebtedness of the Issuer or its Restricted
Subsidiaries not to exceed an aggregate of $10 million in principal amount
outstanding at any time; and
(x) Refinancing Indebtedness in respect of Indebtedness incurred
under clauses (iii), (iv), (v) and (vii) above or incurred pursuant to the
first paragraph of the covenant under "--Certain Covenants--Limitation on
Additional Indebtedness."
"Permitted Investments" means, for any Person, Investments made on or
after the Issue Date consisting of:
(i) Investments by the Issuer, or by a Restricted Subsidiary, in the
Issuer or a Restricted Subsidiary;
(ii) Cash Equivalents;
(iii) Investments by the Issuer, or by a Restricted Subsidiary
thereof, in a Person, if as a result of such Investment (a) such Person
becomes a Restricted Subsidiary of the Issuer or (b) such person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets (including the proceeds of such
Investment) to, or is liquidated into, the Issuer or a Restricted
Subsidiary thereof;
(iv) non-cash consideration received in conjunction with the
consummation of an Asset Sale that is otherwise permitted under the
covenant described under "--Certain Covenants--Limitation on Certain Asset
Sales";
(v) Interest Rate Agreements and Currency Agreements;
(vi) any Investment existing on the Issue Date;
(vii) Investments received in settlement of obligations owed to the
Issuer or any Restricted Subsidiary as a result of bankruptcy or
insolvency proceedings or upon the foreclosure or enforcement of any Lien
in favor of the Issuer or any Restricted Subsidiary;
(viii) Investments required pursuant to any agreement or obligation
of the Issuer or a Restricted Subsidiary to make such Investments in
effect on the Issue Date, as described in the Restated Certificate or the
Exchange Indenture, as the case may be;
(ix) Investments required to be made pursuant to the Transactions,
as described in the Restated Certificate or the Exchange Indenture, as the
case may be; and
(x) Investments by the Issuer or any Restricted Subsidiary not
otherwise permitted under this definition, in an aggregate amount not to
exceed $15 million at any one time outstanding.
For purposes of clause (x) above, the amount of any Investment
outstanding, in respect of any Investment and the issuer thereof (and its
Subsidiaries), shall be equal to the excess of (a) the aggregate amount of all
Investments made therein by the Issuer or any Restricted Subsidiary on or after
the Issue Date (including the Fair Market Value of all such Investments not made
in cash or Cash Equivalents, valued at the time of such Investment) over (b) the
aggregate amount returned in cash or Cash Equivalents on or with respect to
Investments in such Person (whenever
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such Investment was made) whether through the sale or other disposition of the
Investment in such Person (or portion thereof) or through interest payments,
principal payments, dividends or other distributions or payments; provided, that
such payments or distributions shall not be (and have not been) included in
clause (c)(3) of the first paragraph of the covenant "--Certain
Covenants--Limitation on Restricted Payments" or otherwise included in
Consolidated Net Income.
"Permitted Junior Securities" means debt or equity securities of the
Issuer or any successor corporation provided for by a plan of reorganization or
readjustment that are subordinated to the Exchange Debentures at least to the
same extent that the Exchange Debentures are subordinated to the payment of all
Senior Indebtedness then outstanding.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"Public Equity Offering" means any underwritten public offering of shares
of Common Stock (however designated and whether voting or non-voting) of the
Issuer or the Company and any and all rights, warrants or options to acquire
such Common Stock pursuant to an effective registration statement (other than a
registration statement on Form S-4 or S-8) filed with the Commission in
accordance with the Securities Act.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including sales and
excise taxes, installation and delivery charges and other direct costs of, and
other direct expenses paid or charged in connection with, such purchase or
construction) of an item of Property, the principal amount of which Indebtedness
does not exceed the sum of (i) 100% of such cost and (ii) reasonable fees and
expenses of such Person incurred in connection therewith.
"Refinancing Indebtedness" means Indebtedness that refunds or refinances
any Indebtedness of the Issuer or its Restricted Subsidiaries outstanding on the
Issue Date or other Indebtedness permitted to be incurred by the Issuer or its
Restricted Subsidiaries pursuant to the terms of the Restated Certificate or the
Exchange Indenture, as the case may be, but only to the extent that (i) in the
case of Exchange Debentures, if the Indebtedness being refunded or refinanced is
Subordinated Indebtedness, the Refinancing Indebtedness is subordinated to
Exchange Debentures, to at least the same extent as the Indebtedness being
refunded or refinanced, (ii) the Refinancing Indebtedness is scheduled to mature
either (a) no earlier than the Indebtedness being refunded or refinanced, or (b)
at least 91 days after (i) the mandatory redemption date of the Series A Senior
Preferred Stock or (ii) the final stated maturity date of the Exchange
Debentures, as the case may be, (iii) the portion, if any, of the Refinancing
Indebtedness that is scheduled to mature on or prior to (i) the mandatory
redemption date of the Series A Senior Preferred Stock or (ii) the final stated
maturity date of the Exchange Debentures, as the case may be, has a weighted
average life to maturity at the time such Refinancing Indebtedness is incurred
that is equal to or greater than the weighted average life to maturity of the
portion of the Indebtedness being refunded or refinanced that is scheduled to
mature on or prior to (x) the mandatory redemption date of the Series A Senior
Preferred Stock or (y) the final stated maturity date of the Exchange
Debentures, as the case may be, and, in the case of clause (ii) above and this
clause (iii), such Refinancing Indebtedness by its terms, or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, does not
permit redemption or other retirement (including pursuant to any required offer
to purchase to be made by the Issuer or a Restricted Subsidiary) of such
Indebtedness at the option of the holder thereof prior to the final stated
maturity of the Indebtedness being refinanced, other than a redemption or other
retirement at the option of the holder of such Indebtedness (including pursuant
to a required offer to purchase made by the Issuer or a Restricted Subsidiary)
which is conditioned on a change of control of the Issuer pursuant to
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provisions substantially similar to those contained in the Exchange Indenture
described under "--Change of Control" or "Asset Sales" or otherwise on terms
substantially similar to those in such Indebtedness being refinanced, (iv) such
Refinancing Indebtedness is in an aggregate principal amount that is equal to or
less than the sum of (a) the aggregate principal amount then outstanding under
the Indebtedness being refunded or refinanced, (b) the amount of accrued and
unpaid interest, if any, and premiums owed, if any, not in excess of
pre-existing prepayment provisions on such Indebtedness being refunded or
refinanced and (c) the amount of customary fees, expenses and costs related to
the incurrence of such Refinancing Indebtedness, and (v) such Refinancing
Indebtedness is incurred by the same Person that initially incurred the
Indebtedness being refunded or refinanced, except that the Issuer may incur
Refinancing Indebtedness to refund or refinance Indebtedness of any Wholly-Owned
Subsidiary of the Issuer and any Restricted Subsidiary may incur Refinancing
Indebtedness to refund or refinance Indebtedness of any other Restricted
Subsidiary.
"Replacement Assets" means (x) Properties or assets (other than cash or
Cash Equivalents or any Capital Stock or other security) that will be used in a
business of the Issuer and the Restricted Subsidiaries conducted on the Issue
Date or in a business reasonably related thereto or (y) Capital Stock of any
Person that will become on the date of acquisition thereof a Restricted
Subsidiary as a result of such acquisition.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment of any kind or
character (whether in cash, Property or securities) on Junior Capital Stock of
the Issuer or Capital Stock of any Restricted Subsidiary, in the case of the New
Series A Senior Preferred Stock, or Capital Stock of the Issuer or any
Restricted Subsidiary of the Issuer, in the case of the Exchange Debentures, or
any payment made to the direct or indirect holders (in their capacities as such)
of Junior Capital Stock of the Issuer or Capital Stock of any Restricted
Subsidiary of the Issuer, in the case of the New Series A Senior Preferred
Stock, or Capital Stock of the Issuer or Capital Stock of any Restricted
Subsidiary of the Issuer, in the case of the Exchange Debentures (other than (x)
dividends or distributions payable solely in Capital Stock (other than
Disqualified Capital Stock) of the Issuer, in the case of the Exchange
Indenture, or Junior Capital Stock (other than Disqualified Capital Stock) of
the Issuer, in the case of the Restated Certificate, and (y) dividends or
distributions payable to the Issuer or to a Restricted Subsidiary of the Issuer
and (z) dividends or distributions from a Restricted Subsidiary of the Issuer
that are paid ratably to all Persons holding the Capital Stock of such
Restricted Subsidiary in proportion to the Capital Stock held by such Persons),
(ii) the purchase, redemption or other acquisition or retirement for value of
any Junior Capital Stock of the Issuer or any Capital Stock of any of its
Restricted Subsidiaries or any options, warrants or rights to purchase or
acquire such shares or any securities convertible or exchangeable into such
shares (other than any such shares, options, warrants, rights or securities (a)
that are owned by the Issuer or a Restricted Subsidiary of the Issuer; provided,
that such options, warrants, rights or securities are purchased, redeemed or
otherwise acquired for value by the issuer thereof, or (b) the issuer of which
is a Restricted Subsidiary; provided, that, for purposes of this clause (b),
such purchase, redemption or other acquisition or retirement for value is (A)
permitted under clauses (viii) or (x) of the definition of Permitted Investments
or (B) in an amount, which, when added to all other Restricted Payments made
pursuant to this clause (b), is not greater than 10% of Consolidated Tangible
Assets of the Issuer and its Restricted Subsidiaries), (iii) as to the Exchange
Debentures, the making of any principal payment on, or the purchase, defeasance,
repurchase, redemption or other acquisition or retirement for value, prior to
any scheduled maturity, scheduled repayment or scheduled sinking fund payment,
of any Subordinated Indebtedness (other than Subordinated Indebtedness acquired
in anticipation of satisfying a scheduled sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of
acquisition), (iv) the making of any Investment other than a Permitted
Investment, (v) any designation (other than pursuant to clause (x) of the
definition of Permitted Investments) of a Restricted Subsidiary as an
Unrestricted Subsidiary (a "Designation"), provided, that the Designation of a
Subsidiary of the Issuer as an Unrestricted Subsidiary shall be deemed to
include the Designation of all of the Subsidiaries of such Subsidiary that were
Restricted Subsidiaries, (vi) forgiveness of any Indebtedness of an Affiliate of
the Issuer to the Issuer or a Restricted Subsidiary and (vii) any advisory fee
paid to an Affiliate with respect to a specific transaction (other than fees
payable on the Issue Date upon consummation of the Transactions). For purposes
of determining the amount expended for Restricted Payments, (a) cash distributed
or invested shall be valued at the face amount thereof and Property other than
cash shall be valued at its Fair Market Value, except that in determining the
amount of any Restricted Payment made under clause (v) above, the amount of such
Restricted Payment shall be equal to the greater of (i) the book value or (ii)
the Fair Market Value of the Issuer's direct and indirect proportionate interest
in
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such Subsidiary on such date and (b) upon the designation of an Unrestricted
Subsidiary as a Restricted Subsidiary, or the acquisition by the Issuer or a
Restricted Subsidiary of an interest in any Person that, as a result thereof,
becomes a Restricted Subsidiary, the Issuer shall be deemed to have made a
Restricted Payment equal to the Fair Market Value of the Capital Stock or, with
respect to the Exchange Debentures, Subordinated Indebtedness of the Issuer or
its Restricted Subsidiaries owned by such new Restricted Subsidiaries.
"Restricted Subsidiary" means a Subsidiary of the Issuer other than an
Unrestricted Subsidiary and includes all of the Subsidiaries of the Issuer
existing as of the Issue Date. The Board of Directors of the Issuer may
designate any Unrestricted Subsidiary or any Person that is to become a
Subsidiary as a Restricted Subsidiary if immediately after giving effect to such
action (and treating any Acquired Indebtedness as having been incurred at the
time of such action), (i) no Voting Rights Triggering Event or Default or Event
of Default, as the case may be, shall have occurred and be continuing, (ii)
Indebtedness of such Person and its Subsidiaries outstanding immediately
following such redesignation would, if incurred at such time, be permitted to be
incurred under the Restated Certificate or the Exchange Indenture and (iii) the
provisions referred to in clause (b) of the last sentence of the definition of
Restricted Payment is complied with and any Investments pursuant to the second
sentence of the definition of Investments are permitted to be made pursuant to
the Restated Certificate or the Exchange Indenture.
"Seller Note" means any Indebtedness of the Issuer or any Restricted
Subsidiary issued to a seller as a portion of the purchase price in any Asset
Acquisition by the Issuer or such Restricted Subsidiary from such seller.
"Senior Indebtedness" means the principal of and premium, if any, and
interest (including post-petition interest) on, and any and all other fees,
expense reimbursement obligations and other amounts due pursuant to the terms of
all agreements, documents and instruments providing for, creating, securing or
evidencing or otherwise entered into in connection with (a) all Indebtedness of
the Issuer owed to lenders under any Credit Facility or any Surety Arrangement,
(b) all obligations of the Issuer with respect to any Interest Rate Agreement or
any Currency Agreement, (c) all obligations of the Issuer to reimburse any bank
or other person in respect of amounts paid under letters of credit, banker's
acceptances or other similar instruments, (d) all other Indebtedness of the
Issuer which does not provide that it is to rank in right of payment pari passu
with or subordinate to the Exchange Debentures, and (e) all deferrals, renewals,
extensions and refundings of, and amendments, modifications and supplements to,
any of the Senior Indebtedness described above. Notwithstanding anything to the
contrary in the foregoing, Senior Indebtedness will not include (i) Indebtedness
of the Issuer to any of its Subsidiaries, (ii) Indebtedness represented by the
Exchange Debentures, (iii) any Indebtedness which by the express terms of the
agreement or instrument creating, evidencing or governing the same is junior or
subordinate in right of payment to any item of Senior Indebtedness (including,
without limitation, Indebtedness represented by Disqualified Stock), (iv) any
trade payable arising from the purchase of goods or materials or for services
obtained in the ordinary course of business, (v) Indebtedness incurred in
violation of the Exchange Indenture or (vi) any Indebtedness which, when
incurred and without respect to any election under Section 1111(b) of Title 11,
United States Code, is without recourse to such Person.
"Senior Notes" means the $200,000,000 aggregate principal amount of 9 1/2%
Senior Notes due 2008 of the Company.
"Series B Junior Preferred Stock" means the 12 1/4% Series B Junior
Exchangeable Preferred Stock of the Issuer, liquidation preference $1,000 per
share.
"Series C Junior Voting Preferred Stock" means the 12 1/2% Series C Junior
Exchangeable Voting Preferred Stock of the Issuer, liquidation preference $1,000
per share.
"Significant Subsidiary" has the meaning set forth in Rule 1-02 of
Regulation S-X under the Securities Act and the Exchange Act, but shall not
include any Unrestricted Subsidiary.
"South African Credit Facility" means a Credit Facility in an aggregate
principal amount or with aggregate commitments not to exceed $5 million to be
entered into by Morris Mechanical Handling (Pty) Ltd.
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"Subordinated Indebtedness" of the Issuer means any Indebtedness (whether
outstanding on the date hereof or hereafter incurred) which is by its terms
expressly subordinate or junior in right of payment to the Exchange Debentures
to substantially the same extent as the Exchange Debentures are subordinated to
Senior Indebtedness.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, limited liability company, association or other business entity,
whether now existing or hereafter organized or acquired, (i) in the case of a
corporation, of which more than 50% of the total Voting Stock is held by such
first-named Person or any of its Subsidiaries or (ii) in the case of a
partnership, joint venture, limited liability company, association or other
business entity, with respect to which such first-named Person or any of its
Subsidiaries has at least a majority ownership and voting power relating to the
policies, management and affairs thereof.
"Surety Arrangement" means one or more surety arrangements providing,
inter alia, for the issuance of Surety Obligations between the Issuer or any of
its Restricted Subsidiaries and one or more providers, provided to the Issuer or
its Restricted Subsidiaries including, in each case, any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced, restated or refinanced from time to time.
"Surety Obligations" means any bonds, including bid bonds, advance bonds,
or performance bonds, letters of credit, warranties, and similar arrangements
between the Issuer and any of its Restricted Subsidiaries and one or more
providers, for the benefit of the Issuer's or any Restricted Subsidiary's
suppliers, vendors, insurers or customers including, in each case, any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced, restated or refinanced from time to time.
"Tax Allocation Agreement" means a tax allocation agreement among the
Issuer, the Company and MHE Investments, as in effect on the Issue Date and as
the same may be amended from time to time subject to the provisions of the
covenant described under "--Certain Covenants--Limitation on Transactions with
Affiliates" and provided, that no material adverse effect on Issuer or on the
holders of the New Series A Senior Preferred Stock or the Exchange Debentures,
as the case may be, shall result as a consequence thereby.
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of the Issuer which is classified (whether on
or after the Issue Date) as an Unrestricted Subsidiary by a resolution adopted
by the Board of Directors of the Issuer; provided, that a Subsidiary may be so
classified as an Unrestricted Subsidiary only if (i) such classification in
compliance with the covenant set forth under "--Certain Covenants--Limitation on
Restricted Payments," (ii) such Subsidiary does not own beneficially any Capital
Stock of the Issuer or any Restricted Subsidiary (other than any Restricted
Subsidiary of such Subsidiary that is being designated as an Unrestricted
Subsidiary at the time of such classification) and (iii) all Indebtedness of the
Issuer or any Restricted Subsidiary to such Subsidiary is deemed incurred at the
time of such classification or at the time such Capital Stock is no longer so
owned. The Debenture Trustee shall be given prompt notice by the Issuer of each
resolution adopted by the Board of Directors of the Issuer under this provision,
together with a copy of each such resolution adopted. The Restated Certificate
and the Exchange Indenture will provide that the Issuer shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly, at any time, (a) be
liable for any Indebtedness of any Unrestricted Subsidiary or (b) be liable for
any Indebtedness that provides that the holder thereof may (upon notice, lapse
of time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final maturity upon the occurrence of a
default with respect to any Indebtedness of any Unrestricted Subsidiary.
"Voting Stock" of any Person means the Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly-Owned Subsidiary" means any Restricted Subsidiary, all of the
outstanding Voting Stock (other than directors' qualifying shares) of which are
owned, directly or indirectly, by the Issuer.
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PREFERRED STOCK EXCHANGE OFFER; REGISTRATION RIGHTS
In connection with the issuance of the Old Series A Senior Preferred
Stock, the Issuer entered into the Exchange Offer Registration Rights Agreement
pursuant to which it agreed, for the benefit of the holders of the Old Series A
Senior Preferred Stock, that it would, at its cost, (i) within 60 days after the
date of original issue of the Old Series A Senior Preferred Stock, file a
registration statement (the "Series A Senior Preferred Stock Exchange Offer
Registration Statement") with the Commission with respect to a registered offer
to exchange the Old Series A Senior Preferred Stock for preferred stock of the
Issuer of the same series with terms substantially identical in all material
respects to the Old Series A Senior Preferred Stock, and (ii) within 135 days
after the Issue Date, use its best efforts to cause the Series A Senior
Preferred Stock Exchange Offer Registration Statement to be declared effective
under the Securities Act. The form and terms of the shares of New Series A
Senior Preferred Stock are identical in all material respects to the form and
terms of the shares of Old Series A Senior Preferred Stock except (i) that the
shares of New Series A Senior Preferred Stock have been registered under the
Securities Act, (ii) that the shares of New Series A Senior Preferred Stock are
not entitled to certain registration rights which are applicable to the shares
of Old Series A Senior Preferred Stock and (iii) certain contingent interest
rate provisions applicable to shares of Old Series A Senior Preferred Stock are
generally not applicable to the shares of New Series A Senior Preferred Stock.
Upon the Series A Senior Preferred Stock Exchange Offer Registration Statement
being declared effective, the Issuer has agreed to offer the New Series A Senior
Preferred Stock in exchange for surrender of the Old Series A Senior Preferred
Stock. The Issuer has agreed to keep the Exchange Offer open for not less than
30 days (or longer if required by applicable law) after the date notice of the
Exchange Offer is mailed to the holders of the Old Series A Senior Preferred
Stock. For each share of Old Series A Senior Preferred Stock surrendered to the
Issuer pursuant to the Exchange Offer, the holder of such share of Old Series A
Senior Preferred Stock will receive such New Series A Senior Preferred Stock
having a liquidation preference equal to that of the surrendered shares of Old
Series A Senior Preferred Stock. Dividends on the New Series A Senior Preferred
Stock will accrue from March 30, 1998. The Exchange Offer is being made to
satisfy the contractual obligations of the Issuer under the Exchange Offer
Registration Rights Agreement.
Under existing Commission interpretations, the New Series A Senior
Preferred Stock would in general be freely transferable after the Exchange Offer
without further registration under the Securities Act; provided that in the case
of broker-dealers, a prospectus meeting the requirements of the Securities Act
be delivered as required. The Issuer has agreed for a period of 180 days after
consummation of the Exchange Offer to make available a prospectus meeting the
requirements of the Securities Act to any broker-dealer for use in connection
with any resale of any such New Series A Senior Preferred Stock acquired as
described below. A broker-dealer which delivers such a prospectus to purchasers
in connection with such resales will be subject to certain of the civil
liability provisions under the Securities Act, and will be bound by the
provisions of the Exchange Offer Registration Rights Agreement (including
certain indemnification rights and obligations).
Each holder of Old Series A Senior Preferred Stock that wishes to exchange
such Old Series A Senior Preferred Stock for New Series A Senior Preferred Stock
in the Exchange Offer will be required to make certain representations including
representations that (i) any New Series A Senior Preferred Stock to be received
by it will be acquired in the ordinary course of its business, (ii) it has no
arrangement with any person to participate in the distribution of the New Series
A Senior Preferred Stock and (iii) it is not an "affiliate," as defined in Rule
405 of the Securities Act, of the Issuer, or if it is an affiliate, it will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
If the holder is not a broker-dealer, it will be required to represent
that it is not engaged in, and does not intend to engage in, the distribution of
the New Series A Senior Preferred Stock. If the holder is a broker-dealer that
will receive New Series A Senior Preferred Stock for its own account in exchange
for Old Series A Senior Preferred Stock that were acquired as a result of
market-making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such New Series A Senior Preferred Stock.
In the event that applicable interpretations of the staff of the
Commission do not permit the Issuer to effect such a Exchange Offer, or if for
any other reason the Exchange Offer is not consummated within 180 days of the
date of
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the Exchange Offer Registration Rights Agreement, the Issuer will, at its own
expense, (a) as promptly as practicable, file A Senior Preferred Stock Shelf
Registration Statement covering resales of the Old Series A Senior Preferred
Stock (the "Series A Senior Preferred Stock Shelf Registration Statement"), (b)
use its best efforts to cause the Series A Senior Preferred Stock Shelf
Registration Statement to be declared effective under the Securities Act and (c)
use its best efforts to keep effective the Series A Senior Preferred Stock Shelf
Registration Statement until two years after its effective date. The Issuer
will, in the event of the Series A Senior Preferred Stock Shelf Registration
Statement, provide to each holder of the Old Series A Senior Preferred Stock
copies of the prospectus which is a part of the Series A Senior Preferred Stock
Shelf Registration Statement, notify each such holder when the Series A Senior
Preferred Stock Shelf Registration Statement for the Old Series A Senior
Preferred Stock has become effective and take certain other actions as are
required to permit unrestricted resales of the Old Series A Senior Preferred
Stock. A holder of the Old Series A Senior Preferred Stock that sells such Old
Series A Senior Preferred Stock pursuant to the Series A Senior Preferred Stock
Shelf Registration Statement generally would be required to be named as a
selling securityholder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Exchange Offer Registration Rights Agreement which are
applicable to such a holder (including certain indemnification rights and
obligations).
Although the Issuer intends to file one of the registration statements
described above, there can be no assurance that such registration statement will
be filed or, if filed, that it will become effective. If the Issuer fails to
comply with the above provisions or if such registration statement fails to
become effective, then, as liquidated damages, additional dividends shall become
payable in respect of the Old Series A Senior Preferred Stock as follows:
If (i) the Series A Senior Preferred Stock Exchange Offer
Registration Statement is not filed within 60 days after the Issue Date;
(ii) the Series A Senior Preferred Stock Exchange Offer Registration
Statement or Preferred Stock Shelf Registration Statement is not declared
effective within 135 days after the Issue Date; and
(iii) either (A) the Issuer has not exchanged the New Series A
Senior Preferred Stock for all Old Series A Senior Preferred Stock validly
tendered in accordance with the terms of the Exchange Offer on or prior to
45 days after the date on which the Series A Senior Preferred Stock
Exchange Offer Registration Statement was declared effective or (B) the
Series A Senior Preferred Stock Exchange Offer Registration Statement
ceases to be effective at any time prior to the time that the Exchange
Offer is consummated or (C) if applicable, the Series A Senior Preferred
Stock Shelf Registration Statement has been declared effective and such
Series A Senior Preferred Stock Shelf Registration Statement ceases to be
effective at any time prior to the second anniversary of its effective
date;
(each such events referred to in clauses (i) through (iii) above is a "Preferred
Stock Registration Default"), the sole remedy available to holders of the Old
Series A Senior Preferred Stock will be the immediate assessment of additional
dividends ("Additional Dividends") as follows: the per annum dividend rate on
the Old Series A Senior Preferred Stock will increase by 50 basis points; and
the per annum dividend rate will increase by an additional 25 basis points for
each subsequent 90-day period during which the Preferred Stock Registration
Default remains uncured, up to a maximum additional dividend rate of 200 basis
points per annum in excess of the dividend rate originally borne by the Old
Series A Senior Preferred Stock. All Additional Dividends will be payable to
holders of the Old Series A Senior Preferred Stock in cash or, at the option of
the Issuer, in additional shares of Old Series A Senior Preferred Stock on any
dividend payment date occurring on or prior to April 1, 2003 (and, at the
Issuer's option, payment of cash in lieu of fractional shares) on the same
original dividend payment dates commencing with the first such date occurring
after any such Additional Dividend commences to accrue, until such Preferred
Stock Registration Default is cured. After the date on which such Preferred
Stock Registration Default is cured, the dividend rate on the Old Series A
Senior Preferred Stock will revert to the dividend rate originally borne by the
Old Series A Senior Preferred Stock.
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The summary herein of certain provisions of the Exchange Offer
Registration Rights Agreement does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, all the provisions of the
Exchange Offer Registration Rights Agreement, a copy of which will be available
upon request to the Issuer.
DESCRIPTION OF THE OTHER CAPITAL STOCK
The following summary of the capital stock of the Issuer does not purport
to be complete and is qualified in its entirety by reference to the detailed
provisions of the Issuer's Restated Certificate, the Certificates of
Designations and by-laws.
The Issuer's authorized capital stock consists of 120,000 shares of
non-voting Unit Common Stock, $.01 par value, 900,000 shares of voting Common
Stock, $.01 par value and 500,000 shares of preferred stock. The Certificates of
Designations governing Holdings' preferred stock (the "Certificates of
Designation") provide for 120,000 shares of Series A Senior Preferred Stock,
10,000 shares of Series B Junior Preferred Stock and 60,000 shares of Series C
Junior Voting Preferred Stock.
Unit Common Stock
Currently, 720 shares of Unit Common Stock, representing approximately
6.6% of all classes of the Common Stock are outstanding. All of such shares of
Unit Common Stock are validly issued, fully paid and nonassessable. The rights
of holders of shares of Unit Common Stock and voting Common Stock are identical
except for voting rights and certain contractual rights. The rights, preferences
and privileges of holders of Unit Common Stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of
preferred stock, including the Series A Senior Preferred Stock, the Series B
Junior Preferred Stock and the Series C Junior Voting Preferred Stock
outstanding at the Issue Date or which the Issuer may designate in the future.
Voting Rights. Holders of Unit Common Stock are not entitled to vote
except as otherwise required by law. Upon consummation of an initial public
offering of the Common Stock of the Issuer, each share of Unit Common Stock may
be exchanged at the option of the holder thereof for one share of voting Common
Stock.
Dividends. The Issuer does not currently anticipate paying dividends on
its Common Stock. Holders of Unit Common Stock are entitled, when and if
declared by the board of directors of the Issuer out of funds legally available
therefor, to receive dividends on each outstanding share of Unit Common Stock
ratably with the voting Common Stock. The New Credit Facility, the Senior Notes,
the Note Indenture, the Exchange Indenture, and the Certificates of Designations
restrict the ability of the Issuer to pay dividends on its Common Stock,
including the Unit Common Stock.
Unit Common Stock Registration Rights and Stockholders' Agreement
Registration, Tag-Along and Drag-Along Rights. The Issuer, Chartwell and
the Initial Purchaser have entered into a Common Stock Registration Rights and
Stockholders' Agreement (the "Common Stock Registration Rights Agreement") with
respect to the shares of Unit Common Stock issued in the Offering. The Common
Stock Registration Rights Agreement provides that the Initial Purchaser and
persons to whom Unit Common Stock are transferred (collectively, "Holders") have
the registration rights and other rights and obligations with respect to the
Unit Common Stock described below. Unit Common Stock must be exchanged for
voting Common Stock (the "Registrable Securities") prior to any registration
pursuant to the Common Stock Registration Rights Agreement.
Demand Registration Rights. Holders of at least 25% of the Unit Common
Stock will be entitled on or after April 1, 2003 to require the Issuer to effect
one registration under the Securities Act of Registrable Securities ("Demand
Registration"), subject to certain limitations. Upon a demand, the Issuer is
required to prepare, file with the Commission within 40 days (subject to a delay
of up to 60 days under certain limited circumstances) and cause to be effective
within 120 days of such demand, a registration statement in respect of all of
the Registrable
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Securities; provided, that in lieu of filing such registration statement the
Issuer or its designee may make an offer to repurchase all of the Unit Common
Stock at a price per share equal to the fair market value per share of Unit
Common Stock (without any discount for lack of liquidity, the amount of Unit
Common Stock proposed to be sold, the fact that the shares of Unit Common Stock
held by the Holders may represent a minority interest in a private company or
the fact that the Unit Common Stock is non-voting) determined by a nationally
recognized investment banking firm mutually acceptable to the Issuer and the
Holders of a majority of the Registrable Securities to be registered.
Piggy-Back Registration Rights. Holders of Registrable Securities also
have the right to include such Registrable Securities in any registration
statement covering Common Stock under the Securities Act filed by the Issuer for
its own account or for the account of any of its securityholders (other than (i)
a registration statement on Form S-4 or S-8 or any successor form having similar
effect or (ii) a registration statement filed in connection with an offer of
securities solely to existing securityholders) for sale on the same terms and
conditions as the securities of the Issuer or any other selling securityholder
included therein (a "Piggy-Back Registration"). In the case of a Piggy-Back
Registration, the number of Registrable Securities requested to be included
therein is subject to reduction to the extent that the Issuer is advised by the
managing underwriter therefor that the total number of shares proposed to be
included therein is such as to materially and adversely affect the success of
the offering.
The Common Stock Registration Rights Agreement includes customary
covenants on the part of the Issuer and provides that the Issuer will indemnify
the Holders of Registrable Securities included in any registration statement and
any underwriter with respect thereto against certain liabilities.
Tag-Along Rights. In the event of any proposed transfer, sale or other
disposition of voting Common Stock by Chartwell (or any of its Affiliates) in
any transaction, or a series of related transactions involving shares of voting
Common Stock, which when added to the shares previously transferred, constitutes
more than 15% of the shares of voting Common Stock owned by Chartwell and its
Affiliates, (other than to entities, all of the equity interests of which are
directly or indirectly owned by the ultimate parent of Chartwell or to another
similar investment fund, the principal partners or managers of which are Todd R.
Berman or Michael S. Shein), to a person other than an Affiliate of Chartwell
and its Affiliates (for purposes hereof, being a Person as to which Chartwell
and its Affiliates own, directly or indirectly, less than 10% of the common
equity interests and is not otherwise affiliate with Chartwell) (such other
person being hereinafter referred to as the "proposed purchaser"), each of the
Holders shall have the right, subject to certain exceptions, to require the
proposed purchaser to purchase from each of them up to a percentage of the
number of Unit Common Stock owned by such Holder equaling the percentage derived
by dividing the total number of shares of voting Common Stock Chartwell and its
Affiliates propose to transfer (as reduced after giving effect to the exercise
of these tag-along rights) by the total number of shares of voting Common Stock
outstanding. Any Unit Common Stock purchased from the Holders pursuant to such
provision shall be paid for at the same price per security and upon the same
terms and conditions of such proposed transfer by Chartwell and/or its
Affiliates. The provisions of these tag-along rights do not apply to the
transfer by Chartwell, within 60 days after the Recapitalization Closing, of up
to $1.5 million of its interests in Frasier L.L.C. to unaffiliated third parties
at the price paid therefor by Chartwell.
The Issuer shall notify, or cause to be notified, each Holder in writing
of each such proposed transfer at least 30 days prior to the date thereof. Such
notice shall set forth therein in detail the terms and conditions of such sale.
Each Holder shall, upon not less than 10 days' notice following their receipt of
the notice specified in the preceding paragraph, be entitled to sell its shares
pro rata with Chartwell and its Affiliates.
In the event that the proposed purchaser does not purchase Unit Common
Stock from the Holders and on the same terms and conditions as purchased from
Chartwell and/or its Affiliates, then Chartwell and/or its Affiliates shall
purchase such Unit Common Stock if the Transfer occurs.
Tag-along rights shall terminate upon the consummation of offerings
pursuant to one or more effective registration statements filed with the
Commission with respect to shares of Common Stock in one or more public
offerings generating at least $50 million in aggregate gross proceeds of the
Issuer's Common Stock (a "Qualified Public Offering").
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Drag-Along Rights. If, at any time prior to the consummation of a
Qualified Public Offering of the Issuer, Chartwell and its Affiliates determine
to sell not less than 85% of the Common Stock of the Issuer beneficially owned
by Chartwell and its Affiliates to a Person other than an Affiliate of Chartwell
or an underwriter in a Qualified Public Offering of the Issuer or any of its
Subsidiaries, Chartwell shall have the right to require the holders of the
voting Common Stock to sell a like percentage of such voting Common Stock of
such holders to such transferee; provided that, the consideration to be received
by such holders is the same as that to be received by Chartwell and its
Affiliates and, in any event, shall be cash and/or securities registered under
the Securities Act and listed on a national security exchange or authorized for
quotation on the NASDAQ National Market Systems and provided, further, that
after giving effect to such transaction, Chartwell shall not beneficially own,
directly or indirectly, more than 15% of the Common Stock of the Issuer. Any
shares of voting Common Stock purchased pursuant to this paragraph shall be
purchased at the same price per share of voting Common Stock and upon the same
terms and conditions of such proposed transfer by Chartwell and its Affiliates.
Common Stock
All of the outstanding shares of Common Stock are validly issued, fully
paid and nonassessable. Holders of Common Stock, other than Unit Common Stock,
are entitled to one vote for each share held on all matters submitted to a vote
of stockholders. Each share of Series C Junior Voting Preferred Stock is
entitled to .314 votes per share and the holders thereof are entitled to vote as
a class with the holders of voting Common Stock on all matters as to which the
voting Common Stock is entitled to vote. Neither holders of the Common Stock nor
holders of the Series C Junior Voting Preferred Stock have cumulative voting
rights. Accordingly, holders of a majority of the shares entitled to vote in any
election of directors may elect all of the directors standing for election
unless a Voting Rights Triggering Event has occurred. Holders of Common Stock
are entitled to receive ratably such dividends, if any, as may be declared by
the Board of Directors of the Issuer out of funds legally available therefor,
subject to any preferential dividend rights of outstanding Preferred Stock. Upon
the liquidation, dissolution or winding-up of the Issuer, the holders of Common
Stock are entitled to receive ratably the net assets of the Issuer available
after the payment of all debts and other liabilities and subject to the prior
rights of any outstanding preferred stock. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights. The rights,
preferences and privileges of holders of Common Stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of
preferred stock, including the Series A Senior Preferred Stock, the Series B
Junior Preferred Stock and the Series C Junior Voting Preferred Stock
outstanding at the Issue Date or which the Issuer may designate in the future.
Common Stock Stockholders' Agreement
Issuer, MHE Investments and HarnCo entered into the Stockholders'
Agreement simultaneously with the Recapitalization Closing. Pursuant to the
Stockholders' Agreement, HarnCo has the right to appoint a representative,
reasonably acceptable to MHE Investments, to the Issuer's Board of Directors, so
long as HarnCo continues to own at least 5% of the Common Stock. The
Stockholders' Agreement also provides HarnCo the right to purchase its pro rata
share of future issuances of Common Stock, subject to certain limitations.
In addition, the Stockholders' Agreement provides for the following:
Demand Registration. Subsequent to the completion of an initial public
offering of the Common Stock of the Issuer or any of its subsidiaries, HarnCo
shall have two demand registration rights with respect to the Common Stock,
subject to certain limitations.
Piggy Back Rights. HarnCo has an unlimited number of rights to include its
Common Stock in any registration of Common Stock pursuant to the Securities Act,
subject to certain limitations.
Drag-Along Rights. If MHE Investments proposes to sell at least 85% of its
equity securities in the Issuer to an independent third party, MHE Investments
can require HarnCo to sell that same percentage of its equity securities in the
same transaction on the same terms.
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Tag Along Rights. If MHE Investments proposes to sell in excess of 10% of
its Common Stock to an independent third party, HarnCo has the right to sell a
pro rata portion of its Common Stock to the third party in the same transaction
on the same terms.
Preferred Stock
There currently are 57,710 shares of Old Series A Senior Preferred Stock
outstanding, 4,809 shares of Series B Junior Preferred Stock outstanding and
28,855 shares of Series C Junior Voting Preferred Stock outstanding. See
"Description of New Series A Senior Preferred Stock and Exchange Debentures"
above for a description of the terms of the Series A Senior Preferred Stock.
Series B Junior Preferred Stock. The Series B Junior Preferred Stock was
issued to HarnCo in connection with the Recapitalization. Each share of Series B
Junior Preferred Stock has a liquidation preference of $1,000 per share plus
accumulated and unpaid dividends. Dividends on the Series B Junior Preferred
Stock are cumulative from the Issue Date, at an annual rate of 12 1/4%, to be
paid annually in arrears on each April 1 and October 1, commencing October 1
1998. Dividends are payable at the option of the Issuer, on any dividend date
occurring on or prior to April 1, 2003, either in cash or in additional shares
of Series B Junior Preferred Stock. Thereafter, dividends will be payable in
cash.
The Series B Junior Preferred Stock ranks (i) junior to the Series A
Senior Preferred Stock, (ii) senior to the Series C Junior Voting Preferred
Stock, (iii) junior to any other preferred stock not ranking junior to the
Series A Senior Preferred Stock and (iv) senior to any class of Common Stock
with respect to dividend rights and rights upon liquidation, dissolution or
winding up of the Issuer.
The Issuer will be required to redeem in cash all of the Series B Junior
Preferred Stock outstanding on April 1, 2010 at a redemption price equal to 100%
of the liquidation preference thereof plus accumulated and unpaid dividends to
the redemption date.
The Series B Junior Preferred Stock will be redeemable at the option of
the Issuer, in whole or in part, at any time on or after April 1, 2003, at the
redemption prices set forth in the Certificate of Designations with respect to
the Series B Junior Preferred Stock, together with accumulated and unpaid
dividends thereon, if any, to the redemption date. In addition, the Issuer, at
its option, may redeem all, but not less than all, of the Series B Junior
Preferred Stock outstanding at any time on or prior to April 1, 2001 at a
redemption price equal to 112.250% of the liquidation preference thereof
together with accumulated and unpaid dividends thereon, if any, to the
redemption date, out of the net proceeds of one or more Public Equity Offerings;
provided, however, that any such redemption occurs within 90 days following the
closing of any such Public Equity Offering.
Upon the occurrence of a Change of Control, each holder of the Series B
Junior Preferred Stock will be entitled to require the Issuer to make an offer
to purchase such holder's Series B Junior Preferred Stock at a purchase price
equal to 101% of the liquidation preference, together with accumulated and
unpaid dividends thereon, if any, to the repurchase date. The Certificate of
Designations with respect to the Series B Junior Preferred Stock provides that
if the Issuer fails to make or consummate a Change of Control Offer (as defined
therein), the dividend rate on the Series B Junior Preferred Stock will increase
by 400 basis points per annum until such time as the Issuer makes or consummates
a Change of Control Offer.
Holders of the Series B Junior Preferred Stock do not have voting rights,
except under certain limited circumstances or as required by law; provided, that
upon the occurrence of a Voting Rights Triggering Event (as defined in the
Certificate of Designations with respect to the Series B Junior Preferred
Stock), the holders of the then outstanding shares of Series B Junior Preferred
Stock, voting as a class with the holders of the Series A Senior Preferred
Stock, are entitled to elect the lesser of two directors and that number of
directors constituting at least 25% of the members of the Board of Directors of
the Issuer.
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The Certificate of Designations with respect to the Series B Junior
Preferred Stock contains covenants for the benefit of the holders of the Series
B Junior Preferred Stock substantially similar to those of the Series A Senior
Preferred Stock.
Subject to certain provisions, the Series B Junior Preferred Stock is
exchangeable in whole, but not in part, at the option of the Issuer into
subordinated debentures (the "Series B Exchange Debentures") with substantially
the same terms as the Exchange Debentures. The Series B Exchange Debentures, if
issued, will be issued pursuant to an indenture that will contain covenants for
the benefit of the holders of the Series B Exchange Debentures substantially
similar to those contained in the Exchange Indenture, but will be subordinated
in right of payment to the Exchange Debentures.
Series C Junior Voting Preferred Stock. The Series C Junior Preferred
Voting Stock was acquired by MHE Investments in connection with the
Recapitalization. Each share of Series C Junior Preferred Voting Stock has a
liquidation preference of $1,000 per share plus accumulated and unpaid
dividends. Dividends on the Series C Junior Voting Preferred Stock are
cumulative from the Issue Date, at an annual rate of 12 1/2%, to be paid
semi-annually in arrears on each April 1 and October 1, commencing October 1,
1998. Dividends are payable at the option of Issuer, on any dividend date
occurring on or prior to April 1, 2003, either in cash or in additional shares
of Series C Junior Voting Preferred Stock. Thereafter, dividends will be payable
in cash.
The Series C Junior Voting Preferred Stock ranks junior to the Series A
Senior Preferred Stock, the Series B Junior Preferred Stock and any other
preferred stock not ranking senior to the Series A Junior Preferred Stock and
the Series B Junior Preferred Stock, and senior to any class of Common Stock of
the Issuer with respect to dividend rights and rights upon liquidation,
dissolution or winding-up of the Issuer.
The Issuer will be required to redeem in cash all of the Series C Junior
Voting Preferred Stock outstanding on April 1, 2010 at a redemption price equal
to 100% of the liquidation preference thereof plus accumulated and unpaid
dividends to the redemption date.
The Series C Junior Voting Preferred Stock will be redeemable at the
option of the Issuer, in whole or in part, at any time on or after April 1,
2003, at the redemption prices set forth in the Certificate of Designations with
respect to the Series C Junior Preferred Voting Stock, together with accumulated
and unpaid dividends thereon, if any, to the redemption date. In addition, the
Issuer, at its option, may redeem all, but not less than all, of the Series C
Junior Preferred Stock outstanding at any time on or prior to April 1, 2001 at a
redemption price equal to 112.500% of the liquidation preference thereof
together with accumulated and unpaid dividends thereon, if any, to the
redemption date, out of the net proceeds of one or more Public Equity Offerings;
provided, that any such redemption occurs within 90 days following the closing
of any such Public Equity Offering.
Upon the occurrence of a Change of Control, each holder of the Series C
Junior Voting Preferred Stock will be entitled to require the Issuer to make an
offer to purchase such holder's Series C Junior Voting Preferred Stock at a
purchase price equal to 101% of the liquidation preference, together with
accumulated and unpaid dividends thereon, if any, to the repurchase date. The
Certificate of Designations with respect to the Series C Junior Voting Preferred
Stock provides that if the Issuer fails to make or consummate a Change of
Control Offer (as defined therein), the dividend rate on the Series C Junior
Voting Preferred Stock will increase by 400 basis points per annum until such
time as the Issuer makes or consummates a Change of Control Offer.
Each share of Series C Junior Voting Preferred Stock has voting rights of
0.314 votes per share and the holders thereof are entitled to vote as a class
with the holders of Common Stock on all matters as to which voting Common Stock
is entitled to vote. MHE Investments, through its ownership of all of the Series
C Junior Voting Preferred Stock, is entitled to approximately 49.0% of the
voting power of the Issuer, and through its ownership of Common Stock, has 88.2%
of the voting power of the Issuer in the aggregate. Holders of Series C Junior
Preferred Voting Stock are entitled, upon the occurrence and during the
continuance of a Voting Rights Triggering Event to elect one director of the
board of directors of the Issuer. Upon the transfer by MHE Investments to a
third party other than Chartwell or any Affiliate of Chartwell, the Series C
Junior Voting Preferred Stock will be exchanged for Series C
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Junior Preferred Stock (the "Series C Junior Preferred Stock") identical to the
Series C Junior Voting Preferred Stock in all respects except that it will not
have voting rights, other than as required by law.
The Certificate of Designations with respect to the Series C Junior Voting
Preferred Stock contains covenants for the benefit of the holders of the Series
C Junior Preferred Voting Stock substantially similar to the Series A Senior
Preferred Stock.
Subject to certain provisions, the Series C Junior Voting Preferred Stock
and the Series C Junior Preferred Stock are exchangeable in whole, but not in
part, at the option of the Issuer into subordinated debentures (the "Series C
Exchange Debentures") with substantially the same terms as the Exchange
Debentures. The Series C Exchange Debentures, if issued, will be issued pursuant
to an indenture that will contain covenants for the benefit of the holders of
the Series C Exchange Debentures substantially similar to those contained in the
Exchange Debenture, but will be subordinated in right of payment to the Exchange
Debentures and the Series B Exchange Debentures.
Delaware Law and Certain Charter and By-Law Provisions
The Restated Certificate contains certain provisions permitted under the
General Corporation Law of the State of Delaware (the "DGCL") relating to the
liability of directors. The provisions eliminate a director's liability for
monetary damages for a breach of fiduciary duty except in certain circumstances
involving wrongful acts, such as the breach of a director's duty of loyalty or
acts or omissions which involve intentional misconduct or a knowing violation of
law. Further, the Restated Certificate and the Issuer's By-Laws contain
provisions to indemnify the Issuer's directors and officers to the fullest
extent permitted by the DGCL, including payment in advance of a final
disposition of a director's or officer's expenses and attorneys' fees incurred
in defending any action, suit or proceeding. The Issuer believes that these
provisions will assist the Issuer in attracting and retaining qualified
individuals to serve as directors.
BOOK-ENTRY, DELIVERY AND FORM
The Series A Units, the Old Series A Senior Preferred Stock and the Unit
Common Stock (collectively, the "Securities") were sold to QIBs (as defined) in
reliance on Rule 144A of the Securities Act ("Rule 144A Securities"). The Old
Series A Senior Preferred Stock may subsequently have been sold in offshore
transactions in reliance on Regulation S ("Regulation S Securities") or
transferred to institutional "accredited investors" within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act
("Institutional Accredited Investors") in transactions exempt from registration
under the Securities Act not made in reliance on Rule 144A or Regulation S under
the Securities Act ("Other Securities").
Rule 144A Securities initially were represented by one certificate in
registered, global form (the "Old Global Certificate"). The Old Global
Certificate was deposited upon issuance with the Transfer Agent as custodian for
The Depository Trust Company ("DTC"), in New York, New York, and registered in
the name of DTC's nominee. Regulation S Securities and Other Securities held by
Institutional Accredited Investors, if any, are represented by one or more
shares of certificated Securities.
The Old Global Certificate, to the extent directed by holders thereof in
their Letters of Transmittal, will be exchanged through book-entry electronic
transfer for one or more certificates in registered, global form representing
the New Series A Senior Preferred Stock (collectively, the "New Global
Certificate") registered in the name of DTC or its nominee. No service charge
will be made for any registration of transfer or exchange of Series A Senior
Preferred Stock, but the Issuer may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Shares of New Series A Senior Preferred Stock issued to non-qualified
institutional buyers in exchange for shares of Old Series A Senior Preferred
Stock held by such investors, if any, will be issued only in certificated, fully
registered, definitive form. The New Global Certificate will, upon request, be
exchangeable for other shares of New
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Series A Senior Preferred Stock in definitive, fully registered form in whole
shares, but only in accordance with DTC's customary procedures. The New Global
Certificate will also be exchangeable in certain other limited circumstances.
The Issuer, the Transfer Agent and any other agent thereof will be entitled to
treat the DTC's nominee as the sole owner and holder of the unexchanged portion
of the New Global Certificate for all purposes.
Depositary Procedures
DTC has advised the Issuer that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between the Participants through electronic
book-entry changes in accounts of the Participants. The Participants include
securities brokers and dealers (including the Initial Purchaser), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of the Participants and the Indirect Participants.
DTC has also advised the Issuer that pursuant to procedures established by
it, (i) upon deposit of the New Global Certificate, DTC will credit the shares
of New Series A Senior Preferred Stock to the accounts of Participants
designated by the Participants and (ii) ownership of such interests in the New
Global Certificate will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with respect
to other owners of beneficial interests in the New Global Certificate).
Investors in the New Global Certificate may hold their interests therein
directly through DTC, if they are Participants in such system, or indirectly
through organizations which are Participants in such system. The laws of some
states require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer beneficial
interests in Series A Senior Preferred Stock and Exchange Debentures to such
persons may be limited to that extent. Because DTC can act only on behalf of the
Participants, which in turn act on behalf of the Indirect Participants and
certain banks, the ability of a person having beneficial interests in Series A
Senior Preferred Stock or Exchange Debentures to pledge such interests to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests.
Except as described below, owners of interests in the New Global
Certificate will not have New Series A Senior Preferred Stock registered in
their names, will not receive physical delivery of New Series A Senior Preferred
Stock in certificated form and will not be considered the registered owners or
holders thereof under the Restated Certificate for any purpose.
Payments in respect of the principal of (and premium, if any) and
dividends on the New Global Certificate registered in the name of DTC or its
nominee will be payable to DTC or its nominee in its capacity as the registered
holder thereof. The Issuer and the Exchange Agent will treat the persons in
whose names the New Series A Senior Preferred Stock or Exchange Debentures,
including the New Global Certificate, are registered as the owners thereof for
the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither the Issuer or the Exchange Agent or any agent
of the Issuer or the Exchange Agent has or will have any responsibility or
liability for (i) any aspect or accuracy of DTC's records or any Participant's
or Indirect Participant's records relating to or payments made on account of
beneficial ownership interests in the New Global Certificate, or for
maintaining, supervising or reviewing any of DTC's records or any Participant's
or Indirect Participant's records relating to the beneficial ownership interests
in the New Global Certificate, or (ii) any other matter relating to the actions
and practices of DTC or any of the Participants or the Indirect Participants.
DTC has advised the Issuer that its current practice, upon receipt of any
payment in respect of securities such as the New Series A Senior Preferred Stock
or Exchange Debentures (including dividends, principal and interest), is
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to credit the accounts of the relevant Participants with the payment on the
payment date, in amounts proportionate to their respective holdings in principal
amount of beneficial interests in the relevant security as shown on the records
of DTC. Payments by the Participants and the Indirect Participants to the
beneficial owners of the New Series A Senior Preferred Stock or Exchange
Debentures will be governed by standing instructions and customary practices and
will not be the responsibility of DTC, the Exchange Agent or the Issuer. Neither
the Issuer nor the Exchange Agent will be liable for any delay by DTC or any of
the Participants in identifying the beneficial owners of the New Series A Senior
Preferred Stock or Exchange Debentures, and the Issuer and the Exchange Agent
may conclusively rely on and will be protected in relying on instructions from
DTC or its nominee as the registered owner of the New Global Certificate for all
purposes.
Interests in the New Global Certificate will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and the Participants. Transfers between Participants
in DTC will be effected in accordance with DTC's procedures and will be settled
in same-day funds.
DTC has advised the Issuer that it will take any action permitted to be
taken by a holder of Series A Senior Preferred Stock or Exchange Debentures only
at the direction of one or more Participants to whose account with DTC interests
in the Old Global Certificate or the New Global Certificate are credited and
only in respect of such portion of the aggregate principal amount of the Series
A Senior Preferred Stock or Exchange Debentures as to which such Participant or
Participants has or have given such direction. However, if any of the events
described under "--Exchange of Book-Entry Securities for Certificated
Securities" occurs, DTC reserves the right to exchange the New Global
Certificate for New Series A Senior Preferred Stock or Exchange Debentures in
certificate form and to distribute such New Series A Senior Preferred Stock or
Exchange Debentures to its Participants.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Issuer believes
to be reliable, but the Issuer takes no responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate
transfers of interests in the Old Global Certificate and the New Global
Certificate among accountholders in DTC, it is under no obligation to perform or
to continue to perform such procedures, and such procedures may be discontinued
at any time. None of the Issuer or the Exchange Agent nor any agent of the
Issuer or the Exchange Agent will have any responsibility for the performance by
DTC or its participants, indirect participants or accountholders of its
obligations under the rules and procedures governing its operations.
Exchange of Book-Entry Securities for Certificated Securities
The New Global Certificate is exchangeable for definitive New Series A
Senior Preferred Stock or Exchange Debentures in registered certificated form if
(i) DTC (x) notifies the Exchange Agent that it is unwilling or unable to
continue as depository for the New Global Certificate and the Issuer thereupon
fails to appoint a successor depository or (y) has ceased to be a clearing
agency registered under the Exchange Act, (ii) the Issuer, at its option,
notifies the Exchange Agent in writing that it elects to cause the issuance of
the New Series A Senior Preferred Stock or the Exchange Debentures in
certificated form or (iii) there shall have occurred and be continuing a Voting
Rights Triggering Event with respect to the New Series A Senior Preferred Stock
or the Exchange Debentures. In all cases, certificated New Series A Senior
Preferred Stock or Exchange Debentures delivered in exchange for any New Global
Certificate or beneficial interests therein will be registered in the names, and
issued in any approved denominations, requested by or on behalf of the
depository (in accordance with its customary procedures). In addition, subject
to certain restrictions on the transferability of the Series A Senior Preferred
Stock, Series A Senior Preferred Stock in definitive form will be issued upon
the resale, pledge or other transfer of any Series A Senior Preferred Stock or
interest therein to any person or entity that is not a qualified institutional
buyer or that does not participate in DTC.
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CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain U.S. federal income tax
considerations relevant to the acquisition of the New Series A Senior Preferred
Stock in the Exchange Offer; the ownership and disposition of the New Series A
Senior Preferred Stock who acquire the New Series A Senior Preferred Stock
pursuant to the Exchange Offer; the acquisition of Exchange Debentures in
exchange for New Series A Senior Preferred Stock; and the ownership and
disposition of the Exchange Debentures by holders who acquired the Exchange
Debentures in exchange for New Series A Senior Preferred Stock. This discussion
does not purport to be a complete analysis of all potential tax considerations
to prospective purchasers. The discussion is limited solely to U.S. federal
income tax matters. The discussion is based upon the Code, Treasury regulations,
administrative rulings and pronouncements of the Internal Revenue Service
("IRS"), and judicial decisions, all as of the date of this Prospectus and all
of which are subject to change at any time, possibly with retroactive effect. In
particular, potential investors should be aware that certain relevant provisions
of the Code have not been subject to definitive interpretation by the IRS or the
courts.
This discussion is limited to those potential investors who would hold the
New Series A Senior Preferred Stock as a "capital asset" within the meaning of
Section 1221 of the Code. This discussion does not purport to address federal
income tax consequences that may be applicable to particular categories of
investors, including insurance companies, tax-exempt persons, financial
institutions, dealers in securities, persons that own in excess of 10 percent of
Holdings' stock, persons that hold New Series A Senior Preferred Stock or
Exchange Debentures as part of a straddle, hedge, or conversion transaction,
persons that have a functional currency other than the U.S. dollar, holders
subject to the alternative minimum tax, and non-United States persons, including
foreign corporations and nonresident alien individuals, some of which may be
subject to special rules. This discussion does not address any tax
considerations under the laws of any state, locality or jurisdiction, or foreign
country.
Holdings has not sought, nor does it intend to seek, a ruling from the IRS
as to any of the matters covered by this discussion, and there can be no
assurance that the IRS will not successfully challenge the conclusions reached
in this discussion. BECAUSE THE U.S. FEDERAL INCOME TAX CONSEQUENCES DISCUSSED
BELOW DEPEND UPON EACH HOLDER'S PARTICULAR TAX STATUS, AND DEPEND FURTHER UPON
U.S. FEDERAL INCOME TAX LAWS, REGULATIONS, RULINGS AND DECISIONS WHICH ARE
SUBJECT TO CHANGE (WHICH CHANGES MAY BE RETROACTIVE IN EFFECT), PROSPECTIVE
INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE PARTICULAR TAX
CONSEQUENCES OF AN INVESTMENT IN THE NEW SERIES A SENIOR PREFERRED STOCK.
Exchange
The exchange of New Series A Senior Preferred Stock for Old Series A
Senior Preferred Stock pursuant to the Exchange Offer should not be a taxable
event for U.S. federal income tax purposes. As a result, there should be no
material U.S. federal income tax consequences to holders receiving New Series A
Senior Preferred Stock for Old Series A Senior Preferred Stock under the
Exchange Offer, and a holder should have the same adjusted tax basis and holding
period in the New Series A Senior Preferred Stockas it had in the Old Series A
Senior Preferred Stock immediately before the exchange.
Distributions on New Series A Senior Preferred Stock
Based on current information and projections, it is likely that Holdings
will not have current or accumulated earnings and profits ("earnings and
profits") as determined for U.S. federal income tax purposes prior to 1999. As a
result, during such time as Holdings does not have earnings and profits,
distributions on the New Series A Senior Preferred Stock will first be treated
as a nontaxable return of capital and then will be applied against and reduce
the adjusted tax basis of the New Series A Senior Preferred Stock in the hands
of each holder (but not below zero), thereby increasing the amount of any gain
(or reducing the amount of any loss) which would otherwise be realized by such
holder upon a taxable disposition of such New Series A Senior Preferred Stock.
The amount of any such distribution which exceeds the adjusted tax basis of the
New Series A Senior Preferred Stock in the hands of the holder will be treated
as capital gain. Such gain generally will be taxed at a reduced rate for a
holder who is not a
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corporation and who holds such stock for more than one year and at a further
reduced rate for a holder who is not a corporation and who holds such stock for
more than eighteen months. Accordingly, distributions on the New Series A Senior
Preferred Stock which are not out of earnings and profits will not be
characterized as a dividend for U.S. federal income tax purposes with the
additional result that corporate stockholders will not be entitled to claim the
dividends received deduction with respect to such distributions. See the
discussion below under "--Dividends Received Deduction." The amount of any
distribution will be equal to the amount of cash or the fair market value of the
New Series A Senior Preferred Stock distributed.
Treatment of Distributions Out of Earnings and Profits
In the event that Holdings does have earnings and profits, distributions
by Holdings with respect to the New Series A Senior Preferred Stock (whether
paid in cash or by distribution of additional shares of New Series A Senior
Preferred Stock) will be characterized as dividends that are taxable as ordinary
income to the extent of Holdings' earnings and profits.
Dividends Received Deduction
Subject to important restrictions, dividends received out of earnings and
profits by a corporate holder generally will qualify for the 70 percent
dividends received deduction provided by Section 243(a)(1) of the Code. Under
Section 246(b) of the Code, the aggregate dividends received deduction permitted
a corporate holder may not exceed 70 percent of such holder's "taxable income,"
as specially computed under that section. Under Section 246(c) of the Code, the
70 percent dividends received deduction will not be available with respect to
shares of stock which are not held for at least 46 days (at least 91 days in the
case of a dividend attributable to a period or periods aggregating in excess of
366 days), including the day of disposition, but excluding the day of
acquisition or any day which is at least 46 days (at least 91 days in the case
of the more than 366 day period) after the date on which the stock becomes
ex-dividend. The length of time that a holder is deemed to have held shares for
these purposes is reduced for periods during which the holder's risk of loss
with respect to the stock is diminished by reason of the existence of certain
options, contracts to sell, short sales and other similar transactions. Section
246(c) of the Code also denies the dividends received deduction to the extent
that a corporate holder is under an obligation with respect to substantially
similar or related property to make payments corresponding to the dividend
received. Moreover, under Section 246A of the Code, to the extent that a
corporate holder incurs indebtedness "directly attributable" to investment in
the stock and the stock constitutes "debt-financed portfolio stock" as defined
in Section 246A(c)(1) of the Code, the percentage of the dividends received
deduction available to such holder is proportionately reduced.
Extraordinary Dividends. Section 1059 of the Code requires a corporate
holder to reduce (but not below zero) its basis in the New Series A Senior
Preferred Stock by the "nontaxed portion" of any "extraordinary dividend" if the
holder has not held such stock, subject to a risk of loss, for more than two
years before the date Holdings declares, announces, or agrees to, the amount or
payment of such dividend, whichever is earliest. In addition, upon a sale or
disposition of such stock, a holder will recognize gain, in addition to any gain
otherwise required to be recognized, in any amount equal to so much of the
nontaxed portion of all extraordinary dividends as did not cause a reduction in
stock basis due to the limitation on reducing basis below zero. Generally, the
nontaxed portion of an extraordinary dividend is the amount effectively excluded
from income by application of the dividends received deduction. An extraordinary
dividend on preferred stock, such as the New Series A Senior Preferred Stock, is
a dividend that (i) equals or exceeds 5 percent of the holder's adjusted tax
basis in the stock, treating all dividends having ex-dividend dates within an
85-day period as one dividend, or (ii) exceeds 20 percent of the holder's
adjusted tax basis in the stock, treating all dividends having ex-dividend dates
within the same 365-day period as one dividend. A stockholder may elect to
determine whether a dividend on the New Series A Senior Preferred Stock is
extraordinary by reference to the fair market value of the stock on the day
before the ex-dividend date (rather than by reference to the stockholder's
adjusted tax basis) for purposes of the 5 percent or 20 percent tests described
above if the holder is able to establish the fair market value of the New Series
A Senior Preferred Stock as of such date to the satisfaction of the IRS. An
extraordinary dividend may also include any amount treated as a dividend in the
case of a redemption that is either non-pro rata as to all stockholders or in
partial liquidation of the Holdings, regardless of the relative size of the
dividend and regardless of the corporate holder's holding period for the New
Series A Senior Preferred Stock.
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The extraordinary dividend rules do not apply with respect to certain
"qualified preferred dividends." A qualified preferred dividend is any fixed
dividend payable with respect preferred stock which (i) provides for fixed
preferred dividends payable no less often than annually, and (ii) is not in
arrears as to dividends when acquired, provided the actual rate of return, as
determined under Section 1059(e)(3) of the Code, does not exceed 15 percent.
Where a qualified preferred dividend exceeds the 5 percent (or 20 percent)
threshold for extraordinary dividend status described above, (a) the
extraordinary dividend rules will not apply if the holder holds the stock for
more than five years, and (b) if the holder disposed of the stock before it has
been held for more than five years, the aggregate reduction in basis cannot
exceed the excess of the qualified preferred dividends paid on such stock during
the period held by the taxpayer over the qualified preferred dividends which
would have been paid during such period on the basis of the stated rate of
return, as determined under Section 1059(e)(3) of the Code. The length of time
that a taxpayer is deemed to have held stock for this purpose is determined
under principles similar to those contained in Section 246(c) of the Code
(discussed above).
Based upon the issue price of the Series A Senior Preferred Stock, regular
semi-annual distributions should not constitute extraordinary dividends. Under
certain circumstances, however, the redemption of the New Series A Senior
Preferred Stock for cash or in exchange for Exchange Debentures may be treated
as a distribution taxable as a dividend. See the discussion below under "--Sale,
Exchange or Redemption of New Series A Senior Preferred Stock." To the extent
any such redemption constitutes a dividend, it is likely to constitute an
extraordinary dividend to a corporate holder.
Proposed Legislation. The Clinton Administration's Budget Proposal for
Fiscal Year 1999, released February 2, 1998 (the "Administration's Proposal"),
includes a provision that would eliminate the dividends received deduction for
dividends on limited term preferred stock issued after the date of enactment of
legislation. For this purpose, limited preferred stock generally includes any
preferred stock if the issuer or a related person is required to redeem or
purchase the stock within 20 years of the issue date. It is not clear whether
such proposal will be enacted or, if enacted, whether it will be enacted in the
form proposed. However, if the proposal to eliminate the dividends received
deduction on limited term preferred stock is enacted in its current form, the
dividends received deduction may be eliminated with respect to New Series A
Senior Preferred Stock issued after the date of enactment of legislation.
Prospective purchasers of the New Series A Senior Preferred Stock are urged to
consult their tax advisors with respect to the effect of any proposed
legislation.
CORPORATE HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE POSSIBLE APPLICATION OF SECTION 1059 OF THE CODE TO THEIR OWNERSHIP AND
DISPOSITION OF THE NEW SERIES A SENIOR PREFERRED STOCK.
Redemption Premium
If the redemption price of redeemable preferred stock exceeds its issue
price, all or a portion of such excess may, pursuant to Section 305(c) of the
Code, constitute an excess premium (the "Series A Senior Preferred Stock
Discount") that is treated as a series of constructive distributions of property
(and thus as dividends to the extent of Holdings' earnings and profits, and
otherwise as distributions subject to the treatment described above) over the
period during which the New Series A Senior Preferred Stock cannot be called for
redemption under an economic accrual method similar to the method described
under "--Taxation of Stated Interest and Original Issue Discount on Exchange
Debentures" below. For this purpose, Series A Senior Preferred Stock Discount
will generally be treated as zero if it is less than 1/4 of 1 percent of the
redemption price multiplied by the number of complete years from the date of
issuance of the stock until the stock is to be redeemed.
Under the Treasury regulations promulgated under Section 305 of the Code,
Series A Senior Preferred Stock Discount will arise due to the optional
redemption feature only if, based on all of the facts and circumstances as of
the date the New Series A Senior Preferred Stock is issued, redemption pursuant
to the optional redemption is more likely than not to occur. Constructive
distribution treatment would not result, however, if the redemption treatment
were solely in the nature of a penalty for premature redemption. For this
purpose, a penalty for premature redemption is a premium paid as a result of
changes in economic or market conditions over which neither the issuer
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nor the holder has legal or practical control, such as changes in prevailing
dividend rates. The Treasury regulations provide a safe harbor pursuant to which
constructive distribution treatment will not result from an issuer call right if
(i) the issuer and the holder are unrelated, (ii) there are no arrangements that
effectively require the issuer to redeem the stock, and (iii) exercise of the
option to redeem would not reduce the yield of the stock. Holdings believes
that, under the foregoing criteria, the optional redemption feature does not
give rise to Series A Senior Preferred Stock Discount, and accordingly Holdings
will not report redemption premium associated with the optional redemption
feature as a constructive distribution. However, because of the factual nature
of this determination, there can be no assurance that such treatment will be
sustained.
Under the Treasury regulations promulgated under Section 305 of the Code,
Series A Senior Preferred Stock Discount will arise due to a change in control
redemption feature only if, (i) under the same criteria discussed above with
regard to the optional redemption feature, a change in control redemption is
more likely than not to occur and in addition the redemption premium associated
with such redemption is other than solely in the nature of a penalty for
premature redemption, or (ii) triggering Holdings' obligation to redeem under
the change of control redemption feature is within the legal or practical
control of the holders of the New Series A Senior Preferred Stock (or parties
related thereto) and based on all the facts and circumstances on the issue date
such possibility of redemption is more than remote. Holdings believes that,
under the foregoing criteria, the change of control redemption feature does not
give rise to Series A Senior Preferred Stock Discount, and accordingly Holdings
will not report redemption premium associated with the change of control
redemption feature as a constructive distribution. However, because of the
factual nature of this determination, there can be no assurance that such
treatment will be sustained.
The mandatory redemption and the debenture exchange features should result
in no Series A Senior Preferred Stock Discount for the New Series A Senior
Preferred Stock to the extent of the liquidation preference of $1,000 per share
because the redemption price associated with the mandatory redemption and the
debenture exchange is equal to the liquidation preference of the New Series A
Senior Preferred Stock, and because the initial issue price for the New Series A
Senior Preferred Stock is equal to its liquidation preference of $1,000 per
share. However, shares of New Series A Senior Preferred Stock distributed to
holders of New Series A Senior Preferred Stock in lieu of paying cash dividends
may bear Series A Senior Preferred Stock Discount depending on the issue price
of such shares (i.e., the fair market value of such shares on the date of their
issuance).
Sale, Exchange or Redemption of New Series A Senior Preferred Stock
A holder's sale of New Series A Senior Preferred Stock generally will
result in taxable capital gain or loss equal to the difference between the
amount of cash received and the holder's adjusted basis in the New Series A
Senior Preferred Stock sold. Such gain generally will be capital gain and will
be taxed at a reduced rate for a holder who is not a corporation and who holds
the New Series A Senior Preferred Stock for more than one year and at a further
reduced rate for a holder who is not a corporation and who holds such stock for
more than eighteen months.
Redemptions of New Series A Senior Preferred Stock for cash or in exchange
for Exchange Debentures will be a taxable event to the redeemed stockholder. The
amount received in the redemption will be treated as a distribution taxable as a
dividend (to the extent of Holdings' earnings and profits) to the redeemed
stockholder under Section 302 of the Code (and may constitute an extraordinary
dividend under Section 1059 of the Code) unless the redemption: (a) is treated
as a distribution "not essentially equivalent to a dividend" with respect to the
stockholder under Section 302(b)(1); (b) is "substantially disproportionate"
with respect to the stockholder under Section 302(b)(2); (c) "completely
terminates" the stockholder's equity interest in Holdings pursuant to Section
302(b)(3); or (d) is of stock held by a noncorporate stockholder and is in
partial liquidation of Holdings pursuant to Section 302(b)(4). In determining
whether any of these tests has been met, there generally must be taken into
account shares actually owned by the stockholder and shares considered to be
owned by the stockholder by reason of certain constructive ownership rules set
forth in Section 318 of the Code. A distribution will be "not essentially
equivalent to a dividend" as to a particular stockholder only if it results in a
"meaningful reduction" in the stockholder's interest in Holdings, but there
cannot always be certainty as to when such "meaningful reduction" has occurred
because the applicable test is not based on numerical criteria. Prospective
holders of New Series A Senior Preferred Stock should consult their own tax
advisors as to the application of this rule. Satisfaction of the "complete
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termination" and "substantially disproportionate" exceptions is dependent upon
compliance with the objective tests set forth in Sections 302(b)(3) and
302(b)(2) of the Code, respectively.
If any of these tests is met as to a holder, the redemption of the New
Series A Senior Preferred Stock (whether paid in cash or by an exchange of
Exchange Debentures for the New Series A Senior Preferred Stock) generally would
be treated as to that holder as an exchange under Section 302(a) of the Code
giving rise to capital gain or loss (measured by the excess of the amount
received (cash or the issue price of the Exchange Debentures) over the holder's
tax basis in the redeemed stock). Such gain generally will be capital gain and
will be taxed at a reduced rate for a holder who is not a corporation and who
holds such stock for more than one year and at a further reduced rate for a
holder who is not a corporation and who holds the Holdings Preferred Stock for
more than eighteen months. Payments received upon redemption that represent an
amount equal to the cumulative unpaid dividends generally should be treated in
the same manner as other redemption payments if such amount is paid but no
dividend is declared. Under limited circumstances, however, the extraordinary
dividend and/or the redemption premium rules discussed above might nonetheless
apply.
If, however, these tests are not met and a redemption of the New Series A
Senior Preferred Stock is treated as a distribution that is taxable as a
dividend, the amount of the distribution will be measured by the amount of cash
or the issue price of the Exchange Debentures, as the case may be, received by
the holder. The holder's adjusted tax basis in the redeemed New Series A Senior
Preferred Stock will be transferred to any remaining stock holdings in Holdings.
If the holder does not retain any actual stock holding in Holdings (only holding
shares constructively), the holder may lose such basis entirely. Under the
"extraordinary dividend" provisions of Section 1059 of the Code, a corporate
holder may, under certain circumstances, be required to reduce its basis in the
remaining shares of stock of Holdings (and possibly recognize gain upon a
disposition of such shares) to the extent the holder claims the dividends
received deduction with respect to the dividend. See the discussion above under
"--Treatment of Distributions Out of Earnings and Profits."
Depending upon the circumstances, the treatment of the redemption of the
New Series A Senior Preferred Stock as a dividend, in particular upon its
exchange for Exchange Debentures, may produce undesirable federal income tax
consequences, including the requirement to pay substantial federal income tax
prior to the receipt of cash. Prospective purchasers are therefore urged to
consult their own tax advisors regarding satisfaction of the tests described
above in their particular circumstances, including the possibility that a
substantially contemporaneous sale of all or a portion of the purchasers'
interest in the New Series A Senior Preferred Stock or other equity interest
might be regarded as reducing the purchasers' interest in Holdings, thereby
satisfying one or more of the tests of Section 302(b) of the Code.
Depending upon a holder's particular circumstances, the tax consequences
of holding Exchange Debentures may be less advantageous than the tax
consequences of holding New Series A Senior Preferred Stock. Interest payments
and, potentially, original issue discount ("OID") (discussed below in
"--Original Issue Discount on Exchange Debentures") will be currently includible
in the holder's income when paid or accrued. On the other hand, in the absence
of earnings and profits, a holder will not be required to include in income
distributions paid in respect of the New Series A Senior Preferred Stock until
the aggregate amount of such distributions exceeds the holder's tax basis in
such New Series A Senior Preferred Stock. Moreover, if Holdings does have
adequate earnings and profits, a corporate holder may be eligible for the
dividends received deduction with respect to such dividend payments.
PROSPECTIVE HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE
APPLICATION OF SECTION 302 OF THE CODE IN THE EVENT OF A REDEMPTION.
Original Issue Discount on Exchange Debentures
In the event that the New Series A Senior Preferred Stock is exchanged for
Exchange Debentures and the "stated redemption price at maturity" of the
Exchange Debentures exceeds their "issue price" by more than a de minimis amount
(0.25 percent of the stated redemption price at maturity multiplied by the
number of complete years to maturity) the Exchange Debentures will be treated as
having OID equal to the entire amount of such excess.
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If the Exchange Debentures are traded on an established securities market
within the 60 day period ending 30 days after the exchange date, the issue price
of the Exchange Debentures will be their fair market value as of their issue
date. Subject to certain limitations described in the Treasury regulations, the
Exchange Debentures will be deemed to be traded on an established securities
market if, among other things, price quotations will be readily available from
dealers, brokers or traders. If the New Series A Senior Preferred Stock, but not
the Exchange Debentures issued and exchanged therefor, is traded on an
established securities market within the 60 day period ending 30 days after the
exchange, then the issue price of each Exchange Debenture should be the fair
market value of the New Series A Senior Preferred Stock exchanged therefor at
the time of the exchange. The New Series A Senior Preferred Stock generally will
be deemed to be traded on an established securities market if, among other
things, it appears on a system of general circulation that provides a reasonable
basis to determine fair market value based on either recent price quotations or
recent sales transactions. In the event that neither the New Series A Senior
Preferred Stock nor the Exchange Debentures are traded on an established
securities market within the applicable period, the issue price of the Exchange
Debentures will be their stated principal amount--namely, their face
value--unless either (i) the Exchange Debentures do not bear "adequate stated
interest" within the meaning of Section 1274 of the Code, which is unlikely, or
(ii) also unlikely, the Exchange Debentures are issued in a so called
"potentially abusive situation" as defined in the Treasury regulations under
Section 1274 of the Code (including a situation involving a recent sales
transaction), in which case the issue price of such Exchange Debentures
generally will be the fair market value of the New Series A Senior Preferred
Stock surrendered in exchange therefor.
The "stated redemption price at maturity" of the Exchange Debentures will
equal the total of all payments under the Exchange Debentures, other than
payments of "qualified stated interest." "Qualified stated interest" generally
is stated interest that is unconditionally payable in cash or other property
(other than an additional debt instrument of the issuer) at least annually at a
single fixed rate. Exchange Debentures that are issued when Holdings has the
option to pay interest for certain periods in additional Exchange Debentures
should be treated as having been issued without any qualified stated interest.
Accordingly, the sum of all interest payable pursuant to the stated interest
rate on such Exchange Debentures over the entire term should be included (along
with stated principal) in the stated redemption price at maturity of such
Exchange Debentures. On the other hand, if the Exchange Debentures are issued
after the period for paying interest in additional Exchange Debentures has
passed, then stated interest would qualify as qualified stated interest and none
of such stated interest would be included in the stated redemption price at
maturity of the Exchange Debentures. Whether or not stated interest on the
Exchange Debentures qualifies as qualified stated interest, the Exchange
Debentures will have OID, subject to the de minimis exception, if their stated
redemption price at maturity exceeds their issue price.
Taxation of Stated Interest and Original Issue Discount on Exchange Debentures
Each holder of an Exchange Debenture with OID will be required to include
in gross income an amount equal to the sum of the "daily portions" of the OID
for all days during the taxable year in which such holder holds the Exchange
Debenture, even though the cash to which such income is attributable may not be
received until sale, redemption or maturity of the Exchange Debenture. The daily
portions of OID required to be included in a holder's gross income in a taxable
year will be determined under a constant yield method by allocating to each day
during the taxable year in which the holder holds the Exchange Debenture a pro
rata portion of the OID thereon which is attributable to the accrual period in
which such day is included. The amount of the OID attributable to each accrual
period will be the product of the "adjusted issue price" of the Exchange
Debenture at the beginning of such accrual period multiplied by the "yield to
maturity" of the Exchange Debenture (properly adjusted for the length of the
accrual period). The adjusted issue price of an Exchange Debenture at the
beginning of an accrual period is the original issue price of the Exchange
Debenture plus the aggregate amount of OID that accrued in all prior accrual
periods, less any cash payments on the Exchange Debenture. The "yield to
maturity" is the discount rate that, when used in computing the present value of
all principal and interest payments to be made under the Exchange Debenture,
produces an amount equal to the issue price of the Exchange Debenture.
An additional Exchange Debenture (a "Secondary Debenture") issued in
payment of interest with respect to an initially issued Exchange Debenture (an
"Initial Debenture") will not be considered as a payment made on the Initial
Debenture and will instead be aggregated with the Initial Debenture for purposes
of computing and accruing
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OID on the Initial Debenture. As between the Initial Debenture and the Secondary
Debenture, the adjusted issue price of the Initial Debenture would be allocated
between the Initial Debenture and the Secondary Debenture in proportion to their
respective principal amounts. That is, upon the issuance of a Secondary
Debenture with respect to an Initial Debenture, the Initial Debenture and the
Secondary Debenture derived from the Initial Debenture are treated as initially
having the same adjusted issue price and inherent amount of OID per dollar of
principal amount. The Initial Debenture and the Secondary Debenture derived
therefrom also would be treated as having the same yield to maturity. Similar
treatment would be applied when additional Secondary Debentures are issued in
lieu of paying interest. The issue date of the Initial Debenture will also be
the issue date of the Secondary Debenture.
In the event that the Exchange Debentures are issued after April 1, 2003,
when Holdings no longer has the option to pay interest thereon in additional
Exchange Debentures, stated interest would be included in income by a holder in
accordance with such holder's usual method of accounting. In all other cases,
all stated interest will be treated as payments on the Exchange Debentures under
the rules discussed above.
Holdings will furnish annually to the IRS and to certain record holders of
the Exchange Debentures information relating to the OID, if any, accruing during
the calendar year. Such information will be based on the amount of OID that
would have accrued to a holder who acquired the Exchange Debenture on original
issue.
Bond Premium on Exchange Debentures
If the holder's basis in the Exchange Debentures exceeds the amount
payable at the maturity date (or earlier call date, if appropriate), such excess
will be deductible by the holder of the Exchange Debentures as amortizable bond
premium over the term of the Exchange Debentures (taking into account earlier
call dates, as appropriate), under a yield-to-maturity formula, if an election
by the holder under Section 171 of the Code is made or is already in effect. An
election under Section 171 of the Code is available only if the Exchange
Debentures are held as capital assets. This election is revocable only with the
consent of the IRS and applies to all obligations owned or subsequently acquired
by the holder on or after the first day of the taxable year to which the
election applies. To the extent the excess is deducted as amortizable bond
premium, the holder's adjusted tax basis in the Exchange Debentures will be
reduced. The amortizable bond premium is treated as an offset to interest income
on the Exchange Debentures rather than as a separate deduction item. Final
regulations coordinate these amortizable bond premium rules with the acquisition
premium rules in "--Acquisition Premium on Exchange Debentures" below, and in
general would defer to the operation of the acquisition premium rules in the
case of Exchange Debentures issued on or before April 1, 2003, when Holdings has
the option to pay interest on Exchange Debentures in additional Exchange
Debentures (thus precluding stated interest thereon from being qualified stated
interest).
Acquisition Premium on Exchange Debentures
A holder of an Exchange Debenture issued with OID who purchases such
Exchange Debenture for an amount that is greater than its then adjusted issue
price but equal to or less than the sum of all amounts payable on the Exchange
Debenture after the purchase date (other than payments, if any, of qualified
stated interest) will be considered to have purchased such Exchange Debenture at
an "acquisition premium." Under the acquisition premium rules, the amount of OID
which such holder must include in income with respect to such Exchange Debenture
for any taxable year will be reduced by the portion of such acquisition premium
properly allocable to such year.
Market Discount on Exchange Debentures
Purchasers of New Series A Senior Preferred Stock should be aware that the
disposition of Exchange Debentures may be affected by the market discount
provisions of the Code. The market discount rules generally provide that if a
holder of a debt instrument purchases it at a "market discount" and thereafter
realizes gain upon a disposition or a retirement of the debt instrument, the
lesser of such gain or the portion of the market discount that has accrued on a
straight line basis (or on a constant interest rate basis, if such alternative
rate of accrual has been elected by the holder under Section 1276(b) of the
Code) while the debt instrument was held by such holder will be taxed as
ordinary income at the time of such disposition. "Market discount" with respect
to the Exchange
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Debentures will be the amount, if any, by which the "revised issue price" of an
Exchange Debenture (or its stated redemption price at maturity if the Exchange
Debenture has no OID) exceeds the holder's basis in the Exchange Debenture
immediately after such holder's acquisition, subject to a de minimis exception.
The "revised issue price" of an Exchange Debenture is its issue price increased
by the portion of OID previously includible in the gross income of prior holders
for periods prior to the acquisition of the Exchange Debenture by the holder
(without regard to any acquisition premium exclusion) and reduced by prior
payments other than payments of qualified stated interest.
A holder who acquires an Exchange Debenture at a market discount also may
be required to defer a portion of any interest expense that otherwise may be
deductible on any indebtedness incurred or maintained to purchase or carry such
Exchange Debenture until the holder disposes of the Exchange Debenture in a
taxable transaction. Similarly, to the extent of any accrued market discount on
such Exchange Debenture, otherwise unrecognized gain in the Exchange Debenture
will be includible as ordinary income upon disposition of such Exchange
Debenture in certain otherwise non-taxable transfers (such as gifts).
A holder of Exchange Debentures acquired at a market discount may elect
for federal income tax purposes to include market discount in gross income as
the discount accrues, either on a straight-line basis or on a constant interest
rate basis. This current inclusion election, once made, applies to all market
discount obligations acquired on or after the first date of the first taxable
year to which the election applies, and may not be revoked without the consent
of the IRS. If a holder of Exchange Debentures makes such an election, the
foregoing rules with respect to the recognition of ordinary income on sales and
other dispositions of such debt instruments, and with respect to the deferral of
interest deductions on indebtedness incurred or maintained to purchase or carry
such debt instruments, would not apply.
Election to Treat All Interest as Original Issue Discount
A holder may elect to include in gross income all interest that accrues on
an Exchange Debenture using the constant yield method described above under the
heading "--Taxation of Stated Interest and Original Issue Discount on Exchange
Debentures." Holders should consult their own tax advisors regarding the manner
and advisability of making this election.
Applicable High Yield Discount Obligation Consequences
The Exchange Debentures will constitute "applicable high yield discount
obligations" ("AHYDOs") if the yield to maturity of such Exchange Debentures is
equal to or greater than the sum of the relevant applicable federal rate (the
"AFR") for debt instruments at the time the Exchange Debentures are issued plus
five percentage points and they have "significant" OID. A debt instrument is
treated as having significant OID if the aggregate amount that would be included
in gross income with respect to such debt instrument for periods before the
close of any accrual period ending after the date five years after the date of
issue exceeds the sum of (i) the aggregate amount of interest to be paid in cash
under the debt instrument before the close of such accrual period and (ii) the
product of the initial issue price of such debt instrument and its yield to
maturity. It is currently impossible to determine whether the Exchange
Debentures will be treated as AHYDOs because the amount of OID, if any,
attributable to the Exchange Debentures cannot be determined until they are
issued.
If the Exchange Debentures are AHYDOs, a portion of the tax deductions
that would otherwise be available to the Company in respect of the Exchange
Debentures will be deferred or disallowed, which, in turn, might reduce the
after-tax cash flows of Holdings. More particularly, if the Exchange Debentures
constitute AHYDOs, Holdings will not be entitled to deduct OID that accrues with
respect to such Exchange Debentures until amounts attributable to OID are paid
in cash. In addition, if the yield to maturity of the Exchange Debentures
exceeds the sum of the relevant AFR plus six percentage points (the "Excess
Yield"), the "disqualified portion" of the OID accruing on the Exchange
Debenture will be characterized as a non-deductible dividend with respect to
Holdings and also may be treated as a dividend distribution solely for purposes
of the dividends received deduction with respect to holders that are U.S.
corporations. In general, the "disqualified portion" of OID for any accrual
period will be equal to the product of (i) a percentage determined by dividing
the Excess Yield by the yield to maturity and (ii) the OID for the
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accrual period. Subject to otherwise applicable limitations, such a corporate
holder will be entitled to a dividends received deduction (generally at a 70%
rate) with respect to the disqualified portion of the accrued OID if Holdings
has sufficient earnings and profits. To the extent that Holdings' earnings and
profits are insufficient, any portion of the OID that otherwise would have been
recharacterized as a dividend for purposes of the dividends received deduction
will continue to be taxed as ordinary OID income in accordance with the rules
described above in "--Taxation of Stated Interest and Original Issue Discount on
Exchange Debentures."
Redemption or Sale of Exchange Debentures
Generally, any redemption or sale of the Exchange Debentures by a holder
would result in taxable gain or loss equal to the difference between the sum of
the amount of cash and the fair market value of other property received (except
to the extent attributable to accrued, but previously untaxed, interest, which
portion of the consideration would be taxed as ordinary income) and the holder's
adjusted basis in the Exchange Debentures. The adjusted tax basis of a holder
who receives an Exchange Debenture in exchange for New Series A Senior Preferred
Stock will generally be equal to the issue price of the Exchange Debenture
increased by any OID with respect to the Exchange Debenture included in the
holder's income prior to sale or redemption of the Exchange Debenture, reduced
by any amortizable bond premium applied against the holder's income prior to
sale or redemption of the Exchange Debenture and by any cash payments other than
payments of qualified stated interest. Except to the extent that an intention to
call the Exchange Debentures prior to their maturity existed at the time of
their original issue as an agreement or understanding between Holdings and the
original holders of a substantial amount of the Exchange Debentures (which
Holdings believes is unlikely, but might nonetheless be asserted by the IRS
under a theory that the optional redemption and the change in control redemption
in respect of the Exchange Debentures manifests such an intention), and subject
to the above discussion of market discount, such gain or loss would be capital
gain or loss and would be long term capital gain or loss.
Backup Withholding
Federal income tax backup withholding at a rate of 31 percent on
dividends, interest payments (including accrued OID), and proceeds from a sale,
exchange, or redemption of New Series A Senior Preferred Stock or Exchange
Debentures, will apply unless the holder (i) is a corporation or comes within
certain other exempt categories (and, when required, demonstrates this fact) or
(ii) provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding, and otherwise complies with applicable
requirements of the backup withholding rules. The amount of any backup
withholding from a payment to a holder will be allowed as a credit against the
holder's federal income tax liability and may entitle such holder to a refund,
provided that the required information is furnished to the IRS.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSIDERATIONS DOES
NOT CONSIDER THE FACTS AND CIRCUMSTANCES OF ANY PARTICULAR PROSPECTIVE HOLDER'S
SITUATION OR STATUS, AND ACCORDINGLY DOES NOT CONSTITUTE TAX ADVICE. EACH
PURCHASER OF NEW SERIES A SENIOR PREFERRED STOCK SHOULD CONSULT ITS OWN TAX
ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO IT, INCLUDING THOSE UNDER STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS, AND UNDER ANY RECENT OR PROSPECTIVE CHANGES
IN APPLICABLE TAX LAWS.
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PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Securities Purchase
Agreement (the "Purchase Agreement") dated March 23, 1998, Holdings sold to CIBC
Oppenheimer Corp. (the "Initial Purchaser"), and the Initial Purchaser purchased
from Holdings 57,710 Series A Units, consisting of 57,710 shares of Old Series A
Senior Preferred Stock and 720 shares of Unit Common Stock.
The purchase price for the Series A Units was $1,039.68 per share (the
"Unit Offering Price") less the Initial Purchaser's discount of 4.0% per Series
A Unit. The Initial Purchaser sold the Series A Units at the Unit Offering Price
to "Qualified Institutional Buyers" within the meaning of Rule 144A of the
Securities Act.
The Issuer reimbursed the Initial Purchaser for certain expenses and
agreed to indemnify the Initial Purchaser against certain liabilities, including
liabilities under the Securities Act.
The Initial Purchaser acted as a co-agent under the New Credit Facility
and as an initial purchaser in the Senior Note Offering and received customary
fees and had expenses reimbursed in connection with such services.
An affiliate of the Initial Purchaser invested an aggregate of $13.5
million in Frasier L.L.C. and in Niles L.L.C., to acquire indirect equity
interests in Holdings, on arm's length terms concurrent with the Offering.
Each broker-dealer that receives shares of New Series A Senior
Preferred Stock (or any Exchange Debentures issued in exchange therefor) for its
own account pursuant to the Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such shares of New Series A Senior
Preferred Stock (or any Exchange Debentures issued therefor). 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 shares of New Series A Senior
Preferred Stock (or any Exchange Debentures issued in exchange therefor)
received in exchange for shares of Old Series A Senior Preferred Stock only
where such shares of Old Series A Senior Preferred Stock were acquired as a
result of market-making activities or other trading activities. Holdings has
agreed that it will make this Prospectus, as amended or supplemented, available
to any broker-dealer for use in connection with any such resale for a period
until 180 days after the Registration Statement has been declared effective, or
such shorter period as will terminate when all shares of Old Series A Senior
Preferred Stock acquired by broker-dealers for their own accounts as a result of
market-making activities or other trading activities have been exchanged for
shares of New Series A Senior Preferred Stock and such shares of New Series A
Senior Preferred Stock (or any Exchange Debentures issued in exchange therefor)
have been resold by such broker-dealers.
Holdings will not receive any proceeds from any sale of New Series A
Senior Preferred Stock (or any Exchange Debentures issued in exchange therefor)
by broker-dealers. Shares of New Series A Senior Preferred Stock 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 shares of New
Series A Senior Preferred Stock (or any Exchange Debentures issued in exchange
therefor) or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or negotiated prices. Any such resale may be made directly to purchasers
or to or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers of
any shares of New Series A Senior Preferred Stock (or any Exchange Debentures
issued in exchange therefor). Any broker-dealer that resells shares of New
Series A Senior Preferred Stock (or any Exchange Debentures issued in exchange
therefor) 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
shares of New Series A Senior Preferred Stock (or any Exchange Debentures issued
in exchange therefor) may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of shares of New Series A
Senior Preferred Stock (or any Exchange Debentures issued in exchange therefor)
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.
142
<PAGE>
For a period until 180 days after the Registration Statement has been
declared effective, or such shorter period as will terminate when all shares of
Old Series A Senior Preferred Stock acquired by broker-dealers for their own
accounts as a result of market-making activities or other trading activities
have been exchanged for shares of New Series A Senior Preferred Stock and such
shares of New Series A Senior Preferred Stock (or any Exchange Debentures issued
in exchange therefor) have been resold by such broker-dealers, Holdings 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. Holdings has agreed to pay all expenses incident
to the Exchange Offer other than commissions or concessions of any brokers or
dealers and the fees of any counsel or other advisors or experts retained by the
holders of the Series A Senior Preferred Stock, except as expressly set forth in
the Exchange Offer Registration Rights Agreement, and will indemnify the holders
of the Series A Senior Preferred Stock (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
EXPERTS
The combined financial statements of the Material Handling Equipment
Business of Harnischfeger Industries, Inc. as of October 31, 1997 and 1996 and
for each of the three fiscal years in the period ended October 31, 1997,
included in this Prospectus, have been so included in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
LEGAL MATTERS
The validity of the New Series A Senior Preferred Stock will be passed
upon for Holdings by Akin, Gump, Strauss, Hauer & Feld, L.L.P., Washington,
D.C., counsel to Holdings.
143
<PAGE>
INDEX TO COMBINED FINANCIAL STATEMENTS
Page
Reference
---------
MATERIAL HANDLING EQUIPMENT BUSINESS OF HARNISCHFEGER INDUSTRIES, INC.
Combined Balance Sheets as of October 31, 1997 and
January 31, 1998 (unaudited)................................. F-2
Unaudited Combined Statements of Income for the
Three Months Ended January 31, 1998 and
January 31, 1997............................................. F-3
Unaudited Combined Statements of Cash Flows for the
Three Months Ended January 31, 1998
and January 31, 1997......................................... F-4
Notes to Unaudited Combined Financial Statements................ F-5
Report of Independent Accountants............................... F-13
Combined Balance Sheets as of October 31, 1997
and October 31, 1996......................................... F-14
Combined Statements of Income for the Years Ended
October 31, 1997, October 31, 1996 and
October 31, 1995............................................. F-15
Combined Statements of Cash Flows for the Years
Ended October 31, 1997, October 31, 1996
and October 31, 1995......................................... F-16
Notes to Combined Financial Statements.......................... F-17
For purposes hereof, it is assumed that Holdings has historically owned
the capital stock of Morris Material Handling, Inc., that all of the assets of
the MHE Business were owned by subsidiaries thereof and that immediately prior
to the consummation of the Recapitalization, the historical combined financial
statements of Holdings were identical to those of the MHE Business which are
presented herein.
F-1
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
COMBINED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
January 31, October 31,
1998 1997
----------- -----------
(dollars in thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................................................ $ 6,317 $ 1,532
Accounts receivable--net................................................. 75,545 82,209
Inventories.............................................................. 36,509 33,497
Other current assets..................................................... 6,348 4,765
-------- --------
Total current assets............................................... 124,719 122,003
-------- --------
Property, Plant and Equipment
Land and improvements.................................................... 3,328 3,466
Buildings................................................................ 20,860 21,379
Machinery and equipment.................................................. 36,268 35,918
60,456 60,763
Less accumulated depreciation............................................ (22,462) (21,396)
-------- --------
37,994 39,367
-------- --------
Other Assets
Goodwill 31,792 32,229
Other.................................................................... 5,874 6,001
37,666 38,230
-------- --------
Total assets....................................................... $200,379 $199,600
======== ========
LIABILITIES AND SHAREHOLDER'S INVESTMENT
Current Liabilities
Short-term notes payable and current portion of long-term obligations.... $ 567 $ 752
Bank overdrafts.......................................................... 2,713 4,293
Trade accounts payable................................................... 26,729 32,656
Employee compensation and benefits....................................... 7,513 8,113
Advance payments and progress billings................................... 8,829 7,685
Accrued warranties....................................................... 3,476 3,998
Income taxes payable..................................................... 2,563 2,393
Other current liabilities................................................ 10,777 10,870
-------- --------
Total current liabilities.......................................... 63,167 70,760
-------- --------
Long-Term Obligations.......................................................... 1,009 1,043
Deferred Income Taxes.......................................................... 3,142 3,088
Minority Interest.............................................................. 377 391
Shareholder's Investment....................................................... 132,684 124,318
-------- --------
Total liabilities and shareholder's investment..................... $200,379 $199,600
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
COMBINED STATEMENTS OF INCOME
(unaudited)
For the Three
Months Ended
January 31,
----------------------
1998 1997
--------- ----------
(dollars in thousands)
Revenues
Net sales.......................................... $ 76,483 $ 79,982
Other income-net................................... 284 1,254
-------- --------
76,767 81,236
Cost of Sales............................................ 56,653 60,792
Product Development, Selling and Administrative Expenses. 14,480 13,248
Parent Management Fee.................................... 677 648
-------- --------
Operating income............................... 4,957 6,548
Interest (Expense)/Income-Net
Affiliates......................................... (687) 190
Third party........................................ (158) (48)
-------- --------
Income Before Income Taxes and Minority Interest......... 4,112 6,690
Provision for Income Taxes............................... (1,987) (2,671)
Minority Interest........................................ 14 (8)
-------- --------
Net income..................................... $ 2,139 $ 4,011
======== ========
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
COMBINED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the Three
Months Ended
January 31,
----------------------
1998 1997
---------- ----------
(dollars in thousands)
<S> <C> <C>
Operating Activities
Net income ............................................................. $ 2,139 $ 4,011
Add/(deduct)-items not affecting cash provided by operating activities:
Depreciation and amortization .................................... 1,659 1,548
Minority interest ................................................ 14 8
Deferred income taxes-net ........................................ 46 20
Gain on fire insurance claim ..................................... -- (1,100)
Other ............................................................ 34 --
Changes in working capital:
Accounts receivable .............................................. 5,274 (2,138)
Inventories ...................................................... (4,512) (994)
Other current assets ............................................. (1,618) (212)
Trade accounts payable and bank overdrafts ....................... (7,345) 3,156
Employee compensation and benefits ............................... (571) (1,541)
Advance payments and progress billings ........................... 2,659 2,175
Accrued warranties ............................................... (523) (158)
Other current liabilities ........................................ 2,076 (3,557)
Activity with parent and other affiliates-net .................... 5,928 (777)
------- -------
Net cash provided by operating activities .................................... 5,260 441
------- -------
Investment and Other Transactions
Fixed asset additions-net .............................................. (816) (1,744)
Fire insurance claim activity-net ...................................... -- 1,100
Other-net .............................................................. 466 (279)
------- -------
Net cash used for investment and other transactions .......................... (350) (923)
------- -------
Financing Activities
(Repayments)/issuance of debt .......................................... (207) 149
------- -------
Net cash (applied to)/provided by financing activities ....................... (207) 149
------- -------
Effect of Exchange Rate Changes on Cash and Cash Equivalents ................. 82 31
------- -------
Increase/(decrease) in Cash and Cash Equivalents ............................. 4,785 (302)
Cash and Cash Equivalents
Beginning of Period .................................................... 1,532 3,821
------- -------
End of Period .......................................................... $ 6,317 $ 3,519
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS OF
HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(dollars in thousands unless indicated)
(unaudited)
Note 1--Basis of Presentation
In the opinion of management, all adjustments necessary for the fair
presentation of the results of operations for the three months ended January 31,
1998 and 1997, cash flows for the three months ended January 31, 1998 and 1997,
and financial position at January 31, 1998 have been made. All adjustments made
are of a normal recurring nature.
These financial statements should be read in conjunction with the audited
combined financial statements and the notes thereto of the Material Handling
Equipment Business (the "Company") of Harnischfeger Industries, Inc. ("HII") for
each of the three years in the period ended October 31, 1997.
The results of operations for any interim period are not necessarily
indicative of the results to be expected for the full year.
Note 2--Recapitalization Transaction
On January 28, 1998, Harnischfeger Industries, Inc., the Company's parent,
announced that it had reached an agreement with Chartwell Investments Inc. for
the sale of approximately an 80 percent common ownership interest in the Company
for approximately $340 million. The transaction, which is subject to completion
of Chartwell's financing arrangements, would result in a significant change in
the Company's capital structure as a result of debt obligations expected to be
issued to effect the transaction.
Note 3--Inventories
Combined inventories consisted of the following:
January 31, October 31,
1998 1997
----------- -----------
Raw material.......................................... $13,282 $17,391
Work-in-process....................................... 17,849 13,654
Finished parts........................................ 13,630 10,704
------- -------
44,761 41,749
Less excess of current cost over stated LIFO value.... (8,252) (8,252)
------- -------
$36,509 $33,497
======= =======
Inventories valued using the LIFO method represented approximately 39% and
43% of combined inventories at January 31, 1998 and October 31, 1997,
respectively.
Note 4--Contingent Liabilities
At January 31, 1998, the Company and/or its parent were contingently
liable to financial institutions and others for approximately $53,637 for
outstanding letters of credit and surety bonds securing performance of sales
contracts related to the Company's operations.
F-5
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS OF
HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
(unaudited)
The Company is a party to various litigation matters, including product
liability and other claims, which are normal in the course of its operations.
Also, as a normal part of its operations, the Company undertakes certain
contractual obligations and warranties in connection with the sale of products
or services. Although the outcome of these matters cannot be predicted with
certainty, management believes that such matters will not have a material
adverse effect on the Company's combined results of operations, financial
position or cash flows.
The Company is also involved in a number of proceedings and potential
proceedings relating to environmental matters. Although it is difficult to
estimate the potential exposure to the Company related to these environmental
matters, management believes that these matters will not have a material adverse
effect on its combined results of operations, financial position or cash flows.
Note 5--Gain on Fire Insurance Claim
During the first quarter of fiscal 1997, the Company recognized a gain of
approximately $1.1 million based upon the status of the property loss and
business interruption insurance claim related to the 1995 fire at its facility
in the United Kingdom.
Note 6--Sale of Facility
During the first quarter of fiscal 1998, the Company completed the sale of
its Dayton, Ohio land and building which it had acquired in connection with the
acquisition of an aftermarket operation during the prior year. The operation's
former owners reacquired these assets in exchange for a note receivable of $427
and settlement of the remaining amount of $300 due to the former owners related
to the Company's acquisition. The balance of the note was collected in full by
the Company after January 31, 1998. No significant gain or loss was recognized
in connection with this transaction.
Note 7--Supplemental Condensed Combining Financial Information
The sale by Harnischfeger Industries, Inc. of a majority interest in the
Company to MHE Investments, Inc. was completed on March 30, 1998 (see Note 2).
The transaction was accounted for as a recapitalization of MMH Holdings, Inc.
("Holdings"), the owner, directly or indirectly, of all of the equity interests
of the entities engaged in the Material Handling Equipment Business that were
previously owned by Harnischfeger Industries, Inc. In connection with the
transaction, Morris Material Handling, Inc. ("MMH"), a direct wholly-owned
subsidiary of Holdings, issued debt securities that are guaranteed by certain of
the Company's affiliates (the "Guarantor Subsidiaries"). Each of the Guarantor
Subsidiaries is a wholly owned subsidiary, directly or indirectly, of MMH and
the guarantees are full, unconditional and joint and several. Both Holdings and
MMH are holding companies with no material operating assets. All of the
Company's business operations are conducted through subsidiaries of MMH.
F-6
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS OF
HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
(unaudited)
Separate financial statements of the Guarantor Subsidiaries are not
presented because Company management has determined that they would not be
material to investors. The following supplemental financial information sets
forth, on an uncombined basis, balance sheet, statement of operations and cash
flow information for the Guarantor Subsidiaries and for the Company's other
affiliates (the "Non-Guarantor Subsidiaries"). The supplemental financial
information reflects the investments of the Guarantor Subsidiaries in the
Non-Guarantor Subsidiaries using the equity method of accounting. For purposes
of this presentation, it is assumed that all of the assets of the Company were
historically owned by subsidiaries of MMH, which is an entity that was formed by
Holdings in connection with the transaction. Accordingly, the historical
combined financial statements of MMH and Holdings are identical following
completion of the recapitalization.
F-7
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS OF
HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
(unaudited)
SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEET
January 31, 1998
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries Eliminations Combined
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 6,206 $ 111 $ $ 6,317
Accounts receivable - net 67,626 7,919 75,545
Intercompany accounts receivable 4,723 (4,723) --
Inventories 32,635 3,874 36,509
Other current assets 6,040 308 6,348
--------- --------- --------- ---------
117,230 12,212 (4,723) 124,719
--------- --------- --------- ---------
Property, Plant and Equipment - net 35,090 2,904 -- 37,994
--------- --------- --------- ---------
Other Assets
Goodwill 29,729 2,063 31,792
Noncurrent intercompany receivables 3,750 -- (3,750) --
Investment in affiliates 609 -- (609) --
Other 5,874 -- 5,874
--------- --------- --------- ---------
39,962 2,063 (4,359) 37,666
--------- --------- --------- ---------
$ 192,282 $ 17,179 $ (9,082) $ 200,379
========= ========= ========= =========
LIABILITIES AND SHAREHOLDER'S INVESTMENT
Current Liabilities
Short-term notes payable and
current portion of long-term obligations $ 528 $ 39 $ $ 567
Bank overdrafts 433 2,280 2,713
Trade accounts payable 23,111 3,618 26,729
Intercompany accounts payable 4,723 (4,723) --
Employee compensation and benefits 7,471 42 7,513
Advance payments and progress
billings 8,643 186 8,829
Accrued warranties 3,394 82 3,476
Income taxes payable 2,120 443 2,563
Other current liabilities 10,390 387 10,777
--------- --------- --------- ---------
56,090 11,800 (4,723) 63,167
--------- --------- --------- ---------
Long-Term Obligations 366 643 1,009
Noncurrent intercompany payables -- 3,750 (3,750) --
Deferred Income Taxes 3,142 -- 3,142
Minority Interest -- -- 377 377
Shareholder's Investment 132,684 986 (986) 132,684
--------- --------- --------- ---------
$ 192,282 $ 17,179 $ (9,082) $ 200,379
========= ========= ========= =========
</TABLE>
F-8
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS OF
HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
(unaudited)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF INCOME
First Quarter Ended January 31, 1998
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries Eliminations Combined
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
Revenues
Net Sales $ 73,136 $ 5,210 $ (1,863) $ 76,483
Other Income - Net 284 -- 284
-------- -------- -------- --------
73,420 5,210 (1,863) 76,767
Cost of Sales 54,562 3,954 (1,863) 56,653
Product Development, Selling
and Administrative Expenses 13,277 1,203 14,480
Parent Management Fee 677 -- 677
-------- -------- -------- --------
Operating Income 4,904 53 -- 4,957
Interest (Expense) Income - Net
Affiliates (642) (45) (687)
Third Party (12) (146) (158)
-------- -------- -------- --------
Income Before Income Taxes, Equity in Loss of
Combined Affiliates and Minority Interest 4,250 (138) -- 4,112
Provision for Income Taxes (1,976) (11) (1,987)
Equity in Loss of Combined Affiliates (135) -- 135 --
Minority Interest -- -- 14 14
-------- -------- -------- --------
Net Income $ 2,139 $ (149) $ 149 $ 2,139
======== ======== ======== ========
</TABLE>
F-9
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS OF
HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
(unaudited)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF INCOME
First Quarter Ended January 31, 1997
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries Eliminations Combined
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
Revenues
Net Sales $ 75,544 $ 5,299 $ (861) $ 79,982
Other Income - Net 1,254 -- 1,254
-------- -------- -------- --------
76,798 5,299 (861) 81,236
Cost of Sales 57,602 4,051 (861) 60,792
Product Development, Selling
and Administrative Expenses 12,187 1,061 13,248
Parent Management Fee 648 -- 648
-------- -------- -------- --------
Operating Income 6,361 187 -- 6,548
Interest (Expense) Income - Net
Affiliates 240 (50) 190
Third Party 28 (76) (48)
-------- -------- -------- --------
Income Before Income Taxes, Equity in Income of
Combined Affiliates and Minority Interest 6,629 61 -- 6,690
Provision for Income Taxes (2,655) (16) (2,671)
Equity in Income of Combined Affiliates 37 -- (37) --
Minority Interest -- -- (8) (8)
-------- -------- -------- --------
Net Income $ 4,011 $ 45 $ (45) $ 4,011
======== ======== ======== ========
</TABLE>
F-10
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS OF
HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
(unaudited)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS
Three Months Ended January 31, 1998
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries Eliminations Combined
------------ ------------ ------------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Operating Activities
Net income $ 2,139 $ (149) $ 149 $ 2,139
Add/(deduct)-items not affecting cash provided by
operating activities:
Depreciation and amortization 1,541 118 1,659
Equity in loss of combined affiliates 135 (135) --
Minority interest -- 14 14
Deferred income taxes - net 46 46
Gain on fire insurance claim -- --
Other 34 34
Changes in working capital, excluding the effects of
acquisition opening balance sheets:
Accounts receivable 4,642 632 5,274
Inventories (3,154) (1,358) (4,512)
Other current assets (1,587) (31) (1,618)
Trade accounts payable and bank overdrafts (6,481) (864) (7,345)
Other current liabilities 3,373 296 (28) 3,641
Activity with parent and other affiliates - net 4,682 1,246 5,928
------- ------- ------- -------
Net cash provided by operating activities 5,370 (110) -- 5,260
------- ------- ------- -------
Investment and Other Transactions
Fixed asset additions - net (798) (18) (816)
Other - net 357 109 466
------- ------- ------- -------
Net cash used for investment and other transactions (441) 91 -- (350)
------- ------- ------- -------
Financing Activities
Repayments of debt (207) -- (207)
------- ------- ------- -------
Net cash applied to financing activities (207) -- -- (207)
------- ------- ------- -------
Effect of Exchange Rate Changes on Cash and Cash Equivalents 91 (9) 82
------- ------- ------- -------
Increase/(Decrease) in Cash and Cash Equivalents 4,813 (28) -- 4,785
Cash and Cash Equivalents
Beginning of Period 1,393 139 1,532
------- ------- ------- -------
End of Period $ 6,206 $ 111 $ -- $ 6,317
======= ======= ======= =======
</TABLE>
F-11
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS OF
HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Concluded)
(dollars in thousands unless indicated)
(unaudited)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS
Three Months Ended January 31, 1997
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries Eliminations Combined
------------ ------------ ------------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Operating Activities
Net income $ 4,011 $ 45 $ (45) $ 4,011
Add/(deduct)-items not affecting cash provided by
operating activities:
Depreciation and amortization 1,464 84 1,548
Equity in income of combined affiliates (37) 37 --
Minority interest 8 8
Deferred income taxes - net 20 20
Gain on fire insurance claim (1,100) (1,100)
Changes in working capital, excluding the effects of
acquisition opening balance sheets:
Accounts receivable (1,868) (270) (2,138)
Inventories (768) (226) (994)
Other current assets (52) (160) (212)
Trade accounts payable and bank overdrafts 2,812 344 3,156
Other current liabilities (2,813) (268) (3,081)
Activity with parent and other affiliates - net (1,133) 356 (777)
------- ------- ------- -------
Net cash provided by operating activities 536 (95) -- 441
------- ------- ------- -------
Investment and Other Transactions
Fixed asset additions - net (1,722) (22) (1,744)
Fire insurance claim activity - net 1,100 1,100
Other - net (303) 24 (279)
------- ------- ------- -------
Net cash used for investment and other transactions (925) 2 -- (923)
------- ------- ------- -------
Financing Activities
Repayments of debt 149 149
------- ------- ------- -------
Net cash applied to financing activities 149 -- -- 149
------- ------- ------- -------
Effect of Exchange Rate Changes on Cash and Cash Equivalents 29 2 31
------- ------- ------- -------
Decrease in Cash and Cash Equivalents (211) (91) -- (302)
Cash and Cash Equivalents
Beginning of Period 3,582 239 3,821
------- ------- ------- -------
End of Period $ 3,371 $ 148 $ -- $ 3,519
======= ======= ======= =======
</TABLE>
F-12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Harnischfeger Industries, Inc.
In our opinion, the accompanying combined balance sheets and the related
combined statements of income and of cash flows present fairly, in all material
respects, the financial position of the Material Handling Equipment Business
(the "Company") of Harnischfeger Industries, Inc. at October 31, 1997 and 1996,
and the results of its operations and its cash flows for each of the three years
in the period ended October 31, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
December 30, 1997, except as to Note 13 which is as of March 30, 1998
F-13
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31,
----------------------
1997 1996
---------- ---------
(dollars in thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ........................................... $ 1,532 $ 3,821
Accounts receivable--net ............................................ 82,209 75,261
Inventories ......................................................... 33,497 37,239
Other current assets ................................................ 4,765 8,044
-------- --------
Total current assets .......................................... 122,003 124,365
-------- --------
Property, Plant and Equipment
Land and improvements ............................................... 3,466 2,490
Buildings ........................................................... 21,379 17,473
Machinery and equipment ............................................. 35,918 28,564
-------- --------
60,763 48,527
Less accumulated depreciation ....................................... (21,396) (18,340)
-------- --------
39,367 30,187
-------- --------
Other Assets
Goodwill ............................................................ 32,229 28,410
Other ............................................................... 6,001 6,096
-------- --------
38,230 34,506
-------- --------
Total assets .................................................. $199,600 $189,058
======== ========
LIABILITIES AND SHAREHOLDER'S INVESTMENT
Current Liabilities
Short-term notes payable and current portion of long-term obligations $ 752 $ 863
Bank overdrafts ..................................................... 4,293 --
Trade accounts payable .............................................. 32,656 36,921
Employee compensation and benefits .................................. 8,113 9,265
Advance payments and progress billings .............................. 7,685 22,586
Accrued warranties .................................................. 3,998 3,787
Income taxes payable ................................................ 2,393 1,703
Other current liabilities ........................................... 10,870 14,717
-------- --------
Total current liabilities ..................................... 70,760 89,842
-------- --------
Long-Term Obligations ..................................................... 1,043 1,181
Deferred Income Taxes ..................................................... 3,088 3,440
Minority Interest ......................................................... 391 394
Shareholder's Investment .................................................. 124,318 94,201
-------- --------
Total liabilities and shareholder's investment ................ $199,600 $189,058
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------------
1997 1996 1995
--------- --------- ---------
(dollars in thousands)
<S> <C> <C> <C>
Revenues
Net sales ........................................ $ 353,350 $ 323,735 $ 243,169
Other income--net ................................ 2,649 1,149 3,766
--------- --------- ---------
355,999 324,884 246,935
Cost of Sales .......................................... 260,794 247,559 186,404
Product Development, Selling and Administrative Expenses 56,806 44,968 36,931
Parent Management Fee .................................. 2,862 2,341 1,878
--------- --------- ---------
Operating income ................................. 35,537 30,016 21,722
Interest (Expense)/Income--Net
Affiliates ....................................... (394) 163 379
Third party ...................................... (398) (245) (200)
--------- --------- ---------
Income Before Income Taxes and Minority Interest ....... 34,745 29,934 21,901
Provision for Income Taxes ............................. (13,874) (11,488) (8,425)
Minority Interest ...................................... (18) -- --
--------- --------- ---------
Net income ....................................... $ 20,853 $ 18,446 $ 13,476
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------------
1997 1996 1995
-------- -------- --------
(dollars in thousands)
<S> <C> <C> <C>
Operating Activities
Net income ............................................................. $ 20,853 $ 18,446 $ 13,476
Add/(deduct)--items not affecting cash provided by operating
activities:
Depreciation and amortization .................................... 6,736 5,292 3,800
Minority interest ................................................ (18) -- --
Deferred income taxes--net ....................................... 89 1,347 1,083
Gain on fire insurance claim ..................................... (2,011) -- (2,343)
Other ............................................................ (800) (750) (750)
Changes in working capital, excluding the effects of acquisition opening
balance sheets:
Accounts receivable .............................................. (3,656) (7,217) (19,363)
Inventories ...................................................... 6,044 (8,651) 1,962
Other current assets ............................................. 2,077 (530) (1,939)
Trade accounts payable and bank overdrafts ....................... (2,852) 130 9,100
Employee compensation and benefits ............................... (1,293) 1,399 2,487
Advance payments and progress billings ........................... (16,056) 3,460 2,760
Accrued warranties ............................................... 178 (305) 592
Other current liabilities ........................................ (5,116) 4,047 (236)
Activity with parent and other affiliates--net ................... 8,724 6,788 (6,876)
-------- -------- --------
Net cash provided by operating activities .................................... 12,899 23,456 3,753
-------- -------- --------
Investment and Other Transactions
Fixed asset additions--net ............................................. (6,498) (6,752) (3,725)
Acquisition of businesses, net of cash acquired ........................ (11,787) (15,272) (3,862)
Fire insurance claim activity--net ..................................... 3,441 1,613 (700)
Proceeds from sale of facility ......................................... -- -- 5,288
Other--net ............................................................. (103) (747) 503
-------- -------- --------
Net cash used for investment and other transactions .......................... (14,947) (21,158) (2,496)
-------- -------- --------
Financing Activities
Repayments of notes payable ............................................ (99) -- --
Repayments of debt ..................................................... (155) -- --
-------- -------- --------
Net cash applied to financing activities ..................................... (254) -- --
-------- -------- --------
Effect of Exchange Rate Changes on Cash and Cash Equivalents ................. 13 39 (201)
-------- -------- --------
(Decrease)/Increase in Cash and Cash Equivalents ............................. (2,289) 2,337 1,056
Cash and Cash Equivalents
Beginning of year ...................................................... 3,821 1,484 428
-------- -------- --------
End of year ............................................................ $ 1,532 $ 3,821 $ 1,484
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(dollars in thousands unless indicated)
Note 1--Significant Accounting Policies
Description of Business--The Material Handling Equipment Business (the
"Company") of Harnischfeger Industries, Inc. designs, manufactures, services and
markets overhead cranes, electric wire rope and chain hoists, engineered
products, and container cranes and crane modernizations for use worldwide in a
variety of industries and applications. In September, 1997, Harnischfeger
Industries, Inc., the Company's parent, announced that it was exploring the
possible sale of the Company.
Basis of Presentation--The combined financial statements of the Company
include the Material Handling Equipment business in the United States and its
affiliates in the United Kingdom, South Africa, Singapore, Canada and Mexico.
All significant intercompany balances and transactions have been eliminated.
Payables/receivables with the Company's parent or its affiliates are recorded as
a component of shareholder's investment.
Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Ultimate realization of
assets and settlement of liabilities in the future could differ from those
estimates.
Inventories--Inventories are stated at the lower of cost or market value.
Cost is determined by the last-in, first-out (LIFO) method for certain domestic
inventories and by the first-in, first-out (FIFO) method for certain domestic
inventories and inventories of foreign subsidiaries.
Revenue Recognition--The majority of the Company's sales of products or
services are recorded as products are shipped or services are rendered. Revenue
on certain long-term contracts is recorded using the percentage-of-completion
method. Losses, if any, are recognized in full as soon as identified.
Property, Plant and Equipment--Property, plant and equipment is stated at
historical cost. Expenditures for major renewals and improvements are
capitalized, while maintenance and repairs which do not significantly improve
the related asset or extend its useful life are charged to expense as incurred.
For financial reporting purposes, plant and equipment is depreciated primarily
by the straight-line method over the estimated useful lives of the assets.
Depreciation claimed for income tax purposes is computed by accelerated methods.
Cash Equivalents--The Company considers all highly liquid debt instruments
with an initial maturity of three months or less at the date of purchase to be
cash equivalents.
Foreign Exchange Contracts--Any gain or loss on forward contracts
designated as hedges of commitments is deferred and included in the measurement
of the related foreign currency transaction. Foreign exchange contract activity
in 1995 through 1997 was not significant.
Foreign Currency Translation--The assets and liabilities of the Company's
international operations are translated at year-end exchange rates; income and
expenses are translated at average exchange rates prevailing during the year.
For operations whose functional currency is the local currency,
translation adjustments are accumulated within shareholder's investment.
Transaction gains and losses are reflected in income. Pre-tax foreign exchange
gains/(losses) included in operating income were $110, $(167) and $(390) in
1997, 1996 and 1995, respectively.
F-17
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
Goodwill and Intangible Assets--Goodwill represents the excess of the
purchase price over the fair value of identifiable net assets of acquired
companies and is amortized on a straight-line basis over periods ranging from 30
to 40 years. The Company assesses the carrying value of goodwill at each balance
sheet date. Consistent with Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of ", such assessments include, as appropriate, a
comparison of (a) the estimated future nondiscounted cash flows anticipated to
be generated during the remaining amortization period of the goodwill to (b) the
net carrying value of goodwill. The Company recognizes diminution in value of
goodwill, if any, on a current basis. Accumulated amortization was $2,268 and
$1,199 at October 31, 1997 and 1996, respectively.
Income Taxes--The Company's domestic income tax provision reflects an
intercompany tax allocation arrangement with its parent such that the domestic
income taxes payable is recorded as if the Company filed separate income tax
returns. The Company records its domestic income taxes payable as an
intercompany payable within shareholder's investment. The Company's foreign
income tax provision and related income taxes payable are recorded based upon
the income tax returns as filed by its foreign affiliates in their respective
jurisdictions.
Domestic and foreign deferred income taxes are recognized for the tax
consequences of temporary differences by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities, and for
tax basis carryforwards. A valuation allowance is provided for deferred tax
assets where it is considered more likely than not that the Company will not
realize the benefit of such assets.
Fair Value of Financial Instruments--Cash and cash equivalents, accounts
receivable and accounts payable recorded in the balance sheets approximate fair
value based on the short maturity of these instruments. Amounts recorded for
long-term debt are estimated to approximate fair value based on market
conditions and interest rates available to the Company for similar financial
instruments.
Research and Development Expenses--Research and development costs are
expensed as incurred. Such costs incurred in the development of new products or
significant improvements to existing products amounted to $1,369, $319 and $493
in 1997, 1996 and 1995, respectively.
Other Income--Net--Other income--net consists of the following for the
years ended October 31:
1997 1996 1995
------ ------ ------
Gain on fire insurance claim............... $2,011 $ -- $2,343
Licensee income............................ 524 830 679
Other...................................... 114 319 744
------ ------ ------
$2,649 $1,149 $3,766
====== ====== ======
During 1995, one of the Company's facilities in the United Kingdom
experienced a fire which resulted in an insurance claim for property loss and
business interruption. A gain on the property loss portion of the claim amounted
to $2,343 and was recorded in 1995. The remaining $2,011 gain was recorded in
1997 upon finalization of the property loss and business interruption claims.
F-18
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
Note 2--Acquisitions
During 1997, 1996 and 1995, the Company completed several
acquisitions for an aggregate purchase price of $11,787, $15,272 and $3,862,
respectively, net of cash acquired. These acquisitions were primarily related to
the Company's aftermarket business and were accounted for as purchase
transactions with the purchase prices allocated to the fair value of specific
assets acquired and liabilities assumed. Resultant goodwill is being amortized
over 30 to 40 years. With respect to a 1995 acquisition, the Company was
required to make contingent consideration payments of $632 and $691 related to
1996 and 1997, respectively; a final contingent consideration payment related to
1998 may be required.
Note 3--Accounts Receivable
Accounts receivable at October 31 consisted of the following:
1997 1996
------- -------
Trade receivables.............................. $77,356 $67,818
Unbilled receivables........................... 6,183 8,851
Allowance for doubtful accounts................ (1,330) (1,408)
------- -------
$82,209 $75,261
======= =======
The amount of accounts receivable due beyond one year is not significant.
Note 4--Inventories
Inventories at October 31 consisted of the following:
1997 1996
------- -------
Raw material.......................................... $17,391 $22,858
Work-in-process....................................... 13,654 13,213
Finished parts........................................ 10,704 11,087
41,749 47,158
Less excess of current cost over stated LIFO value.... (8,252) (9,919)
------- -------
$33,497 $37,239
======= =======
Inventories valued using the LIFO method represented approximately 43% and
56% of combined inventories at October 31, 1997 and 1996, respectively. During
1997 and 1995, inventory quantities were reduced, resulting in a liquidation of
LIFO inventory quantities carried at lower costs prevailing in prior years as
compared with the cost of 1997 and 1995 purchases. The effect of this
liquidation decreased cost of sales by $1,998 and $698 in 1997 and 1995,
respectively.
Note 5--Income Taxes
The components of income for the Company's domestic and foreign operations
for the years ended October 31 were as follows:
1997 1996 1995
------- ------- -------
Domestic................................. $28,097 $23,381 $16,017
Foreign.................................. 6,648 6,553 5,884
------- ------- -------
$34,745 $29,934 $21,901
======= ======= =======
F-19
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
The provision for income taxes included in the Combined Statements of
Income for years ended October 31 consisted of the following:
1997 1996 1995
-------- -------- --------
Current provision
Federal and state ........ $ 11,028 $ 9,094 $ 6,799
Foreign .................. 2,757 1,047 543
-------- -------- --------
Total current .................. 13,785 10,141 7,342
-------- -------- --------
Deferred provision
Federal and state ........ (137) (91) (611)
Foreign .................. 226 1,438 1,694
-------- -------- --------
Total deferred ................. 89 1,347 1,083
-------- -------- --------
Provision for income taxes ..... $ 13,874 $ 11,488 $ 8,425
======== ======== ========
The difference between the U.S. federal statutory tax rate and the
effective tax rate for the years ended October 31 are as follows:
1997 1996 1995
-------- -------- --------
Federal statutory rate ......... 35.0% 35.0% 35.0%
State taxes, net of federal benefit 3.0 3.0 3.0
Goodwill amortization .......... 2.6 3.0 2.3
Other .......................... (.7) (2.6) (1.8)
-------- -------- --------
39.9% 38.4% 38.5%
======== ======== ========
Foreign income taxes paid were $322, $1,252 and $724 in 1997, 1996 and
1995, respectively.
U.S. income taxes have not been provided on the undistributed profits of
foreign subsidiaries where such profits are expected to be permanently
reinvested. Such unremitted earnings of affiliates which are intended to be
permanently reinvested were $14,100 at October 31, 1997.
Temporary differences and carryforwards which gave rise to the net
deferred tax asset (liability) at October 31 are as follows:
1997 1996
------- -------
Reserves not currently deductible ........ $ 2,766 $ 3,280
Depreciation and amortization ............ (1,897) (2,479)
Prepaid pension asset .................... (1,191) (961)
Other--net ............................... (54) (127)
------- -------
$ (376) $ (287)
======= =======
At October 31, 1997, the Company's Mexican affiliate has a net operating
loss carryforward approximating $2,550 which expires in 2004 and 2005. A
valuation allowance has been recorded against this carryforward for which
utilization is uncertain.
F-20
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
This net deferred tax asset (liability) is included in the Combined
Balance Sheets at October 31 in the following captions:
1997 1996
------- -------
Other current assets ..................... $ 2,712 $ 3,153
Deferred income taxes .................... (3,088) (3,440)
------- -------
$ (376) $ (287)
======= =======
Note 6--Long-Term Obligations and Bank Credit Facilities
Long-term obligations at October 31 consisted of the following:
1997 1996
------ ------
Bank debt, at 7.5% due in installments through 2009 ........ $ 748 $ 876
Industrial Revenue Bonds, at 5.25% due in installments
through 2007 ............................................ 380 405
------ ------
1,128 1,281
Less: amounts payable within one year ...................... 85 100
------ ------
$1,043 $1,181
====== ======
Installments payable related to the Company's long-term obligations are as
follows:
1998 ..................................................................... $85
1999 ..................................................................... 70
2000 ..................................................................... 73
2001 ..................................................................... 82
2002 ..................................................................... 85
At October 31, 1997, short-term bank credit lines of foreign subsidiaries
were approximately $2,828. The outstanding borrowings were $667 with a weighted
average interest rate of 5.25%. There were no compensating balance requirements
under these lines of credit.
Note 7--Employee Benefit Plans
Pensions and Other Employee Benefits
The Company is a participant in its parent's domestic defined benefit
pension plans. Benefits from these plans are based on factors which include
various combinations of service, employee compensation during the last years of
employment and the recipient's social security benefit. Pension expense is
allocated annually by its parent based upon headcount. The Company's pension
expense for these domestic defined benefit plans was $1,275, $1,169 and $1,066
in 1997, 1996 and 1995, respectively.
The Company is also a participant in its parent's qualified profit sharing
plan which covers substantially all domestic employees, except employees covered
by collective bargaining agreements and employees of affiliates with separate
defined contribution plans. Contributions to this plan are based on the
Company's "economic value added" performance. The Company's profit sharing
expense for this plan and other defined contribution plans was $1,584, $1,226
and $1,516 in 1997, 1996 and 1995, respectively.
F-21
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
Pension expense, as determined by the Company's actuaries, for its
employee benefit plan in the United Kingdom for years ended October 31 included
the components shown below. Pension expense for the Company's other foreign
employee benefit plans is not significant.
1997 1996 1995
------- ------- -------
Service cost--benefits earned during the year . $ 782 $ 627 $ 888
Interest cost on projected benefit obligation . 1,359 1,102 1,080
Actual gain on plan assets .................... (2,988) (1,241) (1,552)
Net amortization and deferral ................. 1,186 (259) 223
------- ------- -------
$ 339 $ 229 $ 639
======= ======= =======
The discount rate used for this foreign plan was 7.5% in 1997 and 9.0% in
1996 and 1995. The assumed rate of increase in future compensation of employees
was 4.5% in 1997 and 6% in 1996 and 1995. The expected long-term rate of return
on assets was 10.25% in 1997 and 10.0% in 1996 and 1995.
The following table sets forth this foreign plan's funded status at
October 31:
1997 1996
------- -------
Actuarial present value of:
Vested benefits ................................ $19,268 $13,481
------- -------
Accumulated benefits ........................... 19,268 13,481
------- -------
Projected benefits ............................. 20,665 16,101
Net assets available for benefits .................... 21,101 17,168
------- -------
Plan assets greater than projected benefits .......... 436 1,067
Unrecognized net loss ................................ 3,332 2,225
------- -------
Prepaid pension asset ................................ $ 3,768 $ 3,292
======= =======
Postretirement Benefits Other Than Pensions
The Company's parent generally provides certain health care and life
insurance benefits under various plans for U.S. employees who retire after
attaining early retirement eligibility, subject to plan amendments. In 1993, the
Board of Directors of its parent approved a general approach that would
culminate in the elimination of contributions towards postretirement health care
benefits. Increases in costs were capped for certain plans beginning in 1994
extending through 1998 and contributions will be eliminated on January 1, 1999
for most employee groups. As such, negative plan amendments made subsequent to
November 1, 1993 are being amortized from the date of the amendment to January
1, 1999. Postretirement benefit expense (income) is allocated annually by its
parent based upon headcount. The Company's postretirement benefit (income) was
$(1,658), $(1,126) and $(1,253) in 1997, 1996 and 1995, respectively.
F-22
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
Note 8--Shareholder's Investment
The changes within shareholder's investment for the each of the three
years in the period ended October 31, 1997 are as follows:
Balance at October 31, 1994 .................................... $ 63,155
Net income ............................................... 13,476
Cumulative translation adjustments ....................... (1,229)
Activity with parent and other affiliates--net ........... (6,876)
---------
Balance at October 31, 1995 .................................... 68,526
Net income ............................................... 18,446
Cumulative translation adjustments ....................... 441
Activity with parent and other affiliates--net ........... 6,788
---------
Balance at October 31, 1996 .................................... 94,201
Net income ............................................... 20,853
Cumulative translation adjustments ....................... 540
Activity with parent and other affiliates--net ........... 8,724
---------
Balance at October 31, 1997 .................................... $ 124,318
=========
Note 9--Operating Leases
The Company leases certain plant, office and warehouse space as well as
machinery, vehicles, data processing and other equipment. Certain of these
leases have renewal options at reduced rates and provisions requiring the
Company to pay maintenance, property taxes and insurance. Generally, all rental
payments are fixed.
Total rental expense under operating leases, excluding maintenance, taxes
and insurance, was $4,369, $3,328 and $2,359 in 1997, 1996 and 1995,
respectively.
At October 31, 1997, the future payments for all operating leases with
remaining lease terms in excess of one year, and excluding maintenance, taxes
and insurance, were as follows:
1998 .................................................. $4,054
1999 .................................................. 2,684
2000 .................................................. 1,632
2001 .................................................. 877
2002 .................................................. 523
Note 10--Commitments and Contingencies
At October 31, 1997, the Company and/or its parent were contingently
liable to financial institutions and others for approximately $54,500 for
outstanding letters of credit and surety bonds securing performance of sales
contracts related to the Company's operations.
The Company is party to various litigation matters, including product
liability and other claims, which are normal in the course of its operations.
Also, as a normal part of its operations, the Company undertakes certain
contractual obligations and warranties in connection with the sale of products
or services. Although the outcome of these matters cannot be predicted with
certainty, management believes that the resolution of such matters will not have
a material adverse effect on the Company's combined results of operations,
financial position or cash flows.
F-23
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
The Company is also involved in proceedings and potential proceedings
relating to environmental matters. Although it is difficult to estimate the
potential exposure to the Company related to these environmental matters,
management believes that these matters will not have a material adverse effect
on the Company's combined results of operations, financial position or cash
flows.
Note 11--Geographical Information
<TABLE>
<CAPTION>
Total Sales to
Net Interarea Unaffiliated Operating Identifiable
Sales Sales Customers Income Assets
-------- --------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
1997
United States...................................... $205,815 $ -- $205,815 $26,585 $101,159
Europe............................................. 99,593 (4,667) 94,926 6,662 62,159
Other Foreign...................................... 52,609 -- 52,609 2,290 36,282
Interarea Eliminations............................. (4,667) 4,667 -- -- --
-------- --------- -------- ------- --------
$353,350 $ -- $353,350 $35,537 $199,600
======== ========= ======== ======= ========
1996
United States...................................... $206,896 $ -- $206,896 $21,978 $ 96,803
Europe............................................. 79,280 (3,619) 75,661 5,247 59,766
Other Foreign...................................... 41,178 -- 41,178 2,791 32,489
Interarea Eliminations............................. (3,619) 3,619 -- -- --
-------- --------- -------- ------- --------
$323,735 $ -- $323,735 $30,016 $189,058
======== ========= ======== ======= ========
1995
United States...................................... $147,492 $ -- $147,492 $15,493 $ 80,219
Europe............................................. 87,437 -- 87,437 6,285 55,682
Other Foreign...................................... 8,240 -- 8,240 (56) 15,267
-------- --------- -------- ------- --------
$243,169 $ -- $243,169 $21,722 $151,168
======== ========= ======== ======= ========
</TABLE>
Note 12--Transactions With Parent and Affiliated Companies
The Company and its parent have entered into a management arrangement
whereby the Company is provided with certain services, including, but not
limited to, matters of organization and administration, cash management, labor
relations, employee benefits, public relations, financial policies and
practices, taxation and legal affairs. The annual fee charged the Company for
these services reflects its pro rata share of corporate administration costs
using an allocation methodology based on consolidated worldwide sales. Company
management and its parent believe that the fees charged above are reasonable in
light of the level of services provided and such fees totaled $2,862, $2,341 and
$1,878 in 1997, 1996 and 1995, respectively.
Interest income/(expense) on receivables/(payables) with affiliates is
charged by/(to) the Company using interest rates tied to LIBOR, the 13-week
treasury bill rate or prime rate.
F-24
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
In addition, the Company has the following arrangements with its parent or
other affiliates for shared facilities and services:
1. The Company and an affiliate share a parts warehouse for which
the Company was charged approximately $1,400, $1,272 and $1,215 in 1997,
1996 and 1995, respectively.
2. An affiliate provides support to the Company for accounting,
credit, traffic and human resource services and charged approximately
$756, $784 and $776 to the Company in 1997, 1996 and 1995, respectively.
In addition, the Company leases office space from this affiliate at a cost
of approximately $120 per year for 1997, 1996 and 1995.
3. An affiliate manufactures electric motors and performs
fabrication and machining on certain cranes for the Company at cost.
Company purchases of approximately $10 million per year were made under
this arrangement during fiscal 1995 through 1997.
4. An affiliate provides information systems services to the Company
and charged approximately $1,861, $1,022 and $1,070 to the Company in
1997, 1996 and 1995, respectively.
Note 13--Supplemental Condensed Combining Financial Information
The sale by Harnischfeger Industries, Inc. of a majority interest in the
Company to MHE Investments, Inc. was completed on March 30, 1998. The
transaction was accounted for as a recapitalization of MMH Holdings, Inc.
("Holdings"), the owner, directly of indirectly, of all of the equity interests
of the entities engaged in the Material Handling Equipment Business that were
previously owned by Harnsichfeger Industries, Inc. In connection with the
transaction, Morris Material Handling, Inc. ("MMH"), a direct wholly-owned
subsidiary of Holdings, issued debt securities that are guaranteed by certain of
the Company's affiliates (the "Guarantor Subsidiaries"). Each of the Guarantor
Subsidiaries is a wholly-owned subsidiary, directly or indirectly, of MMH and
the guarantees are full, unconditional and joint and several. Both Holdings and
MMH are holding companies, with no material operating assets. All of the
Company's business operations are conducted through subsidiaries of MMH.
Separate financial statements of the Guarantor Subsidiaries are not
presented because Company management has determined that they would not be
material to investors. The following supplemental financial information sets
forth, on an uncombined basis, balance sheet, statement of operations and cash
flow information for the Guarantor Subsidiaries and for the Company's other
affiliates (the "Non-Guarantor Subsidiaries"). The supplemental financial
information reflects the investments of the Guarantor Subsidiaries in the
Non-Guarantor Subsidiaries using the equity method of accounting. For purposes
of this presentation, it is assumed that all of the assets of the Company were
historically owned by subsidiaries of MMH, which is an entity that was formed by
Holdings in connection with the transaction. Accordingly, the historical
combined financial statements of MMH and Holdings are identical following
completion of the recapitalization.
F-25
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEET
October 31, 1997
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries Eliminations Combined
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,393 $ 139 $ $ 1,532
Accounts receivable - net 73,220 8,989 82,209
Intercompany accounts receivable 5,250 1,539 (6,789) --
Inventories 30,855 2,642 33,497
Other current assets 4,486 279 4,765
--------- --------- --------- ---------
115,204 13,588 (6,789) 122,003
--------- --------- --------- ---------
Property, Plant and Equipment - net 36,192 3,175 -- 39,367
--------- --------- --------- ---------
Other Assets
Goodwill 30,368 1,861 32,229
Noncurrent intercompany receivables 3,136 -- (3,136) --
Investment in affiliates 1,174 -- (1,174) --
Other 6,001 -- 6,001
--------- --------- --------- ---------
40,679 1,861 (4,310) 38,230
--------- --------- --------- ---------
$ 192,075 $ 18,624 $ (11,099) $ 199,600
========= ========= ========= =========
LIABILITIES AND SHAREHOLDER'S INVESTMENT
Current Liabilities
Short-term notes payable and
current portion of long-term obligations $ 692 $ 60 $ $ 752
Bank overdrafts 2,076 2,217 4,293
Trade accounts payable 27,824 4,832 32,656
Intercompany accounts payable 1,539 5,250 (6,789) --
Employee compensation and benefits 8,053 60 8,113
Advance payments and progress
billings 7,626 59 7,685
Accrued warranties 3,913 85 3,998
Income taxes payable 1,935 458 2,393
Other current liabilities 10,656 214 10,870
--------- --------- --------- ---------
64,314 13,235 (6,789) 70,760
--------- --------- --------- ---------
Long-Term Obligations 355 688 1,043
Noncurrent intercompany payables -- 3,136 (3,136) --
Deferred Income Taxes 3,088 -- 3,088
Minority Interest -- -- 391 391
Shareholder's Investment 124,318 1,565 (1,565) 124,318
--------- --------- --------- ---------
$ 192,075 $ 18,624 $ (11,099) $ 199,600
========= ========= ========= =========
</TABLE>
F-26
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEET
October 31, 1996
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries Eliminations Combined
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 3,582 $ 239 $ $ 3,821
Accounts receivable - net 67,331 7,930 75,261
Intercompany accounts receivable 1,030 (1,030) --
Inventories 34,396 2,843 37,239
Other current assets 7,781 263 8,044
--------- --------- --------- ---------
114,120 11,275 (1,030) 124,365
--------- --------- --------- ---------
Property, Plant and Equipment - net 26,832 3,355 -- 30,187
--------- --------- --------- ---------
Other Assets
Goodwill 26,433 1,977 28,410
Noncurrent intercompany receivables 2,840 -- (2,840) --
Investment in affiliates 3,078 -- (3,078) --
Other 6,096 -- 6,096
--------- --------- --------- ---------
38,447 1,977 (5,918) 34,506
--------- --------- --------- ---------
$ 179,399 $ 16,607 $ (6,948) $ 189,058
========= ========= ========= =========
LIABILITIES AND SHAREHOLDER'S INVESTMENT
Current Liabilities
Short-term notes payable and
current portion of long-term obligations $ 788 $ 75 $ $ 863
Trade accounts payable 29,738 7,183 36,921
Intercompany accounts payable 1,030 (1,030) --
Employee compensation and benefits 9,218 47 9,265
Advance payments and progress
billings 22,385 201 22,586
Accrued warranties 3,671 116 3,787
Income taxes payable 1,204 499 1,703
Other current liabilities 14,374 343 14,717
--------- --------- --------- ---------
81,378 9,494 (1,030) 89,842
--------- --------- --------- ---------
Long-Term Obligations 380 801 1,181
Noncurrent intercompany payables 2,840 (2,840) --
Deferred Income Taxes 3,440 -- 3,440
Minority Interest -- -- 394 394
Shareholder's Investment 94,201 3,472 (3,472) 94,201
--------- --------- --------- ---------
$ 179,399 $ 16,607 $ (6,948) $ 189,058
========= ========= ========= =========
</TABLE>
F-27
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF INCOME
Year Ended October 31, 1997
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries Eliminations Combined
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
Revenues
Net Sales $ 332,244 $ 24,065 $ (2,959) $ 353,350
Other Income - Net 2,563 86 2,649
--------- --------- --------- ---------
334,807 24,151 (2,959) 355,999
Cost of Sales 243,776 19,977 (2,959) 260,794
Product Development, Selling
and Administrative Expenses 51,954 4,852 56,806
Parent Management Fee 2,862 -- 2,862
--------- --------- --------- ---------
Operating Income 36,215 (678) -- 35,537
Interest (Expense) Income - Net
Affiliates (198) (196) (394)
Third Party 8 (406) (398)
--------- --------- --------- ---------
Income Before Income Taxes, Equity in Loss of
Combined Affiliates and Minority Interest 36,025 (1,280) -- 34,745
Provision for Income Taxes (13,838) (36) (13,874)
Equity in Loss of Combined Affiliates (1,334) -- 1,334 --
Minority Interest -- -- (18) (18)
--------- --------- --------- ---------
Net Income $ 20,853 $ (1,316) $ 1,316 $ 20,853
========= ========= ========= =========
</TABLE>
F-28
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF INCOME
Year Ended October 31, 1996
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries Eliminations Combined
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
Revenues
Net Sales $ 303,449 $ 23,755 $ (3,469) $ 323,735
Other Income - Net 1,149 -- 1,149
--------- --------- --------- ---------
304,598 23,755 (3,469) 324,884
Cost of Sales 232,952 18,076 (3,469) 247,559
Product Development, Selling
and Administrative Expenses 40,727 4,241 44,968
Parent Management Fee 2,341 -- 2,341
--------- --------- --------- ---------
Operating Income 28,578 1,438 -- 30,016
Interest (Expense) Income - Net
Affiliates 369 (206) 163
Third Party (25) (220) (245)
--------- --------- --------- ---------
Income Before Income Taxes, Equity in Income of
Combined Affiliates and Minority Interest 28,922 1,012 -- 29,934
Provision for Income Taxes (11,150) (338) (11,488)
Equity in Income of Combined Affiliates 674 -- (674) --
--------- --------- --------- ---------
Net Income $ 18,446 $ 674 $ (674) $ 18,446
========= ========= ========= =========
</TABLE>
F-29
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF INCOME
Year Ended October 31, 1995
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries Eliminations Combined
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
Revenues
Net Sales $ 227,038 $ 17,291 $ (1,160) $ 243,169
Other Income - Net 3,766 -- 3,766
--------- --------- --------- ---------
230,804 17,291 (1,160) 246,935
Cost of Sales 174,558 13,006 (1,160) 186,404
Product Development, Selling
and Administrative Expenses 33,776 3,155 36,931
Parent Management Fee 1,878 -- 1,878
--------- --------- --------- ---------
Operating Income 20,592 1,130 -- 21,722
Interest (Expense) Income - Net
Affiliates 600 (221) 379
Third Party (191) (9) (200)
--------- --------- --------- ---------
Income Before Income Taxes, Equity in Income of
Combined Affiliates and Minority Interest 21,001 900 -- 21,901
Provision for Income Taxes (8,095) (330) (8,425)
Equity in Income of Combined Affiliates 570 -- (570) --
--------- --------- --------- ---------
Net Income $ 13,476 $ 570 $ (570) $ 13,476
========= ========= ========= =========
</TABLE>
F-30
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS
Year Ended October 31, 1997
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries Eliminations Combined
------------ ------------ ------------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Operating Activities
Net income $ 20,853 $ (1,316) $ 1,316 $ 20,853
Add/(deduct)-items not affecting cash provided by
operating activities:
Depreciation and amortization 6,400 336 6,736
Equity in loss of combined affiliates 1,334 (1,334) --
Minority interest -- (18) (18)
Deferred income taxes - net 89 89
Gain on fire insurance claim (2,011) (2,011)
Other (800) (800)
Changes in working capital, excluding the effects of
acquisition opening balance sheets:
Accounts receivable (2,318) (1,338) (3,656)
Inventories 5,984 60 6,044
Other current assets 2,113 (36) 2,077
Trade accounts payable and bank overdrafts (3,026) 174 (2,852)
Other current liabilities (22,071) (252) 36 (22,287)
Activity with parent and other affiliates - net 5,976 2,748 8,724
-------- -------- -------- --------
Net cash provided by operating activities 12,523 376 -- 12,899
-------- -------- -------- --------
Investment and Other Transactions
Fixed asset additions - net (6,117) (381) (6,498)
Acquisition of businesses, net of cash acquired (11,787) (11,787)
Fire insurance claim activity - net 3,441 3,441
Other - net (70) (33) (103)
-------- -------- -------- --------
Net cash used for investment and other transactions (14,533) (414) -- (14,947)
-------- -------- -------- --------
Financing Activities
Repayments of notes payable (99) (99)
Repayments of debt (101) (54) (155)
-------- -------- -------- --------
Net cash applied to financing activities (200) (54) -- (254)
-------- -------- -------- --------
Effect of Exchange Rate Changes on Cash and Cash Equivalents 21 (8) 13
-------- -------- -------- --------
Decrease in Cash and Cash Equivalents (2,189) (100) -- (2,289)
Cash and Cash Equivalents
Beginning of year 3,582 239 3,821
-------- -------- -------- --------
End of year $ 1,393 $ 139 $ -- $ 1,532
======== ======== ======== ========
</TABLE>
F-31
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands unless indicated)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS
Year Ended October 31, 1996
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries Eliminations Combined
------------ ------------ ------------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Operating Activities
Net income $ 18,446 $ 674 $ (674) $ 18,446
Add/(deduct)-items not affecting cash provided by
operating activities:
Depreciation and amortization 4,944 348 5,292
Equity in income of combined affiliates (674) 674 --
Deferred income taxes - net 1,347 1,347
Other (750) (750)
Changes in working capital, excluding the effects of
acquisition opening balance sheets:
Accounts receivable (4,252) (2,965) (7,217)
Inventories (7,281) (1,370) (8,651)
Other current assets (410) (120) (530)
Trade accounts payable and bank overdrafts (2,825) 2,955 130
Other current liabilities 8,482 119 8,601
Activity with parent and other affiliates - net 6,230 558 6,788
-------- -------- -------- --------
Net cash provided by operating activities 23,257 199 -- 23,456
-------- -------- -------- --------
Investment and Other Transactions
Fixed asset additions - net (6,373) (379) (6,752)
Acquisition of businesses, net of cash acquired (15,272) (15,272)
Fire insurance claim activity - net 1,613 1,613
Other - net (629) (118) (747)
-------- -------- -------- --------
Net cash used for investment and other transactions (20,661) (497) -- (21,158)
-------- -------- -------- --------
Effect of Exchange Rate Changes on Cash and Cash Equivalents 168 (129) 39
-------- -------- -------- --------
Increase/(Decrease) in Cash and Cash Equivalents 2,764 (427) -- 2,337
Cash and Cash Equivalents
Beginning of year 818 666 1,484
-------- -------- -------- --------
End of year $ 3,582 $ 239 $ -- $ 3,821
======== ======== ======== ========
</TABLE>
F-32
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Concluded)
(dollars in thousands unless indicated)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS
Year Ended October 31, 1995
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries Eliminations Combined
------------ ------------ ------------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Operating Activities
Net income $ 13,476 $ 570 $ (570) $ 13,476
Add/(deduct)-items not affecting cash provided by
operating activities:
Depreciation and amortization 3,643 157 3,800
Equity in income of combined affiliates (570) 570 --
Deferred income taxes - net 1,083 1,083
Gain on fire insurance claim (2,343) (2,343)
Other (750) (750)
Changes in working capital, excluding the effects of
acquisition opening balance sheets:
Accounts receivable (17,767) (1,596) (19,363)
Inventories 2,386 (424) 1,962
Other current assets (1,904) (35) (1,939)
Trade accounts payable and bank overdrafts 7,680 1,420 9,100
Other current liabilities 5,147 456 5,603
Activity with parent and other affiliates - net (6,733) (143) (6,876)
-------- -------- -------- --------
Net cash provided by operating activities 3,348 405 -- 3,753
-------- -------- -------- --------
Investment and Other Transactions
Fixed asset additions - net (3,625) (100) (3,725)
Acquisition of businesses, net of cash acquired (3,862) (3,862)
Fire insurance claim activity - net (700) (700)
Proceeds from sale of facility 5,288 5,288
Other - net 551 (48) 503
-------- -------- -------- --------
Net cash used for investment and other transactions (2,348) (148) -- (2,496)
-------- -------- -------- --------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (182) (19) (201)
-------- -------- -------- --------
Increase in Cash and Cash Equivalents 818 238 -- 1,056
Cash and Cash Equivalents
Beginning of year -- 428 428
-------- -------- -------- --------
End of year $ 818 $ 666 $ -- $ 1,484
======== ======== ======== ========
</TABLE>
F-33
<PAGE>
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
Section 20. Indemnification of Directors and Officers
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law (the
"DGCL"), Article Seventh of Holdings' Second Amended and Restated Certificate of
Incorporation, as amended (the "Certificate of Incorporation") (incorporated by
reference as Exhibit 3.1 to this Registration Statement), eliminates the
liability of Holdings' directors to Holdings or its stockholders, except for
liabilities related to breach of duty of loyalty, actions not in good faith and
certain other liabilities.
Section 145 of the DGCL provides, in substance, that Delaware corporations
shall have the power, under specified circumstances, to indemnify their
directors, officers, employees and agents in connection with actions, suits or
proceedings brought against them by a third party or in the right of the
corporation, by reason of the fact that they were or are such directors,
officers, employees or agents, against expenses incurred in any such action,
suit or proceeding. The DGCL also provides that Delaware corporations may
purchase insurance on behalf of any such director, officer, employee or agent.
Article Eighth of the Certificate of Incorporation provides that Holdings
shall indemnify any current or former director or officer to the fullest extent
permitted by the DGCL. Article V of Holdings' Bylaws provides that Holdings
shall indemnify to the fullest extent permitted by DGCL its current and former
directors and officers and persons serving as directors and officers of any
corporation at the request of Holdings. Holdings also maintains officers' and
directors' liability insurance which insures against liabilities that officers
and directors of Holdings may incur in such capacities.
Reference is made to the Exchange Offer Registration Rights Agreement
filed as Exhibit 4.1 to this Registration Statement which provides for
indemnification for the officers and directors of Holdings signing a
Registration Statement and certain control persons of Holdings against certain
liabilities, including those arising under the Securities Act in certain
circumstances by selling holders.
II-1
<PAGE>
Item 21. Exhibits and Financial Statement Schedules
Exhibit Number Exhibit
- -------------- -------
1.1 Securities Purchase Agreement, dated March 23, 1998, between MMH
Holdings, Inc. and CIBC Oppenheimer Corp.
2.1 Recapitalization Agreement, dated January 28, 1998, among
Harnischfeger Corporation, the sellers named therein and MHE
Investments, Inc., as amended.
3.1 Second Amended and Restated Certificate of Incorporation of MMH
Holdings, Inc.
3.2 Bylaws of MMH Holdings, Inc.
3.3 Certificate of Designations of the Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of 12% Series A
Senior Exchangeable Preferred Stock, and Qualifications, Limitations
and Restrictions Thereof.
3.4 Certificate of Designations of the Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of 12 1/4% Series B
Junior Exchangeable Preferred Stock, and Qualifications, Limitations
and Restrictions Thereof.
3.5 Certificate of Designations of the Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of 12 1/2% Series C
Junior Preferred Stock, and Qualifications, Limitations and
Restrictions Thereof.
4.1 Preferred Stock Registration Rights Agreement, dated as of March 30,
1998, by and among MMH Holdings, Inc. and CIBC Oppenheimer Corp.
4.2 Common Stock Registration Rights and Stockholders Agreement, dated
as of March 30, 1998, among MMH Holdings, Inc., Chartwell, L.P. and
CIBC Oppenheimer Corp.
4.3 Credit Agreement, dated March 30, 1998, among MMH Holdings, Inc.,
Morris Material Handling, Inc., Material Handling, LLC, Morris
Material Handling, Ltd., Mondel ULC, Kaverit Steel and Crane ULC and
Canadian Imperial Bank of Commerce, as Administrative Agent, Credit
Agricole Indosuez, as Syndication Agent, BankBoston, N.A., as
Documentation Agent, and the Lending Institutions listed therein.
4.4 Guarantee, dated as of March 30, 1998, by MMH Holdings, Inc., in
favor and for the benefit of Canadian Imperial Bank of Commerce.
4.5 Guarantee, dated as of March 30, 1998, by each of the subsidiary
Guarantors named therein, in favor and for the benefit of Canadian
Imperial Bank of Commerce.
4.6 Stockholders and Registration Rights Agreement, dated as of March
30, 1998, by and among MMH Holdings, Inc., MHE Investments, Inc. and
Harnischfeger Corporation.
4.7 Form of Indenture dated as of ______, among MMH Holdings, Inc., as
the Issuer, and ________, as the Trustee for $________ 12% Exchange
Debentures due 2009.
4.8 Form of 12% Exchange Debenture due 2009.
5.1 Legal Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
concerning the legality of the Preferred Stock (to be filed by
amendment).
II-2
<PAGE>
Exhibit Number Exhibit
- -------------- -------
8.1 Legal Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
concerning certain tax matters (to be filed by amendment).
10.1 Surety Arrangement, dated March 30, 1998, among Reliance Insurance
Companies, MMH Holdings, Inc., Morris Material Handling, Inc. and
certain of their subsidiaries.
10.2 Credit Indemnification Agreement between Harnischfeger Industries,
Inc. and Morris Material Handling, Inc., dated as of March 30, 1998.
10.3 Tax Sharing Agreement between MHE Investments, Inc., MMH Holdings,
Inc. and certain of MMH Holdings, Inc.'s subsidiaries, dated March
30, 1998.
10.4 Component and Manufactured Products Supply Agreement between HarnCo
and Morris Material Handling, Inc., dated as of March 30, 1998.
10.5 Transition Services Agreement between HarnCo and Morris Material
Handling, Inc., dated as of March 30, 1998.
10.6 Trademark License Agreement between Harnischfeger Technologies, Inc.
and Morris Material Handling, Inc., dated as of March 30, 1998.
10.7 Management Consulting Agreement between Morris Material Handling,
Inc. and Chartwell Investments Inc., dated March 30, 1998.
10.8 Financial Advisory Agreement between Morris Material Handling, Inc.
and Chartwell Investments Inc., dated March 30, 1998.
10.9 Separation Agreement, dated October 26, 1997, between Harnischfeger
Corporation and Material Handling, LLC.
10.10 Share and Asset Purchase Agreement between PHMH Holding Company,
James Gann, Sr., James Gann, Jr. and Gail Gann, dated February 14,
1997.
10.11 Employment Agreement, dated March 30, 1998, between Morris Material
Handling, Inc. and Michael S. Erwin.
10.12 Employment Agreement, dated March 30, 1998, between Morris Material
Handling, Inc. and David D. Smith.
10.13 Employment Agreement, dated March 30, 1998, between Morris Material
Handling, Inc. and Martin L. Ditkof.
10.14 Employment Agreement, dated March 30, 1998, between Morris Material
Handling, Inc. and Richard J. Niespodziani.
10.15 Employment Agreement, dated March 30, 1998, between Morris Material
Handling, Inc. and Peter A. Kerrick.
II-3
<PAGE>
Exhibit Number Exhibit
- -------------- -------
10.16 Employment Agreement, dated March 30, 1998, between Morris Material
Handling, Inc. and Edward J. Doolan.
10.17 Service Agreement, dated March 30, 1998, between Morris Mechanical
Handling Limited and M J Maddock.
10.18 Service Agreement, dated March 30, 1998, between Morris Mechanical
Handling Limited and K B Norridge.
12. Statement of Computation of Financial Ratios.
21. Subsidiaries of MMH Holdings, Inc.
23.1 Consent of Independent Accountants.
23.2 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in
Exhibit 5.1).
25. Statement of Eligibility of Trustee.
27. Financial Data Schedule.
99.1 Letter of Transmittal (to be filed by amendment).
99.2 Notice of Guaranteed Delivery (to be filed by amendment).
II-4
<PAGE>
MATERIAL HANDLING EQUIPMENT BUSINESS
OF HARNISCHFEGER INDUSTRIES, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Balance at Additions Currency Balance
Beginning Charged Translation at End
Classification of Year to Expense Deductions(1) Effects of Year
- ----------------------------------- ---------- ---------- ------------- ----------- -------
<S> <C> <C> <C> <C> <C>
Allowance Deducted in Balance Sheet
from Accounts Receivable:
For the year ended October 31, 1997
Doubtful accounts $1,408 $ 439 $ (537) $ 20 $1,330
====== ====== ====== ====== ======
For the year ended October 31, 1996
Doubtful accounts $1,520 $ 354 $ (515) $ 49 $1,408
====== ====== ====== ====== ======
For the year ended October 31, 1995
Doubtful accounts $1,077 $ 706 $ (238) $ (25) $1,520
====== ====== ====== ====== ======
</TABLE>
(1) Represents write-off of bad debts, net of recoveries.
II-5
<PAGE>
Item 22. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the DGCL, the Certificate of Incorporation and Bylaws, 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 such Securities Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than 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 such
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
The undersigned Registrant hereby undertakes to file, during any period in
which offers or sales are being made, a post-effective amendment to the
Registration Statement: (i) to include any prospectus required by Section
10(a)(3) of the Securities Act; (ii) to reflect in the prospectus any facts or
events arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act if, in the aggregate, the changes in volume and price represent
no more than 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective 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.
The undersigned Registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to remove from registration
by means of a post-effective amendment any of the securities being registered
which remain unsold at the termination of this Offering.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of May, 1998.
MMH HOLDINGS, INC.
By: /s/ TODD R. BERMAN
--------------------------------
Todd R. Berman
Chairman
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael S. Erwin, Todd R. Berman and
Michael S. Shein and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as might or could
be done in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ TODD R. BERMAN Chairman of the Board of Directors May 13, 1998
- ------------------------
Todd R. Berman
/s/ MICHAEL S. ERWIN President, Chief Executive Officer May 13, 1998
- ------------------------ and Director (Principal Executive
Michael S. Erwin Officer)
/s/ DAVID D. SMITH Vice President and Director May 13, 1998
- ------------------------ (Principal Financial and Accounting
David D. Smith Officer)
/s/ MICHAEL S. SHEIN Vice President and Director May 13, 1998
- ------------------------
Michael S. Shein
/s/ JAY R. BLOOM Director May 13, 1998
- ------------------------
Jay R. Bloom
/s/ ROBERT W. HALE Director May 13, 1998
- ------------------------
Robert W. Hale
/s/ MICHAEL R. YOUNG Director May 13, 1998
- ------------------------
Michael R. Young
/s/ LARRY ZINE Director May 13, 1998
- ------------------------
Larry Zine
II-7
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Exhibit
- -------------- -------
1.1 Securities Purchase Agreement, dated March 23, 1998, between MMH
Holdings, Inc. and CIBC Oppenheimer Corp.
2.1 Recapitalization Agreement, dated January 28, 1998, among
Harnischfeger Corporation, the sellers named therein and MHE
Investments, Inc., as amended.
3.1 Second Amended and Restated Certificate of Incorporation of MMH
Holdings, Inc.
3.2 Bylaws of MMH Holdings, Inc.
3.3 Certificate of Designations of the Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of 12% Series A
Senior Exchangeable Preferred Stock, and Qualifications, Limitations
and Restrictions Thereof.
4.1 Preferred Stock Registration Rights Agreement, dated as of March 30,
1998, by and among MMH Holdings, Inc. and CIBC Oppenheimer Corp.
4.2 Common Stock Registration Rights and Stockholders Agreement, dated
as of March 30, 1998, among MMH Holdings, Inc., Chartwell, L.P. and
CIBC Oppenheimer Corp.
4.3 Certificate of Designations of the Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of 12 1/4% Series B
Junior Exchangeable Preferred Stock, and Qualifications, Limitations
and Restrictions Thereof.
4.4 Certificate of Designations of the Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of 12 1/2% Series C
Junior Preferred Stock, and Qualifications, Limitations and
Restrictions Thereof.
4.5 Credit Agreement, dated March 30, 1998, among MMH Holdings, Inc.,
Morris Material Handling, Inc., Material Handling, LLC, Morris
Material Handling, Ltd., Mondel ULC, Kaverit Steel and Crane ULC and
Canadian Imperial Bank of Commerce, as Administrative Agent, Credit
Agricole Indosuez, as Syndication Agent, BankBoston, N.A., as
Documentation Agent, and the Lending Institutions listed therein.
4.6 Guarantee, dated as of March 30, 1998, by MMH Holdings, Inc., in
favor and for the benefit of Canadian Imperial Bank of Commerce.
4.7 Guarantee, dated as of March 30, 1998, by each of the subsidiary
Guarantors named therein, in favor and for the benefit of Canadian
Imperial Bank of Commerce.
4.8 Stockholders and Registration Rights Agreement, dated as of March
30, 1998, by and among MMH Holdings, Inc., MHE Investments, Inc. and
Harnischfeger Corporation.
4.9 Form of Indenture dated as of ______, among MMH Holdings, Inc., as
the Issuer, and ________, as the Trustee for $________ 12% Exchange
Debentures due 2009.
4.10 Form of 12% Exchange Debenture due 2009.
5.1 Legal Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
concerning the legality of the Preferred Stock (to be filed by
amendment).
<PAGE>
Exhibit Number Exhibit
- -------------- -------
8.1 Legal Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
concerning certain tax matters (to be filed by amendment).
10.1 Surety Arrangement, dated March 30, 1998, among Reliance Insurance
Companies, MMH Holdings, Morris Material Handling, Inc. and certain
of their subsidiaries.
10.2 Credit Indemnification Agreement between Harnischfeger Industries,
Inc. and Morris Material Handling, Inc., dated as of March 30, 1998.
10.3 Tax Sharing Agreement between MHE Investments, Inc., MMH Holdings,
Inc. and certain of MMH Holdings, Inc.'s subsidiaries, dated March
30, 1998.
10.4 Component and Manufactured Products Supply Agreement between HarnCo
and Morris Material Handling, Inc., dated as of March 30, 1998.
10.5 Transition Services Agreement between HarnCo and Morris Material
Handling, Inc., dated as of March 30, 1998.
10.6 Trademark License Agreement between Harnischfeger Technologies, Inc.
and Morris Material Handling, Inc., dated as of March 30, 1998.
10.7 Management Consulting Agreement between Morris Material Handling,
Inc. and Chartwell Investments Inc., dated March 30, 1998.
10.8 Financial Advisory Agreement between Morris Material Handling, Inc.
and Chartwell Investments Inc., dated March 30, 1998.
10.9 Separation Agreement, dated October 26, 1997, between Harnischfeger
Corporation and Material Handling, LLC.
10.10 Share and Asset Purchase Agreement between PHMH Holding Company,
James Gann, Sr., James Gann, Jr. and Gail Gann, dated February 14,
1997.
10.11 Employment Agreement, dated March 30, 1998, between Morris Material
Handling, Inc. and Michael S. Erwin.
10.12 Employment Agreement, dated March 30, 1998, between Morris Material
Handling, Inc. and David D. Smith.
10.13 Employment Agreement, dated March 30, 1998, between Morris Material
Handling, Inc. and Martin L. Ditkof.
10.14 Employment Agreement, dated March 30, 1998, between Morris Material
Handling, Inc. and Richard J. Niespodziani.
10.15 Employment Agreement, dated March 30, 1998, between Morris Material
Handling, Inc. and Peter A. Kerrick.
<PAGE>
Exhibit Number Exhibit
- -------------- -------
10.16 Employment Agreement, dated March 30, 1998, between Morris Material
Handling, Inc. and Edward J. Doolan.
10.17 Service Agreement, dated March 30, 1998, between Morris Mechanical
Handling Limited and M J Maddock.
10.18 Service Agreement, dated March 30, 1998, between Morris Mechanical
Handling Limited and K B Norridge.
12. Statement of Computation of Financial Ratios.
21. Subsidiaries of MMH Holdings, Inc.
23.1 Consent of Independent Accountants.
23.2 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in
Exhibit 5.1).
25. Statement of Eligibility of Trustee.
27. Financial Data Schedule.
99.1 Letter of Transmittal (to be filed by amendment).
99.2 Notice of Guaranteed Delivery (to be filed by amendment).
================================================================================
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
by and among
MMH HOLDINGS, INC.
(a Delaware corporation),
as Issuer,
and
CIBC OPPENHEIMER CORP.,
as Initial Purchaser
---------------------------------
Dated as of March 23, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I.
DEFINITIONS
Section 1.1. Definitions.....................................................1
Section 1.2. Accounting Terms; Financial Statements..........................8
ARTICLE II.
ISSUE OF SECURITIES; PURCHASE AND SALE OF SECURITIES; RIGHTS OF HOLDERS OF
SECURITIES; OFFERING BY INITIAL PURCHASER
Section 2.1. Issue of Securities.............................................8
Section 2.2. Purchase, Sale and Delivery of Securities.......................9
Section 2.3. Registration Rights of Holders of Securities...................10
Section 2.4. Offering by the Initial Purchaser..............................10
ARTICLE III.
REPRESENTATIONS AND WARRANTIES; RESALE OF SECURITIES
Section 3.1. Representations and Warranties of the Company..................10
Section 3.2. Resale of Shares...............................................26
ARTICLE IV.
CONDITIONS PRECEDENT TO CLOSING
Section 4.1. Conditions Precedent to Obligations of the Initial Purchaser...26
ARTICLE V.
COVENANTS
Section 5.1. Covenants......................................................31
ARTICLE VI.
FEES
Section 6.1. Costs, Expenses and Taxes......................................34
ARTICLE VII.
INDEMNITY
Section 7.1. Indemnity......................................................35
Section 7.2. Contribution...................................................38
Section 7.3. Registration Rights............................................39
ARTICLE VIII.
MISCELLANEOUS
Section 8.1. Survival of Provisions.........................................39
Section 8.2. Termination....................................................39
<PAGE>
Section 8.3. No Waiver; Modifications in Writing............................40
Section 8.4. Information Supplied by the Initial Purchaser..................41
Section 8.5. Communications.................................................41
Section 8.6. Execution in Counterparts......................................41
Section 8.7. Successors.....................................................42
Section 8.8. Governing Law..................................................42
Section 8.9. Severability of Provisions.....................................42
Section 8.10. Headings......................................................42
Schedule I Subsidiaries
Exhibit A Form of Common Stock Registration Rights Agreement
Exhibit B Form of Preferred Stock Registration Rights Agreement
Exhibit C Form of Opinion of Akin, Gump, Strauss, Hauer & Feld, LLP
ii
<PAGE>
SECURITIES PURCHASE AGREEMENT, dated as of March 23, 1998 (the
"Agreement"), by and among MMH HOLDINGS, INC., a Delaware corporation (the
"Company") and CIBC OPPENHEIMER CORP. (the "Initial Purchaser").
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Act" means the Securities Act of 1933, as amended, and the rules
and regulations of the Commission thereunder.
"Affiliate" means, with respect to any Person, any other Person
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Person in question. 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, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise; provided, however, that beneficial ownership of at least 10% of the
voting securities of a Person shall be deemed to be control.
"Agreement" means this Agreement, including its schedules and
exhibits, as the same may be amended, supplemented or modified in accordance
with the terms hereof.
"Basic Documents" means, collectively, this Agreement, the
Certificate of Designation, the Debenture Indenture, the Preferred Stock
Registration Rights Agreement, the Common Stock Registration Rights Agreement,
the Unit Agreement, the Units, the Preferred Shares (including Dividend Shares),
the Unit Common Shares, the Debentures (including In-Kind Debentures) and, in
each case, all other agreements, instruments and documents executed and
delivered by the Company or its Subsidiaries in connection therewith.
"Blooma" means Morris Blooma Engineering Pte Ltd.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking
<PAGE>
institutions in the City of New York are authorized or obligated by law to
close.
"capital interests" has the meaning set forth in Section 3.1(d).
"Certificate of Designation" means the certificate of designation
under which the Preferred Shares will be issued.
"Closing" has the meaning set forth in Section 2.2(b) of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Act.
"Commonly Controlled Entity" has the meaning set forth in Section
3.1(q) of this Agreement.
"Common Shares" means, collectively, the Unit Common Shares and the
Voting Common Shares.
"Common Stock Registration Rights Agreement" means the Common Stock
Registration Rights and Stockholders' Agreement, dated as of the date of the
Closing, among the Company, Chartwell, L.P. and the Initial Purchaser,
substantially in the form attached hereto as Exhibit A.
"Credit Agreement" means the Credit Agreement to be dated as of the
date of Closing, among Morris Material Handling, the Company, Material Handling
LLC, Morris Material Handling, Ltd., Mondel ULC, Kaverit Steel and Crane ULC,
and Canadian Imperial Bank of Commerce, as Administrative Agent, Credit Agricole
Indosuez, as Syndication Agent, and BankBoston, N.A., as Documentation Agent,
and the lending institutions named therein.
"Debentures" mean the 12% Senior Subordinated Debentures, due 2008,
of the Company, issuable in exchange for Preferred Shares pursuant to the
Certificate of Designation and benefitting from the terms of the Debenture
Indenture.
"Debenture Trustee" means a trustee to be appointed by the Company
as trustee under the Debenture Indenture prior to the exchange of Preferred
Shares for Exchange Debentures.
"Debenture Indenture" means the indenture, in the form delivered to
the Transfer Agent at the Time of Purchase, to be entered into between the
Company and a trustee prior to the exchange of Preferred Shares for Debentures.
2
<PAGE>
"Default" means any event, act or condition which, with notice or
lapse of time or both, would constitute an Event of Default.
"Dividend Shares" has the meaning set forth in Section 3.1(l) of
this Agreement.
"Enforceability Exceptions" has the meaning set forth in Section
3.1(f).
"Environmental Law" has the meaning set forth in Section 3.1(z) of
this Agreement.
"Equity Investment" has the meaning set forth in the Memoranda.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Event of Default" means any event defined as an Event of Default
under the Debenture Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"Exchange Preferred Shares" has the meaning set forth in the
Preferred Stock Registration Rights Agreement.
"Final Memorandum" has the meaning set forth in Section 2.1 of this
Agreement.
"Financial Advisor" has the meaning set forth in the introductory
paragraph of this Agreement.
"Financing Documents" means the Credit Agreement, the Working
Capital Facilities and the Surety Arrangement and, in each case, all other
agreements, instruments and documents executed and delivered by the Company or
its Subsidiaries in connection therewith.
"Foreign Plans" has the meaning set forth in Section 3.1(v) of this
Agreement.
"HarnCo" means Harnischfeger Corporation, a Delaware corporation.
"Indemnified Party" has the meaning set forth in Section 7.1(c) of
this Agreement.
"Indemnifying Party" has the meaning set forth in Section 7.1(c) of
this Agreement.
3
<PAGE>
"Initial Purchaser" has the meaning set forth in the introductory
paragraph of this Agreement.
"In-kind Debentures" has the meaning set forth in Section 3.1(l) of
this Agreement.
"Lien" means, with respect to any property or assets of any Person,
any mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets, conditional
sales, or other title retention agreement having substantially the same economic
effect as any of the foregoing.
"Material Adverse Effect" means, with respect to the Company and its
Subsidiaries, a material adverse effect on the business (including the MHE
Business), condition (financial or otherwise), results of operations or
prospects of the Company and its Subsidiaries, taken as a whole, after giving
effect to each of the Transactions, or a material adverse effect on the ability
of the Company to perform its obligations under the Basic Documents to which it
is a party, including this Agreement.
"Material Handling LLC" means Material Handling LLC, a Delaware
limited liability company.
"Memoranda" has the meaning set forth in Section 2.1 of this
Agreement.
"MHE Business" means the Material Handling Equipment Business of
Harnischfeger Industries, Inc.
"MHE Entities" means each Subsidiary of Morris Material Handling
engaged in the MHE Business after giving effect to the Transactions, as if the
Transactions had occurred as of the date of this Agreement.
"MHE Investments" means MHE Investments, Inc., a Delaware
corporation.
"Morris Delivered Documents" means, collectively, the Basic
Documents, the Financing Documents and the Recapitalization Documents.
"Morris Material Handling" means Morris Material Handling, Inc., a
Delaware corporation.
"Note Indenture" means the indenture dated as of the Time of
Purchase by and among the Company, the guarantors thereunder and the Trustee
under which the Notes and the guarantees thereof will be issued.
4
<PAGE>
"Note Purchase Agreement" means the Securities Purchase Agreement,
dated as of March 23, 1998, among Morris Material Handling, as issuer, the
Guarantors party thereto, as guarantors, CIBC Oppenheimer Corp. and Goldman,
Sachs & Co., as Initial Purchasers and Indosuez Capital, as financial advisor.
"Notes" means the $200,000,000 aggregate principal amount of 9-1/2%
Senior Notes due 2008 of the Company to be issued under the Note Indenture.
"October 1997 Drop Down" means the contribution on October 26, 1997
by HarnCo of the assets comprising the MHE Business to Material Handling LLC, an
indirect Subsidiary of the Company, pursuant to the Separation Agreement.
"Offering Materials" has the meaning provided therefor in Section
7.1(a) of this Agreement.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, incorporated or unincorporated association,
joint-stock company, trust, government (or an agency or political subdivision
thereof) or other entity of any kind.
"PORTAL" means the Private Offerings, Resales and Trading through
Automated Linkages Market.
"Preferred Shares" means the Company's 12% Series A Senior
Exchangeable Preferred Stock, par value $.01 per share.
"Preferred Stock" means the preferred stock included in the Units
being issued pursuant to this Agreement.
"Preferred Stock Registration Rights Agreement" means the Preferred
Stock Registration Rights Agreement dated as of date of the Closing by and
between the Company and the Initial Purchaser, substantially in the form
attached hereto as Exhibit B.
"Preliminary Memorandum" has the meaning set forth in Section 2.1 of
this Agreement.
"Private Exchange Preferred Shares" has the meaning set forth in the
Preferred Stock Registration Rights Agreement.
"Proceeding" has the meaning set forth in Section 7.1(c) of this
Agreement.
"QIB" has the meaning set forth in Section 3.2 of this Agreement.
"Recapitalization" has the meaning set forth in the Memoranda.
5
<PAGE>
"Recapitalization Agreement" means the Recapitalization Agreement,
dated as of January 28, 1998, among HarnCo, the sellers named therein and MHE
Investments, together with Amendment No. 1 thereto, dated as of March 5, 1998.
"Recapitalization Documents" means the Recapitalization Agreement,
together with all other agreements, instruments and documents executed and
delivered, or to be executed and delivered as of the Time of Purchase, by MHE
Investments, the Company, Morris Material Handling or its Subsidiaries in
connection therewith, including, without limitation, the Trademark License
Agreement, by and between Harnischfeger Technologies Inc. and Morris Material
Handling; the Confidentiality and Non-Competition Agreement, by and between
Harnischfeger Industries, Inc. and Morris Material Handling; the Component and
Manufactured Products Supply Agreement, by and between HarnCo and Morris
Material Handling; the Transition Services Agreement, by and between HarnCo and
Morris Material Handling; the Credit Indemnification Agreement, by and between
Harnischfeger Industries, Inc. and Morris Material Handling; and the Assumption
Agreement, by and between HarnCo and Material Handling LLC.
"Regulation S" has the meaning set forth in Section 3.1(ii) of this
Agreement.
"Securities" has the meaning set forth in Section 2.1 of this
Agreement.
"Separation Agreement" means the Separation Agreement, dated as of
October 26, 1997, between HarnCo and Material Handling LLC.
"Solvent" means, with respect to any Person on a particular date (i)
the fair value (or present fair saleable value) of the assets of such Person
will exceed the sum of its stated debts and liabilities (including identified
contingent liabilities); (ii) the Person is able to realize upon its assets and
pay its debts and other liabilities, contingent obligations and commitments as
they mature and become due in the normal course of business; (iii) such Person
is not incurring debts or liabilities beyond its ability to pay as such debts
and liabilities mature; and (iv) such Person is not engaged in any business or
transaction or is not about to engage in any business or transaction (including,
in the case of Morris Material Handling and the guarantors of its Notes, on a
consolidated basis, the issuance of the Notes and such guarantees and the
application of proceeds from the sale of such securities by the Morris Material
Handling (and the application by the Company of such proceeds, together with the
proceeds of the sale of the Securities pursuant to this Agreement, immediately
thereafter), for which at the Time of Purchase as described in the Memoranda)
its property would constitute unreasonably small capital with which to carry on
its business (including the MHE Business) as it is proposed to be conducted
after giving due consideration to the
6
<PAGE>
industry in which the Person is engaged; or (v) such Person is otherwise
insolvent. In computing the amount of such contingent liabilities at any time,
it is intended that such liabilities will be computed at the amount that, in
light of all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured liability.
"State" means each of the states of the United States, the District
of Columbia and the Commonwealth of Puerto Rico.
"State Commission" means any agency of any State having jurisdiction
to enforce such State's securities laws.
"Subsidiaries" means, with respect to any Person, any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the capital stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the direction
of the management and policies of such entity by contract or otherwise or if in
accordance with generally accepted accounting principles such entity is
consolidated with the first-named Person for financial statement purposes;
provided, however, that in respect of the Company, both prior to the Time of
Purchase and on and after the Time of Purchase, the term "Subsidiaries" shall
include, for all purposes of this Agreement, Morris Material Handling as if the
same was a Subsidiary of the Company at the time in question, except in the case
of Sections 3.1(c) and 3.1(d) hereof.
"Surety Arrangement" means the Surety Arrangement, to be dated as of
the Time of Purchase, by and between an affiliate of Reliance Insurance Company
and Morris Material Handling.
"Taxes" has the meaning set forth in Section 3.1(s) of this
Agreement.
"Time of Purchase" has the meaning set forth in Section 2.2(b) of
this Agreement.
"Transactions" has the meaning provided therefor in the Memoranda.
"Trustee" means United States Trust Company of New York, as trustee
under the Indenture.
7
<PAGE>
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, and the rules and regulations of the Commission thereunder.
"Unit Agent" means United States Trust Company of New York, as Unit
Agent under the Unit Agreement.
"Unit Agreement" means the Unit Agreement, dated as of the date of
the Closing, between the Company and the Unit Agent.
"Unit Common Shares" means the non-voting Common Stock, par value
$.01 per share, of the Company.
"Units" means the 57,710 Units issued under the Unit Agreement, each
Unit consisting of one Preferred Share and 720 Unit Common Shares.
"Voting Common Shares" means the voting Common Stock, par value $.01
per share, of the Company.
"Voting Rights Triggering Event" means any event defined as a Voting
Rights Triggering Event under the Certificate of Designation.
"Working Capital Facilities" means the contemplated working capital
facilities to be entered into after the Time of Purchase by the Company and its
Subsidiaries incorporated in South Africa, Singapore and Mexico.
Section 1.2. Accounting Terms; Financial Statements. All accounting
terms used herein and not expressly defined in this Agreement shall have the
respective meanings given to them in accordance with generally accepted
accounting principles in the United States as the same may be in effect from
time to time.
ARTICLE II.
ISSUE OF SECURITIES; PURCHASE AND SALE
OF SECURITIES; RIGHTS OF HOLDERS OF SECURITIES;
OFFERING BY INITIAL PURCHASER
Section 2.1. Issue of Securities. The Company has authorized the
issuance of 57,710 Units, consisting of 52,900 Preferred Shares and 720 Unit
Common Shares. The Preferred Shares are exchangeable, in whole but not in part,
at the option of the Board of Directors of the Company, for the Company's
Debentures on any dividend payment date.
The Units, the Preferred Shares and the Unit Common Shares are
referred to herein collectively as the "Securities."
8
<PAGE>
The Securities have not been registered under the Act, and will be
offered and sold to the Initial Purchaser in reliance on exemptions therefrom.
In connection with the sale of the Securities, the Company has
prepared a preliminary offering memorandum dated March 6, 1998 (the "Preliminary
Memorandum") and prepared a final offering memorandum dated March 23, 1998 (the
"Final Memorandum" and, together with the Preliminary Memorandum, the
Memoranda") setting forth or including a description of the terms of the
Securities and the Debentures, a description of the Company, its Subsidiaries
and the MHE Business and any material developments relating to the Company, its
Subsidiaries and the MHE Business occurring after the date of the most recent
financial statements included therein.
Section 2.2. Purchase, Sale and Delivery of Securities.
(a) On the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and conditions herein
set forth, the Company agrees that it will sell to the Initial Purchaser,
and the Initial Purchaser agrees, that it will purchase the Units from the
Company at the Time of Purchase at a price equal to $998.09 per Unit.
(b) The purchase, sale and delivery of the Securities will take
place at a closing (the "Closing") at the offices of Akin, Gump, Strauss,
Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York, at 9:00 A.M.
New York time, on March 30, 1998, or such later date and time, if any, as
the Initial Purchaser and the Company shall agree. The time at which such
Closing (and the concurrent closing of the Recapitalization, the Equity
Investment and the Credit Agreement) is concluded is herein called the
"Time of Purchase."
(c) Certificates in definitive form for the Securities that the
Initial Purchaser has agreed to purchase hereunder, in such denominations
and registered in such name or names as the Initial Purchaser requests
upon notice to the Company at least 48 hours prior to the Closing, shall
be delivered by or on behalf of the Company to the nominee of The
Depository Trust Company for the account of the Initial Purchaser, against
payment by or on behalf of the Initial Purchaser of the purchase price
therefor by wire transfer of immediately available funds wired in
accordance with the written instructions of the Company. The Company will
make such certificates for the Securities available for inspection by the
Initial Purchaser at the offices of CIBC
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Oppenheimer, or such other place as the Initial Purchaser may designate,
at least 24 hours prior to the Closing.
Section 2.3. Registration Rights of Holders of Securities. The
Initial Purchaser and its direct and indirect transferees of (i) the Preferred
Shares will have such rights with respect to the registration of the Preferred
Shares, the Exchange Preferred Stock and the Debentures under the Act as set
forth in the Preferred Stock Registration Rights Agreement and (ii) the Unit
Common Shares will have such rights with respect to the registration of the Unit
Common Shares as set forth in the Common Stock Registration Rights Agreement.
Section 2.4. Offering by the Initial Purchaser. The Initial
Purchaser proposes to make an offering of the Units at the price and upon the
terms set forth in the Final Memorandum, as soon as practicable after this
Agreement is entered into and as in the judgment of the Initial Purchaser is
advisable.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES; RESALE OF SECURITIES
Section 3.1. Representations and Warranties of the Company. The
Company represents and warrants to and agrees with the Initial Purchaser on and
as of the date hereof and the Time of Purchase as follows:
(a) Each of the Preliminary Memorandum and the Final Memorandum, as
of its respective date and the Final Memorandum as of the Time of
Purchase, did not and will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in
this Section 3.1(a) do not apply to statements or omissions made in
reliance upon and in conformity with information relating to the Initial
Purchaser furnished to the Company in writing by the Initial Purchaser
expressly for use in the Final Memorandum or any amendment or supplement
thereto or relating to the manner of sale of the Securities by the Initial
Purchaser. Each of the Preliminary Memorandum and the Final Memorandum, as
of its respective date and the Final Memorandum as of the Time of
Purchase, contains all the information that, if requested by a prospective
purchaser of the Securities, would be required to be provided to such
prospective purchaser pursuant to Rule 144A(d)(4) under the Act.
(b) Price Waterhouse LLP is an independent public accounting firm
with respect to the Company and the MHE Business within the meaning of the
Act and the rules and
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regulations promulgated thereunder. The historical financial statements
(including the related notes) contained in the Memoranda comply in all
material respects with the requirements applicable to a registration
statement on Form S-1 under the Act; such financial statements have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods covered thereby and fairly
present the financial position of the entities purported to be covered
thereby at the respective dates indicated and the results of their
operations and their cash flows for the respective dates indicated; the
summary and selected financial data contained in the Memoranda present
fairly the information shown therein and have been prepared and compiled
on a basis consistent with the financial statements included therein; and
the adjusted and pro forma financial information contained in the
Memoranda has been prepared on a basis consistent with the historical
financial statements contained in the Memoranda (except for the pro forma
adjustments specified therein), includes all material adjustments to the
historical financial information required by Regulation S-X under the Act
and the Exchange Act to reflect the transactions described in the
Memoranda, gives effect to assumptions made on a reasonable basis and
fairly presents the historical and proposed transactions contemplated by
the Memoranda and the Morris Delivered Documents. The statistical and
market-related data included in the Memoranda are based on or derived from
sources which the Company believes to be reliable and accurate in all
material respects or represents the Company's good faith reasonable
estimates that are made on the basis of data derived from such sources.
(c) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. As of the
date hereof, the Company has no direct or indirect Subsidiaries other than
the MHE Entities and as of the Time of Purchase Morris Material Handling
will be the only directly held Subsidiary of the Company. Morris Material
Handling and each MHE Entity is a corporation, limited liability company
or partnership duly incorporated or organized, validly existing and in
good standing under the laws of the state or other jurisdiction of its
incorporation or organization. Each of the Company, Morris Material
Handling and the MHE Entities is duly qualified and in good standing as a
foreign corporation, limited liability company or partnership and is
authorized to do business in each jurisdiction in which the ownership or
leasing of any property or the character of its operations makes such
qualification necessary, except where the failure to be so qualified would
not have a Material Adverse Effect. Each of the Company, Morris Material
Handling and the MHE Entities has corporate power and authority to own and
lease its
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properties and conduct its business (including the MHE Business) as
described in the Memoranda.
(d) As of the Time of Purchase (after giving effect to the
Transactions, as described in the Memoranda under "The Transactions-The
Recapitalization" and "Security Ownership of Certain Beneficial Owners and
Management"), the Company's authorized capital stock will consist of (i)
100,000 Unit Shares, (ii) 900,000 Voting Shares, (iii) 120,000 Preferred
Shares, (iv) 10,000 Series B Preferred Shares and (v) 60,000 Series C
Preferred Shares, of which (A) 720 Unit Shares will be issued and
outstanding and held initially by the Initial Purchaser, (B) 7,907 Voting
Shares will be issued and outstanding and held by MHE Investments and
2,261 Voting Shares will be issued and outstanding and held by HarnCo, (C)
57,710 Preferred Shares will be issued and outstanding and held initially
by the Initial Purchaser, (D) 4,809 Series B Preferred Shares will be
issued and outstanding and held by HarnCo and (E) 28,855 Series C
Preferred Shares will be issued and outstanding and held by MHE
Investments. All of the issued and outstanding shares of capital stock,
membership interests or partnership interests (collectively, "capital
interests"), as the case may be, of the Company, Morris Material Handling
and the MHE Entities are validly issued (and, in the case of capital
stock, all of such capital stock is fully paid and nonassessable), and
none of such capital interests were issued in violation of any preemptive
or similar rights. As of the Time of Purchase, the Company will have no
Subsidiaries other than Morris Material Handling and the MHE Entities.
Schedule I hereto sets forth the name of each Subsidiary of the Company
after giving effect to the Transactions, as of the Time of Purchase, the
type of each class of outstanding capital interests of each such
Subsidiary as of such date and the number and percentage of such capital
interests to be held by the Company or its Subsidiaries, identifying the
name of the Person holding such capital interests. Except as set forth in
the Final Memorandum, after giving effect to the Transactions, (i) at the
Time of Purchase (A) all of the issued and outstanding capital interests
of Morris Material Handling will be owned by the Company and all of the
issued and outstanding capital interests of Material Handling LLC and each
other MHE Entity will be wholly owned directly or indirectly by Morris
Material Handling, free and clear of any Liens, except, in each case, as
created in connection with the Credit Agreement and (B) there will be no
outstanding subscriptions, options, warrants, rights, convertible
securities or other binding agreements or commitments of any character
obligating the Company, Morris Material Handling or any MHE Entity to
issue any securities and (ii) as of the date hereof there is, and at the
Time of Purchase there will be, no agreement, understanding or arrangement
among the Company, Morris Material Handling or
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any MHE Entity and their respective capital interest holders or any other
Person (other than with another MHE Entity) relating to the ownership or
disposition of any capital interests in the Company, Morris Material
Handling or any MHE Entity, the election of directors of the Company,
Morris Material Handling or any MHE Entity or the governance of the
Company's, Morris Material Handling's or any MHE Entity's affairs, except
for (A) the Stockholders' Agreement (as defined in the Memoranda) the
Common Stock Registration Rights Agreement, the stockholders' agreement
relating to Blooma and employment agreements, employee stock purchase
agreements and option grants, in each case between the Company and the
executives named in the Final Memorandum and (B) the Common Stock
Registration Rights Agreement, and such agreements will not be breached or
violated as a result of the execution and delivery of, or the consummation
of the transactions contemplated by, this Agreement and Morris Delivered
Documents or the consummation of the Transactions.
(e) Each of the Company and its Subsidiaries has, or at the Time of
Purchase will have, the full right, power and authority to enter into the
Morris Delivered Documents (in each case, to the extent a party thereto)
and to carry out their respective obligations thereunder (including,
without limitation, in the case of the Company, issuing the Units in the
manner and for the purpose contemplated by this Agreement) and to
consummate each of the Transactions to which it is a party. The execution,
delivery and performance of the Morris Delivered Documents and the
consummation of the transactions contemplated thereby have been, or at the
Time of Purchase will have been, authorized by the Company and each of its
Subsidiaries (in each case, to the extent a party thereto), and no other
proceeding or approval on the part of the Company, such Subsidiaries, or
the shareholders of any of the foregoing is necessary, or will be
necessary, at the Time of Purchase, to authorize the execution and
delivery of the Morris Delivered Documents or the performance of any of
the transactions contemplated thereby.
(f) This Agreement has been duly authorized, executed and delivered
by the Company and (assuming the due authorization, execution and delivery
by the Initial Purchaser) is a valid and legally binding agreement of the
Company, enforceable in accordance with its terms except (i) that the
enforcement hereof may be subject to bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally, and to
general principles of equity and the discretion of the court before which
any proceeding therefor may be brought (the "Enforceability Exceptions")
and (ii) as any rights to indemnity or contribution hereunder may be
limited by
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federal and state securities laws and public policy considerations.
(g) The Unit Agreement, when executed and delivered by the Company
(assuming the due authorization, execution and delivery by the Unit
Agent), will constitute a valid and legally binding agreement of the
Company, enforceable in accordance with its terms, subject to the
Enforceability Exceptions.
(h) The Units, when issued and delivered by the Company against
payment therefor by the Initial Purchaser in accordance with the terms of
this Agreement (assuming due authentication, execution and delivery
thereof by the Unit Agent in accordance with the Unit Agreement), will be
validly issued, fully paid and nonassessable and free of any preemptive or
similar rights; the certificates for the Units will comply with the
requirements of Delaware General Corporation Law; and the holders of such
Units will not be subject to personal liability by reason of being such
holders.. The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Act.
(i) At the Time of Purchase, the Certificate of Designation relating
to the Preferred Shares and any additional Preferred Shares issued as
dividends in accordance with the terms of the Certificate of Designation
(the "Dividend Shares") will have been duly authorized by the Company. The
Preferred Shares and the Dividend Shares, when issued and delivered by the
Company against payment therefor in accordance with the provisions of this
Agreement, in the case of the Preferred Shares, and in accordance with the
terms of the Certificate of Designation, in the case of the Dividend
Shares, will be validly issued, fully paid and nonassessable and free of
any preemptive or similar rights; the certificates for the Preferred
Shares and the Dividend Shares will comply with the requirements of
Delaware General Corporation Law; and the holders of such Preferred Shares
and Dividend Shares will not be subject to personal liability by reason of
being such holders. At the Time of Purchase, the Company will have
reserved for issuance, and duly authorized the issuance of, the maximum
number of Preferred Shares and Dividend Shares issuable as dividends
pursuant to the terms of the Certificate of Designation. At the Time of
Purchase, the Amended and Restated Certificate of Incorporation of the
Company, by virtue of the Certificate of Designation, will set forth the
rights, preferences and priorities of the Preferred Shares and the
Dividend Shares. At the Time of Purchase, the Exchange Preferred Shares
and the Private Exchange Preferred Shares will have been duly authorized
and, when issued and delivered by the Company in accordance with the
provisions of the Exchange Offer contemplated by the Preferred Stock
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Registration Rights Agreement, will be validly issued, fully paid and
nonassessable and free of any preemptive or similar rights.
(j) The Unit Common Shares, when issued and delivered by the Company
against payment therefor by the Initial Purchaser in accordance with the
terms of this Agreement, will be validly issued, fully paid and
nonassessable, free of any preemptive or similar rights; the certificates
for the Unit Common Shares will comply with the requirements of Delaware
General Corporation Law; and the holders of such Unit Common Shares will
not be subject to personal liability by reason of being such holders. At
the Time of Purchase, the Voting Common Shares issuable in exchange for
the Unit Common Shares will have been duly authorized and, when issued and
delivered by the Company in accordance with the provisions of the
Company's Amended and Restated Certificate of Incorporation, will be
validly issued, fully paid and nonassessable and free of any preemptive or
similar rights.
(k) The Debenture Indenture, when executed and delivered by the
Company (assuming the due authorization, execution and delivery by the
Debenture Trustee), will constitute a valid and legally binding agreement
of the Company, enforceable against the Company in accordance with its
terms, subject to the Enforceability Exceptions. At the Time of Purchase,
the Debenture Indenture will conform in all material respects to the
requirements of the Trust Indenture Act and the rules and regulations of
the Commission applicable to an indenture which is qualified thereunder.
(l) At the Time of Purchase, the Debentures and any additional
Debentures issued as interest in accordance with the provisions of the
Indenture (the "In-kind Debentures") will have been duly authorized by the
Company. The Debentures and the In-kind Debentures, when executed by the
Company (assuming, in the case of the Debentures and In-kind Debentures,
due authentication by the Debenture Trustee in accordance with the
Debenture Indenture) and delivered upon the exchange of the Preferred
Shares and/or the Dividend Shares, if any, in accordance with the
Certificate of Designation relating to the Preferred Shares and the
Dividend Shares in the case of the Exchange Debentures, or as interest on
outstanding Debentures in accordance with the Debenture Indenture, in the
case of the In-kind Debentures, will have been duly executed, issued and
delivered and will constitute valid and binding obligations of the
Company, enforceable in accordance with their respective terms, subject to
the Enforceability Exceptions.
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(m) The Common Stock Registration Rights Agreement, when executed
and delivered by the Company (assuming due authorization, execution and
delivery by each other party thereto), will constitute a valid and legally
binding agreement of the Company, enforceable in accordance with its
terms, subject to the Enforceability Exceptions and as any rights to
indemnity or contribution thereunder may be limited by federal and state
securities laws and public policy considerations. No holder of securities
of the Company or any Subsidiary will be entitled to have such securities
registered under the Common Stock Registration Rights Agreement other than
as expressly permitted thereby.
(n) The Preferred Stock Registration Rights Agreement, when executed
and delivered by the Company (assuming the due authorization, execution
and delivery by the Initial Purchaser), will constitute a valid and
legally binding agreement of the Company, enforceable in accordance with
its terms, subject to the Enforceability Exceptions and as any rights to
indemnity or contribution thereunder may be limited by federal and state
securities laws and public policy considerations. No holder of securities
of the Company or any Subsidiary will be entitled to have such securities
registered under the Preferred Stock Registration Rights Agreement other
than as expressly permitted thereby.
(o) Each other Morris Delivered Document, when duly executed and
delivered by each of the Company, its Subsidiaries and MHE Investments, in
each case, to the extent a party thereto (assuming the due authorization,
execution and delivery thereof by the other parties thereto), will
constitute a valid and legally binding agreement of each of the Company,
its Subsidiaries and MHE Investments, as applicable, enforceable in
accordance with its terms, subject to the Enforceability Exceptions and
except as any rights to indemnity or contribution thereunder may be
limited by federal and state securities laws and public policy
considerations.
(p) The execution, delivery and performance by the Company, its
Subsidiaries and MHE Investments of the Morris Delivered Documents to
which they are a party, the issuance and sale by the Company of the
Securities to be issued by it, the execution, delivery and performance by
the Company, its Subsidiaries and MHE Investments of all other agreements
and instruments to be executed by them and delivered pursuant hereto or
thereto or in connection herewith or therewith or in connection with any
of the transactions contemplated hereby or thereby, and compliance by the
Company, its Subsidiaries and MHE Investments with the terms and
provisions hereof and thereof, and consummation of the other Transactions
(as defined in the Final Memorandum) do not and will not (i) violate any
provision of any law, rule
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or regulation (including, without limitation, Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System), order, writ,
judgment, decree, determination or award presently in effect or in effect
at the Time of Purchase having applicability to the Company, any of its
Subsidiaries or MHE Investments, (ii) violate or conflict with or result
in a breach of or constitute a default under the certificate of
incorporation or by-laws (or similar organizational document) of the
Company, any of its Subsidiaries or MHE Investments, or, as of the Time of
Purchase, any indenture or loan or credit agreement (including, without
limitation, the Financing Documents), or any other material agreement or
instrument which, if the Company were a reporting company pursuant to
Section 13(d) or 15 of the Exchange Act, would be required to be filed
pursuant to Item 601 of Regulation S-K, to which the Company, any of its
Subsidiaries or MHE Investments is or will at such time be a party or by
which the Company, any of its Subsidiaries or MHE Investments or any of
their respective properties or assets may be bound or affected other than
such violations, conflicts or defaults which would not reasonably be
likely to have a Material Adverse Effect, or (iii) except as expressly
contemplated by the Note Indenture, the Financing Documents or the
Debenture Indenture, result in, or require the creation or imposition of,
any Lien upon or with respect to any of the properties or assets now owned
or hereafter acquired by the Company, any of its Subsidiaries or MHE
Investments, except, in each case, where such violation, conflict, default
or creation or imposition of any Lien would not (individually or in the
aggregate) be reasonably likely to have a Material Adverse Effect.
(q) Immediately before and after the consummation of the
Transactions, including those contemplated by this Agreement and the other
Morris Delivered Documents (including the application of proceeds by the
Company from the issuance and sale of the Securities by the Company at the
Time of Purchase as described in the Memoranda), the Company and its
Subsidiaries, on a consolidated basis, will be Solvent.
(r) Subsequent to the date as of which information is given in the
Final Memorandum to the date hereof, except as contemplated in the Final
Memorandum, there has not been (i) any event or condition that has had or
that could reasonably be expected to have a Material Adverse Effect, (ii)
any transaction entered into by the Company or any of its Subsidiaries
that is material to the Company or its Subsidiaries, taken as a whole,
other than in the ordinary course of business, or (iii) any dividend,
redemption or distribution of any kind declared, paid or made by the
Company on its common stock.
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(s) There is no action, suit, investigation or proceeding,
governmental or otherwise, in law or in equity, or before any commission
or other administrative authority, in any jurisdiction in which the
Company or its Subsidiaries conducts business, pending or, to the
knowledge of the Company, threatened to which the Company or any of its
Subsidiaries is or would be a party or of which the properties or assets
of the Company or its Subsidiaries are or may be subject, that (i) seeks
to restrain, enjoin, prevent the consummation of or otherwise challenge
the issuance and sale of the Securities by the Company or any of the other
transactions contemplated by the Morris Delivered Documents or any of the
Transactions, (ii) questions the legality or validity of any such
transactions or seeks to recover damages or obtain other relief in
connection with any such transactions or (iii) could reasonably be
expected to have a Material Adverse Effect. There are no legal or
governmental proceedings that would be required by the Act to be described
in a prospectus relating to the Securities that are not described in the
Final Memorandum.
(t) Neither the Company nor any of its Subsidiaries is currently or,
after giving effect to the consummation of the transactions contemplated
by this Agreement and the other Transactions, will be (i) in violation of
its respective certificate of incorporation or by-laws (or similar
organizational document), (ii) in default (nor will an event occur which
with notice or passage of time or both would constitute such a default)
under or in violation of any indenture or loan or credit agreement or any
other material agreement or instrument to which it is a party or by which
it or any of its properties or assets may be bound or affected, (iii) in
violation of any order of any court, arbitrator or governmental body, or
(iv) in violation of or will have violated any statute, rule or regulation
of any governmental authority, except in each case, which default or
violation (individually or in the aggregate) could not reasonably be
expected to (x) affect the legality, validity or enforceability of any of
the Morris Delivered Documents in any material respect or (y) have a
Material Adverse Effect.
(u) There are no material licenses, franchises, permits and other
governmental authorizations held by the Company or any of its Subsidiaries
with respect to the conduct of their respective businesses that are not
accurately described in the Memoranda, each, as of their respective dates.
No authorization, consent, approval, license, qualification or formal
exemption from, nor any filing, declaration or registration with, any
court, governmental agency or regulatory authority or any securities
exchange is required in connection with the execution, delivery or
performance by the Company or any of
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its Subsidiaries (to the extent they are a party thereto) of any of the
Morris Delivered Documents or consummation of any of the transactions
contemplated thereby or consummation of any of the other Transactions,
except (i) as may be required under state securities or "blue sky" laws or
the laws of any foreign jurisdiction, (ii) such as have been obtained or
made, (iii) as may be required under the Act, the Exchange Act and the
Trust Indenture Act in connection with the performance of obligations
under the Registration Rights Agreement, (iv) as may be required under the
Exchange Act after the Time of Purchase or (v) as would not (individually
or in the aggregate) be reasonably likely to have a Material Adverse
Effect. All such authorizations, consents, approvals, licenses,
qualifications, exemptions, filings, declarations and registrations set
forth in the Final Memorandum (other than as disclosed therein) which are
required to have been obtained by the date hereof have been obtained or
made, as the case may be, and are in full force and effect and not the
subject of any pending or, to the best knowledge of the Company,
threatened attack by appeal or direct proceeding or otherwise, except as
would not reasonably be likely to have a Material Adverse Effect.
(v) Neither the execution and delivery of this Agreement or the
Morris Delivered Documents, the sale of the Securities to the Initial
Purchaser, nor the consummation of the Transactions will involve any
non-exempt prohibited transaction within the meaning of Section 406 of
ERISA, or Section 4975 of the Code on the part of the Company or any of
its Subsidiaries. The representation made by the Company in the preceding
sentence is made in reliance upon and subject to the accuracy of, and
compliance with, the representations and covenants made or deemed made by
the purchasers of Units from the Initial Purchaser as set forth in the
Final Memorandum under "Notice to Investors." The present value of all
benefits vested under each Employee Benefit Plan maintained by the Company
or its Subsidiaries or any person or entity treated with any such Person
as a single employer under Section 414 of ERISA (a "Commonly Controlled
Entity") (based on the current liability, interest rate and other
assumptions used in preparation of the plan's Form 5500 Annual Report) did
not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of
such plan allocable to such accrued benefits. Neither the Company, any of
its Subsidiaries, nor any Commonly Controlled Entity has had a complete or
partial withdrawal from any Multiemployer Plan (as defined in ERISA), and
neither the Company, any of its Subsidiaries, nor any Commonly Controlled
Entity would become subject to any liability under ERISA if the Company,
any Subsidiary, or any such Commonly Controlled Entity were to withdraw
completely from all Multiemployer Plans as of the valuation
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date most closely preceding the date on which such representation is made
or deemed made. No such Multiemployer Plan is in reorganization or
insolvent. There are no material liabilities of the Company, any of its
Subsidiaries, or any Commonly Controlled Entity for post-retirement
benefits to be provided to their current and former employees under Plans
which are welfare benefit plans (as described in Section 3(l) of ERISA).
The Company and each of its Subsidiaries are substantially and in all
material respects in compliance with all applicable laws with respect to
all employee benefit plans maintained or contributed to in respect of
employees other than those employed in the United States ("Foreign
Plans"). There are no material unfunded liabilities of the Company or its
Subsidiaries in respect of the Foreign Plans.
(w) Each of the Company and its Subsidiaries has good and marketable
title to all real property described in the Final Memorandum as being
owned by it and good and valid title to, or valid and enforceable
leasehold interests in, all properties and assets identified in the Final
Memorandum as owned or leased, respectively, by each of them (including,
without limitation, all those transferred to Material Handling LLC in the
October 1997 Drop-Down), free and clear of all material Liens, except (i)
such Liens as are described in the Final Memorandum or (ii) Liens created
in the ordinary course of business which are Permitted Liens (as defined
in the Indenture). All material leases, contracts and agreements,
including those referred to in the Memoranda, to which the Company or any
of the Subsidiaries is a party or by which any of them are bound are in
full force and effect and are valid and enforceable in accordance with
their terms, except for the Enforceability Exceptions. There is not under
any such material lease, contract or agreement any default by the Company
or any such Subsidiary, or any default that with notice or lapse of time
or both would constitute such a default by the Company or any such
Subsidiary and with respect to which the Company or such Subsidiary has
not taken adequate steps to prevent such default from occurring. To the
knowledge of the Company and its Subsidiaries, there is not under any such
material lease, contract or agreement any default by any other party
thereto or any event that with notice or lapse of time or both would
constitute such a default thereunder by such party.
(x) All tax returns required to be filed by the Company or any of
its Subsidiaries in any jurisdiction (including foreign jurisdictions)
have been duly filed, neither the Company nor any Subsidiary is in default
in the payment of any taxes, assessments, fees and other charges
including, without limitation, withholding taxes, penalties, and interest
("Taxes") with respect thereto, except where
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the failure to so pay could not reasonably be expected to have a Material
Adverse Effect. There are no actual or, to the knowledge of the Company
and its Subsidiaries, proposed additional tax assessments for any fiscal
period against the Company or any of its Subsidiaries that, individually
or in the aggregate, is reasonably likely to have a Material Adverse
Effect.
(y) Giving effect to the Transactions, there are no material
copyrights, patents, trade names, service marks or domain names, whether
registered or at common law, or applications therefor that are pending or
in the process or preparation (collectively, the "Intellectual Property
Rights") that are directly or indirectly owned, licensed, used, required
for use or controlled in whole or in part by the Company or its
Subsidiaries, and no material licenses or other agreements allowing the
Company or its Subsidiaries to use Intellectual Property Rights of third
parties that, in any such case, are not accurately described in the Final
Memorandum. Except as otherwise described in the Final Memorandum, the
Company and its Subsidiaries are the sole and exclusive owners of the
Intellectual Property Rights described therein, free and clear of any Lien
(other than Permitted Liens) and such Intellectual Property Rights have
not been and are not being challenged in any way or involved in any
pending or threatened unfair competition proceeding. There has been and is
no claim challenging the scope, validity or enforceability of any of the
Intellectual Property Rights. To the knowledge of the Company and its
Subsidiaries, neither the Company nor any of its Subsidiaries has
infringed, or is infringing or is subject to any unfair competition claim
with respect to any Intellectual Property Rights, or any other proprietary
or other intellectual property right of any person or entity and neither
the Company nor any of its Subsidiaries has received or has any knowledge,
after due inquiry, of any such claim or other notice of any such violation
or infringement.
(z) Except as described in the Final Memorandum, each of the Company
and its Subsidiaries is in compliance with all federal, state, local and
foreign laws, and any rules, regulations, orders, decrees, judgments or
injunctions issued or promulgated thereunder relating to pollution and
protection of public and employee health and the environment
("Environmental Law") and with the terms and conditions of any permit,
license or approval required thereunder in connection with the ownership,
operation or use of its business, property and assets where the failure to
be in such compliance could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect; none of the Company or any
of its Subsidiaries is subject to any liability, absolute or contingent,
under any
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Environmental Law which liability would, individually or in the aggregate,
be reasonably likely to result in a Material Adverse Effect; and there is
no civil, criminal or administrative action, suit, demand, hearing, notice
of violation or deficiency, investigation, proceeding or notice of
potential responsibility or liability or demand letter or request for
information pending or, to the best knowledge of the Company, threatened
against the Company or any of its Subsidiaries under any Environmental Law
which, if determined adversely to the Company or any such Subsidiary,
would, individually or in the aggregate, be reasonably likely to result in
a Material Adverse Effect.
(aa) There has been no resignation or termination of employment of
any officer or key employee of the Company or any Subsidiary and the
Company has no knowledge of any impending or threatened resignation or
termination of employment in any case that would have a Material Adverse
Effect. Except as set forth in the Memoranda, neither the Company nor any
Subsidiary has entered into any severance or similar arrangement in
respect of any present or former employees that would be required to be
disclosed in a prospectus relating to the Securities under the Act. There
is no strike, labor dispute, slowdown or work stoppage with the employees
of the Company or any of its Subsidiaries which is pending or, to the best
knowledge of the Company, threatened.
(bb) Neither the Company nor any Subsidiary has, since the date of
the latest audited financial statements contained in the Memoranda,
sustained any loss or interference with its business from fire, explosion,
flood, accident or other calamity, whether or not covered by insurance, or
from any labor dispute, or has become a party to or the subject of any
litigation, court or governmental action, investigation, order or decree,
in any case otherwise than as set forth in the Final Memorandum, which in
any case has had, or would reasonably be expected to have, a Material
Adverse Effect.
(cc) Each of the Company and its Subsidiaries carries insurance
(including self insurance) in such amounts and covering such risks as in
its reasonable determination is adequate for the conduct of its business
(including the MHE Business) and the value of its properties.
(dd) On or prior to the date hereof, there were transferred by
HarnCo to Material Handling LLC all of the assets described in the
Separation Agreement required to be so transferred thereunder. After
giving effect to such transfers, Material Handling LLC has good and
marketable title to all such assets, and none of such assets are
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subject to any Lien except Permitted Liens. At the Time of Purchase,
Material Handling LLC will be a wholly-owned direct Subsidiary of Morris
Material Handling, and Morris Material Handling will own valid title to
all of the membership interests of Material Handling LLC free and clear of
any Liens except Permitted Liens and all of the assets relating to the MHE
Business will be owned directly or indirectly by the Company as
contemplated in the Recapitalization Agreement except as disclosed under
"Certain Relationships and Related Transactions" in the Memoranda.
(ee) Each of the Morris Delivered Documents conform in all material
respects to the descriptions thereof in the Final Memorandum to the extent
such Morris Delivered Documents would be required by the Act to be
described in a prospectus relating to the Securities. There are no
contracts or other documents that would be required by the Act to be
described in a prospectus relating to the Securities that are not
described in the Final Memorandum.
(ff) The Company has delivered to the Initial Purchaser a true and
correct copy of the Recapitalization Agreement, together with all related
agreements or forms of agreement and all schedules and exhibits thereto
(including the Recapitalization Documents), and as of the date hereof
there have been no amendments, alterations, modifications or waivers of
any of the provisions thereof since its applicable date of execution or
from the form in which any such agreement has been delivered to the
Initial Purchaser, except for any such amendment, modification or waiver a
copy of which has been delivered to the Initial Purchaser. There exists as
of the date hereof no event or condition that would constitute a breach or
default by any of the parties to the Recapitalization Agreement or such
other agreement that would result in a Material Adverse Effect or
materially adversely affect the ability to consummate any of the
Transactions.
(gg) The Company and its Subsidiaries (i) make and keep accurate
books and records and (ii) maintain internal accounting controls which
provide reasonable assurance that (A) transactions are executed in
accordance with management's specific authorization, (B) transactions are
recorded as necessary to permit preparation of their consolidated
financial statements and to maintain accountability for their assets, (C)
access to their assets is permitted only in accordance with management's
specific authorization and (D) the reported accountability for their
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
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(hh) None of the Company, any of its Subsidiaries, nor, to the
Company's knowledge, any director, officer, agent, employee or other
person associated with or acting on behalf of the Company or any of the
Subsidiaries, (i) has used any funds of the Company or any of its
Subsidiaries during the last five years for any unlawful contribution,
gift, entertainment or other unlawful expense relating to political
activity, (ii) made any unlawful payment to any foreign or domestic
government official or employee from corporate funds, (iii) violated or is
in violation of any provision of the Foreign Corrupt Practices Act of
1977, or (iv) made any bribe, rebate, influence payment, kickback or other
unlawful payment which, in each instance, could reasonably be expected to
have a Material Adverse Effect on the Company and its Subsidiaries.
Neither the Company nor any of its Subsidiaries does business with the
government of Cuba or any person or affiliate thereof located in Cuba
within the meaning of Florida Statutes Section 517.075.
(ii) Neither the Company nor any Subsidiary is, or at the Closing
Date will be, (i) a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" thereof, within the meaning of the
Public Utility Holding Company Act of 1935, as amended or (ii) an
"investment company" or a company "controlled by" an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, and
the rules and regulations thereunder.
(jj) Assuming the accuracy of the Initial Purchaser's
representations and warranties set forth in Section 3.2 hereof and the due
performance by the Initial Purchaser of the covenants and agreements set
forth in Section 3.2 hereof, no form of general solicitation or general
advertising was used by the Company, any of its Subsidiaries or any of
their respective representatives in connection with the offer and sale of
the Securities or any other similar securities of the Company or any of
its Subsidiaries. Neither the Company, any of its Subsidiaries nor any
Person authorized to act for any of them has, either directly or
indirectly, sold or offered for sale any of the Securities, or solicited
any offers to buy any thereof from, or has otherwise approached or
negotiated in respect thereof with, any Person or Persons other than with
or through the Initial Purchaser; and assuming the accuracy of the Initial
Purchaser's representations and warranties set forth in Section 3.2 hereof
and the due performance by the Initial Purchaser of the covenants and
agreements set forth in Section 3.2 hereof, the Company agrees that
neither it, any of its Subsidiaries nor any Person acting on its or their
behalf will sell or offer for sale any Securities to, or solicit any
offers to buy any Securities from, or otherwise approach or negotiate in
respect thereof with, any Person or
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Persons so as thereby to bring the issuance or sale of any of the
Securities within the provisions of Section 5 of the Act.
(kk) Assuming the accuracy of the Initial Purchaser's
representations and warranties set forth in Section 3.2 hereof, and the
due performance by the Initial Purchaser of the covenants and agreements
set forth in Section 3.2 hereof, it is not necessary, in connection with
the issuance and sale of the Securities to the Initial Purchaser and the
offer, resale and delivery of the Securities by the Initial Purchaser in
the manner contemplated by this Agreement and the Memoranda to register
them under the Act or to qualify the Debenture Indenture under the Trust
Indenture Act.
(ll) No securities of the Company or any of its Subsidiaries are of
the same class (within the meaning of Rule 144A under the Act) as any of
the Securities and listed on a national securities exchange registered
under Section 6 of the Exchange Act, or quoted in a U.S. automated
inter-dealer quotation system. Neither the Company nor any of its
Subsidiaries have, directly or indirectly or through any agent, sold,
offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any security (as defined in the Act), which is or will be
integrated with the sale of the Securities in a manner that would require
registration of the Securities under the Act.
(mm) Neither the Company nor any of its Subsidiaries has taken, nor
will any of them take, directly or indirectly, any action designed to, or
that might be reasonably expected to, cause or result in stabilization or
manipulation of the price of any of the Securities or that is prohibited
by Regulation M under the Exchange Act.
(nn) None of the Company, its Subsidiaries, any of their respective
Affiliates or any person acting on its or their behalf (other than the
Initial Purchaser) has engaged in any directed selling efforts (as that
term is defined in Regulation S under the Act ("Regulation S") with
respect to any of the Securities and the Company, its Subsidiaries and
their respective Affiliates and any person acting on its or their behalf
(other than the Initial Purchaser) have acted in accordance with the
offering restrictions requirement of Regulation S.
(oo) No forward-looking statement (within the meaning of Section 27A
of the Act and Section 21E of the Exchange Act) contained in the
Preliminary Memorandum or the Final Memorandum has been made or reaffirmed
without a reasonable basis or has been disclosed other than in good faith.
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(pp) Except as stated in the Final Memorandum, the Company does not
know of any claims for services, either in the nature of a broker's
commission, finder's fee or financial advisory fee, with respect to the
offering of the Securities and the transactions contemplated by the Final
Memorandum.
Section 3.2. Resale of Shares. The Initial Purchaser represents and
warrants that it is a "qualified institutional buyer" as defined in Rule 144A
under the Act ("QIB"). The Initial Purchaser agrees with the Company that (a) it
has not and will not, directly or indirectly, solicit offers for, or offer or
sell, any of the Securities by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) or in any
manner involving a public offering within the meaning of Section 4(2) of the
Act; (b) has not and will not, directly or indirectly, engage in any "directed
selling efforts" (as defined in Regulation S under the Act); and (c) it has and
will solicit offers for the Securities only from, and will offer the Securities
only to (i) in the case of offers inside the United States, Persons whom it
reasonably believes to be QIBs or, if any such Person is buying for one or more
institutional accounts for which such Person is acting as fiduciary or agent,
only when such Person has represented to it that each such account is a QIB, to
whom notice has been given that such sale or delivery is being made in reliance
on Rule 144A, and, in each case, in transactions under Rule 144A and (ii) in the
case of offers outside the United States, to Persons other than U.S. Persons
("foreign purchasers," which term shall include dealers or other professional
fiduciaries in the United States acting on a discretionary basis for foreign
beneficial owners (other than an estate or trust)). The Company acknowledges and
agrees that the Initial Purchaser may sell Securities to any Affiliate of an
Initial Purchaser and that any such Affiliate may sell Securities purchased by
it to an Initial Purchaser.
ARTICLE IV.
CONDITIONS PRECEDENT TO CLOSING
Section 4.1. Conditions Precedent to Obligations of the Initial
Purchaser. The obligation of the Initial Purchaser to purchase the Securities to
be purchased by it hereunder is subject to the satisfaction of the following
conditions:
(a) At the Time of Purchase, the Initial Purchaser shall have
received an opinion, addressed to the Initial Purchaser in form and
substance satisfactory to counsel to the Initial Purchaser and dated the
Time of Purchase, from Akin, Gump, Strauss, Hauer & Feld, LLP, counsel to
the Company, in substantially the form set forth in Exhibit C hereto and
(ii) a reliance letter, addressed to the Initial Purchaser, in form and
substance satisfactory to counsel to
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the Initial Purchaser and dated the Time of Purchase, from each of (A)
Akin, Gump, Strauss, Hauer & Feld, LLP, counsel to the Company, entitling
the Initial Purchaser to rely upon their opinion being issued to the
lenders under the Credit Facilities relating to the Financing Documents
and dated the Time of Purchase and (B) Kirkland & Ellis, counsel to
HarnCo, entitling the Initial Purchaser to rely upon their opinion being
issued to the Company relating to the Recapitalization Documents and dated
the Time of Purchase, which opinion shall be substantially in the form
attached as Exhibit H to the Recapitalization Agreement.
(b) The Initial Purchaser shall have received an opinion, addressed
to the Initial Purchaser in form and substance satisfactory to the Initial
Purchaser and dated the Time of Purchase, of Willkie Farr & Gallagher,
counsel to the Initial Purchaser, as to such matters as the Initial
Purchaser shall reasonably request.
In rendering such opinions in accordance with Sections 4.1(a) and
(b), each such counsel may rely as to factual matters upon certificates or
other documents furnished by officers and directors of the Company and
representations of the Initial Purchaser and by government officials, and
upon such other documents as such counsel deem appropriate as a basis for
their opinion. Each such counsel may specify the jurisdictions in which it
is admitted to practice and that it is not admitted to practice in any
other jurisdiction or an expert in the law of any other jurisdiction. To
the extent such opinion concerns the laws of any other such jurisdiction
such counsel may rely upon the opinion of counsel (satisfactory to the
Initial Purchaser) admitted to practice in such jurisdiction. Any opinion
relied upon by such counsel as aforesaid shall be delivered to the Initial
Purchaser together with the opinion of such counsel, which opinion shall
state that such counsel believes that their and the Initial Purchaser's
reliance thereon is justified.
(c) The Initial Purchaser shall have received from Price Waterhouse
LLP a comfort letter or letters dated the date hereof and the Time of
Purchase in form and substance satisfactory to counsel to the Initial
Purchaser.
(d) The Initial Purchaser shall have received a report from
Valuation Research Corporation, in form and substance satisfactory to
counsel to the Initial Purchaser, indicating that the Company and its
Subsidiaries, on a consolidated basis, is Solvent, before and after giving
effect to the Transactions, including those contemplated by this Agreement
and the other Morris Delivered Documents (including the application of
proceeds by the Company from the issuance and
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sale of the Units by the Company at the Time of Purchase as described in
the Final Memorandum).
(e) The representations and warranties made by the Company herein
shall be true and correct in all material respects (except for changes
expressly provided for in this Agreement) on and as of the Time of
Purchase with the same effect as though such representations and
warranties had been made on and as of the Time of Purchase, after giving
effect to the consummation of all of the Transactions; the Company shall
have complied in all material respects with all agreements as set forth in
or contemplated hereunder and in the other Basic Documents required to be
performed by the Company at or prior to the Time of Purchase.
(f) Subsequent to the date of the Final Memorandum, there shall not
have been any change which has had or could be reasonably likely to have a
Material Adverse Effect.
(g) At the Time of Purchase, after giving effect to the consummation
of the transactions contemplated by this Agreement, the other Morris
Delivered Documents and the other Transactions, there shall exist no
Default or Event of Default on the part of the Company or its Subsidiaries
(assuming that the Exchange Indenture is in effect at such time) or Voting
Rights Triggering Event.
(h) The purchase of and payment for the Securities by the Initial
Purchaser hereunder shall not be prohibited or enjoined (temporarily or
permanently) by any applicable law or governmental regulation (including,
without limitation, Regulation G, T, U or X of the Board of Governors of
the Federal Reserve System).
(i) At the Time of Purchase, the Initial Purchaser shall have
received a certificate, dated the Time of Purchase, and executed by the
President and the Vice President - Finance of the Company, to the effect
that:
(i) All of the representations and warranties of the Company
set forth in this Agreement are true and correct as if made on and
as of the Time of Purchase and the Company has complied in all
material respects with all agreements and satisfied all conditions
on their part to be performed or satisfied at or prior to the Time
of Purchase.
(ii) The issuance and sale of the Securities pursuant to this
Agreement and the Final Memorandum and the consummation of the
Transactions have not been enjoined (temporarily or permanently) and
no restraining order or other injunctive order has been
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issued and there has not been any legal action, order, decree or
other administrative proceeding instituted or threatened against the
Company relating to the issuance of the Securities or in connection
with any of the other Transactions.
(iii) Subsequent to the date of this Agreement and since the
date of the most recent financial statements in the Final Memorandum
(exclusive of any amendment or supplement thereto after the date
hereof), there has not occurred (A) any change, or any development
involving a prospective change, in or affecting the general affairs,
management, business, condition (financial or other), properties,
prospects or results of operations of the Company or the
Subsidiaries or the MHE Business, both before and after giving
effect to the Recapitalization and the other Transactions, not
contemplated by the Final Memorandum that would materially adversely
affect the market for the Securities, or (B) any event or
development relating to or involving any of the Company or the
Subsidiaries that makes any statement made in the Final Memorandum
untrue or that requires the making of any addition to or change in
the Final Memorandum in order to state a material fact required by
any applicable law, rule or regulation to be stated therein or
necessary in order to make the statements therein not misleading.
(iv) There has not been any change in the capital stock of the
Company or any of its Subsidiaries nor any material increase in the
consolidated short-term or long-term debt of the Company from that
set forth in or contemplated in the Final Memorandum and the Company
and the Subsidiaries have no liabilities or obligations, contingent
or otherwise (whether or not in the ordinary course of business),
that are material to the Company, its Subsidiaries and the MHE
Business, taken as a whole, both before and after giving effect to
the Recapitalization and the other Transactions, other than those
reflected in the Final Memorandum.
(j) At the Time of Purchase, each of the Morris Delivered Documents
and the other material documents pertaining to the Transactions shall have
been executed and delivered by the respective parties thereto and shall be
in full force and effect.
(k) Contemporaneously with the Time of Purchase, the
Recapitalization and each other transaction contemplated in the
Recapitalization Documents shall be consummated on the terms set forth in
the Recapitalization Agreement and such
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other Recapitalization Documents as in effect as of the date hereof.
(l) Contemporaneously with the Time of Purchase, Morris Material
Handling shall have received at least $55 million aggregate cash proceeds
from borrowings under the Credit Agreement.
(m) Contemporaneously with the Time of Purchase, the transactions
contemplated under the Note Purchase Agreement shall have been consummated
and Morris Material Handling shall have received at least $200 million
aggregate cash proceeds (less applicable commissions) from the offering
contemplated therein.
(n) HarnCo shall have received at least $54 million aggregate cash
proceeds from MHE Investments, and all other transactions contemplated in
connection with the Equity Investment (including the retention by HarnCo
of capital interests in the Company with aggregate implied value of not
less than $12 million) shall have been consummated.
(o) Morris Material Handling shall have redeemed or repurchased 100
shares, representing 50% of its issued and outstanding shares, of common
stock from the Company for aggregate cash consideration of $225 million.
(p) The Company shall have redeemed or repurchased 1,512.317 shares
of its Series C Preferred Stock, and 88,319.182 shares of its common
stock, representing 73% of its issued and outstanding shares of capital
stock from HarnCo for aggregate cash consideration of $282 million.
(q) Each of the Morris Delivered Documents and the other material
documents pertaining to the Transactions shall be reasonably satisfactory
in form and substance to the Initial Purchaser and shall have been
executed and delivered by all the respective parties thereto and shall be
in full force and effect.
(r) All proceedings taken in connection with the issuance of the
Securities (including the due authentication thereof by the Trustee) and
the transactions contemplated by this Agreement, the other Morris
Delivered Documents and the other material documents pertaining to the
Transactions and all documents and papers relating thereto shall be
satisfactory to the Initial Purchaser and counsel to the Initial
Purchaser. The Initial Purchaser and counsel to the Initial Purchaser
shall have received copies of such papers and documents as they may
reasonably request in connection therewith, including, without limitation,
true and correct copies of each of the Morris Delivered Documents
certified
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as such by an officer of the Company, all in form and substance reasonably
satisfactory to them.
(s) The issuance and sale of the Securities hereunder shall not have
been enjoined (temporarily or permanently) at the Time of Purchase.
(t) There shall not have been any announcement by any "nationally
recognized statistical rating organization," as defined for purposes of
Rule 436(g) under the Act, that (A) it is downgrading its rating assigned
to the Preferred Stock being issued by the Company pursuant to this
Agreement or the Notes of Morris Material Handling being issued pursuant
to the Notes Purchase Agreement, or (B) it is reviewing its rating
assigned to any debt securities of the Company or Morris Material Handling
with a view to possible downgrading, or with negative implications, or
direction not determined.
(u) The Securities shall have been approved by the NASD for trading
in the PORTAL Market and accepted by The Depository Trust Company for
clearance and settlement through The Depository Trust Company.
On or before the Time of Purchase, the Initial Purchaser and counsel to
the Initial Purchaser shall have received such further documents, opinions,
certificates and schedules or other instruments relating to the business,
corporate, legal and financial affairs of the Company and its Subsidiaries as
they may reasonably request.
ARTICLE V.
COVENANTS
Section 5.1. Covenants. The Company covenants and agrees with the
Initial Purchaser that:
(a) The Company will not amend or supplement the Final Memorandum or
any amendment or supplement thereto of which the Initial Purchaser shall
not previously have been advised and furnished a copy for a reasonable
period of time prior to the proposed amendment or supplement and as to
which the Initial Purchaser shall not have given their consent, which
consent shall not be unreasonably withheld. The Company will promptly,
upon the reasonable request of the Initial Purchaser or counsel to the
Initial Purchaser, make any amendments or supplements to the Preliminary
Memorandum or the Final Memorandum that may be necessary or advisable in
the opinion of the Initial Purchaser or counsel to the Initial Purchaser
to make the statement therein not
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misleading or in connection with the resale of the Securities by the
Initial Purchaser.
(b) The Company will cooperate with the Initial Purchaser in
arranging for the qualification of the Securities for offering and sale
under the securities or "blue sky" laws of such jurisdictions as the
Initial Purchaser may designate and will continue such qualifications in
effect for as long as may be reasonably necessary to complete the resale
of the Securities; provided, however, that in connection therewith, the
Company shall not be required to qualify as a foreign corporation or to
execute a general consent to service of process in any jurisdiction or
subject itself to service of process in suits or taxation in excess of a
nominal dollar amount in any such jurisdiction where it is not then so
subject.
(c) If, at any time prior to the completion of the distribution by
the Initial Purchaser of the Securities, any event occurs or information
becomes known as a result of which the Final Memorandum as then amended or
supplemented would include any untrue statement of a material fact, or
omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
or if for any other reason it is necessary at any time to amend or
supplement the Final Memorandum to comply with applicable law, the Company
will immediately notify the Initial Purchaser thereof (who thereafter will
not use such Final Memorandum until appropriately amended or supplemented)
and will prepare, at the expense of the Company, an amendment or
supplement to the Final Memorandum that corrects such statement or
omission or effects such compliance; provided, however, that the Company's
obligation hereunder shall not be applicable to the extent resale by the
Initial Purchaser may be accomplished pursuant to a registration statement
filed by the Company pursuant to the Registration Rights Agreement.
(d) The Company will, without charge, provide to the Initial
Purchaser and to counsel to the Initial Purchaser as many copies of the
Preliminary Memorandum and the Final Memorandum or any amendment or
supplement thereto as they may reasonably request.
(e) The Company will apply the net proceeds from the sale of the
Securities as set forth under "Use Of Proceeds" in the Final Memorandum.
(f) For and during the period ending on the date no Securities are
outstanding, the Company will furnish to the Initial Purchaser copies of
all reports and other
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communications (financial or otherwise) furnished by the Company to the
holders of its securities generally and, promptly after available, copies
of any reports or financial statements furnished to or filed by the
Company with the Commission or any national securities exchange on which
any class of securities of the Company may be listed.
(g) None of the Company or any of its Affiliates will sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Act) which could be integrated with the sale
of any of the Securities in a manner which would require the registration
under the Act of any of the Securities.
(h) The Company will not, and will not permit any of its
Subsidiaries to, solicit any offer to buy or offer to sell the Securities
by means of any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Act.
(i) For so long as any of the Securities remain outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the Act
and not salable in full under Rule 144 under the Act (or any successor
provision), the Company will make available, upon request, to any seller
of such Securities the information specified in Rule 144A(d)(4) under the
Act, unless the Company is then subject to Section 13 or 15(d) of the
Exchange Act.
(j) The Company will use its reasonable best efforts to (i) permit
the Securities to be included for quotation on PORTAL and (ii) permit the
Securities to be eligible for clearance and settlement through The
Depository Trust Company.
(k) During the period beginning from the date hereof and continuing
until the Time of Purchase, the Company will not offer, sell, contract to
sell or otherwise dispose of, except as provided in this Agreement, any
securities of the Company that are substantially similar to the
Securities, without the prior written consent of the Initial Purchaser.
(l) The Company will use its reasonable best efforts to do and
perform all things required to be done and performed by them under this
Agreement and the other Basic Documents prior to or after the Closing and
to satisfy all conditions precedent on their part to the obligations of
the Initial Purchaser to purchase and accept delivery of the Securities.
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ARTICLE VI.
FEES
Section 6.1. Costs, Expenses and Taxes. The Company agrees to pay
all costs and expenses incident to the performance of its obligations under this
Agreement, whether or not the transactions contemplated herein are consummated
or this Agreement is terminated pursuant to Section 8.2 hereof, including, but
not limited to, all costs and expenses incident to (i) its negotiation,
preparation, printing, typing, reproduction, execution and delivery of this
Agreement and each of the other Basic Documents, any amendment or supplement to
or modification of any of the foregoing and any and all other documents
furnished pursuant hereto or thereto or in connection herewith or therewith,
(ii) any costs of printing the Preliminary Memorandum and the Final Memorandum
and any amendment or supplement thereto, (iii) all arrangements relating to the
delivery to the Initial Purchaser of copies of the foregoing documents, (iv) the
fees and disbursements of the counsel, the accountants and any other experts or
advisors retained by the Company, (v) preparation (including printing), issuance
and delivery to the Initial Purchaser of the Securities, including transfer
agent fees, (vi) the qualification of the Securities under state securities and
"blue sky" laws, including filing fees and reasonable fees and disbursements in
connection with such counsel's preparation of "blue sky" memoranda, not to
exceed $5,000, of counsel to the Initial Purchaser, (vii) its respective
expenses and the cost of any private or chartered jets in connection with any
meetings with prospective investors in the Securities, (viii) fees and expenses
of the Trustee, the Debenture Trustee (if any), the Unit Agent, and the transfer
agent for the Preferred Shares and the Unit Common Shares, including fees and
expenses of counsel to each such Person, (ix) all expenses and listing fees
incurred in connection with the application for quotation of the Securities on
PORTAL, (x) any fees charged by investment rating agencies for the rating of the
Securities and (xi) except as limited by Article VII, all costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses), if
any, in connection with the enforcement of this Agreement, the Securities or any
other agreement furnished pursuant hereto or thereto or in connection herewith
or therewith. In addition, the Company shall pay any and all stamp, transfer and
other similar taxes (but excluding any income, franchise, personal property, ad
valorem or gross receipts taxes) payable or determined to be payable in
connection with the execution and delivery of this Agreement, any of the other
Basic Documents or the issuance of the Securities, and shall save and hold the
Initial Purchaser harmless from and against any and all liabilities with respect
to or resulting from any delay in paying, or omission to pay, such taxes (other
than if such delay is caused by the Initial Purchaser).
ARTICLE VII.
34
<PAGE>
INDEMNITY
Section 7.1. Indemnity.
(a) Indemnification by the Company. The Company agrees and covenants
to hold harmless and indemnify the Initial Purchaser and any director,
officer, employee, agent or controlling Person of any of the foregoing
from and against any losses, claims, damages, liabilities and expenses
(including expenses of investigation) to which the Initial Purchaser and
such Affiliates of the Initial Purchaser may become subject arising out of
or based upon any untrue statement or alleged untrue statement of any
material fact contained in the Memoranda and any amendments or supplements
thereto, any documents filed with the Commission or any State Commission
(collectively, the "Offering Materials") or arising out of or based upon
the omission or alleged omission to state in any of the Offering Materials
a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the Company
shall not be liable under this paragraph (a) to the extent that such
losses, claims, damages or liabilities arose out of or are based upon an
untrue statement or omission or alleged untrue statement or omission made
in any of the documents referred to in this paragraph (a) in reliance upon
and in conformity with the information relating to the Initial Purchaser
furnished in writing by the Initial Purchaser for inclusion therein (or to
the extent such losses, claims, damages or liabilities arose out of or are
based upon a breach by an Initial Purchaser or the Financial Advisor for
any representation or warranty contained in Section 3.2 of this
Agreement); provided, further, that the Company shall not be liable under
this paragraph (a) to the extent that such losses, claims, damages or
liabilities arose out of or are based upon an untrue statement or omission
or alleged untrue statement or omission made in any Memoranda that is
corrected in the Final Memorandum (or any amendment or supplement thereto)
if the person asserting such loss, claim, damage or liability purchased
Securities from the Initial Purchaser in reliance on such Memoranda but
was not given the Final Memorandum (or any amendment or supplement
thereto) on or prior to the confirmation of the sale of such Securities.
The Company further agrees to reimburse the Initial Purchaser for any
reasonable legal and other expenses as they are incurred by it in
connection with investigating, preparing to defend or defending any
lawsuits, claims or other proceedings or investigations for which
indemnification may be sought under this paragraph (a); provided that if
the Company reimburses an Initial Purchaser hereunder for any expenses
incurred in connection with a lawsuit, claim or other proceeding for which
indemnification is sought, such Initial Purchaser hereby
35
<PAGE>
agrees to refund such reimbursement of expenses to the extent that the
losses, claims, damages or liabilities arise out of or are based upon an
untrue statement or omission or alleged untrue statement or omission made
in any of the documents referred to in this paragraph (a) in reliance upon
and in conformity with the information relating to such Initial Purchaser
furnished in writing by such Initial Purchaser for inclusion therein (or
for a breach by such Initial Purchaser of any representation or warranty
contained in this Agreement). The Company further agrees that the
indemnification, contribution and reimbursement commitments set forth in
this Article VII shall apply whether or not an Initial Purchaser is a
formal party to any such lawsuits, claims or other proceedings. The
indemnity, contribution and expense reimbursement obligations of the
Company under this Article VII shall be in addition to any liability the
Company may otherwise have.
(b) Indemnification by the Initial Purchaser. The Initial Purchaser
agrees and covenants to hold harmless and indemnify the Company and any
director, officer, employee, agent or controlling Person of any of the
foregoing from and against any losses, claims, damages, liabilities and
expenses insofar as such losses, claims, damages, liabilities or expenses
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Offering Materials, or any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or omission was made in reliance upon and in conformity
with the information relating to an Initial Purchaser furnished in writing
by such Initial Purchaser for inclusion therein. The indemnity,
contribution and expense reimbursement obligations of the Initial
Purchaser under this Article VII shall be in addition to any liability the
Initial Purchaser may otherwise have.
(c) Procedure. If any Person shall be entitled to indemnity
hereunder (each an "Indemnified Party"), such Indemnified Party shall give
prompt written notice to the party or parties from which such indemnity is
sought (each an "Indemnifying Party") of the commencement of any action,
suit, investigation or proceeding, governmental or otherwise (a
"Proceeding"), with respect to which such Indemnified Party seeks
indemnification or contribution pursuant hereto; provided, however, that
the failure so to notify the Indemnifying Parties shall not relieve the
Indemnifying Parties from any obligation or liability except to the extent
that the Indemnifying Parties have been prejudiced materially by such
failure. The Indemnifying Parties shall have the right, exercisable by
giving written notice to an
36
<PAGE>
Indemnified Party promptly after the receipt of written notice from such
Indemnified Party of such Proceeding, to assume, at the Indemnifying
Parties' expense, the defense of any such Proceeding, with counsel
reasonably satisfactory to such Indemnified Party; provided, however, that
an Indemnified Party or Parties (if more than one such Indemnified Party
is named in any Proceeding) shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or parties unless: (1) the Indemnifying Parties agree to
pay such fees and expenses; or (2) the Indemnifying Parties fail promptly
to assume the defense of such Proceeding or fail to employ counsel
reasonably satisfactory to such Indemnified Party or Parties; or (3) the
named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party or Parties and the Indemnifying Party
or an Affiliate of the Indemnifying Party and such Indemnified Parties,
and the Indemnified Parties shall have been advised in writing by counsel
that there may be one or more legal defenses available to such Indemnified
Party or Parties that are different from or additional to those available
to the Indemnifying Parties and in the reasonable judgment of such counsel
it is advisable for such Indemnified Parties to employ separate counsel,
in which case, if such Indemnified Party or Parties notifies the
Indemnifying Parties in writing that it elects to employ separate counsel
at the expense of the Indemnifying Parties, the Indemnifying Parties shall
not have the right to assume the defense thereof with respect to the
Indemnified Parties and such counsel shall be at the expense of the
Indemnifying Parties, it being understood, however, that the Indemnifying
Parties shall not, in connection with any one such Proceeding or separate
but substantially similar or related Proceedings in the same jurisdiction,
arising out of the same general allegations or circumstances, be liable
for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such Indemnified
Party or Parties (which firm (and local counsel, if any) shall be
designated in writing by such Indemnified Party or Parties), or for fees
and expenses that are not reasonable. No Indemnified Party or Parties will
settle any Proceeding without the consent of the Indemnifying Party or
Parties (but such consent shall not be unreasonably withheld). Each
Indemnified Party shall use its best efforts to cooperate with the
Indemnifying Parties in the defense of any such Proceeding. No
Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending or threatened
Proceeding in respect of which any Indemnified Party is or could have been
or a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement (i) includes an unconditional
release of
37
<PAGE>
such Indemnified Party from all liability or claims that are the subject
of such Proceeding and (ii) does not include a statement as to, or an
admission of, fault, culpability or a failure to act, by or on behalf of
any Indemnified Party.
Section 7.2. Contribution. If for any reason the indemnification
provided for in Section 7.1 of this Agreement is unavailable to an Indemnified
Party, or insufficient to hold it harmless, in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then each applicable
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnifying Party on the one hand and the Indemnified Party on the other from
the offering of the Securities, but also the relative fault of the Indemnifying
and Indemnified Parties in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the
Indemnifying and Indemnified Parties shall be deemed to be in the same
proportion as the total proceeds from the offering of the Securities (net of
discounts but before deducting expenses) received by the Company bear to the
total discounts and commissions received by the Initial Purchaser. The relative
fault of the Indemnifying and Indemnified Parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Indemnifying or Indemnified Parties and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any such
claim.
The Company, on the one hand, and the Initial Purchaser, on the
other hand, agree that it would not be just and equitable if contribution
pursuant to the immediately preceding paragraph were determined pro rata or per
capita or by any other method of allocation which does not take into account the
equitable considerations referred to in such paragraph. Notwithstanding any
other provision of this Section 7.2, the Initial Purchaser shall not be
obligated to make contributions hereunder that in the aggregate exceed the total
discounts, commissions and other compensation received by the Initial Purchaser
under this Agreement, less the aggregate amount of any damages that such Initial
Purchaser has otherwise been required to pay by reason of the untrue or alleged
untrue statements or a breach of a representation or warranty or the omissions
or
38
<PAGE>
alleged omissions to state a material fact. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation.
Section 7.3. Registration Rights. Notwithstanding anything to the
contrary in this Article VII, the indemnification and contribution provisions of
the Preferred Stock Registration Rights Agreement and the Common Stock
Registration Rights Agreement, respectively, shall govern any claim with respect
thereto.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1. Survival of Provisions. The representations, warranties
and covenants of the Company and its officers and the Initial Purchaser made
herein, the indemnity and contribution agreements contained herein and each of
the provisions of Articles VI, VII and VIII shall remain operative and in full
force and effect regardless of (a) the investigation made by or on behalf of the
Company, the Initial Purchaser or any Indemnified Party, (b) acceptance of any
of the Securities and payment therefor, (c) any termination of this Agreement or
(d) disposition of the Securities by an Initial Purchaser whether by redemption,
exchange, sale or otherwise.
Section 8.2. Termination. (a) This Agreement may be terminated in
the sole discretion of the Initial Purchaser by notice to the Company given
prior to the Time of Purchase in the event that the Company shall have failed,
refused or been unable to perform all obligations and satisfy all conditions on
its part to be performed or satisfied hereunder at or prior thereto or, if at or
prior to the Closing:
(i) the Company or any of its Subsidiaries shall have
sustained any loss or interference with respect to its businesses or
properties from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any strike, labor
dispute, slow down or work stoppage or any legal or governmental
proceeding, which loss or interference, in the sole judgment of the
Initial Purchaser, has had or has a Material Adverse Effect, or
there shall have been any event or development that, individually or
in the aggregate, has or could be reasonably likely to have a
Material Adverse Effect (including without limitation a change in
control of the Company or any of its Subsidiaries), except in each
case as described in the Final Memorandum (exclusive of any
amendment or supplement thereto);
39
<PAGE>
(ii) trading in securities generally on the New York Stock
Exchange, American Stock Exchange or the Nasdaq National Market
shall have been suspended or minimum or maximum prices shall have
been established on any such exchange or market;
(iii) a banking moratorium shall have been declared by New
York or United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B)
an outbreak or escalation of any other insurrection or armed
conflict involving the United States or any other national or
international calamity or emergency, or (C) any material change in
the financial markets of the United States which, in the case of
(A), (B) or (C) above and in the sole judgment of the Initial
Purchaser, makes it impracticable or inadvisable to proceed with the
offering or the delivery of the Securities as contemplated by the
Final Memorandum; or
(v) the Preferred Stock shall have been downgraded or placed
on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 8.2 shall
be without liability of any party to any other party except as provided in
Section 8.1 hereof. If for any reason the Securities are not delivered by
or on behalf of the Company as provided herein (other than by reason of a
failure by the Initial Purchaser to purchase the Units after satisfaction
of all the conditions set forth in Section 4.1 hereof), in addition to any
liability the Company may have as provided in Section 8.1 hereof, the
Company will reimburse the Initial Purchaser for all out-of-pocket
expenses approved in writing by it including fees and disbursements of
counsel, reasonably incurred by the Initial Purchaser in making
preparations for the purchase, sale and delivery of the Securities.
Section 8.3. No Waiver; Modifications in Writing. No failure or
delay on the part of the Company or the Initial Purchaser in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies provided for herein are cumulative and are not exclusive of
any remedies that may be available to the Company or the Initial Purchaser at
law or in equity or otherwise. No waiver of or consent to any departure by
40
<PAGE>
the Company or the Initial Purchaser from any provision of this Agreement shall
be effective unless signed in writing by the party entitled to the benefit
thereof, provided that notice of any such waiver shall be given to each party
hereto as set forth below. Except as otherwise provided herein, no amendment,
modification or termination of any provision of this Agreement shall be
effective unless signed in writing by or on behalf of each of the Company and
the Initial Purchaser. Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and
any consent to any departure by the Company or the Initial Purchaser from the
terms of any provision of this Agreement, shall be effective only in the
specific instance and for the specific purpose for which made or given. Except
where notice is specifically required by this Agreement, no notice to or demand
on the Company in any case shall entitle the Company to any other or further
notice or demand in similar or other circumstances.
Section 8.4. Information Supplied by the Initial Purchaser. The
statements set forth in the third paragraph, the third sentence of the sixth
paragraph and the eighth and ninth paragraphs under the heading "Plan of
Distribution" in the Final Memorandum (to the extent such statements relate to
such Initial Purchaser) constitute the only information furnished by the Initial
Purchaser to the Company for the purposes of Sections 3.1(a) and 7.1(a) and (b)
hereof.
Section 8.5. Communications. All notices, demands and other
communications provided for hereunder shall be in writing, and, (a) if to the
Initial Purchaser, shall be given by registered or certified mail, return
receipt requested, telex, telegram, telecopy, courier service or personal
delivery, addressed to CIBC Oppenheimer Corp., 425 Lexington Avenue, 3rd Floor,
New York, New York 10017, Attention: Neil Wiesenberg, with a copy to Willkie
Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York
10022, Attention: Laurence D. Weltman, Esq., and (b) if to the Company, shall be
given by similar means to MMH Holdings, Inc., 315 W. Forest Hill Avenue, Oak
Creek, Wisconsin 53154, Attention: Martin L. Ditkof, General Counsel, with a
copy to Akin, Gump, Strauss, Hauer & Feld, LLP, 1333 New Hampshire Avenue, N.W.,
Suite 400, Washington, D.C. 20036 Attention: Russell W. Parks, Jr., Esq. In each
case notices, demands and other communications shall be deemed given when
received.
Section 8.6. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
41
<PAGE>
Section 8.7. Successors. This Agreement shall inure to the benefit
of and be binding upon the Initial Purchaser and the Company and their
respective successors and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
Person any legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained; this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of such Persons and for the benefit of no other Person except that (i)
the indemnities of the Company contained in Section 7.1(a) of this Agreement
shall also be for the benefit of the directors, officers, employees and agents
of the Initial Purchaser and any Person or Persons who control the Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (ii) the indemnities of the Initial Purchaser contained in
Section 7.1(b) of this Agreement shall also be for the benefit of the Company,
its directors, officers, employees and agents and any Person or Persons who
control the Company within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act. No purchaser of any Securities from the Initial Purchaser will
be deemed a successor because of such purchase.
Section 8.8. Governing Law. THIS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
Section 8.9. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 8.10. Headings. The Article and Section headings and Table
of Contents used or contained in this Agreement are for convenience of reference
only and shall not affect the construction of this Agreement.
42
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
MMH HOLDINGS, INC.
By: /s/ Michael S. Erwin
------------------------------------------
Name: Michael S. Erwin
Title: President
The foregoing Agreement is hereby confirmed
and accepted as of the date first written
above:
INITIAL PURCHASER:
CIBC OPPENHEIMER CORP.
By: /s/ Neil Wiesenberg
------------------------------------------
Name: Neil Wiesenberg
Title: Managing Director
43
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Outstanding
Capital Percentage of
Subsidiaries Interests Holder Class Held
- ------------ --------- ------ ----------
<S> <C> <C> <C>
3014794 Nova Morris Material
Scotia ULC Handling, LLC
Birmingham Crane & 10,000 PHMH Holding
Hoist, Inc. Company
Butters 100,000 Invercoe Engineering
Engineering Limited
Services Limited MHE Canada. ULC
Morris Material
Handling, LLC
CMH Material 99% Harnischfeger 100%
Handling, LLC Distribution &
Service, LLC
1% PHME Service,
Inc.
EPH Material 99% Harnischfeger 100%
Handling, LLC Distribution &
Service, LLC
1% PHME Service,
Inc.
Harnischfeger 99% Material Handling 100%
Distribution & Equipment Nevada
Service, LLC Corporation
1% PHME Service,
Inc.
Hercules S.A. de 8,000 com. Morris Material
C.V. 28,610 v. Handling, Inc.
3,624,390 v. PHME Holding Co.
HPH Material 99% Harnischfeger 100%
Handling, LLC Distribution &
Service, LLC
1% PHME Service,
Inc.
Hydramach ULC 1 3014794 Nova
Scotia ULC
Invercoe 100,000 Lowfile Limited
Engineering Ltd. 14,286A
Kaverit Steel & 20 3014794 Nova
Crane ULC Scotia ULC
100 Morris
Linear Motors Mechanical
Limited Handling Ltd.
Lowfile Limited 100 RedCrown, ULC
Material Handling 100 PHMH Holding
Equipment Nevada Company
Corporation
Material Handling, 100% Morris Material 100%
LLC Handling, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Outstanding
Capital Percentage of
Subsidiaries Interests Holder Class Held
- ------------ --------- ------ ----------
<S> <C> <C> <C>
MHE Technologies, Inc. 100 PHMH Holding Co.
MHE Canada ULC Morris Material
Handling, Inc.
Morris Material Morris Material
Handling, Ltd. Handling, Inc.
MMH (Holdings) Ltd. 175,000 ord. Lowfile Limited
775,000 A ord.
37,975,000 B ord.
10,725,000 C pr.
Harnischfeger
Holdings Ltd.
MMH International 3,776,471 MMH (Holdings) Ltd.
Ltd.
Mondel ULC 8,600 3014794 Nova Scotia ULC
Morris Blooma Pte 37,500 PHMH Holding Co. 85%
Ltd. 56,250 Soh Heng Keow
56,250 Tan Lee Peng
Morris Material MMH Holdings, Inc.
Handling, Inc.
Morris Mechanical 1,000 MMH International
Handling, Inc. Limited
Morris Mechanical 9,949,678 ord. MMH (Holdings)
Handling, Ltd. 300,000 cum pr. Ltd.
Morris Mechanical 200 MMH International Ltd.
Handling, Pty Ltd.
MPH Crane, Inc. 450nv PHMH Holding Co.
50v
NPH Material 98 Material Handling
Handling, Inc. Equipment Nevada Corp.
2 PHME Service, Inc. 50%(?)
P&H Middle East Ltd. 1 PHMH Holding Co.
PHME Service, Inc. 100 PHMH Holding Co.
PHMH Holding Co. 350 Morris Material
250 Handling, Inc.
RedCrown, ULC 99.9% Morris Material
Handling, Ltd.
.1% Morris Material Handling,
Inc.
Royce Ltd. 2 Morris Mechanical
Handling Limited
SPH Crane & Hoist, PHMH Holding Company
Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Outstanding
Capital Percentage of
Subsidiaries Interests Holder Class Held
- ------------ --------- ------ ----------
<S> <C> <C> <C>
U.K. Crane Services 2 Morris Mechanical
Ltd. Handling Limited
Vaughan Crane Co. 2 Morris Mechanical
Handling Limited
</TABLE>
[Execution Copy]
RECAPITALIZATION AGREEMENT
AMONG
HARNISCHFEGER CORPORATION
THE SELLERS NAMED HEREIN
AND
MHE INVESTMENTS, INC.
January 28, 1998
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions......................................................1
Section 2. Purchase and Sale of Company Shares.............................18
(a) Recapitalization Transaction....................................18
(b) The Closing.....................................................20
(c) Pre-Closing Transactions........................................21
(d) Purchase Price Adjustment.......................................22
(e) Certain Actions in Connection with the Closing..................25
(f) Allocation of Purchase Price....................................26
(g) Excluded Liabilities; Contracts.................................27
(h) Treatment.......................................................28
Section 3. Representations and Warranties Concerning the Transaction.......28
(a) Representations and Warranties of HarnCo and Sellers............28
(b) Representations and Warranties of Investor......................30
Section 4. Representations and Warranties Concerning the Companies
and their Subsidiaries.........................................33
(a) Organization, Qualification, and Corporate Power................33
(b) Capitalization..................................................34
(c) Noncontravention................................................35
(d) Brokers' Fees...................................................36
(e) Title to Assets.................................................36
(f) Subsidiaries....................................................36
(g) Financial Statements............................................37
(h) Subsequent Events...............................................38
(i) Legal Compliance................................................40
(j) Tax Matters.....................................................40
(k) Real Property...................................................42
(l) Intellectual Property...........................................44
(m) Contracts.......................................................45
(n) Litigation......................................................47
(o) Employee Benefits...............................................48
(p) Bonds...........................................................51
(q) Environmental Matters...........................................51
(r) Licenses and Authorizations.....................................53
(s) Labor and Employee Matters......................................53
(t) Insurance.......................................................55
(u) Certain Business Relationships with the Companies and their
Subsidiaries....................................................55
-i-
<PAGE>
(v) Foreign Corrupt Practices Act...................................56
(w) Condition of Assets.............................................56
(x) Disclosure......................................................56
Section 5. Pre-Closing Covenants...........................................56
(a) General.........................................................56
(b) Notices and Consents............................................56
(c) Operation of Business...........................................57
(d) Preservation of Business........................................59
(e) Full Access.....................................................59
(f) Compensation....................................................59
(g) Notice of Developments..........................................60
(h) Exclusivity.....................................................60
(i) Insurance.......................................................60
(j) Notice of Litigation............................................61
(k) Performance of Agreements.......................................61
(l) No Solicitation.................................................61
(m) Tax Elections...................................................61
(n) Financing.......................................................61
(o) Exchange Proceeds...............................................61
(p) Interim Financial Statements....................................62
(q) Update by Investor..............................................62
(r) Knowing Breach..................................................62
(s) Collective Bargaining Agreements................................62
(t) Joinder.........................................................63
Section 6. Post-Closing Covenants..........................................63
(a) General.........................................................63
(b) Records; Employees..............................................64
(c) Employees and Employee Benefit Matters..........................65
(d) Tax Matters.....................................................70
(e) Transition......................................................74
(f) Concerning the Separation Agreement.............................74
(g) Insurance Arrangements..........................................74
(h) Concerning the Trademark Agreement..............................75
(i) Certain Purchasing Arrangements.................................75
Section 7. Conditions to Obligation to Close...............................75
(a) Conditions to Obligation of Investor............................75
(b) Conditions to Obligation of HarnCo and Sellers..................77
Section 8. Remedies for Breaches of this Agreement.........................79
(a) Survival of Representations and Warranties......................79
-ii-
<PAGE>
(b) Indemnification Provisions for Benefit of Investor..............80
(c) Indemnification Provisions for Benefit of HarnCo and Sellers....82
(d) Tax Indemnification Provisions..................................83
(e) Indemnification Procedure.......................................84
(f) Remedy..........................................................86
(g) No Contribution From Company....................................86
(h) Calculation Methodology.........................................87
Section 9. Termination.....................................................87
(a) Termination of Agreement........................................87
(b) Effect of Termination...........................................89
Section 10. Miscellaneous...................................................89
(a) Certain Understandings of Investor..............................89
(b) Press Releases and Public Announcements.........................90
(c) No Third Party Beneficiaries....................................90
(d) Entire Agreement................................................90
(e) Succession and Assignment.......................................90
(f) Return of Information...........................................91
(g) No Personal Liability...........................................91
(h) Counterparts....................................................91
(i) Headings........................................................91
(j) Notices.........................................................91
(k) Governing Law...................................................92
(l) Amendments and Waivers..........................................92
(m) Severability....................................................93
(n) Expenses........................................................93
(o) Construction....................................................94
(p) Incorporation of Exhibits and Schedules.........................94
(q) Specific Performance............................................94
(r) Submission to Jurisdiction......................................94
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List of Exhibits
Exhibit A - Trademark Agreement
Exhibit B - Confidentiality and Non-Competition Agreement
Exhibit C - Separation Agreement
Exhibit D - Specified Employees
Exhibit E - Term Sheet for Stockholders Agreement
Exhibit F - Supply Agreement
Exhibit G - Transition Services Agreement
Exhibit H - Sellers' Opinion
Exhibit I - Investor's Opinion
Exhibit J - Preferred Stock Term Sheets
Exhibit K - Intentionally Omitted
Exhibit L - U.K. Pension Arrangements
Exhibit M - Net Assets Calculation
Exhibit N - Excluded Taxes
Exhibit O - Value of Assets
Exhibit P - Credit Indemnification Agreement
Exhibit Q - Assumption Agreement
Exhibit R - Employees Party to the Employment Agreements
Disclosure Schedule - Exceptions to Representations and Warranties
Concerning the Companies and their Subsidiaries
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RECAPITALIZATION AGREEMENT
AGREEMENT entered into as of January 28, 1998, by and among MHE
Investments, Inc., a Delaware corporation (the "Investor"), Harnischfeger
Corporation, a Delaware corporation ("HarnCo"), and each of the Sellers (as
defined herein). Investor, HarnCo and Sellers are collectively referred to
herein as the "Parties." Other capitalized terms used herein are defined in
Section 1.
WHEREAS, the MHE Business is owned and conducted by the Companies;
WHEREAS, the Parties wish to enter into the transactions set forth
herein, pursuant to which, among other things, (i) MHE will acquire the
outstanding interests and capital stock of the other Companies; and (ii) HarnCo
and Investor will participate in a recapitalization of MHE; and
WHEREAS, in connection with the Closing, MHE will license certain
trademarks and trade names from Harnischfeger Technologies, Inc., a Delaware
corporation ("HTI"), pursuant to the Trademark Agreement of even date herewith.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
Section 1. Definitions.
"Adjusted Closing Balance Sheet" has the meaning set forth in
Section 2(d)(iv) below.
"Adverse Consequences" means all actions, suits, proceedings,
investigations, charges, complaints, claims, injunctions, judgments, orders,
decrees, rulings, damages, dues,
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hearings, penalties, fines, costs, reasonable amounts paid in settlement,
Liabilities, obligations, Taxes, liens, losses, expenses, and fees, including
court costs and reasonable attorneys' fees and expenses.
"Affiliate" means, with respect to any Person, (a) any other Person
that, directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned Person; (b)
any other Person who is a director, officer or general partner or is, directly
or indirectly, the beneficial owner of ten percent (10%) or more of any class of
equity securities, of the specified Person (but excluding any beneficial owner
of more than 10% of any class of equity securities of HII); (c) any other Person
of whom the specified Person is a director, officer or general partner or is,
directly or indirectly, the beneficial owner of ten percent (10%) or more of any
class of equity securities; or (d) any relative of the specified Person. As used
in this definition, "control" (including, with correlative meanings, "controlled
by" and "under common control with") shall mean possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise). The foregoing notwithstanding, the
Companies and their Subsidiaries (and their other Affiliates) shall not be
considered Affiliates of HII, HarnCo or Sellers (or their Affiliates) from and
after the Closing.
"Affiliated Group" means any affiliated group within the meaning of
Section 1504 of the Code (or any group defined under similar provision of state,
local or foreign law) of which any of the Companies or their Subsidiaries is a
member.
"Applicable Rate" means the sum of (i) the six-month London
Interbank Offered Rate, as published from time to time in The Wall Street
Journal, plus (ii) 0.325%.
"Asbestos Liabilities" means Liabilities arising in connection with
claims made or litigation brought by or on behalf of Persons before, on or after
the Closing Date alleging exposure to asbestos prior to the Closing in
connection with the MHE Business.
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"Audit Fees" has the meaning set forth in Section 10(n) below.
"Audited Financial Statements" has the meaning set forth in Section
4(g) below.
"BCH" means Birmingham Crane & Hoist, Inc., an Alabama corporation.
"BelCan" means Beloit Canada Ltd., a corporation organized under the
laws of Canada
"Blooma" means Morris Blooma Pte., Ltd., a corporation organized
under the laws of Singapore, which was formerly known as Blooma Engineering
Pte., Ltd.
"Brokers" has the meaning set forth in Section 3(a)(iv) below.
"Business Assets" means all real, personal and mixed assets, both
tangible and intangible, which are used exclusively in the conduct of the MHE
Business. Business Assets shall include all such assets existing on the date of
this Agreement and all such assets acquired between the date hereof and the
Closing Date, but shall exclude any such assets (other than for purposes of
Exchange Proceeds) which are (x) disposed of between the date hereof and the
Closing Date in transactions consistent with the terms hereof or (y) are the
subject of a loss, casualty or condemnation between the date hereof and the
Closing Date.
"Business Records" means any books, records or other information
relating to (i) the assets, Liabilities, business or affairs of the MHE Business
prior to the Closing or (ii) the transactions contemplated by the Transaction
Agreements.
"Canada Newco" means a limited liability company to be organized
under the Laws of Delaware.
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"Canada Newco Interests" means the limited liability company
membership interests of Canada Newco.
"Cash" means cash and cash equivalents including marketable
securities and short term investments (but excluding Exchange Proceeds).
"Chartwell Group" means the following persons: Todd R. Berman,
Michael S. Shein, Richard A. Keller and David A. Stonehill.
"Closing" has the meaning set forth in Section 2(b)(i) below.
"Closing Balance Sheet" has the meaning set forth in Section 2(d)(i)
below.
"Closing Date" has the meaning set forth in Section 2(b)(i) below.
"Closing Financial Data" has the meaning set forth in Section
2(d)(i) below.
"COBRA" has the meaning set forth in Section 4(o)(v) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment Letters" means the letters dated January 27, 1998 from
Canadian Imperial Bank of Commerce and Credit Agricole Indosuez pursuant to
which a syndicate of lenders is to provide $180 million of bank financing
subject to, and in accordance with, the terms and conditions thereof.
"Companies" collectively means MHE, Redcrown, Hercules, Canada Newco
and MHE Technologies.
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"Company Shares" means the MHE Common Shares, the MHE Class C
Preferred Shares, the Redcrown Shares, the Hercules Shares and the Canada Newco
Interests.
"Confidentiality Agreement" has the meaning set forth in Section
10(d) below.
"Contract" means any contract, agreement or lease.
"Credit Indemnification Agreement" means the Credit Indemnification
Agreement between HII and MHE substantially in the form attached hereto as
Exhibit P.
"Current Employee" means any individual employed by any of the
Companies or their Subsidiaries on the Closing Date; provided, that Current
Employees shall be limited to individuals employed in the United States at such
time.
"Current Employee Claims" has the meaning set forth in Section
6(c)(iv) below.
"Disclosure Schedule" has the meaning set forth in Section 3(a)
below.
"Divestiture Bonus Agreements" means those certain Divestiture Bonus
Agreements referred to in Schedule 4(m)(iv) of the Disclosure Schedule.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan, or (d)
Employee Welfare Benefit Plan.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Sec. 3(1).
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"Employment Agreements" means the employment agreements in effect on
the date of this Agreement with the individuals listed on Exhibit R hereto,
copies of which have been furnished to Investor.
"Encumbrance" means any mortgage, pledge, lien, encumbrance, claim,
easement, right of way, lease, occupancy, tenancy, option, warrant, purchase
right, charge, or security interest, other than, with respect to assets other
than shares, partnership interests and membership interests of the Companies and
their Subsidiaries, (a) mechanic's, materialmen's, and similar liens, (b) liens
for taxes not yet due and payable or for taxes that the taxpayer is contesting
in good faith through appropriate proceedings, (c) purchase money liens and
liens securing rental payments under capital lease arrangements, and (d) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money (which other liens do not materially interfere with
the present use or value of the asset subject thereto).
"End Date" has the meaning set forth in Section 6(c)(ix) below.
"Environmental, Health and Safety Requirements" means, to the extent
enacted and in effect on or prior to the Closing Date, all federal, foreign,
state, provincial and local statutes, regulations, rules, ordinances, guidelines
having the force of law and policies having the force of law, and all court
orders and decrees and arbitration awards, which pertain to environmental
matters, including particulate emissions, pollution, effluent discharges,
Hazardous Substances, and the protection of the environment, or the health and
safety of workers or the general public, including but not limited to, the
Resource Conservation and Recovery Act; the Comprehensive Environment Response,
Compensation and Liability Act; the Superfund Amendments and Reauthorization
Act; the Toxic Substances Control Act; the Hazardous Materials Transportation
Act; the Clean Air Act, the Clean Water Act; and the Hazard Communication
Standard.
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<PAGE>
"Environmental Permits" means permits, licenses, registrations,
governmental approvals, agreements and consents that are required under
Environmental, Health and Safety Requirements.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Estimated Purchase Price Adjustment" has the meaning set forth in
Section 2(a)(iii) below.
"Exchange Proceeds" means (i) any insurance proceeds payable on
account of the loss of or casualty to any Business Asset or Incidental Asset,
(ii) any proceeds from the taking of any Business Asset or Incidental Asset
pursuant to the power of eminent domain, (iii) any proceeds from the sale of
Business Assets or Incidental Assets outside of the Ordinary Course of Business
or (iv) proceeds from the sale of excess or obsolete assets which generate book
gains in excess of $500,000 in the aggregate; provided that the Gann Indemnity
Proceeds shall not be considered Exchange Proceeds.
"Excluded Liabilities" means: (i) Excluded Taxes; (ii) Liabilities
for which HarnCo and its Affiliates are liable pursuant to Section 6(c) hereof;
(iii) Asbestos Liabilities; (iv) Liabilities retained by HarnCo under Section
4.3 of the Separation Agreement; (v) payments under the Divestiture Bonus
Agreements; (vi) Liabilities for which HarnCo or its Affiliates have been named
as a potentially responsible party with respect to the Marina Cliffs Superfund
Site in South Milwaukee, Wisconsin and the Muskego Landfill Superfund Site in
Muskego, Wisconsin; and (viii) Assumed Liabilities (as defined in the Separation
Agreement) if and to the extent such Assumed Liabilities did not result from,
arise out of or relate to the MHE Business as presently conducted or as
conducted in the past.
"Excluded Taxes" has the meaning set forth on Exhibit N hereto.
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"Financing Shares" means MHE Common Shares, if any, or warrants to
purchase MHE Common Shares, if any, issued to purchasers of MHE Class A
Preferred Shares referred to in the Term Sheets.
"Financing Shares Ratio" means a fraction (currently estimated to be
0.053), the numerator of which is the value of the Financing Shares (currently
estimated to be $2.4 million) and the denominator of which is $45,000,000.
"Former Employee" means any individual employed by any of the
Companies or their Subsidiaries (or any predecessor thereto) prior to but not on
the Closing Date; provided, that Former Employees shall be limited to
individuals previously employed in the United States.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"Gann Indemnity Proceeds" has the meaning set forth in Section
6(d)(viii) below.
"Governmental Agency" means any court or federal, state, municipal
or other government or governmental or quasi-governmental agency, authority,
department, commission, board, agency or instrumentality, foreign or domestic,
or any employee or agent thereof.
"Guaranty" means any obligation, contingent or otherwise, of any
Person guaranteeing any Indebtedness or obligation of any other Person in any
manner, whether directly or indirectly, including any obligation of such Person,
direct or indirect, (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of such
Indebtedness, (ii) to purchase property, securities or services for the express
purpose of assuring the owner of such Indebtedness of the payment thereof, or
(iii) to maintain the working capital, equity capital or other financial
statement condition of any primary obligor; provided, however, that the term
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Guaranty shall not include endorsement of instruments for deposit and collection
in the ordinary course of business.
"HarnCo" has the meaning set forth in the preface above.
"HarnCo Indemnitees" has the meaning set forth in Section 8(c)(i).
"Harnischfeger Savings Plan" has the meaning set forth in Section
6(c)(vi)(A) below.
"Hazardous Substances" means any hazardous substance, regulated
substance, hazardous or toxic waste, hazardous material, noise, pollutant or
contaminant, as those or similar terms are used in the Environmental, Health and
Safety Requirements and shall include, without limitation, asbestos and
asbestos-related products, nuclear waste, radon, chlorofluorocarbons, oils or
petroleum-derived compounds, polychlorinated biphenyls, pesticides and other
substances defined, listed or regulated under the Environmental, Health and
Safety Requirements.
"HCHC" means HCHC, Inc., a Delaware corporation.
"HDS" means Harnischfeger Distribution & Service, LLC, a Delaware
limited liability company.
"HDS Subsidiaries" collectively means HPH Material Handling, LLC,
EPH Material Handling, LLC and CMH Material Handling, LLC.
"Hercules" means Hercules S.A. de C.V., a corporation organized
under the laws of Mexico.
"Hercules Shares" means the shares of common stock and variable
capital stock of
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Hercules.
"HII" means Harnischfeger Industries, Inc., a Delaware corporation.
"HII Note" means those certain promissory notes payable by Lowfile
Limited to HII.
"HK Agreement" means an agreement to become bound by the provisions
of (i) that certain Noncompetition Agreement dated as of October 28, 1993 by and
among HEI Acquisition, Inc., HII and Harnischfeger Engineers, Inc. (as and to
the extent required by Section 2(b) thereof) and (ii) that certain HC Closing
Agreement dated as of October 28, 1993 by and among HII, HarnCo and
Harnischfeger Engineers, Inc. (as and to the extent required by Section 2.7
thereof).
"HMH" means Harnischfeger Mexico Holdings S.A. de C.V., a
corporation organized under the laws of Mexico.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"HTI" has the meaning set forth in the preface above.
"Incidental Assets" means all assets (other than Business Assets)
included in the Most Recent Balance Sheet or the fixed asset ledgers of the
Companies or their Subsidiaries. Incidental Assets shall include all such assets
existing on the date of this Agreement and on the Closing Date, but shall
exclude any such assets (other than for purposes of Exchange Proceeds) which are
(x) disposed of between the date hereof and the Closing Date in transactions
consistent with the terms hereof or (y) are the subject of a loss, casualty or
condemnation between the date hereof and the Closing Date.
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"Income Taxes" means any Tax (including, without limitation, in the
case of the United Kingdom, corporation Tax), levy or other charge or assessment
based in whole or in part upon or calculated with reference to the income (as
defined for the purposes of any Tax legislation), profits or gains (including
capital gains) of any description or from any source, net worth or capital of an
entity, and any other Tax levied in lieu thereof or with respect to any returns
or report therefor, and all interest, penalties, charges and additions thereto,
whether disputed or not.
"Indebtedness" of any Person means, without duplication: (a) all
obligations of such Person for borrowed money and purchase money indebtedness
(in each case, whether or not full recourse), (b) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (c) all Guaranties
by such Person of obligations of another Person which would constitute
Indebtedness of such other Person (other than a wholly-owned Subsidiary
thereof); and (d) all lease obligations, but only to the extent, if any, that
such lease obligations are required to be classified and accounted for as
capital leases on a balance sheet of such Person as of such date computed in
accordance with GAAP.
"Indemnified Party" has the meaning set forth in Section 8(e)(i)
below.
"Indemnifying Party" has the meaning set forth in Section 8(e)(i)
below.
"Intellectual Property" has the meaning set forth in Section 4(l)(i)
below.
"Intercompany Debt" means any and all debts owed between (A) any of
the Companies and their respective Subsidiaries, and (B) HII and its Affiliates,
excluding the entities described in clause (A).
"Investor" has the meaning set forth in the preface above.
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"Investor Indemnitees" has the meaning set forth in Section 8(b)(i)
below.
"Investor Notice" has the meaning set forth in Section 5(q) below.
"Knowing Breach" has the meaning set forth in Section 5(r).
"Knowledge" means actual knowledge.
"Liabilities" means all obligations, indebtedness, commitments, and
other items constituting "liabilities" under GAAP, and any other known or
unknown obligations or liabilities.
"Licenses" means all licenses, franchises, authorizations, permits,
approvals and other governmental authorizations owned, leased or held and used
by HarnCo, the Sellers, the Companies or any of their Subsidiaries in connection
with the ownership and operation of the MHE Business, together with any
renewals, extensions or modifications thereof and additions thereto between the
date hereof and the Closing Date (but giving effect to any Licenses which expire
or are surrendered which are not necessary for the continued conduct of the MHE
Business).
"Local 1114" has the meaning set forth in Section 5(s) below.
"Material Adverse Effect" means any material and adverse effect upon
the business, assets, Liabilities or financial condition of the MHE Business,
taken as a whole, or upon the ability of HarnCo or Sellers to perform in any
material respect their respective obligations under the Transaction Agreements.
"MHE" means Material Handling Equipment, Inc., a Delaware
corporation.
"MHE Business" means (i) the original equipment business for
industrial cranes,
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hoists, winches, and other related types of industrial "through-the-air"
material handling equipment, (ii) aftermarket products, parts and services for
the products described in clause (i), including inspection, repair,
modernization and maintenance, and (iii) other service activities conducted at
Material Handling Service Center locations. Except in the definition of the term
"Excluded Liabilities," references to the MHE Business shall refer to the MHE
Business as performed by or through HII and its Subsidiaries and Affiliates on
the date hereof and the Closing Date.
"MHE Canada" means a company to be organized under the laws of
Canada and a wholly-owned subsidiary of MHE.
"MHE Class A Preferred Shares" means the Class A Preferred Stock,
par value $0.01 per share, of MHE which will (i) be authorized and issued
following the date of this Agreement in connection with the Investor's financing
of the transaction contemplated hereby and (ii) have the terms described on
Exhibit J-1.
"MHE Class B Preferred Shares" means the Class B Preferred Stock,
par value $0.01 per share, of MHE which will (i) be authorized and issued
following the date of this Agreement and (ii) have the terms described on
Exhibit J-2.
"MHE Class C Preferred Shares" means the Class C Preferred Stock,
par value $0.01 per share, of MHE which will (i) be authorized and issued
following the date of this Agreement and (ii) have the terms described on
Exhibit J-3.
"MHE Common Shares" means the Common Stock, par value $0.01 per
share, of MHE.
"MHE Defined Contribution Plan" has the meaning set forth in Section
6(c)(vi)(A) below.
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"MHE Nevada" means Material Handling Equipment Nevada Corporation, a
Nevada corporation.
"MHE Technologies" means MHE Technologies, Inc., a Delaware
corporation.
"MHE U.K." means a company to be organized under the laws of the
United Kingdom and a wholly-owned subsidiary of MHE.
"Most Recent Balance Sheet" means the October 31, 1997 balance sheet
contained in the Audited Financial Statements.
"MPH" means MPH Crane, Inc., a Delaware corporation.
"Net Assets" means the net amount of the balance sheet line items
listed in Exhibit M hereto.
"Neutral Auditors" has the meaning set forth in Section 2(d)(iv)
below.
"New Subsidiary" means a new wholly-owned Subsidiary of MHE to be
formed after the date of this Agreement.
"Non-Competition Agreement" means the Confidentiality and
Non-Competition Agreement between HII and MHE substantially in the form attached
hereto as Exhibit B.
"Non-U.S. Employee Benefit Plan" means any non-U.S. (A) pension,
welfare benefit or deferred compensation plan or scheme (including all Non-U.S.
Pension Plans) or (B) other employee benefit plan, policy or arrangement,
whether or not Tax-qualified, Tax-exempt or otherwise Tax-favored under the laws
of the applicable non-U.S. (federal or state) Governmental
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Agency.
"Non-U.S. Pension Plan" means any plan, scheme, policy or
arrangement which provides pension or retirement benefits and which is intended
to be Tax-qualified, Tax-exempt, or otherwise Tax-favored under the laws of any
non-U.S. (federal or state) Governmental Agency.
"NPH" means NPH Material Handling, Inc., a Michigan corporation.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
"Party" has the meaning set forth in the preface above (as qualified
by Section 5(t) below).
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a body corporate, a limited liability
company, an unlimited liability company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"PHME" means PHME Service, Inc., a Delaware corporation.
"PHMH" means PHMH Holding Company, a Delaware corporation.
"Pre-Closing Transactions" has the meaning set forth in Section 2(c)
below.
"RCHH" means RCHH, Inc., a Delaware corporation.
"Redcrown" means Redcrown, ULC, an unlimited liability company
organized under the laws of the United Kingdom.
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"Redcrown Shares" means the ordinary shares of Redcrown.
"Redemption Price" has the meaning set forth in Section 2(a)(ii)
below.
"Resolution Period" has the meaning set forth in Section 2(d)(iii)
below.
"RYL" means RYL, LLC, a Delaware limited liability company.
"SEC" means the Securities and Exchange Commission.
"Section 338(h)(10) Election" has the meaning set forth in Section
6(d)(v)(A) below.
"Securities Act" means the Securities Act of 1933, as amended.
"Sellers" means RCHH, RYL, HCHC, HMH and BelCan.
"Separation Agreement" means the Separation Agreement between HarnCo
and Material Handling, LLC dated as of October 26, 1997 and attached hereto as
Exhibit C.
"Specified Employees" means the persons listed on Exhibit D.
"Stockholders Agreement" means a Stockholders and Registration
Rights Agreement among MHE, HarnCo and the Investor containing the terms set
forth in Exhibit E hereto.
"Subsidiary" means any corporation or other form of entity with
respect to which a specified Person (or a Subsidiary thereof), directly or
indirectly, owns a majority of the common stock or other voting interests, or,
directly or indirectly, has the power to vote or direct the voting
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of sufficient securities to elect a majority of the directors of such
corporation or entity. For the avoidance of doubt, Material Handling, LLC shall
be considered a Subsidiary of MHE for purposes of this Agreement.
"Supply Agreement" means the Component and Manufactured Products
Supply Agreement among HarnCo and the Companies substantially in the form
attached hereto as Exhibit F.
"Tax" or "Taxes" means all forms of taxation and includes (without
limitation) any federal, state, governmental, local, or foreign income
(including income tax or amounts for or on account of income tax required to be
deducted or withheld from or accounted for in respect of any payment), gross
receipts, corporation, advance corporation, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, capital
gains, development land, inheritance, national insurance contributions, capital
duty, landfill, stamp duty or stamp duty reserve tax, secondary tax on
companies, duties of customs and excise, petroleum revenue tax, all taxes,
duties or charges replaced by or replacing any of them, and all levies, imposts,
duties, charges or withholdings of any nature whatsoever chargeable by any Tax
Authority, and any payment whatsoever which the Companies or any of their
Subsidiaries may be or become bound to make to any Person as a result of the
discharge by that Person of any tax which the Companies or any of their
Subsidiaries has failed to discharge, together with all penalties, charges and
interest relating to any of the foregoing or to any late or incorrect return in
respect of any of them, and regardless of whether any such taxes, levies,
duties, imposts, charges, withholdings, penalties and interest are chargeable
directly or primarily against or attributable directly or primarily to the
Companies, any of their Subsidiaries or any other Person.
"Tax Audit" means any audit, examination or other proceeding
conducted by a Tax
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Authority with respect to Taxes of a Person for which a separate notice of
audit, examination or proceeding is issued.
"Tax Authority" means any taxing or other authority (whether within
or outside the United States) competent to impose any Tax.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Termination Date" shall mean the latest to occur of (i) December
31, 2007 or (ii) 60 days after the expiration of the statute of limitations
period (including extensions) relating to the records or matter in question.
"Term Sheets" means the Term Sheets dated January 27, 1998 from CIBC
Oppenheimer Corp. outlining the terms and conditions of an offering of $175
million of subordinated debt and $45 million of MHE Class A Preferred Shares.
"Third Party Claim" has the meaning set forth in Section 8(e)(i)
below.
"Trademark Agreement" means the Trademark License Agreement between
HTI and MHE substantially in the form attached hereto as Exhibit A.
"Transaction Agreements" means this Agreement, the Trademark
Agreement, the Non-Competition Agreement, the Separation Agreement, the
Stockholders Agreement, the Supply Agreement, the Transition Services Agreement,
the Assumption Agreement, the Credit Indemnification Agreement and the HK
Agreement.
"Transfer Date" has the meaning set forth in Section 6(c)(vi)(B)
below.
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"Transition Services Agreement" means the Transition Services
Agreement among HarnCo and the Companies substantially in the form attached
hereto as Exhibit G.
"U.S. Entities" collectively means MHE, PHMH, BCH, PHME, MHE Nevada,
MHE Technologies, MPH, the New Subsidiary, NPH, HDS and the HDS Subsidiaries.
"Unresolved Changes" has the meaning set forth in Section 2(d)(iv)
below.
Section 2. Purchase and Sale of Company Shares
(a) Recapitalization Transaction. On and subject to the terms and
conditions of this Agreement, the Parties will consummate the following
transactions at the Closing:
(i) The New Subsidiary shall redeem from MHE shares of the New
Subsidiary's capital stock, the proceeds of which shall be used by
MHE as partial funding for the transactions described in Sections
2(a)(ii) and (iii) below.
(ii) MHE shall redeem from HarnCo for a price of $282 million:
(A) that number of MHE Class C Preferred Shares
(currently estimated to be 1,600 MHE Class C
Preferred Shares) equal to the product of (x)
30,000 and (y) the Financing Shares Ratio; and
(B) that number of MHE Common Shares (currently
estimated to be 88,176 MHE Common Shares) equal to
88,679.245 less (x) the number of MHE Class C
Preferred Shares redeemed pursuant to Section
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2(a)(ii)(A) above (currently estimated to be 1,600
MHE Class C Preferred Shares) multiplied by (y)
$1,000 divided by (z) $3,180.
The price paid pursuant to this Section 2(a)(ii) (the "Redemption
Price") shall be payable by wire transfer of immediately available
funds.
(iii) MHE shall pay to HarnCo $5 million in immediately
available funds as an estimate of the adjustment to the Redemption
Price to be made pursuant to Section 2(d) hereof (the "Estimated
Purchase Price Adjustment").
(iv) MHE shall redeem from HarnCo that number of MHE Common
Shares (currently estimated to be 1,488 MHE Common Shares) equal to
1,572.327 multiplied by the difference of (a) 1 (one) less (b) the
Financing Shares Ratio, in exchange for MHE Class B Preferred Shares
having a face value (currently estimated to be $4,733,333) of $5.0
million multiplied by the difference of (a) 1 (one) less (b) the
Financing Shares Ratio.
(v) Investor shall purchase from HarnCo:
(A) 7,547.170 MHE Common Shares for $24 million;
(B) that number of MHE Common Shares (currently
estimated to be 503 MHE Common Shares) equal to
(x) 9,433.962 multiplied by (y) the Financing
Shares Ratio, in exchange for that amount
(currently estimated to be $1.6 million) equal to
the product of (a) $30 million and (b) the
Financing Shares Ratio; and
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(C) that number of MHE Class C Preferred Shares
(currently estimated to be 28,400) equal to 30,000
MHE Class C Preferred Shares times the difference
of (x) 1 (one) less (y) the Financing Shares
Ratio, in exchange for that amount equal to the
product of (a) $1,000 and (b) the number of MHE
Class C Preferred Shares purchased by Investor
pursuant to this Section 2(a)(v)(C).
The cash price paid pursuant to this Section 2(a)(v) shall be payable by wire
transfer of immediately available funds.
(b) The Closing.
(i) Closing Transactions. The closing of the transactions
contemplated by Section 2(a) above (the "Closing") shall take place
at the offices of Kirkland & Ellis in Chicago, Illinois or such
other place as the Investor's financing sources shall require,
commencing at 9:00 a.m. local time on February 27, 1998 (or, if
later, the second business day following the satisfaction or waiver
of all conditions to the obligations of the Parties to consummate
the transactions contemplated hereby (other than conditions with
respect to actions the respective Parties will take at the Closing
itself)) (the "Closing Date").
(ii) Post-Closing Transactions. MHE and one of its
Subsidiaries shall purchase all of the Hercules Shares from HCHC and
HMH for an aggregate price of $2 million payable in immediately
available funds. Such price shall be paid to HCHC and HMH pro rata
based on their ownership of the Hercules Shares.
(c) Pre-Closing Transactions. Prior to the Closing Date, HarnCo and
Sellers
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shall cause the following transactions to be consummated (the "Pre-Closing
Transactions"):
(i) HarnCo shall contribute to MHE cash (in Pounds Sterling
and U.S. or Canadian Dollars) in amounts sufficient to consummate the
transactions set forth in Section 2(b)(ii) above and Sections 2(c)(ii),
(iii), (iv) and (v) below.
(ii) MHE shall loan Pounds Sterling in cash to MHE U.K. and
U.S. or Canadian Dollars in cash to MHE Canada and shall contribute Pounds
Sterling in cash to the capital of MHE U.K. and U.S. or Canadian Dollars
in cash to the capital of MHE Canada, in each case in amounts sufficient
to consummate the transactions set forth in Sections 2(c) (iii), (iv) and
(v) below. The allocation of such amounts between loans and capital
contributions shall be reasonably satisfactory to Investor.
(iii) MHE U.K. and a Subsidiary of MHE shall purchase all of
the Redcrown Shares from RCHH and RYL for an aggregate price of One
Hundred (100) Pounds Sterling.
(iv) MHE U.K. shall purchase the HII Note from HII for an
amount in Pounds Sterling equal to principal plus accrued interest
thereon, such amount to be payable in immediately available funds.
(v) MHE Canada shall purchase all of the Canada Newco
Interests from BelCan for $32 million (or its Canadian Dollar equivalent),
such amount to be payable in immediately available funds.
(vi) HDS shall distribute all of its shares of NPH to MHE
Nevada and PHME in accordance with their respective ownership interests in
HDS.
(vii) Such other transactions as may be necessary for MHE to
own (and continue to own at Closing), directly or indirectly, all
outstanding equity securities of
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the other Companies and their Subsidiaries (other than Hercules and the
15% of Blooma held by third parties), free and clear of Encumbrances.
(viii) MHE shall contribute all of its assets and assign all
of its Liabilities to the New Subsidiary.
(d) Purchase Price Adjustment.
(i) As soon as practicable, but in no event later than 60 days
following the Closing Date, MHE shall prepare a combined and
consolidated balance sheet of the Companies as of the Closing Date
(the "Closing Balance Sheet") and a calculation of Net Assets as of
the Closing Date based on the Closing Balance Sheet (collectively,
the "Closing Financial Data"). The Closing Balance Sheet and
calculation of Net Assets shall be prepared on a basis consistent
with the methods, principles, practices and policies employed in the
preparation and presentation of the Audited Financial Statements and
in accordance with Exhibit M.
(ii) During the preparation of the Closing Financial Data, and
the period of any review or dispute within the contemplation of this
Section 2(d), MHE shall (A) provide Investor, HarnCo and their
authorized representatives with full access to all relevant books,
records, work-papers and employees of the Companies and their
Subsidiaries, and (B) cooperate fully with Investor, HarnCo and
their authorized representatives, including the provision on a
timely basis of all information necessary or useful.
(iii) MHE shall deliver a copy of the Closing Financial Data
to Investor and HarnCo promptly after it has been prepared. After
receipt of the Closing Financial Data, Investor and HarnCo shall
have 30 days to review the
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Closing Financial Data, together with the work-papers used in the
preparation thereof. Unless Investor or HarnCo delivers written
notice to MHE on or prior to the 30th day after their receipt of the
Closing Financial Data stating that it has objections to the Closing
Financial Data (and setting forth the details of its calculation of
disputed items), Investor and HarnCo shall be deemed to have
accepted and agreed to the Closing Financial Data. If Investor or
HarnCo so notifies MHE of its objections to the Closing Financial
Data, then Investor and HarnCo shall, within 30 days (or such longer
period as they may agree) following such notice (the "Resolution
Period"), attempt to resolve their differences and any resolution by
them as to any disputed amounts shall be final, binding and
conclusive on all Parties (and MHE).
(iv) Any amounts remaining in dispute at the conclusion of the
Resolution Period ("Unresolved Changes") shall be submitted to a
nationally recognized independent public accounting firm jointly
selected by the independent public accounting firms of HarnCo and
Investor (such firm being referred to as the "Neutral Auditors")
within 10 days after the expiration of the Resolution Period. The
Parties agree to execute, if requested by the Neutral Auditors, a
reasonable engagement letter. All fees and expenses relating to the
work, if any, to be performed by the Neutral Auditors shall be borne
pro rata by HarnCo and MHE in proportion to the allocation of the
dollar amount of the Unresolved Changes made by the Neutral Auditors
such that the prevailing party pays a lesser proportion of the fees
and expenses. The Neutral Auditors shall act as an arbitrator to
determine, based on the provisions of this Section 2(d), only the
Unresolved Changes. The Neutral Auditors' determination of the
Unresolved Changes shall be made within 45 days of the submission of
the Unresolved Changes thereto, shall be set forth in a written
statement delivered to HarnCo and Investor and shall be final,
binding and conclusive on all Parties (and MHE). The term "Adjusted
Closing Balance Sheet," as used in this Agreement, shall mean the
definitive Closing
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Balance Sheet agreed to (or deemed agreed to) by HarnCo and Investor
under Section 2(d)(iii) or, if Unresolved Changes are submitted to
the Neutral Auditors, such definitive Closing Balance Sheet, as
adjusted to reflect the determination of the Neutral Auditors under
this Section 2(d)(iv).
(v) If and to the extent Net Assets as of the Closing as shown
on the Adjusted Closing Balance Sheet are greater than One Hundred
Twenty-Five Million Nine Hundred and Seventy-Three Thousand Dollars
($125,973,000) plus the Estimated Purchase Price Adjustment, then
MHE shall pay such excess to HarnCo as an adjustment to the
Redemption Price. If and to the extent Net Assets as of the Closing
as shown on the Adjusted Closing Balance Sheet are less than One
Hundred Twenty-Five Million Nine Hundred and Seventy-Three Thousand
Dollars ($125,973,000) plus the Estimated Purchase Price Adjustment,
then HarnCo shall pay such shortfall to MHE as an adjustment to the
Redemption Price. Any payment made pursuant to this Section 2(d)(v)
shall be paid by wire transfer of immediately available funds to a
bank account specified by the party to which such payment is owed.
If the amount of Net Assets as of the Closing is agreed to (or
deemed agreed to) by HarnCo and Investor before or during the
Resolution Period, then payment of any adjustment shall be made
within five business days after the date of such agreement (or
deemed agreement). If there are Unresolved Changes at the end of the
Resolution Period, then (A) the minimum amount which the parties
agree is owed pursuant to this Section 2(d) shall be paid within
five business days after the end of the Resolution Period and any
additional amounts owing with respect to the Unresolved Changes
shall be paid within five business days after the resolution thereof
by the Neutral Auditors or (B) in all other cases, any and all
payments shall be made within five business days after the
resolution of the Unresolved Changes by the Neutral Auditors.
(vi) All payments made pursuant to this Section 2(d) shall be
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accompanied by interest at the Applicable Rate from the Closing Date
through the date of payment.
(e) Certain Actions in Connection with the Closing.
(i) Prior to the Closing, HarnCo shall (and shall cause its
Affiliates to) (A) take such action as is necessary to cause all
Intercompany Debt to be settled in full, (B) cause MHE to organize
MHE Canada and MHE U.K. and (C) cause the charters (or corresponding
governing documents) of the Companies and their Subsidiaries to be
amended to create the MHE Class B Preferred Shares and the MHE Class
C Preferred Shares (and other capital stock necessary to consummate
the reorganization of the Subsidiaries in Canada, Mexico, the United
States and the United Kingdom to facilitate the transactions
contemplated by the Transaction Agreements). At their option, HarnCo
and its Affiliates may, at any time prior to the Closing, remove all
or a portion of any Cash held by the Companies and their
Subsidiaries; provided that the Cash contributed to MHE pursuant to
Section 2(c)(i) above shall be used for the purposes referred to in
such Section.
(ii) Prior to MHE's approval and consummation of the actions
to be taken by it at the Closing (and the debt and equity financing
thereof), HarnCo shall take such actions as are necessary to cause
the board of directors of MHE (and its Subsidiaries which are party
to the financing arrangements) to be comprised exclusively of
individuals who are (A) members of the MHE management team or (B)
members of the Chartwell Group. HarnCo shall consult with Investor
as to the individuals who will be elected to MHE's board of
directors under the preceding sentence, and Investor shall use its
best efforts to ensure that such individuals are available to serve
in such capacity.
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(iii) Subject to obtaining financing on terms reasonably
consistent with those contained in the Term Sheets and the
Commitment Letters, Investor shall procure senior debt, subordinated
debt and preferred stock financing for MHE in amounts sufficient to
enable MHE to make the payments and enter into the transactions
contemplated by Section 2(a) of this Agreement.
(iv) At the Closing, (A) HarnCo shall deliver to MHE and
Investor the various instruments and documents referred to in
Section 7(a) below, (B) MHE and Investor shall deliver to HarnCo the
various instruments and documents referred to in Section 7(b) below,
(C) HarnCo shall deliver to MHE and Investor certificates
representing the MHE Common Shares and MHE Class C Preferred Shares
to be acquired by them, endorsed in blank or accompanied by duly
executed assignment documents, (D) MHE and Investor shall deliver to
HarnCo the consideration specified in Section 2(a) above, and (E)
MHE shall deliver to HarnCo certificates representing the MHE Class
B Preferred Shares to be issued to HarnCo.
(v) In connection with the closing of the Pre-Closing
Transactions, (A) the Sellers shall deliver to MHE U.K. or MHE
Canada (as appropriate) certificates representing the Company Shares
to be acquired by them, endorsed in blank or accompanied by duly
executed assignment documents and (B) MHE U.K. and MHE Canada shall
deliver to the Sellers the consideration specified in Section 2(c)
above.
(vi) Immediately after Closing, (A) the Sellers shall deliver
to MHE certificates representing the Hercules Shares and (B) MHE
shall deliver to the Sellers the consideration specified in Section
2(b)(ii) above.
(f) Allocation of Purchase Price. The Parties agree that the fair
market values
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of the assets of the MHE Business are as set forth on Exhibit O hereto, and that
such fair market values shall be used in determining allocations of the amounts
paid hereunder for all purposes. No Party shall take any action in preparation
of tax returns or tax filings or otherwise that is inconsistent with such
allocations, except as otherwise required by law.
(g) Excluded Liabilities; Contracts.
(i) Limitation on Obligations of MHE. Neither MHE nor the
other Companies nor their Subsidiaries shall retain or be deemed to
retain at Closing, under the Transaction Agreements or by reason of
any transactions contemplated thereunder, any Excluded Liabilities.
Immediately prior to the Closing, HarnCo shall assume the Excluded
Liabilities and relinquish its rights to indemnification for
Excluded Liabilities under the Separation Agreement pursuant to an
assumption agreement in the form attached as Exhibit Q hereto.
(ii) Substitution Where Not Transferable. If the Parties shall
be unable, on or prior to the Closing, to obtain any consent
required in connection with the transactions contemplated by the
Transaction Agreements under (A) any Contract to which any of the
Companies or their Subsidiaries is a party or (B) any Contract (as
defined under the Separation Agreement), then HarnCo, HarnCo's
Affiliates and Investor will cooperate to enter into a reasonable
arrangement designed to enable the Companies or their Subsidiaries
to perform the obligations thereunder, and to provide for the
retention by the Companies or their Subsidiaries of the benefits,
risks and burdens of, and Liabilities under, any such Contract,
including enforcement at the cost and for the account of the
Companies and their Subsidiaries of any and all rights of the
Companies and their Subsidiaries against the other party thereto;
provided that if any third party refuses to consent to the
assignment of any such Contract, challenges any arrangement under
this Section 2(g)(ii) or attempts to cancel, accelerate or change
the terms of any such Contract
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as a result of the transactions contemplated hereby, then HarnCo and
Sellers, on the one hand, and the Companies and their Subsidiaries,
on the other hand, shall each bear 50% of the total Adverse
Consequences suffered by HarnCo, Sellers, the Companies and their
Subsidiaries (and their respective Affiliates) which arise or result
therefrom. Effective as of the date of this Agreement, the
provisions of this Section 2(g) shall supersede and replace the
provisions of Sections 3.4 and 4.4 of the Separation Agreement.
(h) Treatment. For U.S. federal, state and local tax purposes only,
the creation and issuance of the MHE Class B Preferred Shares and MHE Class C
Preferred Shares, the redemptions described under Sections 2(a)(i), (ii) and
(iv) of this Agreement and any distributions or deemed distributions to HarnCo
or MHE (when combined with the sale of stock of MHE described under Section 2(a)
of this Agreement and Code Sec. 338(h)(10) elections for MHE and the New
Subsidiary), shall be deemed to constitute proceeds from the respective Code
Sec. 332 liquidations of MHE and the New Subsidiary. This Agreement shall
constitute the plans of liquidation of MHE and the New Subsidiary for purposes
of Code Sec. 332.
Section 3. Representations and Warranties Concerning the
Transaction.
(a) Representations and Warranties of HarnCo and Sellers. HarnCo and
Sellers jointly and severally represent and warrant to Investor that the
statements contained in this Section 3(a) are true and correct as of the date of
this Agreement and will be true and correct as of the Closing Date (or the dates
specified in such statements), except (1) as set forth in the disclosure
schedule delivered by HarnCo and Sellers to Investor on the date hereof (the
"Disclosure Schedule") (as the same may be supplemented in accordance with
Sections 5(g) and 5(q) below) and (2) as may be affected by the transactions
contemplated by this Agreement. The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 3(a) and Sections 3(b) and 4.
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(i) Organization. Each of HarnCo and Sellers is a corporation
or limited liability company, duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
organization.
(ii) Authorization of Transaction. Each of HarnCo and Sellers
has full power and authority pursuant to its corporate charter or
limited liability company operating agreement, as the case may be,
to execute and deliver each of the Transaction Agreements to which
it is a party and to perform its obligations thereunder. Each of the
Transaction Agreements constitutes the valid and legally binding
obligation of each of HarnCo and the Sellers party thereto,
enforceable in accordance with its respective terms and conditions.
Neither HarnCo nor Sellers needs to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of
any Governmental Agency in order to consummate the transactions
contemplated by the Transaction Agreements, except as required
pursuant to the HSR Act and any applicable foreign merger
regulations (including those of Mexico).
(iii) Noncontravention. Neither the execution and the delivery
of the Transaction Agreements, nor the consummation of the
transactions contemplated thereby, do or will, either with notice or
upon the expiration of applicable grace or cure periods or both, (A)
violate or conflict in any material respect with any statute,
constitution, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any Governmental Agency or
court to which any of HarnCo or Sellers is subject or any provision
of its charter, bylaws or operating agreement, as applicable, or (B)
result in a breach of, constitute a default under, conflict with,
result in the acceleration or termination of, create in any party
the right to accelerate, terminate, modify, or cancel, or require
any notice under any material Contract or license unrelated to the
MHE Business to which HarnCo or any Seller is a party or otherwise
bound.
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(iv) Brokers' Fees. Neither HarnCo, Sellers, the Companies,
the MHE Business nor any of their Affiliates has engaged any broker
or consultant (collectively, "Brokers") in connection with this
Agreement or the transactions contemplated herein or any aspect
hereof. Neither HarnCo nor Sellers has any liability or obligation
to pay any fees or commissions to any Broker with respect to the
transactions contemplated by the Transaction Agreements for which
the Companies, their Subsidiaries or Investor could become liable or
obligated.
(v) Company Shares. Immediately prior to the Closing, (A)
HarnCo will hold of record and beneficially own 100,000 MHE Common
Shares and 30,000 MHE Class C Preferred Shares (which will represent
all of the issued and outstanding shares of MHE's capital stock
immediately prior to the Closing), (B) MHE U.K. and a Subsidiary of
MHE will collectively hold of record and beneficially own all of the
issued and outstanding Redcrown Shares, (C) HCHC and HMH will
collectively hold of record and beneficially own all of the issued
and outstanding Hercules Shares, and (D) MHE Canada will hold of
record and beneficially own all of the issued and outstanding Canada
Newco Interests, in each case free and clear of any restrictions on
transfer (other than restrictions under the Securities Act and state
securities laws), Taxes, Encumbrances, claims and demands. Neither
HarnCo nor any Seller is party to any option, warrant, purchase
right, or other contract or commitment that could require it to
sell, transfer, or otherwise dispose of any capital stock or
interests of any of the Companies (other than this Agreement).
Neither HarnCo nor any Seller is party to any voting trust, proxy,
or other agreement or understanding with respect to the voting of
any capital stock or interests of any of the Companies or their
Subsidiaries.
(b) Representations and Warranties of Investor. Investor represents
and
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warrants to HarnCo and Sellers that the statements contained in this Section
3(b) are true and correct as of the date of this Agreement and will be true and
correct as of the Closing Date (or the dates specified in such statements).
(i) Organization. Investor is a corporation duly organized,
validly existing and in good standing under the laws of Delaware.
(ii) Authorization of Transaction. Investor has full power and
authority pursuant to its organizational documents to execute and
deliver each of the Transaction Agreements to which it is a party
and to perform its obligations thereunder. Each of the Transaction
Agreements to which Investor is a party constitutes the valid and
legally binding obligation of Investor, enforceable in accordance
with its respective terms and conditions. Investor does not need to
give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any Governmental Agency in
order to consummate the transactions contemplated by the Transaction
Agreements, except as required pursuant to the HSR Act and any
applicable foreign merger regulations (including those of Mexico).
(iii) Sufficient Funds. Investor has obtained the Commitment
Letters and the Term Sheets (copies of which have been furnished to
HarnCo and Sellers) relating to bank, subordinated debt and
preferred stock financing for the transactions contemplated by this
Agreement. Investor has received (and furnished HarnCo copies of)
commitment letters for $54 million in equity financing to fund its
purchase of preferred and common stock from HarnCo under Section
2(a) (v) above. Based on its due diligence investigation and current
market conditions, Investor believes that such financing will be
available at the Closing on terms reasonably consistent with those
set forth in the Commitment Letters and the Term Sheets.
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(iv) Noncontravention. Neither the execution and the delivery
of the Transaction Agreements to which the Investor is a party, nor
the consummation of the transactions contemplated thereby, do or
will, either with notice or upon the expiration of applicable grace
or cure periods or both, (A) violate or conflict with any statute,
constitution, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any Governmental Agency or
court to which the Investor is subject or any provision of its
charter, bylaws or partnership agreement, or (B) conflict with,
result in a breach of, constitute a default under, result in the
acceleration or termination of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice
under any material agreement, contract, lease, license, instrument,
or other arrangement to which the Investor is a party or by which it
is bound or to which any of its material assets is subject.
(v) Brokers' Fees. Investor has no liability or obligation to
pay any fees or commissions to any Broker with respect to the
transactions contemplated by the Transaction Agreements for which
any of HarnCo or Sellers could become liable or obligated.
(vi) MHE Solvency; Net Worth. Assuming the correctness of the
representations and warranties in Section 4 hereof:
(A) MHE will, after giving effect to the transactions
contemplated hereby, be solvent and capable of meeting its
obligations as they become due, have assets exceeding its
Liabilities and have a reasonable amount of capital for the conduct
of its business.
(B) MHE's surplus (as defined under Delaware law) at the time
of
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the Closing will exceed the Redemption Price.
(vii) No Knowledge of Breach. To the Knowledge of the
Chartwell Group (after reviewing reports from attorneys, consultants
and other advisors), the representations and warranties of HarnCo
and the Sellers in Section 3(a)(iii)(B) and Section 4 of this
Agreement are true and correct in all material respects as of the
date of this Agreement.
(viii) Share Ownership. Assuming the correctness of the
representations and warranties in Section 4 hereof, the MHE Common
Shares held by HarnCo immediately following the Closing will
represent 22.58% of the total MHE Common Shares then outstanding
(subject, however, to adjustment under the provisions of Section
2(a) hereof and decrease due to the equity interests of MHE
management and any initial common investment in MHE by Investor in
excess of the amount contemplated by the Term Sheets).
Section 4. Representations and Warranties Concerning the Companies
and their Subsidiaries. HarnCo and Sellers jointly and severally represent and
warrant to Investor that the statements contained in this Section 4 are true and
correct as of the date of this Agreement and will be true and correct as of the
Closing Date (or the dates specified in such statements), except (i) as set
forth in the Disclosure Schedule (as the same may be supplemented in accordance
with Sections 5(g) and 5(q) below) and (ii) as may be affected by the
transactions contemplated by this Agreement.
(a) Organization, Qualification, and Corporate Power. Each of the
Companies and its Subsidiaries is duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its organization. Each of the
Companies and its Subsidiaries is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such qualification is
required, except where the lack of such qualification, individually or in the
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aggregate, would not have a Material Adverse Effect. Each of the Companies and
its Subsidiaries has full corporate (or other entity) power and authority to
carry on the businesses in which it is engaged and which it proposes to engage
under existing agreements and to own and use the properties owned and used by
it. HarnCo has made available (or will promptly make available after the date
hereof) to the Investor correct and complete copies of the charter and bylaws of
each of HarnCo, Sellers, the Companies and the Companies' Subsidiaries (as
amended to date). The stock certificate books and the stock record books of each
of the Companies and the Companies' Subsidiaries correctly reflect the current
stockholders and their record ownership thereof. None of HarnCo, Sellers, the
Companies nor any of the Companies' Subsidiaries is in default under or in
violation of any provision of its charter or bylaws. None of the MHE Business is
conducted through any corporation or Person other than the Companies and their
Subsidiaries. Since becoming Affiliates of HarnCo, the Companies and their
Subsidiaries' sole business and operations have consisted of the ownership and
operation of the MHE Business.
(b) Capitalization.
(i) Immediately prior to the Closing, the entire authorized
capital stock of MHE will consist of 1,000,000 Common Shares, a
number of MHE Class A Preferred Shares to be determined by Investor,
100,000 MHE Class B Preferred Shares and 100,000 MHE Class C
Preferred Shares, of which 100,000 Common Shares and 30,000 MHE
Class C Preferred Shares will be issued and outstanding. All of the
issued and outstanding shares of MHE's capital stock immediately
prior to the Closing will have been duly authorized, will be validly
issued, fully paid and nonassessable, and will be held of record and
beneficially by HarnCo.
(ii) Redcrown's authorized share capital comprises 100,000,000
redeemable ordinary shares, par value one Pound Sterling, and 100
ordinary shares, par value one Pound Sterling, of which no
redeemable ordinary shares and 100 ordinary shares are issued. All
of the issued Redcrown Shares have been duly
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authorized, are validly issued, are fully paid and are
nonassessable. As of the date of this Agreement, all of the issued
and outstanding shares of Redcrown are held of record and
beneficially by RCHH and RYL. As of the Closing, all of the issued
and outstanding shares of Redcrown will be held by MHE U.K. and a
Subsidiary of MHE. Redcrown has neither allotted nor agreed to allot
any further shares.
(iii) The entire authorized capital stock of Hercules consists
of 8,000 shares of Common Stock and an unlimited number of shares of
variable capital stock, of which 8,000 shares of Common Stock and
3,661,000 shares of variable capital stock are issued and
outstanding. All of the issued and outstanding Hercules Shares have
been duly authorized, are validly issued, fully paid, and
nonassessable, and are held of record and beneficially by HCHC and
HMH.
(iv) As of the Closing, all of the issued and outstanding
Canada Newco Interests will have been duly authorized, will be
validly issued, fully paid, and nonassessable, and will be held of
record and beneficially by MHE Canada.
There are no Encumbrances or outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other commitments or arrangements, relating to any securities or
interests in the Companies or that could require any of the Companies to issue,
sell, or otherwise cause to become outstanding any of its respective capital
stock, securities or interests, as the case may be. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, stock based
or similar rights with respect to any of the Companies. There are no voting
trusts, proxies or other agreements or understandings with respect to the voting
of the capital stock of the Companies. Neither the Companies, nor any of their
Subsidiaries own, directly or indirectly, debt securities, shares or other
equity interests or securities in any corporation, partnership, joint venture or
other Person, and none of them has any agreement or commitment to purchase any
such interests or securities.
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(c) Noncontravention. Neither the execution and the delivery of the
Transaction Agreements, nor the consummation of the transactions contemplated
thereby, do or will, either with notice or upon the expiration of applicable
grace or cure periods or both, (i) violate or conflict in any material respect
with any statute, regulation, rule, injunction, judgment, constitution, order,
decree, ruling, charge, or other restriction of any Governmental Agency or court
to which any of the Companies or their Subsidiaries or the MHE Business is
subject or any provision of the charter, bylaws or operating agreement of any of
the Companies or their Subsidiaries or (ii) result in a breach of, constitute a
default under, conflict with, result in the acceleration or termination of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under (x) any Contract listed (or required to be listed) on
Schedule 4(m) of the Disclosure Schedule or (y) to the Knowledge of the
Specified Employees, any other material Contract or license (I) to which any of
the Companies or their Subsidiaries or the MHE Business is a party, (II) by
which any of them is bound, (III) to which any of their material assets is
subject or (IV) which could result in the imposition of any Encumbrance upon any
of their material assets. None of the Companies, their Subsidiaries or the MHE
Business needs to give any notice to, make any material filing with, or obtain
any material authorization, consent, waiver or approval of any government or
Governmental Agency in order for the Parties to consummate the transactions
contemplated by this Agreement, except under the HSR Act and any applicable
European or national merger regulations. The foregoing notwithstanding, no
representation or warranty is made as to the financing of the transactions
contemplated by this Agreement or any Contracts entered into in connection
therewith.
(d) Brokers' Fees. None of the Companies or their Subsidiaries has
any Liability or obligation to pay any fees or commissions to any Broker
(including those listed on Schedule 3(a)(iv) of the Disclosure Schedule, which
shall be borne by HarnCo) with respect to the transactions contemplated by the
Transaction Agreements.
(e) Title to Assets. The Companies and their Subsidiaries have good
and marketable title to, or have a valid leasehold interest in, all tangible
personal property included in
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the Business Assets or the Incidental Assets and have good and marketable title
to, a valid leasehold interest in or other valid right to use all intangible
assets included in the Business Assets or the Incidental Assets, in each case
free and clear of Encumbrances (it being understood, however, that certain
services will be provided and certain assets will be made available to the
Companies and their Subsidiaries under the Transition Services Agreement, the
Supply Agreement and the Trademark Agreement). The Business Assets, plus the
Incidental Assets, plus the services to be provided and assets to be made
available under the Transition Services Agreement, the Supply Agreement and the
Trademark Agreement, are sufficient to operate the MHE Business in substantially
the same manner as operated prior to the date of this Agreement.
(f) Subsidiaries. Schedule 4(f) of the Disclosure Schedule sets
forth for each Subsidiary of each Company (i) if such Subsidiary is a
corporation (A) its name and jurisdiction of incorporation, (B) the number of
shares of authorized capital stock of each class of its capital stock and other
securities, (C) the number of issued and outstanding shares of each class of its
capital stock and other securities, (D) the names of the holders of shares of
each class of its capital stock and other securities, and (E) the number of
shares held by each such holder; (ii) if such Subsidiary is a partnership (A)
its name and jurisdiction of organization, (B) the names of the holders of its
general and limited partner interests and (C) the percentage general or limited
partner interest held by each such holder; and (iii) if such Subsidiary is a
limited liability company (A) its name and jurisdiction of organization, (B) the
names of its members, and (C) the percentage interest held by each such member.
All of the issued and outstanding shares of capital stock of each corporate
Subsidiary of the Companies have been duly authorized and are validly issued,
fully paid and nonassessable. All of the outstanding general and limited partner
interests of each partnership Subsidiary of the Companies have been duly
authorized and are validly issued. All of the outstanding limited liability
company membership interests of each limited liability company Subsidiary of the
Companies have been duly authorized and are validly issued, fully paid and
nonassessable. One of the Companies or their Subsidiaries holds of record and
owns beneficially all of the outstanding shares of each corporate Subsidiary of
the Companies and one of the Companies or their Subsidiaries owns each
outstanding partner interest or member interest
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of each partnership or limited liability company Subsidiary of the Companies, as
the case may be, free and clear of any restrictions on transfer (other than
restrictions under the Securities Act and state securities laws), Taxes,
Encumbrances, claims and demands. There are no Encumbrances or outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights or other contracts or commitments that could require any
of the Companies or their Subsidiaries to sell, transfer or otherwise dispose of
any capital stock or securities of any of their Subsidiaries or that could
require any Subsidiary of the Companies to issue, sell or otherwise cause to
become outstanding any of their own capital stock. There are no outstanding
stock appreciation, phantom stock, profit participation, stock based or similar
rights with respect to any Subsidiary of the Companies. There are no voting
trusts, proxies or other agreements or understandings with respect to the voting
of any capital stock of any Subsidiary of the Companies. None of the Companies
or any of their Subsidiaries controls directly or indirectly or has any direct
or indirect equity participation in any corporation, partnership, trust or other
business association which is not a Subsidiary of the Companies.
(g) Financial Statements. Schedule 4(g) of the Disclosure Schedule
contains the following financial statements: audited combined balance sheets for
the MHE Business as of October 31, 1997 and 1996 and income statements and cash
flow statements for the MHE Business as and for the fiscal years ended October
31, 1997, 1996 and 1995 (the "Audited Financial Statements"). Except as
otherwise noted, the Audited Financial Statements present fairly in all material
respects the financial condition and results of operations of the MHE Business
as of and for the periods covered thereby in accordance with GAAP consistently
applied and are consistent with the books and records of the MHE Business. To
the Knowledge of the Specified Employees, none of the Companies or their
Subsidiaries has any Liabilities which would be required by GAAP (applied on a
basis consistent with the preparation of the Audited Financial Statements) to be
set forth on a balance sheet other than (1) Liabilities reflected on the Most
Recent Balance Sheet, (2) Liabilities that have arisen thereafter in the
Ordinary Course of Business (excluding Liabilities arising from Knowing
Breaches), (3) Liabilities to be reflected in the calculation of Net Assets on
the Closing Balance Sheet, and (4) other immaterial Liabilities.
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(h) Subsequent Events.
(i) Since October 31, 1997, there has not been any material
adverse change in the business, financial condition or operations of
the MHE Business.
(ii) Since October 31, 1997, neither HarnCo nor Sellers nor
their Affiliates have, with respect to the MHE Business, engaged in
any material practice, taken any material action or entered into any
material transaction outside the Ordinary Course of Business (other
than (A) the transactions contemplated by or referred to in the
Transaction Agreements and (B) the reorganization of their
Subsidiaries in Canada, Mexico, the United States, and the United
Kingdom to facilitate the transactions contemplated by the
Transaction Agreements).
Without limiting the generality of the foregoing, since
October 31, 1997, none of Sellers, HarnCo (with respect to the MHE
Business), the Companies or the Companies' Subsidiaries:
(A) has sold, leased, transferred, or assigned any of its
material assets, tangible or intangible, other than in the Ordinary
Course of Business;
(B) has (nor, to the Knowledge of the Specified Employees, has
any other party) accelerated, terminated, modified or cancelled any
Contract or license (or series of related Contracts and licenses)
involving more than $50,000 (other than change orders for sales and
purchasing contracts in the Ordinary Course of Business);
(C) has made any capital expenditure (or series of related
capital
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expenditures) either involving more than $1,250,000 or outside the
Ordinary Course of Business;
(D) has issued any note, Guaranty, bond or other debt security
or created, incurred or assumed any Indebtedness, either involving
more than $250,000 singly or $1,000,000 in the aggregate (for the
entire MHE Business);
(E) has made any material change in the policies of the
Companies or any of their Subsidiaries with respect to the payment
of accounts payable or other current Liabilities or the collection
of accounts receivable, including any acceleration, deferral or
write-off of the payment or collection thereof, as applicable.
(F) has cancelled, compromised, waived or released any right
or claim (or series of related rights and claims) either involving
more than $250,000 or outside the Ordinary Course of Business;
(G) has made any general changes in employee compensation;
(H) has made any material change in accounting policies
(including with respect to intercompany transactions) in connection
with the maintenance of the books and records of the MHE Business;
(I) has waived or released any material rights of the Company
or any of its Subsidiaries, except in the Ordinary Course of
Business and for fair value;
(J) has removed any Exchange Proceeds from the Companies or
their Subsidiaries (by dividend, distribution, redemption or other
means); or
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(K) none of HarnCo, the Sellers, the Companies nor any of the
Companies' Subsidiaries has committed to any of the foregoing.
(i) Legal Compliance. To the Knowledge of the Specified Employees,
the MHE Business has been conducted in compliance in all material respects with
all applicable laws, rules, codes, plans, injunctions, judgments, orders,
decrees, rulings, charges and regulations of Governmental Agencies and the MHE
Business has not received written notice of any such non-compliance (other than
notices as to (x) matters which have been resolved and (y) immaterial matters).
(j) Tax Matters.
(i) Each of the Companies and their Subsidiaries has filed or
been included in all Tax Returns that it was required to file or to
be included in and all Taxes shown thereon as owing have been paid.
(ii) No Tax liens have been filed by any Governmental Agency
against any property or assets of the Companies or their
Subsidiaries, and no claims are being asserted with respect to any
Taxes.
(iii) The U.S. federal income Tax Returns of the Companies and
their Subsidiaries and of each consolidated group of which any of
the Companies or their Subsidiaries is or has been a member have
been examined by the IRS and closed or are federal income Tax
Returns with respect to which the applicable period for assessment
under applicable law, after giving effect to extensions or waivers,
has expired. No issue relating to the Companies or their
Subsidiaries has been raised in writing by any taxing authority in
any audit or examination with respect to taxable periods of any of
the Companies or their Subsidiaries, which, by
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application of the same or similar principles, could reasonably be
expected to result in a material deficiency for any subsequent
period (including periods subsequent to the Closing Date). There are
no outstanding agreements, waivers, or arrangements extending the
statutory period of limitation applicable to any claim for, or the
period of collection or assessment of, Taxes due from or with
respect to the Companies or their Subsidiaries for any taxable
period. No power of attorney granted by any of the Companies or
their Subsidiaries with respect to Taxes is currently in force. No
closing agreement pursuant to Section 7121 of the Code (or any
predecessor provision) or any similar provision of any state, local
or foreign law has been entered into by or with respect to any of
the Companies or their Subsidiaries.
(iv) No audit or other proceeding by any Governmental Agency,
or similar Person is pending nor has any dispute been raised or, to
the Knowledge of the Specified Employees, threatened with respect to
any Taxes due from or with respect to any of the Companies or their
Subsidiaries or any Tax Return filed by or with respect to any of
the Companies or their Subsidiaries. No assessment of Tax is
proposed against any of the Companies or their Subsidiaries or any
of their assets. No claim has ever been made by any Governmental
Authority in a jurisdiction where any of the Companies or their
Subsidiaries do not file Tax Returns that any of them is or may be
subject to Tax by that jurisdiction.
(v) None of the Companies or their Subsidiaries (A) has been a
member of an Affiliated Group filing a consolidated federal Tax
Return (other than a group the common parent of which was HII) or
(B) has any Liability for Taxes of any Person under Reg. Section
1.1502-6 (or other similar provision of state, local or foreign
law), as a transferee or successor, by contract, or otherwise.
(vi) None of the Companies or their Subsidiaries have filed a
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consent under Code Section 341(f) concerning collapsible
corporations. None of the Companies or their Subsidiaries have made
or entered into, or holds any assets subject to, a "safe harbor
lease" subject to former Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended, and the regulations thereunder. None of
the Companies or their Subsidiaries has made any payments, is
obligated to make any payments, or is party to any agreement that
under certain circumstances could obligate it to make any payments
that would not be deductible under Code Section 280G. None of the
Companies or their Subsidiaries has been a United States real
property holding corporation within the meaning of Code Section
897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). None of the Companies or their Subsidiaries has
been an investment company within the meaning of Code Section
351(e).
(vii) All elections made on IRS Form 8832 with respect to
entity classification relating to any of the Companies or their
Subsidiaries are set forth in Schedule 4(j) of the Disclosure
Schedule.
(k) Real Property.
(i) Schedule 4(k)(i) of the Disclosure Schedule lists all real
property owned by the Companies and their Subsidiaries. With respect
to each such parcel of real property:
(A) the owner has good and marketable title to the parcel of
real property, free and clear of any Encumbrance, easement,
covenant, or other restriction, except for installments of special
assessments not yet delinquent, recorded easements, covenants, and
other restrictions, and utility easements, building restrictions,
zoning restrictions, and other easements and restrictions existing
generally with respect to properties of a similar character that do
not
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materially impair the current or contemplated use of such parcel or
the value thereof;
(B) there are not any leases, subleases, licenses,
concessions, or other agreements granting to any party or parties
the right of use or occupancy of any portion of the parcel of real
property, other than leases, subleases, licenses and other
agreements which do not, individually or in the aggregate,
materially impair the current or contemplated use of such property
or the value thereof;
(C) there are not any outstanding options or rights of first
refusal to purchase the parcel of real property or any portion
thereof (or any binding commitment to grant or enter into any such
option or right);
(D) there are no pending or, to the Knowledge of the Specified
Employees, threatened condemnation proceedings;
(E) all approvals of Governmental Agencies (including licenses
and permits) required in connection with the ownership or operation
thereof have been received, except those the failure to obtain which
would not, individually or in the aggregate, materially impair the
current or contemplated use of such property or the value thereof.
(ii) Schedule 4(k)(ii) of the Disclosure Schedule lists all
leases and subleases of real property to which any of the Companies
or their Subsidiaries is a party as of the date of this Agreement
providing for lease payments in excess of $20,000 per year. HarnCo
and Sellers have made available to Investor copies of the leases and
subleases listed in Schedule 4(k)(ii) of the Disclosure Schedule. To
the Knowledge of the Specified Employees, each lease and sublease
relating to the property listed in Schedule 4(k)(ii) of the
Disclosure Schedule is legal, valid,
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binding, enforceable, and in full force and effect.
(l) Intellectual Property.
(i) Schedule 4(l) of the Disclosure Schedule identifies and
describes the following included in the Business Assets: (A) U.S.
and Foreign patents and pending patent applications; (B) U.S. and
Foreign trademark, service mark and trade name registrations and
applications therefor; (C) U.S. and Foreign copyright registrations
and applications (or similar protections by whatever name) therefor;
and (D) licenses and similar agreements for the use, reproduction,
distribution, manufacture or sale of any intellectual property
(including, without limitation, patents, unpatented inventions and
technology, trademarks, service marks and trade names, copyrights
and copyrightable works, know-how and trade secrets, hereinafter
collectively referred to as "Intellectual Property") (other than
licenses for the use of commercially available computer software and
related documentation, which licenses do not require the payment of
ongoing royalties and were each acquired for consideration totaling
less than $10,000).
(ii) The Companies and their Subsidiaries own and possess all
right, title and interest in and to, or have a license or right to
use, the Intellectual Property necessary for the operation of the
MHE Business (it being understood, however, that certain assets will
be made available and certain services will be provided to the
Companies and their Subsidiaries under the Transition Services
Agreement, the Supply Agreement and the Trademark Agreement). To the
Knowledge of the Specified Employees, no action, suit, proceeding or
written claim by any third party is currently outstanding which (i)
contests the validity, enforceability, use or ownership of any of
the Intellectual Property owned or used by the MHE Business or (ii)
alleges that the MHE Business has infringed or misappropriated any
Intellectual Property of others, in each case except as would
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not have a Material Adverse Effect.
(iii) Schedule 4(l) of the Disclosure Schedule sets forth as
of the date hereof a list of all licenses and agreements under which
the MHE Business have granted rights to third parties under any of
the Intellectual Property, including without limitation any rights
granted to third parties to use any computer programs, databases,
manufacturing processes or other know-how.
(iv) To the Knowledge of the Specified Employees, all granted
and issued patents listed on Schedule 4(l) of the Disclosure
Schedule, all registered trademarks, trade names and service marks
and all applications to register the same listed on Schedule 4(l) of
the Disclosure Schedule, and all copyright registrations and
applications listed on Schedule 4(l) of the Disclosure Schedule are
valid, enforceable and subsisting. To the Knowledge of the Specified
Employees, as of the date hereof, there has not been and there is
not any unauthorized use, infringement or misappropriation by any
third party, employee or former employee of the MHE Business of any
Intellectual Property owned by the Companies or their Subsidiaries,
except as would not have a Material Adverse Effect.
(m) Contracts. Schedule 4(m) of the Disclosure Schedule lists the
following written Contracts of the MHE Business as of the date
hereof:
(i) any Contract the performance of which is expected to
involve consideration in excess of $2,000,000;
(ii) any Contract which restricts or contains limitations on
the ability of any of the MHE Business or the Companies or their
Subsidiaries to freely conduct business anywhere in the world or
relates to confidentiality (other than confidentiality agreements
that relate to (x) the purchase or sale of goods or
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services in the Ordinary Course of Business, or (y) acquisitions or
joint venture transactions);
(iii) any collective bargaining agreement;
(iv) any contract which provides for the employment of any
individual on a full-time, part-time, consulting or other basis
providing annual salary and cash bonus in excess of $100,000 or
which provides for severance or change in control benefits;
(v) any agreement which relates to Indebtedness or any
Guaranty;
(vi) any Contract concerning a partnership, joint venture or
other similar entity or arrangement;
(vii) any Contract between the Companies or their Subsidiaries
on the one hand, and any of the Sellers or their Affiliates (other
than the Companies and their Subsidiaries) on the other hand;
(viii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance or other plan or
arrangement for the benefit of its current or former directors,
officers and employees;
(ix) any Contract under which the Companies or any of their
Subsidiaries has advanced or loaned any amount to any of their
directors, officers and employees outside the Ordinary Course of
Business; and
(x) with respect to any of the foregoing, any outstanding
executed letters of intent and written offers to which the Companies
and/or their
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Subsidiaries is party (including, but not limited to, offers made,
but not yet accepted, for the acquisition or sale of any facility,
real property or business, but excluding offers made, but not yet
accepted, for the sale of goods or services in the Ordinary Course
of Business).
HarnCo and Sellers have made available to Investor (or will make
available to Investor promptly following the date hereof) a correct and complete
copy of each written contract or other agreement listed in Schedule 4(m) of the
Disclosure Schedule. With respect to each such Contract: (A) the Contract is
legal, valid, binding, enforceable in accordance with its terms against the
Companies, their Subsidiaries and their Affiliates party thereto and, to the
Knowledge of the Specified Employees, the other parties thereto; (B) neither the
Companies, their Subsidiaries nor their Affiliates and, to the Knowledge of the
Specified Employees, no other party thereto is in material breach or default,
and, to the Knowledge of the Specified Employees, no event has occurred which
with notice or upon the expiration of applicable grace or cure periods or both
would constitute a material breach or default, or permit termination,
modification or acceleration under, the Contract; (C) neither the Companies,
their Subsidiaries nor their Affiliates and, to the Knowledge of the Specified
Employees, no other party, has repudiated any material provision of the
Contract; and (D) none of HarnCo, Sellers, the Companies nor any of the
Companies' Subsidiaries has granted any release or waiver of any material
provision under the Contract outside the Ordinary Course of Business.
(n) Litigation. Schedule 4(n) of the Disclosure Schedule sets forth
each instance in which HarnCo (with respect to the MHE Business), Sellers, the
Companies or any Subsidiaries of the Companies (or the MHE Business or the
Business Assets) is (i) subject to any outstanding injunction, judgment,
stipulation, writ, order, decree, ruling, or charge or (ii) a party to, or to
the Knowledge of any of the Specified Employees, is threatened to be made a
party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or Governmental Agency . The foregoing
notwithstanding, HarnCo and the Sellers shall not be required to list in the
Disclosure Schedules any action, suit or proceeding which has been filed
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against them but which has not been served (unless a Specified Employee has
Knowledge of the action, suit or proceeding in question).
(o) Employee Benefits. Schedule 4(o) of the Disclosure Schedule
lists, and the Sellers, the Companies and their Subsidiaries will make available
to Investor promptly after the date hereof copies of, each Employee Benefit Plan
and each Non-U.S. Employee Benefit Plan that any of the Companies or their
Subsidiaries maintains or to which any of them contributes or has any obligation
to contribute.
(i) Each such Employee Benefit Plan and each such non-U.S.
Employee Benefit Plan (and, with respect to all such plans, each
related trust, insurance contract, or fund) complies in form and in
operation in all material respects with (A) the applicable
requirements of ERISA, the Code and other applicable laws, both U.S.
and non-U.S., and (B) its own terms.
(ii) All contributions (including all employer contributions
and employee salary reduction contributions) which are due have been
paid to each Employee Benefit Plan which is an Employee Pension
Benefit Plan and to each Non-U.S. Employee Benefit Plan and all
contributions for any period ending on or before the Closing Date
which are not yet due have been reserved for in the accounts of
HarnCo, the Sellers, the Companies or the Companies' Subsidiaries
(as applicable). All premiums or other payments for all periods
ending on or before the Closing Date which are due have been paid
with respect to each Employee Welfare Benefit Plan and with respect
to each Non-U.S. Employee Benefit Plan. With respect to non-U.S.
operations and employees, the Sellers, the Companies and their
Subsidiaries are in compliance in all material respects with the
laws and regulations of any applicable Governmental Agency with
respect to employee benefits.
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(iii) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan has (A) received a determination letter from
the Internal Revenue Service to the effect that it meets the
requirements of Code Sec. 401(a), or (B) an application for such a
determination letter for such plan has been timely filed within the
remedial amendment period (as described in Section 401(b) of the
Code) with respect to the Tax Reform Act of 1986, as amended, and
subsequent federal legislation, or (C) such remedial amendment
period for such plan has not yet expired; and none of HII, HarnCo or
the Sellers is aware of any facts or circumstances that could result
in the revocation of any such determination letter. Each of the
Non-U.S. Pension Plans has been operated in accordance with all
applicable laws in all material respects to retain its
Tax-qualified, Tax-exempt or Tax-favored status and, if applicable,
has been determined to be Tax-qualified, Tax-exempt or Tax-favored
by any relevant Governmental Agency.
(iv) Neither HarnCo nor any "ERISA Affiliate" (each business
or entity which is a member of a "controlled group of corporations,"
under "common control" or an "affiliated service group" with HarnCo
within the meaning of Sections 414(b), (c) or (m) of the Code, or is
required to be aggregated with HarnCo under Section 414(o) of the
Code, or is under "common control" with HarnCo, within the meaning
of Section 4001(a)(14) of ERISA) has any liability with respect to
any multiemployer plan within the meaning of Section 3(37)(A) of
ERISA. Neither BelCan nor any of its Subsidiaries is required to
make any contributions to any multiemployer plan.
(v) HarnCo, Sellers, the Companies and their Subsidiaries have
complied in all material respects with the requirements under
Section 4980B of the Code and Section 601 et seq. of ERISA
("COBRA").
(vi) To the Knowledge of the Specified Employees, (A) there
have
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been no prohibited transactions (as defined in ERISA Section 406)
with respect to any Employee Benefit Plan, (B) no fiduciary of any
Employee Benefit Plan or any Non-U.S. Employee Benefit Plan has any
Liability for breach of fiduciary duty or any other failure to act
or comply in connection with the administration or investment of the
assets of any Employee Benefit Plan or any Non-U.S. Employee Benefit
Plan; and (C) no action, suit, proceeding, hearing, audit or
investigation with respect to the administration or the investment
of the assets of any Employee Benefit Plan or any Non-U.S. Employee
Benefit Plan (other than routine claims for benefits) is pending.
(vii) No Liability under Title IV of ERISA has been incurred
by HarnCo, HII or any ERISA Affiliate which has not been satisfied
in full (other than for the payment of PBGC premiums), and no event
has occurred and no condition exists that could reasonably be
expected to result in HII, HarnCo or any ERISA Affiliate incurring a
Liability under Title IV of ERISA (other than for the payment of
PBGC premiums) or could constitute grounds for terminating any
Employee Pension Benefit Plan.
(viii) HarnCo and Sellers have made available to Investor (or
will make available to Investor promptly after the date hereof) true
and correct copies of the plan documents and summary plan
descriptions, the most recent determination letter received from the
Internal Revenue Service and any recent applications for a
determination letter with respect to each Employee Pension Benefit
Plan and each Non-U.S. Employee Benefit Plan, the two most recently
filed Form 5500 Annual Reports or other annual reports, the two most
recent actuarial valuations for the Morris Mechanical Handling
Limited Scheme, all related trust agreements and other funding
agreements which implement each such Employee Benefit Plan and each
such Non-U.S. Employee Benefit Plan and all insurance contracts
which relate to each such Non-U.S. Employee Benefit Plan.
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(ix) Unless listed in the Disclosure Schedule, none of the
Companies or their Subsidiaries have made any commitments (A) to
increase benefits under any of the Employee Benefit Plans or
Non-U.S. Employee Benefit Plans or (B) to establish new employee
benefits, plans, policies, schemes or other arrangements.
(p) Bonds. Schedule 4(p) of the Disclosure Schedule identifies all
bonds, Guarantees, letters of credit and similar instruments and credit support
maintained by or on behalf of the MHE Business, copies of which have been made
available to Investor.
(q) Environmental Matters. To the Knowledge of the Specified
Employees, the Companies and their Subsidiaries and the MHE Business are in
compliance in all material respects with all Environmental, Health and Safety
Requirements, and each of them has obtained all material Environmental Permits
which are required for the operation of their respective businesses, and none of
them is subject to any outstanding material claim or notice to the contrary with
respect to such businesses or any businesses previously owned, leased, used,
conducted, occupied or controlled by any of the Companies and their Subsidiaries
or any other location where any of the Companies or their Subsidiaries would
have any Liability under the Environmental, Health and Safety Requirements.
(i) Without limiting the generality of the foregoing, to the
Knowledge of the Specified Employees, the Companies, their Subsidiaries
and the MHE Business have not generated, manufactured, refined,
transported, treated, stored, handled, disposed, transferred, produced,
imported, exported, used or processed any Hazardous Substances, except in
compliance in all material respects with all Environmental Health and
Safety Requirements (excluding for this purpose any previous failure to so
comply which has been substantially addressed or resolved).
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(ii) Without limiting the generality of the foregoing, to the
Knowledge of the Specified Employees, there has been no material release,
spill, emission, discharge or similar occurrence (which would require
reporting thereof to the applicable governmental or regulatory authority)
of any Hazardous Substances at or from any location of the Companies,
their Subsidiaries, the MHE Business or at any other locations where any
Hazardous Substances were generated, manufactured, refined, transported,
treated, stored, handled, disposed, transferred, produced, imported,
exported, used or processed from or by the Companies, their Subsidiaries
or the MHE Business in connection with their respective business and there
are no material remediation obligations, costs or expenses currently
required to be incurred by the Companies, their Subsidiaries or the MHE
Business relating to Environmental, Health and Safety Requirements.
(iii) HarnCo and the Sellers have heretofore made available to
Investor true and correct copies of all material internal and third-party
environmental audits, studies, reports and records in the possession or
control of HII, the Sellers, the Companies or their Subsidiaries (other
than audits, studies, reports and records relating to Excluded
Liabilities). There are no agreements between the Companies and their
Subsidiaries, on the one hand, and HarnCo and its other Affiliates, on the
other hand, as to the sharing of environmental liabilities (except as
expressly set forth in this Agreement and the Separation Agreement).
(iv) To the Knowledge of the Specified Employees, none of the
following exists at any property or facility owned or operated by the
Companies, their Subsidiaries and the MHE Business, the presence of which
could reasonably be expected to give rise to a material liability: (A)
underground storage tanks, (B) asbestos-containing material in any damaged
and friable form or condition, (C) materials or equipment containing
polychlorinated biphenyls, or (D) landfills, surface impoundments or
disposal areas.
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(v) To the Knowledge of the Specified Employees, neither the
Transaction Agreements nor the consummation of the transactions that are
the subject of the Transaction Agreements will result in any material
obligation for site investigation or clean-up, or notification to or
consent of any Governmental Agency under so-called "responsible property
transfer" Environmental, Health and Safety Requirements.
(vi) This Section 4(q), together with Sections 4(n), 4(p) and
4(r), sets forth the sole and exclusive representations and warranties of
HarnCo and Sellers with respect to environmental, health and safety
matters, including without limitation any matters arising under
Environmental, Health and Safety Requirements.
(r) Licenses and Authorizations. The Companies or one of their
Subsidiaries holds or owns all material Licenses the Companies and their
Subsidiaries must have to conduct the MHE Business as presently being conducted.
All such material Licenses are listed on Schedule 4(r) of the Disclosure
Schedule. To the Knowledge of the Specified Employees, all such Material
Licenses are valid and in full force and effect. There are no judgments, writs,
decrees, injunctions, stipulations, compliance or settlement agreements that
have been issued that could be expected to result in a forfeiture or the
suspension, termination prior to its expiration date, revocation, material
impairment, materially adverse modification or non-renewal of any material
License. No action, suit or proceeding is pending, or to the Knowledge of the
Specified Employees, threatened before any Governmental Authority to revoke,
refuse to renew or make material adverse modifications to any such material
License.
(s) Labor and Employee Matters.
(i) The Companies and their Subsidiaries are not party to any
labor or collective bargaining agreement and there are no labor or
collective bargaining agreements that pertain to employees of the
Companies, their
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Subsidiaries or the MHE Business. The Companies have made available
to the Investor correct, and complete copies of the labor or
collective bargaining agreements listed on Schedule 4(s)(i) of the
Disclosure Schedule, together with all amendments, modifications,
letters of agreements and supplements thereto. HarnCo, Sellers, the
Companies and the Subsidiaries of the Companies are not currently
engaged in or required to be engaged in collective bargaining with
any employee representative.
(ii) No employees of the Companies or the MHE Business are
represented by any labor organization. No labor organization or
group of employees of the Companies or the MHE Business has made a
pending demand for recognition, and there are no representation
proceedings or petitions presently pending or, to the Knowledge of
the Specified Employees, threatened to be brought or filed, with the
National Labor Relations Board or other labor relations tribunal.
There is no labor organizing activity involving the Companies'
employees or employees of the MHE Business pending or, to the
Knowledge of the Specified Employees, threatened by any labor
organization or group of employees of the Companies or the MHE
Business.
(iii) There are no strikes, work stoppages, slow downs,
lockouts, arbitrations or unfair labor practice charges (or actions,
suits or proceedings relating to wrongful discharge, discrimination,
employment practices, employment conditions, or terms and conditions
of employment) pending or, to the Knowledge of the Specified
Employees, threatened against or involving the Companies, their
Subsidiaries or the MHE Business.
(iv) Neither the Companies, their Subsidiaries, nor the MHE
Business is delinquent or allegedly delinquent in payments to any of
its employees of any wages, salaries, commissions, bonuses, or other
direct compensation for any
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services performed by them to date or in amounts required to be
reimbursed to such employees.
(v) Sellers have heretofore delivered to Investor a list of
all Employees of the MHE Business whose aggregate salary and cash
bonus exceeded $100,000 for the 12 month period ended October 31,
1997 setting forth as to each such employee listed thereon, the job
title, location and salary and cash bonus of such employee for such
period.
(t) Insurance. Schedule 4(t) of the Disclosure Schedule sets forth
the following information with respect to each insurance policy (including
policies providing property, casualty, liability and workers' compensation
coverage) to which any of the MHE Business has been a party, a named insured or
otherwise the beneficiary of coverage at any time within the past 5 years:
(i) the policy number and the period of coverage;
(ii) the scope (including an indication of whether the
coverage was on a claims made, occurrence or other basis) and amount
(including a description of how deductibles and ceiling are
calculated and operate) of coverage; and
(iii) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable and in full force and effect; (B) neither HarnCo, the
Sellers nor their Affiliates (nor, to the Knowledge of the Specified Employees,
any other party to the policy) is in material breach or default, and no event
has occurred which, with notice or the lapse of time, would constitute such a
material breach or default, or permit termination, modification or acceleration,
under the policy; and (C) to
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the Knowledge of the Specified Employees, no party to the policy has repudiated
any material provision thereof. Schedule 4(t) of the Disclosure Schedule
describes any self-insurance arrangements affecting any of the MHE Business.
(u) Certain Business Relationships with the Companies and their
Subsidiaries. Except as set forth on Schedule 4(u) in the Disclosure Schedule,
none of HarnCo, the Sellers nor their Affiliates (i) is or has been involved in
any material business arrangement or relationship with any of the Companies, the
Companies' Subsidiaries or the MHE Business since November 1, 1996, and none of
the Sellers or their Affiliates owns any material asset, tangible or intangible,
which is used in the MHE Business or (ii) is the direct or indirect owner of an
interest in any Person which is a present competitor or supplier of the MHE
Business; provided that, in the case of individuals included in the definition
of Affiliate by virtue of their status as a director, officer, partner or
relative, the representation and warranty in this sentence is made to the
Knowledge of the Specified Employees.
(v) Foreign Corrupt Practices Act. To the Knowledge of the Specified
Employees, the MHE Business has been conducted in compliance with the Foreign
Corrupt Practices Act of 1977, as amended, and the rules and regulations
promulgated thereunder.
(w) Condition of Assets. Viewed in the aggregate, the Business
Assets and the Incidental Assets are in reasonable operating condition (subject
to ordinary wear and tear).
(x) Disclosure. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements contained in
this Section 4 not misleading.
Section 5. Pre-Closing Covenants. The Parties agree as follows with
respect to the period between the execution of this Agreement and the Closing
(or the earlier termination of this Agreement under Section 9); provided that
with respect to Hercules, the
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covenants in this Section 5 shall apply until such time as MHE purchases
Hercules.
(a) General. Each of the Parties will use commercially reasonable
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in Section 7 below and the execution and delivery of the other Transaction
Agreements).
(b) Notices and Consents. Each of the Parties will (and HarnCo and
Sellers will cause each of the Companies and their Subsidiaries to) give any
notices to third parties, and each of the Parties will (and HarnCo and Sellers
will cause each of the Companies and their Subsidiaries to) use commercially
reasonable efforts to obtain any third party consents, that the other Party may
reasonably request in connection with the transactions contemplated by this
Agreement. Each of the Parties will (and HarnCo and Sellers will cause each of
the Companies and their Subsidiaries to) give any notices to, make any filings
with, and use commercially reasonable efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in connection
with the matters referred to in Section 3(a)(ii), Section 3(b)(ii), and Section
4(c) above. Without limiting the generality of the foregoing, each of the
Parties will file within 15 business days of the date of this Agreement any
Notification and Report Forms and related material that it may be required to
file with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the HSR Act. Each of the Parties will
promptly make any other merger, anti-trust or similar filings which may be
required in other jurisdictions. The Parties will (i) supply promptly any
additional information and documentary material that may be requested in
connection with such filings, (ii) use commercially reasonable efforts to obtain
early termination (if available) of any applicable waiting periods, (iii) make
any further filings pursuant thereto that may be necessary, proper, or advisable
in connection therewith and (iv) take all commercially reasonable actions
necessary to obtain all required clearances. Prior to Closing, the Employment
Agreements with U.S. employees shall be assigned from HarnCo to MHE (or one of
its Subsidiaries), and HarnCo shall be released from its
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obligations thereunder.
(c) Operation of Business. HarnCo and the Sellers will not and will
not cause or permit any of the Companies and their Subsidiaries to engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business (other than (A) the transactions contemplated by or referred
to in the Transaction Agreements and (B) the reorganization of their
subsidiaries in Canada, Mexico, the United States and the United Kingdom to
facilitate the transactions contemplated by this Agreement). Without limiting
the generality of the foregoing, HarnCo and the Sellers (with respect to the MHE
Business) will not and will not cause or permit any of the Companies or any of
their Subsidiaries to:
(i) declare, set aside or pay any dividend or make any
distribution with respect to its capital stock (other than dividends
and distributions payable in Cash prior to the Closing) or redeem,
purchase or otherwise acquire any of its capital stock for any
consideration other than Cash payable prior to the Closing;
(ii) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by
any other manner, any corporation, partnership, association or other
business organization or division thereof;
(iii) amend the charter, bylaws or comparable governing
instruments of the Companies or any of their Subsidiaries;
(iv) except pursuant to pre-existing contractual commitments
heretofore disclosed to Investor, issue or sell any shares of its
capital stock or other interests or securities, or issue options,
warrants or rights of any kind to acquire, or any securities
convertible into, exchangeable for or representing a right to
purchase or receive, or enter into any contract, plan, understanding
or
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arrangement with respect to the issuance of, any equity based or
equity related awards, shares of its capital stock or other
securities, in each instance of the Companies or any of their
Subsidiaries;
(v) enter into any arrangement or contract with respect to the
purchase, encumbrance or voting of the shares of capital stock or
adjust, split, combine or reclassify any of the securities, or make
any other changes in the equity capital structure, in each instance
of the Companies or any of their Subsidiaries; or
(vi) otherwise engage in any practice, take any action or
enter into any transaction of the sort described in Section 4(h)(ii)
above (provided that neither HarnCo nor the Sellers will be deemed
to have breached this covenant as a result of (i) actions taken or
omissions made by Persons other than HarnCo, the Sellers, the
Companies or their Subsidiaries or Affiliates or (ii) acts of God or
other events beyond their control).
(d) Preservation of Business. HarnCo and Sellers shall use
commercially reasonable efforts to and shall cause each of the Companies and
their Subsidiaries to use commercially reasonable efforts to keep the MHE
Business and its properties substantially intact, including its present
operations, physical facilities, working conditions and relationships with
lessors, licensors, suppliers, customers and employees.
(e) Full Access. Each of HarnCo and the Sellers will permit, and
HarnCo and the Sellers will cause each of the Companies and their Subsidiaries
to permit, representatives of the Investor to have full access at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of the Companies and their Subsidiaries, to all premises, properties,
personnel, books, records (including Tax records), contracts and documents of or
pertaining to each of the Companies and their Subsidiaries; it being understood
that the foregoing shall include such access (i) as Investor and its
accountants, attorneys, agents and representatives
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shall reasonably require in order to review (at Investor's expense) the books
and records of the MHE Business, including access to accountants' work-papers
and the like (but subject to Investor signing any letter which such accountants
may require as a prerequisite to reviewing work papers and the like); and (ii)
as Investor may reasonably require to the management of the MHE Business to
enable Investor to obtain information about the employees of the MHE Business.
(f) Compensation. Without Investor's prior written consent, no
increase shall be made in the compensation, bonuses or commissions payable or to
become payable to any employee of the MHE Business, except in accordance with
existing employment arrangements or in the Ordinary Course of Business; no
arrangement shall be made by the Companies or any of their Subsidiaries for any
new, additional or increased bonuses, profit sharing plan, pension or retirement
plan, or any similar plan relating to the employees of the MHE Business; and no
material change shall be effected in management, personnel policies or employee
benefits of the MHE Business or any of the Companies or their Subsidiaries.
(g) Notice of Developments. HarnCo and Sellers shall promptly notify
Investor in writing in the event that any Specified Employee has Knowledge of
any matter which would cause any of their representations and warranties in
Section 3(a) or Section 4 above (or in the other Transaction Agreements) to be
untrue as of the date of this Agreement or the Closing Date. With respect to any
fact, circumstance, event or development occurring after the date of this
Agreement (other than those which constitute a Knowing Breach), the written
notice pursuant to this Section 5(g) will be deemed to have amended the
Disclosure Schedule, to have qualified the representations and warranties
contained in Section 3(a) or Section 4 above, and to have corrected any
misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the fact, circumstance, event or development (with the
result that no misrepresentation or breach shall be deemed to have occurred), in
each case to the extent of the disclosure contained in such notice.
(h) Exclusivity. From and after the date of this Agreement, neither
HarnCo
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nor the Sellers nor their Affiliates will (i) solicit, initiate, or encourage
the submission of any proposal or offer from any Person relating to the
acquisition of all or substantially all of the MHE Business or the capital
stock, voting securities or assets of any of the Companies or their Subsidiaries
(including any acquisition structured as a merger, consolidation, or share
exchange) or (ii) participate in any discussion or negotiations regarding,
furnish any information or enter into any agreement with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. The Sellers will notify the Investor
immediately if any Person makes any proposal, offer, inquiry or contact with
respect to any of the foregoing and will promptly provide Investor with a copy
of any documentation relating thereto.
(i) Insurance. The Companies shall use commercially reasonable
efforts to maintain in effect through the Closing Date the property damage,
liability and other insurance policies set forth on Schedule 4(t) of the
Disclosure Schedule with respect to the MHE Business.
(j) Notice of Litigation. The Companies shall notify Investor of any
material litigation filed by or served on them or their Subsidiaries after the
date of this Agreement, including any litigation which challenges the
transactions contemplated hereby, and of any material damage to or destruction
of their material assets.
(k) Performance of Agreements. HarnCo and the Sellers shall use
commercially reasonable efforts to, and shall cause the Companies and their
Subsidiaries to use commercially reasonable efforts to, perform all obligations
(including, without limitation, all payment obligations) required to be
performed by them under all agreements, leases, contracts and commitments
relating to the MHE Business. Neither the Companies nor their Subsidiaries shall
enter into any collective bargaining agreement, employment agreement with any
management-level employee (other than agreements terminable at will and
agreements required by law in nations other than the U.S.) or Employee Benefit
Plan (or any material amendment thereto), except as otherwise required by law or
with the prior written consent of Investor.
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(l) No Solicitation. Neither HarnCo nor any of its Affiliates shall
directly or indirectly through another Person induce or attempt to induce any
employee of the Companies or their Subsidiaries to leave the employ of the
Companies or their Subsidiaries.
(m) Tax Elections. Neither HII, HarnCo, the Sellers, the Companies
nor any of the Companies' Subsidiaries shall make any new elections with respect
to Taxes, or change any current elections with respect to Taxes, that adversely
affect the Companies, their Subsidiaries or the MHE Business.
(n) Financing. Investor shall use commercially reasonable efforts to
obtain the necessary financing for the transactions contemplated by this
Agreement on terms reasonably consistent with those referred to in the
Commitment Letters and the Term Sheets.
(o) Exchange Proceeds. If, between the date hereof and the Closing,
HarnCo, Sellers, the Companies or their Subsidiaries and/or any of their
Affiliates receives any Exchange Proceeds, one of them shall promptly notify the
Investor of the receipt of the Exchange Proceeds. Any Exchange Proceeds received
by HarnCo, Sellers, the Companies or their Subsidiaries between October 31, 1997
and the Closing shall either be used to purchase replacement Business Assets or
shall be retained by the Companies (as determined based on consultation with
Investor).
(p) Interim Financial Statements. HarnCo shall furnish to Investor
within twenty (20) days after the end of each monthly accounting period,
commencing with the monthly accounting period ending in December, unaudited
combined consolidated management accounts for the MHE Business consisting of (i)
statements of income and cash flows for the MHE Business for such monthly
accounting period and the fiscal year to date and (ii) a balance sheet of the
MHE Business as of the end of such monthly accounting period. Notwithstanding
anything to the contrary contained in this Agreement, HarnCo and the Sellers do
not make (and will not make) any representation or warranty as to the financial
information furnished under this Section.
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(q) Update by Investor. Investor shall promptly give written notice
to HarnCo (an "Investor Notice") in the event that any person in the Chartwell
Group has Knowledge of any matter which would cause any representation or
warranty of HarnCo and the Sellers in this Agreement or any other Transaction
Document to be untrue or incorrect in any material respect. Any Investor Notice
shall have the same effect as a notice delivered by HarnCo and Sellers under
Section 5(g) hereof.
(r) Knowing Breach. HarnCo and Sellers shall not cause or permit
any Knowing Breach to occur. As used in this Agreement, "Knowing Breach" means
an action (or a willful failure to take action) by, at the direction of, or with
the prior Knowledge of any Specified Employee, which action would (i) cause any
of the representations or warranties of HarnCo and Sellers in this Agreement or
any other Transaction Agreement to be untrue in any material respect (other than
actions (or willful failures to take action) in the Ordinary Course of Business)
or (ii) breach any other covenant contained in this Section 5.
(s) Collective Bargaining Agreements. Effective on the Closing Date,
Investor shall cause MHE to assume and to be responsible for all employer
liabilities and obligations (as such apply to the MHE Business) that accrue
after the Closing Date under the collective bargaining agreement applicable to
United Steelworkers of America, Local No. 1114 ("Local 1114"), as currently set
forth in the "1995-1998 Agreement" between HarnCo and Local 1114, dated
September 1, 1995, subject to the provisions in this Agreement as to Excluded
Liabilities.
(t) Joinder. At the Closing, Investor shall cause MHE and the other
Companies to execute an instrument for the benefit of HarnCo and its Affiliates
pursuant to which MHE, the other Companies and their Subsidiaries will ratify
and approve and will agree to honor and be bound by all provisions of this
Agreement which are applicable to them. From and after the Closing, MHE and the
other Companies shall be deemed "Parties" to this Agreement for purposes of all
provisions of this Agreement which are applicable to them.
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Section 6. Post-Closing Covenants. The Parties agree as follows with
respect to the period following the Closing.
(a) General. In case at any time after the Closing any further
reasonable action is necessary to carry out the purposes of this Agreement, each
of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party may
reasonably request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 8 below). HarnCo and the Sellers acknowledge and agree that from and
after the Closing, the Investor will be entitled to possession of all documents,
books, records (including Tax records other than U.S. and state income Tax
records relating to periods ending on or prior to the Closing Date), agreements
and financial data of any sort relating to the Companies and the Companies'
Subsidiaries and the MHE Business, if and to the extent such Business Records
are reasonably separable from those relating to HII's other businesses.
(b) Records; Employees.
(i) Records in Investor's and MHE's Possession. Until the
Termination Date, Investor and MHE agree to permit HarnCo, Sellers
and their officers, employees, attorneys, accountants, agents and
designees, such access to, and right to copy, Business Records in
the possession of the Investor or MHE (or any of their Affiliates)
as HarnCo or Sellers may deem reasonably necessary or reasonably
desirable. Any such examination and copying shall be at HarnCo or
Sellers' expense, shall be performed at the place where the Business
Records are regularly maintained and shall not unreasonably
interfere with the normal business activities of the furnishing
party. In the event that Investor or MHE (or any of their
Affiliates) intends to destroy any Business Records prior to the
Termination Date, it shall so notify HarnCo and Sellers (and HarnCo
and the Sellers shall have
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the right to review and remove at their expense any of the Business
Records to be destroyed).
(ii) Records in HarnCo's or Sellers' Possession. Until the
Termination Date, HarnCo and Sellers agree to permit Investor, MHE
and their officers, employees, attorneys, accountants, agents and
designees, such access to, and right to copy, such Business Records
in the possession of HarnCo and Sellers (or any of their Affiliates)
as Investor or MHE may deem reasonably necessary or reasonably
desirable. Any such examination and copying shall be at the expense
of Investor or MHE, shall be performed at the place where the
Business Records are regularly maintained and shall not unreasonably
interfere with the normal business activities of the furnishing
party. In the event that HarnCo or Sellers (or any of their
Affiliates) intend to destroy any Business Records prior to the
Termination Date, they shall so notify the Investor and MHE (and the
Investor and MHE shall have the right to review and remove at its
expense any of the Business Records to be destroyed).
(iii) Investor and MHE Employees. Until the Termination Date,
Investor and MHE shall afford HarnCo and Sellers access to those
employees of Investor or MHE (or any of their Affiliates) who are
familiar with the MHE Business. Any such access shall be: (i) at the
request of HarnCo or Sellers, (ii) scheduled and provided on a
reasonable basis, and (iii) for any proper business purpose of
HarnCo or Sellers, including the defense of any legal proceedings
and the preparation, filing and execution of any Tax Returns. HarnCo
and Sellers shall pay all reasonable out-of-pocket expenses,
excluding wages, salaries, overhead or burden, incurred by Investor
or MHE (or any of their Affiliates) in connection with this
subsection (iii).
(iv) HarnCo and Seller Employees. Until the Termination Date,
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HarnCo and Sellers shall afford Investor and MHE access to those
employees of HarnCo or Sellers who are familiar with the MHE
Business. Any such access shall be: (i) at the request of Investor
or MHE; (ii) scheduled and provided on a reasonable basis, and (iii)
for any proper business purpose of Investor or MHE, including the
defense of any legal proceedings and the preparation, filing and
execution of any Tax Returns. Investor and MHE shall pay all
reasonable out-of-pocket expenses, excluding wages, salaries,
overhead or burden, incurred by HarnCo or Sellers in connection with
this subsection (iv).
(c) Employees and Employee Benefit Matters.
(i) Except as set forth in Section 6(c)(vi) below and except
as may be required by collective bargaining agreements in effect on
the Closing Date, nothing in this Agreement (whether express or
implied) shall in any way restrict the right of the Companies and/or
their Subsidiaries to provide salaries, wages and benefits different
from those provided to Current Employees (or employees of the
non-U.S. Companies and their Subsidiaries) prior to the Closing
Date. HarnCo and Sellers shall retain all Liability for
post-retirement medical benefits and other benefits payable to
Former Employees as of the Closing Date. Nothing in this Agreement
shall be deemed to restrict or otherwise prevent or prohibit the
Companies or their Subsidiaries from terminating after the Closing
Date any employee of the Companies or their Subsidiaries, to the
extent permitted by applicable law and any applicable collective
bargaining agreement. Investor and MHE shall indemnify HarnCo and
its Affiliates against any Adverse Consequences which HarnCo or its
Affiliates may incur or suffer under the Worker Adjustment and
Retraining Notification Act or any similar state law arising out of,
or relating to, any actions taken by Investor, the Companies or
their Subsidiaries with respect to Current Employees on or after the
Closing Date.
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(ii) To the extent Current Employees or Former Employees
participate in employee health, disability, dental or life insurance
benefit plans which are sponsored by HII, HarnCo or one or more of
the Sellers, then HII, HarnCo and Sellers shall retain liability for
all claims filed thereunder prior to the Closing Date. The Companies
and their Subsidiaries shall have liability for all claims filed
under such plans by Current Employees on or after the Closing Date.
HarnCo and Sellers shall retain Liability for all medical and
disability benefits for all Current Employees who are on short-term
or long-term disability as of the Closing Date as to such condition
or disability.
(iii) HarnCo and Sellers shall retain and assume the Liability
for all workers' compensation claims filed prior to the Closing Date
and the Companies and their Subsidiaries shall have Liability for
all workers' compensation claims for all Current Employees filed on
or after the Closing Date.
(iv) HarnCo and its Affiliates shall retain responsibility for
any claims by Former Employees arising out of or relating to the
termination of their retiree medical benefits. The Companies and
their Subsidiaries shall be responsible for any claims by Current
Employees arising out of or relating to the termination of their
retiree medical benefits ("Current Employee Claims"). HarnCo and its
Affiliates shall control and manage the defense of any litigation
brought against the Companies or their Subsidiaries in respect of
Current Employee Claims and shall pay the costs and expenses of
defending such litigation (but not any settlements or judgments in
respect of such litigation); provided that the Companies and their
Subsidiaries may retain separate co-counsel at their sole cost and
expense to monitor the defense of such litigation; and provided
further that the Companies and their Subsidiaries may elect to
assume control of the defense (in which case (A) the Companies and
their Subsidiaries shall be responsible for the payment of the costs
and expenses of defending such litigation and (B) HarnCo and its
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Affiliates may retain separate co- counsel at their sole cost and
expense to monitor such litigation). Neither the Companies or their
Subsidiaries, on the one hand, nor HarnCo or its Affiliates, on the
other hand, shall enter into any settlement of any litigation
against the Companies or their Subsidiaries in respect of Current
Employee Claims without the consent of the other, not to be
unreasonably withheld.
(v) On behalf of itself, MHE and the Companies, Investor
agrees and acknowledges that (i) HarnCo does not consider retiree
medical insurance to be a vested benefit and (ii) HarnCo has
retained, and communicated to Former Employees and Current
Employees, its right to change, modify or alter, in whole or in
part, or to eliminate retiree medical benefits. With respect to
retiree medical insurance, Investor shall permit HarnCo to monitor
and consult with MHE concerning its planning for and presentations
in collective bargaining negotiations with Local 1114. Until such
time as HarnCo and its Affiliates cease to hold any ownership
interest (including any interest in preferred shares) in MHE,
Investor shall not (and shall not permit MHE or the Companies to)
make any statement or admission in its collective bargaining
negotiations or otherwise which is inconsistent with the first
sentence of this Section 6(c)(v).
(vi) (A) Effective as of the Closing Date, MHE shall adopt and
maintain a defined contribution plan (the "MHE Defined Contribution
Plan") intended to be qualified under Section 401(a) of the Code
that has features concerning the timing and method of distributions
such that a mandatory transfer from the Harnischfeger Industries
Employees' Savings Plan (the "Harnischfeger Savings Plan") to the
MHE Defined Contribution Plan of account balances attributable to
the Current Employees will not cause a violation of Section
411(d)(6) of the Code, and that credits the Current Employees with
all of their years of service credited under the Harnischfeger
Savings Plan as of the Closing
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Date for all purposes under the MHE Defined Contribution Plan. As
soon as practicable following the Closing Date, MHE shall submit the
MHE Defined Contribution Plan to the IRS for a favorable
determination that the MHE Defined Contribution Plan is qualified
under Section 401(a) of the Code, and MHE shall take all such
actions as may be necessary to obtain such favorable determination
prior to the end of the remedial amendment period specified therefor
in Section 401(b) of the Code.
(B) In accordance with the applicable provisions of
Section 414(l) of the Code, HarnCo and Sellers shall cause the
assets of the Harnischfeger Savings Plan attributable to the
accounts (whether or not vested) of each Current Employee (or the
beneficiaries or alternate payee(s) of each Current Employee) to be
transferred by the trustee of the Harnischfeger Savings Plan to the
trustee of the MHE Defined Contribution Plan. The transfer of assets
from the Harnischfeger Savings Plan to the MHE Defined Contribution
Plan made pursuant to the terms of this Agreement shall be in cash
or in kind (including any promissory notes or other evidences of
indebtedness with respect to outstanding loans made to Current
Employees), as mutually agreed by HarnCo, Sellers and MHE, or in
cash and such promissory notes if no such agreement is made, and
shall be made as of and as soon as practicable after a valuation
date under the Harnischfeger Savings Plan occurring coincident with
or immediately following the Closing Date, or as of such later
valuation date as may be mutually selected by Sellers, HarnCo and
MHE. Such transfer shall account appropriately for earnings and
losses during the period from the applicable valuation date to the
actual date of transfer (the "Transfer Date").
(C) From the Closing Date until the Transfer Date, MHE
shall make continuous payroll deductions each pay period from the
pay of each Current Employee who has a loan(s) outstanding from the
Harnischfeger Savings Plan of
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amounts sufficient to pay the installment payments of principal and
interest on each such loan as required by the promissory note or
other evidence of indebtedness relating to such loan. Such deducted
amounts shall be paid by MHE to the trustee of the Harnischfeger
Savings Plan who shall accept such payments for a credit against
such loans.
(vii) HarnCo and Sellers shall retain the Harnischfeger
Industries Salaried Employees' Retirement Plan and the Harnischfeger
Industries Hourly Employees' Retirement Plan, and all Liabilities
with respect to each such plan; provided, that effective as of the
Closing Date, Current Employees will no longer accrue service for
purposes of benefit accrual, vesting or early retirement subsidies.
Neither Investor nor MHE shall assume the Harnischfeger Industries
Salaried Employees' Retirement Plan or the Harnischfeger Industries
Hourly Employees' Retirement Plan, or any Liabilities with respect
to either such plan.
(viii) The provisions of Exhibit L shall govern the treatment
of the Morris Pension Scheme.
(ix) From the Closing Date until the earlier of MHE's notice
of termination to HarnCo or December 31, 1998 (such earlier date
shall be the "End Date"), the Current Employees shall continue to
participate in the medical, dental, life and long-term disability
insurance benefit plans which are sponsored by HarnCo for the
benefit of such Current Employees as of the Closing Date; provided
that, except as otherwise set forth in this Section 6(c), MHE shall
(and Investor and MHE shall cause the other Companies and their
Subsidiaries to) pay to HarnCo and Sellers the cost of all benefits
provided under such plans with respect to the Current Employees from
the Closing Date until the End Date, including, but not limited to,
(i) the amount of all claims paid thereunder on or prior to the End
Date, (ii) the amount of any claims paid thereunder subsequent to
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the End Date, provided that any such claim was incurred on or prior
to the End Date, and (iii) the cost of any administrative and
support services provided with respect to the claims paid pursuant
to clauses (i) and (ii). All payments of such costs shall be made
not later than 30 days following the submission to the Companies of
an invoice therefor by HII or HarnCo.
(d) Tax Matters. The following provisions shall govern the
allocation of responsibility as between the Parties for certain Tax matters
following the Closing Date:
(i) Tax Periods Ending on or Before the Closing Date. Investor
shall prepare or cause to be prepared and file or cause to be filed
and pay any amounts (other than Excluded Taxes) related to all Tax
Returns for each of the Companies and their Subsidiaries for all
periods ending on or prior to the Closing Date which are filed after
the Closing Date other than Tax Returns with respect to periods for
which a consolidated, unitary or combined income Tax Return of
HarnCo or the Sellers will include the operations of any of the
Companies or their Subsidiaries, the income Tax Returns of Redcrown,
ULC and its subsidiaries for periods ending on or before October 31,
1997 and the income Tax Returns for periods ended on or before the
Closing Date of any U.S. Entity which is a flow-through entity for
U.S. Tax purposes (which returns shall be prepared or be caused to
be prepared and filed or be caused to be filed by Sellers and
Sellers will pay any amounts related thereto).
(ii) Tax Periods Beginning Before and Ending After the Closing
Date. Investor shall prepare or cause to be prepared and file or
cause to be filed and pay any amounts (other than Excluded Taxes)
related to any Tax Returns of each of the Companies and their
Subsidiaries which begin before and end after the Closing Date.
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(iii) Cooperation on Tax Matters. Investor, MHE, HarnCo, the
Sellers and the Companies and their Subsidiaries shall cooperate
fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns pursuant to this
Section 6(d), the providing of copies of Tax Returns and any audit,
litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other Party's
request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other
proceeding and making employees available without charge on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder.
(iv) Tax Sharing Agreements. On the Closing Date, none of the
Companies or their Subsidiaries will be a party to, be bound by, or
have any obligation under any Tax sharing agreement or similar
contract or arrangement.
(v) Section 338(h)(10) Election.
(A) The Parties will join in making an election under Section
338(h)(10) of the Code (and any corresponding election under state
or local law) with respect to the purchase and sale of the stock of
the U.S. Entities and Morris Mechanical Handling Inc. (a "Section
338(h)(10) Election"). HarnCo and the Sellers will include any
income, gain, loss, deduction, or any other tax item resulting from
the Section 338(h)(10) Election on their Tax Returns to the extent
permitted by applicable law. HarnCo and the Sellers shall also pay
any Tax imposed on the U.S. Entities attributable to the making of
the Section 338(h)(10) Election, including, but not limited to, (A)
any Tax imposed under Reg. Section 1.338(h)(10)-1(e)(5), or (B) any
state, local or foreign Tax imposed on the U.S. Entities gain, and
HarnCo and the Sellers shall indemnify the Investors, or the U.S.
Entities against any Adverse Consequences arising out of any failure
to pay any
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such Taxes. HarnCo and the Sellers shall report, in connection with
the determination of Taxes, the transactions contemplated by this
Agreement in a manner consistent with the Section 338(h)(10)
Election, including the reasonable determination by the fair market
value of the assets of the U.S. Entities and the allocation of the
deemed purchase price of the assets of the U.S. Entities within the
meaning of Section 338(h)(10) of the Code and the Treasury
Regulations promulgated thereunder.
(B) The Parties jointly shall be responsible for the
preparation and filing of all forms and documents required in
connection with the Section 338(h)(10) Election. The Parties shall
cooperate fully with each other and make available to each other
such Tax data and other information as may be reasonably required by
the Parties in order to timely file the Section 338(h)(10) Election
and other required statements or schedules. HarnCo and the Sellers
shall promptly execute and deliver the Investor any amendments made
to Form 8023 (or successor form) (and any comparable state and local
forms) subsequent to the filing of the Section 338(h)(10) Election
and any attachments which are required to be filed under applicable
law, including any amendments to Form 8023 (or successor form)
necessitated by any indemnification payments made pursuant to this
Agreement.
(C) To the extent permitted by state or local laws, the
principles and procedures of this Section 6(d) shall also apply with
respect to a Section 338(h)(10) election or equivalent or comparable
provision under state or local, including, without limitation, an
election under Section 338(g) of the Code or equivalent or
comparable provision under state or local law.
(vi) Investor, MHE, HarnCo and Sellers shall take such action
as is necessary to cause the elections under the Code (and any
comparable election
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under state and local tax law) to be made in connection with the
transactions contemplated by this Agreement. The U.S. Entities,
Investor, Sellers, HarnCo and their respective affected Affiliates
shall cooperate with each other in the making of such elections. The
Parties shall prepare and deliver the appropriate election forms as
soon as practicable after Closing. None of the Companies, their
Subsidiaries or the Parties shall take a position for Tax or other
purposes which is inconsistent with this Agreement.
(vii) Investor shall notify HarnCo upon receipt of a notice
from any Taxing Authority claiming that MHE or any of its
Subsidiaries has a Tax Liability referred to in paragraph (e) of
Exhibit N in excess of $250,000 for any Tax Audit that relates to
the operation of the MHE Business prior to Closing. HarnCo shall
have the right to monitor and participate in any such Tax Audit.
(viii) Gann Indemnity Rights. Notwithstanding anything in this
Agreement to the contrary, HarnCo and Sellers shall have the right
to receive and retain $400,000 of the Gann Indemnity Proceeds (as
defined below) in order to pay Excluded Taxes associated with MPH
Crane, Inc. and HarnCo's collection costs; provided that any portion
of such $400,000 of the Gann Indemnity Proceeds in excess of such
Excluded Taxes and collection costs shall be available to the
Companies and their Subsidiaries as a source of payment for
indemnity claims under (and subject to the terms of) that certain
Share and Asset Purchase Agreement dated February 14, 1997. As used
in this Agreement, "Gann Indemnity Proceeds" means the cash proceeds
from the sale by MPH of that certain real estate on West 3rd Street
in Dayton, Ohio. Notwithstanding any provision of Section 5 of this
Agreement to the contrary, HarnCo shall be entitled to cause the
sale of such real estate to be completed after the date of this
Agreement and to cause the Companies and their Subsidiaries to
distribute or pay to HarnCo $400,000 of the Gann Indemnity Proceeds.
In the event such sale is completed
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after the Closing, MHE shall cause $400,000 of the Gann Indemnity
Proceeds to be paid to HarnCo for application in accordance with
this Section.
(ix) Effective as of the Closing Date, the procedures in this
Section 6(d) shall supersede the procedures contained in Section 14
of the Separation Agreement.
(e) Transition. None of the Sellers, HarnCo nor any of their
Affiliates will take any action that is designed or intended to have the effect
of discouraging any lessor, licensor, customer, supplier or other business
associate of any of the MHE Business from maintaining the same business
relationships with the MHE Business after the Closing as it maintained with the
MHE Business prior to the Closing. Each of HarnCo, the Sellers and their
Affiliates will refer all customer inquiries relating to the MHE Businesses to
MHE from and after the Closing.
(f) Concerning the Separation Agreement. Notwithstanding any
provision of the Separation Agreement to the contrary, the Parties agree that
(i) the Closing Date shall be deemed to be the "Termination Date" for purposes
of the Separation Agreement and (ii) Material Handling LLC may assign its rights
and obligations under the Separation Agreement to a third party as part of a
sale of all or substantially all of the MHE Business (whether by stock sale,
asset sale, merger or otherwise) so long as the successor to the MHE Business
executes an assumption agreement for the benefit of HarnCo and its Affiliates
pursuant to which such successor becomes fully and unconditionally bound by the
Separation Agreement.
(g) Insurance Arrangements. HarnCo shall use commercially reasonable
efforts to make available to the Companies and their Subsidiaries coverage under
any existing insurance policies (other than self insurance) which may be in
effect with respect to occurrences prior to the Closing. HarnCo shall permit the
Companies and their Subsidiaries to pursue access to such insurance through
declaratory judgment and other legal proceedings against HarnCo's insurance
carriers in the name of HarnCo and/or its Affiliates (or, to the extent
practicable, any of
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their predecessors which are named insureds on such policies).
(h) Concerning the Trademark Agreement. HarnCo agrees, on behalf of
itself and its Affiliates, to comply and to cause HTI to comply with the
Trademark Agreement.
(i) Certain Purchasing Arrangements. Following the Closing (and for
a period of up to two years thereafter), HarnCo and the Sellers shall use
commercially reasonable efforts to make available to the Companies those
purchasing arrangements referenced in item 2 of Schedule 4(m)(vii) of the
Disclosure Schedule which are in effect on the Closing.
Section 7. Conditions to Obligation to Close.
(a) Conditions to Obligation of Investor. The obligation of Investor
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section
3(a) and Section 4 shall be true and correct in all material
respects as of the date of this Agreement, taking into account the
Disclosure Schedule;
(ii) the representations set forth in Section 3(a) and Section
4 shall be true and correct in all material respects as of the
Closing Date, taking into account the Disclosure Schedule (as
supplemented in accordance with Sections 5(g) and 5(q) hereof);
(iii) from the date of this Agreement through the Closing
Date, no Material Adverse Effect shall have occurred;
(iv) HarnCo and Sellers shall have performed and complied with
all
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of their covenants hereunder in all material respects through the
Closing;
(v) there shall not be any action, suit or proceeding pending
or threatened before any Governmental Agency or before any
arbitrator in connection with the consummation of the transactions
contemplated by this Agreement wherein an unfavorable injunction,
judgment, order, decree, ruling or charge would (A) prevent
consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation or result in
material damages to Investor, the MHE Business or the Companies, (C)
affect adversely the right of the Investor to own the shares of MHE
and to control the Companies and their Subsidiaries , or (D) have a
material adverse effect on the right of the Companies and their
Subsidiaries to own their assets or to operate their business (and
no such injunction, judgment, order, decree, ruling, or charge shall
be in effect);
(vi) all applicable waiting periods (and any extensions
thereof) under the HSR Act and any applicable European or national
merger regulations shall have expired or otherwise been terminated;
(vii) HTI shall have executed the Trademark Agreement;
(viii) HII shall have executed the Non-Competition Agreement;
(ix) HarnCo shall have executed the Stockholders Agreement,
the Supply Agreement, the Transition Services Agreement, the
Assumption Agreement and the Credit Indemnity Agreement;
(x) HarnCo and the Sellers shall have delivered to the
Investor a certificate to the effect that each of the conditions
specified above in Section
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7(a)(i) - (iv) is satisfied in all respects;
(xi) Investor shall have received the opinions in form and
substance as set forth in Exhibit H attached hereto, addressed to
the Investor, and dated as of the Closing Date;
(xii) Investor shall have obtained financing for the
transactions contemplated by this Agreement on terms reasonably
consistent with the Commitment Letters and Term Sheets,
respectively;
(xiii) The business relationships identified on Schedule
4(m)(vii) (other than those identified in items 4 through 12 and
items 17 and 19 thereof) shall have either been (A) terminated or
(B) superseded or otherwise modified pursuant to the express terms
of the Transaction Agreements (as applicable);
(xiv) The Employment Agreements shall be in full force and
effect; and
(xv) MHE shall own, directly or indirectly, all of the
outstanding equity securities of the other Companies and their
Subsidiaries free and clear of all Encumbrances (other than (A) the
15% interest in Blooma held by third parties and (B) the Hercules
Shares).
Investor may waive any condition specified in this Section 7(a) prior to the
Closing (without prejudice to any of Investor's rights under Section 8 hereof).
(b) Conditions to Obligation of HarnCo and Sellers. The obligation
of HarnCo and Sellers to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:
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(i) the representations and warranties set forth in Section
3(b) above shall be true and correct in all material respects at and
as of the date of this Agreement and the Closing Date;
(ii) Investor shall have performed and complied with all of
its covenants hereunder in all material respects through the
Closing;
(iii) there shall not be any action, suit, or proceeding
pending or threatened before any Governmental Agency or before any
arbitrator in connection with the consummation of the transactions
contemplated by this Agreement wherein an unfavorable injunction,
judgment, order, decree, ruling or charge would (A) prevent
consummation of any of the transactions contemplated by this
Agreement, or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(iv) all applicable waiting periods (and any extensions
thereof) under the HSR Act and any applicable European or national
merger regulations shall have expired or otherwise been terminated;
(v) MHE shall have executed the Trademark Agreement;
(vi) MHE shall have executed the Non-Competition Agreement;
(vii) MHE shall have executed the Supply Agreement and the
Transition Services Agreement;
(viii) MHE, Investor and the other parties shall have executed
and
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delivered the Stockholders Agreement;
(ix) MHE and Investor shall have executed and delivered the HK
Agreement;
(x) MHE shall have executed and delivered the Credit
Indemnification Agreement; and
(xi) HarnCo and Sellers shall have received from Akin, Gump,
Strauss, Hauer & Feld, L.L.P., counsel to the Investor, an opinion
in form and substance as set forth in Exhibit I attached hereto,
addressed to HarnCo and Sellers, and dated as of the Closing Date.
HarnCo and Sellers may waive any condition specified in this Section 7(b) prior
to the Closing (without prejudice to any of HarnCo and Sellers' rights under
Section 8 of this Agreement).
Section 8. Remedies for Breaches of this Agreement.
(a) Survival of Representations and Warranties.
(i) All of the representations and warranties of HarnCo and
Sellers contained in Section 3(a)(iii)(B) and 4 above (taking into
account the Disclosure Schedule as supplemented pursuant to Sections
5(g) and 5(q)) shall survive the Closing hereunder and shall
continue in full force and effect for a period of eighteen (18)
months after the Closing; with the exception of (A) those
representations and warranties contained in Sections 4(a)
(Organization, Qualification and Corporate Power), 4(b)
(Capitalization) and 4(f) (Subsidiaries) which shall survive
indefinitely; (B) those representations and warranties contained in
Sections 4(e) (Title to Assets) and 4(q) (Environmental Matters)
which shall
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survive for two (2) years after the Closing; (C) those
representations and warranties contained in Sections 4(l)
(Intellectual Property) and 4(o) (Employee Benefits) which shall
survive for three (3) years after the Closing; and (D) those
representations and warranties contained in Section 4(j) (Tax
Matters) which shall survive until expiration of applicable statutes
of limitation or, if later, the date on which the relevant
Governmental Agency is no longer entitled to raise an assessment in
respect of the relevant matters.
(ii) All of the representations and warranties of HarnCo and
Sellers contained in Section 3(a) (i), (ii), (iii)(A), (iv) and (v)
above (taking into account the Disclosure Schedule as supplemented
pursuant to Sections 5(g) and 5(q)) shall survive the Closing and
continue in full force and effect forever thereafter (subject to any
applicable statutes of limitations). All of the representations and
warranties of Investor contained in Section 3(b) above shall survive
the Closing and continue in full force and effect forever thereafter
(subject to any applicable statutes of limitations).
(b) Indemnification Provisions for Benefit of Investor.
(i) In the event that (A) HarnCo and Sellers breach any of
their representations or warranties contained herein (other than the
representations and warranties in Section 3(a) (i), (ii), (iii)(A),
(iv) and (v) and Sections 4(b) and 4(f) above) and (B) Investor
makes a written claim for indemnification against HarnCo and Sellers
with respect thereto within the time periods, if any, specified in
Section 8(a)(i) above (which written claim shall specify in
reasonable particulars the basis of the breach being asserted and,
to the extent then determinable, an estimate of any Adverse
Consequences which Investor, the Companies and their Subsidiaries
and their respective Affiliates (the "Investor Indemnitees") claim
to suffer as a result thereof), then HarnCo and Sellers jointly and
severally agree to indemnify
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the Investor Indemnitees from and against any Adverse Consequences
the Investor Indemnitees suffer (including any Adverse Consequences
the Investor Indemnitees may suffer after the end of any applicable
survival period) resulting from, arising out of, or caused by such
breach; provided, however, that HarnCo and Sellers shall not have
any obligation to indemnify the Investor Indemnitees from and
against any Adverse Consequences caused by the breach of any
representation or warranty of HarnCo and Sellers contained herein
(other than those representations and warranties in Section 3(a)(i),
(ii), (iii)(A), (iv) and (v) and in Sections 4(b) and 4(f)): (X)
unless and until the Investor Indemnitees have suffered Adverse
Consequences by reason of all such breaches in excess of a $7.5
million aggregate deductible (after which point HarnCo and Sellers
will be obligated only to indemnify the Investor Indemnitees from
and against further such Adverse Consequences), and (Y) to the
extent the Adverse Consequences the Investor Indemnitees have
suffered by reason of all such breaches exceeds a $32.5 million
aggregate ceiling (after which point HarnCo and Sellers will have no
obligation to the indemnify the Investor Indemnitees from and
against further such Adverse Consequences). For purposes of clarity,
the purpose of the proviso in the preceding sentence is to limit the
total indemnification obligations of HarnCo and Sellers to a maximum
of $25 million in respect of all breaches of the representations and
warranties contained herein (other than those representations and
warranties in Section 3(a)(i), (ii), (iii)(A), (iv) and (v) and in
Sections 4(b) and 4(f)).
(ii) In the event that (A) HarnCo and Sellers breach any of
their representations and warranties in Section 3(a) (i), (ii),
(iii)(A), (iv) or (v) or Sections 4(b) or 4(f) or (B) HarnCo or
Sellers breach any of their covenants contained herein, then HarnCo
and Sellers jointly and severally agree to indemnify the Investor
Indemnitees from and against any Adverse Consequences the Investor
Indemnitees suffer through and after the date of the claim for
indemnification
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resulting from, arising out of, or caused by the breach.
(iii) HarnCo and the Sellers jointly and severally agree to
indemnify the Investor Indemnitees from and against the entirety of
any Adverse Consequences the Investor Indemnitees may suffer
resulting from, arising out of, or caused by any Excluded Liability
(other than Asbestos Liabilities).
(iv) HarnCo and Sellers jointly and severally agree to
indemnify Investor for any Adverse Consequences Investor suffers as
the result of any employee pension benefit plan maintained or
contributed to by HarnCo and Sellers and which is subject to Title
IV of ERISA.
(c) Indemnification Provisions for Benefit of HarnCo and Sellers.
(i) In the event Investor breaches any of its representations,
warranties, or covenants contained herein, then Investor shall
indemnify (and, from and after the Closing, MHE, the other Companies
and their Subsidiaries shall jointly and severally indemnify)
HarnCo, Sellers and their Affiliates (the "HarnCo Indemnitees") from
and against any Adverse Consequences the HarnCo Indemnitees suffer
resulting from, arising out of, or caused by the breach.
(ii) MHE shall (and MHE shall cause the other Companies and
their Subsidiaries to) jointly and severally indemnify the HarnCo
Indemnitees from and against any and all Adverse Consequences the
HarnCo Indemnitees suffer resulting from, arising out of or caused
by the Asbestos Liabilities; provided that (x) Adverse Consequences
shall be net of any insurance proceeds received by the HarnCo
Indemnitees, excluding self-insurance and giving effect to all
deductibles, ceilings, uninsured layers, exclusions, payments in
respect of retro-rated coverage and similar items, and (y) MHE shall
control the defense of the litigation relating to
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the Asbestos Liabilities as an Indemnifying Party under Section 8(e)
below. MHE shall be responsible for the cost of defending the
litigation relating to the Asbestos Liabilities to the extent not
paid by HarnCo's insurance carriers.
(iii) From and after the Closing, MHE, the other Companies and
their Subsidiaries shall jointly and severally indemnify the HarnCo
Indemnitees from and against all Adverse Consequences the HarnCo
Indemnitees suffer resulting from, arising out of, or caused by the
breach by any of MHE, the other Companies or their Subsidiaries of
any provision of this Agreement or any other Transaction Agreement
which is applicable to them.
(iv) The Parties agree and acknowledge that Investor has not
agreed to assume or pay any of the Liabilities of the Companies or
their Subsidiaries or the MHE Business.
(v) The foregoing notwithstanding, (A) the indemnification
provisions in clauses (i) and (ii) above shall not apply to those of
the Companies and their Subsidiaries incorporated under U.K. company
law (the "U.K. Companies") and (B) the indemnification provisions of
clause (iii) above shall only apply to the U.K. Companies on a
several basis with respect to those provisions of this Agreement and
the other Transaction Agreements expressly applicable to them as to
which such U.K. Company committed a breach; provided that the U.K.
Companies agree that they will make such dividends or distributions
as are lawful in order to provide funds to the other Companies (or
their Subsidiaries) to make any indemnification payments which such
other Companies (or their Subsidiaries) are required to make
hereunder.
(d) Tax Indemnification Provisions. Notwithstanding any other
provisions of this Agreement:
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(i) HarnCo and the Sellers shall be liable for the payment or
satisfaction of and hereby indemnify and hold harmless Investor and
its Affiliates against any and all (A) Excluded Taxes and (B) any
and all Taxes for which the Companies and their Subsidiaries are
liable arising from or by reason of Treas. Reg. ss.1.1502-6 or any
similar provision of state, local or foreign law for any taxable
period ending on or prior to the Closing Date.
(ii) All payments made by HarnCo or the Sellers pursuant to
Section 8 of this Agreement shall be made free and clear of, and
without reduction or withholding of, any Taxes. If any withholding
Taxes are payable in respect of any such payment, the amount of such
payment shall be increased to the extent necessary to yield (after
payment of all withholding Taxes) the same amount that would have
been received if no withholding Taxes were payable in respect of the
payment giving effect to any offsets or credits for such withholding
Taxes received by the indemnified party.
(e) Indemnification Procedure.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against
any other Party (the "Indemnifying Party") under this Section 8,
then the Indemnified Party shall promptly (and in any event within
20 business days after receiving notice of the Third Party Claim)
notify each Indemnifying Party thereof in writing; provided,
however, that failure to provide such notice on a timely basis shall
not release the Indemnifying Party from any of its obligations under
this Section 8 except to the extent the Indemnifying Party is
prejudiced by such failure.
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(ii) The Indemnifying Party will have the right at any time to
assume and thereafter conduct the defense of the Third Party Claim
with counsel of its choice; provided, however, that the Indemnifying
Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (not to be
unreasonably withheld or delayed) unless the judgment or proposed
settlement involves only the payment of money damages and does not
impose an injunction or other equitable relief upon the Indemnified
Party.
(iii) If the Indemnifying Party assumes the defense of the
Third Party Claim, the Indemnified Party may retain separate
co-counsel at its sole cost and expense to monitor the defense of
the Third Party Claim.
(iv) Unless and until the Indemnifying Party assumes the
defense of the Third Party Claim as provided in Section 8(e)(ii)
above, or if the Indemnifying Party assumes the defense and
thereafter fails to conduct the defense in good faith, (A) the
Indemnified Party may defend against the Third Party Claim in any
manner it reasonably may deem appropriate, and (B) the Indemnifying
Parties will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, or
caused by the Third Party Claim to the extent provided in this
Section 8.
(v) In no event will the Indemnified Party consent to the
entry of any judgment or enter into any settlement with respect to
the Third Party Claim without the prior written consent of each of
the Indemnifying Parties (not to be unreasonably withheld or
delayed).
(vi) In the event that any Party suffers damage or loss in
respect of which it makes a valid claim against another Party for
indemnification, it must take
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reasonable steps to mitigate its loss or damage.
(vii) With respect to any investigatory, remedial, or
corrective action undertaken with respect to any claim under this
Section 8 made by Investor Indemnitees arising from a breach of the
representation set forth in Section 4(q) hereof (in addition to the
procedures set forth above and whether or not arising from a Third
Party Claim), HarnCo and Sellers shall have the right, but not the
obligation, to conduct and principally manage all such action
(including any related governmental negotiations), subject to the
obligation to consult reasonably with Investor Indemnitees with
respect to such action and to complete such action with reasonable
promptness and diligence and in compliance with all Environmental,
Health and Safety Requirements; provided that HarnCo and Sellers
shall not have the right to enter into any agreements, consents or
settlements which would require any payment by or materially
adversely affect the Companies, their Subsidiaries or the MHE
Business without the prior written consent of MHE (not to be
unreasonably withheld).
(viii) Subject to the provisions of Sections 3(b)(vii), 5(g)
and 5(q), each Party to this Agreement shall be entitled to
indemnification for any breach of representation or warranty
notwithstanding that such Party had Knowledge at or prior to the
Closing of the facts or circumstances giving rise to such breach.
(f) Remedy. Except as set forth in Section 10(q), each of the
Parties hereby acknowledges and agrees that its sole and exclusive remedy with
respect to any and all claims (including without limitation any matters arising
under CERCLA or any other Environmental, Health and Safety Requirements) against
any other Party after the Closing relating to the acquisition of the MHE
Business or any other issue relating to the subject matter of this Agreement or
the transactions contemplated hereby shall be pursuant to the indemnification
provisions contained in this Section 8. Notwithstanding the foregoing, the
Parties shall have the
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right to pursue remedies against other Parties outside of this Section 8 to
enforce covenants contained in the other Transaction Agreements; provided that
HarnCo shall not have the right to seek indemnification from the Companies or
their Subsidiaries under the Separation Agreement for Excluded Liabilities.
(g) No Contribution From Company. The obligations of the Sellers and
HarnCo to indemnify pursuant to this Agreement are primary obligations of the
Sellers and HarnCo, subject to the limitations set forth herein. Each Seller and
HarnCo hereby waives any rights to seek or obtain indemnification or
contribution from the Companies or their Subsidiaries in respect of any
Liability or obligation of HarnCo or Sellers pursuant to Section 8. The
foregoing notwithstanding, this Section shall not limit the right of HarnCo and
Sellers to obtain indemnification under Section 8 of this Agreement or under the
other Transaction Agreements; provided that HarnCo shall not have the right to
seek indemnification from the Companies or their Subsidiaries under the
Separation Agreement for Excluded Liabilities.
(h) Calculation Methodology. The Parties recognize that in order to
structure this transaction as a recapitalization, the Investor is acquiring less
than all of the stock of MHE. The parties also recognize that in certain events
a representation, warranty or covenant of HarnCo or the Sellers may be breached
that may not entail an actual "loss" suffered by the Investor but would result
in an actual loss by a purchaser of 100% of the stock of MHE. However, for
purposes of the indemnification obligations under Section 8, Adverse
Consequences suffered, sustained or incurred by the Investor shall be deemed to
be those that would have been sustained by a purchaser of 100% of the stock of
MHE in reliance on such representations, warranties and covenants (it being
understood, however, that indemnification in respect of such Adverse
Consequences shall be payable to the Companies and their Subsidiaries as opposed
to Investor (except to the extent Investor has suffered such Adverse
Consequences directly)).
Section 9. Termination.
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(a) Termination of Agreement. This Agreement may be terminated as
provided below:
(i) Investor and HarnCo may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) Investor may terminate this Agreement by giving written
notice to HarnCo at any time prior to the Closing in the event that
(A) HarnCo and Sellers have given Investor any notice pursuant to
Section 5(g) above and (B) the matter that is the subject of the
notice (taken together with the matters which have been the subject
of previous notices under Sections 5(g) or 5(q)) has had or could
reasonably be expected to have a Material Adverse Effect;
(iii) Investor may terminate this Agreement by giving written
notice to HarnCo (A) at any time prior to the Closing in the event
that (1) HarnCo and Sellers have breached any covenant contained in
this Agreement in any material respect, (2) Investor has notified
HarnCo of such breach and (3) such breach has not been cured within
30 days after the notice of breach or cannot be cured; (B) at any
time prior to the Closing in the event that (1) HarnCo and Sellers
have breached any representation or warranty contained in this
Agreement, (2) such breach would have or could reasonably be
expected to have a Material Adverse Effect, (3) Investor has
notified HarnCo of such breach and (4) such breach has not been
cured (by means of a supplement to the Disclosure Schedule under
Sections 5(g) or 5(q) or otherwise) within 30 days after the notice
of breach or cannot be cured; or (C) if the Closing shall not have
occurred on or before March 31, 1998 by reason of the failure of any
condition precedent under Section 7(a) hereof (unless the failure
results primarily from Investor breaching any representation,
warranty or covenant contained in this Agreement); and
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(iv) HarnCo may terminate this Agreement by giving written
notice to Investor (A) at any time prior to the Closing if Investor
has breached any material representation, warranty or covenant
contained in this Agreement in any material respect, HarnCo has
notified Investor of the breach, and the breach has not been cured
within 30 days after the notice of breach, (B) at any time after
March 15, 1998; provided that, such termination right shall not be
available to HarnCo in the event there is a reasonable expectation
that the Closing will occur by March 31, 1998 or (C) if the Closing
shall not have occurred on or before March 31, 1998 by reason of the
failure of any condition precedent under Section 7(b) hereof (unless
the failure results primarily from HarnCo or any Seller breaching
any representation, warranty or covenant contained in this
Agreement) or by reason of Investor's not having procured financing
for the transactions contemplated by this Agreement by such date.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); provided, that the
Confidentiality Agreement shall survive termination; and provided further that,
if this Agreement is terminated by Investor by reason of the breach hereof by
HarnCo or Sellers (other than a Knowing Breach), Investor's remedy shall be
limited to the recovery of its out-of-pocket costs and expenses in connection
the transactions contemplated hereby.
Section 10. Miscellaneous.
(a) Certain Understandings of Investor. Investor acknowledges that
it has had sufficient opportunity to make whatever investigation it has deemed
necessary and advisable for purposes of determining whether or not to enter into
this Agreement and acknowledges and agrees that, EXCEPT TO THE EXTENT OF THE
EXPRESS REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS CONTAINED IN THIS
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AGREEMENT, AND SUBJECT TO THE DISCLOSURE SCHEDULE, INVESTOR IS ACQUIRING THE
COMPANIES, THEIR SUBSIDIARIES AND THE MHE BUSINESS IN RELIANCE UPON ITS OWN
INVESTIGATION AND WITHOUT ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY,
FITNESS FOR ANY PARTICULAR PURPOSE OR ANY OTHER IMPLIED WARRANTIES WHATSOEVER.
Investor acknowledges (i) that in the course of its independent investigation of
the MHE Business, it examined the information contained in the draft
Confidential Offering Memorandum (the "Offering Memorandum"), attended
presentations conducted by management of the MHE Business (the "Presentations"),
and has made its own evaluation of the Companies, their Subsidiaries and the MHE
Business, and their respective present and expected future values, (ii) that
because of its investigation, Investor is not relying on the information
contained in the Offering Memorandum or the statements made and information
furnished in connection with the Presentations in its decision to enter into
this Agreement, including any projections, estimates or budgets contained in the
Offering Memorandum or provided to Investor, and (iii) that neither HarnCo nor
Sellers make any representation or warranty concerning the information contained
in the Offering Memorandum or the statements made and information furnished in
connection with the Presentations.
(b) Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of
HarnCo and Investor; provided, however, that any Party may make any public
disclosure it believes in good faith, upon the advice of counsel, is required by
applicable law, the regulations of the New York Stock Exchange, Inc. or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will use commercially reasonable efforts to consult
the other Parties prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted
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assigns.
(d) Entire Agreement. The Transaction Agreements (including the
schedules and exhibits thereto) constitute the entire agreement among the
Parties and supersedes any prior understandings, agreements, or representations
by or among the Parties, written or oral, to the extent they related in any way
to the subject matter hereof; provided, however, that the letter agreement
between Chartwell Investments Inc. and HII concerning confidentiality (the
"Confidentiality Agreement") shall continue in effect between the date of this
Agreement and the Closing.
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of HarnCo and Investor; provided, however, that any Party may (i)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates or financing sources and (ii) designate one or more of its Affiliates
to perform its obligations hereunder (in any or all of which cases the assigning
Party nonetheless shall remain responsible for the performance of all of its
obligations hereunder). Any attempted assignment made in violation of this
Agreement shall be null and void.
(f) Return of Information. If for any reason whatsoever the
transactions contemplated by this Agreement or the other Transaction Agreements
are not consummated, Investor shall promptly return to HarnCo and Sellers all
books and records furnished by HarnCo and Sellers, the Companies or any of their
respective agents, employees or representatives (including all copies, if any,
thereof), and shall not use or disclose the information contained in such books
and records for any purpose or make such information available to any other
entity or Person.
(g) No Personal Liability. No director, officer, member, employee or
agent of
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HII, Investor or their Affiliates (including, without limitation, HarnCo,
Chartwell Investments Inc. and Sellers) shall have any personal liability to any
other party for any breach of any representation, warranty or obligation
contained in this Agreement or the other Transaction Agreements.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(i) Headings. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(j) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then five
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to HarnCo or Sellers: Copy to:
Harnischfeger Industries, Inc. Kirkland & Ellis
3600 South Lake Drive 200 East Randolph Drive
St. Francis, WI 53235-3716 Chicago, IL 60601
Attn: James A. Chokey Attn: Keith S. Crow
If to Investor: Copy to:
Chartwell Investments Inc. Akin, Gump, Strauss, Hauer
717 Fifth Avenue & Feld, L.L.P.
23rd Floor 1333 New Hampshire Avenue, NW
New York, NY 10022 Suite 400
Attn: Todd R. Berman Washington, D.C. 20036
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Attn: Russell W. Parks, Jr.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(k) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of New York without giving
effect to any choice or conflict of law provision or rule (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York.
(l) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by duly
authorized representatives of Investor and HarnCo. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(m) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(n) Expenses. Each of Investor and HarnCo will bear its own costs
and
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expenses (including legal fees and expenses) incurred in connection with this
Agreement, the other Transaction Agreements and the transactions contemplated
hereby and thereby. Investor shall be responsible for the payment upon
termination of this Agreement (other than due to a breach by HarnCo or Sellers)
of the first $100,000 of the fees and expenses of Price Waterhouse LLP in
connection with the audit performed on the Companies and their Subsidiaries
prior to the Closing (the "Audit Fees") and HarnCo shall be responsible for the
payment of the balance of the Audit Fees; provided that, in the event the
Closing occurs, MHE shall pay 100% of the Audit Fees. The Sellers and HarnCo
agree that, except as provided below, neither the Companies nor any of their
Subsidiaries will bear on or after the Closing any of the Sellers' or HarnCo's
costs and expenses (including any of their legal fees and expenses) in
connection with the Transaction Agreements or any of the transactions
contemplated thereby and that on the Closing MHE will (i) pay to Investor and
its Affiliates their costs and fees associated with the transactions
contemplated by this Agreement, (ii) pay to the entities financing the
transactions contemplated by this Agreement their fees and charges and (iii) pay
to Kirkland & Ellis the fees and expenses of Kirkland & Ellis in connection with
the opinion referred to in Section 7(a)(xi) above. Notwithstanding the
foregoing, none of the fees and expenses payable by MHE hereunder shall offset
or reduce the consideration payable to HarnCo and Sellers under this Agreement.
(o) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(p) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof, and Section 1 applies to each of them accordingly.
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(q) Specific Performance. Each of the Parties recognizes and affirms
that in the event of breach by any of them of any of the provisions of this
Agreement, money damages would be inadequate and no adequate remedy at law would
exist. Accordingly, each of the Parties agrees that any Party shall have the
right, in addition to any other rights and remedies existing in its favor, to
enforce its rights and the obligations of any other Party under this Agreement
not only by an action or actions for damages, but also by an action or action
for specific performance, injunction and/or other equitable relief in order to
enforce or prevent any violations of the provision of this Agreement.
(r) Submission to Jurisdiction. Each of the Parties consents to the
exclusive jurisdiction of the federal courts of the Eastern District of
Wisconsin for any legal action, suit, or proceeding arising out of or in
connection with this Agreement, and agrees that any such action, suit, or
proceeding may be brought only in such courts. If such forum is not available,
each of the Parties consents to the exclusive jurisdiction of the Milwaukee
County Circuit Court for any such action, suit or proceeding. Each of the
Parties further waives any objection to the laying of venue for any such suit,
action, or proceeding in such courts. Each Party agrees to accept and
acknowledge service of any and all process that may be served in any suit,
action, or proceeding. Each Party agrees that any service of process upon it
mailed by registered or certified mail, return receipt requested to such Party
at the address provided in Section 10(j) above shall be deemed in every respect
effective service of process upon such Party in any such suit, action, or
proceeding. Each Party agrees to waive any right it might have to a trial by
jury in any such suit, action or proceeding.
* * * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
MHE INVESTMENTS, INC. HARNISCHFEGER CORPORATION
By: /s/ Michael S. Shein By: /s/ Eric B. Fonstad
----------------------------- -------------------------------------
Name: Michael S. Shein Name: Eric B. Fonstad
Title: Vice President Title: Assistant Secretary
HCHC, INC.
By: /s/ John P. Garniewski, Jr.
-----------------------------
Name: John P. Garniewski, Jr.
Title: President
RCHH, INC.
By: /s/ Eric B. Fonstad
-----------------------------
Name: Eric B. Fonstad
Title: President
RYL, LLC
By: /s/ Eric B. Fonstad
-----------------------------
Name: Eric B. Fonstad
Title: Authorized Signatory
HARNISCHFEGER MEXICO
HOLDINGS S.A. de C.V.
By: /s/ Michael W. Salsieder
-----------------------------
Name: Michael W. Salsieder
Title: Secretary
BELOIT CANADA LTD.
By: /s/ Francis M. Corby, Jr.
-----------------------------
<PAGE>
Name: Francis M. Corby, Jr.
Title: Treasurer
<PAGE>
FIRST AMENDMENT TO
THE RECAPITALIZATION AGREEMENT
This FIRST AMENDMENT, dated as of March 4, 1998, by and among (a) MHE
Investments, Inc., a Delaware corporation ("Investor"), (b) Harnischfeger
Corporation, a Delaware corporation ("HarnCo"), and (c) RCHH, Inc., a Delaware
corporation, RYL, LLC, a Delaware limited liability company, HCHC, Inc., a
Delaware corporation, Harnischfeger Mexico Holdings S.A. de C.V., a corporation
organized under the laws of Mexico, and Beloit Canada Ltd., a corporation
organized under the laws of Canada (collectively, "Sellers"). Investor, HarnCo
and Sellers are collectively referred to herein as the "Parties."
WHEREAS, Investor, HarnCo and Sellers are parties to that certain
Recapitalization Agreement dated as of January 28, 1998 (the "Recapitalization
Agreement"); and
WHEREAS, the Parties desire to modify certain provisions of the
Recapitalization Agreement.
NOW, THEREFORE, the Parties hereby covenant and agree as follows:
Section 1. Definitions; Amendments. Capitalized terms which are used
herein without definition and which are defined in the Recapitalization
Agreement shall have the same meanings herein as in the Recapitalization
Agreement. The following definitions are hereby amended and restated in their
entirety to read:
"Commitment Letters" means the letters dated March 4, 1998
from Canadian Imperial Bank of Commerce and Credit Agricole Indosuez pursuant to
which a syndicate of lenders is to provide $155 million of bank financing
subject to, and in accordance with, the terms and conditions thereof.
"Financing Shares Ratio" means a fraction (currently estimated
to be 0.038), the numerator of which is the value of the Financing Shares
(currently estimated to be $2.1 million) and the denominator of which is $55
million.
"Term Sheets" means the Term Sheets dated March 4, 1998 from
CIBC Oppenheimer Corp., outlining the terms and conditions of an offering of
$190 million of senior debt and $55 million of MHE Class A Preferred Shares.
Section 2. Amendment to Section 2. Sections 2(a)(ii), (iv) and (v) of the
Recapitalization Agreement are hereby amended and restated in their entirety to
read as follows:
"(ii) MHE shall redeem from HarnCo for a price of $282 million:
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(A) that number of MHE Class C Preferred Shares
(currently estimated to be 1,145 MHE Class C
Preferred Shares) equal to the product of (x)
30,000 and (y) the Financing Shares Ratio; and
(B) that number of MHE Common Shares (currently
estimated to be 88,319 MHE Common Shares) equal to
88,679.245 less (x) the number of MHE Class C
Preferred Shares redeemed pursuant to Section
2(a)(ii)(A) above (currently estimated to be 1,145
MHE Class C Preferred Shares) multiplied by (y)
$1,000 divided by (z) $3,180.
The price paid pursuant to this Section 2(a)(ii) (the "Redemption Price")
shall be payable by wire transfer of immediately available funds.
(iv) MHE shall redeem from HarnCo that number of MHE Common
Shares (currently estimated to be 1,512 MHE Common Shares) equal to
1,572.327 multiplied by the difference of (a) 1 (one) less (b) the
Financing Shares Ratio, in exchange for MHE Class B Preferred Shares
having a face value (currently estimated to be $4,809,000) of $5.0
million multiplied by the difference of (a) 1 (one) less (b) the
Financing Shares Ratio.
(v) Investor shall purchase from HarnCo:
(A) 7,547.170 MHE Common Shares for $24 million;
(B) that number of MHE Common Shares (currently
estimated to be 360 MHE Common Shares) equal to
(x) 9,433.962 multiplied by (y) the Financing
Shares Ratio, in exchange for that amount
(currently estimated to be $1.1 million) equal to
the product of (a) $30 million and (b) the
Financing Shares Ratio; and
(C) that number of MHE Class C Preferred Shares
(currently estimated to be 28,855) equal to 30,000
MHE Class C Preferred Shares times the difference
of (x) 1 (one) less (y) the Financing Shares
Ratio, in exchange for that amount equal to the
product of (a) $1,000 and (b) the number of MHE
Class C Preferred Shares purchased by Investor
pursuant to this Section 2(a)(v)(C).
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The cash price paid pursuant to this Section 2(a)(v) shall be payable by
wire transfer of immediately available funds."
Section 3. No Other Changes. Except as specifically amended by this First
Amendment, the Recapitalization Agreement shall remain in full force and effect.
Without limiting the foregoing, Sections 2(a)(i) and (iii) of the
Recapitalization Agreement shall remain in full force and effect.
Section 4. No Waiver. The execution and delivery of this First Amendment
shall not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of any party
under, the Recapitalization Agreement.
Section 5. Miscellaneous.
(a) Headings. The Section headings contained in this First
Amendment are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this First Amendment.
(b) Counterparts. This First Amendment may be executed in one
or more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, the Parties hereto have executed this First Amendment
to the Recapitalization Agreement as of the date first above written.
MHE INVESTMENTS, INC. HARNISCHFEGER CORPORATION
By: /s/ Michael S. Shein By: /s/ Eric B. Fonstad
------------------------------ --------------------------------------
Name: Michael S. Shein Name: Eric B. Fonstad
Title: Vice President Title: Assistant Secretary
HCHC, INC.
By: /s/ John P. Garniewski, Jr.
--------------------------------------
Name: John P. Garniewski, Jr.
Title: President
RCHH, INC.
By: /s/ Eric B. Fonstad
--------------------------------------
Name: Eric B. Fonstad
Title: President
RYL, LLC
By: /s/ Eric B. Fonstad
--------------------------------------
Name: Eric B. Fonstad
Title: Authorized Signatory
HARNISCHFEGER MEXICO
HOLDINGS S.A. de C.V.
By: /s/ Michael W. Salsieder
--------------------------------------
Name: Michael W. Salsieder
Title: Secretary
BELOIT CANADA LTD.
By: /s/ Francis M. Corby, Jr.
--------------------------------------
Name: Francis M. Corby, Jr.
Title: Treasurer
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<PAGE>
SECOND AMENDMENT TO
THE RECAPITALIZATION AGREEMENT
This SECOND AMENDMENT, dated as of March 23, 1998, by and among (a) MHE
Investments, Inc., a Delaware corporation ("Investor"), (b) Harnischfeger
Corporation, a Delaware corporation ("HarnCo"), and (c) RCHH, Inc., a Delaware
corporation, RYL, LLC, a Delaware limited liability company, HCHC, Inc., a
Delaware corporation, Harnischfeger Mexico Holdings S.A. de C.V., a corporation
organized under the laws of Mexico, and Beloit Canada Ltd., a corporation
organized under the laws of Canada (collectively, "Sellers"). Investor, HarnCo
and Sellers are collectively referred to herein as the "Parties."
WHEREAS, Investor, HarnCo and Sellers are parties to that certain
Recapitalization Agreement dated as of January 28, 1998, as amended as of March
4, 1998 (the "Recapitalization Agreement"); and
WHEREAS, the Parties desire to modify certain provisions of the
Recapitalization Agreement.
NOW, THEREFORE, the Parties hereby covenant and agree as follows:
Section 1. Definitions; Amendments. Capitalized terms which are used
herein without definition and which are defined in the Recapitalization
Agreement shall have the same meanings herein as in the Recapitalization
Agreement. The following definition is hereby amended and restated in its
entirety to read:
"Financing Shares Ratio" means a fraction (currently estimated
to be 0.038), the numerator of which is the value of the Financing Shares
(currently estimated to be $2.29 million) and the denominator of which is $60
million.
Section 2. Retirement Plan. Notwithstanding the provisions of Section
6(c)(vii) of the Recapitalization Agreement, the Harnischfeger Industries Hourly
Employees' Retirement Plan (the "HIHERP") shall be amended in connection with
the Closing in accordance with Exhibit I attached hereto. Section 6(c)(vii) of
the Recapitalization Agreement is hereby amended to the extent it is
inconsistent with the transactions contemplated by Exhibit I. In consideration
of such amendment to the HIHERP, MMH Holdings, Inc. Shall pay HarnCo $115,000 on
the Closing Date. The price paid pursuant to this Section 2 of this Second
Amendment to the Recapitalization Agreement shall be payable by wire transfer of
immediately available funds.
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<PAGE>
Section 3. Hercules Capitalization. Section 4(b)(iii) of the
Recapitalization Agreement is hereby amended and restated in its entirety to
read:
"(iii) The entire authorized capital stock of Hercules consists of
an unlimited number of shares of variable capital stock, of which
20,891,605 shares of variable capital stock are issued and outstanding.
All of the issued and outstanding Hercules Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are
held of record and beneficially by HCHC and HMH."
Section 4. No Other Changes. Except as specifically amended by this Second
Amendment, the Recapitalization Agreement shall remain in full force and effect.
Section 5. No Waiver. The execution and delivery of this Second Amendment
shall not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of any party
under, the Recapitalization Agreement.
Section 6. Miscellaneous.
(a) Headings. The Section headings contained in this Second
Amendment are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Second Amendment.
(b) Counterparts. This Second Amendment may be executed in one
or more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Second Amendment
to the Recapitalization Agreement as of the date first above written.
MHE INVESTMENTS, INC. HARNISCHFEGER CORPORATION
By: /s/ Michael S. Shein By: /s/ Eric B. Fonstad
------------------------------ --------------------------------------
Name: Michael S. Shein Name: Eric B. Fonstad
Title: Vice President Title: Assistant Secretary
HCHC, INC.
By: /s/ John P. Garniewski, Jr.
--------------------------------------
Name: John P. Garniewski, Jr.
Title: President
RCHH, INC.
By: /s/ Eric B. Fonstad
--------------------------------------
Name: Eric B. Fonstad
Title: President
RYL, LLC
By: /s/ Eric B. Fonstad
--------------------------------------
Name: Eric B. Fonstad
Title: Assistant Secretary
HARNISCHFEGER MEXICO
HOLDINGS S.A. de C.V.
By: /s/ Eric B. Fonstad
--------------------------------------
Name: Eric B. Fonstad
Title: Assistant Secretary
BELOIT CANADA LTD.
By: /s/ Eric B. Fonstad
--------------------------------------
Name: Eric B. Fonstad
Title: Assistant Secretary
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SECOND
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MMH HOLDINGS, INC.
The undersigned, Martin L. Ditkof, Secretary of MMH Holdings, Inc., a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: The name of the corporation is:
MMH Holdings, Inc. (the "Corporation").
SECOND: The Certificate of Incorporation of the Corporation was filed in the
Office of the Secretary of State of the State of Delaware on December 4, 1991
under the name SPH Crane and Hoist, Inc.
THIRD: The first Certificate of Amendment of the Certificate of Incorporation of
the Corporation was filed in the Office of the Secretary of State of the State
of Delaware on September 30, 1997.
FOURTH: The first Amended and Restated Certificate of Incorporation of the
Corporation was filed in the Office of the Secretary of State of the State of
Delaware on March 6, 1998.
FIFTH: This Second Amended and Restated Certificate of Incorporation was duly
adopted in accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware, the Board of Directors having duly
adopted resolutions setting forth and declaring advisable this Second Amended
and Restated Certificate of Incorporation, and in lieu of a meeting of the
stockholders, written consent to this Second Amended and Restated Certificate of
Incorporation having been given by the holders of all of the outstanding stock
of the Corporation in accordance with Section 228 of the General Corporation Law
of the State of Delaware.
SIXTH: This Second Amended and Restated Certificate of Incorporation is being
filed pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware in order to amend the Amended and Restated Certificate of
Incorporation to deny holders of Nonvoting Common Stock the right to vote on any
future proposals to increase the number of authorized shares of Nonvoting Common
Stock.
<PAGE>
SEVENTH: The Amended and Restated Certificate of Incorporation of the
Corporation is hereby amended and restated in its entirety as follows:
FIRST: The name of the corporation is MMH Holdings, Inc. (hereinafter, the
"Corporation").
SECOND: The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, Wilmington, County of New Castle, Delaware 19805.
The name of its registered agent at such address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 1,500,000 shares of stock, of which
500,000 shares, designated as preferred stock, shall have a par value of One
Cent ($.01) per share (the "Preferred Stock"), 900,000 shares, designated as
voting common stock, shall have a par value of One Cent ($.01) per share (the
"Voting Common Stock"), and 100,000 shares, designated as nonvoting common
stock, shall have a par value of One Cent ($.01) per share (the "Nonvoting
Common Stock," and collectively, with the Voting Common Stock, the "Common
Stock").
A statement of the powers, preferences and rights, and the qualifications,
limitations or restrictions thereof, in respect of each class of stock of the
Corporation is as follows:
Preferred Stock. The Preferred Stock may be issued from time to time by the
Board of Directors as shares of one or more classes or series. Subject to the
provisions of this Certificate of Incorporation and the limitations prescribed
by law, the Board of Directors is expressly authorized by adopting resolutions
to issue the shares, fix the number of shares and change the number of shares
constituting any series, and to provide for or change the voting powers,
designations, preferences and relative, participating, optional or other special
rights, qualifications, limitations or restrictions thereof, including dividend
rights (and whether dividends are cumulative), dividend rates, terms of
redemption (including sinking fund provisions), a redemption price or prices,
conversion rights and liquidation preferences of the shares constituting any
class or series of the Preferred Stock, without any further action or vote by
the stockholders.
Common Stock. 1. Dividends. Subject to the preferred rights of the holders of
shares of any class or series of Preferred Stock as provided by the Board of
Directors with respect to any such class or series of Preferred Stock, the
holders of the Common Stock
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<PAGE>
shall be entitled to receive, as and when declared by the Board of Directors out
of the funds of the Corporation legally available therefor, such dividends
(payable in cash, stock or otherwise) as the Board of Directors may from time to
time determine, payable to stockholders of record on such dates, not exceeding
60 days preceding the dividend payment dates, as shall be fixed for such purpose
by the Board of Directors in advance of payment of each particular dividend.
2. Liquidation. In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, after the distribution or
payment to the holders of shares of any class or series of Preferred Stock as
provided by the Board of Directors with respect to any such class or series of
Preferred Stock, the remaining assets of the Corporation available for
distribution to stockholders shall be distributed among and paid to the holders
of Common Stock ratably in proportion to the number of shares of Common Stock
held by them.
3. Voting Rights. Except as otherwise required by law, each holder of
shares of Voting Common Stock shall be entitled to one vote for each share of
Common Stock standing in such holder's name on the books of the Corporation.
Except as required by law, the holders of Nonvoting Common Stock shall have no
voting rights and, in addition, the holders of Nonvoting Common Stock shall have
no voting rights with respect to the approval of any proposed increase in the
number of authorized shares of Nonvoting Common Stock. Except for the absence of
voting rights, the holders of shares of Nonvoting Common Stock, with respect to
Nonvoting Common Stock, shall have the same rights, preferences, and privileges
as holders of Voting Common Stock with respect to Voting Common Stock.
FIFTH: The Corporation reserves the right to amend, alter, change or
repeal any provision in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute.
SIXTH: Elections of directors need not be by written ballot unless the
bylaws of the Corporation shall so provide.
SEVENTH: No director of the Corporation shall be liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware or (iv) for any transaction from which the director derived an improper
personal benefit.
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<PAGE>
EIGHTH: The Corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of the State of Delaware, as amended from
time to time, indemnify all persons whom it may indemnify pursuant thereto.
NINTH: Pursuant to Section 203(b) of the General Corporation Law of the
State of Delaware, the Corporation hereby expressly elects not to be governed by
Section 203 of the General Corporation Law of the State of Delaware.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Second Amended and
Restated Certificate of Incorporation on behalf of the Corporation and does
verify and affirm, under penalty of perjury, that this Second Amended and
Restated Certificate of Incorporation is the act and deed of the Corporation and
that the facts stated herein are true as of this 26th day of March, 1998.
MMH HOLDINGS, INC.
By: /s/ Martin L. Ditkof
--------------------------------
Name: Martin L. Ditkof
Title: Secretary
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(MMH Holdings)
BY LAWS
OF
MMH HOLDINGS, INC.
ARTICLE I
OFFICERS
Section 1. Registered Office. The registered office of the
corporation in the State of Delaware shall be Corporation Trust Center, 1209
Orange Street, City of Wilmington, County of New Castle. The name of the
corporation's registered agent at such address shall be The Corporation Trust
Company.
Section 2. Other Offices. The corporation may also have offices at
such other places, both within and without the State of Delaware, as the board
of directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held for the purpose of electing directors and conducting
such other business as may come before the meeting. The date, time and place of
the annual meeting shall be determined by resolution of the board of directors.
Special meetings of stockholders for any other purpose may be held at such time
and place, within or without the State of Delaware, as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof. Special
meetings of the stockholders may be called by the president for any purpose and
shall be called by the secretary if directed by the board of directors.
Section 2. Notice. Written or printed notice of every annual or
special meeting of the stockholders, stating the place, date, time, and, in such
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the meeting. All such
notices shall be delivered, either personally or by mail, by or at the direction
of the board of directors, the President or the secretary, and if mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
addressed to the stockholder at his or her address as it appears on the records
of the corporation, with postage prepaid.
<PAGE>
Section 3. Stockholders List. The officer having charge of the stock
ledger of the corporation shall make, at least 10 days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, specifying the address of and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 4. Quorum. The holders of a majority of the outstanding
shares of capital stock, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders, except as otherwise
provided by statute or by the certificate of incorporation. If a quorum is not
present, the holders of the shares present in person or represented by proxy at
the meeting, and entitled to vote thereat, shall have the power, by the
affirmative vote of the holders of a majority of such shares, to adjourn the
meeting to another time and/or place. Unless the adjournment is for more than
thirty days or unless a new record date is set for the adjourned meeting, no
notice of the adjourned meeting need be given to any stockholder, provided that
the time and place of the adjourned meeting were announced at the meeting at
which the adjournment was taken. At the adjourned meeting the corporation may
transact any business which might have been transacted at the original meeting.
Section 5. Vote Required. When a quorum is present or represented by
proxy at any meeting, the vote of the holders of a majority of the shares
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by express provisions
of an applicable statute or of the certificate of incorporation a different vote
is required, in which case such express provision shall govern and control the
decision of such question.
Section 6. Voting Rights. Every stockholder shall at every meeting
of the stockholders be entitled to one vote in person or by proxy for each share
of capital stock held by such stockholder, except that no proxy shall be voted
after three years from its date, unless such proxy provides for a longer period.
Section 7. Informal Action. Any action required to be taken at any
annual or special meeting of stockholders of the corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a
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<PAGE>
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing. Any action
taken pursuant to such written consent of the stockholders shall have the same
force and effect as if taken by the stockholders at a meeting thereof.
ARTICLE III
DIRECTORS
Section 1. Number, Election and Term of Office. The number of
directors which shall constitute the whole board shall be two or more. The
directors shall be elected at the annual meeting of the stockholders, except as
provided in Section 3 of this Article III, and each director elected shall hold
office until the next annual meeting of stockholders and until a successor is
duly elected and qualified or until his or her earlier death, resignation or
removal as hereinafter provided.
Section 2. Removal. Any director or the entire board of directors
may be removed at any time, with or without cause, by the holders of a majority
of the shares of stock of the corporation then entitled to vote at an election
of directors, except as otherwise provided by statute.
Section 3. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office though less than a quorum, and
each director so chosen shall hold office until the next annual meeting of
stockholders and until a successor is duly elected and qualified or until his or
her earlier death, resignation and removal as hereinafter provided.
Section 4. Annual Meetings. The annual meeting of each newly elected
board shall be held without other notice than this bylaw immediately after, and
at the same place as, the annual meeting of stockholders.
Section 5. Other Meetings and Notice. Regular meetings, other than
the annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the board of directors may be called by or at the
request of the president on at least 24 hours notice to each
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<PAGE>
director, either personally, by telephone, by mail, or by telegraph; in like
manner and on like notice the president must call a special meeting on the
written request of a majority of directors.
Section 6. Quorum. A majority of the total number of directors shall
constitute a quorum for the transaction of business. The vote of a majority of
directors present at a meeting at which a quorum is present shall be the act of
the board of directors. If a quorum shall not be present at any meeting of the
board of directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 7. Committees. The board of directors may, by resolution
passed by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation, which
to the extent provided in such resolution shall have and may exercise the powers
of the board of directors in the management and affairs of the corporation
except as otherwise limited by statute. The board of directors may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the board of directors. Each committee shall keep
regular minutes of its meetings and report the same to the directors when
required.
Section 8. Committee Rules. Each committee of the board of directors
may fix its own rules of procedure and shall hold its meetings as provided by
such rules, except as may otherwise be provided by the resolution of the board
of directors designating such committee, but in all cases the presence of at
least a majority of the members of such committee shall be necessary to
constitute a quorum. In the event that a member and that member's alternate, if
alternates are designated by the board of directors as provided in Section 7 of
this Article III, of such committee is/are absent or disqualified, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in place of any
such absent or disqualified member.
Section 9. Informal Action. Any action required or permitted to be
taken at any meeting of the board of directors, or of any committee thereof, may
be taken without a meeting if all members of the board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the board or committee.
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<PAGE>
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the corporation shall be elected
by the board of directors and shall consist of a president, one or more vice
presidents, a secretary, a treasurer, and such other officers and assistant
officers as may be deemed necessary or desirable by the board of directors. Any
number of offices may be held by the same person. In its discretion, the board
of directors may choose not to fill any office for any period as it may deem
advisable, except the offices of president and secretary.
Section 2. Election and Term of Office. The officers of the
corporation shall be elected annually by the board of directors at the first
meeting of the board of directors held after each annual meeting of
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as conveniently may be. Vacancies
may be filled or new offices created and filled at any meeting of the board of
directors. Each officer shall hold office until the next annual meeting of the
board of directors and until a successor is duly elected and qualified or until
his or her earlier death, resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights if any, of the person so
removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term by the board of directors
then in office.
Section 5. Compensation. Compensation of all officers shall be fixed
by the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of the fact that he or she is also a director of the
corporation.
Section 6. The President. The president shall be the principal
executive officer of the corporation and shall preside at all meetings of the
stockholders and of the board of directors; shall have general and active
management of the business of the corporation; and shall see that all orders and
resolutions of the board of directors are carried into effect. The president
shall execute bonds, mortgages and other contracts requiring a seal, under the
seal of the corporation, except where required or
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<PAGE>
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
Section 7. Vice Presidents. The vice president, or if there shall be
more than one, the vice presidents in the order determined by the board of
directors, shall, in the absence or disability of the president, perform the
duties and exercise the powers of the president and shall perform such other
duties and have such other powers as the board of directors may, from time to
time, determine or these bylaws may prescribe.
Section 8. The Secretary and Assistant Secretaries. The secretary
shall attend all meetings of the board of directors and all meetings of the
stockholders and record all the proceedings of the meetings of the corporation
and of the board of directors in a book to be kept for that purpose and shall
perform like duties for the standing committees when required. The secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the board of directors; perform such other duties as may be
prescribed by the board of directors or president, under whose supervision he or
she shall be; shall have custody of the corporate seal of the corporation and
the secretary, or an assistant secretary shall have authority to affix the same
to any instrument requiring it and when so affixed, it may be attested by his or
her signature or by the signature of such assistant secretary. The board of
directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his or her signature. The
assistant secretary, or if there be more than one, the assistant secretaries in
the order determined by the board of directors, shall, in the absence or
disability of the secretary, perform the duties and exercise the powers of the
secretary and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
Section 9. The Treasurer and Assistant Treasurer. The treasurer
shall have the custody of the corporate funds and securities; shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
corporation; shall deposit all monies and other valuable effects in the name and
to the credit of the corporation as may be ordered by the board of directors,
taking proper vouchers for such disbursements; and shall render to the president
and the board of directors, at its regular meeting or when the board of
directors so requires, an account of the corporation. If required by the board
of directors, the treasurer shall give the corporation a bond (which shall be
rendered every six years) in such sums and with such surety or sureties as shall
be satisfactory to the board of directors for the faithful performance of the
duties of the office of treasurer and for the restoration to the corporation, in
case of death, resignation,
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retirement, or removal from office, of all books, papers, vouchers, money, and
other property of whatever kind in the possession or under the control of the
treasurer belonging to the corporation. The assistant treasurer, or if there
shall be more than one, the assistant treasurers in the order determined by the
board of directors, shall in the absence or disability of the treasurer, perform
the duties and exercise the powers of the treasurer and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
Section 10. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these bylaws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
ARTICLE V
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
Section 1. The corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee, or agent of another corporation against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interest of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
or she reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
Section 2. The corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of
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the corporation as a director, officer, employee, or agent of another
corporation, against expenses (including attorney's fees) actually and
reasonably incurred by him or her in connection with the defense or settlement
of such action or suit if he or she 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 and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his or her duty to the
corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
Section 3. To the extent that a director, officer, employee, or
agent of a corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in Sections 1 and 2 of this
Article V or in defense of any claim, issue or matter therein, he or she shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
Section 4. Any indemnification under Sections 1 and 2 of this
Article V (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee, or agent is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in Sections 1 and 2
of this Article V. Such determination shall be made (1) by the board of
directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
Section 5. Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding as authorized by the board
of directors in the specific case upon receipt of an undertaking by or on behalf
of the director, officer, employee, or agent to repay such amount unless it
shall ultimately be determined that he or she is entitled to be indemnified by
the corporation as authorized in this Article V.
Section 6. The indemnification provided by this Article V shall not
be deemed exclusive of any other rights to which those seeking indemnification
may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
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continue as to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
Section 7. The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
against any liability asserted against him or her and incurred by him or her in
any such capacity, or arising out of his or her status as such, whether or not
the corporation would have the power to indemnify him or her against such
liability under the provisions of this Article V.
Section 8. For purposes of this Article V, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees and
agents so that any person who is or was a director, officer, employee, or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation shall stand in the same position under the provisions of this
Article V with respect to the resulting or surviving corporation as he or she
would have with respect to such constituent corporation if its separate
existence had continued.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by,
the president or a vice-president and the secretary or an assistant secretary of
the corporation, certifying the number of shares owned by him or her in the
corporation. Where a certificate is signed (1) by a transfer agent or an
assistant transfer agent other than the corporation or its employee or (2) by a
registrar, other than the corporation or its employee, the signature of any such
president, vice-president, secretary, or assistant secretary may be facsimile.
Section 2. Fixing a Record Date. The board of directors may fix in
advance a date, not more than sixty nor less than ten days preceding the date of
any meeting of stockholders, or the date for the payment of any dividend, or the
date for the
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allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining any
consent, as a record date for the determination of the stockholders entitled to
notice of, and to vote at, any such meeting, and any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect to any such change, conversion, or
exchange of capital stock, or to give such consent, and in such case such
stockholders and only such stockholders as shall be stockholders of record on
the date so fixed shall be entitled to such notice of, and to vote at, such
meeting and any adjournment thereof, or to receive payment of such dividend, or
to receive such allotment of rights, or to exercise such rights, or to give such
consent, as the case may be notwithstanding any transfer of any stock on the
books of the corporation after any such record date fixed as aforesaid. If no
record date is fixed, the time for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the date next preceding the day on which notice is given, or if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held. The time for determining stockholders for any other purpose
shall be at the close of business on the date on which the board of directors
adopts the resolution relating thereto. A determination of stockholders entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the board of directors may
fix a new record date for the adjourned meeting.
Section 3. Registered Stockholders. The corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be found to recognize any equitable or other claim to
or interest in such share or shares on the part of the other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of the State of Delaware.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of any
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funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think in the best interest of the corporation,
and the directors may modify or abolish any such reserve in the manner in which
it was created.
Section 2. Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the board of directors.
Section 4. Seal. The corporate seal shall have inscribed thereon the
name of the corporation and the words "Corporate Seal, Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
Section 5. Securities Owned By Corporation. Voting securities in any
other corporation held by the corporation shall be voted by the president,
unless the board of directors specifically confers authority to vote with
respect thereto, which may be general or confined to specific instances, upon
some other person or officer. Any person authorized to vote securities shall
have the power to appoint proxies, with general power of substitution.
ARTICLE VIII
AMENDMENTS
These bylaws may be amended, altered or repealed and new bylaws
adopted at any meeting of the board of directors by a majority vote. The fact
that the power to adopt, amend, alter, or repeal the bylaws has been conferred
upon the board of directors shall not divest the stockholders of the same
powers.
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CERTIFICATE OF DESIGNATIONS OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF 12%
SERIES A SENIOR EXCHANGEABLE PREFERRED STOCK, AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
MMH Holdings, Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to authority conferred upon the Board of Directors (as
defined herein) by its Amended and Restated Certificate of Incorporation
(hereinafter referred to as the "Restated Certificate"), and pursuant to the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, said Board of Directors, by unanimous written consent dated March 23,
1998, duly approved and adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Restated Certificate, the Board of Directors does hereby
create, authorize and provide for the issuance of 12% Series A Senior
Exchangeable Preferred Stock, par value $.01 per share, with a stated
value of $1,000.00 per share, consisting of 120,000 shares, having the
designations, preferences, relative, participating, optional and other
special rights and the qualifications, limitations and restrictions
thereof that are set forth in the Restated Certificate and in this
Resolution as follows:
(a) Designation. There is hereby created out of the authorized and
unissued shares of Preferred Stock of the Corporation a series of Preferred
Stock designated as the "12% Series A Senior Exchangeable Preferred Stock." The
number of shares constituting such series shall be 120,000 and are referred to
herein as the "Senior Preferred Stock." 57,710 shares of Senior Preferred Stock
shall be initially issued with an additional 62,290 shares reserved for issuance
in accordance with paragraph (c)(i) hereof. The liquidation preference of the
Senior Preferred Stock shall be $1,000.00 per share. All references in this
Certificate of Designations to Senior Preferred Stock shall include Original
Stock, Exchange Preferred Stock and Private Exchange Preferred Stock.
(b) Ranking. The Senior Preferred Stock shall, with respect to
dividends and distributions upon liquidation, dissolution or winding-up of the
Corporation, rank senior to all
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classes of Common Stock of the Corporation and to each other class of Capital
Stock of the Corporation or series of Preferred Stock of the Corporation
existing on the date hereof or hereafter created including, without limitation,
Junior Capital Stock. The Corporation may not (i) issue any class or series of
Capital Stock that ranks on a parity with the Senior Preferred Stock as to
dividends or distributions upon liquidation, dissolution or winding-up of the
Corporation, or amend the provisions of any existing class of Capital Stock or
series of Preferred Stock to make such class or series rank on a parity with
Senior Preferred Stock (collectively referred to as "Parity Stock") (provided,
that the Corporation can issue, from time to time, additional shares of Senior
Preferred Stock to satisfy dividend payments on outstanding shares of Senior
Preferred Stock in accordance with this Certificate of Designations) without the
approval of the Holders in accordance with paragraph (f)(ii)(A) hereof (to the
extent such approval is required); (ii) issue any class or series of Capital
Stock that ranks senior to the Senior Preferred Stock as to dividends and
distributions upon liquidation, dissolution or winding-up of the Corporation, or
amend the provisions of any existing class of Capital Stock or series of
Preferred Stock to make such class or series rank senior to the Senior Preferred
Stock (collectively referred to as "Senior Stock"), without the approval of the
Holders in accordance with paragraph (f)(ii)(B) hereof (to the extent such
approval is required); or (iii) issue any shares of Series B Junior Preferred
Stock (other than shares of Series B Junior Preferred Stock issued on the Issue
Date and shares of Series B Junior Preferred Stock issued as dividends thereon
in accordance with the certificate of designation of the Series B Junior
Preferred Stock as in effect on the Issue Date), without the approval of the
Holders in accordance with paragraph (f)(ii)(C) hereof (to the extent such
approval is required).
(c) Dividends.
(i) Commencing on the Issue Date, the Holders of the outstanding
shares of Senior Preferred Stock shall be entitled to receive, when, as
and if declared by the Board of Directors, out of funds legally available
therefor, dividends on each share of Senior Preferred Stock, at a rate per
annum equal to 12% of the liquidation preference per share of the Senior
Preferred Stock, payable semi-annually; provided, that the dividend rate
per annum is subject to increase as provided for in clauses (vi) and (vii)
below. All dividends shall be cumulative, whether or not earned or
declared, on a daily basis from the Issue Date and shall be payable
semi-annually in arrears on each Dividend Payment Date, commencing on the
first Dividend Payment Date after the Issue Date to Holders of record on
the Dividend Record Date immediately preceding the relevant Dividend
Payment
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Date. Dividends accumulating on or prior to April 1, 2003 may be paid, at
the Corporation's option, either in cash or by the issuance of additional
shares of Senior Preferred Stock (and, at the Corporation's option,
payment of a whole share (after rounding up) or cash in lieu of a
fractional share) having an aggregate liquidation preference equal to the
amount of such dividends. In the event that on or prior to April 1, 2003,
dividends are declared and paid through the issuance of additional shares
of Senior Preferred Stock as provided in the previous sentence, such
dividends shall be deemed paid in full and shall not accumulate. Dividends
accumulating after April 1, 2003 must be paid in cash. Each dividend shall
be payable to the Holders of record as they appear on the stock books of
the Corporation on the Dividend Record Date immediately preceding the
related Dividend Payment Date. Dividends shall cease to accumulate in
respect of the Senior Preferred Stock exchanged for Exchange Debentures on
the Exchange Date or on the date of their earlier redemption unless the
Corporation shall have failed to issue the appropriate aggregate principal
amount of Exchange Debentures in respect of the Senior Preferred Stock to
be exchanged on the Exchange Date or shall have failed to pay the relevant
redemption price on Senior Preferred Stock to be redeemed on the date
fixed for redemption.
(ii) All dividends paid with respect to shares of the Senior
Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata to the
Holders entitled thereto.
(iii) Dividends accumulating after April 1, 2003 on the Senior
Preferred Stock for any past Dividend Period and dividends in connection
with any optional redemption pursuant to paragraph (e)(i) may be declared
and paid at any time, without reference to any Dividend Payment Date, to
Holders of record on such date, not more than forty-five (45) days prior
to the payment thereof, as may be fixed by the Board of Directors.
(iv) So long as any share of the Senior Preferred Stock is
outstanding, the Corporation shall not declare, pay or set apart for
payment any dividend in cash on any Junior Capital Stock (or make any
other dividend or distribution on any Junior Capital Stock other than in
Junior Capital Stock) or make any cash payment on account of any Junior
Capital Stock (A) unless full cumulative dividends determined in
accordance herewith on the Senior Preferred Stock have been paid in cash
in full when required to be so paid or (B) during any period when cash
dividends (whether or not required to be paid) are not paid on the Senior
Preferred Stock.
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(v) Dividends payable on the Senior Preferred Stock for any period
less than a year shall be computed on the basis of a 360-day year of
twelve 30-day months.
(vi) Additional Dividends shall become due and payable with respect
to the Senior Preferred Stock as set forth in the Registration Rights
Agreement. All references herein to "dividends" shall be deemed to include
any such "Additional Dividends."
(vii) Upon the occurrence and during the continuance of a Voting
Rights Triggering Event described in paragraph (f)(iii)(A)(3) hereof, the
per annum dividend rate on the Senior Preferred Stock will increase by 400
basis points per annum ("Special Dividends") in excess of the dividend
rate originally borne by the Senior Preferred Stock as set forth under
paragraph (c)(i) hereof. All references herein to "dividends" shall be
deemed to include any such "Special Dividends."
(d) Liquidation Preference.
(i) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Corporation, the Holders
of shares of Senior Preferred Stock then outstanding shall be entitled to
be paid out of the assets of the Corporation available for distribution to
its stockholders an amount in cash equal to the liquidation preference for
each share outstanding, plus, without duplication, an amount in cash equal
to accumulated and unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding-up (including an amount equal to a
prorated dividend for the period from the immediately preceding Dividend
Payment Date to the date fixed for liquidation, dissolution or
winding-up), before any payment shall be made or any assets distributed to
the holders of any of the Junior Capital Stock. After payment of the full
amount of the liquidation preference and accumulated and unpaid dividends
to which they are entitled, Holders of Senior Preferred Stock shall not be
entitled to any further participation in any distribution of assets of the
Corporation. If the assets of the Corporation are not sufficient to pay in
full the liquidation payments payable to the Holders of outstanding shares
of the Senior Preferred Stock and all Parity Stock, if any, upon any
voluntary or involuntary liquidation, dissolution or winding-up of the
affairs of the Corporation, then the holders of all such shares shall
share equally and ratably in such distribution of assets in proportion to
the full liquidation preference to which each is entitled until such
preferences are paid in
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full, and then in proportion to their respective amounts of accumulated
but unpaid dividends.
(ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the Property or assets
of the Corporation nor the consolidation or merger of the Corporation with
or into one or more entities shall be deemed to be a liquidation,
dissolution or winding-up of the affairs of the Corporation.
(e) Redemption.
(i) Optional Redemption. (A) The Corporation may, at the option of
the Board of Directors, redeem at any time or from time to time on or
after April 1, 2003, subject to contractual and other restrictions with
respect thereto and from any source of funds legally available therefor,
in whole or in part, in the manner provided for in paragraph (e)(iii)
hereof, any or all of the shares of the Senior Preferred Stock, at the
redemption prices in cash (expressed as a percentage of the then effective
liquidation preference thereof) set forth below plus, without duplication,
an amount in cash equal to all accumulated and unpaid dividends per share
(including an amount in cash equal to a prorated dividend for the period
from the Dividend Payment Date immediately prior to the Redemption Date to
the Redemption Date), if redeemed during the 12-month period beginning on
April 1 of each of the years set forth below:
2003......................................106.000%
2004......................................104.000%
2005......................................102.000%
2006 and thereafter.......................100.000%
(B) Notwithstanding the provisions of paragraph (e)(i)(A)
above, the Corporation may, at the option of the Board of Directors,
redeem in the aggregate all, but not less than all, of the Senior
Preferred Stock then outstanding, at any time prior to April 1,
2001, at a redemption price equal to 112.000% of the then effective
liquidation preference thereof, plus, without duplication, an amount
in cash equal to all accumulated and unpaid dividends (including an
amount in cash equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the Redemption Date to
the Redemption Date) out of the Net Proceeds of one or more Public
Equity Offerings; provided, that any
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such redemption occurs within 90 days following the closing of any
such Public Equity Offering.
(C) No redemption pursuant to paragraph (e)(i)(A) or (B)
hereof shall be authorized or made unless prior thereto full
accumulated and unpaid dividends are declared and paid in full, or
declared and a sum in cash (if such dividend is to be paid in cash)
is set apart sufficient for such payment, on the Senior Preferred
Stock for all Dividend Periods terminating on or prior to the
Redemption Date.
(D) In the event of a redemption pursuant to paragraph
(e)(i)(A) hereof of only a portion of the then outstanding shares of
the Senior Preferred Stock, the Corporation shall effect such
redemption on a pro rata basis according to the number of shares
held by each Holder of the Senior Preferred Stock, except that the
Corporation may redeem such shares held by Holders of fewer than ten
shares (or shares held by Holders who would hold less than ten
shares as a result of such redemption), as may be determined by the
Corporation.
(ii) Mandatory Redemption. On April 1, 2009, the Corporation shall
redeem, subject to contractual and other restrictions with respect thereto
and to the extent of funds legally available therefor, in the manner
provided for in paragraph (e)(iii) hereof, all of the shares of the Senior
Preferred Stock then outstanding at a redemption price equal to 100% of
the liquidation preference per share, plus, without duplication, an amount
in cash (whether or not otherwise payable in cash) equal to all
accumulated and unpaid dividends per share (including an amount equal to a
prorated dividend for the period from the Dividend Payment Date
immediately prior to the Redemption Date to the Redemption Date).
(iii) Procedures for Redemption. (A) At least thirty (30) days and
not more than sixty (60) days prior to the date fixed for any redemption
of the Senior Preferred Stock, written notice (the "Redemption Notice")
shall be given by first class mail, postage prepaid, to each Holder of
record on the record date fixed for such redemption of the Senior
Preferred Stock at such Holder's address as it appears on the register
maintained by the Transfer Agent, provided, that no failure to give such
notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Senior Preferred Stock to be
redeemed except as to
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the Holder or Holders to whom the Corporation has failed to give said
notice or except as to the Holder or Holders whose notice was defective.
The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph
(e)(i)(A) or (B) or (e)(ii) hereof;
(2) the redemption price;
(3) whether all or less than all the outstanding shares of
the Senior Preferred Stock are to be redeemed and the
total number of shares of the Senior Preferred Stock
being redeemed;
(4) the Redemption Date;
(5) that the Holder is to surrender to the Corporation, in
the manner, at the place or places and at the price
designated, his certificate or certificates representing
the shares of Senior Preferred Stock to be redeemed; and
(6) that dividends on the shares of the Senior Preferred
Stock to be redeemed shall cease to accumulate on such
Redemption Date unless the Corporation defaults in the
payment of the redemption price.
(B) Each Holder of Senior Preferred Stock shall surrender the
certificate or certificates representing such shares of Senior
Preferred Stock to the Corporation, duly endorsed (or otherwise in
proper form for transfer, as determined by the Corporation), in the
manner and at the place designated in the Redemption Notice, and on
the Redemption Date the full redemption price for such shares shall
be payable in cash to the Person whose name appears on such
certificate or certificates as the owner thereof, and each
surrendered certificate shall be canceled and retired. In the event
that less than all of the shares represented by any such certificate
are redeemed, a new certificate shall be issued representing the
unredeemed shares.
(C) On and after the Redemption Date, unless the Corporation
defaults in the payment in full of the applicable redemption price,
dividends on the Senior Preferred Stock called for redemption shall
cease to accumulate on the Redemption Date, and all rights of the
Holders of redeemed shares shall terminate with respect thereto on
the Redemption Date, other than the
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right to receive the redemption price; provided, that if a notice of
redemption shall have been given as provided in paragraph (iii)(A)
above and the funds necessary for redemption (including an amount in
cash in respect of all dividends that will accumulate to the
Redemption Date) shall have been irrevocably deposited in trust for
the equal and ratable benefit for the Holders of the shares to be
redeemed, then, at the close of business on the day on which such
funds are segregated and set aside, the Holders of the shares to be
redeemed shall cease to be stockholders of the Corporation and shall
be entitled only to receive the redemption price.
(f) Voting Rights.
(i) The Holders of Senior Preferred Stock, except as otherwise
required under Delaware law or as set forth in paragraphs (ii), (iii) and
(iv) below, shall not be entitled or permitted to vote on any matter
required or permitted to be voted upon by the stockholders of the
Corporation.
(ii) (A) So long as any shares of the Senior Preferred Stock are
outstanding, the Corporation shall not authorize or issue any additional
shares of Senior Preferred Stock or any class or series of Parity Stock
without the affirmative vote or consent of Holders of at least a majority
of the then outstanding shares of Senior Preferred Stock, voting or
consenting, as the case may be, as one class, given in person or by proxy,
either in writing or by resolution adopted at an annual or special
meeting; provided, that no such vote or consent shall be necessary in
connection with (i) the issuance of additional shares of Senior Preferred
Stock pursuant to the provisions of paragraph (c) of this Certificate of
Designations, or (ii) the authorization and issuance of that number of
shares of Exchange Preferred Stock and/or the Private Exchange Preferred
Stock not in excess of 120,000 shares.
(B) So long as any shares of the Senior Preferred Stock are
outstanding, the Corporation shall not authorize or issue any class
or series of Senior Stock without the affirmative vote or consent of
Holders of at least a majority of the outstanding shares of Senior
Preferred Stock, voting or consenting, as the case may be, as one
class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.
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(C) So long as any shares of the Senior Preferred Stock are
outstanding, the Corporation shall not authorize or issue any shares
of Series B Junior Preferred Stock (other than shares of Series B
Junior Preferred Stock issued on the Issue Date and shares of Series
B Junior Preferred Stock issued as dividends thereon in accordance
with the terms of the certificate of designation of the Series B
Junior Preferred Stock as in effect on the Issue Date) without the
affirmative vote or consent of Holders of at least a majority of the
outstanding shares of Senior Preferred Stock, voting or consenting,
as the case may be, as one class, given in person or by proxy,
either in writing or by resolution adopted at an annual or special
meeting.
(D) So long as any shares of the Senior Preferred Stock are
outstanding, the Corporation shall not amend this Certificate of
Designations so as to affect adversely the specified rights,
preferences, privileges or voting rights of holders of shares of
Senior Preferred Stock without the affirmative vote or consent of
Holders of at least a majority of the then issued and outstanding
shares of Senior Preferred Stock, voting or consenting, as the case
may be, as one class, given in person or by proxy, either in writing
or by resolution adopted at an annual or special meeting; provided,
that any increase in the amount of authorized Preferred Stock of the
Corporation or the creation and issuance (other than the Senior
Preferred Stock and Series B Junior Preferred Stock as provided
under paragraph (b) above) of any other class of Preferred Stock or
any increase in the amount of authorized shares of such class or any
other class of Junior Capital Stock, including Junior Capital Stock
which is Preferred Stock, will not be deemed to affect adversely
such rights, preferences or voting powers.
(E) Prior to the exchange of all outstanding shares of Senior
Preferred Stock for Exchange Debentures, the Corporation shall not
amend or modify the form of the Indenture for the Exchange
Debentures from the form thereof certified by the Secretary of the
Corporation and delivered to the Transfer Agent on the Issue Date
(the "Indenture") (except as expressly provided therein in respect
of amendments without the consent of Holders of Exchange Debentures)
without the affirmative vote or consent of holders of at least a
majority of the aggregate liquidation preference of the outstanding
shares of Senior Preferred Stock, voting or consenting, as the case
may be, together as one class,
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given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting.
(iii) (A) If (1) after April 1, 2003, cash dividends on the Senior
Preferred Stock are in arrears and unpaid for two or more semi-annual
Dividend Periods (whether or not consecutive) (a "Dividend Default"); (2)
the Corporation fails to redeem all of the then outstanding shares of
Senior Preferred Stock on or before April 1, 2009; (3) the Corporation
fails to make or consummate a Change of Control Offer following a Change
of Control if such Change of Control Offer is required by paragraph (h)
hereof; (4) the Corporation breaches or violates one of the provisions set
forth in paragraph (l) hereof and the breach or violation continues for a
period of 60 days or more after the Corporation receives notice thereof
specifying the default from the holders of at least 25% of the shares of
Senior Preferred Stock then outstanding, then in the case of any of
clauses (1) through (4) above, the number of directors constituting the
Board of Directors shall be increased or decreased by the number, if any,
necessary to permit the Holders of a majority of the aggregate outstanding
shares Senior Preferred Stock and, to the extent there exists a voting
rights triggering event with respect to the Series B Junior Preferred
Stock (pursuant to its certificate of designation as in effect on the
Issue Date), the Series B Junior Preferred Stock, voting together as one
class, to elect the lesser of two directors or that number of directors
constituting at least 25% of the members of the Board of Directors. Each
such event described in clauses (1), (2), (3) and (4) is a "Voting Rights
Triggering Event"; provided, that if the Corporation breaches or violates
more than one of the provisions set forth in paragraph (A) hereof, all
such breaches or violations together shall not constitute more than one
Voting Rights Triggering Event. Holders of a majority of the aggregate
outstanding shares of Senior Preferred Stock and, to the extent there
exists a voting rights triggering event with respect to the Series B
Junior Preferred Stock (pursuant to its certificate of designation as in
effect on the Issue Date), the Series B Junior Preferred Stock, voting
together and as one class, shall have the exclusive right to elect the
lesser of two directors or that number of directors constituting at least
25% of the members of the Board of Directors at a meeting therefor called
upon occurrence of such Voting Rights Triggering Event. Except as provided
in paragraph (c)(vii), the voting rights provided herein shall be the
exclusive remedy at law or in equity of the holders of the Senior
Preferred Stock for any Voting Rights Triggering Event. Notwithstanding
the foregoing, if the voting rights granted
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pursuant to this subparagraph would violate any rules or regulations
applicable to any Regulated Holder, the shares of Senior Preferred Stock
held by such Regulated Holder shall be deemed to be not issued and not
outstanding solely for purposes of this paragraph (f)(iii)(A). As used
herein, "Regulated Holder" shall mean any Person holding shares of Senior
Preferred Stock that is (or that is a subsidiary of a bank holding company
that is) subject to the provisions of Regulation Y of the Board of
Governors of the Federal Reserve System, 12 C.F.R., Part 225 (or any
successor to Regulation Y).
(B) The right of the Holders of Senior Preferred Stock and, to
the extent there exists a voting rights triggering event with
respect to the Series B Junior Preferred Stock (pursuant to its
certificate of designation as in effect on the Issue Date), the
Series B Junior Preferred Stock, voting together as one class, to
elect members of the Board of Directors as set forth in subparagraph
(f)(iii)(A) above shall continue until such time as (x) in the event
such right arises due to a Dividend Default, all accumulated
dividends that are in arrears on the Senior Preferred Stock are paid
in full in cash; and (y) in all other cases, the failure, breach or
default giving rise to such Voting Rights Triggering Event is
remedied, cured or waived by the holders of at least a majority of
the aggregate outstanding shares of Senior Preferred Stock and, to
the extent there exists a voting rights triggering event with
respect to the Series B Junior Preferred Stock (pursuant to its
certificate of designation as in effect on the Issue Date), the
Series B Junior Preferred Stock, voting or consenting, as the case
may be, together as one class at which time (1) the special right of
the Holders of Senior Preferred Stock and, to the extent there
existed a voting rights triggering event with respect to the Series
B Junior Preferred Stock (pursuant to its certificate of designation
as in effect on the Issue Date), the Series B Junior Preferred
Stock, to vote together as one class for the election of directors
and (2) the term of office of the directors elected by the Holders
of the Senior Preferred Stock and, to the extent there existed a
voting rights triggering event with respect to the Series B Junior
Preferred Stock (pursuant to its certificate of designation as in
effect on the Issue Date), the Series B Junior Preferred Stock,
shall each terminate and the number of directors constituting the
Board of Directors shall be increased or decreased to such number
equal to the directors elected by the
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holders of Common Stock or Capital Stock (other than the Senior
Preferred Stock and, if applicable, Series B Junior Preferred
Stock). At any time after voting power to elect directors shall have
become vested and be continuing in the Holders of Senior Preferred
Stock and, if applicable, Series B Junior Preferred Stock, pursuant
to this paragraph (f)(iii)(A) hereof, or if vacancies shall exist in
the offices of directors elected by the Holders of Senior Preferred
Stock and, if applicable, Series B Junior Preferred Stock, a proper
officer of the Corporation may, and upon the written request of the
Holders of record of at least twenty-five percent (25%) of the then
outstanding shares of Senior Preferred Stock and, if applicable,
Series B Junior Preferred Stock, taken as a whole, addressed to the
Secretary of the Corporation shall call a special meeting of the
Holders of Senior Preferred Stock and, if applicable, Series B
Junior Preferred Stock, for the purpose of electing the directors
which such Holders are entitled to elect. If such meeting shall not
be called by a proper officer of the Corporation within twenty (20)
days after personal service of said written request upon the
Secretary of the Corporation, or within twenty (20) days after
mailing the same within the United States by certified mail,
addressed to the Secretary of the Corporation at its principal
executive offices, then the Holders of record of at least
twenty-five percent (25%) of the outstanding shares of Senior
Preferred Stock and, if applicable, Series B Junior Preferred Stock,
taken as a whole, may designate in writing one of their number to
call such meeting at the expense of the Corporation, and such
meeting may be called by the Person so designated upon the notice
required for the annual meetings of stockholders of the Corporation
and shall be held at the place for holding the annual meetings of
stockholders. Any Holder of Senior Preferred Stock or, if
applicable, Series B Junior Preferred Stock, so designated shall
have, and the Corporation shall provide, reasonable access to the
lists of stockholders of Senior Preferred Stock and Series B Junior
Preferred Stock to be called pursuant to the provisions hereof.
(C) At any meeting held for the purpose of electing directors
at which the Holders of Senior Preferred Stock and, if applicable,
Series B Junior Preferred Stock, shall have the right, voting
together as one class, to elect directors as aforesaid, the presence
in person or by proxy of the Holders of at least a majority of the
then outstanding shares of
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Senior Preferred Stock and, if applicable, Series B Junior Preferred
Stock, taken as a whole, entitled to vote thereat shall be required
to constitute a quorum of such Senior Preferred Stock and, if
applicable, Series B Junior Preferred Stock.
(D) Any vacancy occurring in the office of a director elected
by the Holders of Senior Preferred Stock and, if applicable, Series
B Junior Preferred Stock, may be filled by the remaining director,
if any, elected by the Holders of Senior Preferred Stock and, if
applicable, Series B Junior Preferred Stock, unless and until such
vacancy shall be filled by the Holders of Senior Preferred Stock
and, if applicable, Series B Junior Preferred Stock.
(iv) In any case in which the Holders of Senior Preferred Stock and,
if applicable, Series B Junior Preferred Stock, shall be entitled to vote
pursuant to this paragraph (f) or pursuant to Delaware law, each Holder of
Senior Preferred Stock, and, if applicable, Series B Junior Preferred
Stock, entitled to vote with respect to such matter shall be entitled to
one vote for each share of Senior Preferred Stock, and, if applicable,
Series B Junior Preferred Stock, held.
(g) Exchange.
(i) Requirements. The outstanding shares of Senior Preferred Stock
(including any shares of Senior Preferred Stock issuable on such Dividend
Payment Date on the outstanding shares of Senior Preferred Stock) are
exchangeable, in whole but not in part, at the option of the Corporation,
at any time on any Dividend Payment Date for the Corporation's 12%
Exchange Debentures due 2009 (the "Exchange Debentures") to be
substantially in the form of Exhibit A to the Indenture, a copy of which
is on file with the Transfer Agent and the Secretary of the Corporation;
provided, that any such exchange may only be made if on or prior to the
date of such exchange, (i) the Corporation has paid (or is deemed to have
paid) all accumulated dividends on the Senior Preferred Stock (including
the dividends payable on such Dividend Payment Date) and there shall be no
contractual impediment to such exchange on such Dividend Payment Date;
(ii) there shall be legally available funds sufficient therefor; (iii)
immediately after giving effect to such exchange, no Default or Event of
Default (each as defined in the Indenture) would exist under the Indenture
as if the Indenture had been in effect as of the Issue Date and no default
or event of default under any other material
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instrument governing Indebtedness outstanding at the time of such exchange
would be caused thereby; and (iv) the Indenture has been qualified under
the Trust Indenture Act, if such qualification is required at the time of
exchange. The exchange rate shall be $1.00 principal amount of Exchange
Debentures for each $1.00 of liquidation preference of Senior Preferred
Stock. Exchange Debentures shall be issued in principal amounts of $1,000
and integral multiples thereof to the extent possible and, to the extent
necessary, in principal amounts less than $1,000, provided, that the
Corporation shall have the right, at its option, to pay cash in an amount
equal to the principal amount of that portion of any Exchange Debenture
that is not an integral multiple of $1,000 in lieu of delivering an
Exchange Debenture in a denomination of less than $1,000.
(ii) Procedure for Exchange. (A) At least thirty (30) days and not
more than sixty (60) days prior to the date fixed for exchange, written
notice (the "Exchange Notice") shall be given by the Corporation by
first-class mail, postage prepaid, to each Holder of record on the
Dividend Record Date immediately preceding such Dividend Payment Date at
such Holder's address as the same appears on the stock register maintained
by the Transfer Agent, provided, that no failure to give such notice nor
any deficiency therein shall affect the validity of the procedure for the
exchange of shares of Senior Preferred Stock to be exchanged. The Exchange
Notice shall state:
(1) the date fixed for exchange;
(2) that the Holder is to surrender to the Corporation, in
the manner and at the place or places designated, his
certificate or certificates representing all his shares
of Senior Preferred Stock to be exchanged;
(3) that dividends on the shares of Senior Preferred Stock
to be exchanged shall cease to accumulate on the
Exchange Date whether or not certificates for shares of
Senior Preferred Stock are surrendered for exchange on
the Exchange Date unless the corporation shall default
in the delivery of the Exchange Debentures; and
(4) that interest on the Exchange Debentures shall accrue
from the Exchange Date whether or not certificates for
shares of Senior
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Preferred Stock are surrendered for exchange on the
Exchange Date.
(B) On or before the Exchange Date, each Holder of shares of
Senior Preferred Stock shall surrender the certificates representing
such shares of Senior Preferred Stock, in the manner and at the
place designated in the Exchange Notice. The Corporation shall cause
the Indenture and the Exchange Debentures to be executed on the
Exchange Date and, upon surrender in accordance with the Exchange
Notice of the certificates for the shares of Senior Preferred Stock
so exchanged, duly endorsed (or otherwise in proper form for
transfer, as determined by the Corporation), such shares shall be
exchanged by the Corporation into Exchange Debentures. The
Corporation shall pay interest on the Exchange Debentures at the
rate and on the dates specified therein from the Exchange Date.
(C) If notice has been mailed as aforesaid, and if before the
Exchange Date specified in such notice all Exchange Debentures
necessary for such exchange shall have been duly executed by the
Corporation and delivered to the trustee under the Indenture with
irrevocable instructions to authenticate the Exchange Debentures
necessary for such exchange, then the rights of the Holders of
Senior Preferred Stock so exchanged as stockholders of the
Corporation shall cease (except the right to receive Exchange
Debentures (including Exchange Debentures issued in exchange for
shares of Senior Preferred Stock issued on such Dividend Payment
Date), an amount in cash equal to the amount of accumulated and
unpaid dividends to the Exchange Date and, if the Corporation so
elects, cash in lieu of any Exchange Debenture not an integral
multiple of $1,000), and the Person or Persons entitled to receive
the Exchange Debentures issuable upon exchange shall be treated for
all purposes as the registered Holder or Holders of such Exchange
Debentures as of the Exchange Date.
(iii) No Exchange in Certain Cases. Notwithstanding the foregoing
provisions of this paragraph (g), the Corporation shall not be entitled or
required to exchange the Senior Preferred Stock for Exchange Debentures if
such exchange, or any term or provision of the Indenture or the Exchange
Debentures, or the performance of the Corporation's obligations under the
Indenture or the Exchange Debentures, shall materially violate or conflict
with any applicable law or agreement or instrument then binding on the
Corporation
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<PAGE>
or if, at the time of such exchange, the Corporation is insolvent or if it
would be rendered insolvent by such exchange.
(h) Change of Control.
(i) Upon the occurrence of a Change of Control, the Corporation
shall be obligated to make an offer to purchase (the "Change of Control
Offer") the outstanding Senior Preferred Stock at a purchase price equal
to 101% of the liquidation preference thereof plus, without duplication,
an amount in cash equal to all accumulated and unpaid dividends thereon
(including an amount in cash equal to a prorated dividend for the period
from the immediately preceding Dividend Payment Date to the Change of
Control Payment Date) (such applicable purchase price being hereinafter
referred to as the "Change of Control Purchase Price") in accordance with
the procedures set forth in this paragraph (h).
(ii) Within 30 days of the occurrence of a Change of Control, the
Corporation shall (i) cause a notice of the Change of Control Offer to be
sent at least once to the Dow Jones News Service or similar business news
service in the United States and (ii) send by first-class mail, postage
prepaid, to each Holder of Senior Preferred Stock, at the address
appearing in the register maintained by the Transfer Agent, a notice
stating:
(1) that the Change of Control Offer is being made pursuant
to this paragraph (h) and that all Senior Preferred
Stock validly tendered will be accepted for payment;
(2) the Change of Control Purchase Price and the purchase
date (which shall be a Business Day not earlier than 30
days nor later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"));
(3) that any Senior Preferred Stock not validly tendered
will continue to accumulate dividends;
(4) that, unless the Corporation defaults in the payment of
the Change of Control Purchase Price, any Senior
Preferred Stock accepted for payment pursuant to the
Change of Control Offer shall cease to accumulate
dividends after the Change of Control Payment Date;
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<PAGE>
(5) that Holders accepting the offer to have their Senior
Preferred Stock purchased pursuant to a Change of
Control Offer will be required to surrender their
certificates representing Senior Preferred Stock to the
Corporation at the address specified in the notice prior
to the close of business on the Business Day preceding
the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their
acceptance if the Corporation receives, not later than
the close of business on the third Business Day
preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the number of
shares of Senior Preferred Stock delivered for purchase,
and a statement that such Holder is withdrawing his
election to have such Senior Preferred Stock purchased;
(7) that Holders whose Senior Preferred Stock is being
purchased only in part will be issued new certificates
representing the number of shares of Senior Preferred
Stock equal to the unpurchased portion of the
certificates surrendered; and
(8) any other procedures that a Holder must follow to accept
a Change of Control Offer or effect withdrawal of such
acceptance.
(iii) The Corporation will comply with any securities laws and
regulations, to the extent such laws and regulations are applicable to the
redemption of the Senior Preferred Stock in connection with a Change of
Control Offer. Without limiting the foregoing, in the event that a Change
of Control occurs and the holders of Senior Preferred Stock exercise their
right to require the Corporation to purchase Senior Preferred Stock, if
such purchase constitutes a "tender offer" for purposes of Rule l4e-1
under the Exchange Act at that time, the Corporation will comply with the
requirements of Rule l4e-1 as then in effect with respect to such
repurchase.
(iv) On the Change of Control Payment Date, the Corporation shall,
to the extent lawful, (A) accept for payment the number of shares of
Senior Preferred Stock validly tendered pursuant to the Change of Control
Offer and
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<PAGE>
(B) promptly mail to each Holder of shares so accepted the Change of
Control Purchase Price therefor and execute and issue a new Senior
Preferred Stock certificate representing the number of shares of Senior
Preferred Stock equal to any unpurchased shares represented by a
certificate surrendered. Unless the Corporation defaults in the payment
for the shares of Senior Preferred Stock validly tendered pursuant to the
Change of Control Offer, dividends shall cease to accumulate with respect
to the shares of Senior Preferred Stock so tendered and all rights of
Holders of such tendered shares shall terminate, except for the right to
receive payment therefor, on the Change of Control Payment Date.
(v) If any Credit Facility is in effect or if the Senior Notes are
outstanding or if any other Indebtedness of the Corporation or its
Restricted Subsidiaries that requires a payment upon a Change of Control
is outstanding, or any amounts are owing thereunder or in respect thereof,
at the time of the occurrence of a Change of Control, then, prior to the
mailing of the notice to Holders described in paragraph (h)(ii) above, but
in any event within 30 days following any Change of Control, the
Corporation shall, to the extent required to permit the repurchase of
Senior Preferred Stock pursuant to this paragraph (h), be required to (A)
cause the borrowers thereunder to repay in full all obligations under or
in respect of such Credit Facility or such other Indebtedness or offer to
repay in full all obligations under or in respect of such Credit Facility
or such other Indebtedness and repay within such 30-day period the
obligations under or in respect of such Credit Facility or such other
Indebtedness of each lender who has then irrevocably accepted such offer
and cause Morris Material Handling to repay within such 30-day period in
full all obligations in respect of the Senior Notes or offer to repay in
full all obligations in respect of the Senior Notes of each holder who has
then irrevocably accepted such offer or (B) cause such borrowers and
Morris Material Handling to obtain the requisite consent under such Credit
Facility or such other Indebtedness, from the holders of such other
Indebtedness and from the holders of the Senior Notes, respectively, to
permit the repurchase of the Senior Preferred Stock as described above.
Until the requirements of the immediately preceding sentence are
satisfied, the Corporation shall not make, and shall not be required to
make, any Change of Control Offer; provided, that the Corporation's
failure to comply with the provisions of this paragraph (h)(v) shall
constitute a Voting Rights Triggering Event.
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<PAGE>
(vi) (A) If the Corporation has any outstanding Preferred Stock
(other than the Senior Preferred Stock), and the Corporation is required
to make a Change of Control Offer or to make a distribution with respect
to such Preferred Stock (other than the Senior Preferred Stock) in the
event of a Change of Control, the Corporation shall not consummate any
such offer or distribution with respect to such Preferred Stock (other
than the Senior Preferred Stock) until such time as the Corporation shall
have paid the Change of Control Purchase Price in full to the holders of
Senior Preferred Stock that have validly accepted the Corporation's Change
of Control Offer and shall otherwise have consummated the Change of
Control Offer made to holders of the Senior Preferred Stock and (B) the
Corporation will not issue Preferred Stock with change of control
provisions requiring the payment of such Preferred Stock prior to the
payment of the Senior Preferred Stock in the event of a Change in Control
under this paragraph (h).
(vii) The Corporation will not be required to make a Change of
Control Offer upon a Change of Control if a third party makes such Change
of Control Offer contemporaneously with or upon a Change of Control in the
manner, at the times and otherwise in compliance with the requirements of
this paragraph (h) and purchases all Senior Preferred Stock validly
tendered and not withdrawn under such Change of Control Offer.
(i) Conversion or Exchange. The Holders of shares of Senior
Preferred Stock shall not have any rights hereunder to convert such shares into
or exchange such shares for shares of any other class or classes or of any other
series of any class or classes of Capital Stock of the Corporation other than
the Exchange Preferred Stock and the Private Exchange Preferred Stock as
provided in the Registration Rights Agreement.
(j) Reissuance of Senior Preferred Stock. Shares of Senior Preferred
Stock that have been issued and reacquired in any manner, including shares
purchased or redeemed or exchanged, shall (upon compliance with any applicable
provisions of the laws of Delaware) have the status of authorized and unissued
shares of Preferred Stock undesignated as to series and may be redesignated and
reissued as part of any series of Preferred Stock, provided, that any issuance
of such shares of Preferred Stock must be in compliance with the terms hereof;
provided, further, that Shares of Senior Preferred Stock that have been issued
and reacquired in the exchange offer contemplated by the Registration Rights
Agreement, shall (upon compliance with any applicable provisions of the laws of
the State of Delaware) have the status of
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<PAGE>
authorized and unissued shares of Senior Preferred Stock and may be reissued as
part of the Senior Preferred Stock.
(k) Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(l) Certain Additional Provisions.
(i) Limitation on Additional Indebtedness. The Corporation will not,
and will not cause or permit any Restricted Subsidiary of the Corporation
to, directly or indirectly, incur (as defined) any Indebtedness (including
any Acquired Indebtedness); provided, that if no Voting Rights Triggering
Event shall have occurred and be continuing at the time or as a
consequence of the incurrence of such Indebtedness, the Corporation or any
Restricted Subsidiary may incur Indebtedness (including any Acquired
Indebtedness) if the Corporation's Consolidated Interest Coverage Ratio is
greater than 2.0 to 1.
Notwithstanding the foregoing, the Corporation and its
Restricted Subsidiaries may incur Permitted Indebtedness.
(ii) Limitation on Restricted Payments. The Corporation will not
make, and will not permit any of its Restricted Subsidiaries to, directly
or indirectly, make, any Restricted Payment after the Issue Date, unless:
(A) no Voting Rights Triggering Event shall have occurred and
be continuing at the time of or immediately after giving effect to
such Restricted Payment;
(B) immediately after giving pro forma effect to such
Restricted Payment, (i) the Corporation could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under
paragraph (l)(i); and
(C) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made
after the Issue Date does not exceed the sum (without duplication)
of (1) 50% of the cumulative Consolidated Net Income of the
Corporation (or minus 100% of any cumulative deficit in Consolidated
Net Income) for the period (treated as one accounting period) from
the first day of the fiscal
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quarter in which the Issue Date occurs through the last day of the
fiscal quarter immediately preceding such Restricted Payment, (2)
100% of the aggregate Net Proceeds in cash received by the
Corporation from the issuance or sale, after the Issue Date (other
than to a Restricted Subsidiary), of (a) Junior Capital Stock (other
than Disqualified Capital Stock) of the Corporation or (b) any
Indebtedness or other securities of the Corporation that are
convertible into or exercisable or exchangeable for Junior Capital
Stock (other than Disqualified Capital Stock) of the Corporation
which have been so converted or exercised or exchanged (other than
by a Restricted Subsidiary of the Corporation) and (3) 100% of the
net reduction in Investments (other than Permitted Investments),
subsequent to the Issue Date, in any Person, resulting from payments
of interest on Indebtedness, dividends, repayments of loans or
advances or other transfers or distributions of Property or return
of capital (but only to the extent such interest, dividends or
repayments or other transfers or distributions of Property or return
of capital are not included in the calculation of Consolidated Net
Income), in each case, to the Corporation or any Restricted
Subsidiary from any Person (including Unrestricted Subsidiaries) or
from redesignations (the designation of which did not constitute a
Permitted Investment) of Unrestricted Subsidiaries as Restricted
Subsidiaries in accordance with the Certificate of Designations, not
to exceed in the case of any Person, the amount of Investments
(other than Permitted Investments) previously made by the
Corporation or any Restricted Subsidiary in such Person. For
purposes of determining the amount expended for Restricted Payments
under this clause (C), Property other than cash (including a
distribution of assets) shall be valued at its Fair Market Value.
The provisions of this paragraph (l)(ii) shall not prohibit:
(i) the payment of any distribution within 60 days after the date of
declaration thereof, if at such date of declaration such payment would
comply with the provisions of this Certificate of Designations;
(ii) the retirement of any shares of Junior Capital Stock of the
Corporation by conversion into, or by or in exchange for, shares of Junior
Capital Stock (other
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than Disqualified Capital Stock) of the Corporation, or out of, the Net
Proceeds of the substantially concurrent sale (other than to a Restricted
Subsidiary of the Corporation) of other shares of Junior Capital Stock of
the Corporation (other than Disqualified Capital Stock); provided, that
any such Net Proceeds are excluded from clause (C)(2) of this paragraph
(l)(ii) for the purposes of this calculation (and were not included
therein at any time);
(iii) the retirement of any shares of Junior Capital Stock that is
Disqualified Capital Stock by conversion into, or by exchange for, shares
of Junior Capital Stock that is Disqualified Capital Stock of the
Corporation, or out of the Net Proceeds of the substantially concurrent
sale (other than to a Restricted Subsidiary of the Corporation) of other
shares of Junior Capital Stock that are Disqualified Capital Stock of the
Corporation;
(iv) payments to MHE Investments or any other Person in respect of
which MHE Investments or such other Person is a member of the consolidated
tax group of the Corporation, for so long as MHE Investments or such other
Person owns such amount of the Capital Stock of the Corporation as will
permit it or a member of the consolidated tax group of MHE Investments or
such other Person to be entitled to file consolidated federal tax returns
with the Corporation, for income taxes pursuant to the Tax Allocation
Agreement or for the purpose of enabling MHE Investments or such other
Person or any such members to pay taxes other than income taxes, to the
extent actually owed and attributable to the operations of the Corporation
and its Subsidiaries or to MHE Investments' or such other Person's
ownership thereof;
(v) payments to MHE Investments, for so long as it owns not less
than a majority of the outstanding Common Stock of the Corporation, in
amounts sufficient to pay the ordinary operating and administrative
expenses of MHE Investments (including all reasonable professional fees
and expenses), including in connection with its complying with the
Corporation's reporting obligations (including filings with the Commission
and any exchange on which the Corporation's securities are traded) and
obligations to prepare and distribute business records in the ordinary
course of business and the Corporation's costs and expenses relating to
taxes, other than those referred to in clause (iv) (which taxes are
attributable to the operations of the Corporation and its Restricted
Subsidiaries or to MHE Investments' ownership thereof); provided, that the
aggregate payments paid in each fiscal year pursuant to this clause (v)
will not exceed 0.20% of the consolidated net sales of the Corporation and
its Restricted Subsidiaries for such fiscal year;
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(vi) the purchase, redemption, retirement or other acquisition for
value of Capital Stock of the Corporation or of any Person that directly
or indirectly controls (as defined in the definition of Affiliate) the
Corporation held by employees or former employees of the Corporation or
any Restricted Subsidiary (or their estates or beneficiaries under their
estates) upon death, disability, retirement, termination of employment and
pursuant to the terms of any agreement under which such Capital Stock was
issued, provided, that the aggregate Fair Market Value of the
consideration paid for such purchase, redemption, retirement or other
acquisition of such Capital Stock does not exceed $500,000 in any fiscal
year;
(vii) payments due under the Permitted Affiliate Agreements (other
than payments pursuant to paragraph (iv) above) that would otherwise
constitute Restricted Payments; and
(viii) payments that would otherwise constitute Restricted Payments,
not to exceed $750,000 in the aggregate;
provided, that in calculating the aggregate amount of Restricted Payments made
subsequent to the Issue Date for purposes of clause (C) of this paragraph
(l)(ii), amounts expended pursuant to clause (i) (but only if the declaration
thereof has not been counted in a prior period), (v) (other than to the extent
otherwise reducing Consolidated Net Income), (vi) and (viii) shall be included,
without duplication, in such calculation and (ii), (iii), (iv) and (vii) shall
not be included in such calculation. Nothing in the immediately preceding
proviso is meant to affect whether any amount expended pursuant to clause (iv)
should be reflected in Consolidated Net Income. Notwithstanding any other
provision of this paragraph (l)(ii), no dividends or distributions may be paid
on any class of Common Stock of the Corporation unless the Corporation has paid
in cash all accumulated dividends due on the two Dividend Payment Dates on or
immediately preceding such proposed date of such dividend or distribution.
If the Corporation or any Restricted Subsidiary makes a Restricted Payment
which, at the time of the making of such Restricted Payment, in the good faith
determination of the Board of Directors or the board of directors of Morris
Material Handling, would be permitted under the requirements of this Certificate
of Designations, such Restricted Payment shall be deemed to have been made in
compliance with this Certificate of Designations notwithstanding any subsequent
adjustment made in
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good faith to the Corporation's or such Restricted Subsidiary's financial
statements affecting Consolidated Net Income.
(iii) Limitation on Transactions with Affiliates. The Corporation
will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or
series of related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets, Property or services) with any
Affiliate (each, an "Affiliate Transaction") or extend, renew, waive or
otherwise modify the terms of any Affiliate Transaction entered into prior
to the Issue Date unless (A) such Affiliate Transaction is between or
among the Corporation and the Restricted Subsidiaries or between or among
Restricted Subsidiaries; or (B) the terms of such Affiliate Transaction
are fair to the Corporation or such Restricted Subsidiary, as the case may
be, and the terms of such Affiliate Transaction are at least as favorable
as the terms which could be obtained by the Corporation or such Restricted
Subsidiary, as the case may be, in a comparable transaction made on an
arm's-length basis between unaffiliated parties. In any Affiliate
Transaction (or any series of related Affiliate Transactions) involving an
amount or having a Fair Market Value in excess of $2 million which is not
permitted under clause (A) of the immediately preceding sentence, the
Corporation shall first obtain a resolution of a majority of the
disinterested members of the Board of Directors which reflects the
approval of such Affiliate Transaction and a determination that such
Affiliate Transaction complies with clause (B) of the immediately
preceding sentence. In any Affiliate Transaction (or series of related
Affiliate Transactions) which includes the payment of fees of $1 million
or more to Chartwell, the Corporation shall obtain a resolution of a
majority of the disinterested members of the Board of Directors which
reflects the approval of such Affiliate Transaction. In addition, in any
Affiliate Transaction (or any series of related Affiliate Transactions)
involving an amount or having a Fair Market Value in excess of $10 million
which is not permitted under clause (A) of the immediately preceding
sentence, the Corporation must obtain, prior to the consummation of the
transaction or transactions, a written opinion from a nationally
recognized investment banking firm or other expert stating that such
transaction or transactions are fair to the Corporation or such Restricted
Subsidiary, as the case may be, from a financial point of view; provided,
that no such opinion shall be required in respect of the provision of
services or sales of inventory or products by the Corporation or any of
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its Restricted Subsidiaries to a Joint Venture in the ordinary course of
business.
The foregoing provisions will not apply to: (i) any transaction or series
of related transactions pursuant to the terms of the Permitted Affiliate
Agreements; (ii) reasonable fees and compensation paid to and indemnity provided
on behalf of officers, directors or employees of the Corporation or any
Restricted Subsidiary of the Corporation as determined in good faith by the
Board of Directors or senior management; (iii) any payment that would be
permitted under the first paragraph or clauses (iv) or (v) of the second
paragraph of paragraph (l)(ii) above; (iv) any Permitted Investment (other than
Permitted Investments made pursuant to clause (x) of the definition of Permitted
Investments); or (v) loans or advances to employees and officers of the
Corporation or any of its Subsidiaries in the ordinary course of business to
provide for the payment of reasonable expenses incurred by such persons in the
performance of their responsibilities to the Corporation or such Subsidiary or
in connection with any relocation. The aggregate management, consulting and
similar fees paid by the Corporation or its Subsidiaries (excluding expenses and
amounts paid pursuant to the last sentence of this covenant or pursuant to
clause (iii) of this paragraph) to Chartwell shall not exceed $1 million during
any fiscal year; provided, that any such fees may accrue but shall not be paid
by the Corporation at any time after the occurrence and during the continuance
of a Voting Rights Triggering Event until such Voting Rights Triggering Event is
cured, whereupon such accrued and unpaid fees may be paid in addition to other
permitted fees. In addition, the Corporation may pay advisory fees to an
Affiliate of the Corporation (including Chartwell) with respect to specific
transactions, provided, that such payments would be permitted under the first
paragraph of paragraph (l)(ii). In addition, for purposes of this paragraph
(l)(iii), any transaction or series of related transactions between the
Corporation or any Restricted Subsidiary and an Affiliate of the Corporation
that is approved by a majority of the disinterested members of its Board of
Directors shall be deemed to comply with clause (B) of the first sentence of the
preceding paragraph. Notwithstanding the provisions of this paragraph (l)(iii),
the Corporation may pay fees and expenses to Affiliates of the Corporation on
the Issue Date in connection with the consummation of the Transactions.
(iv) Limitation on Preferred Stock of Restricted Subsidiaries. The
Corporation will not permit any of its Restricted Subsidiaries to issue
any Preferred Stock (other than to the Corporation or a Wholly-Owned
Subsidiary), other than Permitted Foreign Restricted Subsidiary Preferred
Stock, or permit any Person (other than the Corporation or a
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Wholly-Owned Subsidiary) to hold any such Preferred Stock unless the
Corporation or such Restricted Subsidiary would be entitled to incur or
assume Indebtedness under paragraph (l)(i) in the aggregate principal
amount equal to the aggregate liquidation value of the Preferred Stock to
be issued or so held.
(v) Merger, Consolidation or Sale of Assets. The Corporation will
not consolidate or merge with or into any Person, or sell, assign, lease,
convey or otherwise dispose of (or cause or permit any of its Restricted
Subsidiaries to sell, assign, lease, convey or otherwise dispose of
(however effected, including, without limitation, by merger or
consolidation)) all or substantially all of the Corporation's assets
(determined on a consolidated basis for the Corporation and its Restricted
Subsidiaries), whether as an entirety or substantially an entirety in one
transaction or a series of related transactions, including by way of
liquidation or dissolution, to any Person unless, in each such case:
(A)(x) the Corporation shall be the continuing Person, or (y) the Person
(if other than the Corporation) formed by such consolidation or into which
the Corporation or the Restricted Subsidiary, as the case may be, is
merged or to which the Properties and assets of the Corporation or any
Restricted Subsidiary, as the case may be, are transferred (such Person,
the "Surviving Entity") (1) shall be a corporation organized and existing
under the laws of the United States or any State thereof or the District
of Columbia and (2) the Senior Preferred Stock shall be converted into or
exchanged for and shall become shares of such successor, transferee or
resulting Person, having in respect of such successor, transferee or
resulting Person the same powers, preferences and relative participating,
optional or other special rights and the qualifications, limitations or
restrictions thereon, that the Senior Preferred Stock had immediately
prior to such transaction; (B) immediately before and immediately after
giving effect to such transaction on a pro forma basis (including, without
limitation, giving effect to any Indebtedness and Acquired Indebtedness
incurred or anticipated to be incurred in connection with or in respect of
the transaction), no Voting Rights Triggering Event shall have occurred
and be continuing; and (C) immediately after giving effect to such
transaction on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or
in respect of such transaction or series of transactions) the Corporation
(or the Surviving Entity if the Corporation is not continuing) (x) shall
have a Consolidated Net Worth equal to or greater than the Consolidated
Net Worth of the Corporation
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immediately prior to such transaction and (y) could incur at least $1.00
of additional Indebtedness (other than Permitted Indebtedness) under
paragraph (l)(i) above; provided, that a Restricted Subsidiary may merge
with and into the Corporation without complying with this clause (C)(y).
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of
all or substantially all of the Properties or assets of one or more
Subsidiaries of the Corporation, the Capital Stock of which constitutes
all or substantially all of the Properties and assets of the Corporation,
shall be deemed to be the transfer of all or substantially all of the
assets of the Corporation.
For all purposes of this Certificate of Designations and the Senior
Preferred Stock, Subsidiaries of any Surviving Entity will, upon such
transaction or series of transactions, become Restricted Subsidiaries or
Unrestricted Subsidiaries, to the extent and as provided pursuant to this
Certificate of Designations.
(vi) Reports to Holders. Whether or not required by the rules and
regulations of the Commission, so long as any shares of Senior Preferred
Stock are outstanding, the Corporation shall furnish to the holders of the
Senior Preferred Stock within 10 days after it is or would have been
required to file them with the Commission, (i) all annual and quarterly
financial information that would be required to be contained in a filing
with the Commission on Forms 10-K and 10-Q (without exhibits) if the
Corporation were required to file such forms, including a section entitled
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" and, with respect to the annual information only, a report
thereon by the Corporation's certified independent accountants and (ii)
all current reports that would be required to be filed with the Commission
on Form 8-K (without exhibits) if the Corporation were required to file
such reports. In addition, whether or not required by the rules and
regulations of the Commission, the Corporation will file a copy of all
such information and reports with the Commission for public availability
(unless the Commission will not accept such a filing). In addition, the
Corporation shall furnish to the holders of the Senior Preferred Stock and
to securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144(d)(4) under the
Securities Act and the exhibits omitted from the information furnished
pursuant to the preceding sentence, for so long as the
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Senior Preferred Stock is not freely transferable under the Securities
Act.
(m) Definitions. As used in this Certificate of Designations, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Acquired Indebtedness" means (a) Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person and (b) any Seller Note.
"Additional Dividends" has the meaning ascribed to it in the Registration
Rights Agreement.
"Affiliate" of any specified Person means any other Person (including,
without limitation, such Person's issue, siblings and spouse) that directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, such specified Person. For the 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, means 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. For purposes of this Certificate of Designations, the term
"Affiliate," as it relates to the Corporation, shall (a) include HarnCo for so
long as HarnCo is entitled to designate at least one member of the Board of
Directors of the Corporation or any successor to the Corporation and (b) not
include CIBC Oppenheimer Corp. or Indosuez Capital or their respective
Affiliates.
"Affiliate Transaction" has the meaning ascribed to it in paragraph
(l)(iii) hereof.
"Asset Acquisition" means (a) an Investment by the Corporation or any
Restricted Subsidiary of the Corporation in any other Person pursuant to which
such Person becomes a Restricted Subsidiary of the Corporation, or is merged
with or into the Corporation or any Restricted Subsidiary of the Corporation or
(b) the acquisition by the Corporation or any Restricted Subsidiary of the
Corporation of the assets of any Person (other than a Restricted Subsidiary of
the Corporation) which constitute all or substantially all of the assets of such
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Person or comprise any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means the sale, transfer or other disposition (including,
without limitation, by merger or consolidation) (other than to the Corporation
or any of its Restricted Subsidiaries) in any single transaction or series of
related transactions of (a) any Capital Stock of or other equity interest in any
Restricted Subsidiary of the Corporation (other than directors' qualifying
shares to the extent required by applicable law), (b) all or substantially all
of the assets of the Corporation or of any Restricted Subsidiary thereof, (c)
real Property or (d) all or substantially all of the assets, or any Property, or
part thereof, owned by the Corporation or any Restricted Subsidiary thereof, or
a division, line of business or comparable business segment of the Corporation
or any Restricted Subsidiary thereof; provided, that Asset Sales shall not
include (i) sales, leases, conveyances, transfers or other dispositions to the
Corporation or to a Restricted Subsidiary or to any other Person if after giving
effect to such sale, lease, conveyance, transfer or other disposition such other
Person becomes a Restricted Subsidiary, (ii) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Corporation and its Restricted Subsidiaries taken as a whole as permitted under
paragraph (l)(v) above, (iii) any transfer, conveyance, sale, lease or other
disposition of Property or assets, the gross proceeds of which (exclusive of
indemnities) do not exceed $500,000, (iv) any sales, leases, conveyances,
transfers or other dispositions of Property or equipment that has become worn
out, obsolete or damaged or otherwise unsuitable for use in connection with the
business of the Corporation or any Restricted Subsidiary, as the case may be,
(v) the incurrence of any Liens, (vi) the making of any Restricted Payment
permitted by paragraph (l)(ii) above, (vii) transfers of cash and sales of Cash
Equivalents and (viii) sales, leases, conveyances, transfers or other
dispositions of Property or equipment in the ordinary course of business.
"Board of Directors" means the board of directors of the Corporation or
any committee authorized to act therefor.
"Business Day" means any day except a Saturday, a Sunday or a federally
recognized holiday or a day on which banking institutions are not required to be
open in the State of New York or the State of Delaware.
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents (however designated and whether or not voting) of capital
stock, partnership interests or any other participation, right or other interest
in the nature of an
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equity interest in such Person or any option, warrant or other security
convertible into any of the foregoing.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Certificate of Designations" means this Certificate of Designations
creating the Senior Preferred Stock.
"Cash Equivalents" means any of the following Investments: (i) marketable
direct obligations issued by, or unconditionally guaranteed by, the United
States Government or issued by any agency thereof and backed by the full faith
and credit of the United States maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any foreign country recognized by the United
States or any political subdivision of any such state or foreign country, as the
case may be, or any public instrumentality thereof (including any taxing
authority) maturing within one year from the date of acquisition thereof and, at
the time of acquisition, having one of the two highest ratings obtainable from
either Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service,
Inc. ("Moody's"); (iii) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit,
time deposit accounts, operating accounts or bankers' acceptances maturing
within one year from the date of acquisition thereof issued or guaranteed by any
commercial banking institution organized under the laws of any jurisdiction
recognized by the United States of America and in which the Corporation or its
Subsidiaries actively conduct business, having at the date of acquisition
thereof combined capital and surplus of not less than U.S. $250,000,000 or the
foreign currency equivalent thereof; (v) repurchase obligations with a term of
not more than 30 days for underlying securities of the types described in clause
(i) above entered into with any bank meeting the qualifications specified in
clause (iv) above; (vi) investments in money market funds which invest
substantially all their assets in securities of the types described in clauses
(i) through (v) above; and (vii) foreign bank deposits and cash equivalents in
jurisdictions where the Corporation or its Subsidiaries are then actively
conducting business, provided, that (a) all such deposits are required to be
made in the ordinary course of business, (b) such deposits do not exceed
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$1,000,000 in the aggregate, and (c) the funds so deposited do not remain in
such bank for more than 10 days.
A "Change of Control" of the Corporation will be deemed to have occurred
at such time as (i) any Person (including a Person's Affiliates) or any Persons
acting together that would constitute a group (for purposes of Section 13(d) of
the Exchange Act, or any successor provision thereto) (a "Group"), other than a
Permitted Holder, becomes the beneficial owner (as defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of (a) 50%
or more of the total Voting Stock of the Corporation or (b) 50% of all classes
of Common Stock (whether voting or non-voting), taken as a whole, of the
Corporation, (iii) any Person (including a Person's Affiliates) or Group, other
than a Permitted Holder, becomes the beneficial owner of more than 30% of the
total Voting Stock of the Corporation, and the Permitted Holders beneficially
own, in the aggregate, a lesser percentage of the total Voting Stock of the
Corporation, than such other Person or Group and the Permitted Holders do not
have the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of the Corporation,
(iv) there shall be consummated any consolidation or merger of the Corporation
in which the Corporation is not the continuing or surviving corporation or
pursuant to which the Common Stock of the Corporation would be converted into
cash, securities or other Property, other than a merger or consolidation of the
Corporation in which the holders of the Common Stock of the Corporation
outstanding immediately prior to the consolidation or merger hold, directly or
indirectly, at least a majority of the Common Stock of the surviving corporation
immediately after such consolidation or merger, or (v) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Corporation (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
shareholders of the Corporation has been approved by 66 2/3% of the directors
then still in office who either were directors at the beginning of such period
or whose election or recommendation for election was previously so approved)
cease to constitute a majority of the Board of Directors.
"Chartwell" means Chartwell Investments Inc. and its Affiliates.
"Commission" means the Securities and Exchange Commission.
"Common Stock" of any Person means all Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or
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involuntary liquidation, dissolution or winding-up of such Person, to any other
class of Capital Stock of such Person.
"Consolidated Interest Coverage Ratio" of any Person means the ratio of
(i) EBITDA of such Person for the four most recent consecutive fiscal quarters
for which financial statements are available or, if the Corporation is not in
compliance with its obligations under paragraph (l)(vi) above on the date of
determination, the four most recent consecutive quarters ending on or prior to
the date of determination (in either such case, the "Four Quarter Period") to
(ii) Consolidated Interest Expense of such Person for such Four Quarter Period.
In addition to and without limitation of the foregoing, for purposes of this
definition, "EBITDA" and "Consolidated Interest Expense" shall be calculated
after giving effect on a pro forma basis to (i)(a) the incurrence of any
Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and (b) any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), occurring on or after the first day of the
Four Quarter Period and on or prior to the date of determination, in each case
set forth in clauses (i)(a) and (b), as if such incurrence or repayment, as the
case may be (and the application of the proceeds thereof), occurred on the first
day of the Four Quarter Period (except that Indebtedness under any revolving
credit facility shall be deemed to be the average daily balance of such
Indebtedness during such Four Quarter Period) and (ii) any Asset Sales or Asset
Acquisitions (including (x) any Person who becomes a Restricted Subsidiary as a
result of any such Asset Acquisition and including any Asset Sale or Asset
Acquisition during such Four Quarter Period by any such Person determined as if
such Person had been a Restricted Subsidiary at the time of such transaction;
provided, that all Indebtedness of such Person and any such Restricted
Subsidiaries shall be deemed to have been incurred on the first day of the Four
Quarter Period and (y) the increase or decrease, as the case may be, in EBITDA
directly attributable to such Asset Sale or Asset Acquisition, as the case may
be) occurring on or after the first day of the Four Quarter Period and on or
prior to the date of determination, as if such Asset Sale or Asset Acquisition,
as the case may be, (including the incurrence, assumption or liability for any
such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period. For purposes of this definition, whenever pro forma effect is to be
given to an Asset Acquisition, the amount of income or earnings relating thereto
and the amount of Consolidated Interest Expense associated with any Indebtedness
incurred in connection therewith shall be determined in good faith by a
responsible financial or accounting officer of the Corporation.
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"Consolidated Interest Expense" means, with respect to any Person, for any
period, without duplication, (i) the aggregate amount of interest charges
(excluding fees and expenses incurred in connection with the Transactions),
whether expensed or capitalized, incurred or accrued by such Person and its
Restricted Subsidiaries, determined on a consolidated basis in conformity with
GAAP for such period, plus (ii) to the extent not included in clause (i) above,
an amount equal to the sum of: (A) imputed interest included in Capitalized
Lease Obligations, (B) all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing, (C)
the net costs associated with Interest Rate Agreements, Currency Agreements and
other hedging obligations, (D) the interest portion of any deferred payment
obligations, (E) amortization of discount or premium on Indebtedness, if any,
(F) all capitalized interest and all accrued interest, (G) all other non-cash
interest expense, (H) all interest incurred or paid under any guarantee of
Indebtedness (including a guarantee of principal, interest or any combination
thereof) of any Person, and (I) all dividends or distributions on Disqualified
Capital Stock if payable to a Person other than the Corporation or a Restricted
Subsidiary (other than dividends paid or payable in shares of Junior Capital
Stock (other than Disqualified Capital Stock) of the Corporation) declared and
payable in cash, minus (iii) to the extent included in clause (i) or (ii) above,
amortization or write-off of deferred financing costs (and original issue
discount to the extent it arises from the issuance of Junior Capital Stock
(other than Disqualified Capital Stock) of the Corporation) during such period
and, without duplication, any charge related to any premium or penalty paid in
connection with redeeming or retiring any Indebtedness of the Corporation or its
Restricted Subsidiaries prior to the stated maturity thereof. If any
Indebtedness outstanding or to be incurred (x) bears a floating rate of
interest, the interest expense on such Indebtedness shall be calculated as if
the rate in effect on the date of determination had been the applicable rate for
the entire Four Quarter Period (taking into account on a pro forma basis any
Interest Rate Agreement that has a remaining term as of the date of
determination in excess of 12 months), and/or (y) was incurred under a revolving
credit facility, the interest expense on such Indebtedness shall be computed
based upon the average daily balance of such Indebtedness during the applicable
period. If any Indebtedness to be incurred bears, at the option of the
Corporation or a Restricted Subsidiary, a fixed or floating rate of interest,
the interest expense on such Indebtedness shall be computed by applying, at the
option of the Corporation or such Restricted Subsidiary, such fixed or floating
rate.
"Consolidated Net Income" means with respect to any Person, for any
period, the aggregate of the Net Income of such Person
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and its Restricted Subsidiaries for such period on a consolidated basis,
determined in accordance with GAAP; provided, that (a) the Net Income of any
Person that is not a Restricted Subsidiary shall be included only to the extent
of the amount of dividends or other distributions representing the Corporation's
proportionate share of such Person's Net Income for such period actually paid in
cash to the Corporation or a Restricted Subsidiary (subject to clause (b) below)
by such Person during such period, (b) the Net Income of any Subsidiary of the
Person in question that is subject to any restriction or limitation on the
payment of dividends or the making of other distributions (other than pursuant
to the Credit Agreement, the Senior Notes, the Note Indenture, or any other
Indebtedness of the Corporation or any Restricted Subsidiary of the Corporation
containing, in the good faith judgment of the Board of Directors of the
Corporation, substantially the same or less restrictive limitations on the
payment of dividends or the making of other distributions than those contained
in such Credit Agreement, the Senior Notes or the Note Indenture or the Exchange
Debentures or the Indenture if the same were issued) shall be excluded to the
extent of such restriction or limitation (regardless of any waiver thereof),
(c)(i) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition and (ii) any
net after tax gain (but not loss) resulting from an Asset Sale by the Person in
question or any of its Subsidiaries other than in the ordinary course of
business shall be excluded, (d) non-cash gains and losses due solely to
fluctuations in currency values shall be excluded, (e) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, any earnings (or losses) of the successor
corporation prior to such consolidation, merger or transfer of assets shall be
excluded, and (f) all items classified as extraordinary, unusual or
nonrecurring, including all items relating to the Transactions and the
pre-closing events relating thereto shall be excluded (including the fees and
expenses incurred in connection with the Transactions and write-offs or other
costs associated or arising in connection with the Transactions). In computing
Consolidated Net Income under clause (C) under paragraph (l)(ii) above, the
Corporation or such Restricted Subsidiary (i) shall use audited financial
statements for the portion of the relevant period for which such statements are
available on the date of determination and unaudited financial statements and
other current financial data based on the books and records of the Corporation
for the remaining portion of such period and (ii) shall be permitted to rely in
good faith for the balance of the relevant period for which audited financial
statements are not available on the financial statements and other financial
data derived from the books and
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records of the Corporation or such Restricted Subsidiary that are available on
the date of determination.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person and its Restricted Subsidiaries determined
on a consolidated basis in accordance with GAAP, less (to the extent included)
amounts attributable to Disqualified Capital Stock of such Person.
"Consolidated Tangible Assets" of any Person means the consolidated
tangible assets of such Person and its Restricted Subsidiaries determined on a
consolidated basis in accordance with GAAP as of the end of the most recent
fiscal quarter for which financial statements are available or, if the
Corporation is not in compliance with its obligations under paragraph (l)(vi)
above on the date of determination, the end of the most recent quarter ending on
or prior to the date of determination.
"Credit Agreement" means the Credit Agreement, dated on or about March 30,
1998, among Morris Material Handling, the Corporation, Material Handling LLC,
Morris Material Handling, Ltd., Mondel ULC, Kaverit Steel and Crane ULC, and
Canadian Imperial Bank of Commerce, as Administrative Agent, Credit Agricole
Indosuez, as Syndication Agent, BankBoston N.A., as Documentation Agent, and the
lending institutions named therein.
"Credit Facilities" means one or more senior secured or unsecured credit
facilities providing, inter alia, for revolving credit loans, term loans,
bankers' acceptances and/or letters of credit between the Corporation or its
Restricted Subsidiaries and one or more lenders, including, in each case, any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced, restated 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 designed to protect the
Corporation or any Restricted Subsidiary of the Corporation against fluctuations
in currency values.
"Disqualified Capital Stock" means any Capital Stock of the Corporation or
a Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the mandatory redemption date of the Senior Preferred Stock for any
consideration other than
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Capital Stock of the Corporation which is not Disqualified Capital Stock;
provided, that the Preferred Stock of the Corporation that is issued with the
benefit of provisions requiring a change of control offer to be made for such
Preferred Stock in the event of a change of control of the Corporation, which
provisions have substantially the same effect as the provisions of paragraph (h)
of this Certificate of Designations shall not be deemed to be Disqualified
Capital Stock solely by virtue of such provisions. Without limitation of the
foregoing, Disqualified Capital Stock shall be deemed to include any Preferred
Stock of a Restricted Subsidiary of the Corporation except for Permitted Foreign
Restricted Subsidiary Preferred Stock.
"Dividend Payment Date" means April 1 and October 1 of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter, each
semi-annual dividend period.
"Dividend Record Date" means March 15 and September 15 of each year.
"EBITDA" means, for any Person, for any period, an amount equal to (a) the
sum of (i) Consolidated Net Income for such period, plus (ii) the provision for
taxes for such period based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income (minus any provision
for taxes utilized in computing net loss under clause (i) hereof to the extent
such provision reduced the net loss), plus (iii) Consolidated Interest Expense
for such period, plus (iv) depreciation for such period on a consolidated basis
to the extent reducing Consolidated Net Income, plus (v) amortization of
intangibles for such period on a consolidated basis to the extent reducing
Consolidated Net Income, plus (vi) amortization of original issue discount to
the extent it arises from the issuance of Junior Capital Stock (other than
Disqualified Capital Stock) of the Corporation, to the extent reducing
Consolidated Net Income, plus (vii) any charge related to any premium or penalty
paid in connection with redeeming or retiring any Indebtedness prior to its
stated maturity to the extent reducing Consolidated Net Income, plus (viii) any
other non-cash items reducing Consolidated Net Income for such period, minus (b)
all non-cash items increasing Consolidated Net Income for such period, minus (c)
all cash payments during such period relating to non-cash charges that were
added back in determining EBITDA in any prior period (provided that payment of
such cash amounts did not reduce Consolidated Net Income), all for such Person
and its Restricted Subsidiaries determined in accordance with GAAP.
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"Equity Investment" means the investment by MHE Investments, Inc., the
purchase by certain institutional investors of Units being issued by the
Corporation, and a retained equity investment by HarnCo, in each case, in the
Corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Date" means the date, if any, on which the shares of Senior
Preferred Stock are exchanged by the Corporation for Exchange Debentures.
"Exchange Debentures" shall have the meaning ascribed to it in paragraph
(g) hereof.
"Exchange Offer" shall have the meaning ascribed to it in the Registration
Rights Agreement.
"Exchange Preferred Stock" means the Corporation's 12% Series A Senior
Exchangeable Preferred Stock that may be issued in exchange for the Original
Stock constituting Senior Preferred Stock as contemplated by the Registration
Rights Agreement and having terms identical in all material respects to the
Original Stock constituting Senior Preferred Stock.
"Exchange Notice" shall have the meaning ascribed to it in paragraph (g)
hereof.
"Fair Market Value" means, with respect to any asset or Property, the
price which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair Market
Value shall be determined by the Board of Directors acting in good faith and, in
the case of determination involving assets or Property in excess of $2 million,
shall be evidenced by a resolution of the Board of Directors delivered to the
Trustee.
"Financings" means, collectively, the offering by Morris Material Handling
of the Senior Notes, the borrowings by Morris Material Handling under the Credit
Agreement, and the Equity Investment.
"Foreign Restricted Subsidiary" of any specified Person means any
Restricted Subsidiary the jurisdiction of incorporation, organization or
formation of which is outside of the United States, Canada, the United Kingdom
and South Africa.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States from time to time.
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"Guarantee" means a guarantee of the Senior Notes by a guarantor under the
Note Indenture, as in effect from time to time.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the performance
(or payment of damages in the event of non-performance) of all or any part of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit. A guarantee shall include, without
limitation, any agreement to preserve or maintain any other Person's financial
condition or to cause any other Person to achieve certain levels of operating
results.
"HarnCo" means Harnischfeger Corporation.
"Holder" means a holder of shares of Senior Preferred Stock, as reflected
in the register maintained by the Transfer Agent.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such Person (and
"incurrence," "incurred," "incurrable," and "incurring" shall have meanings
correlative to the foregoing); provided, that a change in GAAP that results in
an obligation of such Person that exists at such time becoming Indebtedness
shall not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person,
any indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
Property (excluding, without limitation, any balances that constitute accounts
payable or trade payables or liabilities arising from advance payments or
customer deposits for goods and services sold by such Person or its Restricted
Subsidiaries in the ordinary course of business, and other accrued liabilities,
in each case, arising in the ordinary course of business) if and to the extent
any of the foregoing indebtedness would appear as a liability upon a balance
sheet of
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such Person prepared in accordance with GAAP, and shall also include, to the
extent not otherwise included (i) any Capitalized Lease Obligations, (ii)
guarantees of items of other Persons which would be included within this
definition for such other Persons (whether or not such items would appear upon
the balance sheet of the guarantor), including, without limitation, guarantees
of dividends for which such Person may be liable directly or indirectly, (iii)
all obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction (provided that in the case of
any such letters of credit, the items for which such letters of credit provide
credit support are those of other Persons which would be included within this
definition for such other Persons), (iv) Disqualified Capital Stock of the
Corporation or any Restricted Subsidiary thereof, including, without limitation,
any liquidation preference and mandatory redemption payment obligations in
respect thereof and (v) obligations of any such Person under any Interest Rate
Agreement or Currency Agreement applicable to any of the foregoing (if and to
the extent such Interest Rate Agreement or Currency Agreement obligations would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP). The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations included within the definition
of Indebtedness, the maximum liability upon the occurrence of the contingency
giving rise to the obligation, provided, that (i) the amount outstanding at any
time of any Indebtedness issued with original issue discount is the principal
amount of such Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at such time as determined in
conformity with GAAP but such Indebtedness shall only be deemed to have been
incurred on the date of original issuance thereof and, in the case of any
securities constituting Indebtedness, the payment of interest upon which is in
such securities, such Indebtedness shall only be deemed to have been incurred on
the date of issuance of the original securities constituting such Indebtedness,
(ii) Indebtedness shall not include any liability for federal, state, local,
foreign or other taxes and (iii) contingent obligations of the Corporation or
any of its Restricted Subsidiaries under any Surety Obligation will be deemed to
be Indebtedness only upon the earlier of (a) the Corporation's or any Restricted
Subsidiary's obtaining knowledge of any payment by or in respect of any provider
in respect of any Surety Obligation, (b) the demand by any provider for any
reimbursement by the Corporation or any of its Restricted Subsidiaries of any
Surety Obligation or (c) the time at which the Corporation or any of its
Restricted Subsidiaries becomes obligated to make payment in respect of any
Surety Obligation as a result of the provider having made a
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payment in respect of such Surety Obligation or as a result of such payment
being required to be made by such provider. Notwithstanding any other provision
of the foregoing definition, any trade or accounts payable arising from the
purchase of goods or materials or for services obtained in the ordinary course
of business shall not be deemed to be "Indebtedness" of the Corporation or any
Restricted Subsidiaries for purposes of this definition. Furthermore, guarantees
of (or obligations with respect to letters of credit supporting) Indebtedness
otherwise included in the determination of such amount shall not also be
included.
"Initial Dividend Period" means the dividend period commencing on the
Issue Date and ending on the first Dividend Payment Date to occur thereafter.
"Indenture" shall have the meaning ascribed to it in paragraph (f)(ii)(E)
hereof.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance (or other
extension of credit), loan or capital contribution to (by means of transfers of
Property to others, payments for Property or services for the account or use of
others or otherwise), any guarantee of any obligations or Indebtedness of any
other Person, the purchase of any stock, bonds, notes, debentures, partnership
or joint venture interests or other securities of, the acquisition, by purchase
or otherwise, of any evidence of beneficial ownership of, or interest in, any
Person. Upon the designation of an Unrestricted Subsidiary as a Restricted
Subsidiary or the acquisition by the Corporation or a Restricted Subsidiary of
an interest in any Person that, as a result thereof, becomes a Restricted
Subsidiary, the Corporation shall be deemed to have made an Investment equal to
the Fair Market Value of all Investments owned by such new Restricted
Subsidiary. Investments shall exclude (i) accounts receivable and other
extensions of trade credit, in each case, on commercially reasonable terms in
accordance with normal trade practices, (ii) prepaid expenses and workers'
compensation, utility, lease and similar deposits, in the ordinary course of
business and (iii) acquisitions of Property or assets paid for solely by the
issuance of Capital Stock (other than Disqualified Capital Stock) of the
Corporation.
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"Issue Date" means the date of original issuance of the Senior Preferred
Stock.
"Joint Venture" of any specified Person means any corporation,
partnership, joint venture, limited liability company, association or other
business entity, whether now existing or hereafter organized or acquired, and
(a) which is engaged in a similar line of business as the Corporation or any
Restricted Subsidiary at the date of determination and (b)(i) in the case of a
corporation, of which not more than 50% of the total voting power of the Capital
Stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, officers or trustees thereof is held by the
Corporation or any of its Restricted Subsidiaries, or (ii) in the case of a
partnership, joint venture, limited liability company, association or other
business entity, with respect to which the Corporation or any of its Restricted
Subsidiaries has not more than 50% of the ownership and voting power relating to
the policies, management and affairs thereof.
"Junior Capital Stock" means Capital Stock of the Corporation, including
the Series B Junior Preferred Stock and the Series C Junior Voting Preferred
Stock, that does not rank, as to the payment of dividends or other comparable
distributions or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation, prior to
or on a parity with the Senior Preferred Stock.
"Lien" means with respect to any Property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such Property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"Mandatory Redemption Price" shall have the meaning ascribed to it in
paragraph (e) hereof.
"MHE Investments" means MHE Investments, Inc., a Delaware corporation.
"Morris Material Handling" means Morris Material Handling, Inc., a
Delaware corporation.
"Moody's" means Moody's Investors Services, Inc. and its successors.
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"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP, plus the amount
of any decrease in the deferred tax asset for such period relating to the actual
cash tax benefit realized by such Person or the consolidated tax group of which
such Person is a member resulting from the election under Section 338(h)(10) of
the Internal Revenue Code of 1986, as amended, in respect of the Transactions.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by the
Corporation, the aggregate net proceeds received by the Corporation, after
payment of expenses, commissions and the like incurred in connection therewith,
whether such proceeds are in cash or in Property (valued at the Fair Market
Value thereof at the time of receipt) and (b) in the case of any exchange,
exercise, conversion or surrender of outstanding securities of any kind for or
into shares of Capital Stock of the Corporation which is not Disqualified Stock,
the net book value of such outstanding securities on the date of such exchange,
exercise, conversion or surrender (plus any additional amount required to be
paid by the holder to the Corporation upon such exchange, exercise, conversion
or surrender) less any and all payments made to the holders, e.g., on account of
fractional shares and less all expenses incurred by the Corporation in
connection therewith.
"Note Indenture" means the Indenture relating to the Senior Notes, as in
effect on the Issue Date.
"October 1997 Drop Down" means the transfer in October 1997 by HarnCo of
the assets of its Material Handling Equipment Division to Material Handling,
LLC, a wholly-owned subsidiary of the Corporation.
"Offering Memorandum" means the Offering Memorandum dated March 23, 1998
relating to the Corporation's offering and placement of the Senior Preferred
Stock.
"Original Stock" means shares of Senior Preferred Stock that are not
shares of Exchange Preferred Stock.
"Parity Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Permitted Affiliate Agreements" means the following agreements between or
among the Corporation and any of MHE Investments, HarnCo, Chartwell or their
respective Affiliates:
(i) Recapitalization Agreement;
(ii) Transition Services Agreement between HarnCo and Morris Material
Handling, dated on or about March 30, 1998;
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(iii) Trademark License Agreement between Harnischfeger Technologies, Inc.
and Morris Material Handling, dated on or about March 30, 1998;
(iv) Separation Agreement between HarnCo and Material Handling, LLC, dated
October 26, 1997;
(v) Component and Manufactured Products Supply Agreement between HarnCo
and Morris Material Handling, dated on or about March 30, 1998;
(vi) Employment Agreement between Morris Material Handling and Michael
Erwin, dated on or about March 30, 1998;
(vii) Employment Agreement between Morris Material Handling and David
Smith, dated on or about March 30, 1998;
(viii) Employment Agreement between Morris Material Handling and Richard
Niespodziani, dated on or about March 30, 1998;
(ix) Employment Agreement between Morris Material Handling and Peter
Kerrick, dated on or about March 30, 1998;
(x) Employment Agreement between Morris Material Handling and Edward
Doolan, dated on or about March 30, 1998;
(xi) Employment Agreement between Morris Material Handling and Michael
Maddock, dated on or about March 30, 1998;
(xii) Employment Agreement between Morris Material Handling and Bruce
Norridge, dated on or about March 30, 1998;
(xiii) Management Consulting Agreement between Morris Material Handling
and Chartwell Investments Inc., dated on or about March 30, 1998;
(xiv) Financial Advisory Agreement between Morris Material Handling and
Chartwell Investments Inc., dated on or about March 30, 1998;
(xv) Tax Sharing Agreement between MHE Investments, Inc., the Corporation
and certain of the Corporation's subsidiaries, dated on or about March 30, 1998;
(xvi) Shareholders Agreement between MHE Investments, Inc., the
Corporation and HarnCo, dated on or about March 30, 1998;
(xvii) Credit Indemnification Agreement between Harnischfeger Industries,
Inc. and Morris Material Handling, dated on or about March 30, 1998;
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(xviii) Equity Purchase Agreements between Niles L.L.C. and certain
members of management;
(xix) HK Agreement by and among the Corporation, MHE Investments, Inc. and
the majority stockholder of the Corporation, dated on or about March 30, 1998;
and
(xx) Employee Loan Agreements between Morris Material Handling and certain
members of management with respect to loans aggregating $600,000 by Morris
Material Handling to such employees to acquire equity interests in Niles L.L.C.
Each of the foregoing agreements is a Permitted Affiliated Agreement in
the form such agreement is in effect immediately after the initial issuance of
the Senior Preferred Stock on the Issue Date, or as the same may be amended from
time to time subject to the provisions of paragraph (l)(iii) above provided,
that notwithstanding paragraph (1)(iii), such agreements may be extended from
time to time or otherwise amended, to the extent that a majority of the
disinterested members of the Board of Directors has determined in good faith
that no material adverse effect on the creditworthiness of the Corporation and
its Restricted Subsidiaries, taken as a whole, shall result as a consequence
thereby.
"Permitted Foreign Restricted Subsidiary Preferred Stock" means securities
of Foreign Restricted Subsidiaries of the Corporation denominated in Preferred
Stock that (a) otherwise have substantially the same characteristics of voting
or non-voting Common Stock of a Delaware corporation, (b) do not obligate the
issuer to pay current dividends or distributions in cash or otherwise and (c)
are not subject to any requirement of redemption or repurchase.
"Permitted Holders" means Chartwell.
"Permitted Indebtedness" means:
(i) Indebtedness of the Corporation or any Restricted Subsidiary
arising under or in connection with the Credit Facilities or Acquired
Indebtedness in an aggregate principal amount at any one time outstanding
not to exceed the sum of (a) $55 million, less the aggregate amount of all
Net Proceeds of Asset Sales applied to permanently reduce the outstanding
amount of such Indebtedness, and (b) the greater of (1) $75 million, less
the aggregate amount of all Net Proceeds of Asset Sales applied to
permanently reduce the outstanding amount of such Indebtedness or (2) the
sum of (x) 80% of the book value of accounts receivable of the Corporation
and its Restricted Subsidiaries and (y) 45% of
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the book value of consolidated inventory of the Corporation and its
Restricted Subsidiaries, in each case, determined at the time of such
incurrence, less the aggregate amount of all Net Proceeds of Asset Sales
applied to permanently reduce the outstanding amount of such Indebtedness;
provided, that $15 million of the Indebtedness incurred under this clause
(b) may be incurred solely to obtain letters of credit and to fund draws
thereunder to provide credit support for the Surety Arrangement or other
Surety Obligations or other letters of credit reasonably necessary in the
ordinary course of business;
(ii) Indebtedness under Surety Obligations and under the Surety
Arrangement, in either case, that are due not later than 10 days after the
earlier of (a) the Corporation's or any Restricted Subsidiary's obtaining
knowledge of any payment by or in respect of any provider in respect of
any Surety Obligation, (b) the demand by any provider for any
reimbursement by the Corporation or any of its Restricted Subsidiaries of
any Surety Obligation or (c) the time at which the Corporation or any of
its Restricted Subsidiaries becomes obligated to make payment in respect
of any Surety Obligation as a result of the provider having made a payment
in respect of such Surety Obligation or as a result of such payment being
required to be made by such provider;
(iii) Indebtedness under the Exchange Debentures, the Indenture, the
Senior Notes, the Note Indenture and the Guarantees;
(iv) Indebtedness not covered by any other clause of this definition
which is outstanding on the Issue Date other than under the South African
Credit Facility;
(v) Indebtedness of the Corporation to any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary to the Corporation or another
Restricted Subsidiary, provided, that Indebtedness of the Corporation or
any Wholly-Owned Subsidiary to any Restricted Subsidiary (other than a
Wholly-Owned Subsidiary) is incurred for borrowed money; provided,
further, that any Indebtedness otherwise referred to in this clause (v)
that is no longer held by a Restricted Subsidiary or the Corporation
(whether (i) as a result of a sale or transfer of such Indebtedness, (ii)
as a result of such Person no longer being the Corporation or a Restricted
Subsidiary or (iii) otherwise), shall, in each case, be deemed incurred at
such time;
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(vi) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire Property in the ordinary course of business, which
Indebtedness and Capitalized Lease Obligations, in the aggregate,
outstanding on any date of incurrence (and any Refinancing Indebtedness in
respect thereof), do not exceed 4% of the Consolidated Tangible Assets of
the Corporation and its Restricted Subsidiaries;
(vii) Interest Rate Agreements and Currency Agreements;
(viii) guarantees of obligations of the Corporation or its
Restricted Subsidiaries;
(ix) additional Indebtedness of the Corporation or its Restricted
Subsidiaries not to exceed an aggregate of $10 million in principal amount
outstanding at any time; and
(x) Refinancing Indebtedness in respect of Indebtedness incurred
under clauses (iii), (iv), (v) and (vii) above or incurred pursuant to the
first paragraph of paragraph (l)(i) above.
"Permitted Investments" means, for any Person, Investments made on
or after the Issue Date consisting of:
(i) Investments by the Corporation, or by a Restricted Subsidiary,
in the Corporation or a Restricted Subsidiary;
(ii) Cash Equivalents;
(iii) Investments by the Corporation, or by a Restricted Subsidiary
thereof, in a Person, if as a result of such Investment (a) such Person
becomes a Restricted Subsidiary of the Corporation or (b) such person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets (including the proceeds of such
Investment) to, or is liquidated into, the Corporation or a Restricted
Subsidiary thereof;
(iv) non-cash consideration received in conjunction with the
consummation of an Asset Sale;
(v) Interest Rate Agreements and Currency Agreements;
(vi) any Investment existing on the Issue Date;
(vii) Investments received in settlement of obligations owed to the
Corporation or any Restricted Subsidiary as a result of bankruptcy or
insolvency proceedings or upon the
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foreclosure or enforcement of any Lien in favor of the Corporation or any
Restricted Subsidiary;
(viii) Investments required pursuant to the following agreements or
obligations of the Corporation or a Restricted Subsidiary to make such
Investments in effect on the Issue Date:
(A) Shareholders Agreement among Penang Port SDN BHD., Morris
Mechanical Handling Limited and the General Electric Company of
Malaysia SDN BHD, dated November 8, 1995.
(B) Joint Venture Formation and Partners Agreement by and
among P&H Middle East Ltd., Morris Mechanical Handling, Ltd., and
Hamad Abdulla Al-Zamil and Brothers Company, dated 1997.
(ix) Investments required to be made pursuant to the Transactions,
as follows: All transactions contemplated in the Recapitalization
Agreement; and
(x) Investments by the Corporation or any Restricted Subsidiary not
otherwise permitted under this definition, in an aggregate amount not to
exceed $15 million at any one time outstanding.
For purposes of clause (x) above, the amount of any Investment
outstanding, in respect of any Investment and the issuer thereof (and its
Subsidiaries), shall be equal to the excess of (a) the aggregate amount of all
Investments made therein by the Corporation or any Restricted Subsidiary on or
after the Issue Date (including the Fair Market Value of all such Investments
not made in cash or Cash Equivalents, valued at the time of such Investment)
over (b) the aggregate amount returned in cash or Cash Equivalents on or with
respect to Investments in such Person (whenever such Investment was made)
whether through the sale or other disposition of the Investment in such Person
(or portion thereof) or through interest payments, principal payments, dividends
or other distributions or payments; provided, that such payments or
distributions shall not be (and have not been) included in clause (C)(3) of the
first paragraph of paragraph (l)(ii) above or otherwise included in Consolidated
Net Income.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
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"Predecessor Stock" of any particular share of Senior Preferred Stock
means every previous share of Senior Preferred Stock issued before, and
evidencing all or a portion of the same interest as that evidenced by, such
particular share of Senior Preferred Stock; and, for the purposes of this
definition, any share of Senior Preferred Stock issued and delivered in exchange
for or in lieu of a mutilated, destroyed, lost or stolen share of Senior
Preferred Stock shall be deemed to evidence the same interest as the mutilated,
destroyed, lost or stolen share of Senior Preferred Stock.
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Private Exchange Offer" shall have the meaning ascribed to it in the
Registration Rights Agreement.
"Private Exchange Preferred Stock" means the Corporation's 12% Series A
Senior Exchangeable Preferred Stock contemplated by the Registration Rights
Agreement.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed Property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"Public Equity Offering" means any underwritten public offering of shares
of Common Stock (however designated and whether voting or non-voting) of the
Corporation or Morris Material Handling and any and all rights, warrants or
options to acquire such Common Stock pursuant to an effective registration
statement (other than a registration statement on Form S-4 or S-8) filed with
the Commission in accordance with the Securities Act.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including sales and
excise taxes, installation and delivery charges and other direct costs of, and
other direct expenses paid or charged in connection with, such purchase or
construction) of an item of Property, the principal amount of which Indebtedness
does not exceed the sum of (i) 100% of such cost and (ii) reasonable fees and
expenses of such Person incurred in connection therewith.
"Recapitalization" means the recapitalization of the Corporation pursuant
to the Recapitalization Agreement.
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"Recapitalization Agreement" means the Recapitalization Agreement, dated
as of January 28, 1998, among HarnCo, the sellers named therein and MHE
Investments, Inc., together with Amendment No. 1 thereto, dated as of March 4,
1998.
"Redemption Date" with respect to any shares of Senior Preferred Stock,
means the date on which such shares of Senior Preferred Stock are redeemed by
the Corporation.
"Redemption Notice" shall have the meaning ascribed to it in paragraph (e)
hereof.
"Refinancing Indebtedness" means Indebtedness that refunds or refinances
any Indebtedness of the Corporation or its Restricted Subsidiaries outstanding
on the Issue Date or other Indebtedness permitted to be incurred by the
Corporation or its Restricted Subsidiaries pursuant to the terms of this
Certificate of Designations, but only to the extent that (i) the Refinancing
Indebtedness is scheduled to mature either (a) no earlier than the Indebtedness
being refunded or refinanced, or (b) at least 91 days after the mandatory
Redemption Date of the Senior Preferred Stock, (ii) the portion, if any, of the
Refinancing Indebtedness that is scheduled to mature on or prior to the
mandatory Redemption Date of the Senior Preferred Stock has a weighted average
life to maturity at the time such Refinancing Indebtedness is incurred that is
equal to or greater than the weighted average life to maturity of the portion of
the Indebtedness being refunded or refinanced that is scheduled to mature on or
prior to the mandatory Redemption Date of the Senior Preferred Stock and, in the
case of clause (i) above and this clause (ii), such Refinancing Indebtedness by
its terms, or by the terms of any agreement or instrument pursuant to which such
Indebtedness is issued, does not permit redemption or other retirement
(including pursuant to any required offer to purchase to be made by the
Corporation or a Restricted Subsidiary) of such Indebtedness at the option of
the holder thereof prior to the final stated maturity of the Indebtedness being
refinanced, other than a redemption or other retirement at the option of the
holder of such Indebtedness (including pursuant to a required offer to purchase
made by the Corporation or a Restricted Subsidiary) which is conditioned on a
change of control of the Corporation pursuant to provisions substantially
similar to those contained under paragraph (h) above and provisions contained in
the Note Indenture attributable to required offers to purchase attributable to
Asset Sales or otherwise on terms substantially similar to those in such
Indebtedness being refinanced, (iii) such Refinancing Indebtedness is in an
aggregate principal amount that is equal to or less than the sum of (a) the
aggregate principal amount then outstanding under the Indebtedness being
refunded or refinanced, (b) the amount of accrued and unpaid
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interest, if any, and premiums owed, if any, not in excess of pre-existing
prepayment provisions on such Indebtedness being refunded or refinanced and (c)
the amount of customary fees, expenses and costs related to the incurrence of
such Refinancing Indebtedness, and (iv) such Refinancing Indebtedness is
incurred by the same Person that initially incurred the Indebtedness being
refunded or refinanced, except that the Corporation may incur Refinancing
Indebtedness to refund or refinance Indebtedness of any Wholly-Owned Subsidiary
of the Corporation and any Restricted Subsidiary may incur Refinancing
Indebtedness to refund or refinance Indebtedness of any other Restricted
Subsidiary.
"Registration Rights Agreement" means the Preferred Stock Registration
Rights Agreement dated as of the Issue Date between the Corporation and CIBC
Oppenheimer Corp.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment of any kind or
character (whether in cash, Property or securities) on Junior Capital Stock of
the Corporation or Capital Stock of any Restricted Subsidiary or any payment
made to the direct or indirect holders (in their capacities as such) of Junior
Capital Stock of the Corporation or Capital Stock of any Restricted Subsidiary
of the Corporation (other than (x) dividends or distributions payable solely in
Junior Capital Stock (other than Disqualified Capital Stock) of the Corporation,
and (y) dividends or distributions payable to the Corporation or to a Restricted
Subsidiary of the Corporation and (z) dividends or distributions from a
Restricted Subsidiary of the Corporation that are paid ratably to all Persons
holding the Capital Stock of such Restricted Subsidiary in proportion to the
Capital Stock held by such Persons), (ii) the purchase, redemption or other
acquisition or retirement for value of any Junior Capital Stock of the
Corporation or any Capital Stock of any of its Restricted Subsidiaries or any
options, warrants or rights to purchase or acquire such shares or any securities
convertible or exchangeable into such shares (other than any such shares,
options, warrants, rights or securities (a) that are owned by the Corporation or
a Restricted Subsidiary of the Corporation; provided, that such options,
warrants, rights or securities are purchased, redeemed or otherwise acquired for
value by the issuer thereof, or (b) the issuer of which is a Restricted
Subsidiary; provided, that, for purposes of this clause (b), such purchase,
redemption or other acquisition or retirement for value is (A) permitted under
clauses (viii) or (x) of the definition of Permitted Investments or (B) in an
amount, which, when added to all other Restricted Payments made pursuant to this
clause (b), is not greater than 10% of Consolidated Tangible Assets of the
Corporation and its Restricted Subsidiaries), (iii) the making of any Investment
other than a Permitted Investment, (iv) any designation (other
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than pursuant to clause (x) of the definition of Permitted Investments) of a
Restricted Subsidiary as an Unrestricted Subsidiary (a "Designation"), provided,
that the Designation of a Subsidiary of the Corporation as an Unrestricted
Subsidiary shall be deemed to include the Designation of all of the Subsidiaries
of such Subsidiary that were Restricted Subsidiaries, (v) forgiveness of any
Indebtedness of an Affiliate of the Corporation to the Corporation or a
Restricted Subsidiary, and (vi) any advisory fee paid to an Affiliate with
respect to a specific transaction (other than fees payable on the Issue Date
upon consummation of the Transactions). For purposes of determining the amount
expended for Restricted Payments, (a) cash distributed or invested shall be
valued at the face amount thereof and Property other than cash shall be valued
at its Fair Market Value, except that in determining the amount of any
Restricted Payment made under clause (iv) above, the amount of such Restricted
Payment shall be equal to the greater of (x) the book value or (y) the Fair
Market Value of the Corporation's direct and indirect proportionate interest in
such Subsidiary on such date and (b) upon the designation of an Unrestricted
Subsidiary as a Restricted Subsidiary, or the acquisition by the Corporation or
a Restricted Subsidiary of an interest in any Person that, as a result thereof,
becomes a Restricted Subsidiary, the Corporation shall be deemed to have made a
Restricted Payment equal to the Fair Market Value of the Capital Stock of the
Corporation or its Restricted Subsidiaries owned by such new Restricted
Subsidiaries.
"Restricted Subsidiary" means a Subsidiary of the Corporation other than
an Unrestricted Subsidiary and includes all of the Subsidiaries of the
Corporation existing as of the Issue Date. The Board of Directors may designate
any Unrestricted Subsidiary or any Person that is to become a Subsidiary as a
Restricted Subsidiary if immediately after giving effect to such action (and
treating any Acquired Indebtedness as having been incurred at the time of such
action), (i) no Voting Rights Triggering Event shall have occurred and be
continuing, (ii) Indebtedness of such Person and its Subsidiaries outstanding
immediately following such redesignation would, if incurred at such time, be
permitted to be incurred under this Certificate of Designations and (iii) the
provisions referred to in clause (b) of the last sentence of the definition of
Restricted Payment is complied with and any Investments pursuant to the second
sentence of the definition of Investments are permitted to be made pursuant to
this Certificate of Designations.
"Securities Act" means the Securities Act of 1933, as amended.
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"Seller Note" means any Indebtedness of the Corporation or any Restricted
Subsidiary issued to a seller as a portion of the purchase price in any Asset
Acquisition by the Corporation or such Restricted Subsidiary from such seller.
"Senior Notes" means the $200,000,000 aggregate principal amount of 9 1/2%
Senior Notes due 2008 of Morris Material Handling.
"Senior Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Series B Junior Preferred Stock" means the 12 1/4% Series B Junior
Exchangeable Preferred Stock of the Corporation, liquidation preference $1,000
per share.
"Series C Junior Voting Preferred Stock" means the 12 1/2% Series C Junior
Exchangeable Voting Preferred Stock of the Corporation, liquidation preference
$1,000 per share.
"South African Credit Facility" means a Credit Facility in an aggregate
principal amount or with aggregate commitments not to exceed $5 million to be
entered into by Morris Mechanical Handling (Pty) Ltd.
"Special Dividends" shall have the meaning ascribed to it in paragraph
(c)(vii) hereof.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, limited liability company, association or other business entity,
whether now existing or hereafter organized or acquired, (i) in the case of a
corporation, of which more than 50% of the total Voting Stock is held by such
first-named Person or any of its Subsidiaries or (ii) in the case of a
partnership, joint venture, limited liability company, association or other
business entity, with respect to which such first-named Person or any of its
Subsidiaries has at least a majority ownership and voting power relating to the
policies, management and affairs thereof.
"Successor Stock" of any particular share of Senior Preferred Stock means
every share of Senior Preferred Stock issued after, and evidencing all or a
portion of the same interest as that evidenced by, such particular share of
Senior Preferred Stock; and, for the purposes of this definition, any Senior
Preferred Stock issued and delivered in exchange for or in lieu of a mutilated,
destroyed, lost or stolen share of Senior Preferred Stock shall be deemed to
evidence the same interest as the mutilated, destroyed, lost or stolen share of
Senior Preferred Stock.
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"Surety Arrangement" means one or more surety arrangements providing,
inter alia, for the issuance of Surety Obligations between the Corporation or
any of its Restricted Subsidiaries and one or more providers, provided to the
Corporation or its Restricted Subsidiaries including, in each case, any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced, restated or refinanced from time to time.
"Surety Obligations" means any bonds, including bid bonds, advance bonds,
or performance bonds, letters of credit, warranties, and similar arrangements
between the Corporation and any of its Restricted Subsidiaries and one or more
providers, for the benefit of the Corporation's or any Restricted Subsidiary's
suppliers, vendors, insurers or customers including, in each case, any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced, restated or refinanced from time to time.
"Tax Allocation Agreement" means a tax allocation agreement among the
Corporation, Morris Material Handling and MHE Investments, as in effect on the
Issue Date and as the same may be amended from time to time subject to the
provisions of paragraph (l)(iii) above and provided, that no material adverse
effect on Corporation or on the holders of the Senior Preferred Stock shall
result as a consequence thereby.
"Transactions" means, collectively, the Recapitalization, the Financings
and the October 1997 Drop Down and the other related transactions described in
the section "The Transactions" contained in the Offering Memorandum.
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of the Corporation which is classified
(whether on or after the Issue Date) as an Unrestricted Subsidiary by a
resolution adopted by the Board of Directors of the Corporation; provided, that
a Subsidiary may be so classified as an Unrestricted Subsidiary only if (i) such
classification in compliance with paragraph (l)(ii) above, (ii) such Subsidiary
does not own beneficially any Capital Stock of the Corporation or any Restricted
Subsidiary (other than any Restricted Subsidiary of such Subsidiary that is
being designated as an Unrestricted Subsidiary at the time of such
classification) and (iii) all Indebtedness of the Corporation or any Restricted
Subsidiary to such Subsidiary is deemed incurred at the time of such
classification or at the time such Capital Stock is no longer so owned. The
Corporation shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, at any
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time, (a) be liable for any Indebtedness of any Unrestricted Subsidiary or (b)
be liable for any Indebtedness that provides that the holder thereof may (upon
notice, lapse of time or both) declare a default thereon or cause the payment
thereof to be accelerated or payable prior to its final maturity upon the
occurrence of a default with respect to any Indebtedness of any Unrestricted
Subsidiary.
"Voting Rights Triggering Event" shall have the meaning ascribed to it in
paragraph (f) hereof.
"Voting Stock" of any Person means the Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly-Owned Subsidiary" means any Restricted Subsidiary, all of the
outstanding Voting Stock (other than directors' qualifying shares) of which are
owned, directly or indirectly, by the Corporation.
(n) Restrictions on Transfer
(i) Each share of Original Stock shall contain a legend
substantially to the following effect until the Resale Restriction
Termination Date (as defined below) unless the Corporation determines
otherwise:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR
(B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3)
OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE
TRANSACTION" PURSUANT TO REGULATION S (WITHIN THE MEANING OF RULE
903(C)(2) OF REGULATION S UNDER THE SECURITIES ACT), (2) AGREES THAT IT
WILL NOT, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE")
THAT IS TWO YEARS (OR SUCH SHORTER PERIOD AS MAY BE PRESCRIBED BY RULE
144(K)(OR ANY SUCCESSOR PROVISION THEREOF) UNDER THE SECURITIES ACT) AFTER
THE LATER OF THE ORIGINAL ISSUE DATE AND THE LAST DATE ON WHICH THE ISSUER
OR ANY AFFILIATE THEREOF WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY), RESELL OR OTHERWISE TRANSFER THIS
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SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (D) INSIDE THE UNITED STATES TO
AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRANSFER AGENT A
LETTER SIGNED BY SUCH INVESTOR CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRANSFER AGENT), (E) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) AND (3) AGREES THAT
IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED PRIOR TO
THE RESALE RESTRICTION TERMINATION DATE A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. PRIOR TO ANY OFFER, SALE OR OTHER TRANSFER OF THIS
SECURITY PRIOR TO THE RESALE RESTRICTION TERMINATION DATE PURSUANT TO
CLAUSES (D) AND (F) ABOVE, THE HOLDER WILL BE REQUIRED TO DELIVER TO THE
TRANSFER AGENT AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM OR IN A TRANSACTION
NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT.
(ii) Prior to the Resale Restriction Termination Date (or such
shorter period as may be prescribed by Rule 144(k) under the Securities
Act (or any successor thereto)) no transfers of any Original Stock may be
effected other than in accordance with the procedures set forth in
paragraph (n)(i) above.
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IN WITNESS WHEREOF, said MMH Holdings, Inc. has caused this
Certificate of Designations to be signed by Michael S. Erwin, its President,
this 27th day of March, 1998.
MMH HOLDINGS, INC.
By: /s/ Michael S. Erwin
--------------------
Name: Michael S. Erwin
Title: President
CERTIFICATE OF DESIGNATIONS OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF 12 1/4%
SERIES B JUNIOR EXCHANGEABLE PREFERRED STOCK, AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
MMH Holdings, Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to authority conferred upon the Board of Directors (as
defined herein) by its Second Amended and Restated Certificate of Incorporation
(hereinafter referred to as the "Restated Certificate"), and pursuant to the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, said Board of Directors, by unanimous written consent dated March 23,
1998, duly approved and adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Restated Certificate, the Board of Directors does hereby
create, authorize and provide for the issuance of 12 1/4% Series B Junior
Exchangeable Preferred Stock, par value $.01 per share, with a stated
value of $1,000.00 per share, consisting of 10,000 shares, having the
designations, preferences, relative, participating, optional and other
special rights and the qualifications, limitations and restrictions
thereof that are set forth in the Restated Certificate and in this
Resolution as follows:
(a) Designation. There is hereby created out of the authorized and
unissued shares of Preferred Stock of the Corporation a series of Preferred
Stock designated as the "12 1/4% Series B Junior Exchangeable Preferred Stock."
The number of shares constituting such series shall be 10,000 and are referred
to herein as the "Series B Junior Preferred Stock." 4,809 shares of Series B
Junior Preferred Stock shall be initially issued with an additional 5,191 shares
reserved for issuance in accordance with paragraph (c)(i) hereof. The
liquidation preference of the Series B Junior Preferred Stock shall be $1,000.00
per share.
(b) Ranking. The Series B Junior Preferred Stock shall, with respect
to dividends and distributions upon liquidation, dissolution or winding-up of
the Corporation, rank (i) junior to the Senior Preferred Stock, (ii) senior to
the Junior Stock, including the Series C Junior Preferred Stock, (iii) junior to
any other Preferred Stock not ranking junior to the Senior Preferred Stock and
(iv) senior to all classes of Common Stock of the Corporation. The Corporation
may not (i) issue any class or series of Capital Stock that ranks on a parity
with the Series B Junior Preferred Stock as to dividends or distributions upon
liquidation, dissolution or winding-up of the Corporation, or amend the
provisions of any existing class of Capital Stock or series of Preferred Stock
to make such class or series rank on a parity with Series B Junior
<PAGE>
Preferred Stock (collectively referred to as "Parity Stock") (provided, that the
Corporation can issue, from time to time, additional shares of Series B Junior
Preferred Stock to satisfy dividend payments on outstanding shares of Series B
Junior Preferred Stock in accordance with this certificate of designations)
without the approval of the Holders in accordance with paragraph (f)(ii)(A)
hereof (to the extent such approval is required); or (ii) issue any class or
series of Capital Stock that ranks senior to the Series B Junior Preferred Stock
as to dividends and distributions upon liquidation, dissolution or winding-up of
the Corporation, or amend the provisions of any existing class of Capital Stock
or series of Preferred Stock to make such class or series rank senior to the
Series B Junior Preferred Stock (collectively referred to as "Senior Stock")
(provided, that the Corporation can issue, from time to time, additional shares
of Senior Preferred Stock to satisfy dividend payments on outstanding shares of
Senior Preferred Stock in accordance with the certificate of designations of the
Senior Preferred Stock), without the approval of the Holders in accordance with
paragraph (f)(ii)(B) hereof (to the extent such approval is required).
(c) Dividends.
(i) Commencing on the Issue Date, the Holders of the outstanding
shares of Series B Junior Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors, out of funds legally
available therefor, dividends on each share of Series B Junior Preferred
Stock, at a rate per annum equal to 12 1/4% of the liquidation preference
per share of the Series B Junior Preferred Stock, payable semi-annually;
provided, that the dividend rate per annum is subject to increase as
provided for in clause (vi) below. All dividends shall be cumulative,
whether or not earned or declared, on a daily basis from the Issue Date
and shall be payable semi-annually in arrears on each Dividend Payment
Date, commencing on the first Dividend Payment Date after the Issue Date
to Holders of record on the Dividend Record Date immediately preceding the
relevant Dividend Payment Date. Dividends accumulating on or prior to
April 1, 2003 may be paid, at the Corporation's option, either in cash or
by the issuance of additional shares of Series B Junior Preferred Stock
(and, at the Corporation's option, payment of a whole share (after
rounding up) or cash in lieu of a fractional share) having an aggregate
liquidation preference equal to the amount of such dividends. In the event
that on or prior to April 1, 2003, dividends are declared and paid through
the issuance of additional shares of Series B Junior Preferred Stock as
provided in the previous sentence, such dividends shall be deemed paid in
full and shall not accumulate. Dividends accumulating after April 1, 2003
must be paid in cash. Each dividend shall be payable to the Holders of
record as they appear on the stock books of the Corporation on the
Dividend Record Date immediately preceding the related Dividend Payment
Date. Dividends shall cease to accumulate in respect of the Series B
Junior Preferred Stock exchanged for Exchange Debentures on the Exchange
Date or on the date of their earlier redemption unless the Corporation
shall have failed to issue the appropriate aggregate principal amount of
Exchange Debentures in respect of the Series B Junior Preferred Stock to
be exchanged on the Exchange Date or shall have failed to pay the relevant
redemption price on Series B Junior Preferred Stock to be redeemed on the
date fixed for redemption.
(ii) All dividends paid with respect to shares of the Series B
Junior Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata
to the Holders entitled thereto.
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(iii) Dividends accumulating after April 1, 2003 on the Series B
Junior Preferred Stock for any past Dividend Period and dividends in
connection with any optional redemption pursuant to paragraph (e)(i) may
be declared and paid at any time, without reference to any Dividend
Payment Date, to Holders of record on such date, not more than forty-five
(45) days prior to the payment thereof, as may be fixed by the Board of
Directors.
(iv) So long as any share of the Series B Junior Preferred Stock is
outstanding, the Corporation shall not declare, pay or set apart for
payment any dividend in cash on any Junior Stock (or make any other
dividend or distribution on any Junior Stock other than in Junior Stock)
or make any cash payment on account of any Junior Stock (A) unless full
cumulative dividends determined in accordance herewith on the Series B
Junior Preferred Stock have been paid in cash in full when required to be
so paid or (B) during any period when cash dividends (whether or not
required to be paid) are not paid on the Series B Junior Preferred Stock.
(v) Dividends payable on the Series B Junior Preferred Stock for any
period less than a year shall be computed on the basis of a 360-day year
of twelve 30-day months.
(vi) Upon the occurrence and during the continuance of a Voting
Rights Triggering Event described in paragraph (f)(iii)(A)(3) hereof, the
per annum dividend rate on the Series B Junior Preferred Stock will
increase by 400 basis points per annum ("Special Dividends") in excess of
the dividend rate originally borne by the Series B Junior Preferred Stock
as set forth under paragraph (c)(i) hereof. All references herein to
"dividends" shall be deemed to include any such "Special Dividends."
(d) Liquidation Preference.
(i) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Corporation, the Holders
of shares of Series B Junior Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders an amount in cash equal to the
liquidation preference for each share outstanding, plus, without
duplication, an amount in cash equal to accumulated and unpaid dividends
thereon to the date fixed for liquidation, dissolution or winding-up
(including an amount equal to a prorated dividend for the period from the
immediately preceding Dividend Payment Date to the date fixed for
liquidation, dissolution or winding-up), after any payment shall be made
or any assets distributed to the holders of any Senior Preferred Stock,
but before any payment shall be made or any assets distributed to the
holders of any of the Junior Stock. After payment of the full amount of
the liquidation preference and accumulated and unpaid dividends to which
they are entitled, Holders of Series B Junior Preferred Stock shall not be
entitled to any further participation in any distribution of assets of the
Corporation. If the assets of the Corporation are not sufficient to pay in
full the liquidation payments payable to the Holders of outstanding shares
of the Series B Junior Preferred Stock and all Parity Stock, if any, upon
any voluntary or involuntary liquidation, dissolution or winding-up of the
affairs of the Corporation, then the holders of all such shares shall
share equally and
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ratably in such distribution of assets in proportion to the full
liquidation preference to which each is entitled until such preferences
are paid in full, and then in proportion to their respective amounts of
accumulated but unpaid dividends.
(ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the Property or assets
of the Corporation nor the consolidation or merger of the Corporation with
or into one or more entities shall be deemed to be a liquidation,
dissolution or winding-up of the affairs of the Corporation.
(e) Redemption.
(i) Optional Redemption. (A) The Corporation may, at the option of
the Board of Directors, redeem at any time or from time to time on or
after April 1, 2003, subject to contractual and other restrictions with
respect thereto and from any source of funds legally available therefor,
in whole or in part, in the manner provided for in paragraph (e)(iii)
hereof, any or all of the shares of the Series B Junior Preferred Stock,
at the redemption prices in cash (expressed as a percentage of the then
effective liquidation preference thereof) set forth below plus, without
duplication, an amount in cash equal to all accumulated and unpaid
dividends per share (including an amount in cash equal to a prorated
dividend for the period from the Dividend Payment Date immediately prior
to the Redemption Date to the Redemption Date), if redeemed during the
12-month period beginning on April 1, of each of the years set forth
below:
2003...............................................106.125%
2004...............................................104.083%
2005...............................................102.042%
2006 and thereafter................................100.000%
(B) Notwithstanding the provisions of paragraph (e)(i)(A)
above, the Corporation may, at the option of the Board of Directors,
redeem in the aggregate all, but not less than all, of the Series B
Junior Preferred Stock then outstanding, at any time prior to April
1, 2001, at a redemption price equal to 112.25% of the then
effective liquidation preference thereof, plus, without duplication,
an amount in cash equal to all accumulated and unpaid dividends
(including an amount in cash equal to a prorated dividend for the
period from the Dividend Payment Date immediately prior to the
Redemption Date to the Redemption Date) out of the Net Proceeds of
one or more Public Equity Offerings; provided, that any such
redemption occurs within 90 days following the closing of any such
Public Equity Offering.
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(C) No redemption pursuant to paragraph (e)(i)(A) or (B)
hereof shall be authorized or made unless prior thereto full
accumulated and unpaid dividends are declared and paid in full, or
declared and a sum in cash (if such dividend is to be paid in cash)
is set apart sufficient for such payment, on the Series B Junior
Preferred Stock for all Dividend Periods terminating on or prior to
the Redemption Date.
(D) In the event of a redemption pursuant to paragraph
(e)(i)(A) hereof of only a portion of the then outstanding shares of
the Series B Junior Preferred Stock, the Corporation shall effect
such redemption on a pro rata basis according to the number of
shares held by each Holder of the Series B Junior Preferred Stock,
except that the Corporation may redeem such shares held by Holders
of fewer than ten shares (or shares held by Holders who would hold
less than ten shares as a result of such redemption), as may be
determined by the Corporation.
(ii) Mandatory Redemption. On April 1, 2010, the Corporation shall
redeem, subject to contractual and other restrictions with respect thereto
and to the extent of funds legally available therefor, in the manner
provided for in paragraph (e)(iii) hereof, all of the shares of the Series
B Junior Preferred Stock then outstanding at a redemption price equal to
100% of the liquidation preference per share, plus, without duplication,
an amount in cash (whether or not otherwise payable in cash) equal to all
accumulated and unpaid dividends per share (including an amount equal to a
prorated dividend for the period from the Dividend Payment Date
immediately prior to the Redemption Date to the Redemption Date).
(iii) Procedures for Redemption. (A) At least thirty (30) days and
not more than sixty (60) days prior to the date fixed for any redemption
of the Series B Junior Preferred Stock, written notice (the "Redemption
Notice") shall be given by first class mail, postage prepaid, to each
Holder of record on the record date fixed for such redemption of the
Series B Junior Preferred Stock at such Holder's address as it appears on
the register maintained by the Transfer Agent, provided, that no failure
to give such notice nor any deficiency therein shall affect the validity
of the procedure for the redemption of any shares of Series B Junior
Preferred Stock to be redeemed except as to the Holder or Holders to whom
the Corporation has failed to give said notice or except as to the Holder
or Holders whose notice was defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph
(e)(i)(A) or (B) or (e)(ii) hereof;
(2) the redemption price;
(3) whether all or less than all the outstanding shares of
the Series B Junior Preferred Stock are to be redeemed
and the total number of shares of the Series B Junior
Preferred Stock being redeemed;
(4) the Redemption Date;
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(5) that the Holder is to surrender to the Corporation, in
the manner, at the place or places and at the price
designated, his certificate or certificates representing
the shares of Series B Junior Preferred Stock to be
redeemed; and
(6) that dividends on the shares of the Series B Junior
Preferred Stock to be redeemed shall cease to accumulate
on such Redemption Date unless the Corporation defaults
in the payment of the redemption price.
(B) Each Holder of Series B Junior Preferred Stock shall
surrender the certificate or certificates representing such shares
of Series B Junior Preferred Stock to the Corporation, duly endorsed
(or otherwise in proper form for transfer, as determined by the
Corporation), in the manner and at the place designated in the
Redemption Notice, and on the Redemption Date the full redemption
price for such shares shall be payable in cash to the Person whose
name appears on such certificate or certificates as the owner
thereof, and each surrendered certificate shall be canceled and
retired. In the event that less than all of the shares represented
by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(C) On and after the Redemption Date, unless the Corporation
defaults in the payment in full of the applicable redemption price,
dividends on the Series B Junior Preferred Stock called for
redemption shall cease to accumulate on the Redemption Date, and all
rights of the Holders of redeemed shares shall terminate with
respect thereto on the Redemption Date, other than the right to
receive the redemption price; provided, that if a notice of
redemption shall have been given as provided in paragraph (iii)(A)
above and the funds necessary for redemption (including an amount in
cash in respect of all dividends that will accumulate to the
Redemption Date) shall have been irrevocably deposited in trust for
the equal and ratable benefit for the Holders of the shares to be
redeemed, then, at the close of business on the day on which such
funds are segregated and set aside, the Holders of the shares to be
redeemed shall cease to be stockholders of the Corporation and shall
be entitled only to receive the redemption price.
(f) Voting Rights.
(i) The Holders of Series B Junior Preferred Stock, except as
otherwise required under Delaware law or as set forth in paragraphs (ii),
(iii) and (iv) below, shall not be entitled or permitted to vote on any
matter required or permitted to be voted upon by the stockholders of the
Corporation.
(ii) (A) So long as any shares of the Series B Junior Preferred
Stock are outstanding, the Corporation shall not authorize or issue any
additional shares of Senior Preferred Stock or any class or series of
Parity Stock without the affirmative vote or consent of Holders of at
least a majority of the then outstanding shares of Series B Junior
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Preferred Stock, voting or consenting, as the case may be, as one class,
given in person or by proxy, either in writing or by resolution adopted at
an annual or special meeting; provided, that no such vote or consent shall
be necessary in connection with (i) the issuance of additional shares of
Senior Preferred Stock pursuant to the certificate of designations of the
Senior Preferred Stock as in effect on the Issue Date or (ii) the issuance
of additional shares of Series B Junior Preferred Stock pursuant to the
provisions of paragraph (c) of this certificate of designations.
(B) So long as any shares of the Series B Junior Preferred
Stock are outstanding, the Corporation shall not authorize or issue
any class or series of Senior Stock without the affirmative vote or
consent of Holders of at least a majority of the outstanding shares
of Series B Junior Preferred Stock, voting or consenting, as the
case may be, as one class, given in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting.
(C) [Reserved.]
(D) So long as any shares of the Series B Junior Preferred
Stock are outstanding, the Corporation shall not amend this
certificate of designations so as to affect adversely the specified
rights, preferences, privileges or voting rights of holders of
shares of Series B Junior Preferred Stock without the affirmative
vote or consent of Holders of at least a majority of the then issued
and outstanding shares of Series B Junior Preferred Stock, voting or
consenting, as the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or
special meeting; provided, that any increase in the amount of
authorized Preferred Stock of the Corporation or the creation and
issuance (other than the Senior Preferred Stock and Series B Junior
Preferred Stock as provided under paragraph (b) above) of any other
class of Preferred Stock or any increase in the amount of authorized
shares of such class or any other class of Junior Stock, including
Junior Stock which is Preferred Stock, will not be deemed to affect
adversely such rights, preferences or voting powers.
(E) Prior to the exchange of all outstanding shares of Series
B Junior Preferred Stock for Exchange Debentures, the Corporation
shall not amend or modify the form of the Indenture for the Exchange
Debentures from the form thereof certified by the Secretary of the
Corporation and delivered to the Transfer Agent on the Issue Date
(the "Indenture") (except as expressly provided therein in respect
of amendments without the consent of Holders of Exchange Debentures)
without the affirmative vote or consent of holders of at least a
majority of the aggregate liquidation preference of the outstanding
shares of Series B Junior Preferred Stock, voting or consenting, as
the case may be, together as one class, given in person or by proxy,
either in writing or by resolution adopted at an annual or special
meeting.
(iii) (A) If (1) after April 1, 2003, cash dividends on the Series B
Junior Preferred Stock are in arrears and unpaid for two or more
semi-annual Dividend Periods
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(whether or not consecutive) (a "Dividend Default"); (2) the Corporation
fails to redeem all of the then outstanding shares of Series B Junior
Preferred Stock on or before April 1, 2010; (3) the Corporation fails to
make or consummate a Change of Control Offer following a Change of Control
if such Change of Control Offer is required by paragraph (h) hereof; (4)
the Corporation breaches or violates one of the provisions set forth in
paragraph (l) hereof and the breach or violation continues for a period of
60 days or more after the Corporation receives notice thereof specifying
the default from the holders of at least 25% of the shares of Series B
Junior Preferred Stock then outstanding, then in the case of any of
clauses (1) through (4) above, the number of directors constituting the
Board of Directors shall be increased or decreased by the number, if any,
necessary to permit the Holders of a majority of the aggregate outstanding
shares Series B Junior Preferred Stock and, to the extent there exists a
voting rights triggering event with respect to the Senior Preferred Stock
(pursuant to its certificate of designations as in effect on the Issue
Date), the Senior Preferred Stock, voting together as one class, to elect
the lesser of two directors or that number of directors constituting at
least 25% of the members of the Board of Directors. Each such event
described in clauses (1), (2), (3) and (4) is a "Voting Rights Triggering
Event"; provided, that if the Corporation breaches or violates more than
one of the provisions set forth in paragraph (A) hereof, all such breaches
or violations together shall not constitute more than one Voting Rights
Triggering Event. Holders of a majority of the aggregate outstanding
shares of Series B Junior Preferred Stock and, to the extent there exists
a voting rights triggering event with respect to the Senior Preferred
Stock (pursuant to its certificate of designations as in effect on the
Issue Date), the Senior Preferred Stock, voting together and as one class,
shall have the exclusive right to elect the lesser of two directors or
that number of directors constituting at least 25% of the members of the
Board of Directors at a meeting therefor called upon occurrence of such
Voting Rights Triggering Event. Except as provided in paragraph (c)(vi),
the voting rights provided herein shall be the exclusive remedy at law or
in equity of the holders of the Series B Junior Preferred Stock for any
Voting Rights Triggering Event. Notwithstanding the foregoing, if the
voting rights granted pursuant to this subparagraph would violate any
rules or regulations applicable to any Regulated Holder, the shares of
Series B Junior Preferred Stock held by such Regulated Holder shall be
deemed to be not issued and not outstanding solely for purposes this
paragraph (f)(iii)(A). As used herein, "Regulated Holder" shall mean any
Person holding shares of Series B Junior Preferred Stock that is (or that
is a subsidiary of a bank holding company that is) subject to the
provisions of Regulation Y of the Board of Governors of the Federal
Reserve System, 12 C.F.R., Part 225 (or any successor to Regulation Y).
(B) The right of the Holders of Series B Junior Preferred
Stock and, to the extent there exists a voting rights triggering
event with respect to the Senior Preferred Stock (pursuant to its
certificate of designations as in effect on the Issue Date), the
Senior Preferred Stock, voting together as one class, to elect
members of the Board of Directors as set forth in subparagraph
(f)(iii)(A) above shall continue until such time as (x) in the event
such right arises due to a Dividend Default, all accumulated
dividends that are in arrears on the Series B Junior Preferred Stock
are paid in full in cash; and (y) in all other cases, the failure,
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breach or default giving rise to such Voting Rights Triggering Event
is remedied, cured or waived by the holders of at least a majority
of the aggregate outstanding shares of Series B Junior Preferred
Stock and, to the extent there exists a voting rights triggering
event with respect to the Senior Preferred Stock (pursuant to its
certificate of designations as in effect on the Issue Date), the
Senior Preferred Stock, voting or consenting, as the case may be,
together as one class, at which time (1) the special right of the
Holders of Series B Junior Preferred Stock and, to the extent there
existed a voting rights triggering event with respect to the Senior
Preferred Stock (pursuant to its certificate of designations as in
effect on the Issue Date), the Senior Preferred Stock, to vote
together as one class for the election of directors and (2) the term
of office of the directors elected by the Holders of the Series B
Junior Preferred Stock and, to the extent there existed a voting
rights triggering event with respect to the Senior Preferred Stock
(pursuant to its certificate of designations as in effect on the
Issue Date), the Senior Preferred Stock, shall each terminate and
the number of directors constituting the Board of Directors shall be
increased or decreased to such number equal to the directors elected
by the holders of Common Stock or Capital Stock (other than the
Series B Junior Preferred Stock and, if applicable, Senior Preferred
Stock). At any time after voting power to elect directors shall have
become vested and be continuing in the Holders of Series B Junior
Preferred Stock and, if applicable, Senior Preferred Stock, pursuant
to this paragraph (f)(iii)(A) hereof, or if vacancies shall exist in
the offices of directors elected by the Holders of Series B Junior
Preferred Stock and, if applicable, Senior Preferred Stock, a proper
officer of the Corporation may, and upon the written request of the
Holders of record of at least twenty-five percent (25%) of the then
outstanding shares of Series B Junior Preferred Stock and, if
applicable, Senior Preferred Stock, taken as a whole, addressed to
the Secretary of the Corporation shall call a special meeting of the
Holders of Series B Junior Preferred Stock and, if applicable,
Senior Preferred Stock, for the purpose of electing the directors
which such Holders are entitled to elect. If such meeting shall not
be called by a proper officer of the Corporation within twenty (20)
days after personal service of said written request upon the
Secretary of the Corporation, or within twenty (20) days after
mailing the same within the United States by certified mail,
addressed to the Secretary of the Corporation at its principal
executive offices, then the Holders of record of at least
twenty-five percent (25%) of the outstanding shares of Series B
Junior Preferred Stock and, if applicable, Senior Preferred Stock,
taken as a whole, may designate in writing one of their number to
call such meeting at the expense of the Corporation, and such
meeting may be called by the Person so designated upon the notice
required for the annual meetings of stockholders of the Corporation
and shall be held at the place for holding the annual meetings of
stockholders. Any Holder of Series B Junior Preferred Stock or, if
applicable, Senior Preferred Stock, so designated shall have, and
the Corporation shall provide, reasonable access to the lists of
stockholders of Series B Junior Preferred Stock and Senior Preferred
Stock to be called pursuant to the provisions hereof.
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(C) At any meeting held for the purpose of electing directors
at which the Holders of Series B Junior Preferred Stock and, if
applicable, Senior Preferred Stock, shall have the right, voting
together as one class, to elect directors as aforesaid, the presence
in person or by proxy of the Holders of at least a majority of the
then outstanding shares of Series B Junior Preferred Stock and, if
applicable, Senior Preferred Stock, taken as a whole, entitled to
vote thereat shall be required to constitute a quorum of such Series
B Junior Preferred Stock and, if applicable, Senior Preferred Stock.
(D) Any vacancy occurring in the office of a director elected
by the Holders of Series B Junior Preferred Stock and, if
applicable, Senior Preferred Stock, may be filled by the remaining
director, if any, elected by the Holders of Series B Junior
Preferred Stock and, if applicable, Senior Preferred Stock, unless
and until such vacancy shall be filled by the Holders of Series B
Junior Preferred Stock and, if applicable, Senior Preferred Stock.
(iv) In any case in which the Holders of Series B Junior Preferred
Stock and, if applicable, Senior Preferred Stock, shall be entitled to
vote pursuant to this paragraph (f) or pursuant to Delaware law, each
Holder of Series B Junior Preferred Stock, and, if applicable, Senior
Preferred Stock, entitled to vote with respect to such matter shall be
entitled to one vote for each share of Series B Junior Preferred Stock,
and, if applicable, Senior Preferred Stock, held.
(g) Exchange.
(i) Requirements. The outstanding shares of Series B Junior Preferred
Stock (including any shares of Series B Junior Preferred Stock issuable on
such Dividend Payment Date on the outstanding shares of Series B Junior
Preferred Stock) are exchangeable, in whole but not in part, at the option
of the Corporation, at any time on any Dividend Payment Date for the
Corporation's 12 1/4% Exchange Debentures due 2010 (the "Exchange
Debentures") to be substantially in the form of Exhibit A to the
Indenture, a copy of which is on file with the Transfer Agent and the
Secretary of the Corporation; provided, that any such exchange may only be
made if on or prior to the date of such exchange, (i) the Corporation has
paid all accumulated dividends on the Series B Junior Preferred Stock
(including the dividends payable on such Dividend Payment Date) and there
shall be no contractual impediment to such exchange on such Dividend
Payment Date; (ii) there shall be legally available funds sufficient
therefor; (iii) immediately after giving effect to such exchange, no
Default or Event of Default (each as defined in the Indenture) would exist
under the Indenture as if the Indenture had been in effect as of the Issue
Date and no default or event of default under any other material
instrument governing Indebtedness outstanding at the time of such exchange
would be caused thereby; and (iv) the Indenture has been qualified under
the Trust Indenture Act, if such qualification is required at the time of
exchange. The exchange rate shall be $1.00 principal amount of Exchange
Debentures for each $1.00 of liquidation preference of Series B Junior
Preferred Stock. Exchange Debentures shall be issued in principal amounts
of $1,000 and integral multiples thereof to the extent possible and, to
the extent
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necessary, in principal amounts less than $1,000, provided, that the
Corporation shall have the right, at its option, to pay cash in an amount
equal to the principal amount of that portion of any Exchange Debenture
that is not an integral multiple of $1,000 in lieu of delivering an
Exchange Debenture in a denomination of less than $1,000.
(ii) Procedure for Exchange. (A) At least thirty (30) days and not
more than sixty (60) days prior to the date fixed for exchange, written
notice (the "Exchange Notice") shall be given by the Corporation by
first-class mail, postage prepaid, to each Holder of record on the
Dividend Record Date immediately preceding such Dividend Payment Date at
such Holder's address as the same appears on the stock register maintained
by the Transfer Agent, provided, that no failure to give such notice nor
any deficiency therein shall affect the validity of the procedure for the
exchange of shares of Series B Junior Preferred Stock to be exchanged. The
Exchange Notice shall state:
(1) the date fixed for exchange;
(2) that the Holder is to surrender to the Corporation, in
the manner and at the place or places designated, his
certificate or certificates representing all his shares
of Series B Junior Preferred Stock to be exchanged;
(3) that dividends on the shares of Series B Junior
Preferred Stock to be exchanged shall cease to
accumulate on the Exchange Date whether or not
certificates for shares of Series B Junior Preferred
Stock are surrendered for exchange on the Exchange Date
unless the corporation shall default in the delivery of
the Exchange Debentures; and
(4) that interest on the Exchange Debentures shall accrue
from the Exchange Date whether or not certificates for
shares of Series B Junior Preferred Stock are
surrendered for exchange on the Exchange Date.
(B) On or before the Exchange Date, each Holder of shares of
Series B Junior Preferred Stock shall surrender the certificates
representing such shares of Series B Junior Preferred Stock, in the
manner and at the place designated in the Exchange Notice. The
Corporation shall cause the Indenture and the Exchange Debentures to
be executed on the Exchange Date and, upon surrender in accordance
with the Exchange Notice of the certificates for the shares of
Series B Junior Preferred Stock so exchanged, duly endorsed (or
otherwise in proper form for transfer, as determined by the
Corporation), such shares shall be exchanged by the Corporation into
Exchange Debentures. The Corporation shall pay interest on the
Exchange Debentures at the rate and on the dates specified therein
from the Exchange Date.
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(C) If notice has been mailed as aforesaid, and if before the
Exchange Date specified in such notice all Exchange Debentures
necessary for such exchange shall have been duly executed by the
Corporation and delivered to the trustee under the Indenture with
irrevocable instructions to authenticate the Exchange Debentures
necessary for such exchange, then the rights of the Holders of
Series B Junior Preferred Stock so exchanged as stockholders of the
Corporation shall cease (except the right to receive Exchange
Debentures (including Exchange Debentures issued in exchange for
shares of Series B Junior Preferred Stock issued on such Dividend
Payment Date), an amount in cash equal to the amount of accumulated
and unpaid dividends to the Exchange Date and, if the Corporation so
elects, cash in lieu of any Exchange Debenture not an integral
multiple of $1,000), and the Person or Persons entitled to receive
the Exchange Debentures issuable upon exchange shall be treated for
all purposes as the registered Holder or Holders of such Exchange
Debentures as of the Exchange Date.
(iii) No Exchange in Certain Cases. Notwithstanding the foregoing
provisions of this paragraph (g), the Corporation shall not be entitled or
required to exchange the Series B Junior Preferred Stock for Exchange
Debentures if such exchange, or any term or provision of the Indenture or
the Exchange Debentures, or the performance of the Corporation's
obligations under the Indenture or the Exchange Debentures, shall
materially violate or conflict with any applicable law or agreement or
instrument then binding on the Corporation or if, at the time of such
exchange, the Corporation is insolvent or if it would be rendered
insolvent by such exchange.
(h) Change of Control.
(i) Upon the occurrence of a Change of Control, the Corporation
shall be obligated to make an offer to purchase (the "Change of Control
Offer") the outstanding Series B Junior Preferred Stock at a purchase
price equal to 101% of the liquidation preference thereof plus, without
duplication, an amount in cash equal to all accumulated and unpaid
dividends thereon (including an amount in cash equal to a prorated
dividend for the period from the immediately preceding Dividend Payment
Date to the Change of Control Payment Date) (such applicable purchase
price being hereinafter referred to as the "Change of Control Purchase
Price") in accordance with the procedures set forth in this paragraph (h).
(ii) Within 30 days of the occurrence of a Change of Control, the
Corporation shall (i) cause a notice of the Change of Control Offer to be
sent at least once to the Dow Jones News Service or similar business news
service in the United States and (ii) send by first-class mail, postage
prepaid, to each Holder of Series B Junior Preferred Stock, at the address
appearing in the register maintained by the Transfer Agent, a notice
stating:
(1) that the Change of Control Offer is being made pursuant
to this paragraph (h) and that all Series B Junior
Preferred Stock validly tendered will be accepted for
payment;
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(2) the Change of Control Purchase Price and the purchase
date (which shall be a Business Day not earlier than 30
days nor later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"));
(3) that any Series B Junior Preferred Stock not validly
tendered will continue to accumulate dividends;
(4) that, unless the Corporation defaults in the payment of
the Change of Control Purchase Price, any Series B
Junior Preferred Stock accepted for payment pursuant to
the Change of Control Offer shall cease to accumulate
dividends after the Change of Control Payment Date;
(5) that Holders accepting the offer to have their Series B
Junior Preferred Stock purchased pursuant to a Change of
Control Offer will be required to surrender their
certificates representing Series B Junior Preferred
Stock to the Corporation at the address specified in the
notice prior to the close of business on the Business
Day preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their
acceptance if the Corporation receives, not later than
the close of business on the third Business Day
preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the number of
shares of Series B Junior Preferred Stock delivered for
purchase, and a statement that such Holder is
withdrawing his election to have such Series B Junior
Preferred Stock purchased;
(7) that Holders whose Series B Junior Preferred Stock is
being purchased only in part will be issued new
certificates representing the number of shares of Series
B Junior Preferred Stock equal to the unpurchased
portion of the certificates surrendered; and
(8) any other procedures that a Holder must follow to accept
a Change of Control Offer or effect withdrawal of such
acceptance.
(iii) The Corporation will comply with any securities laws and
regulations, to the extent such laws and regulations are applicable to the
redemption of the Series B Junior Preferred Stock in connection with a
Change of Control Offer. Without limiting the foregoing, in the event that
a Change of Control occurs and the holders of Series B Junior Preferred
Stock exercise their right to require the Corporation to purchase Series B
Junior Preferred Stock, if such purchase constitutes a "tender offer" for
purposes of Rule l4e-1 under the Exchange Act at that time, the
Corporation will comply with the requirements of Rule l4e-1 as then in
effect with respect to such repurchase.
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(iv) On the Change of Control Payment Date, the Corporation shall,
to the extent lawful, (A) accept for payment the number of shares of
Series B Junior Preferred Stock validly tendered pursuant to the Change of
Control Offer and (B) promptly mail to each Holder of shares so accepted
the Change of Control Purchase Price therefor and execute and issue a new
Series B Junior Preferred Stock certificate representing the numbers of
shares of Series B Junior Preferred Stock equal to any unpurchased shares
represented by a certificate surrendered. Unless the Corporation defaults
in the payment for the shares of Series B Junior Preferred Stock validly
tendered pursuant to the Change of Control Offer, dividends shall cease to
accumulate with respect to the shares of Series B Junior Preferred Stock
so tendered and all rights of Holders of such tendered shares shall
terminate, except for the right to receive payment therefor, on the Change
of Control Payment Date.
(v) If any Credit Facility is in effect or if the Senior Notes or
the Senior Preferred Stock are outstanding or if any other Indebtedness of
the Corporation or its Restricted Subsidiaries that requires a payment
upon a Change of Control is outstanding, or any amounts are owing
thereunder or in respect thereof, at the time of the occurrence of a
Change of Control, then, prior to the mailing of the notice to Holders
described in paragraph (h)(ii) above, but in any event within 30 days
following any Change of Control, the Corporation shall, to the extent
required to permit the repurchase of Series B Junior Preferred Stock
pursuant to this paragraph (h), be required to (A) cause the borrowers
thereunder to repay in full all obligations under or in respect of such
Credit Facility, the Senior Preferred Stock or such other Indebtedness or
offer to repay in full all obligations under or in respect of such Credit
Facility, the Senior Preferred Stock or such other Indebtedness and repay
within such 30-day period the obligations under or in respect of such
Credit Facility, the Senior Preferred Stock or such other Indebtedness of
each lender or holder who has then irrevocably accepted such offer and
cause Morris Material Handling to repay within such 30-day period in full
all obligations in respect of the Senior Notes or offer to repay in full
all obligations in respect of the Senior Notes of each holder who has then
irrevocably accepted such offer or (B) cause such borrowers and Morris
Material Handling to obtain the requisite consent under such Credit
Facility, the Senior Preferred Stock or such other Indebtedness, from the
holders of such other Indebtedness and from the holders of the Senior
Notes, respectively, to permit the repurchase of the Series B Junior
Preferred Stock as described above. Until the requirements of the
immediately preceding sentence are satisfied, the Corporation shall not
make, and shall not be required to make, any Change of Control Offer;
provided, that the Corporation's failure to comply with the provisions of
this paragraph (h)(v) shall constitute a Voting Rights Triggering Event.
(vi) (A) If the Corporation has any outstanding Preferred Stock
(other than the Senior Preferred Stock and the Series B Junior Preferred
Stock), and the Corporation is required to make a Change of Control Offer
or to make a distribution with respect to such Preferred Stock (other than
the Senior Preferred Stock and the Series B Junior Preferred Stock) in the
event of a Change of Control, the Corporation shall not consummate any
such offer or distribution with respect to such Preferred Stock (other
than the Senior Preferred Stock and the Series B Junior Preferred Stock)
until such time as the
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Corporation shall have paid the Change of Control Purchase Price in full
to the Holders of Series B Junior Preferred Stock that have validly
accepted the Corporation's Change of Control Offer and shall otherwise
have consummated the Change of Control Offer made to Holders of the Series
B Junior Preferred Stock and (B) the Corporation will not issue Preferred
Stock (except pursuant to paragraph (b) hereof) with change of control
provisions requiring the payment of such Preferred Stock prior to the
payment of the Series B Junior Preferred Stock in the event of a Change in
Control under this paragraph (h).
(vii) The Corporation will not be required to make a Change of
Control Offer upon a Change of Control if a third party makes such Change
of Control Offer contemporaneously with or upon a Change of Control in the
manner, at the times and otherwise in compliance with the requirements of
this paragraph (h) and purchases all Series B Junior Preferred Stock
validly tendered and not withdrawn under such Change of Control Offer.
(i) [Reserved.]
(j) Reissuance of Series B Junior Preferred Stock. Shares of Series
B Junior Preferred Stock that have been issued and reacquired in any manner,
including shares purchased or redeemed or exchanged, shall (upon compliance with
any applicable provisions of the laws of Delaware) have the status of authorized
and unissued shares of Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock, provided
that any issuance of such shares of Preferred Stock must be in compliance with
the terms hereof.
(k) Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(l) Certain Additional Provisions.
(i) Limitation on Additional Indebtedness. The Corporation will not,
and will not cause or permit any Restricted Subsidiary of the Corporation
to, directly or indirectly, incur (as defined) any Indebtedness (including
any Acquired Indebtedness); provided, that if no Voting Rights Triggering
Event shall have occurred and be continuing at the time or as a
consequence of the incurrence of such Indebtedness, the Corporation or any
Restricted Subsidiary may incur Indebtedness (including any Acquired
Indebtedness) if the Corporation's Consolidated Interest Coverage Ratio is
greater than 2.0 to 1.
Notwithstanding the foregoing, the Corporation and its
Restricted Subsidiaries may incur Permitted Indebtedness.
(ii) Limitation on Restricted Payments. The Corporation will not
make, and will not permit any of its Restricted Subsidiaries to, directly
or indirectly, make, any Restricted Payment after the Issue Date, unless:
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(A) no Voting Rights Triggering Event shall have occurred and
be continuing at the time of or immediately after giving effect to
such Restricted Payment;
(B) immediately after giving pro forma effect to such
Restricted Payment, (i) the Corporation could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under
paragraph (l)(i); and
(C) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made
after the Issue Date does not exceed the sum (without duplication)
of (1) 50% of the cumulative Consolidated Net Income of the
Corporation (or minus 100% of any cumulative deficit in Consolidated
Net Income) for the period (treated as one accounting period) from
the first day of the fiscal quarter in which the Issue Date occurs
through the last day of the fiscal quarter immediately preceding
such Restricted Payment, (2) 100% of the aggregate Net Proceeds in
cash received by the Corporation from the issuance or sale, after
the Issue Date (other than to a Restricted Subsidiary), of (a)
Junior Stock (other than Disqualified Capital Stock) of the
Corporation or (b) any Indebtedness or other securities of the
Corporation that are convertible into or exercisable or exchangeable
for Junior Stock (other than Disqualified Capital Stock) of the
Corporation which have been so converted or exercised or exchanged
(other than by a Restricted Subsidiary of the Corporation) and (3)
100% of the net reduction in Investments (other than Permitted
Investments), subsequent to the Issue Date, in any Person, resulting
from payments of interest on Indebtedness, dividends, repayments of
loans or advances or other transfers or distributions of Property or
return of capital (but only to the extent such interest, dividends
or repayments or other transfers or distributions of Property or
return of capital are not included in the calculation of
Consolidated Net Income), in each case, to the Corporation or any
Restricted Subsidiary from any Person (including Unrestricted
Subsidiaries) or from redesignations (the designation of which did
not constitute a Permitted Investment) of Unrestricted Subsidiaries
as Restricted Subsidiaries in accordance with the Certificate of
Designations, not to exceed in the case of any Person, the amount of
Investments (other than Permitted Investments) previously made by
the Corporation or any Restricted Subsidiary in such Person. For
purposes of determining the amount expended for Restricted Payments
under this clause (C), Property other than cash (including a
distribution of assets) shall be valued at its Fair Market Value.
The provisions of this paragraph (l)(ii) shall not prohibit:
(i) the payment of any distribution within 60 days after the
date of declaration thereof, if at such date of
declaration such payment would comply with the
provisions of the Certificate of Designations;
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(ii) the retirement of any shares of Junior Stock of the
Corporation by conversion into, or by or in exchange
for, shares of Junior Stock (other than Disqualified
Capital Stock) of the Corporation, or out of, the Net
Proceeds of the substantially concurrent sale (other
than to a Restricted Subsidiary of the Corporation) of
other shares of Junior Stock of the Corporation (other
than Disqualified Capital Stock); provided, that any
such Net Proceeds are excluded from clause (C)(2) of
this paragraph (l)(ii) for the purposes of this
calculation (and were not included therein at any time);
(iii) the retirement of any shares of Junior Stock that is
Disqualified Capital Stock by conversion into, or by
exchange for, shares of Junior Stock that is
Disqualified Capital Stock of the Corporation, or out of
the Net Proceeds of the substantially concurrent sale
(other than to a Restricted Subsidiary of the
Corporation) of other shares of Junior Stock that are
Disqualified Capital Stock of the Corporation;
(iv) payments to MHE Investments or any other Person in
respect of which MHE Investments or such other Person is
a member of the consolidated tax group of the
Corporation, for so long as MHE Investments or such
other Person owns such amount of the Capital Stock of
the Corporation as will permit it or a member of the
consolidated tax group of MHE Investments or such other
Person to be entitled to file consolidated federal tax
returns with the Corporation, for income taxes pursuant
to the Tax Allocation Agreement or for the purpose of
enabling MHE Investments or such other Person or any
such members to pay taxes other than income taxes, to
the extent actually owed and attributable to the
operations of the Corporation and its Subsidiaries or to
MHE Investments' or such other Person's ownership
thereof;
(v) payments to MHE Investments, for so long as it owns not
less than a majority of the outstanding Common Stock of
the Corporation, in amounts sufficient to pay the
ordinary operating and administrative expenses of MHE
Investments (including all reasonable professional fees
and expenses), including in connection with its
complying with the Corporation's reporting obligations
(including filings with the Commission and any exchange
on which the Corporation's securities are traded) and
obligations to prepare and distribute business records
in the ordinary course of business and the Corporation's
costs and expenses relating to taxes, other than those
referred to in clause (iv) (which taxes are attributable
to the operations of the Corporation and its Restricted
Subsidiaries or to MHE Investments' ownership thereof);
provided, that the aggregate payments paid in each
fiscal year pursuant to this clause (v) will not
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exceed 0.20% of the consolidated net sales of the
Corporation and its Restricted Subsidiaries for such
fiscal year;
(vi) the purchase, redemption, retirement or other
acquisition for value of Capital Stock of the
Corporation or of any Person that directly or indirectly
controls (as defined in the definition of Affiliate) the
Corporation held by employees or former employees of the
Corporation or any Restricted Subsidiary (or their
estates or beneficiaries under their estates) upon
death, disability, retirement, termination of employment
and pursuant to the terms of any agreement under which
such Capital Stock was issued, provided, that the
aggregate Fair Market Value of the consideration paid
for such purchase, redemption, retirement or other
acquisition of such Capital Stock does not exceed
$500,000 in any fiscal year;
(vii) payments due under the Permitted Affiliate Agreements
(other than payments pursuant to paragraph (iv) above)
that would otherwise constitute Restricted Payments; and
(viii) payments that would otherwise constitute Restricted
Payments, not to exceed $750,000 in the aggregate;
provided, that in calculating the aggregate amount of Restricted Payments made
subsequent to the Issue Date for purposes of clause (C) of this paragraph
(l)(ii), amounts expended pursuant to clause (i) (but only if the declaration
thereof has not been counted in a prior period), (v) (other than to the extent
otherwise reducing Consolidated Net Income), (vi) and (viii) shall be included,
without duplication, in such calculation and (ii), (iii), (iv) and (vii) shall
not be included in such calculation. Nothing in the immediately preceding
proviso is meant to affect whether any amount expended pursuant to clause (iv)
should be reflected in Consolidated Net Income. Notwithstanding any other
provision of this paragraph (l)(ii), no dividends or distributions may be paid
on any class of Common Stock of the Corporation unless the Corporation has paid
in cash all accumulated dividends due on the Series B Junior Preferred Stock on
the two Dividend Payment Dates on or immediately preceding such proposed date of
such dividend or distribution.
If the Corporation or any Restricted Subsidiary makes a Restricted
Payment which, at the time of the making of such Restricted Payment, in the good
faith determination of the Board of Directors or the board of directors of
Morris Material Handling, would be permitted under the requirements of the
Certificate of Designations, such Restricted Payment shall be deemed to have
been made in compliance with the Certificate of Designations notwithstanding any
subsequent adjustment made in good faith to the Corporation's or such Restricted
Subsidiary's financial statements affecting Consolidated Net Income.
(iii) Limitation on Transactions with Affiliates. The Corporation will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or suffer to exist any transaction or series of related transactions
(including, without limitation, the sale, purchase, exchange or lease of assets,
Property or services) with any Affiliate (each, an "Affiliate
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Transaction") or extend, renew, waive or otherwise modify the terms of any
Affiliate Transaction entered into prior to the Issue Date unless (A) such
Affiliate Transaction is between or among the Corporation and the Restricted
Subsidiaries or between or among Restricted Subsidiaries; or (B) the terms of
such Affiliate Transaction are fair to the Corporation or such Restricted
Subsidiary, as the case may be, and the terms of such Affiliate Transaction are
at least as favorable as the terms which could be obtained by the Corporation or
such Restricted Subsidiary, as the case may be, in a comparable transaction made
on an arm's-length basis between unaffiliated parties. In any Affiliate
Transaction (or any series of related Affiliate Transactions) involving an
amount or having a Fair Market Value in excess of $2 million which is not
permitted under clause (A) of the immediately preceding sentence, the
Corporation shall first obtain a resolution of a majority of the disinterested
members of the Board of Directors which reflects the approval of such Affiliate
Transaction and a determination that such Affiliate Transaction complies with
clause (B) of the immediately preceding sentence. In any Affiliate Transaction
(or series of related Affiliate Transactions) which includes the payment of fees
of $1 million or more to Chartwell, the Corporation shall obtain a resolution of
a majority of the disinterested members of the Board of Directors which reflects
the approval of such Affiliate Transaction. In addition, in any Affiliate
Transaction (or any series of related Affiliate Transactions) involving an
amount or having a Fair Market Value in excess of $10 million which is not
permitted under clause (A) of the immediately preceding sentence, the
Corporation must obtain, prior to the consummation of the transaction or
transactions, a written opinion from a nationally recognized investment banking
firm or other expert stating that such transaction or transactions are fair to
the Corporation or such Restricted Subsidiary, as the case may be, from a
financial point of view; provided, that no such opinion shall be required in
respect of the provision of services or sales of inventory or products by the
Corporation or any of its Restricted Subsidiaries to a Joint Venture in the
ordinary course of business.
The foregoing provisions will not apply to: (i) any transaction or
series of related transactions pursuant to the terms of the Permitted Affiliate
Agreements; (ii) reasonable fees and compensation paid to and indemnity provided
on behalf of officers, directors or employees of the Corporation or any
Restricted Subsidiary of the Corporation as determined in good faith by the
Board of Directors or senior management; (iii) any payment that would be
permitted under the first paragraph or clauses (iv) or (v) of the second
paragraph of paragraph (l)(ii) above; (iv) any Permitted Investment (other than
Permitted Investments made pursuant to clause (x) of the definition of Permitted
Investments); or (v) loans or advances to employees and officers of the
Corporation or any of its Subsidiaries in the ordinary course of business to
provide for the payment of reasonable expenses incurred by such persons in the
performance of their responsibilities to the Corporation or such Subsidiary or
in connection with any relocation. The aggregate management, consulting and
similar fees paid by the Corporation or its Subsidiaries (excluding expenses and
amounts paid pursuant to the last sentence of this covenant or pursuant to
clause (iii) of this paragraph) to Chartwell shall not exceed $1 million during
any fiscal year; provided, that any such fees may accrue but shall not be paid
by the Corporation at any time after the occurrence and during the continuance
of a Voting Rights Triggering Event until such Voting Rights Triggering Event is
cured, whereupon such accrued and unpaid fees may be paid in addition to other
permitted fees. In addition, the Corporation may pay advisory fees to an
Affiliate of the Corporation (including Chartwell) with respect to specific
transactions, provided, that such
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payments would be permitted under the first paragraph of paragraph (l)(ii). In
addition, for purposes of this paragraph (l)(iii), any transaction or series of
related transactions between the Corporation or any Restricted Subsidiary and an
Affiliate of the Corporation that is approved by a majority of the disinterested
members of its Board of Directors shall be deemed to comply with clause (B) of
the first sentence of the preceding paragraph. Notwithstanding the provisions of
this paragraph (l)(iii), the Corporation may pay fees and expenses to Affiliates
of the Corporation on the Issue Date in connection with the consummation of the
Transactions.
(iv) Limitation on Preferred Stock of Restricted Subsidiaries. The
Corporation will not permit any of its Restricted Subsidiariesto issue any
Preferred Stock (other than to the Corporation or a Wholly-Owned
Subsidiary), other than Permitted Foreign Restricted Subsidiary Preferred
Stock, or permit any Person (other than the Corporation or a Wholly-Owned
Subsidiary) to hold any such Preferred Stock unless the Corporation or
such Restricted Subsidiary would be entitled to incur or assume
Indebtedness under paragraph (l)(i) in the aggregate principal amount
equal to the aggregate liquidation value of the Preferred Stock to be
issued or so held.
(v) Merger, Consolidation or Sale of Assets. The Corporation will
not consolidate or merge with or into any Person, or sell, assign, lease,
convey or otherwise dispose of (or cause or permit any of its Restricted
Subsidiaries to sell, assign, lease, convey or otherwise dispose of
(however effected, including, without limitation, by merger or
consolidation)) all or substantially all of the Corporation's assets
(determined on a consolidated basis for the Corporation and its Restricted
Subsidiaries), whether as an entirety or substantially an entirety in one
transaction or a series of related transactions, including by way of
liquidation or dissolution, to any Person unless, in each such case:
(A)(x) the Corporation shall be the continuing Person, or (y) the Person
(if other than the Corporation) formed by such consolidation or into which
the Corporation or the Restricted Subsidiary, as the case may be, is
merged or to which the Properties and assets of the Corporation or any
Restricted Subsidiary, as the case may be, are transferred (such Person,
the "Surviving Entity") (1) shall be a corporation organized and existing
under the laws of the United States or any State thereof or the District
of Columbia and (2) the Series B Junior Preferred Stock shall be converted
into or exchanged for and shall become shares of such successor,
transferee or resulting Person, having in respect of such successor,
transferee or resulting Person the same powers, preferences and relative
participating, optional or other special rights and the qualifications,
limitations or restrictions thereon, that the Series B Junior Preferred
Stock had immediately prior to such transaction; (B) immediately before
and immediately after giving effect to such transaction on a pro forma
basis (including, without limitation, giving effect to any Indebtedness
and Acquired Indebtedness incurred or anticipated to be incurred in
connection with or in respect of the transaction), no Voting Rights
Triggering Event shall have occurred and be continuing; and (C)
immediately after giving effect to such transaction on a pro forma basis
(including, without limitation, any Indebtedness incurred or anticipated
to be incurred in connection with or in respect of such transaction or
series of transactions) the Corporation (or the Surviving Entity if the
Corporation is not continuing) (x) shall have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of the Corporation
immediately prior to such transaction and (y)
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could incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under paragraph (l)(i) above; provided, that a
Restricted Subsidiary may merge with and into the Corporation without
complying with this clause (C)(y).
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the Properties or assets of one or more Subsidiaries of the
Corporation, the Capital Stock of which constitutes all or substantially all of
the Properties and assets of the Corporation, shall be deemed to be the transfer
of all or substantially all of the assets of the Corporation.
For all purposes of the certificate of designations and the Series B
Junior Preferred Stock, Subsidiaries of any Surviving Entity will, upon such
transaction or series of transactions, become Restricted Subsidiaries or
Unrestricted Subsidiaries, to the extent and as provided pursuant to the
certificate of designations.
(vi) Reports to Holders. Whether or not required by the rules and
regulations of the Commission, so long as any shares of Series B Junior
Preferred Stock are outstanding, the Corporation shall furnish to the
holders of the Series B Junior Preferred Stock within 10 days after it is
or would have been required to file them with the Commission, (i) all
annual and quarterly financial information that would be required to be
contained in a filing with the Commission on Forms 10-K and 10-Q (without
exhibits) if the Corporation were required to file such forms, including a
section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by the Corporation's certified
independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K (without exhibits) if
the Corporation were required to file such reports. In addition, whether
or not required by the rules and regulations of the Commission, the
Corporation will file a copy of all such information and reports with the
Commission for public availability (unless the Commission will not accept
such a filing). In addition, the Corporation shall furnish to the holders
of the Series B Junior Preferred Stock and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144(d)(4) under the Securities Act and the
exhibits omitted from the information furnished pursuant to the preceding
sentence, for so long as the Series B Junior Preferred Stock is not freely
transferable under the Securities Act.
(m) Definitions. As used in this certificate of designations, the
following terms shall have the following meanings (with terms defined in
the singular having comparable meanings when used in the plural and vice
versa), unless the context otherwise requires:
"Acquired Indebtedness" means (a) Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person and (b) any Seller Note.
"Affiliate" of any specified Person means any other Person (including,
without limitation, such Person's issue, siblings and spouse) that directly or
indirectly through one or more
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<PAGE>
intermediaries controls, or is controlled by, or is under common control with,
such specified Person. For the 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, means 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. For purposes of the
Certificate of Designations, the term "Affiliate," as it relates to the
Corporation, shall (a) include HarnCo for so long as HarnCo is entitled to
designate at least one member of the Board of Directors of the Corporation or
any successor to the Corporation and (b) not include CIBC Oppenheimer Corp. or
Indosuez Capital or their respective Affiliates.
"Affiliate Transaction" has the meaning ascribed to it in paragraph
(l)(iii) hereof.
"Asset Acquisition" means (a) an Investment by the Corporation or any
Restricted Subsidiary of the Corporation in any other Person pursuant to which
such Person becomes a Restricted Subsidiary of the Corporation, or is merged
with or into the Corporation or any Restricted Subsidiary of the Corporation or
(b) the acquisition by the Corporation or any Restricted Subsidiary of the
Corporation of the assets of any Person (other than a Restricted Subsidiary of
the Corporation) which constitute all or substantially all of the assets of such
Person or comprise any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means the sale, transfer or other disposition (including,
without limitation, by merger or consolidation) (other than to the Corporation
or any of its Restricted Subsidiaries) in any single transaction or series of
related transactions of (a) any Capital Stock of or other equity interest in any
Restricted Subsidiary of the Corporation (other than directors' qualifying
shares to the extent required by applicable law), (b) all or substantially all
of the assets of the Corporation or of any Restricted Subsidiary thereof, (c)
real Property or (d) all or substantially all of the assets, or any Property, or
part thereof, owned by the Corporation or any Restricted Subsidiary thereof, or
a division, line of business or comparable business segment of the Corporation
or any Restricted Subsidiary thereof; provided, that Asset Sales shall not
include (i) sales, leases, conveyances, transfers or other dispositions to the
Corporation or to a Restricted Subsidiary or to any other Person if after giving
effect to such sale, lease, conveyance, transfer or other disposition such other
Person becomes a Restricted Subsidiary, (ii) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Corporation and its Restricted Subsidiaries taken as a whole as permitted under
paragraph (l)(v) above, (iii) any transfer, conveyance, sale, lease or other
disposition of Property or assets, the gross proceeds of which (exclusive of
indemnities) do not exceed $500,000, (iv) any sales, leases, conveyances,
transfers or other dispositions of Property or equipment that has become worn
out, obsolete or damaged or otherwise unsuitable for use in connection with the
business of the Corporation or any Restricted Subsidiary, as the case may be,
(v) the incurrence of any Liens, (vi) the making of any Restricted Payment
permitted by paragraph (l)(ii) above, (vii) transfers of cash and sales of Cash
Equivalents and (viii) sales, leases, conveyances, transfers or other
dispositions of Property or equipment in the ordinary course of business.
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"Board of Directors" means the board of directors of the Corporation or
any Committee authorized to act therefor.
"Business Day" means any day except a Saturday, a Sunday or a federally
recognized holiday or a day on which banking institutions are not required to be
open in the State of New York or the State of Delaware.
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents (however designated and whether or not voting) of capital
stock, partnership interests or any other participation, right or other interest
in the nature of an equity interest in such Person or any option, warrant or
other security convertible into any of the foregoing.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Certificate of Designations" means the certificate of designations
creating the Senior Preferred Stock.
"Cash Equivalents" means any of the following Investments: (i) marketable
direct obligations issued by, or unconditionally guaranteed by, the United
States Government or issued by any agency thereof and backed by the full faith
and credit of the United States maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any foreign country recognized by the United
States or any political subdivision of any such state or foreign country, as the
case may be, or any public instrumentality thereof (including any taxing
authority) maturing within one year from the date of acquisition thereof and, at
the time of acquisition, having one of the two highest ratings obtainable from
either Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service,
Inc. ("Moody's"); (iii) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit,
time deposit accounts, operating accounts or bankers' acceptances maturing
within one year from the date of acquisition thereof issued or guaranteed by any
commercial banking institution organized under the laws of any jurisdiction
recognized by the United States of America and in which the Corporation or its
Subsidiaries actively conduct business, having at the date of acquisition
thereof combined capital and surplus of not less than U.S. $250,000,000 or the
foreign currency equivalent thereof; (v) repurchase obligations with a term of
not more than 30 days for underlying securities of the types described in clause
(i) above entered into with any bank meeting the qualifications specified in
clause (iv) above; (vi) investments in money market funds which invest
substantially all their assets in securities of the types described in clauses
(i) through (v) above; and (vii) foreign bank deposits and cash equivalents in
jurisdictions where the Corporation or its Subsidiaries are then actively
conducting business, provided, that (a) all such deposits are required to be
made in the ordinary course of business, (b) such deposits do not exceed
$1,000,000 in the aggregate, and (c) the funds so deposited do not remain in
such bank for more than 10 days.
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A "Change of Control" of the Corporation will be deemed to have occurred
at such time as (i) any Person (including a Person's Affiliates) or any Persons
acting together that would constitute a group (for purposes of Section 13(d) of
the Exchange Act, or any successor provision thereto) (a "Group"), other than a
Permitted Holder, becomes the beneficial owner (as defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of (a) 50%
or more of the total Voting Stock of the Corporation or (b) 50% of all classes
of Common Stock (whether voting or non-voting), taken as a whole, of the
Corporation, (iii) any Person (including a Person's Affiliates) or Group, other
than a Permitted Holder, becomes the beneficial owner of more than 30% of the
total Voting Stock of the Corporation, and the Permitted Holders beneficially
own, in the aggregate, a lesser percentage of the total Voting Stock of the
Corporation, than such other Person or Group and the Permitted Holders do not
have the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of the Corporation,
(iv) there shall be consummated any consolidation or merger of the Corporation
in which the Corporation is not the continuing or surviving corporation or
pursuant to which the Common Stock of the Corporation would be converted into
cash, securities or other Property, other than a merger or consolidation of the
Corporation in which the holders of the Common Stock of the Corporation
outstanding immediately prior to the consolidation or merger hold, directly or
indirectly, at least a majority of the Common Stock of the surviving corporation
immediately after such consolidation or merger, or (v) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Corporation (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
shareholders of the Corporation has been approved by 66 2/3% of the directors
then still in office who either were directors at the beginning of such period
or whose election or recommendation for election was previously so approved)
cease to constitute a majority of the Board of Directors.
"Chartwell" means Chartwell Investments Inc. and its Affiliates.
"Commission" means the Securities and Exchange Commission.
"Common Stock" of any Person means all Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding-up
of such Person, to any other class of Capital Stock of such Person.
"Consolidated Interest Coverage Ratio" of any Person means the ratio of
(i) EBITDA of such Person for the four most recent consecutive fiscal quarters
for which financial statements are available or, if the Corporation is not in
compliance with its obligations under paragraph (l)(vi) above on the date of
determination, the four most recent consecutive quarters ending on or prior to
the date of determination (in either such case, the "Four Quarter Period") to
(ii) Consolidated Interest Expense of such Person for such Four Quarter Period.
In addition to and without limitation of the foregoing, for purposes of this
definition, "EBITDA" and "Consolidated Interest Expense" shall be calculated
after giving effect on a pro forma basis to (i)(a) the incurrence of any
Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and (b) any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), occurring on or
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after the first day of the Four Quarter Period and on or prior to the date of
determination, in each case set forth in clauses (i)(a) and (b), as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period (except that
Indebtedness under any revolving credit facility shall be deemed to be the
average daily balance of such Indebtedness during such Four Quarter Period) and
(ii) any Asset Sales or Asset Acquisitions (including (x) any Person who becomes
a Restricted Subsidiary as a result of any such Asset Acquisition and including
any Asset Sale or Asset Acquisition during such Four Quarter Period by any such
Person determined as if such Person had been a Restricted Subsidiary at the time
of such transaction; provided, that all Indebtedness of such Person and any such
Restricted Subsidiaries shall be deemed to have been incurred on the first day
of the Four Quarter Period and (y) the increase or decrease, as the case may be,
in EBITDA directly attributable to such Asset Sale or Asset Acquisition, as the
case may be) occurring on or after the first day of the Four Quarter Period and
on or prior to the date of determination, as if such Asset Sale or Asset
Acquisition, as the case may be, (including the incurrence, assumption or
liability for any such Acquired Indebtedness) occurred on the first day of the
Four Quarter Period. For purposes of this definition, whenever pro forma effect
is to be given to an Asset Acquisition, the amount of income or earnings
relating thereto and the amount of Consolidated Interest Expense associated with
any Indebtedness incurred in connection therewith shall be determined in good
faith by a responsible financial or accounting officer of the Corporation.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, without duplication, (i) the aggregate amount of interest charges
(excluding fees and expenses incurred in connection with the Transactions),
whether expensed or capitalized, incurred or accrued by such Person and its
Restricted Subsidiaries, determined on a consolidated basis in conformity with
GAAP for such period, plus (ii) to the extent not included in clause (i) above,
an amount equal to the sum of: (A) imputed interest included in Capitalized
Lease Obligations, (B) all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing, (C)
the net costs associated with Interest Rate Agreements, Currency Agreements and
other hedging obligations, (D) the interest portion of any deferred payment
obligations, (E) amortization of discount or premium on Indebtedness, if any,
(F) all capitalized interest and all accrued interest, (G) all other non-cash
interest expense, (H) all interest incurred or paid under any guarantee of
Indebtedness (including a guarantee of principal, interest or any combination
thereof) of any Person, and (I) all dividends or distributions on Disqualified
Capital Stock if payable to a Person other than the Corporation or a Restricted
Subsidiary (other than dividends paid or payable in shares of Junior A Capital
Stock (other than Disqualified Capital Stock) of the Corporation) declared and
payable in cash, minus (iii) to the extent included in clause (i) or (ii) above,
amortization or write-off of deferred financing costs (and original issue
discount to the extent it arises from the issuance of Junior A Capital Stock
(other than Disqualified Capital Stock) of the Corporation) during such period
and, without duplication, any charge related to any premium or penalty paid in
connection with redeeming or retiring any Indebtedness of the Corporation or its
Restricted Subsidiaries prior to the stated maturity thereof. If any
Indebtedness outstanding or to be incurred (x) bears a floating rate of
interest, the interest expense on such Indebtedness shall be calculated as if
the rate in effect on the date of determination had been the applicable rate for
the entire Four Quarter Period (taking into account on a pro forma basis any
Interest Rate Agreement that has a remaining term as of the date of
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determination in excess of 12 months), and/or (y) was incurred under a revolving
credit facility, the interest expense on such Indebtedness shall be computed
based upon the average daily balance of such Indebtedness during the applicable
period. If any Indebtedness to be incurred bears, at the option of the
Corporation or a Restricted Subsidiary, a fixed or floating rate of interest,
the interest expense on such Indebtedness shall be computed by applying, at the
option of the Corporation or such Restricted Subsidiary, such fixed or floating
rate.
"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 (a) the Net Income of any Person that is not a
Restricted Subsidiary shall be included only to the extent of the amount of
dividends or other distributions representing the Corporation's proportionate
share of such Person's Net Income for such period actually paid in cash to the
Corporation or a Restricted Subsidiary (subject to clause (b) below) by such
Person during such period, (b) the Net Income of any Subsidiary of the Person in
question that is subject to any restriction or limitation on the payment of
dividends or the making of other distributions (other than pursuant to the
Credit Agreement, the Senior Notes, the Note Indenture, or any other
Indebtedness of the Corporation or any Restricted Subsidiary of the Corporation
containing, in the good faith judgment of the Board of Directors of the
Corporation, substantially the same or less restrictive limitations on the
payment of dividends or the making of other distributions than those contained
in such Credit Agreement, the Senior Notes or the Note Indenture or the Exchange
Debentures or the Indenture if the same were issued) shall be excluded to the
extent of such restriction or limitation (regardless of any waiver thereof),
(c)(i) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition and (ii) any
net after tax gain (but not loss) resulting from an Asset Sale by the Person in
question or any of its Subsidiaries other than in the ordinary course of
business shall be excluded, (d) non-cash gains and losses due solely to
fluctuations in currency values shall be excluded, (e) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, any earnings (or losses) of the successor
corporation prior to such consolidation, merger or transfer of assets shall be
excluded, and (f) all items classified as extraordinary, unusual or
nonrecurring, including all items relating to the Transactions and the
pre-closing events relating thereto shall be excluded (including the fees and
expenses incurred in connection with the Transactions and write-offs or other
costs associated or arising in connection with the Transactions). In computing
Consolidated Net Income under clause (C) under paragraph (l)(ii) above, the
Corporation or such Restricted Subsidiary (i) shall use audited financial
statements for the portion of the relevant period for which such statements are
available on the date of determination and unaudited financial statements and
other current financial data based on the books and records of the Corporation
for the remaining portion of such period and (ii) shall be permitted to rely in
good faith for the balance of the relevant period for which audited financial
statements are not available on the financial statements and other financial
data derived from the books and records of the Corporation or such Restricted
Subsidiary that are available on the date of determination.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person and its Restricted Subsidiaries determined
on a consolidated basis in accordance with GAAP, less (to the extent included)
amounts attributable to Disqualified Capital Stock of such Person.
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"Consolidated Tangible Assets" of any Person means the consolidated
tangible assets of such Person and its Restricted Subsidiaries determined on a
consolidated basis in accordance with GAAP as of the end of the most recent
fiscal quarter for which financial statements are available or, if the
Corporation is not in compliance with its obligations under paragraph (l)(vi)
above on the date of determination, the end of the most recent quarter ending on
or prior to the date of determination.
"Credit Agreement" means the Credit Agreement, dated on or about March 30,
1998, among Morris Material Handling, the Corporation, Material Handling LLC,
Morris Material Handling, Ltd., Mondel ULC, Kaverit Steel and Crane ULC, and
Canadian Imperial Bank of Commerce, as Administrative Agent, Credit Agricole
Indosuez, as Syndication Agent, BankBoston, N.A., as Documentation Agent, and
the lending institutions named therein.
"Credit Facilities" means one or more senior secured or unsecured credit
facilities providing, inter alia, for revolving credit loans, term loans,
bankers' acceptances and/or letters of credit between the Corporation or its
Restricted Subsidiaries and one or more lenders, including, in each case, any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced, restated 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 designed to protect the
Corporation or any Restricted Subsidiary of the Corporation against fluctuations
in currency values.
"Disqualified Capital Stock" means any Capital Stock of the Corporation or
a Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the mandatory redemption date of the Senior Preferred Stock for any
consideration other than Capital Stock of the Corporation which is not
Disqualified Capital Stock; provided, that the Series C Junior Preferred Stock
shall not be deemed to be Disqualified Capital Stock and Preferred Stock of the
Corporation that is issued with the benefit of provisions requiring a change of
control offer to be made for such Preferred Stock in the event of a change of
control of the Corporation, which provisions have substantially the same effect
as the provisions of paragraph (h) of the Certificate of Designations shall not
be deemed to be Disqualified Capital Stock solely by virtue of such provisions.
Without limitation of the foregoing, Disqualified Capital Stock shall be deemed
to include any Preferred Stock of a Restricted Subsidiary of the Corporation
except for Permitted Foreign Restricted Subsidiary Preferred Stock.
"Dividend Payment Date" means April 1 and October 1 of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter, each
semi-annual dividend period.
"Dividend Record Date" means March 15 and September 15 of each year.
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"EBITDA" means, for any Person, for any period, an amount equal to (a) the
sum of (i) Consolidated Net Income for such period, plus (ii) the provision for
taxes for such period based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income (minus any provision
for taxes utilized in computing net loss under clause (i) hereof to the extent
such provision reduced the net loss), plus (iii) Consolidated Interest Expense
for such period, plus (iv) depreciation for such period on a consolidated basis
to the extent reducing Consolidated Net Income, plus (v) amortization of
intangibles for such period on a consolidated basis to the extent reducing
Consolidated Net Income, plus (vi) amortization of original issue discount to
the extent it arises from the issuance of Junior A Capital Stock (other than
Disqualified Capital Stock) of the Corporation, to the extent reducing
Consolidated Net Income, plus (vii) any charge related to any premium or penalty
paid in connection with redeeming or retiring any Indebtedness prior to its
stated maturity to the extent reducing Consolidated Net Income, plus (viii) any
other non-cash items reducing Consolidated Net Income for such period, minus (b)
all non-cash items increasing Consolidated Net Income for such period, minus (c)
all cash payments during such period relating to non-cash charges that were
added back in determining EBITDA in any prior period (provided that payment of
such cash amounts did not reduce Consolidated Net Income), all for such Person
and its Restricted Subsidiaries determined in accordance with GAAP.
"Equity Investment" means the investment by MHE Investments, Inc., the
purchase by certain institutional investors of Units being issued by the
Corporation, and a retained equity investment by HarnCo, in each case, in the
Corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Date" means the date, if any, on which the shares of Series B
Junior Preferred Stock are exchanged by the Corporation for Exchange Debentures.
"Exchange Debentures" shall have the meaning ascribed to it in paragraph
(g) hereof.
"Exchange Notice" shall have the meaning ascribed to it in paragraph (g)
hereof.
"Fair Market Value" means, with respect to any asset or Property, the
price which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair Market
Value shall be determined by the Board of Directors acting in good faith and, in
the case of determination involving assets or Property in excess of $2 million,
shall be evidenced by a resolution of the Board of Directors delivered to the
Trustee.
"Financings" means, collectively, the offering by Morris Material Handling
of the Senior Notes, the borrowings by Morris Material Handling under the Credit
Agreement, and the Equity Investment.
"Foreign Restricted Subsidiary" of any specified Person means any
Restricted Subsidiary the jurisdiction of incorporation, organization or
formation of which is outside of the United States, Canada, the United Kingdom
and South Africa.
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"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States from time to time.
"Guarantee" means a guarantee of the Senior Notes by a guarantor under the
Note Indenture, as in effect from time to time.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the performance
(or payment of damages in the event of non-performance) of all or any part of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit. A guarantee shall include, without
limitation, any agreement to preserve or maintain any other Person's financial
condition or to cause any other Person to achieve certain levels of operating
results.
"HarnCo" means Harnischfeger Corporation.
"Holder" means a holder of shares of Series B Junior Preferred Stock, as
reflected in the register maintained by the Transfer Agent.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such Person (and
"incurrence," "incurred," "incurrable," and "incurring" shall have meanings
correlative to the foregoing); provided, that a change in GAAP that results in
an obligation of such Person that exists at such time becoming Indebtedness
shall not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person,
any indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
Property (excluding, without limitation, any balances that constitute accounts
payable or trade payables or liabilities arising from advance payments or
customer deposits for goods and services sold by such Person or its Restricted
Subsidiaries in the ordinary course of business, and other accrued liabilities,
in each case, arising in the ordinary course of business) if and to the extent
any of the foregoing indebtedness would appear as a liability upon a balance
sheet of such Person prepared in accordance with GAAP, and shall also include,
to the extent not otherwise included (i) any Capitalized Lease Obligations, (ii)
guarantees of items of other Persons which would be included within this
definition for such other Persons (whether or not such items would appear upon
the balance sheet of the guarantor), including, without limitation, guarantees
of dividends for which such Person may be liable directly or indirectly, (iii)
all obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction (provided that in
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the case of any such letters of credit, the items for which such letters of
credit provide credit support are those of other Persons which would be included
within this definition for such other Persons), (iv) Disqualified Capital Stock
of the Corporation or any Restricted Subsidiary thereof, including, without
limitation, any liquidation preference and mandatory redemption payment
obligations in respect thereof and (v) obligations of any such Person under any
Interest Rate Agreement or Currency Agreement applicable to any of the foregoing
(if and to the extent such Interest Rate Agreement or Currency Agreement
obligations would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP). The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and, with respect to contingent obligations
included within the definition of Indebtedness, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, provided, that (i)
the amount outstanding at any time of any Indebtedness issued with original
issue discount is the principal amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP (but such Indebtedness shall only be
deemed to have been incurred on the date of original issuance thereof) and, in
the case of any securities constituting Indebtedness, the payment of interest
upon which is in such securities, such Indebtedness shall only be deemed to have
been incurred on the date of issuance of the original securities constituting
such Indebtedness, (ii) Indebtedness shall not include any liability for
federal, state, local, foreign or other taxes and (iii) contingent obligations
of the Corporation or any of its Restricted Subsidiaries under any Surety
Obligation will be deemed to be Indebtedness only upon the earlier of (a) the
Corporation's or any Restricted Subsidiary's obtaining knowledge of any payment
by or in respect of any provider in respect of any Surety Obligation, (b) the
demand by any provider for any reimbursement by the Corporation or any of its
Restricted Subsidiaries of any Surety Obligation or (c) the time at which the
Corporation or any of its Restricted Subsidiaries becomes obligated to make
payment in respect of any Surety Obligation as a result of the provider having
made a payment in respect of such Surety Obligation or as a result of such
payment being required to be made by such provider. Notwithstanding any other
provision of the foregoing definition, any trade or accounts payable arising
from the purchase of goods or materials or for services obtained in the ordinary
course of business shall not be deemed to be "Indebtedness" of the Corporation
or any Restricted Subsidiaries for purposes of this definition. Furthermore,
guarantees of (or obligations with respect to letters of credit supporting)
Indebtedness otherwise included in the determination of such amount shall not
also be included.
"Initial Dividend Period" means the dividend period commencing on the
Issue Date and ending on the first Dividend Payment Date to occur thereafter.
"Indenture" shall have the meaning ascribed to it in paragraph (f)(ii)(E)
hereof.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance (or other
extension of credit), loan or capital contribution to (by means of transfers of
Property to others, payments for Property or services for the account or use of
others or otherwise), any guarantee of any obligations or
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Indebtedness of any other Person, the purchase of any stock, bonds, notes,
debentures, partnership or joint venture interests or other securities of, the
acquisition, by purchase or otherwise, of any evidence of beneficial ownership
of, or interest in, any Person. Upon the designation of an Unrestricted
Subsidiary as a Restricted Subsidiary or the acquisition by the Corporation or a
Restricted Subsidiary of an interest in any Person that, as a result thereof,
becomes a Restricted Subsidiary, the Corporation shall be deemed to have made an
Investment equal to the Fair Market Value of all Investments owned by such new
Restricted Subsidiary. Investments shall exclude (i) accounts receivable and
other extensions of trade credit, in each case, on commercially reasonable terms
in accordance with normal trade practices, (ii) prepaid expenses and workers'
compensation, utility, lease and similar deposits, in the ordinary course of
business and (iii) acquisitions of Property or assets paid for solely by the
issuance of Capital Stock (other than Disqualified Capital Stock) of the
Corporation.
"Issue Date" means the date of original issuance of the Senior Preferred
Stock or the Series B Junior Preferred Stock, as the case may be.
"Joint Venture" of any specified Person means any corporation,
partnership, joint venture, limited liability company, association or other
business entity, whether now existing or hereafter organized or acquired, and
(a) which is engaged in a similar line of business as the Corporation or any
Restricted Subsidiary at the date of determination and (b)(i) in the case of a
corporation, of which not more than 50% of the total voting power of the Capital
Stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, officers or trustees thereof is held by the
Corporation or any of its Restricted Subsidiaries, or (ii) in the case of a
partnership, joint venture, limited liability company, association or other
business entity, with respect to which the Corporation or any of its Restricted
Subsidiaries has not more than 50% of the ownership and voting power relating to
the policies, management and affairs thereof.
"Junior A Capital Stock" means Capital Stock of the Corporation, including
the Series B Junior Preferred Stock and the Series C Junior Preferred Stock,
that does not rank, as to the payment of dividends or other comparable
distributions or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation, prior to
or on a parity with the Senior Preferred Stock.
"Junior Stock" means Capital Stock of the Corporation, including the
Series C Junior Preferred Stock, that does not rank, as to the payment of
dividends or other comparable distributions or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation, prior to or on a parity with the Series B Junior Preferred Stock.
"Lien" means with respect to any Property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such Property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
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"Mandatory Redemption Price" shall have the meaning ascribed to it in
paragraph (e) hereof.
"MHE Investments" means MHE Investments, Inc., a Delaware corporation.
"Morris Material Handling" means Morris Material Handling, Inc., a
Delaware corporation.
"Moody's" means Moody's Investors Services, Inc. and its successors.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP, plus the amount
of any decrease in the deferred tax asset for such period relating to the actual
cash tax benefit realized by such Person or the consolidated tax group of which
such Person is a member resulting from the election under Section 338(h)(10) of
the Internal Revenue Code of 1986, as amended, in respect of the Transactions.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by the
Corporation, the aggregate net proceeds received by the Corporation, after
payment of expenses, commissions and the like incurred in connection therewith,
whether such proceeds are in cash or in Property (valued at the Fair Market
Value thereof at the time of receipt) and (b) in the case of any exchange,
exercise, conversion or surrender of outstanding securities of any kind for or
into shares of Capital Stock of the Corporation which is not Disqualified Stock,
the net book value of such outstanding securities on the date of such exchange,
exercise, conversion or surrender (plus any additional amount required to be
paid by the holder to the Corporation upon such exchange, exercise, conversion
or surrender) less any and all payments made to the holders, e.g., on account of
fractional shares and less all expenses incurred by the Corporation in
connection therewith.
"Note Indenture" means the Indenture relating to the Senior Notes, as in
effect on the Issue Date.
"October 1997 Drop Down" means the transfer in October 1997 by HarnCo of
the assets of its Material Handling Equipment Division to Material Handling,
LLC, a wholly-owned subsidiary of the Corporation.
"Offering Memorandum" means the Offering Memorandum dated March 23, 1998,
relating to the Corporation's offering and placement of the Senior Preferred
Stock.
"Parity Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Permitted Affiliate Agreements" means the following agreements between or
among the Corporation and any of MHE Investments, HarnCo, Chartwell or their
respective Affiliates:
(i) Recapitalization Agreement;
(ii) Transition Services Agreement between HarnCo and Morris Material
Handling, Inc., dated on or about March 30, 1998;
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(iii) Trademark License Agreement between Harnischfeger Technologies, Inc.
and Morris Material Handling Inc., dated on or about March 30, 1998;
(iv) Separation Agreement between HarnCo and Material Handling, LLC, dated
October 26, 1997;
(v) Component and Manufactured Products Supply Agreement between HarnCo
and Morris Material Handling, Inc., dated on or about March 30, 1998;
(vi) Employment Agreement between Morris Material Handling, Inc. and
Michael Erwin, dated on or about March 30, 1998;
(vii) Employment Agreement between Morris Material Handling, Inc. and
David Smith, dated on or about March 30, 1998;
(viii) Employment Agreement between Morris Material Handling, Inc. and
Richard Niespodziani, dated on or about March 30, 1998;
(ix) Employment Agreement between Morris Material Handling, Inc. and Peter
Kerrick, dated on or about March 30, 1998;
(x) Employment Agreement between Morris Material Handling, Inc. and Edward
Doolan, dated on or about March 30, 1998;
(xi) Employment Agreement between Morris Material Handling, Inc. and
Michael Maddock, dated on or about March 30, 1998;
(xii) Employment Agreement between Morris Material Handling, Inc. and
Bruce Norridge, dated on or about March 30, 1998;
(xiii) Management Consulting Agreement between Morris Material Handling,
Inc. and Chartwell Investments Inc., dated on or about March 30, 1998;
(xiv) Financial Advisory Agreement between Morris Material Handling, Inc.
and Chartwell Investments Inc., dated on or about March 30, 1998;
(xv) Tax Sharing Agreement between MHE Investments, Inc., the Corporation
and certain of MMH Holdings' subsidiaries, dated on or about March 30, 1998;
(xvi) Shareholders Agreement between MHE Investments, Inc., the
Corporation and HarnCo, dated on or about March 30, 1998;
(xvii) Credit Indemnification Agreement between Harnischfeger Industries,
Inc. and Morris Material Handling, Inc., dated on or about March 30, 1998;
(xviii) Equity Purchase Agreements between Niles L.L.C. and certain
members of management;
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(xix) HK Agreement by and among the Corporation, MHE Investments, Inc. and
majority stockholder of the Corporation, dated on or about March 30, 1998; and
(xx) Employee Loan Agreements between Morris Material Handling, Inc. and
certain members of management with respect to loans aggregating $600,000 by
Morris Material Handling, Inc. to such employees to acquire equity interests in
Niles L.L.C.
Each of the foregoing agreements is a Permitted Affiliate Agreement in the
form such agreement is in effect immediately after the initial issuance of the
Senior Preferred Stock on the Issue Date, or as the same may be amended from
time to time subject to the provisions of paragraph (l)(iii) above; provided,
that notwithstanding paragraph (l)(iii), such agreements may be extended from
time to time or otherwise amended, to the extent that a majority of the
disinterested members of the Board of Directors has determined in good faith
that no material adverse effect on the creditworthiness of the Corporation and
its Restricted Subsidiaries, taken as a whole, shall result as a consequence
thereby.
"Permitted Foreign Restricted Subsidiary Preferred Stock" means securities
of Foreign Restricted Subsidiaries of the Corporation denominated in Preferred
Stock that (a) otherwise have substantially the same characteristics of voting
or non-voting Common Stock of a Delaware corporation, (b) do not obligate the
issuer to pay current dividends or distributions in cash or otherwise and (c)
are not subject to any requirement of redemption or repurchase.
"Permitted Holders" means Chartwell.
"Permitted Indebtedness" means:
(i) Indebtedness of the Corporation or any Restricted Subsidiary arising
under or in connection with the Credit Facilities or Acquired Indebtedness in an
aggregate principal amount at any one time outstanding not to exceed the sum of
(a) $55 million, less the aggregate amount of all Net Proceeds of Asset Sales
applied to permanently reduce the outstanding amount of such Indebtedness, and
(b) the greater of (1) $75 million, less the aggregate amount of all Net
Proceeds of Asset Sales applied to permanently reduce the outstanding amount of
such Indebtedness or (2) the sum of (x) 80% of the book value of accounts
receivable of the Corporation and its Restricted Subsidiaries and (y) 45% of the
book value of consolidated inventory of the Corporation and its Restricted
Subsidiaries, in each case, determined at the time of such incurrence, less the
aggregate amount of all Net Proceeds of Asset Sales applied to permanently
reduce the outstanding amount of such Indebtedness; provided, that $15 million
of the Indebtedness incurred under this clause (b) may be incurred solely to
obtain letters of credit and to fund draws thereunder to provide credit support
for the Surety Arrangement or other Surety Obligations or other letters of
credit reasonably necessary in the ordinary course of business;
(ii) Indebtedness under Surety Obligations and under the Surety
Arrangement, in either case, that are due not later than 10 days after the
earlier of (a) the Corporation's or any Restricted Subsidiary's obtaining
knowledge of any payment by or in respect of any provider in respect of any
Surety Obligation, (b) the demand by any provider for any reimbursement by the
Corporation or any of its Restricted Subsidiaries of any Surety Obligation or
(c) the time at which
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the Corporation or any of its Restricted Subsidiaries becomes obligated to make
payment in respect of any Surety Obligation as a result of the provider having
made a payment in respect of such Surety Obligation or as a result of such
payment being required to be made by such provider;
(iii) Indebtedness under the Exchange Debentures, the Indenture, the
Senior Notes, the Note Indenture and the Guarantees;
(iv) Indebtedness not covered by any other clause of this definition which
is outstanding on the Issue Date other than under the South African Credit
Facility;
(v) Indebtedness of the Corporation to any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary to the Corporation or another
Restricted Subsidiary, provided, that Indebtedness of the Corporation or any
Wholly-Owned Subsidiary to any Restricted Subsidiary (other than a Wholly-Owned
Subsidiary) is incurred for borrowed money; provided, further, that any
Indebtedness otherwise referred to in this clause (v) that is no longer held by
a Restricted Subsidiary or the Corporation (whether (i) as a result of a sale or
transfer of such Indebtedness, (ii) as a result of such Person no longer being
the Corporation or a Restricted Subsidiary or (iii) otherwise), shall, in each
case, be deemed incurred at such time;
(vi) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire Property in the ordinary course of business, which
Indebtedness and Capitalized Lease Obligations, in the aggregate, outstanding on
any date of incurrence (and any Refinancing Indebtedness in respect thereof), do
not exceed 4% of the Consolidated Tangible Assets of the Corporation and its
Restricted Subsidiaries;
(vii) Interest Rate Agreements and Currency Agreements;
(viii) guarantees of obligations of the Corporation or its Restricted
Subsidiaries;
(ix) additional Indebtedness of the Corporation or its Restricted
Subsidiaries not to exceed an aggregate of $10 million in principal amount
outstanding at any time; and
(x) Refinancing Indebtedness in respect of Indebtedness incurred under
clauses (iii), (iv), (v) and (vii) above or incurred pursuant to the first
paragraph of paragraph (l)(i) above.
"Permitted Investments" means, for any Person, Investments made on or
after the Issue Date consisting of:
(i) Investments by the Corporation, or by a Restricted Subsidiary, in the
Corporation or a Restricted Subsidiary;
(ii) Cash Equivalents;
(iii) Investments by the Corporation, or by a Restricted Subsidiary
thereof, in a Person, if as a result of such Investment (a) such Person becomes
a Restricted Subsidiary of the Corporation or (b) such person is merged,
consolidated or amalgamated with or into, or transfers or
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conveys substantially all of its assets (including the proceeds of such
Investment) to, or is liquidated into, the Corporation or a Restricted
Subsidiary thereof;
(iv) non-cash consideration received in conjunction with the consummation
of an Asset Sale;
(v) Interest Rate Agreements and Currency Agreements;
(vi) any Investment existing on the Issue Date;
(vii) Investments received in settlement of obligations owed to the
Corporation or any Restricted Subsidiary as a result of bankruptcy or insolvency
proceedings or upon the foreclosure or enforcement of any Lien in favor of the
Corporation or any Restricted Subsidiary; (viii) Investments required pursuant
to the following agreements or obligations of the Corporation or a Restricted
Subsidiary to make such Investments in effect on the Issue Date:
(A) Shareholders Agreement among Penang Port SDN BHD., Morris
Mechanical Handling Limited and The General Electric Company of Malaysia
SDN BHD., dated November 8, 1995; and
(B) Joint Venture Formation and Partners Agreement by and among P&H
Middle East Ltd., Morris Mechanical Handling, Ltd., and Hamad Abdulla
Al-Zamil and Brothers Company, dated 1997;
(ix) Investments required to be made pursuant to the Transactions, as
contemplated by the Permitted Affiliate Agreements; and
(x) Investments by the Corporation or any Restricted Subsidiary not
otherwise permitted under this definition, in an aggregate amount not to exceed
$15 million at any one time outstanding.
For purposes of clause (x) above, the amount of any Investment
outstanding, in respect of any Investment and the issuer thereof (and its
Subsidiaries), shall be equal to the excess of (a) the aggregate amount of all
Investments made therein by the Corporation or any Restricted Subsidiary on or
after the Issue Date (including the Fair Market Value of all such Investments
not made in cash or Cash Equivalents, valued at the time of such Investment)
over (b) the aggregate amount returned in cash or Cash Equivalents on or with
respect to Investments in such Person (whenever such Investment was made)
whether through the sale or other disposition of the Investment in such Person
(or portion thereof) or through interest payments, principal payments, dividends
or other distributions or payments; provided, that such payments or
distributions shall not be (and have not been) included in clause (C)(3) of the
first paragraph of paragraph (l)(ii) above or otherwise included in Consolidated
Net Income.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
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"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed Property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"Public Equity Offering" means any underwritten public offering of shares
of Common Stock (however designated and whether voting or non-voting) of the
Corporation or Morris Material Handling and any and all rights, warrants or
options to acquire such Common Stock pursuant to an effective registration
statement (other than a registration statement on Form S-4 or S-8) filed with
the Commission in accordance with the Securities Act.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including sales and
excise taxes, installation and delivery charges and other direct costs of, and
other direct expenses paid or charged in connection with, such purchase or
construction) of an item of Property, the principal amount of which Indebtedness
does not exceed the sum of (i) 100% of such cost and (ii) reasonable fees and
expenses of such Person incurred in connection therewith.
"Recapitalization" means the recapitalization of the Corporation pursuant
to the Recapitalization Agreement.
"Recapitalization Agreement" means the Recapitalization Agreement, dated
as of January 28, 1998, among HarnCo, the sellers named therein and MHE
Investments, Inc., together with Amendment No. 1 thereto, dated as of March 4,
1998, and Amendment No. 2 thereto, dated as of March 23, 1998.
"Redemption Date" with respect to any shares of Senior Preferred Stock,
means the date on which such shares of Senior Preferred Stock are redeemed by
the Corporation.
"Redemption Notice" shall have the meaning ascribed to it in paragraph (e)
hereof.
"Refinancing Indebtedness" means Indebtedness that refunds or refinances
any Indebtedness of the Corporation or its Restricted Subsidiaries outstanding
on the Issue Date or other Indebtedness permitted to be incurred by the
Corporation or its Restricted Subsidiaries pursuant to the terms of the
Certificate of Designations, but only to the extent that (i) the Refinancing
Indebtedness is scheduled to mature either (a) no earlier than the Indebtedness
being refunded or refinanced, or (b) at least 91 days after the mandatory
Redemption Date of the Senior Preferred Stock (ii) the portion, if any, of the
Refinancing Indebtedness that is scheduled to mature on or prior to the
mandatory Redemption Date of the Senior Preferred Stock has a weighted average
life to maturity at the time such Refinancing Indebtedness is incurred that is
equal to or greater than the weighted average life to maturity of the portion of
the Indebtedness being refunded or refinanced that is scheduled to mature on or
prior to the mandatory Redemption Date of the Senior Preferred Stock and, in the
case of clause (i) above and this clause
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(ii), such Refinancing Indebtedness by its terms, or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, does not
permit redemption or other retirement (including pursuant to any required offer
to purchase to be made by the Corporation or a Restricted Subsidiary) of such
Indebtedness at the option of the holder thereof prior to the final stated
maturity of the Indebtedness being refinanced, other than a redemption or other
retirement at the option of the holder of such Indebtedness (including pursuant
to a required offer to purchase made by the Corporation or a Restricted
Subsidiary) which is conditioned on a change of control of the Corporation
pursuant to provisions substantially similar to those contained under paragraph
(h) above or provisions contained in the Note Indenture attributable to required
offers to purchase attributable to Asset Sales or otherwise on terms
substantially similar to those in such Indebtedness being refinanced, (iii) such
Refinancing Indebtedness is in an aggregate principal amount that is equal to or
less than the sum of (a) the aggregate principal amount then outstanding under
the Indebtedness being refunded or refinanced, (b) the amount of accrued and
unpaid interest, if any, and premiums owed, if any, not in excess of
pre-existing prepayment provisions on such Indebtedness being refunded or
refinanced and (c) the amount of customary fees, expenses and costs related to
the incurrence of such Refinancing Indebtedness, and (iv) such Refinancing
Indebtedness is incurred by the same Person that initially incurred the
Indebtedness being refunded or refinanced, except that the Corporation may incur
Refinancing Indebtedness to refund or refinance Indebtedness of any Wholly-Owned
Subsidiary of the Corporation and any Restricted Subsidiary may incur
Refinancing Indebtedness to refund or refinance Indebtedness of any other
Restricted Subsidiary.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment of any kind or
character (whether in cash, Property or securities) on Junior Stock of the
Corporation or Capital Stock of any Restricted Subsidiary or any payment made to
the direct or indirect holders (in their capacities as such) of Junior Stock of
the Corporation or Capital Stock of any Restricted Subsidiary of the Corporation
(other than (x) dividends or distributions payable solely in Junior Stock (other
than Disqualified Capital Stock) of the Corporation, and (y) dividends or
distributions payable to the Corporation or to a Restricted Subsidiary of the
Corporation and (z) dividends or distributions from a Restricted Subsidiary of
the Corporation that are paid ratably to all Persons holding the Capital Stock
of such Restricted Subsidiary in proportion to the Capital Stock held by such
Persons), (ii) the purchase, redemption or other acquisition or retirement for
value of any Junior Stock of the Corporation or any Capital Stock of any of its
Restricted Subsidiaries or any options, warrants or rights to purchase or
acquire such shares or any securities convertible or exchangeable into such
shares (other than any such shares, options, warrants, rights or securities (a)
that are owned by the Corporation or a Restricted Subsidiary of the Corporation;
provided, that such options, warrants, rights or securities are purchased,
redeemed or otherwise acquired for value by the issuer thereof, or (b) the
issuer of which is a Restricted Subsidiary; provided, that, for purposes of this
clause (b), such purchase, redemption or other acquisition or retirement for
value is (A) permitted under clauses (viii) or (x) of the definition of
Permitted Investments or (B) in an amount, which, when added to all other
Restricted Payments made pursuant to this clause (b), is not greater than 10% of
Consolidated Tangible Assets of the Corporation and its Restricted
Subsidiaries), (iii) the making of any Investment other than a Permitted
Investment, (iv) any designation (other than pursuant to clause (x) of the
definition of Permitted Investments) of a Restricted Subsidiary as an
Unrestricted
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Subsidiary (a "Designation"), provided, that the Designation of a Subsidiary of
the Corporation as an Unrestricted Subsidiary shall be deemed to include the
Designation of all of the Subsidiaries of such Subsidiary that were Restricted
Subsidiaries, (v) forgiveness of any Indebtedness of an Affiliate of the
Corporation to the Corporation or a Restricted Subsidiary and (vi) any advisory
fee paid to an Affiliate with respect to a specific transaction (other than fees
payable on the Issue Date upon consummation of the Transactions. For purposes of
determining the amount expended for Restricted Payments, (a) cash distributed or
invested shall be valued at the face amount thereof and Property other than cash
shall be valued at its Fair Market Value, except that in determining the amount
of any Restricted Payment made under clause (iv) above, the amount of such
Restricted Payment shall be equal to the greater of (x) the book value or (y)
the Fair Market Value of the Corporation's direct and indirect proportionate
interest in such Subsidiary on such date and (b) upon the designation of an
Unrestricted Subsidiary as a Restricted Subsidiary, or the acquisition by the
Corporation or a Restricted Subsidiary of an interest in any Person that, as a
result thereof, becomes a Restricted Subsidiary, the Corporation shall be deemed
to have made a Restricted Payment equal to the Fair Market Value of the Capital
Stock of the Corporation or its Restricted Subsidiaries owned by such new
Restricted Subsidiaries.
"Restricted Subsidiary" means a Subsidiary of the Corporation other than
an Unrestricted Subsidiary and includes all of the Subsidiaries of the
Corporation existing as of the Issue Date. The Board of Directors may designate
any Unrestricted Subsidiary or any Person that is to become a Subsidiary as a
Restricted Subsidiary if immediately after giving effect to such action (and
treating any Acquired Indebtedness as having been incurred at the time of such
action), (i) no Voting Rights Triggering Event shall have occurred and be
continuing, (ii) Indebtedness of such Person and its Subsidiaries outstanding
immediately following such redesignation would, if incurred at such time, be
permitted to be incurred under the Certificate of Designations and (iii) the
provisions referred to in clause (b) of the last sentence of the definition of
Restricted Payment is complied with and any Investments pursuant to the second
sentence of the definition of Investments are permitted to be made pursuant to
the Certificate of Designations.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Note" means any Indebtedness of the Corporation or any Restricted
Subsidiary issued to a seller as a portion of the purchase price in any Asset
Acquisition by the Corporation or such Restricted Subsidiary from such seller.
"Senior Notes" means the $200,000,000 aggregate principal amount of 9 1/2%
Senior Notes due 2008 of Morris Material Handling.
"Senior Preferred Stock" means the 12% Series A Senior Exchangeable
Preferred Stock of the Corporation, liquidation preference $1,000 per share.
"Senior Stock" shall have the meaning ascribed to it in paragraph (b) hereof.
"Series C Junior Preferred Stock" means the 12 1/2 % Series C Junior
Preferred Stock of the Corporation, liquidation preference $1,000 per share.
39
<PAGE>
"South African Credit Facility" means a Credit Facility in an aggregate
principal amount or with aggregate commitments not to exceed $5 million to be
entered into by Morris Mechanical Handling (Pty) Ltd.
"Special Dividends" shall have the meaning ascribed to it in paragraph
(c)(vi) hereof.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, limited liability company, association or other business entity,
whether now existing or hereafter organized or acquired, (i) in the case of a
corporation, of which more than 50% of the total Voting Stock is held by such
first-named Person or any of its Subsidiaries or (ii) in the case of a
partnership, joint venture, limited liability company, association or other
business entity, with respect to which such first-named Person or any of its
Subsidiaries has at least a majority ownership and voting power relating to the
policies, management and affairs thereof.
"Surety Arrangement" means one or more surety arrangements providing,
inter alia, for the issuance of Surety Obligations between the Corporation or
any of its Restricted Subsidiaries and one or more providers, provided to the
Corporation or its Restricted Subsidiaries including, in each case, any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced, restated or refinanced from time to time.
"Surety Obligations" means any bonds, including bid bonds, advance bonds,
or performance bonds, letters of credit, warranties, and similar arrangements
between the Corporation and any of its Restricted Subsidiaries and one or more
providers, for the benefit of the Corporation's or any Restricted Subsidiary's
suppliers, vendors, insurers or customers including, in each case, any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced, restated or refinanced from time to time.
"Tax Allocation Agreement" means a tax allocation agreement among the
Corporation, Morris Material Handling and MHE Investments, as in effect on the
Issue Date and as the same may be amended from time to time subject to the
provisions of paragraph (l)(iii) above and provided, that no material adverse
effect on Corporation or on the holders of the Senior Preferred Stock shall
result as a consequence thereby.
"Transactions" means, collectively, the Recapitalization, the Financings
and the October 1997 Drop Down and the other related transactions described in
the section "The Transactions" contained in the Offering Memorandum.
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of the Corporation which is classified
(whether on or after the Issue Date) as an Unrestricted Subsidiary by a
resolution adopted by the Board of Directors of the Corporation; provided, that
a Subsidiary may be so classified as an Unrestricted Subsidiary only if (i) such
classification in compliance with paragraph (l)(ii) above, (ii) such Subsidiary
does not own beneficially any Capital Stock of the Corporation or any Restricted
Subsidiary (other than any Restricted Subsidiary of such Subsidiary that is
being designated as an Unrestricted Subsidiary at
40
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the time of such classification) and (iii) all Indebtedness of the Corporation
or any Restricted Subsidiary to such Subsidiary is deemed incurred at the time
of such classification or at the time such Capital Stock is no longer so owned.
The Corporation shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, at any time, (a) be liable for any Indebtedness of any
Unrestricted Subsidiary or (b) be liable for any Indebtedness that provides that
the holder thereof may (upon notice, lapse of time or both) declare a default
thereon or cause the payment thereof to be accelerated or payable prior to its
final maturity upon the occurrence of a default with respect to any Indebtedness
of any Unrestricted Subsidiary.
"Voting Rights Triggering Event" shall have the meaning ascribed to it in
paragraph (f) hereof.
"Voting Stock" of any Person means the Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly-Owned Subsidiary" means any Restricted Subsidiary, all of the
outstanding Voting Stock (other than directors' qualifying shares) of which are
owned, directly or indirectly, by the Corporation.
(n) Restrictions on Transfer
(a) Each share of Series B Junior Preferred Stock shall contain a legend
substantially to the following effect until the Resale Restriction Termination
Date (as defined below) unless the Corporation determines otherwise:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS,
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR")
OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE
TRANSACTION" PURSUANT TO REGULATION S (WITHIN THE MEANING OF RULE 903(C)(2) OF
REGULATION S UNDER THE SECURITIES ACT), (2) AGREES THAT IT WILL NOT, PRIOR TO
THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO YEARS (OR SUCH
SHORTER PERIOD AS MAY BE PRESCRIBED BY RULE 144(K)(OR ANY SUCCESSOR PROVISION
THEREOF) UNDER THE SECURITIES ACT) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE THEREOF WAS THE OWNER OF
THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY), RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B)
PURSUANT TO AN EFFECTIVE REGISTRATION
41
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STATEMENT UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (D)
INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE
TRANSFER AGENT A LETTER SIGNED BY SUCH INVESTOR CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRANSFER AGENT), (E)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) AND (3) AGREES THAT IT WILL
GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED PRIOR TO THE RESALE
RESTRICTION TERMINATION DATE A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. PRIOR TO ANY OFFER, SALE OR OTHER TRANSFER OF THIS SECURITY PRIOR TO THE
RESALE RESTRICTION TERMINATION DATE PURSUANT TO CLAUSES (D) AND (F) ABOVE, THE
HOLDER WILL BE REQUIRED TO DELIVER TO THE TRANSFER AGENT AND THE ISSUER SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
(b) Prior to the Resale Restriction Termination Date (or such shorter
period as may be prescribed by Rule 144(k) under the Securities Act (or any
successor thereto)) no transfers of any Series B Junior Preferred Stock may be
effected other than in accordance with the procedures set forth in paragraph
(n)(i) above.
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IN WITNESS WHEREOF, said MMH Holdings, Inc. has caused this Certificate of
Designations to be signed by Martin L. Ditkof, its Secretary, this 27th day of
March, 1998.
MMH HOLDINGS, INC.
By: /s/ Martin L. Ditkof
------------------------------
Name: Martin L. Ditkof
Title: Secretary
43
CERTIFICATE OF DESIGNATIONS OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF 12 1/2%
SERIES C JUNIOR PREFERRED STOCK, AND
QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
MMH Holdings, Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to authority conferred upon the Board of Directors (as
defined herein) by its Second Amended and Restated Certificate of Incorporation
(hereinafter referred to as the "Restated Certificate"), and pursuant to the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, said Board of Directors, by unanimous written consent dated March 23,
1998, duly approved and adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Restated Certificate, the Board of Directors does hereby
create, authorize and provide for the issuance of 12 1/2% Series C Junior
Preferred Stock, par value $.01 per share, with a stated value of
$1,000.00 per share, consisting of 60,000 shares, having the designations,
preferences, relative, participating, optional and other special rights
and the qualifications, limitations and restrictions thereof that are set
forth in the Restated Certificate and in this Resolution as follows:
(a) Designation. There is hereby created out of the authorized and
unissued shares of Preferred Stock of the Corporation a series of Preferred
Stock designated as the "12 1/2% Series C Junior Preferred Stock." The number of
shares constituting such series shall be 60,000 and are referred to herein as
the "Series C Junior Preferred Stock." 30,000 shares of Series C Junior
Preferred Stock shall be initially issued with an additional 30,000 shares
reserved for issuance in accordance with paragraph (c)(i) hereof. The
liquidation preference of the Series C Junior Preferred Stock shall be $1,000.00
per share.
(b) Ranking. The Series C Junior Preferred Stock shall, with respect
to dividends and distributions upon liquidation, dissolution or winding-up of
the Corporation, rank (i) junior to the Senior Preferred Stock and the Series B
Junior Preferred Stock, (ii) junior to any other Preferred Stock not ranking
junior to the Senior Preferred Stock and the Series B Junior Preferred Stock and
(iii) senior to all classes of Junior Stock and Common Stock of the Corporation.
The Corporation may not (i) issue any class or series of
<PAGE>
Capital Stock that ranks on a parity with the Series C Junior Preferred Stock as
to dividends or distributions upon liquidation, dissolution or winding-up of the
Corporation, or amend the provisions of any existing class of Capital Stock or
series of Preferred Stock to make such class or series rank on a parity with
Series C Junior Preferred Stock (collectively referred to as "Parity Stock")
(provided, that the Corporation can issue, from time to time, additional shares
of Series C Junior Preferred Stock to satisfy dividend payments on outstanding
shares of Series C Junior Preferred Stock in accordance with this certificate of
designations) without the approval of the Holders in accordance with paragraph
(f)(ii)(A) hereof (to the extent such approval is required); or (ii) issue any
class or series of Capital Stock that ranks senior to the Series C Junior
Preferred Stock as to dividends and distributions upon liquidation, dissolution
or winding-up of the Corporation, or amend the provisions of any existing class
of Capital Stock or series of Preferred Stock to make such class or series rank
senior to the Series C Junior Preferred Stock (collectively referred to as
"Senior Stock") (provided, that the Corporation can issue, from time to time,
additional shares of Senior Preferred Stock to satisfy dividend payments on
outstanding shares of Senior Preferred Stock in accordance with the certificate
of designations of the Senior Preferred Stock and additional shares of Series B
Junior Preferred Stock to satisfy dividend payments on outstanding shares of
Series B Junior Preferred Stock in accordance with the certificate of
designations of the Series B Junior Preferred Stock), without the approval of
the Holders in accordance with paragraph (f)(ii)(B) hereof (to the extent such
approval is required).
(c) Dividends.
(i) Commencing on the Issue Date, the Holders of the outstanding
shares of Series C Junior Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors, out of funds legally
available therefor, dividends on each share of Series C Junior Preferred
Stock, at a rate per annum equal to 12 1/2% of the liquidation preference
per share of the Series C Junior Preferred Stock, payable semi-annually;
provided, that the dividend rate per annum is subject to increase as
provided for in clause (vi) below. All dividends shall be cumulative,
whether or not earned or declared, on a daily basis from the Issue Date
and shall be payable semi-annually in arrears on each Dividend Payment
Date, commencing on the first Dividend Payment Date after the Issue Date
to Holders of record on the Dividend Record Date immediately preceding the
relevant Dividend Payment Date. Dividends accumulating on or prior to
April 1, 2003 may be paid, at the Corporation's option, either in cash or
by the issuance of additional shares of Series C Junior Preferred Stock
(and, at the Corporation's option, payment of a whole share (after
rounding up) or cash in lieu of a fractional share) having an aggregate
liquidation preference equal to the amount of such dividends. In the event
that on or prior to April 1, 2003, dividends are declared and paid through
the issuance of additional shares of Series C Junior Preferred Stock as
provided in the previous sentence, such dividends shall be deemed paid in
full and shall not accumulate. Dividends accumulating after April 1, 2003
must be paid in cash. Each dividend shall be payable to the Holders of
record as they appear on the stock books of the Corporation on the
Dividend Record Date immediately
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preceding the related Dividend Payment Date. Dividends shall cease to
accumulate in respect of the Series C Junior Preferred Stock exchanged for
Exchange Debentures on the Exchange Date or on the date of their earlier
redemption unless the Corporation shall have failed to issue the
appropriate aggregate principal amount of Exchange Debentures in respect
of the Series C Junior Preferred Stock to be exchanged on the Exchange
Date or shall have failed to pay the relevant redemption price on Series C
Junior Preferred Stock to be redeemed on the date fixed for redemption.
(ii) All dividends paid with respect to shares of the Series C
Junior Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata
to the Holders entitled thereto.
(iii) Dividends accumulating after April 1, 2003 on the Series C
Junior Preferred Stock for any past Dividend Period and dividends in
connection with any optional redemption pursuant to paragraph (e)(i) may
be declared and paid at any time, without reference to any Dividend
Payment Date, to Holders of record on such date, not more than forty-five
(45) days prior to the payment thereof, as may be fixed by the Board of
Directors.
(iv) So long as any share of the Series C Junior Preferred Stock is
outstanding, the Corporation shall not declare, pay or set apart for
payment any dividend in cash on any Junior Stock (or make any other
dividend or distribution on any Junior Stock other than in Junior Stock)
or make any cash payment on account of any Junior Stock (A) unless full
cumulative dividends determined in accordance herewith on the Series C
Junior Preferred Stock have been paid in cash in full when required to be
so paid or (B) during any period when cash dividends (whether or not
required to be paid) are not paid on the Series C Junior Preferred Stock.
(v) Dividends payable on the Series C Junior Preferred Stock for any
period less than a year shall be computed on the basis of a 360-day year
of twelve 30-day months.
(vi) Upon the occurrence and during the continuance of a Voting
Rights Triggering Event described in paragraph (f)(iii)(A)(3) hereof, the
per annum dividend rate on the Series C Junior Preferred Stock will
increase by 400 basis points per annum ("Special Dividends") in excess of
the dividend rate originally borne by the Series C Junior Preferred Stock
as set forth under paragraph (c)(i) hereof. All references herein to
"dividends" shall be deemed to include any such "Special Dividends."
(d) Liquidation Preference.
(i) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Corporation, the Holders
of shares of Series C
3
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Junior Preferred Stock then outstanding shall be entitled to be paid out
of the assets of the Corporation available for distribution to its
stockholders an amount in cash equal to the liquidation preference for
each share outstanding, plus, without duplication, an amount in cash equal
to accumulated and unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding-up (including an amount equal to a
prorated dividend for the period from the immediately preceding Dividend
Payment Date to the date fixed for liquidation, dissolution or
winding-up), after any payment shall be made or any assets distributed to
the holders of any Senior Preferred Stock and Series B Junior Preferred
Stock, but before any payment shall be made or any assets distributed to
the holders of any of the Junior Stock. After payment of the full amount
of the liquidation preference and accumulated and unpaid dividends to
which they are entitled, Holders of Series C Junior Preferred Stock shall
not be entitled to any further participation in any distribution of assets
of the Corporation. If the assets of the Corporation are not sufficient to
pay in full the liquidation payments payable to the Holders of outstanding
shares of the Series C Junior Preferred Stock and all Parity Stock, if
any, upon any voluntary or involuntary liquidation, dissolution or
winding-up of the affairs of the Corporation, then the holders of all such
shares shall share equally and ratably in such distribution of assets in
proportion to the full liquidation preference to which each is entitled
until such preferences are paid in full, and then in proportion to their
respective amounts of accumulated but unpaid dividends.
(ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the Property or assets
of the Corporation nor the consolidation or merger of the Corporation with
or into one or more entities shall be deemed to be a liquidation,
dissolution or winding-up of the affairs of the Corporation.
(e) Redemption. The provisions of this paragraph (e) shall not
become effective until all of the shares of Series C Junior Preferred Stock are
transferred by the Initial Holder to an unaffiliated third-party of the Initial
Holder and, thereafter, shall be in full force and effect with respect to all
Holders.
(i) Optional Redemption. (A) The Corporation may, at the option of
the Board of Directors, redeem at any time or from time to time on or
after April 1, 2003, subject to contractual and other restrictions with
respect thereto and from any source of funds legally available therefor,
in whole or in part, in the manner provided for in paragraph (e)(iii)
hereof, any or all of the shares of the Series C Junior Preferred Stock,
at the redemption prices in cash (expressed as a percentage of the then
effective liquidation preference thereof) set forth below plus, without
duplication, an amount in cash equal to all accumulated and unpaid
dividends per share (including an amount in cash equal to a prorated
dividend for the period from the Dividend Payment Date immediately prior
to the Redemption Date to the Redemption Date), if redeemed during the
12-month period beginning on April 1 of each of the years set forth below:
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2003........................................106.250%
2004........................................104.167%
2005........................................102.083%
2006 and thereafter.........................100.000%
(B) Notwithstanding the provisions of paragraph (e)(i)(A)
above, the Corporation may, at the option of the Board of Directors,
redeem in the aggregate all, but not less than all, of the Series C
Junior Preferred Stock then outstanding, at any time prior to April
1, 2001, at a redemption price equal to 112.500% of the then
effective liquidation preference thereof, plus, without duplication,
an amount in cash equal to all accumulated and unpaid dividends
(including an amount in cash equal to a prorated dividend for the
period from the Dividend Payment Date immediately prior to the
Redemption Date to the Redemption Date) out of the Net Proceeds of
one or more Public Equity Offerings; provided, that any such
redemption occurs within 90 days following the closing of any such
Public Equity Offering.
(C) No redemption pursuant to paragraph (e)(i)(A) or (B)
hereof shall be authorized or made unless prior thereto full
accumulated and unpaid dividends are declared and paid in full, or
declared and a sum in cash (if such dividend is to be paid in cash)
is set apart sufficient for such payment, on the Series C Junior
Preferred Stock for all Dividend Periods terminating on or prior to
the Redemption Date.
(D) In the event of a redemption pursuant to paragraph
(e)(i)(A) hereof of only a portion of the then outstanding shares of
the Series C Junior Preferred Stock, the Corporation shall effect
such redemption on a pro rata basis according to the number of
shares held by each Holder of the Series C Junior Preferred Stock,
except that the Corporation may redeem such shares held by Holders
of fewer than ten shares (or shares held by Holders who would hold
less than ten shares as a result of such redemption), as may be
determined by the Corporation.
(ii) Mandatory Redemption. On April 1, 2010, the Corporation shall
redeem, subject to contractual and other restrictions with respect thereto
and to the extent of funds legally available therefor, in the manner
provided for in paragraph (e)(iii) hereof, all of the shares of the Series
C Junior Preferred Stock then outstanding at a redemption price equal to
100% of the liquidation preference per share, plus, without duplication,
an amount in cash (whether or not otherwise payable in cash) equal to all
accumulated and unpaid dividends per share (including
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an amount equal to a prorated dividend for the period from the Dividend
Payment Date immediately prior to the Redemption Date to the Redemption
Date).
(iii) Procedures for Redemption. (A) At least thirty (30) days and
not more than sixty (60) days prior to the date fixed for any redemption
of the Series C Junior Preferred Stock, written notice (the "Redemption
Notice") shall be given by first class mail, postage prepaid, to each
Holder of record on the record date fixed for such redemption of the
Series C Junior Preferred Stock at such Holder's address as it appears on
the register maintained by the Transfer Agent, provided, that no failure
to give such notice nor any deficiency therein shall affect the validity
of the procedure for the redemption of any shares of Series C Junior
Preferred Stock to be redeemed except as to the Holder or Holders to whom
the Corporation has failed to give said notice or except as to the Holder
or Holders whose notice was defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph
(e)(i)(A) or (B) or (e)(ii) hereof;
(2) the redemption price;
(3) whether all or less than all the outstanding shares of
the Series C Junior Preferred Stock are to be redeemed
and the total number of shares of the Series C Junior
Preferred Stock being redeemed;
(4) the Redemption Date;
(5) that the Holder is to surrender to the Corporation, in
the manner, at the place or places and at the price
designated, his certificate or certificates representing
the shares of Series C Junior Preferred Stock to be
redeemed; and
(6) that dividends on the shares of the Series C Junior
Preferred Stock to be redeemed shall cease to accumulate
on such Redemption Date unless the Corporation defaults
in the payment of the redemption price.
(B) Each Holder of Series C Junior Preferred Stock shall
surrender the certificate or certificates representing such shares
of Series C Junior Preferred Stock to the Corporation, duly endorsed
(or otherwise in proper form for transfer, as determined by the
Corporation), in the manner and at the place designated in the
Redemption Notice, and on the Redemption Date the full redemption
price for such shares shall be payable in cash to the Person whose
name appears on such certificate or certificates as the owner
thereof, and each surrendered certificate shall be canceled and
retired. In the event that less than all of the shares represented
by any such
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<PAGE>
certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(C) On and after the Redemption Date, unless the Corporation
defaults in the payment in full of the applicable redemption price,
dividends on the Series C Junior Preferred Stock called for
redemption shall cease to accumulate on the Redemption Date, and all
rights of the Holders of redeemed shares shall terminate with
respect thereto on the Redemption Date, other than the right to
receive the redemption price; provided, that if a notice of
redemption shall have been given as provided in paragraph (iii)(A)
above and the funds necessary for redemption (including an amount in
cash in respect of all dividends that will accumulate to the
Redemption Date) shall have been irrevocably deposited in trust for
the equal and ratable benefit for the Holders of the shares to be
redeemed, then, at the close of business on the day on which such
funds are segregated and set aside, the Holders of the shares to be
redeemed shall cease to be stockholders of the Corporation and shall
be entitled only to receive the redemption price.
(f) Voting Rights.
(i) The Holders of Series C Junior Preferred Stock, except as
otherwise required under Delaware law or as set forth in paragraphs (ii),
(iii) and (iv) below, shall not be entitled or permitted to vote on any
matter required or permitted to be voted upon by the stockholders of the
Corporation, provided, that so long as MHE Investments or any Affiliate
thereof holds any shares of the Series C Junior Preferred Stock, the
Series C Junior Preferred Stock, shall be entitled to .314 votes per share
of Series C Junior Preferred Stock, voting together as one class with the
holders of voting Common Stock of the Corporation, on all matters as to
which voting Common Stock of the Corporation is entitled to vote.
(ii) (A) So long as any shares of the Series C Junior Preferred Stock are
outstanding, the Corporation shall not authorize or issue any additional shares
of Senior Preferred Stock, Series B Junior Preferred Stock or any class or
series of Parity Stock without the affirmative vote or consent of Holders of at
least a majority of the then outstanding shares of Series C Junior Preferred
Stock, voting or consenting, as the case may be, as one class, given in person
or by proxy, either in writing or by resolution adopted at an annual or special
meeting; provided, that no such vote or consent shall be necessary in connection
with (i) the issuance of additional shares of Senior Preferred Stock pursuant to
the certificate of designations of the Senior Preferred Stock as in effect on
the Issue Date and shares of Series B Junior Preferred Stock pursuant to the
certificate of designations of the Series B Junior Preferred Stock as is effect
on the Issue Date, (ii) the issuance of additional shares of Series C Junior
Preferred Stock pursuant to the provisions of paragraph (c) of this certificate
of designations or (iii) the issuance of shares of Series C Junior Preferred
Stock without voting rights in exchange for shares of Series C Junior Preferred
Stock with voting rights.
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(B) So long as any shares of the Series C Junior Preferred
Stock are outstanding, the Corporation shall not authorize or issue
any class or series of Senior Stock without the affirmative vote or
consent of Holders of at least a majority of the outstanding shares
of Series C Junior Preferred Stock, voting or consenting, as the
case may be, as one class, given in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting.
(C) [Reserved.]
(D) So long as any shares of the Series C Junior Preferred
Stock are outstanding, the Corporation shall not amend this
certificate of designations so as to affect adversely the specified
rights, preferences, privileges or voting rights of holders of
shares of Series C Junior Preferred Stock without the affirmative
vote or consent of Holders of at least a majority of the then issued
and outstanding shares of Series C Junior Preferred Stock, voting or
consenting, as the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or
special meeting; provided, that any increase in the amount of
authorized Preferred Stock of the Corporation or the creation and
issuance (other than the Senior Preferred Stock, Series B Junior
Preferred Stock and Series C Junior Preferred Stock as provided
under paragraph (b) above) of any other class of Preferred Stock or
any increase in the amount of authorized shares of such class or any
other class of Junior Stock, including Junior Stock which is
Preferred Stock, will not be deemed to affect adversely such rights,
preferences or voting powers.
(E) Prior to the exchange of all outstanding shares of Series
C Junior Preferred Stock for Exchange Debentures, the Corporation
shall not amend or modify the form of the Indenture for the Exchange
Debentures from the form thereof certified by the Secretary of the
Corporation and delivered to the Transfer Agent on the Issue Date
(the "Indenture") (except as expressly provided therein in respect
of amendments without the consent of Holders of Exchange Debentures)
without the affirmative vote or consent of holders of at least a
majority of the aggregate liquidation preference of the outstanding
shares of Series C Junior Preferred Stock, voting or consenting, as
the case may be, together as one class, given in person or by proxy,
either in writing or by resolution adopted at an annual or special
meeting.
(iii) (A) If (1) after April 1, 2003, cash dividends on the Series C
Junior Preferred Stock are in arrears and unpaid for two or more
semi-annual Dividend Periods (whether or not consecutive) (a "Dividend
Default"); (2) the Corporation fails to redeem all of the then outstanding
shares of Series C Junior
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<PAGE>
Preferred Stock on or before April 1, 2010; (3) the Corporation fails to
make or consummate a Change of Control Offer following a Change of Control
if such Change of Control Offer is required by paragraph (h) hereof; (4)
the Corporation breaches or violates one of the provisions set forth in
paragraph (l) hereof and the breach or violation continues for a period of
60 days or more after the Corporation receives notice thereof specifying
the default from the holders of at least 25% of the shares of Series C
Junior Preferred Stock then outstanding, then in the case of any of
clauses (1) through (4) above, the number of directors constituting the
Board of Directors shall be increased or decreased by the number, if any,
necessary to permit the Holders of a majority of the aggregate outstanding
shares Series C Junior Preferred Stock, voting together as one class, to
elect one director to the Board of Directors. Each such event described in
clauses (1), (2), (3) and (4) is a "Voting Rights Triggering Event";
provided, that if the Corporation breaches or violates more than one of
the provisions set forth in paragraph (A) hereof, all such breaches or
violations together shall not constitute more than one Voting Rights
Triggering Event. Holders of a majority of the aggregate outstanding
shares of Series C Junior Preferred Stock, voting together and as one
class, shall have the exclusive right to elect one director to the Board
of Directors at a meeting therefor called upon occurrence of such Voting
Rights Triggering Event. Except as provided in paragraph (c)(vi), the
voting rights provided herein shall be the exclusive remedy at law or in
equity of the holders of the Series C Junior Preferred Stock for any
Voting Rights Triggering Event. Notwithstanding the foregoing, if the
voting rights granted pursuant to this subparagraph would violate any
rules or regulations applicable to any Regulated Holder, the shares of
Series C Junior Preferred Stock held by such Regulated Holder shall be
deemed to be not issued and not outstanding solely for purposes this
paragraph (f)(iii)(A). As used herein, "Regulated Holder" shall mean any
Person holding shares of Series C Junior Preferred Stock that is (or that
is a subsidiary of a bank holding company that is) subject to the
provisions of Regulation Y of the Board of Governors of the Federal
Reserve System, 12 C.F.R., Part 225 (or any successor to Regulation Y).
(B) The right of the Holders of Series C Junior Preferred
Stock, voting together as one class, to elect members of the Board
of Directors as set forth in subparagraph (f)(iii)(A) above shall
continue until such time as (x) in the event such right arises due
to a Dividend Default, all accumulated dividends that are in arrears
on the Series C Junior Preferred Stock are paid in full in cash; and
(y) in all other cases, the failure, breach or default giving rise
to such Voting Rights Triggering Event is remedied, cured or waived
by the holders of at least a majority of the aggregate outstanding
shares of Series C Junior Preferred Stock, voting or consenting, as
the case may be, together as one class, at which time (1) the
special right of the Holders of Series C Junior Preferred Stock, to
vote together as one class for the election of directors and (2) the
term of office of the director elected by the Holders of the Series
C Junior Preferred Stock, shall each terminate and the number of
directors constituting the Board of Directors shall be
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<PAGE>
increased or decreased to such number equal to the directors elected
by the holders of Common Stock or Capital Stock (other than the
Series C Junior Preferred Stock pursuant to paragraph (f)(iii)(A)).
At any time after voting power to elect directors shall have become
vested and be continuing in the Holders of Series C Junior Preferred
Stock pursuant to this paragraph (f)(iii)(A) hereof, or if vacancies
shall exist in the offices of directors elected by the Holders of
Series C Junior Preferred Stock, a proper officer of the Corporation
may, and upon the written request of the Holders of record of at
least twenty-five percent (25%) of the then outstanding shares of
Series C Junior Preferred Stock, taken as a whole, addressed to the
Secretary of the Corporation shall call a special meeting of the
Holders of Series C Junior Preferred Stock for the purpose of
electing the directors which such Holders are entitled to elect. If
such meeting shall not be called by a proper officer of the
Corporation within twenty (20) days after personal service of said
written request upon the Secretary of the Corporation, or within
twenty (20) days after mailing the same within the United States by
certified mail, addressed to the Secretary of the Corporation at its
principal executive offices, then the Holders of record of at least
twenty-five percent (25%) of the outstanding shares of Series C
Junior Preferred Stock, taken as a whole, may designate in writing
one of their number to call such meeting at the expense of the
Corporation, and such meeting may be called by the Person so
designated upon the notice required for the annual meetings of
stockholders of the Corporation and shall be held at the place for
holding the annual meetings of stockholders. Any Holder of Series C
Junior Preferred Stock so designated shall have, and the Corporation
shall provide, reasonable access to the lists of stockholders of
Series C Junior Preferred Stock to be called pursuant to the
provisions hereof.
(C) At any meeting held for the purpose of electing directors
at which the Holders of Series C Junior Preferred Stock shall have
the right, voting together as one class, to elect directors as
aforesaid, the presence in person or by proxy of the Holders of at
least a majority of the then outstanding shares of Series C Junior
Preferred Stock, taken as a whole, entitled to vote thereat shall be
required to constitute a quorum of such Series C Junior Preferred
Stock.
(D) Any vacancy occurring in the office of a director elected
by the Holders of Series C Junior Preferred Stock may be filled by
the remaining director, if any, elected by the Holders of Series C
Junior Preferred Stock unless and until such vacancy shall be filled
by the Holders of Series C Junior Preferred Stock.
(iv) In any case in which the Holders of Series C Junior Preferred
Stock shall be entitled to vote pursuant to this paragraph (f) or pursuant
to Delaware law, each Holder of Series C Junior Preferred Stock entitled
to vote with respect
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<PAGE>
to such matter shall be entitled to one vote for each share of Series C
Junior Preferred Stock.
(g) Exchange. The provisions of this paragraph (g) shall not become
effective until all of the shares of Series C Junior Preferred Stock are
transferred by the Initial Holder to an unaffiliated third-party of the Initial
Holder and, thereafter, shall be in full force and effect with respect to all
Holders.
(i) Requirements. The outstanding shares of Series C Junior
Preferred Stock (including any shares of Series C Junior Preferred Stock
issuable on such Dividend Payment Date on the outstanding shares of Series
C Junior Preferred Stock) are exchangeable, in whole but not in part, at
the option of the Corporation, at any time on any Dividend Payment Date
for the Corporation's 12 1/2% Exchange Debentures due 2010 (the "Exchange
Debentures") to be substantially in the form of Exhibit A to the
Indenture, a copy of which is on file with the Transfer Agent and the
Secretary of the Corporation; provided, that any such exchange may only be
made if on or prior to the date of such exchange, (i) the Corporation has
paid all accumulated dividends on the Series C Junior Preferred Stock
(including the dividends payable on such Dividend Payment Date) and there
shall be no contractual impediment to such exchange on such Dividend
Payment Date; (ii) there shall be legally available funds sufficient
therefor; (iii) immediately after giving effect to such exchange, no
Default or Event of Default (each as defined in the Indenture) would exist
under the Indenture as if the Indenture had been in effect as of the Issue
Date and no default or event of default under any other material
instrument governing Indebtedness outstanding at the time of such exchange
would be caused thereby; and (iv) the Indenture has been qualified under
the Trust Indenture Act, if such qualification is required at the time of
exchange. The exchange rate shall be $1.00 principal amount of Exchange
Debentures for each $1.00 of liquidation preference of Series C Junior
Preferred Stock. Exchange Debentures shall be issued in principal amounts
of $1,000 and integral multiples thereof to the extent possible and, to
the extent necessary, in principal amounts less than $1,000, provided,
that the Corporation shall have the right, at its option, to pay cash in
an amount equal to the principal amount of that portion of any Exchange
Debenture that is not an integral multiple of $1,000 in lieu of delivering
an Exchange Debenture in a denomination of less than $1,000.
(ii) Procedure for Exchange. (A) At least thirty (30) days and not
more than sixty (60) days prior to the date fixed for exchange, written
notice (the "Exchange Notice") shall be given by the Corporation by
first-class mail, postage prepaid, to each Holder of record on the
Dividend Record Date immediately preceding such Dividend Payment Date at
such Holder's address as the same appears on the stock register maintained
by the Transfer Agent, provided, that no failure to give such notice nor
any deficiency therein shall affect the validity of the procedure for the
exchange of shares of Series C Junior Preferred Stock to be exchanged. The
Exchange Notice shall state:
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<PAGE>
(1) the date fixed for exchange;
(2) that the Holder is to surrender to the Corporation, in
the manner and at the place or places designated, his
certificate or certificates representing all his shares
of Series C Junior Preferred Stock to be exchanged;
(3) that dividends on the shares of Series C Junior
Preferred Stock to be exchanged shall cease to
accumulate on the Exchange Date whether or not
certificates for shares of Series C Junior Preferred
Stock are surrendered for exchange on the Exchange Date
unless the corporation shall default in the delivery of
the Exchange Debentures; and
(4) that interest on the Exchange Debentures shall accrue
from the Exchange Date whether or not certificates for
shares of Series C Junior Preferred Stock are
surrendered for exchange on the Exchange Date.
(B) On or before the Exchange Date, each Holder of shares of
Series C Junior Preferred Stock shall surrender the certificates
representing such shares of Series C Junior Preferred Stock, in the
manner and at the place designated in the Exchange Notice. The
Corporation shall cause the Indenture and the Exchange Debentures to
be executed on the Exchange Date and, upon surrender in accordance
with the Exchange Notice of the certificates for the shares of
Series C Junior Preferred Stock so exchanged, duly endorsed (or
otherwise in proper form for transfer, as determined by the
Corporation), such shares shall be exchanged by the Corporation into
Exchange Debentures. The Corporation shall pay interest on the
Exchange Debentures at the rate and on the dates specified therein
from the Exchange Date.
(C) If notice has been mailed as aforesaid, and if before the
Exchange Date specified in such notice all Exchange Debentures
necessary for such exchange shall have been duly executed by the
Corporation and delivered to the trustee under the Indenture with
irrevocable instructions to authenticate the Exchange Debentures
necessary for such exchange, then the rights of the Holders of
Series C Junior Preferred Stock so exchanged as stockholders of the
Corporation shall cease (except the right to receive Exchange
Debentures (including Exchange Debentures issued in exchange for
shares of Series C Junior Preferred Stock issued on such Dividend
Payment Date), an amount in cash equal to the amount of accumulated
and unpaid dividends to the Exchange Date and, if the Corporation so
elects, cash in lieu of any Exchange Debenture not an integral
multiple of $1,000), and the Person or Persons entitled to receive
the Exchange Debentures
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<PAGE>
issuable upon exchange shall be treated for all purposes as the registered
Holder or Holders of such Exchange Debentures as of the Exchange Date.
(iii) No Exchange in Certain Cases. Notwithstanding the foregoing
provisions of this paragraph (g), the Corporation shall not be entitled or
required to exchange the Series C Junior Preferred Stock for Exchange
Debentures if such exchange, or any term or provision of the Indenture or
the Exchange Debentures, or the performance of the Corporation's
obligations under the Indenture or the Exchange Debentures, shall
materially violate or conflict with any applicable law or agreement or
instrument then binding on the Corporation or if, at the time of such
exchange, the Corporation is insolvent or if it would be rendered
insolvent by such exchange.
(h) Change of Control.
(i) Upon the occurrence of a Change of Control, the Corporation
shall be obligated to make an offer to purchase (the "Change of Control
Offer") the outstanding Series C Junior Preferred Stock at a purchase
price equal to 101% of the liquidation preference thereof plus, without
duplication, an amount in cash equal to all accumulated and unpaid
dividends thereon (including an amount in cash equal to a prorated
dividend for the period from the immediately preceding Dividend Payment
Date to the Change of Control Payment Date) (such applicable purchase
price being hereinafter referred to as the "Change of Control Purchase
Price") in accordance with the procedures set forth in this paragraph (h).
(ii) Within 30 days of the occurrence of a Change of Control, the
Corporation shall (i) cause a notice of the Change of Control Offer to be
sent at least once to the Dow Jones News Service or similar business news
service in the United States and (ii) send by first-class mail, postage
prepaid, to each Holder of Series C Junior Preferred Stock, at the address
appearing in the register maintained by the Transfer Agent, a notice
stating:
(1) that the Change of Control Offer is being made pursuant
to this paragraph (h) and that all Series C Junior
Preferred Stock validly tendered will be accepted for
payment;
(2) the Change of Control Purchase Price and the purchase
date (which shall be a Business Day not earlier than 30
days nor later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"));
(3) that any Series C Junior Preferred Stock not validly
tendered will continue to accumulate dividends;
(4) that, unless the Corporation defaults in the payment of
the Change of Control Purchase Price, any Series C
Junior
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Preferred Stock accepted for payment pursuant to the
Change of Control Offer shall cease to accumulate
dividends after the Change of Control Payment Date;
(5) that Holders accepting the offer to have their Series C
Junior Preferred Stock purchased pursuant to a Change of
Control Offer will be required to surrender their
certificates representing Series C Junior Preferred
Stock to the Corporation at the address specified in the
notice prior to the close of business on the Business
Day preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their
acceptance if the Corporation receives, not later than
the close of business on the third Business Day
preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the number of
shares of Series C Junior Preferred Stock delivered for
purchase, and a statement that such Holder is
withdrawing his election to have such Series C Junior
Preferred Stock purchased;
(7) that Holders whose Series C Junior Preferred Stock is
being purchased only in part will be issued new
certificates representing the number of shares of Series
C Junior Preferred Stock equal to the unpurchased
portion of the certificates surrendered; and
(8) any other procedures that a Holder must follow to accept
a Change of Control Offer or effect withdrawal of such
acceptance.
(iii) The Corporation will comply with any securities laws and
regulations, to the extent such laws and regulations are applicable to the
redemption of the Series C Junior Preferred Stock in connection with a
Change of Control Offer. Without limiting the foregoing, in the event that
a Change of Control occurs and the holders of Series C Junior Preferred
Stock exercise their right to require the Corporation to purchase Series C
Junior Preferred Stock, if such purchase constitutes a "tender offer" for
purposes of Rule l4e-1 under the Exchange Act at that time, the
Corporation will comply with the requirements of Rule l4e-1 as then in
effect with respect to such repurchase.
(iv) On the Change of Control Payment Date, the Corporation shall,
to the extent lawful, (A) accept for payment the number of shares of
Series C Junior Preferred Stock validly tendered pursuant to the Change of
Control Offer and (B) promptly mail to each Holder of shares so accepted
the Change of Control
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<PAGE>
Purchase Price therefor and execute and issue a new Series C Junior
Preferred Stock certificate representing the numbers of shares of Series C
Junior Preferred Stock equal to any unpurchased shares represented by a
certificate surrendered. Unless the Corporation defaults in the payment
for the shares of Series C Junior Preferred Stock validly tendered
pursuant to the Change of Control Offer, dividends shall cease to
accumulate with respect to the shares of Series C Junior Preferred Stock
so tendered and all rights of Holders of such tendered shares shall
terminate, except for the right to receive payment therefor, on the Change
of Control Payment Date.
(v) If any Credit Facility is in effect or if the Senior Notes, the
Senior Preferred Stock or Series B Junior Preferred Stock are outstanding
or if any other Indebtedness of the Corporation or its Restricted
Subsidiaries that requires a payment upon a Change of Control is
outstanding, or any amounts are owing thereunder or in respect thereof, at
the time of the occurrence of a Change of Control, then, prior to the
mailing of the notice to Holders described in paragraph (h)(ii) above, but
in any event within 30 days following any Change of Control, the
Corporation shall, to the extent required to permit the repurchase of
Series C Junior Preferred Stock pursuant to this paragraph (h), be
required to (A) cause the borrowers thereunder to repay in full all
obligations under or in respect of such Credit Facility, the Senior
Preferred Stock, the Series B Junior Preferred Stock or such other
Indebtedness or offer to repay in full all obligations under or in respect
of such Credit Facility, the Senior Preferred Stock, the Series B Junior
Preferred Stock or such other Indebtedness and repay the obligations under
or in respect of such Credit Facility, the Senior Preferred Stock, Series
B Junior Preferred Stock or such other Indebtedness of each lender or
holder who has then irrevocably accepted such offer and cause Morris
Material Handling to repay within such 30 day period in full all
obligations in respect of the Senior Notes or offer to repay in full all
obligations in respect of the Senior Notes of each holder who has then
irrevocably accepted such offer or (B) cause such borrowers and Morris
Material Handling to obtain the requisite consent under such Credit
Facility, the Senior Preferred Stock, the Series B Junior Preferred Stock
or such other Indebtedness, from the holders of such other Indebtedness
and from the holders of the Senior Notes, respectively, to permit the
repurchase of the Series C Junior Preferred Stock as described above.
Until the requirements of the immediately preceding sentence are
satisfied, the Corporation shall not make, and shall not be required to
make, any Change of Control Offer; provided, that the Corporation's
failure to comply with the provisions of this paragraph (h)(v) shall
constitute a Voting Rights Triggering Event.
(vi) (A) If the Corporation has any outstanding Preferred Stock
(other than the Senior Preferred Stock, the Series B Junior Preferred
Stock and the Series C Junior Preferred Stock), and the Corporation is
required to make a Change of Control Offer or to make a distribution with
respect to such Preferred Stock (other than the Senior Preferred Stock,
the Series B Junior Preferred Stock and the Series C Junior Preferred
Stock) in the event of a Change of Control, the Corporation
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<PAGE>
shall not consummate any such offer or distribution with respect to such
Preferred Stock (other than the Senior Preferred Stock, the Series B
Junior Preferred Stock and the Series C Junior Preferred Stock) until such
time as the Corporation shall have paid the Change of Control Purchase
Price in full to the Holders of Series C Junior Preferred Stock that have
validly accepted the Corporation's Change of Control Offer and shall
otherwise have consummated the Change of Control Offer made to Holders of
the Series C Junior Preferred Stock and (B) the Corporation will not issue
Preferred Stock (except pursuant to paragraph (b) hereof) with change of
control provisions requiring the payment of such Preferred Stock prior to
the payment of the Series C Junior Preferred Stock in the event of a
Change in Control under this paragraph (h).
(vii) The Corporation will not be required to make a Change of
Control Offer upon a Change of Control if a third party makes such Change
of Control Offer contemporaneously with or upon a Change of Control in the
manner, at the times and otherwise in compliance with the requirements of
this paragraph (h) and purchases all Series C Junior Preferred Stock
validly tendered and not withdrawn under such Change of Control Offer.
(i) [Reserved.]
(j) Reissuance of Series C Junior Preferred Stock. Shares of Series
C Junior Preferred Stock that have been issued and reacquired in any manner,
including shares purchased or redeemed or exchanged, shall (upon compliance with
any applicable provisions of the laws of Delaware) have the status of authorized
and unissued shares of Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock, provided
that any issuance of such shares of Preferred Stock must be in compliance with
the terms hereof; provided, further, that shares of Series C Junior Preferred
Stock with voting rights that have been issued and reacquired in exchange for
shares of Series C Junior Preferred Stock without voting rights and shares of
Series C Junior Preferred Stock reacquired from HarnCo or its Affiliates, shall
(upon compliance with any applicable provisions of the laws of the State of
Delaware) have the status of authorized and unissued shares of Series C Junior
Preferred Stock and may be reissued as part of the Series C Junior Preferred
Stock
(k) Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(l) Certain Additional Provisions.
(i) Limitation on Additional Indebtedness. The Corporation will not,
and will not cause or permit any Restricted Subsidiary of the Corporation
to, directly or indirectly, incur (as defined) any Indebtedness (including
any Acquired Indebtedness); provided, that if no Voting Rights Triggering
Event shall have
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<PAGE>
occurred and be continuing at the time or as a consequence of the
incurrence of such Indebtedness, the Corporation or any Restricted
Subsidiary may incur Indebtedness (including any Acquired Indebtedness) if
the Corporation's Consolidated Interest Coverage Ratio is greater than 2.0
to 1.
Notwithstanding the foregoing, the Corporation and its
Restricted Subsidiaries may incur Permitted Indebtedness.
(ii) Limitation on Restricted Payments. The Corporation will not
make, and will not permit any of its Restricted Subsidiaries to, directly
or indirectly, make, any Restricted Payment after the Issue Date, unless:
(A) no Voting Rights Triggering Event shall have occurred and
be continuing at the time of or immediately after giving effect to
such Restricted Payment;
(B) immediately after giving pro forma effect to such
Restricted Payment, (i) the Corporation could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under
paragraph (l)(i); and
(C) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made
after the Issue Date does not exceed the sum (without duplication)
of (1) 50% of the cumulative Consolidated Net Income of the
Corporation (or minus 100% of any cumulative deficit in Consolidated
Net Income) for the period (treated as one accounting period) from
the first day of the fiscal quarter in which the Issue Date occurs
through the last day of the fiscal quarter immediately preceding
such Restricted Payment, (2) 100% of the aggregate Net Proceeds in
cash received by the Corporation from the issuance or sale, after
the Issue Date (other than to a Restricted Subsidiary), of (a)
Junior Stock (other than Disqualified Capital Stock) of the
Corporation or (b) any Indebtedness or other securities of the
Corporation that are convertible into or exercisable or exchangeable
for Junior Stock (other than Disqualified Capital Stock) of the
Corporation which have been so converted or exercised or exchanged
(other than by a Restricted Subsidiary of the Corporation) and (3)
100% of the net reduction in Investments (other than Permitted
Investments), subsequent to the Issue Date, in any Person, resulting
from payments of interest on Indebtedness, dividends, repayments of
loans or advances or other transfers or distributions of Property or
return of capital (but only to the extent such interest, dividends
or repayments or other transfers or distributions of Property or
return of capital are not included in the calculation of
Consolidated Net Income), in each case, to the Corporation or any
Restricted Subsidiary from any Person (including Unrestricted
Subsidiaries) or from redesignations (the designation of which did
not constitute a Permitted Investment) of Unrestricted Subsidiaries
as Restricted Subsidiaries in accordance with the
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Certificate of Designations, not to exceed in the case of any
Person, the amount of Investments (other than Permitted Investments)
previously made by the Corporation or any Restricted Subsidiary in
such Person. For purposes of determining the amount expended for
Restricted Payments under this clause (C), Property other than cash
(including a distribution of assets) shall be valued at its Fair
Market Value.
The provisions of this paragraph (l)(ii) shall not prohibit:
(i) the payment of any distribution within 60 days after the
date of declaration thereof, if at such date of
declaration such payment would comply with the
provisions of the Certificate of Designations;
(ii) the retirement of any shares of Junior Stock of the
Corporation by conversion into, or by or in exchange
for, shares of Junior Stock (other than Disqualified
Capital Stock) of the Corporation, or out of, the Net
Proceeds of the substantially concurrent sale (other
than to a Restricted Subsidiary of the Corporation) of
other shares of Junior Stock of the Corporation (other
than Disqualified Capital Stock); provided, that any
such Net Proceeds are excluded from clause (C)(2) of
this paragraph (l)(ii) for the purposes of this
calculation (and were not included therein at any time);
(iii) the retirement of any shares of Junior Stock that is
Disqualified Capital Stock by conversion into, or by
exchange for, shares of Junior Stock that is
Disqualified Capital Stock of the Corporation, or out of
the Net Proceeds of the substantially concurrent sale
(other than to a Restricted Subsidiary of the
Corporation) of other shares of Junior Stock that are
Disqualified Capital Stock of the Corporation;
(iv) payments to MHE Investments or any other Person in
respect of which MHE Investments or such other Person is
a member of the consolidated tax group of the
Corporation, for so long as MHE Investments or such
other Person owns such amount of the Capital Stock of
the Corporation as will permit it or a member of the
consolidated tax group of MHE Investments or such other
Person to be entitled to file consolidated federal tax
returns with the Corporation, for income taxes pursuant
to the Tax Allocation Agreement or for the purpose of
enabling MHE Investments or such other Person or any
such members to pay taxes other than income
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taxes, to the extent actually owed and attributable to
the operations of the Corporation and its Subsidiaries
or to MHE Investments' or such other Person's ownership
thereof;
(v) payments to MHE Investments, for so long as it owns not
less than a majority of the outstanding Common Stock of
the Corporation, in amounts sufficient to pay the
ordinary operating and administrative expenses of MHE
Investments (including all reasonable professional fees
and expenses), including in connection with its
complying with the Corporation's reporting obligations
(including filings with the Commission and any exchange
on which the Corporation's securities are traded) and
obligations to prepare and distribute business records
in the ordinary course of business and the Corporation's
costs and expenses relating to taxes, other than those
referred to in clause (iv) (which taxes are attributable
to the operations of the Corporation and its Restricted
Subsidiaries or to MHE Investments' ownership thereof);
provided, that the aggregate payments paid in each
fiscal year pursuant to this clause (v) will not exceed
0.20% of the consolidated net sales of the Corporation
and its Restricted Subsidiaries for such fiscal year;
(vi) the purchase, redemption, retirement or other
acquisition for value of Capital Stock of the
Corporation or of any Person that directly or indirectly
controls (as defined in the definition of Affiliate) the
Corporation held by employees or former employees of the
Corporation or any Restricted Subsidiary (or their
estates or beneficiaries under their estates) upon
death, disability, retirement, termination of employment
and pursuant to the terms of any agreement under which
such Capital Stock was issued, provided, that the
aggregate Fair Market Value of the consideration paid
for such purchase, redemption, retirement or other
acquisition of such Capital Stock does not exceed
$500,000 in any fiscal year;
(vii) payments due under the Permitted Affiliate Agreements
(other than payments pursuant to paragraph (iv) above)
that would otherwise constitute Restricted Payments; and
(viii) payments that would otherwise constitute Restricted
Payments, not to exceed $750,000 in the aggregate;
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provided, that in calculating the aggregate amount of Restricted Payments made
subsequent to the Issue Date for purposes of clause (C) of this paragraph
(l)(ii), amounts expended pursuant to clause (i) (but only if the declaration
thereof has not been counted in a prior period), (v) (other than to the extent
otherwise reducing Consolidated Net Income), (vi) and (viii) shall be included,
without duplication, in such calculation and (ii), (iii), (iv) and (vii) shall
not be included in such calculation. Nothing in the immediately preceding
proviso is meant to affect whether any amount expended pursuant to clause (iv)
should be reflected in Consolidated Net Income. Notwithstanding any other
provision of this paragraph (l)(ii), no dividends or distributions may be paid
on any class of Common Stock of the Corporation unless the Corporation has paid
in cash all accumulated dividends due on the two Dividend Payment Dates on or
immediately preceding such proposed date of such dividend or distribution.
If the Corporation or any Restricted Subsidiary makes a Restricted
Payment which, at the time of the making of such Restricted Payment, in the good
faith determination of the Board of Directors or the board of directors of
Morris Material Handling, would be permitted under the requirements of the
Certificate of Designations, such Restricted Payment shall be deemed to have
been made in compliance with the Certificate of Designations notwithstanding any
subsequent adjustment made in good faith to the Corporation's or such Restricted
Subsidiary's financial statements affecting Consolidated Net Income.
(iii) Limitation on Transactions with Affiliates. The Corporation
will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or
series of related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets, Property or services) with any
Affiliate (each, an "Affiliate Transaction") or extend, renew, waive or
otherwise modify the terms of any Affiliate Transaction entered into prior
to the Issue Date unless (A) such Affiliate Transaction is between or
among the Corporation and the Restricted Subsidiaries or between or among
Restricted Subsidiaries; or (B) the terms of such Affiliate Transaction
are fair to the Corporation or such Restricted Subsidiary, as the case may
be, and the terms of such Affiliate Transaction are at least as favorable
as the terms which could be obtained by the Corporation or such Restricted
Subsidiary, as the case may be, in a comparable transaction made on an
arm's-length basis between unaffiliated parties. In any Affiliate
Transaction (or any series of related Affiliate Transactions) involving an
amount or having a Fair Market Value in excess of $2 million which is not
permitted under clause (A) of the immediately preceding sentence, the
Corporation shall first obtain a resolution of a majority of the
disinterested members of the Board of Directors which reflects the
approval of such Affiliate Transaction and a determination that such
Affiliate Transaction complies with clause (B) of the immediately
preceding sentence. In any Affiliate Transaction (or series of related
Affiliate Transactions) which includes the payment of fees of $1 million
or more to Chartwell, the Corporation shall obtain a resolution of a
majority of the disinterested members of the Board of Directors which
reflects the approval of such Affiliate Transaction. In addition, in any
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Affiliate Transaction (or any series of related Affiliate Transactions)
involving an amount or having a Fair Market Value in excess of $10 million
which is not permitted under clause (A) of the immediately preceding
sentence, the Corporation must obtain, prior to the consummation of the
transaction or transactions, a written opinion from a nationally
recognized investment banking firm or other expert stating that such
transaction or transactions are fair to the Corporation or such Restricted
Subsidiary, as the case may be, from a financial point of view; provided,
that no such opinion shall be required in respect of the provision of
services or sales of inventory or products by the Corporation or any of
its Restricted Subsidiaries to a Joint Venture in the ordinary course of
business.
The foregoing provisions will not apply to: (i) any transaction or
series of related transactions pursuant to the terms of the Permitted Affiliate
Agreements; (ii) reasonable fees and compensation paid to and indemnity provided
on behalf of officers, directors or employees of the Corporation or any
Restricted Subsidiary of the Corporation as determined in good faith by the
Board of Directors or senior management; (iii) any payment that would be
permitted under the first paragraph or clauses (iv) or (v) of the second
paragraph of paragraph (l)(ii) above; (iv) any Permitted Investment (other than
Permitted Investments made pursuant to clause (x) of the definition of Permitted
Investments); or (v) loans or advances to employees and officers of the
Corporation or any of its Subsidiaries in the ordinary course of business to
provide for the payment of reasonable expenses incurred by such persons in the
performance of their responsibilities to the Corporation or such Subsidiary or
in connection with any relocation. The aggregate management, consulting and
similar fees paid by the Corporation or its Subsidiaries (excluding expenses and
amounts paid pursuant to the last sentence of this covenant or pursuant to
clause (iii) of this paragraph) to Chartwell shall not exceed $1 million during
any fiscal year; provided, that any such fees may accrue but shall not be paid
by the Corporation at any time after the occurrence and during the continuance
of a Voting Rights Triggering Event until such Voting Rights Triggering Event is
cured, whereupon such accrued and unpaid fees may be paid in addition to other
permitted fees. In addition, the Corporation may pay advisory fees to an
Affiliate of the Corporation (including Chartwell) with respect to specific
transactions, provided, that such payments would be permitted under the first
paragraph of paragraph (l)(ii). In addition, for purposes of this paragraph
(l)(iii), any transaction or series of related transactions between the
Corporation or any Restricted Subsidiary and an Affiliate of the Corporation
that is approved by a majority of the disinterested members of its Board of
Directors shall be deemed to comply with clause (B) of the first sentence of the
preceding paragraph. Notwithstanding the provisions of this paragraph (l)(iii),
the Corporation may pay fees and expenses to Affiliates of the Corporation on
the Issue Date in connection with the consummation of the Transactions.
(iv) Limitation on Preferred Stock of Restricted Subsidiaries. The
Corporation will not permit any of its Restricted Subsidiaries to issue
any Preferred Stock (other than to the Corporation or a Wholly-Owned
Subsidiary), other than Permitted Foreign Restricted Subsidiary Preferred
Stock, or permit any Person (other than the Corporation or a Wholly-Owned
Subsidiary) to hold any
21
<PAGE>
such Preferred Stock unless the Corporation or such Restricted Subsidiary
would be entitled to incur or assume Indebtedness under paragraph (l)(i)
in the aggregate principal amount equal to the aggregate liquidation value
of the Preferred Stock to be issued or so held.
(v) Merger, Consolidation or Sale of Assets. The Corporation will
not consolidate or merge with or into any Person, or sell, assign, lease,
convey or otherwise dispose of (or cause or permit any of its Restricted
Subsidiaries to sell, assign, lease, convey or otherwise dispose of
(however effected, including, without limitation, by merger or
consolidation)) all or substantially all of the Corporation's assets
(determined on a consolidated basis for the Corporation and its Restricted
Subsidiaries), whether as an entirety or substantially an entirety in one
transaction or a series of related transactions, including by way of
liquidation or dissolution, to any Person unless, in each such case:
(A)(x) the Corporation shall be the continuing Person, or (y) the Person
(if other than the Corporation) formed by such consolidation or into which
the Corporation or the Restricted Subsidiary, as the case may be, is
merged or to which the Properties and assets of the Corporation or any
Restricted Subsidiary, as the case may be, are transferred (such Person,
the "Surviving Entity") (1) shall be a corporation organized and existing
under the laws of the United States or any State thereof or the District
of Columbia and (2) the Series C Junior Preferred Stock shall be converted
into or exchanged for and shall become shares of such successor,
transferee or resulting Person, having in respect of such successor,
transferee or resulting Person the same powers, preferences and relative
participating, optional or other special rights and the qualifications,
limitations or restrictions thereon, that the Series C Junior Preferred
Stock had immediately prior to such transaction; (B) immediately before
and immediately after giving effect to such transaction on a pro forma
basis (including, without limitation, giving effect to any Indebtedness
and Acquired Indebtedness incurred or anticipated to be incurred in
connection with or in respect of the transaction), no Voting Rights
Triggering Event shall have occurred and be continuing; and (C)
immediately after giving effect to such transaction on a pro forma basis
(including, without limitation, any Indebtedness incurred or anticipated
to be incurred in connection with or in respect of such transaction or
series of transactions) the Corporation (or the Surviving Entity if the
Corporation is not continuing) (x) shall have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of the Corporation
immediately prior to such transaction and (y) could incur at least $1.00
of additional Indebtedness (other than Permitted Indebtedness) under
paragraph (l)(i) above; provided, that a Restricted Subsidiary may merge
with and into the Corporation without complying with this clause (C)(y).
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the Properties or assets of one or more Subsidiaries of the
Corporation, the Capital Stock of which constitutes all or substantially all of
the Properties and assets of the Corporation,
22
<PAGE>
shall be deemed to be the transfer of all or substantially all of the assets of
the Corporation.
For all purposes of the certificate of designations and the Series C
Junior Preferred Stock, Subsidiaries of any Surviving Entity will, upon such
transaction or series of transactions, become Restricted Subsidiaries or
Unrestricted Subsidiaries, to the extent and as provided pursuant to the
certificate of designations.
(vi) Reports to Holders. Whether or not required by the rules and
regulations of the Commission, so long as any shares of Series C Junior
Preferred Stock are outstanding, the Corporation shall furnish to the
holders of the Series C Junior Preferred Stock within 10 days after it is
or would have been required to file them with the Commission, (i) all
annual and quarterly financial information that would be required to be
contained in a filing with the Commission on Forms 10-K and 10-Q (without
exhibits) if the Corporation were required to file such forms, including a
section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by the Corporation's certified
independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K (without exhibits) if
the Corporation were required to file such reports. In addition, whether
or not required by the rules and regulations of the Commission, the
Corporation will file a copy of all such information and reports with the
Commission for public availability (unless the Commission will not accept
such a filing). In addition, the Corporation shall furnish to the holders
of the Series C Junior Preferred Stock and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144(d)(4) under the Securities Act and the
exhibits omitted from the information furnished pursuant to the preceding
sentence, for so long as the Series C Junior Preferred Stock is not freely
transferable under the Securities Act.
(m) Definitions. As used in this certificate of designations, the
following terms shall have the following meanings (with terms defined in
the singular having comparable meanings when used in the plural and vice
versa), unless the context otherwise requires:
"Acquired Indebtedness" means (a) Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person and (b) any Seller Note.
"Affiliate" of any specified Person means any other Person (including,
without limitation, such Person's issue, siblings and spouse) that directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, such specified Person. For the 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, means the possession, directly or indirectly, of
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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. For purposes of the Certificate of Designations, the term
"Affiliate," as it relates to the Corporation, shall (a) include HarnCo for so
long as HarnCo is entitled to designate at least one member of the Board of
Directors of the Corporation or any successor to the Corporation and (b) not
include CIBC Oppenheimer Corp. or Indosuez Capital or their respective
Affiliates.
"Affiliate Transaction" has the meaning ascribed to it in paragraph
(l)(iii) hereof.
"Asset Acquisition" means (a) an Investment by the Corporation or any
Restricted Subsidiary of the Corporation in any other Person pursuant to which
such Person becomes a Restricted Subsidiary of the Corporation, or is merged
with or into the Corporation or any Restricted Subsidiary of the Corporation or
(b) the acquisition by the Corporation or any Restricted Subsidiary of the
Corporation of the assets of any Person (other than a Restricted Subsidiary of
the Corporation) which constitute all or substantially all of the assets of such
Person or comprise any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means the sale, transfer or other disposition (including,
without limitation, by merger or consolidation) (other than to the Corporation
or any of its Restricted Subsidiaries) in any single transaction or series of
related transactions of (a) any Capital Stock of or other equity interest in any
Restricted Subsidiary of the Corporation (other than directors' qualifying
shares to the extent required by applicable law), (b) all or substantially all
of the assets of the Corporation or of any Restricted Subsidiary thereof, (c)
real Property or (d) all or substantially all of the assets, or any Property, or
part thereof, owned by the Corporation or any Restricted Subsidiary thereof, or
a division, line of business or comparable business segment of the Corporation
or any Restricted Subsidiary thereof; provided, that Asset Sales shall not
include (i) sales, leases, conveyances, transfers or other dispositions to the
Corporation or to a Restricted Subsidiary or to any other Person if after giving
effect to such sale, lease, conveyance, transfer or other disposition such other
Person becomes a Restricted Subsidiary, (ii) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Corporation and its Restricted Subsidiaries taken as a whole as permitted under
paragraph (l)(v) above, (iii) any transfer, conveyance, sale, lease or other
disposition of Property or assets, the gross proceeds of which (exclusive of
indemnities) do not exceed $500,000, (iv) any sales, leases, conveyances,
transfers or other dispositions of Property or equipment that has become worn
out, obsolete or damaged or otherwise unsuitable for use in connection with the
business of the Corporation or any Restricted Subsidiary, as the case may be,
(v) the incurrence of any Liens, (vi) the making of any Restricted Payment
permitted by paragraph (l)(ii) above, (vii) transfers of cash and sales of Cash
Equivalents and (viii) sales, leases, conveyances, transfers or other
dispositions of Property or equipment in the ordinary course of business.
"Board of Directors" means the board of directors of the Corporation or
any Committee authorized to act therefor.
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"Business Day" means any day except a Saturday, a Sunday or a federally
recognized holiday or a day on which banking institutions are not required to be
open in the State of New York or the State of Delaware.
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents (however designated and whether or not voting) of capital
stock, partnership interests or any other participation, right or other interest
in the nature of an equity interest in such Person or any option, warrant or
other security convertible into any of the foregoing.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Certificate of Designations" means the Certificate of Designations
creating the Senior Preferred Stock.
"Cash Equivalents" means any of the following Investments: (i) marketable
direct obligations issued by, or unconditionally guaranteed by, the United
States Government or issued by any agency thereof and backed by the full faith
and credit of the United States maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any foreign country recognized by the United
States or any political subdivision of any such state or foreign country, as the
case may be, or any public instrumentality thereof (including any taxing
authority) maturing within one year from the date of acquisition thereof and, at
the time of acquisition, having one of the two highest ratings obtainable from
either Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service,
Inc. ("Moody's"); (iii) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit,
time deposit accounts, operating accounts or bankers' acceptances maturing
within one year from the date of acquisition thereof issued or guaranteed by any
commercial banking institution organized under the laws of any jurisdiction
recognized by the United States of America and in which the Corporation or its
Subsidiaries actively conduct business, having at the date of acquisition
thereof combined capital and surplus of not less than U.S. $250,000,000 or the
foreign currency equivalent thereof; (v) repurchase obligations with a term of
not more than 30 days for underlying securities of the types described in clause
(i) above entered into with any bank meeting the qualifications specified in
clause (iv) above; (vi) investments in money market funds which invest
substantially all their assets in securities of the types described in clauses
(i) through (v) above; and (vii) foreign bank deposits and cash equivalents in
jurisdictions where the Corporation or its Subsidiaries are then actively
conducting business, provided, that (a) all such deposits are required to be
made in the ordinary course of business, (b) such deposits do not exceed
$1,000,000 in the aggregate, and (c) the funds so deposited do not remain in
such bank for more than 10 days.
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A "Change of Control" of the Corporation will be deemed to have occurred
at such time as (i) any Person (including a Person's Affiliates) or any Persons
acting together that would constitute a group (for purposes of Section 13(d) of
the Exchange Act, or any successor provision thereto) (a "Group"), other than a
Permitted Holder, becomes the beneficial owner (as defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of (a) 50%
or more of the total Voting Stock of the Corporation or (b) 50% of all classes
of Common Stock (whether voting or non-voting), taken as a whole, of the
Corporation, (iii) any Person (including a Person's Affiliates) or Group, other
than a Permitted Holder, becomes the beneficial owner of more than 30% of the
total Voting Stock of the Corporation, and the Permitted Holders beneficially
own, in the aggregate, a lesser percentage of the total Voting Stock of the
Corporation, than such other Person or Group and the Permitted Holders do not
have the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of the Corporation,
(iv) there shall be consummated any consolidation or merger of the Corporation
in which the Corporation is not the continuing or surviving corporation or
pursuant to which the Common Stock of the Corporation would be converted into
cash, securities or other Property, other than a merger or consolidation of the
Corporation in which the holders of the Common Stock of the Corporation
outstanding immediately prior to the consolidation or merger hold, directly or
indirectly, at least a majority of the Common Stock of the surviving corporation
immediately after such consolidation or merger, or (v) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Corporation (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
shareholders of the Corporation has been approved by 66 2/3% of the directors
then still in office who either were directors at the beginning of such period
or whose election or recommendation for election was previously so approved)
cease to constitute a majority of the Board of Directors.
"Chartwell" means Chartwell Investments Inc. and its Affiliates.
"Commission" means the Securities and Exchange Commission.
"Common Stock" of any Person means all Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding-up
of such Person, to any other class of Capital Stock of such Person.
"Consolidated Interest Coverage Ratio" of any Person means the ratio of
(i) EBITDA of such Person for the four most recent consecutive fiscal quarters
for which financial statements are available or, if the Corporation is not in
compliance with its obligations under paragraph (l)(vi) above on the date of
determination, the four most recent consecutive quarters ending on or prior to
the date of determination (in either such case, the "Four Quarter Period") to
(ii) Consolidated Interest Expense of such Person for such Four Quarter Period.
In addition to and without limitation of the foregoing, for purposes of this
definition, "EBITDA" and "Consolidated Interest Expense" shall be calculated
after giving effect on a pro forma basis to (i)(a) the incurrence of any
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Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and (b) any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), occurring on or after the first day of the
Four Quarter Period and on or prior to the date of determination, in each case
set forth in clauses (i)(a) and (b), as if such incurrence or repayment, as the
case may be (and the application of the proceeds thereof), occurred on the first
day of the Four Quarter Period (except that Indebtedness under any revolving
credit facility shall be deemed to be the average daily balance of such
Indebtedness during such Four Quarter Period) and (ii) any Asset Sales or Asset
Acquisitions (including (x) any Person who becomes a Restricted Subsidiary as a
result of any such Asset Acquisition and including any Asset Sale or Asset
Acquisition during such Four Quarter Period by any such Person determined as if
such Person had been a Restricted Subsidiary at the time of such transaction;
provided, that all Indebtedness of such Person and any such Restricted
Subsidiaries shall be deemed to have been incurred on the first day of the Four
Quarter Period and (y) the increase or decrease, as the case may be, in EBITDA
directly attributable to such Asset Sale or Asset Acquisition, as the case may
be) occurring on or after the first day of the Four Quarter Period and on or
prior to the date of determination, as if such Asset Sale or Asset Acquisition,
as the case may be, (including the incurrence, assumption or liability for any
such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period. For purposes of this definition, whenever pro forma effect is to be
given to an Asset Acquisition, the amount of income or earnings relating thereto
and the amount of Consolidated Interest Expense associated with any Indebtedness
incurred in connection therewith shall be determined in good faith by a
responsible financial or accounting officer of the Corporation.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, without duplication, (i) the aggregate amount of interest charges
(excluding fees and expenses incurred in connection with the Transactions),
whether expensed or capitalized, incurred or accrued by such Person and its
Restricted Subsidiaries, determined on a consolidated basis in conformity with
GAAP for such period, plus (ii) to the extent not included in clause (i) above,
an amount equal to the sum of: (A) imputed interest included in Capitalized
Lease Obligations, (B) all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing, (C)
the net costs associated with Interest Rate Agreements, Currency Agreements and
other hedging obligations, (D) the interest portion of any deferred payment
obligations, (E) amortization of discount or premium on Indebtedness, if any,
(F) all capitalized interest and all accrued interest, (G) all other non-cash
interest expense, (H) all interest incurred or paid under any guarantee of
Indebtedness (including a guarantee of principal, interest or any combination
thereof) of any Person, and (I) all dividends or distributions on Disqualified
Capital Stock if payable to a Person other than the Corporation or a Restricted
Subsidiary (other than dividends paid or payable in shares of Junior A Capital
Stock (other than Disqualified Capital Stock) of the Corporation) declared and
payable in cash, minus (iii) to the extent included in clause (i) or (ii) above,
amortization or write-off of deferred financing costs (and original issue
discount to the extent it arises from the issuance of Junior A Capital Stock
(other than Disqualified Capital Stock) of the
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Corporation) during such period and, without duplication, any charge related to
any premium or penalty paid in connection with redeeming or retiring any
Indebtedness of the Corporation or its Restricted Subsidiaries prior to the
stated maturity thereof. If any Indebtedness outstanding or to be incurred (x)
bears a floating rate of interest, the interest expense on such Indebtedness
shall be calculated as if the rate in effect on the date of determination had
been the applicable rate for the entire Four Quarter Period (taking into account
on a pro forma basis any Interest Rate Agreement that has a remaining term as of
the date of determination in excess of 12 months), and/or (z) was incurred under
a revolving credit facility, the interest expense on such Indebtedness shall be
computed based upon the average daily balance of such Indebtedness during the
applicable period. If any Indebtedness to be incurred bears, at the option of
the Corporation or a Restricted Subsidiary, a fixed or floating rate of
interest, the interest expense on such Indebtedness shall be computed by
applying, at the option of the Corporation or such Restricted Subsidiary, such
fixed or floating rate.
"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 (a) the Net Income of any Person that is not a
Restricted Subsidiary shall be included only to the extent of the amount of
dividends or other distributions representing the Corporation's proportionate
share of such Person's Net Income for such period actually paid in cash to the
Corporation or a Restricted Subsidiary (subject to clause (b) below) by such
Person during such period, (b) the Net Income of any Subsidiary of the Person in
question that is subject to any restriction or limitation on the payment of
dividends or the making of other distributions (other than pursuant to the
Credit Agreement, the Senior Notes, the Note Indenture, or any other
Indebtedness of the Corporation or any Restricted Subsidiary of the Corporation
containing, in the good faith judgment of the Board of Directors of the
Corporation, substantially the same or less restrictive limitations on the
payment of dividends or the making of other distributions than those contained
in such Credit Agreement, the Senior Notes or the Note Indenture or the Exchange
Debentures or the Indenture if the same were issued) shall be excluded to the
extent of such restriction or limitation (regardless of any waiver thereof),
(c)(i) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition and (ii) any
net after tax gain (but not loss) resulting from an Asset Sale by the Person in
question or any of its Subsidiaries other than in the ordinary course of
business shall be excluded, (d) non-cash gains and losses due solely to
fluctuations in currency values shall be excluded, (e) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, any earnings (or losses) of the successor
corporation prior to such consolidation, merger or transfer of assets shall be
excluded, and (f) all items classified as extraordinary, unusual or
nonrecurring, including all items relating to the Transactions and the
pre-closing events relating thereto shall be excluded (including the fees and
expenses incurred in connection with the Transactions and write-offs or other
costs associated or arising in connection with the Transactions). In computing
Consolidated Net Income under clause (C) under paragraph (l)(ii) above, the
Corporation or such Restricted Subsidiary (i) shall use audited financial
statements for the
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portion of the relevant period for which such statements are available on the
date of determination and unaudited financial statements and other current
financial data based on the books and records of the Corporation for the
remaining portion of such period and (ii) shall be permitted to rely in good
faith for the balance of the relevant period for which audited financial
statements are not available on the financial statements and other financial
data derived from the books and records of the Corporation or such Restricted
Subsidiary that are available on the date of determination.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person and its Restricted Subsidiaries determined
on a consolidated basis in accordance with GAAP, less (to the extent included)
amounts attributable to Disqualified Capital Stock of such Person.
"Consolidated Tangible Assets" of any Person means the consolidated
tangible assets of such Person and its Restricted Subsidiaries determined on a
consolidated basis in accordance with GAAP as of the end of the most recent
fiscal quarter for which financial statements are available or, if the
Corporation is not in compliance with its obligations under paragraph (l)(vi)
above on the date of determination, the end of the most recent quarter ending on
or prior to the date of determination.
"Credit Agreement" means the Credit Agreement, dated on or about March 30,
1998, among Morris Material Handling, the Corporation, Material Handling LLC,
Morris Material Handling, Ltd., Mondel ULC, Kaverit Steel and Crane ULC, and
Canadian Imperial Bank of Commerce, as Administrative Agent, Credit Agricole
Indosuez, as Syndication Agent, BankBoston, N.A., as Documentation Agent, and
the lending institutions named therein.
"Credit Facilities" means one or more senior secured or unsecured credit
facilities providing, inter alia, for revolving credit loans, term loans,
bankers' acceptances and/or letters of credit between the Corporation or its
Restricted Subsidiaries and one or more lenders, including, in each case, any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced, restated 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 designed to protect the
Corporation or any Restricted Subsidiary of the Corporation against fluctuations
in currency values.
"Disqualified Capital Stock" means any Capital Stock of the Corporation or
a Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the mandatory redemption date of the Senior Preferred Stock for any
consideration other than Capital Stock of the Corporation which is not
Disqualified
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Capital Stock; provided, that the Series B Junior Preferred Stock shall not be
deemed to be Disqualified Capital Stock and the Preferred Stock of the
Corporation that is issued with the benefit of provisions requiring a change of
control offer to be made for such Preferred Stock in the event of a change of
control of the Corporation, which provisions have substantially the same effect
as the provisions of paragraph (h) of the Certificate of Designations shall not
be deemed to be Disqualified Capital Stock solely by virtue of such provisions.
Without limitation of the foregoing, Disqualified Capital Stock shall be deemed
to include any Preferred Stock of a Restricted Subsidiary of the Corporation
except for Permitted Foreign Restricted Subsidiary Preferred Stock.
"Dividend Payment Date" means April 1 and October 1 of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter, each
semi-annual dividend period.
"Dividend Record Date" means March 15 and September 15 of each year.
"EBITDA" means, for any Person, for any period, an amount equal to (a) the
sum of (i) Consolidated Net Income for such period, plus (ii) the provision for
taxes for such period based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income (minus any provision
for taxes utilized in computing net loss under clause (i) hereof to the extent
such provision reduced the net loss), plus (iii) Consolidated Interest Expense
for such period, plus (iv) depreciation for such period on a consolidated basis
to the extent reducing Consolidated Net Income, plus (v) amortization of
intangibles for such period on a consolidated basis to the extent reducing
Consolidated Net Income, plus (vi) amortization of original issue discount to
the extent it arises from the issuance of Junior A Capital Stock (other than
Disqualified Capital Stock) of the Corporation, to the extent reducing
Consolidated Net Income, plus (vii) any charge related to any premium or penalty
paid in connection with redeeming or retiring any Indebtedness prior to its
stated maturity to the extent reducing Consolidated Net Income, plus (viii) any
other non-cash items reducing Consolidated Net Income for such period, minus (b)
all non-cash items increasing Consolidated Net Income for such period, minus (c)
all cash payments during such period relating to non-cash charges that were
added back in determining EBITDA in any prior period (provided that payment of
such cash amounts did not reduce Consolidated Net Income), all for such Person
and its Restricted Subsidiaries determined in accordance with GAAP.
"Equity Investment" means the investment by MHE Investments, Inc., the
purchase by certain institutional investors of Units being issued by the
Corporation, and a retained equity investment by HarnCo, in each case, in the
Corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Date" means the date, if any, on which the shares of Series C
Junior Preferred Stock are exchanged by the Corporation for Exchange Debentures.
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"Exchange Debentures" shall have the meaning ascribed to it in paragraph
(g) hereof.
"Exchange Notice" shall have the meaning ascribed to it in paragraph (g)
hereof.
"Fair Market Value" means, with respect to any asset or Property, the
price which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair Market
Value shall be determined by the Board of Directors acting in good faith and, in
the case of determination involving assets or Property in excess of $2 million,
shall be evidenced by a resolution of the Board of Directors delivered to the
Trustee.
"Financings" means, collectively, the offering by Morris Material Handling
of the Senior Notes, the borrowings by Morris Material Handling under the Credit
Agreement, and the Equity Investment.
"Foreign Restricted Subsidiary" of any specified Person means any
Restricted Subsidiary the jurisdiction of incorporation, organization or
formation of which is outside of the United States, Canada, the United Kingdom
and South Africa.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States from time to time.
"Guarantee" means a guarantee of the Senior Notes by a guarantor under the
Note Indenture, as in effect from time to time.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the performance
(or payment of damages in the event of non-performance) of all or any part of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit. A guarantee shall include, without
limitation, any agreement to preserve or maintain any other Person's financial
condition or to cause any other Person to achieve certain levels of operating
results.
"HarnCo" means Harnischfeger Corporation.
"Holder" means a holder of shares of Series C Junior Preferred Stock, as
reflected in the register maintained by the Transfer Agent.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other
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obligation on the balance sheet of such Person (and "incurrence," "incurred,"
"incurrable," and "incurring" shall have meanings correlative to the foregoing);
provided, that a change in GAAP that results in an obligation of such Person
that exists at such time becoming Indebtedness shall not be deemed an incurrence
of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person,
any indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
Property (excluding, without limitation, any balances that constitute accounts
payable or trade payables or liabilities arising from advance payments or
customer deposits for goods and services sold by such Person or its Restricted
Subsidiaries in the ordinary course of business, and other accrued liabilities,
in each case, arising in the ordinary course of business) if and to the extent
any of the foregoing indebtedness would appear as a liability upon a balance
sheet of such Person prepared in accordance with GAAP, and shall also include,
to the extent not otherwise included (i) any Capitalized Lease Obligations, (ii)
guarantees of items of other Persons which would be included within this
definition for such other Persons (whether or not such items would appear upon
the balance sheet of the guarantor), including, without limitation, guarantees
of dividends for which such Person may be liable directly or indirectly, (iii)
all obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction (provided that in the case of
any such letters of credit, the items for which such letters of credit provide
credit support are those of other Persons which would be included within this
definition for such other Persons), (iv) Disqualified Capital Stock of the
Corporation or any Restricted Subsidiary thereof, including, without limitation,
any liquidation preference and mandatory redemption payment obligations in
respect thereof and (v) obligations of any such Person under any Interest Rate
Agreement or Currency Agreement applicable to any of the foregoing (if and to
the extent such Interest Rate Agreement or Currency Agreement obligations would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP). The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations included within the definition
of Indebtedness, the maximum liability upon the occurrence of the contingency
giving rise to the obligation, provided, that (i) the amount outstanding at any
time of any Indebtedness issued with original issue discount is the principal
amount of such Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at such time as determined in
conformity with GAAP (but such Indebtedness shall only be deemed to have been
incurred on the date of original issuance thereof) and, in the case of any
securities constituting Indebtedness, the payment of interest upon which is in
such securities, such Indebtedness shall only be deemed to have been incurred on
the date of issuance of the original securities constituting such Indebtedness,
(ii) Indebtedness shall not include any liability for federal, state, local,
foreign or other taxes and (iii) contingent obligations of the Corporation or
any of its Restricted Subsidiaries under any Surety Obligation will be deemed to
be Indebtedness
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only upon the earlier of (a) the Corporation's or any Restricted Subsidiary's
obtaining knowledge of any payment by or in respect of any provider in respect
of any Surety Obligation, (b) the demand by any provider for any reimbursement
by the Corporation or any of its Restricted Subsidiaries of any Surety
Obligation or (c) the time at which the Corporation or any of its Restricted
Subsidiaries becomes obligated to make payment in respect of any Surety
Obligation as a result of the provider having made a payment in respect of such
Surety Obligation or as a result of such payment being required to be made by
such provider. Notwithstanding any other provision of the foregoing definition,
any trade or accounts payable arising from the purchase of goods or materials or
for services obtained in the ordinary course of business shall not be deemed to
be "Indebtedness" of the Corporation or any Restricted Subsidiaries for purposes
of this definition. Furthermore, guarantees of (or obligations with respect to
letters of credit supporting) Indebtedness otherwise included in the
determination of such amount shall not also be included.
"Initial Holder" means HarnCo.
"Initial Dividend Period" means the dividend period commencing on the
Issue Date and ending on the first Dividend Payment Date to occur thereafter.
"Indenture" shall have the meaning ascribed to it in paragraph (f)(ii)(E)
hereof.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance (or other
extension of credit), loan or capital contribution to (by means of transfers of
Property to others, payments for Property or services for the account or use of
others or otherwise), any guarantee of any obligations or Indebtedness of any
other Person, the purchase of any stock, bonds, notes, debentures, partnership
or joint venture interests or other securities of, the acquisition, by purchase
or otherwise, of any evidence of beneficial ownership of, or interest in, any
Person. Upon the designation of an Unrestricted Subsidiary as a Restricted
Subsidiary or the acquisition by the Corporation or a Restricted Subsidiary of
an interest in any Person that, as a result thereof, becomes a Restricted
Subsidiary, the Corporation shall be deemed to have made an Investment equal to
the Fair Market Value of all Investments owned by such new Restricted
Subsidiary. Investments shall exclude (i) accounts receivable and other
extensions of trade credit, in each case, on commercially reasonable terms in
accordance with normal trade practices, (ii) prepaid expenses and workers'
compensation, utility, lease and similar deposits, in the ordinary course of
business and (iii) acquisitions of Property or assets paid for solely by the
issuance of Capital Stock (other than Disqualified Capital Stock) of the
Corporation.
"Issue Date" means the date of original issuance of the Senior Preferred
Stock or the Series C Junior Preferred Stock, as the case may be.
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"Joint Venture" of any specified Person means any corporation,
partnership, joint venture, limited liability company, association or other
business entity, whether now existing or hereafter organized or acquired, and
(a) which is engaged in a similar line of business as the Corporation or any
Restricted Subsidiary at the date of determination and (b)(i) in the case of a
corporation, of which not more than 50% of the total voting power of the Capital
Stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, officers or trustees thereof is held by the
Corporation or any of its Restricted Subsidiaries, or (ii) in the case of a
partnership, joint venture, limited liability company, association or other
business entity, with respect to which the Corporation or any of its Restricted
Subsidiaries has not more than 50% of the ownership and voting power relating to
the policies, management and affairs thereof.
"Junior A Capital Stock" means Capital Stock of the Corporation, including
the Series B Junior Preferred Stock and the Series C Junior Preferred Stock,
that does not rank, as to the payment of dividends or other comparable
distributions or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation, prior to
or on a parity with the Senior Preferred Stock.
"Junior Stock" means Capital Stock of the Corporation that does not rank,
as to the payment of dividends or other comparable distributions or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, prior to or on a parity with the
Series C Junior Preferred Stock.
"Lien" means with respect to any Property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such Property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"Mandatory Redemption Price" shall have the meaning ascribed to it in
paragraph (e) hereof.
"MHE Investments" means MHE Investments, Inc., a Delaware corporation.
"Morris Material Handling" means Morris Material Handling, Inc., a
Delaware corporation.
"Moody's" means Moody's Investors Services, Inc. and its successors.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP, plus the amount
of any decrease in the deferred tax asset for such period relating to the actual
cash tax benefit realized by such Person or the consolidated tax group of which
such Person is a member
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resulting from the election under Section 338(h)(10) of the Internal Revenue
Code of 1986, as amended, in respect of the Transactions.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by the
Corporation, the aggregate net proceeds received by the Corporation, after
payment of expenses, commissions and the like incurred in connection therewith,
whether such proceeds are in cash or in Property (valued at the Fair Market
Value thereof at the time of receipt) and (b) in the case of any exchange,
exercise, conversion or surrender of outstanding securities of any kind for or
into shares of Capital Stock of the Corporation which is not Disqualified Stock,
the net book value of such outstanding securities on the date of such exchange,
exercise, conversion or surrender (plus any additional amount required to be
paid by the holder to the Corporation upon such exchange, exercise, conversion
or surrender) less any and all payments made to the holders, e.g., on account of
fractional shares and less all expenses incurred by the Corporation in
connection therewith.
"Note Indenture" means the Indenture relating to the Senior Notes, as in
effect on the Issue Date.
"October 1997 Drop Down" means the transfer in October 1997 by HarnCo of
the assets of its Material Handling Equipment Division to Material Handling,
LLC, a wholly-owned subsidiary of the Corporation.
"Offering Memorandum" means the Offering Memorandum dated March 23, 1998,
relating to the Corporation's offering and placement of the Senior Preferred
Stock.
"Parity Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Permitted Affiliate Agreements" means the following agreements between or
among the Corporation and any of MHE Investments, HarnCo, Chartwell or their
respective Affiliates:
(i) Recapitalization Agreement;
(ii) Transition Services Agreement between HarnCo and Morris Material
Handling, Inc., dated on or about March 30, 1998;
(iii) Trademark License Agreement between Harnischfeger Technologies, Inc.
and Morris Material Handling Inc., dated on or about March 30, 1998;
(iv) Separation Agreement between HarnCo and Material Handling, LLC, dated
October 26, 1997;
(v) Component and Manufactured Products Supply Agreement between HarnCo
and Morris Material Handling, Inc., dated on or about March 30, 1998;
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(vi) Employment Agreement between Morris Material Handling, Inc. and
Michael Erwin, dated on or about March 30, 1998;
(vii) Employment Agreement between Morris Material Handling, Inc. and
David Smith, dated on or about March 30, 1998;
(viii) Employment Agreement between Morris Material Handling, Inc. and
Richard Niespodziani, dated on or about March 30, 1998;
(ix) Employment Agreement between Morris Material Handling, Inc. and Peter
Kerrick, dated on or about March 30, 1998;
(x) Employment Agreement between Morris Material Handling, Inc. and Edward
Doolan, dated on or about March 30, 1998;
(xi) Employment Agreement between Morris Material Handling, Inc. and
Michael Maddock, dated on or about March 30, 1998;
(xii) Employment Agreement between Morris Material Handling, Inc. and
Bruce Norridge, dated on or about March 30, 1998;
(xiii) Management Consulting Agreement between Morris Material Handling,
Inc. and Chartwell Investments Inc., dated on or about March 30, 1998;
(xiv) Financial Advisory Agreement between Morris Material Handling, Inc.
and Chartwell Investments Inc., dated on or about March 30, 1998;
(xv) Tax Sharing Agreement between MHE Investments, Inc., the Corporation
and certain of MMH Holdings' subsidiaries, dated on or about March 30, 1998;
(xvi) Shareholders Agreement between MHE Investments, Inc., the
Corporation and HarnCo, dated on or about March 30, 1998;
(xvii) Credit Indemnification Agreement between Harnischfeger Industries,
Inc. and Morris Material Handling, Inc., dated on or about March 30, 1998;
(xviii) Equity Purchase Agreements between Niles L.L.C. and certain
members of management;
(xix) HK Agreement by and among the Corporation, MHE Investments, Inc. and
majority stockholder of the Corporation, dated on or about March 30, 1998; and
(xx) Employee Loan Agreements between Morris Material Handling, Inc. and
certain members of management with respect to loans aggregating $600,000 by
Morris Material Handling, Inc. to such employees to acquire equity interests in
Niles L.L.C.
Each of the foregoing agreements is a Permitted Affiliate Agreement in the
form such agreement is in effect immediately after the initial issuance of the
Senior Preferred
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Stock on the Issue Date, or as the same may be amended from time to time subject
to the provisions of paragraph (l)(iii) above; provided, that notwithstanding
paragraph (l)(iii), such agreements may be extended from time to time or
otherwise amended, to the extent that a majority of the disinterested members of
the Board of Directors has determined in good faith that no material adverse
effect on the creditworthiness of the Corporation and its Restricted
Subsidiaries, taken as a whole, shall result as a consequence thereby.
"Permitted Foreign Restricted Subsidiary Preferred Stock" means securities
of Foreign Restricted Subsidiaries of the Corporation denominated in Preferred
Stock that (a) otherwise have substantially the same characteristics of voting
or non-voting Common Stock of a Delaware corporation, (b) do not obligate the
issuer to pay current dividends or distributions in cash or otherwise and (c)
are not subject to any requirement of redemption or repurchase.
"Permitted Holders" means Chartwell.
"Permitted Indebtedness" means:
(i) Indebtedness of the Corporation or any Restricted Subsidiary arising
under or in connection with the Credit Facilities or Acquired Indebtedness in an
aggregate principal amount at any one time outstanding not to exceed the sum of
(a) $55 million, less the aggregate amount of all Net Proceeds of Asset Sales
applied to permanently reduce the outstanding amount of such Indebtedness, and
(b) the greater of (1) $75 million, less the aggregate amount of all Net
Proceeds of Asset Sales applied to permanently reduce the outstanding amount of
such Indebtedness or (2) the sum of (x) 80% of the book value of accounts
receivable of the Corporation and its Restricted Subsidiaries and (y) 45% of the
book value of consolidated inventory of the Corporation and its Restricted
Subsidiaries, in each case, determined at the time of such incurrence, less the
aggregate amount of all Net Proceeds of Asset Sales applied to permanently
reduce the outstanding amount of such Indebtedness; provided, that $15 million
of the Indebtedness incurred under this clause (b) may be incurred solely to
obtain letters of credit and to fund draws thereunder to provide credit support
for the Surety Arrangement or other Surety Obligations or other letters of
credit reasonably necessary in the ordinary course of business;
(ii) Indebtedness under Surety Obligations and under the Surety
Arrangement, in either case, that are due not later than 10 days after the
earlier of (a) the Corporation's or any Restricted Subsidiary's obtaining
knowledge of any payment by or in respect of any provider in respect of any
Surety Obligation, (b) the demand by any provider for any reimbursement by the
Corporation or any of its Restricted Subsidiaries of any Surety Obligation or
(c) the time at which the Corporation or any of its Restricted Subsidiaries
becomes obligated to make payment in respect of any Surety Obligation as a
result of the provider having made a payment in respect of such Surety
Obligation or as a result of such payment being required to be made by such
provider;
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(iii) Indebtedness under the Exchange Debentures, the Indenture, the
Senior Notes, the Note Indenture and the Guarantees;
(iv) Indebtedness not covered by any other clause of this definition which
is outstanding on the Issue Date other than under the South African Credit
Facility;
(v) Indebtedness of the Corporation to any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary to the Corporation or another
Restricted Subsidiary, provided, that Indebtedness of the Corporation or any
Wholly-Owned Subsidiary to any Restricted Subsidiary (other than a Wholly-Owned
Subsidiary) is incurred for borrowed money; provided, further, that any
Indebtedness otherwise referred to in this clause (v) that is no longer held by
a Restricted Subsidiary or the Corporation (whether (i) as a result of a sale or
transfer of such Indebtedness, (ii) as a result of such Person no longer being
the Corporation or a Restricted Subsidiary or (iii) otherwise), shall, in each
case, be deemed incurred at such time;
(vi) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire Property in the ordinary course of business, which
Indebtedness and Capitalized Lease Obligations, in the aggregate, outstanding on
any date of incurrence (and any Refinancing Indebtedness in respect thereof), do
not exceed 4% of the Consolidated Tangible Assets of the Corporation and its
Restricted Subsidiaries;
(vii) Interest Rate Agreements and Currency Agreements;
(viii) guarantees of obligations of the Corporation or its Restricted
Subsidiaries;
(ix) additional Indebtedness of the Corporation or its Restricted
Subsidiaries not to exceed an aggregate of $10 million in principal amount
outstanding at any time; and
(x) Refinancing Indebtedness in respect of Indebtedness incurred under
clauses (iii), (iv), (v) and (vii) above or incurred pursuant to the first
paragraph of paragraph (l)(i) above.
"Permitted Investments" means, for any Person, Investments made on or
after the Issue Date consisting of:
(i) Investments by the Corporation, or by a Restricted Subsidiary, in the
Corporation or a Restricted Subsidiary;
(ii) Cash Equivalents;
(iii) Investments by the Corporation, or by a Restricted Subsidiary
thereof, in a Person, if as a result of such Investment (a) such Person becomes
a Restricted Subsidiary of the Corporation or (b) such person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets (including the proceeds of such Investment) to, or is
liquidated into, the Corporation or a Restricted Subsidiary thereof;
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(iv) non-cash consideration received in conjunction with the consummation
of an Asset Sale;
(v) Interest Rate Agreements and Currency Agreements;
(vi) any Investment existing on the Issue Date;
(vii) Investments received in settlement of obligations owed to the
Corporation or any Restricted Subsidiary as a result of bankruptcy or insolvency
proceedings or upon the foreclosure or enforcement of any Lien in favor of the
Corporation or any Restricted Subsidiary;
(viii) Investments required pursuant to the following agreements or
obligations of the Corporation or a Restricted Subsidiary to make such
Investments in effect on the Issue Date:
(A) Shareholders Agreement among Penang Port SDN BHD., Morris
Mechanical Handling Limited and The General Electric Company of Malaysia
SDN BHD., dated November 8, 1995; and
(B) Joint Venture Formation and Partners Agreement by and among P&H
Middle East Ltd., Morris Mechanical Handling, Ltd., and Hamad Abdulla
Al-Zamil and Brothers Company, dated 1997;
(ix) Investments required to be made pursuant to the Transactions, as
contemplated by the Permitted Affiliate Agreements; and
(x) Investments by the Corporation or any Restricted Subsidiary not
otherwise permitted under this definition, in an aggregate amount not to exceed
$15 million at any one time outstanding.
For purposes of clause (x) above, the amount of any Investment
outstanding, in respect of any Investment and the issuer thereof (and its
Subsidiaries), shall be equal to the excess of (a) the aggregate amount of all
Investments made therein by the Corporation or any Restricted Subsidiary on or
after the Issue Date (including the Fair Market Value of all such Investments
not made in cash or Cash Equivalents, valued at the time of such Investment)
over (b) the aggregate amount returned in cash or Cash Equivalents on or with
respect to Investments in such Person (whenever such Investment was made)
whether through the sale or other disposition of the Investment in such Person
(or portion thereof) or through interest payments, principal payments, dividends
or other distributions or payments; provided, that such payments or
distributions shall not be (and have not been) included in clause (C)(3) of the
first paragraph of paragraph (l)(ii) above or otherwise included in Consolidated
Net Income.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
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"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed Property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"Public Equity Offering" means any underwritten public offering of shares
of Common Stock (however designated and whether voting or non-voting) of the
Corporation or Morris Material Handling and any and all rights, warrants or
options to acquire such Common Stock pursuant to an effective registration
statement (other than a registration statement on Form S-4 or S-8) filed with
the Commission in accordance with the Securities Act.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including sales and
excise taxes, installation and delivery charges and other direct costs of, and
other direct expenses paid or charged in connection with, such purchase or
construction) of an item of Property, the principal amount of which Indebtedness
does not exceed the sum of (i) 100% of such cost and (ii) reasonable fees and
expenses of such Person incurred in connection therewith.
"Recapitalization" means the recapitalization of the Corporation pursuant
to the Recapitalization Agreement.
"Recapitalization Agreement" means the Recapitalization Agreement, dated
as of January 28, 1998, among HarnCo, the sellers named therein and MHE
Investments, Inc., together with Amendment No. 1 thereto, dated as of March 4,
1998, and Amendment No. 2 thereto, dated as of March 23, 1998.
"Redemption Date" with respect to any shares of Senior Preferred Stock,
means the date on which such shares of Senior Preferred Stock are redeemed by
the Corporation.
"Redemption Notice" shall have the meaning ascribed to it in paragraph (e)
hereof.
"Refinancing Indebtedness" means Indebtedness that refunds or refinances
any Indebtedness of the Corporation or its Restricted Subsidiaries outstanding
on the Issue Date or other Indebtedness permitted to be incurred by the
Corporation or its Restricted Subsidiaries pursuant to the terms of the
Certificate of Designations, but only to the extent that (i) the Refinancing
Indebtedness is scheduled to mature either (a) no earlier than the Indebtedness
being refunded or refinanced, or (b) at least 91 days after the mandatory
Redemption Date of the Senior Preferred Stock (ii) the portion, if any, of the
Refinancing Indebtedness that is scheduled to mature on or prior to the
mandatory Redemption Date of the Senior Preferred Stock has a weighted average
life to maturity at the time such Refinancing Indebtedness is incurred that is
equal to or greater than the weighted average
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life to maturity of the portion of the Indebtedness being refunded or refinanced
that is scheduled to mature on or prior to the mandatory Redemption Date of the
Senior Preferred Stock and, in the case of clause (i) above and this clause
(ii), such Refinancing Indebtedness by its terms, or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, does not
permit redemption or other retirement (including pursuant to any required offer
to purchase to be made by the Corporation or a Restricted Subsidiary) of such
Indebtedness at the option of the holder thereof prior to the final stated
maturity of the Indebtedness being refinanced, other than a redemption or other
retirement at the option of the holder of such Indebtedness (including pursuant
to a required offer to purchase made by the Corporation or a Restricted
Subsidiary) which is conditioned on a change of control of the Corporation
pursuant to provisions substantially similar to those contained under paragraph
(h) above or provisions contained in the Note Indenture attributable to required
offers to purchase attributable to Asset Sales or otherwise on terms
substantially similar to those in such Indebtedness being refinanced, (iii) such
Refinancing Indebtedness is in an aggregate principal amount that is equal to or
less than the sum of (a) the aggregate principal amount then outstanding under
the Indebtedness being refunded or refinanced, (b) the amount of accrued and
unpaid interest, if any, and premiums owed, if any, not in excess of
pre-existing prepayment provisions on such Indebtedness being refunded or
refinanced and (c) the amount of customary fees, expenses and costs related to
the incurrence of such Refinancing Indebtedness, and (iv) such Refinancing
Indebtedness is incurred by the same Person that initially incurred the
Indebtedness being refunded or refinanced, except that the Corporation may incur
Refinancing Indebtedness to refund or refinance Indebtedness of any Wholly-Owned
Subsidiary of the Corporation and any Restricted Subsidiary may incur
Refinancing Indebtedness to refund or refinance Indebtedness of any other
Restricted Subsidiary.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment of any kind or
character (whether in cash, Property or securities) on Junior Stock of the
Corporation or Capital Stock of any Restricted Subsidiary or any payment made to
the direct or indirect holders (in their capacities as such) of Junior Stock of
the Corporation or Capital Stock of any Restricted Subsidiary of the Corporation
(other than (x) dividends or distributions payable solely in Junior Stock (other
than Disqualified Capital Stock) of the Corporation, and (y) dividends or
distributions payable to the Corporation or to a Restricted Subsidiary of the
Corporation and (z) dividends or distributions from a Restricted Subsidiary of
the Corporation that are paid ratably to all Persons holding the Capital Stock
of such Restricted Subsidiary in proportion to the Capital Stock held by such
Persons), (ii) the purchase, redemption or other acquisition or retirement for
value of any Junior Stock of the Corporation or any Capital Stock of any of its
Restricted Subsidiaries or any options, warrants or rights to purchase or
acquire such shares or any securities convertible or exchangeable into such
shares (other than any such shares, options, warrants, rights or securities (a)
that are owned by the Corporation or a Restricted Subsidiary of the Corporation;
provided, that such options, warrants, rights or securities are purchased,
redeemed or otherwise acquired for value by the issuer thereof, or (b) the
issuer of which is a Restricted Subsidiary; provided, that, for purposes of this
clause (b), such purchase,
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redemption or other acquisition or retirement for value is (A) permitted under
clauses (viii) or (x) of the definition of Permitted Investments or (B) in an
amount, which, when added to all other Restricted Payments made pursuant to this
clause (b), is not greater than 10% of Consolidated Tangible Assets of the
Corporation and its Restricted Subsidiaries), (iii) the making of any Investment
other than a Permitted Investment, (iv) any designation (other than pursuant to
clause (x) of the definition of Permitted Investments) of a Restricted
Subsidiary as an Unrestricted Subsidiary (a "Designation"), provided, that the
Designation of a Subsidiary of the Corporation as an Unrestricted Subsidiary
shall be deemed to include the Designation of all of the Subsidiaries of such
Subsidiary that were Restricted Subsidiaries, (v) forgiveness of any
Indebtedness of an Affiliate of the Corporation to the Corporation or a
Restricted Subsidiary and (vi) any advisory fee paid to an Affiliate with
respect to a specific transaction (other than fees payable on the Issue Date
upon consummation of the Transactions. For purposes of determining the amount
expended for Restricted Payments, (a) cash distributed or invested shall be
valued at the face amount thereof and Property other than cash shall be valued
at its Fair Market Value, except that in determining the amount of any
Restricted Payment made under clause (iv) above, the amount of such Restricted
Payment shall be equal to the greater of (x) the book value or (y) the Fair
Market Value of the Corporation's direct and indirect proportionate interest in
such Subsidiary on such date and (b) upon the designation of an Unrestricted
Subsidiary as a Restricted Subsidiary, or the acquisition by the Corporation or
a Restricted Subsidiary of an interest in any Person that, as a result thereof,
becomes a Restricted Subsidiary, the Corporation shall be deemed to have made a
Restricted Payment equal to the Fair Market Value of the Capital Stock of the
Corporation or its Restricted Subsidiaries owned by such new Restricted
Subsidiaries.
"Restricted Subsidiary" means a Subsidiary of the Corporation other than
an Unrestricted Subsidiary and includes all of the Subsidiaries of the
Corporation existing as of the Issue Date. The Board of Directors may designate
any Unrestricted Subsidiary or any Person that is to become a Subsidiary as a
Restricted Subsidiary if immediately after giving effect to such action (and
treating any Acquired Indebtedness as having been incurred at the time of such
action), (i) no Voting Rights Triggering Event shall have occurred and be
continuing, (ii) Indebtedness of such Person and its Subsidiaries outstanding
immediately following such redesignation would, if incurred at such time, be
permitted to be incurred under the Certificate of Designations and (iii) the
provisions referred to in clause (b) of the last sentence of the definition of
Restricted Payment is complied with and any Investments pursuant to the second
sentence of the definition of Investments are permitted to be made pursuant to
the Certificate of Designations.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Note" means any Indebtedness of the Corporation or any Restricted
Subsidiary issued to a seller as a portion of the purchase price in any Asset
Acquisition by the Corporation or such Restricted Subsidiary from such seller.
"Senior Notes" means the $200,000,000 aggregate principal amount of 9 1/2%
Senior Notes due 2008 of Morris Material Handling.
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"Senior Preferred Stock" means the 12% Series A Senior Exchangeable
Preferred Stock of the Corporation, liquidation preference $1,000 per share.
"Senior Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Series B Junior Preferred Stock" means the 12 1/4% Series B Junior
Exchangeable Preferred Stock of the Corporation, liquidation preference $1,000
per share.
"South African Credit Facility" means a Credit Facility in an aggregate
principal amount or with aggregate commitments not to exceed $5 million to be
entered into by Morris Mechanical Handling (Pty) Ltd.
"Special Dividends" shall have the meaning ascribed to it in paragraph
(c)(vi) hereof.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, limited liability company, association or other business entity,
whether now existing or hereafter organized or acquired, (i) in the case of a
corporation, of which more than 50% of the total Voting Stock is held by such
first-named Person or any of its Subsidiaries or (ii) in the case of a
partnership, joint venture, limited liability company, association or other
business entity, with respect to which such first-named Person or any of its
Subsidiaries has at least a majority ownership and voting power relating to the
policies, management and affairs thereof.
"Surety Arrangement" means one or more surety arrangements providing,
inter alia, for the issuance of Surety Obligations between the Corporation or
any of its Restricted Subsidiaries and one or more providers, provided to the
Corporation or its Restricted Subsidiaries including, in each case, any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced, restated or refinanced from time to time.
"Surety Obligations" means any bonds, including bid bonds, advance bonds,
or performance bonds, letters of credit, warranties, and similar arrangements
between the Corporation and any of its Restricted Subsidiaries and one or more
providers, for the benefit of the Corporation's or any Restricted Subsidiary's
suppliers, vendors, insurers or customers including, in each case, any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced, restated or refinanced from time to time.
"Tax Allocation Agreement" means a tax allocation agreement among the
Corporation, Morris Material Handling and MHE Investments, as in effect on the
Issue Date and as the same may be amended from time to time subject to the
provisions of paragraph (l)(iii) above and provided, that no material adverse
effect on Corporation or on the holders of the Senior Preferred Stock shall
result as a consequence thereby.
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"Transactions" means, collectively, the Recapitalization, the Financings
and the October 1997 Drop Down and the other related transactions described in
the section "The Transactions" contained in the Offering Memorandum.
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of the Corporation which is classified
(whether on or after the Issue Date) as an Unrestricted Subsidiary by a
resolution adopted by the Board of Directors of the Corporation; provided, that
a Subsidiary may be so classified as an Unrestricted Subsidiary only if (i) such
classification in compliance with paragraph (l)(ii) above, (ii) such Subsidiary
does not own beneficially any Capital Stock of the Corporation or any Restricted
Subsidiary (other than any Restricted Subsidiary of such Subsidiary that is
being designated as an Unrestricted Subsidiary at the time of such
classification) and (iii) all Indebtedness of the Corporation or any Restricted
Subsidiary to such Subsidiary is deemed incurred at the time of such
classification or at the time such Capital Stock is no longer so owned. The
Corporation shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, at any time, (a) be liable for any Indebtedness of any
Unrestricted Subsidiary or (b) be liable for any Indebtedness that provides that
the holder thereof may (upon notice, lapse of time or both) declare a default
thereon or cause the payment thereof to be accelerated or payable prior to its
final maturity upon the occurrence of a default with respect to any Indebtedness
of any Unrestricted Subsidiary.
"Voting Rights Triggering Event" shall have the meaning ascribed to it in
paragraph (f) hereof.
"Voting Stock" of any Person means the Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly-Owned Subsidiary" means any Restricted Subsidiary, all of the
outstanding Voting Stock (other than directors' qualifying shares) of which are
owned, directly or indirectly, by the Corporation.
(n) Restrictions on Transfer
(a) Each share of Series C Junior Preferred Stock shall contain a legend
substantially to the following effect until the Resale Restriction Termination
Date (as defined below) unless the Corporation determines otherwise:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS,
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT
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IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER
THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO
REGULATION S (WITHIN THE MEANING OF RULE 903(C)(2) OF REGULATION S UNDER THE
SECURITIES ACT), (2) AGREES THAT IT WILL NOT, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") THAT IS TWO YEARS (OR SUCH SHORTER PERIOD AS MAY
BE PRESCRIBED BY RULE 144(K)(OR ANY SUCCESSOR PROVISION THEREOF) UNDER THE
SECURITIES ACT) AFTER THE LATER OF THE ORIGINAL ISSUE DATE AND THE LAST DATE ON
WHICH THE ISSUER OR ANY AFFILIATE THEREOF WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY), RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT
(A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO
A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (D) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRANSFER AGENT A LETTER SIGNED BY SUCH INVESTOR CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRANSFER
AGENT), (E) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) AND (3) AGREES THAT IT
WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED PRIOR TO THE
RESALE RESTRICTION TERMINATION DATE A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. PRIOR TO ANY OFFER, SALE OR OTHER TRANSFER OF THIS SECURITY PRIOR TO THE
RESALE RESTRICTION TERMINATION DATE PURSUANT TO CLAUSES (D) AND (F) ABOVE, THE
HOLDER WILL BE REQUIRED TO DELIVER TO THE TRANSFER AGENT AND THE ISSUER SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
(b) Prior to the Resale Restriction Termination Date (or such shorter
period as may be prescribed by Rule 144(k) under the Securities Act (or any
successor thereto)) no
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transfers of any Series C Junior Preferred Stock may be effected other than in
accordance with the procedures set forth in paragraph (n)(i) above.
46
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IN WITNESS WHEREOF, said MMH Holdings, Inc. has caused this Certificate of
Designations to be signed by Martin L. Ditkof, its Secretary, this 27th day of
March, 1998.
MMH HOLDINGS, INC.
By: /s/ Martin L. Ditkof
------------------------------
Name: Martin L. Ditkof
Title: Secretary
47
Execution Copy
PREFERRED STOCK REGISTRATION RIGHTS AGREEMENT
Dated as of March 30, 1998
by and among
MMH HOLDINGS, INC.,
and
CIBC OPPENHEIMER CORP.
as Initial Purchaser
57,710 Shares
of
12% Series A Senior Exchangeable Preferred Stock
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS...............................................................1
2. EXCHANGE OFFER............................................................4
3. SHELF REGISTRATION........................................................7
(a) INITIAL SHELF REGISTRATION.........................................7
(b) SUBSEQUENT SHELF REGISTRATIONS.....................................8
(c) SUPPLEMENTS AND AMENDMENTS.........................................8
4. ADDITIONAL DIVIDENDS......................................................9
5. REGISTRATION PROCEDURES..................................................10
6. REGISTRATION EXPENSES....................................................19
7. INDEMNIFICATION..........................................................20
8. RULES 144 AND 144A.......................................................23
9. UNDERWRITTEN REGISTRATIONS...............................................23
10. MISCELLANEOUS...........................................................24
(a) REMEDIES..........................................................24
(b) ENFORCEMENT.......................................................24
(c) NO INCONSISTENT AGREEMENTS........................................24
(d) ADJUSTMENTS AFFECTING REGISTRABLE PREFERRED STOCK.................24
(e) AMENDMENTS AND WAIVERS............................................25
(f) NOTICES...........................................................25
(g) SUCCESSORS AND ASSIGNS............................................26
(h) COUNTERPARTS......................................................26
(i) HEADINGS..........................................................26
(j) GOVERNING LAW.....................................................26
(k) SEVERABILITY......................................................26
(l) ENTIRE AGREEMENT..................................................26
(m) PREFERRED STOCK HELD BY THE COMPANY OR ITS AFFILIATES.............26
REGISTRATION OF THE DEBENTURES.........................................26
<PAGE>
PREFERRED STOCK REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") dated as
of March 30, 1998, by and among MMH HOLDINGS, INC., a Delaware corporation (the
"COMPANY ") and CIBC OPPENHEIMER CORP. (the "INITIAL PURCHASER").
This Agreement is entered into in connection with the Securities Purchase
Agreement, dated as of March 23, 1998, by and among each of the parties hereto
(the "PURCHASE AGREEMENT").
In order to induce the Initial Purchaser to enter into the Purchase
Agreement, the Company has agreed to provide the rights set forth in this
Agreement for the benefit of the Initial Purchaser. The execution and delivery
of this Agreement is a condition to the Initial Purchaser's obligation to
purchase the securities under the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
ACT: The Securities Act of 1933, as amended, and the rules and regulations
of the SEC promulgated thereunder.
ADDITIONAL DIVIDENDS: See Section 4(a).
ADVICE: See the last paragraph of Section 5.
APPLICABLE PERIOD: See Section 2(b).
"BUSINESS DAY": means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in the City of New York are
authorized or obligated by law to close.
CERTIFICATE OF DESIGNATION: means the certificate of designation governing
the Preferred Stock.
CLOSING: See the Purchase Agreement.
COMPANY: See the introductory paragraph to this Agreement.
DEBENTURES: means the 12% Senior Subordinated Debentures of the Company
issuable under the Indenture.
EFFECTIVENESS DATE: The 135th day after the Issue Date.
EFFECTIVENESS PERIOD: See Section 3(a).
EVENT DATE: See Section 4(b).
<PAGE>
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
EXCHANGE PREFERRED STOCK: The shares of 12% Series A Senior Exchangeable
Preferred Stock, par value $.01 per share, of the Company that are identical to
the Preferred Stock in all material respects, except that the provisions
regarding restrictions on transfer shall be modified, as provided in the
Certificate of Designation, and the issuance thereof pursuant to the Exchange
Offer shall have been registered pursuant to an effective Registration Statement
in compliance with the Act.
EXCHANGE OFFER: See Section 2(a).
EXCHANGE REGISTRATION STATEMENT: See Section 2(a).
FILING DATE: The 60th day after the Issue Date.
FINANCIAL ADVISOR: As defined in the preamble hereof.
GUARANTORS: CMH Material Handling, LLC; EPH Material Handling, LLC
(formerly EPH Distribution & Service, LLC); Harnischfeger Distribution &
Service, LLC; HPH Material Handling, LLC (formerly HPH Distribution & Service,
LLC); Material Handling, LLC; MHE Technologies, Inc.; Morris Mechanical
Handling, Inc.; MPH Crane, Inc.; NPH Material Handling, Inc. (formerly NPH
Distribution & Service, Inc.); PHME Service, Inc.; PHMH Holding Company;
Hercules S.A. de C.V.; Hydramach ULC; Kaverit Steel and Crane ULC; Mondel ULC;
Lowfile Limited; Invercoe Engineering Limited; Butters Engineering Limited; MMH
(Holdings) Limited; Morris Mechanical Handling Limited; MMH International
Limited; Redcrown, ULC; SPH Crane & Hoist, Inc.; Morris Material Handling, Ltd.;
Material Handling Equipment Nevada Corporation; MHE Canada, ULC; Morris Material
Handling, LLC; and 3016117 Nova Scotia ULC.
HOLDER: Any holder of any share of Registrable Preferred Stock.
INDEMNIFIED PERSON: See Section 7(c).
INDEMNIFYING PERSON: See Section 7(c).
INDENTURE: The form of the Indenture, a copy of which is on file with the
Transfer Agent, pertaining to the Debentures.
INITIAL PURCHASER: As defined in the preamble hereof.
INITIAL SHELF REGISTRATION: See Section 3(a).
INSPECTORS: See Section 5(o).
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<PAGE>
ISSUE DATE: The date on which the original shares of Preferred Stock are
sold to the Initial Purchaser pursuant to the Purchase Agreement.
NASD: See Section 5(t).
PARTICIPANT: See Section 7(a).
PARTICIPATING BROKER-DEALER: See Section 2(b).
PERSON: An individual, corporation, limited liability company,
partnership, joint venture, incorporated or unincorporated association,
joint-stock company, trust, government (or an agency or political subdivision
thereof) or other entity of any kind.
PRIVATE EXCHANGE: See Section 2(b).
PRIVATE EXCHANGE PREFERRED STOCK: See Section 2(b).
PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Preferred Stock covered by such Registration Statement, and all
other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
PURCHASE AGREEMENT: See the introductory paragraphs to this Agreement.
RECORDS: See Section 5(o).
REGISTRABLE PREFERRED STOCK: The Preferred Stock upon original issuance of
the Preferred Stock and at all times subsequent thereto and, if issued, the
Private Exchange Preferred Stock, until in the case of any such Preferred Stock
or any such Private Exchange Preferred Stock, as the case may be, (i) a
Registration Statement covering such Preferred Stock or such Private Exchange
Preferred Stock has been declared effective by the SEC and such Preferred Stock
or such Private Exchange Preferred Stock, as the case may be, have been disposed
of in accordance with such effective Registration Statement, (ii) such Preferred
Stock or such Private Exchange Preferred Stock, as the case may be, are sold in
compliance with Rule 144, (iii) in the case of any share of Preferred Stock, the
Exchange Offer has been consummated, (iv) such Preferred Stock or such Private
Exchange Preferred Stock, as the case may be, cease to be outstanding or (v) two
years have passed from the Issue Date.
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<PAGE>
REGISTRATION DEFAULT: See Section 4(a).
REGISTRATION STATEMENT: Any registration statement of the Company,
including, but not limited to, the Exchange Registration Statement, which covers
any of the Registrable Preferred Stock pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
RULE 144: Rule 144 promulgated under the Act, as such Rule may be amended
from time to time, or any similar rule (other than Rule 144A) or regulation
hereafter adopted by the SEC providing for offers and sales of securities made
in compliance therewith resulting in offers and sales by subsequent holders that
are not affiliates of an issuer of such securities being free of the
registration and prospectus delivery requirements of the Act.
RULE 144A: Rule 144A promulgated under the Act, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
RULE 415: Rule 415 promulgated under the Act, as such Rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
SEC.
SEC: The Securities and Exchange Commission.
SHELF NOTICE: See Section 2(c).
SHELF REGISTRATION: See Section 3(b).
SUBSEQUENT SHELF REGISTRATION: See Section 3(b).
TRANSFER AGENT: means United States Trust Company of New York.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in
which securities are sold to an underwriter for reoffering to the public.
2. EXCHANGE OFFER
(a) Unless not permitted by applicable law or SEC policy, the Company
agrees to use its best efforts to file with the SEC as soon as practicable after
the Closing, but in no event later than the Filing Date, an offer to exchange
(the "EXCHANGE OFFER") any and all of the Preferred Stock for a like aggregate
liquidation preference of Exchange Preferred Stock, except that the Exchange
Preferred Stock shall have been registered pursuant to an effective Registration
Statement under the Act. The Exchange Offer will be registered under the Act on
an appropriate form (the "EXCHANGE REGISTRATION STATEMENT") and will comply with
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all applicable tender offer rules and regulations under the Exchange Act. The
Company agrees to use its best efforts to (x) cause the Exchange Registration
Statement to become effective under the Act on or before the Effectiveness Date;
(y) keep the Exchange Offer open for at least 30 days (or longer if required by
applicable law) after the date that notice of the Exchange Offer is mailed to
Holders; and (z) consummate the Exchange Offer on or prior to the 60th day
following the date on which the Exchange Registration Statement is declared
effective. Each Holder who participates in the Exchange Offer will be required
to represent that any Exchange Preferred Stock received by it will be acquired
in the ordinary course of its business, that at the time of the consummation of
the Exchange Offer such Holder will have no arrangement or understanding with
any person to participate in the distribution of the Exchange Preferred Stock,
and that such Holder is not an affiliate of the Company within the meaning of
Rule 405 promulgated under the Act or if it is such an affiliate, that it will
comply with the registration and prospectus delivery requirements of the Act, to
the extent applicable. Upon consummation of the Exchange Offer in accordance
with this Section 2, the provisions of this Agreement shall continue to apply,
MUTATIS MUTANDIS, solely with respect to Registrable Preferred Stock that are
Private Exchange Preferred Stock and Exchange Preferred Stock held by
Participating Broker-Dealers (as defined below), and the Company shall have no
further obligation to register Registrable Preferred Stock (other than Private
Exchange Preferred Stock and Exchange Preferred Stock held by Participating
Broker-Dealers) pursuant to Section 3 of this Agreement.
(b) The Company shall include within the Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of Distribution,"
acceptable to the Initial Purchaser, which shall contain a summary statement of
the positions taken or policies made by the staff of the SEC with respect to the
potential "underwriter" status of any broker-dealer that is the beneficial owner
(as defined in Rule 13d-3 promulgated under the Exchange Act) of Exchange
Preferred Stock received by such broker-dealer in the Exchange Offer (a
"PARTICIPATING BROKER-DEALER"), whether such positions or policies have been
publicly disseminated by the staff of the SEC or such positions or policies, in
the judgment of the Initial Purchaser, represent the prevailing views of the
staff of the SEC. Such "Plan of Distribution" section shall also allow the use
of the Prospectus by all persons subject to the prospectus delivery requirements
of the Act, including all Participating Broker-Dealers, and include a statement
describing the means by which Participating Broker-Dealers may resell the
Exchange Preferred Stock.
The Company shall use its best efforts to keep the Exchange Registration
Statement effective and to amend and supplement the Prospectus contained
therein, in order to permit such Prospectus to be lawfully delivered by all
persons subject to the prospectus
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delivery requirements of the Act for such period of time as such persons must
comply with such requirements in order to resell the Exchange Preferred Stock,
PROVIDED that such period shall not exceed 180 days (or such longer period if
extended pursuant to the last paragraph of Section 5) after the date of the
consummation of the Exchange Offer (the "APPLICABLE PERIOD").
If, prior to consummation of the Exchange Offer, the Initial Purchaser
holds any Preferred Stock acquired by it and having, or which are reasonably
likely to be determined to have, the status of an unsold allotment in the
initial distribution, the Company upon the request of such Initial Purchaser
shall, simultaneously with the delivery of the Exchange Preferred Stock in the
Exchange Offer, issue and deliver to such Initial Purchaser, in exchange (the
"PRIVATE EXCHANGE") for the Preferred Stock held by such Initial Purchaser, a
like liquidation preference of preferred stock of the Company, identical in all
material respects to the Exchange Preferred Stock (the "PRIVATE EXCHANGE
PREFERRED STOCK") (and which is issued pursuant to the same certificate of
designation as the Exchange Preferred Stock). The Private Exchange Preferred
Stock shall bear the same CUSIP number as the Exchange Preferred Stock.
Dividends on the Exchange Preferred Stock and any Private Exchange Preferred
Stock will accumulate from (A) the later of (i) the last dividend payment date
on which dividends were paid on the Preferred Stock surrendered in exchange
therefor or (ii) if the Preferred Stock is surrendered for exchange on a date in
a period which includes the record date for a dividend payment date to occur on
or after the date of such exchange and as to which dividends will be paid, the
date of such dividend payment date or (B), if no dividends have been paid on the
Preferred Stock, from the Issue Date.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Registration Statement, together with an appropriate letter of
transmittal and related documents;
(ii) utilize the services of a depository for the Exchange Offer
with an address in the Borough of Manhattan, The City of New York; and
(iii) permit Holders to withdraw tendered Preferred Stock at any
time prior to the close of business, New York time, on the last business
day on which the Exchange Offer shall remain open.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all Preferred Stock tendered and not validly
withdrawn pursuant to the Exchange Offer or the Private Exchange; and
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(ii) cancel all Preferred Stock or portions thereof so accepted for
exchange by the Company, and issue to and mail to each holder of Preferred
Stock, shares of Exchange Preferred Stock or Private Exchange Preferred
Stock, as the case may be, equal in liquidation preference to the
Preferred Stock of such Holder so accepted for exchange.
The Exchange Preferred Stock and the Private Exchange Preferred Stock may
be issued under (i) the Certificate of Designation will provide that the
Exchange Preferred Stock will not be subject to the transfer restrictions set
forth in the Certificate of Designation and that the Exchange Preferred Stock,
the Private Exchange Preferred Stock and the Preferred Stock will vote and
consent together (and, in certain circumstances, together with the Company's
Series B Junior Preferred Stock (as defined in the Certificate of Designation)),
to the extent provided by the Certificate of Designation, on all matters as one
class and that neither the Exchange Preferred Stock, the Private Exchange
Preferred Stock nor the Preferred Stock will have the right to vote or consent
as a separate class on any matter.
(c) If (1) prior to the consummation of the Exchange Offer, the Company or
Holders of at least a majority in aggregate liquidation preference of the
Registrable Preferred Stock reasonably determine in good faith that (i) the
Exchange Preferred Stock would not, upon receipt, be tradable by such Holders
which are not affiliates (within the meaning of the Act) of the Company without
restriction under the Act and without restrictions under applicable state
securities laws or (ii) after conferring with counsel, the SEC is unlikely to
permit the consummation of the Exchange Offer prior to 60 days after the
Effectiveness Date, (2) subsequent to the consummation of the Private Exchange,
any holder of the Private Exchange Preferred Stock so requests, or (3) the
Exchange Offer is commenced and not consummated within 180 days of the date of
this Agreement, then the Company shall promptly deliver to the Holders and the
Transfer Agent written notice thereof (the "SHELF NOTICE") and shall file an
Initial Shelf Registration pursuant to Section 3. Following the delivery of a
Shelf Notice to the Holders of Registrable Preferred Stock (in the circumstances
contemplated by clauses (1) and (3) of the preceding sentence), the Company
shall not have any further obligation to conduct the Exchange Offer or the
Private Exchange under this Section 2.
3. SHELF REGISTRATION
If a Shelf Notice is delivered as contemplated by Section 2(c), then:
(a) INITIAL SHELF REGISTRATION. The Company shall prepare and file with
the SEC a Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the Registrable Preferred Stock (the
"INITIAL SHELF REGISTRATION"). The Company shall use its best efforts to file
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with the SEC the Initial Shelf Registration within 30 days of the delivery of
the Shelf Notice. The Initial Shelf Registration shall be on Form S-1 or another
appropriate form permitting registration of such Registrable Preferred Stock for
resale by such Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Company shall not
permit any securities other than the Registrable Preferred Stock to be included
in the Initial Shelf Registration or any Subsequent Shelf Registration (as
defined below). The Company shall use its best efforts to cause the Initial
Shelf Registration to be declared effective under the Act on or prior to the
Effectiveness Date and to keep the Initial Shelf Registration continuously
effective under the Act until two years from the Issue Date (the "EFFECTIVENESS
PERIOD"), or such shorter period ending when (i) all Registrable Preferred Stock
covered by the Initial Shelf Registration have been sold in the manner set forth
and as contemplated in the Initial Shelf Registration or (ii) a Subsequent Shelf
Registration covering all of the Registrable Preferred Stock has been declared
effective under the Act.
(b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf Registration or
any Subsequent Shelf Registration ceases to be effective for any reason at any
time during the Effectiveness Period (prior to the sale of all of the securities
registered thereunder), the Company shall use its best efforts to obtain the
prompt withdrawal of any order suspending the effectiveness thereof, and in any
event shall within 45 days of such cessation of effectiveness amend the Shelf
Registration in a manner reasonably expected to obtain the withdrawal of the
order suspending the effectiveness thereof, or file an additional "shelf"
Registration Statement pursuant to Rule 415 covering all of the Registrable
Preferred Stock (a "SUBSEQUENT SHELF REGISTRATION"). In the event that the
Company become eligible to use any form other than Form S-1 for a Subsequent
Shelf Registration, if permitted under applicable law, the Company shall be
entitled to cause a Subsequent Shelf Registration to be substituted for the
Initial Shelf Registration. If a Subsequent Shelf Registration is filed, the
Company shall use its best efforts to cause the Subsequent Shelf Registration to
be declared effective as soon as practicable after such filing and to keep such
Registration Statement continuously effective during the Effectiveness Period.
As used herein the term "SHELF REGISTRATION" means the Initial Shelf
Registration and any Subsequent Shelf Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Company shall promptly supplement and
amend the Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Act, or if requested by the Holders of a
majority in aggregate liquidation preference of the Registrable Preferred Stock
covered by such Registration Statement or by any underwriter(s) of such
Registrable Preferred Stock.
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4. ADDITIONAL DIVIDENDS
(a) The Company and the Initial Purchaser agree that the Holders of
Registrable Preferred Stock will suffer damages if the Company fails to fulfill
its obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Company agrees to pay additional dividends on the Preferred Stock
("ADDITIONAL DIVIDENDS") under the circumstances set forth below:
(i) if the Exchange Registration Statement has not been filed on or
prior to the Filing Date or the Initial Shelf Registration has not been
filed on or prior to the Filing Date;
(ii) if neither the Exchange Registration Statement nor the Initial
Shelf Registration has been declared effective on or prior to the
Effectiveness Date; and/or
(iii) if either (A), if applicable, the Company has not exchanged
the Exchange Preferred Stock for all Preferred Stock validly tendered in
accordance with the terms of the Exchange Offer on or prior to 45 days
after the date on which the Exchange Registration Statement was declared
effective or (B), if applicable, the Exchange Registration Statement
ceases to be effective at any time prior to the time that the Exchange
Offer is consummated as to all Preferred Stock validly tendered or (C) if
applicable, the Shelf Registration has been declared effective and such
Shelf Registration ceases to be effective at any time prior to the earlier
of the date on which all Registrable Preferred Stock covered by the Shelf
Registration have been sold in the manner set forth and as contemplated in
the Shelf Registration or the second anniversary of the Issue Date;
(each such event referred to in clauses (i) through (iii) above is a
"REGISTRATION DEFAULT"), the sole remedy available to holders of the Preferred
Stock will be the immediate accrual of Additional Dividends as follows: the per
annum dividend rate on the Preferred Stock will increase by 0.5% upon the
occurrence of the first Registration Default; and the per annum dividend rate
will increase by an additional 0.25% for each subsequent 90-day period during
which any Registration Default remains uncured, up to a maximum additional
dividend rate of 2.0% per annum for all Registration Defaults, PROVIDED,
HOWEVER, that (1) upon the filing of the Exchange Registration Statement or the
Initial Shelf Registration (in the case of (i) above), (2) upon the
effectiveness of the Exchange Registration Statement or a Shelf Registration (in
the case of (ii) above) or (3) upon the exchange of Exchange Preferred Stock for
all Preferred Stock tendered (in the case of (iii)(A) above), or upon the
effectiveness of the Exchange Registration Statement which had ceased to remain
effective (in the case of (iii)(B) above), or upon the
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effectiveness of the Shelf Registration which had ceased to remain effective (in
the case of (iii)(C) above), Additional Dividends on the Preferred Stock as a
result of such clause (i), (ii) or (iii) (or the relevant subclause thereof), as
the case may be, shall cease to accumulate and the dividend rate on the
Preferred Stock will revert to the dividend rate originally borne by the
Preferred Stock. Notwithstanding the foregoing, the amount of Additional
Dividends shall not increase because more than one Registration Default has
occurred and is pending.
(b) The Company shall notify the Transfer Agent within one business day
after each and every date on which an event occurs in respect of which
Additional Dividends are required to be paid (an "EVENT DATE"). Any amounts of
Additional Dividends due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section
4 will be payable in cash semi-annually on each April 1 and October 1 (to the
Holders of record on the March 15 and September 15th immediately preceding such
dates), commencing with the first such date occurring after any such Additional
Dividends commence to accumulate. The amount of Additional Dividends with
respect to each share of Preferred Stock will be determined by multiplying the
applicable Additional Dividend rate by the liquidation preference of such share
of Preferred Stock, multiplied by a fraction, the numerator of which is the
number of days such Additional Dividend rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months),
and the denominator of which is 360.
5. REGISTRATION PROCEDURES
In connection with the registration of any Registrable Preferred Stock or
Private Exchange Preferred Stock pursuant to Section 2 or 3 hereof, the Company
shall effect such registrations to permit the sale of such Registrable Preferred
Stock or Private Exchange Preferred Stock in accordance with the intended method
or methods of disposition thereof, and pursuant thereto the Company shall:
(a) Prepare and file with the SEC, prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by Section 2 or
3, and to use its best efforts to cause each such Registration Statement to
become effective and remain effective as provided herein, PROVIDED that, if (1)
such filing is pursuant to Section 3, or (2) a Prospectus contained in an
Exchange Registration Statement filed pursuant to Section 2 is required to be
delivered under the Act by any Participating Broker-Dealer who seeks to sell
Exchange Preferred Stock during the Applicable Period, before filing any
Registration Statement or Prospectus or any amendments or supplements thereto,
the Company shall, if requested by any Holders of Registrable Preferred Stock,
furnish to and afford such Holders of the Registrable Preferred Stock and each
such Participating Broker-Dealer, as the case may be, covered by such
Registration Statement, its counsel and the managing underwriters, if any, a
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reasonable opportunity to review copies of all such documents (including copies
of any documents to be incorporated by reference therein and all exhibits
thereto) proposed to be filed (at least 5 business days prior to such filing).
The Company shall not file any Registration Statement or Prospectus or any
amendments or supplements thereto in respect of which the Holders must be
afforded an opportunity to review prior to the filing of such document, if the
Holders of a majority in aggregate liquidation preference of the Registrable
Preferred Stock covered by such Registration Statement, or such Participating
Broker-Dealer, as the case may be, their counsel, or the managing
underwriter(s), if any, shall reasonably object;
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Registration Statement, as the
case may be, as may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period or the Applicable Period, as
the case may be; cause the related Prospectus to be supplemented by any
prospectus supplement required by applicable law, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) under the
Act; and comply with the provisions of the Act, the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to them with
respect to the disposition of all securities covered by such Registration
Statement as so amended or in such Prospectus as so supplemented and with
respect to the subsequent resale of any securities being sold by a Participating
Broker-Dealer covered by any such Prospectus; the Company shall be deemed not to
have used its best efforts to keep a Registration Statement effective during the
Applicable Period if it voluntarily takes any action that would result in
selling Holders of the Registrable Preferred Stock covered thereby or
Participating Broker-Dealers seeking to sell Exchange Preferred Stock not being
able to sell such Registrable Preferred Stock or such Exchange Preferred Stock
during that period unless such action is required by applicable law or unless
the Company complies with this Agreement, including without limitation, the
provisions of clause 5(c)(v) below;
(c) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a
Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Act by any Participating
Broker-Dealer who seeks to sell Exchange Preferred Stock during the Applicable
Period, notify the selling Holders of Registrable Preferred Stock, or each such
Participating Broker-Dealer, as the case may be, their counsel and the managing
underwriter(s), if any, promptly (but in any event within two Business Days),
and confirm such notice in writing, (i) when a Prospectus or any prospectus
supplement or post-effective amendment thereto has been filed, and, with respect
to a Registration Statement or any post-effective amendment thereto, when the
same has become effective (including in such notice a written statement that any
Holder may, upon request, obtain, without charge, one conformed copy of
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such Registration Statement or post-effective amendment thereto including
financial statements and schedules, documents incorporated or deemed to be
incorporated by reference and exhibits), (ii) of the issuance by the SEC of any
stop order suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of any preliminary Prospectus or the
initiation of any proceedings for that purpose, (iii) if at any time when a
Prospectus is required by the Act to be delivered in connection with sales of
the Registrable Preferred Stock the representations and warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated by Section 5(n) below cease to be true and correct, (iv) of the
receipt by any of the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of a Registration Statement
or any of the Registrable Preferred Stock or the Exchange Preferred Stock to be
sold by any Participating Broker-Dealer for offer or sale in any jurisdiction,
or the initiation or threatening of any proceeding for such purpose, (v) of the
happening of any event or any information becoming known to any Issuer that
makes any statement made in such Registration Statement or related Prospectus or
any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any changes in, or
amendments or supplements to, such Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the Prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, and (vi) any
Issuer's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate;
(d) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a
Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Act by any Participating
Broker-Dealer who seeks to sell Exchange Preferred Stock during the Applicable
Period, use its best efforts to prevent the issuance of any order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of a Prospectus or suspending the qualification (or exemption
from qualification) of any of the Registrable Preferred Stock or the Exchange
Preferred Stock to be sold by any Participating Broker-Dealer, for sale in any
jurisdiction, and, if any such order is issued, to use its best efforts to
obtain the withdrawal of any such order at the earliest possible moment;
(e) If a Shelf Registration is filed pursuant to Section 3 and if
reasonably requested by the managing underwriter(s), if
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any, or the Holders of a majority in aggregate liquidation preference of the
Registrable Preferred Stock being sold in connection with an underwritten
offering, (i) promptly incorporate in a Prospectus supplement or post-effective
amendment thereto such information as the managing underwriters), if any, or
such Holders reasonably request to be included therein, (ii) make all required
filings of such Prospectus supplement or such post-effective amendment thereto
as soon as practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment thereto and (iii), if applicable, supplement or make amendments to
such Registration Statement;
(f) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a
Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Act by any Participating
Broker-Dealer who seeks to sell Exchange Preferred Stock during the Applicable
Period, furnish to each selling Holder of Registrable Preferred Stock and to
each such Participating Broker-Dealer who so requests and to counsel and the
managing underwriter(s), if any, without charge, one conformed copy of the
Registration Statement or Registration Statements and each post-effective
amendment thereto, including financial statements and schedules, and, if
requested, all documents incorporated or deemed to be incorporated therein by
reference and all exhibits;
(g) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a
Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Act by any Participating
Broker-Dealer who seeks to sell Exchange Preferred Stock during the Applicable
Period, deliver to each selling Holder of Registrable Preferred Stock, or each
such Participating Broker-Dealer, as the case may be, their counsel, and the
managing underwriter or underwriters, if any, without charge, as many copies of
the Prospectus or Prospectuses (including each form of preliminary Prospectus)
and each amendment or supplement thereto and any documents incorporated by
reference therein as such Persons may reasonably request; and, subject to the
last paragraph of this Section 5, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders of Registrable Preferred Stock or each such Participating Broker-Dealer,
as the case may be, and the managing underwriter or underwriters or agents, if
any, and dealers (if any), in connection with the offering and sale of the
Registrable Preferred Stock covered by or the sale by Participating
Broker-Dealers of the Exchange Preferred Stock pursuant to such Prospectus and
any amendment or supplement thereto;
(h) Prior to any public offering of Registrable Preferred Stock or any
delivery of a Prospectus contained in the Exchange Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Preferred Stock during
the Applicable
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Period, to use its best efforts to register or qualify, and to cooperate with
the selling Holders of Registrable Preferred Stock or each such Participating
Broker-Dealer, as the case may be, the managing underwriter or underwriters, if
any, and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Preferred Stock or Exchange Preferred Stock for offer and sale under
the securities or Blue Sky laws of such jurisdictions within the United States
as any selling Holder, Participating Broker-Dealer, or the managing underwriter
or underwriters, if any, reasonably request in writing, PROVIDED that where
Exchange Preferred Stock held by Participating Broker-Dealers or Registrable
Preferred Stock are offered other than through an underwritten offering, the
Company agrees to cause its counsel to perform Blue Sky investigations and file
registrations and qualifications required to be filed pursuant to this Section
5(h); keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to be kept
effective and do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Exchange
Preferred Stock held by Participating Broker-Dealers or the Registrable
Preferred Stock covered by the applicable Registration Statement; PROVIDED that
no Issuer shall be required to (A) qualify generally to do business in any
jurisdiction where it is not then so qualified, (B) take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or (C) subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction;
(i) If a Shelf Registration is filed pursuant to Section 3, cooperate with
the selling Holders of Registrable Preferred Stock and the managing underwriter
or underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Preferred Stock to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Preferred Stock to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or Holders may
reasonably request and which are consistent with the terms of the Certificate of
Designation under which the Registrable Preferred Stock are issued;
(j) Use its best efforts to cause the Registrable Preferred Stock covered
by the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof or the managing underwriter or underwriters, if any, to
consummate the disposition of such Registrable Preferred Stock, except as may be
required solely as a consequence of the nature of such selling Holder's
business, in which case the Company will cooperate in all reasonable respects
with the filing of such Registration
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Statement and the granting of such approvals at such sellers' cost and expense;
(k) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a
Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Act by any Participating
Broker-Dealer who seeks to sell Exchange Preferred Stock during the Applicable
Period, upon the occurrence of any event contemplated by paragraph 5(c)(v) or
5(c)(vi) above, as promptly as reasonably practicable prepare and (subject to
Section 5(a) above) file with the SEC, at the expense of the Company, a
supplement or post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Preferred
Stock being sold thereunder or to the purchasers of the Exchange Preferred Stock
to whom such Prospectus will be delivered by a Participating Broker-Dealer
during the Applicable Period, any such Prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(l) Use its best efforts to cause the Registrable Preferred Stock covered
by a Registration Statement or the Exchange Preferred Stock sold by a
Participating Broker-Dealer during the Applicable Period, as the case may be, to
be rated with the appropriate rating agencies, if so requested by the Holders of
a majority in aggregate liquidation preference of Registrable Preferred Stock
covered by such Registration Statement or the Exchange Preferred Stock, as the
case may be, or the managing underwriter or underwriters, if any;
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Preferred Stock, (i) provide the Transfer Agent with
printed certificates for the Registrable Preferred Stock in a form eligible for
deposit with The Depository Trust Company and (ii) provide a CUSIP number for
the Registrable Preferred Stock;
(n) In connection with an underwritten offering of Registrable Preferred
Stock pursuant to a Shelf Registration, enter into an underwriting agreement as
is customary in underwritten offerings of debt securities similar to the
Preferred Stock and take all such other actions as are reasonably requested by
the managing underwriter(s), if any, in order to expedite or facilitate the
registration or the disposition of such Registrable Preferred Stock, and in such
connection, (i) make such representations and warranties to the managing
underwriter or underwriters on behalf of any underwriters, with respect to the
business of the Company and its subsidiaries and the Registration Statement,
Prospectus and documents, if any,
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incorporated or deemed to be incorporated by reference therein, in each case, as
are customarily made by issuers to underwriters in underwritten offerings of
debt securities, and confirm the same if and when requested; (ii) obtain
opinions of counsel to the Company and updates thereof in form and substance
reasonably satisfactory to the managing underwriter or underwriters, addressed
to the managing underwriter or underwriters covering the matters customarily
covered in opinions requested in underwritten offerings of debt securities and
such other matters as may be reasonably requested by underwriters; (iii) obtain
"cold comfort" letters and updates thereof in form and substance reasonably
satisfactory to the managing underwriter or underwriters from the independent
certified public accountants of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary of the Company or of
any business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to the managing underwriter or underwriters on behalf of
any underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt securities and such other matters as reasonably
requested by the managing underwriter or underwriters; and (iv) if an
underwriting agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable than those set forth in Section 7
hereof (or such other provisions and procedures acceptable to Holders of a
majority in aggregate liquidation preference of Registrable Preferred Stock
covered by such Registration Statement and the managing underwriter or
underwriters or agents) with respect to all parties to be indemnified pursuant
to said Section. The above shall be done at each closing under such underwriting
agreement, or as and to the extent required thereunder;
(o) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a
Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Act by any Participating
Broker-Dealer who seeks to sell Exchange Preferred Stock during the Applicable
Period, make available for inspection by any selling Holder of such Registrable
Preferred Stock being sold, or each such Participating Broker-Dealer, as the
case may be, the managing underwriter or underwriters participating in any such
disposition of Registrable Preferred Stock, if any, and any attorney, accountant
or other agent retained by any such selling Holder or each such Participating
Broker-Dealer, as the case may be (collectively, the "INSPECTORS"), at the
offices where normally kept, during reasonable business hours, all financial and
other records, pertinent corporate documents and properties of the Company and
its subsidiaries (collectively, the "RECORDS") as shall be reasonably necessary
to enable them to exercise any applicable due diligence responsibilities, and
cause the officers, directors and employees of the Company and its subsidiaries
to supply all information in each case reasonably
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requested by any such Inspector in connection with such Registration Statement.
Records which the Company determines, in good faith, to be confidential and any
Records which it notifies the Inspectors are confidential shall not be disclosed
by the Inspectors unless (i) the disclosure of such Records is necessary to
avoid or correct a material misstatement or material omission in such
Registration Statement and the Company fails to promptly correct such material
misstatement or omission after notice thereof, (ii) the release of such Records
is ordered pursuant to a subpoena or other order from a court of competent
jurisdiction or (iii) the information in such Records has been made generally
available to the public other than through the Inspectors' breach of any
confidentiality agreement. Each selling Holder of such Registrable Preferred
Stock and each such Participating Broker-Dealer or underwriter will be required
to agree that information obtained by it as a result of such inspections shall
be deemed confidential and shall not be used by it for any purpose other than
discharging due diligence responsibilities. In addition, such information shall
not be used as the basis for any market transactions in the securities of the
Company unless and until such is made generally available to the public. Each
selling Holder of such Registrable Preferred Stock and each such Participating
Broker-Dealer will be required to further agree that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company to undertake appropriate action to
prevent disclosure of the Records deemed confidential at its expense;
(p) Provide a transfer agent for the Registrable Preferred Stock not later
than the effective date of the Exchange Offer Registration Statement or the
first Registration Statement relating to the Registrable Preferred Stock;
(q) Comply with all applicable rules and regulations of the SEC and make
generally available to its securityholders earnings statements satisfying the
provisions of Section 11(a) of the Act and Rule 158 thereunder (or any similar
rule promulgated under the Act) no later than 45 days after the end of any
12-month period (or 90 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Preferred Stock are sold to underwriters in a firm commitment or
best efforts underwritten offering and (ii) if not sold to underwriters in such
an offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which statements
shall cover said 12-month periods;
(r) Upon consummation of an Exchange Offer or a Private Exchange, obtain
an opinion of counsel to the Company, in a form customary for underwritten
offerings of debt securities similar to the Preferred Stock, addressed to the
Transfer Agent for the benefit of all Holders of Registrable Preferred Stock
participating in the Exchange Offer or the Private Exchange, as
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the case may be, and which includes an opinion that (i) the Company has duly
authorized, executed and delivered the Exchange Preferred Stock and Private
Exchange Preferred Stock and the certificate of designation in respect thereof,
and (ii) each of the Exchange Preferred Stock or the Private Exchange Preferred
Stock, as the case may be, and related certificate of designation constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its respective terms (with customary exceptions);
(s) If an Exchange Offer or a Private Exchange is to be consummated, upon
delivery of the Registrable Preferred Stock by Holders to the Company (or to
such other Person as directed by the Company) in exchange for the Exchange
Preferred Stock or the Private Exchange Preferred Stock, as the case may be, the
Company shall mark, or cause to be marked, on such Registrable Preferred Stock
that such Registrable Preferred Stock are being canceled in exchange for the
Exchange Preferred Stock or the Private Exchange Preferred Stock, as the case
may be; and, in no event shall such Registrable Preferred Stock be marked as
paid or otherwise satisfied;
(t) Cooperate with each seller of Registrable Preferred Stock covered by
any Registration Statement and the managing underwriter(s), if any,
participating in the disposition of such Registrable Preferred Stock and its
respective counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD") and any securities
exchange, if any, on which the Registrable Preferred Stock are to be listed; and
(u) Use its best efforts to take all other steps necessary to effect the
registration of the Registrable Preferred Stock covered by a Registration
Statement contemplated hereby.
The Company may require each seller of Registrable Preferred Stock or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Company such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Preferred Stock or
Exchange Preferred Stock to be sold by such Participating Broker-Dealer, as the
case may be, as the Company may, from time to time, reasonably request. The
Company may exclude from such registration the Registrable Preferred Stock of
any seller or Participating Broker-Dealer who fails to furnish such information
within a reasonable time after receiving such request.
Each Holder of Registrable Preferred Stock and each Participating
Broker-Dealer agrees by acquisition of such Registrable Preferred Stock or
Exchange Preferred Stock to be sold by such Participating Broker-Dealer, as the
case may be, that, upon receipt of any notice from the Company of the happening
of any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or
5(c)(vi), such Holder will forthwith
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discontinue disposition of such Registrable Preferred Stock covered by such
Registration Statement or Prospectus or Exchange Preferred Stock to be sold by
such Holder or Participating Broker-Dealer, as the case may be, until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(k), or until it is advised in writing (the "ADVICE")
by the Company that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto. In the event the
Company shall give any such notice, the Applicable Period shall be extended by
the number of days during such period from and including the date of the giving
of such notice to and including the date when each seller of Exchange Preferred
Stock to be sold by such Participating Broker-Dealer, shall have received (x)
the copies of the supplemented or amended Prospectus contemplated by Section
5(k) or (y) the Advice.
6. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company whether or not
the Exchange Offer or a Shelf Registration is filed or becomes effective,
including, without limitation, (i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required to be made with
the NASD in connection with one underwritten offering and (B) fees and expenses
of compliance with state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of counsel in connection with Blue
Sky qualifications of the Registrable Preferred Stock or Exchange Preferred
Stock and determination of the eligibility of the Registrable Preferred Stock or
Exchange Preferred Stock for investment under the laws of such jurisdictions (x)
where the Holders of Registrable Preferred Stock are located, in the case of the
Exchange Preferred Stock, or (y) as provided in Section 5(h), in the case of
Registrable Preferred Stock or Exchange Preferred Stock to be sold by a
Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Preferred Stock or Exchange Preferred Stock in a form eligible for
deposit with The Depository Trust Company and of printing Prospectuses if the
printing of Prospectuses is reasonably requested by the managing underwriter or
underwriters, if any, or, in respect of Registrable Preferred Stock or Exchange
Preferred Stock to be sold by any Participating Broker-Dealer during the
Applicable Period, by the Holders of a majority in aggregate liquidation
preference of the Registrable Preferred Stock included in any Registration
Statement or of such Exchange Preferred Stock, as the case may be), (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and fees and disbursements of special counsel for the
sellers of Registrable Preferred Stock (subject to the provisions of Section
6(b)), (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(n)(iii)
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(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance), (vi) rating
agency fees, (vii) Act liability insurance, if the Company desires such
insurance, (viii) fees and expenses of the Transfer Agent (including, without
limitation, fees and disbursements of counsel), (ix) fees and expenses of all
other Persons retained by the Company, (x) internal expenses of the Company
(including, without limitation, all salaries and expenses of officers and
employees of the Company performing legal or accounting duties), (xi) the
expense of any annual audit, (xii) the fees and expenses incurred in connection
with any listing of the securities to be registered on any securities exchange
if the Company elects to list any such securities and (xiii) the expenses
relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, securities sales agreements, certificates
of designation, the Indenture, and any other documents necessary in order to
comply with this Agreement.
(b) In connection with any Shelf Registration hereunder, the Company shall
reimburse the Holders of the Registrable Preferred Stock being registered in
such registration for the reasonable fees and disbursements of not more than one
counsel (in addition to appropriate local counsel) chosen by the Holders of a
majority in aggregate liquidation preference of the Registrable Preferred Stock
to be included in such Registration Statement and other reasonable out-of-pocket
expenses of the Holders of Registrable Preferred Stock incurred in connection
with the registration of the Registrable Preferred Stock. The Company shall not
have any obligation to pay any underwriting fees, discounts or commissions
attributable to the sale of Registrable Preferred Stock.
7. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder of
Registrable Preferred Stock and each Participating Broker-Dealer selling
Exchange Preferred Stock during the Applicable Period, the officers and
directors of each such person, and each person, if any, who controls any such
person within the meaning of either Section 15 of the Act or Section 20 of the
Exchange Act (each, a "PARTICIPANT"), from and against any and all losses,
claims, damages and liabilities (including, without limitation, the reasonable
legal fees and other expenses incurred in connection with any suit, action or
proceeding or any claim asserted) caused by, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or any preliminary
Prospectus, or caused by, arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not
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misleading, except insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information relating to
any Participant or underwriter furnished to the Company in writing by such
Participant or underwriter expressly for use therein.
(b) Each Participant will be required to agree, severally and not jointly,
to indemnify and hold harmless the Company, its directors and officers and each
person who controls any such person within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company to each Participant, but only with reference to information
relating to such Participant furnished to the Company in writing by such
Participant expressly for use in any Registration Statement or Prospectus, any
amendment or supplement thereto, or any preliminary Prospectus. The liability of
any Participant under this paragraph (b) shall in no event exceed the proceeds
received by such Participant from sales of Registrable Preferred Stock giving
rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either
paragraph (a) or (b) of this Section 7, such person (the "INDEMNIFIED PERSON")
shall promptly notify the person against whom such indemnity may be sought (the
"INDEMNIFYING PERSON") in writing, and the Indemnifying Person, upon request of
the Indemnified Person, shall retain one counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses incurred by such counsel related to such
proceeding. In any such proceeding, any Indemnified Person shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless (i) the Indemnifying Person and
the Indemnified Person shall have mutually agreed in writing to the contrary,
(ii) the Indemnifying Person has failed within a reasonable time to retain
counsel reasonably satisfactory to the Indemnified Person or (iii) the named
parties in any such proceeding (including any impleaded parties) include both
the Indemnifying Person and the Indemnified Person and representations of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying Person
shall not, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate law
firm (in addition to any local counsel) for all Indemnified Persons, and that
all such fees and expenses shall be reimbursed as they are incurred. Any such
separate firm for the Participants and such control persons of Participants
shall be designated in writing by Participants who sold a majority in interest
of Registrable Preferred Stock
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sold by all such Participants and any such separate firm for the Company, its
directors, its officers and such control persons of the Company shall be
designated in writing by the Company. The Indemnifying Person shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified
Person shall have requested an Indemnifying Person to reimburse the Indemnified
Person for reasonable fees and expenses incurred by counsel as contemplated by
the third sentence of this paragraph, the Indemnifying Person agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such Indemnifying Person of the aforesaid request and (ii) such
Indemnifying Person shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement. No
Indemnifying Person shall, without the prior written consent of the Indemnified
Person, effect any settlement of any pending or threatened proceeding in respect
of which any Indemnified Person is or could have been a party, unless such
settlement includes an unconditional release of such Indemnified Person from all
liability on claims that are the subject matter of such proceeding.
If the indemnification provided for in paragraphs (a) and (b) of this
Section 7 is unavailable to an Indemnified Person in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraphs, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the Company on the
one hand and the Participants on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Company on the one hand and the Participants on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Participants and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The parties shall agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by PRO RATA allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding
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paragraph. The amount paid or payable by an Indemnified Person as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Preferred
Stock or Exchange Preferred Stock exceeds the amount of any damages that such
Participant has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 7 will
be in addition to any liability which the Indemnifying Persons may otherwise
have to the Indemnified Persons referred to above.
8. RULES 144 AND 144A
The Company covenants that it will file the reports required to be filed
by it under the Act and the Exchange Act and the rules and regulations adopted
by the SEC thereunder in a timely manner and, if at any time the Company is not
required to file such reports, it will, upon the request of any Holder of
Registrable Preferred Stock, make publicly available other information of a like
nature until no longer necessary to permit sales pursuant to Rule 144 or Rule
144A. The Company further covenants that so long as any Registrable Preferred
Stock remain outstanding and the Company is not required to make filings
pursuant to Section 13(d) or 15 of the Exchange Act to make available to any
Holder of Registrable Preferred Stock in connection with any sale thereof, the
information required by Rule 144A(d)(4) under the Act in order to permit resales
of such Registrable Preferred Stock pursuant to (a) such Rule 144A, or (b) any
similar rule or regulation hereafter adopted by the SEC, unless at such time the
Registrable Preferred Stock are fully saleable under Rule 144 or any successor
provision.
9. UNDERWRITTEN REGISTRATIONS
If any of the Registrable Preferred Stock covered by any Shelf
Registration is to be sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will manage the offering will be
selected by the Holders of a majority in aggregate liquidation preference of
such Registrable Preferred Stock included in such offering and shall be
reasonably acceptable to the Company.
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No Holder of Registrable Preferred Stock may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Preferred Stock on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
10. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by the Company of any of its
obligations under this Agreement, other than the occurrence of an event which
requires payment of Additional Dividends, each Holder of Registrable Preferred
Stock, in addition to being entitled to exercise all rights provided herein, in
the Certificate of Designation or, in the case of the Initial Purchaser, in the
Purchase Agreement or granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by them of any of the provisions of this
Agreement and hereby further agree that, in the event of any action for specific
performance in respect of such breach, they shall waive the defense that a
remedy at law would be adequate.
(b) ENFORCEMENT. The Transfer Agent shall be authorized to enforce the
provisions of this Agreement for the ratable benefit of the Holders.
(c) NO INCONSISTENT AGREEMENTS. The Company does not have, as of the date
hereof, and the Company shall not, after the date of this Agreement, enter into,
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Registrable Preferred Stock in this
Agreement or otherwise conflicts with the provisions hereof. The Company has not
entered and will not enter into any agreement with respect to any of its
securities which will grant to any Person piggyback rights with respect to a
Registration Statement.
(d) ADJUSTMENTS AFFECTING REGISTRABLE PREFERRED STOCK. The Company shall
not, directly or indirectly, take any action with respect to the Registrable
Preferred Stock as a class that would adversely affect the ability of the
Holders of Registrable Preferred Stock to include such Registrable Preferred
Stock in a registration undertaken pursuant to this Agreement.
(e) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the Company has obtained the written consent of Holders of at
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least a majority of the then outstanding aggregate liquidation preference of
Registrable Preferred Stock. Notwithstanding the foregoing, a waiver or consent
to depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders of Registrable Preferred Stock whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of Registrable Preferred Stock may be given by Holders of at least a
majority in aggregate liquidation preference of the Registrable Preferred Stock
being sold by such Holders pursuant to such Registration Statement, PROVIDED
that the provisions of this sentence may not be amended, modified or
supplemented except in accordance with the provisions of the immediately
preceding sentence.
(f) NOTICES. All notices and other communications (including without
limitation any notices or other communications to the Transfer Agent) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Preferred Stock, at the most
current address given by the Transfer Agent to the Company; and
(ii) if to the Company:
Morris Material Handling, Inc.
315 W. Forest Hill Avenue
Oak Creek, Wisconsin 53154
Attention: Martin L. Ditkof, General Counsel
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, LLP
1333 New Hampshire Avenue, N.W., Suite 400
Washington, D.C. 20036
Attention: Russell Parks, Esq.
All such notices and communications shall be deemed to have been duly
given: (i) when delivered by hand, if personally delivered; (ii) five business
days after being deposited in the mail, postage prepaid, if mailed; (iii) one
business day after being timely delivered to a next-day air courier; and (iv)
when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the transfer agent of
the Preferred Stock.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the
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need for an express assignment, subsequent Holders of Registrable Preferred
Stock.
(h) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction.
(l) ENTIRE AGREEMENT. This Agreement, together with the Purchase Agreement
and the Certificate of Designation and the Indenture, is intended by the parties
as a final expression of their agreement, and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein.
(m) PREFERRED STOCK HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Preferred Stock is required hereunder, Registrable Preferred Stock held by the
Company or its affiliates (as such term is defined in Rule 405 under the Act)
shall not be deemed outstanding for such purpose and shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
(n) REGISTRATION OF THE DEBENTURES. In the event that the Company effects
an exchange of the Preferred Stock for the Debentures prior to the consummation
of the Exchange Offer in accordance with Section 2 hereof, the provisions of
this agreement shall continue to apply, MUTATIS MUTANDIS, with respect
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to the Debentures, including any Debentures held by Participating
Broker-Dealers, provided, however, that references to the Transfer Agent shall
apply to the trustee under the Indenture, and provided, further, that in
connection with any such registration, the Company shall cause the Indenture to
be qualified under the Trust Indenture Act of 1939, as amended (the "TIA") not
later than the effective date of the registration statement relating to the
Debentures; and in connection therewith, cooperate with the trustee under such
Indenture and the holders of the registrable Debentures, to effect such changes
to such Indenture as may be required for such Indenture to be qualified in
accordance with the terms of the TIA; and execute, and use its best efforts to
cause the trustee to execute, all documents as may be required to effect such
changes, and all other forms and documents required to be filed with the SEC to
enable such Indenture to be qualified in a timely manner.
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IN WITNESS WHEREOF, the parties have executed this Preferred Stock
Registration Rights Agreement as of the date first written above.
MMH HOLDINGS, INC.
By: /s/ David D. Smith
---------------------------------
Name: David D. Smith
Title: Vice President
CIBC OPPENHEIMER CORP.
By: /s/ Walter McLallen
---------------------------------
Name: Walter McLallen
Title: Managing Director
Execution Copy
COMMON STOCK REGISTRATION RIGHTS
AND STOCKHOLDERS AGREEMENT
Dated as of March 30, 1998
among
MMH HOLDINGS, INC.
and
CHARTWELL, L.P.
and
CIBC OPPENHEIMER CORP.
(as Initial Purchaser)
THIS COMMON STOCK REGISTRATION RIGHTS AND STOCKHOLDERS AGREEMENT
(this "Agreement") is made and entered into as of March 23, 1998 among MMH
Holdings, Inc. a Delaware corporation (the "Issuer"), Chartwell, L.P., a
Delaware limited partnership ("Chartwell") and CIBC Oppenheimer Corp., as
Initial Purchaser (the "Initial Purchaser"). This Agreement is made pursuant to
the Securities Purchase Agreement, dated as of March 23, 1998, among the Issuer
and the Initial Purchaser (the "Purchase Agreement"), relating, among other
things, to the sale by the Issuer to the Initial Purchaser of an aggregate of
57,710 Units, each Unit consisting of one share of the Issuer's 12% Series A
Senior Exchangeable Preferred Stock (the "Senior Preferred Stock") and 0.012476
shares of non-voting Common Stock, par value $0.01 per share ("Unit Common
Stock"), of the Issuer. In order to induce the Initial Purchaser to enter into
the Purchase Agreement (a) the Issuer has agreed to provide to the Initial
Purchaser and the Holders (as defined herein), among other things, the
registration rights for the Unit Common Stock (it being understood that such
rights will apply only to shares of Voting Common Stock (as defined) issued in
exchange for shares of Unit Common Stock, as provided in the definition of
"Registrable Securities," but subject to Section 4(iv) hereof) set forth in this
Agreement and (b) Chartwell (on behalf of itself and its Affiliates) has agreed
to provide the Holders, among other things, the tag-along rights and drag-along
rights for the Unit Common Stock set forth herein. In consideration of the
foregoing, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"Act" shall mean the Securities Act of 1933, as amended from time to
time.
"Affiliate" of any specified Person means any other Person
(including, without limitation, such Person's issue, siblings and spouse) that
directly or indirectly through one or
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more intermediaries controls, or is controlled by, or is under common control
with, such specified Person. For the purposes of this definition, "control"
(including, with correlative meanings, the term "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, means 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. For purposes of this
Agreement, the term "Affiliate" as it relates to Chartwell or any of its
Affiliates shall not include CIBC Oppenheimer Corp., Indosuez Capital, Niles or
the holders of interests in Niles other than Chartwell.
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in the City of New
York are authorized or obligated by law to close.
"Capital Stock" shall mean with respect to any Person any and all
shares or other equivalents (however designated and whether or not voting) of
capital stock, partnership interests or any other participation, right or other
interest in the nature of an equity interest in such Person or any option,
warrant or other security convertible into any of the foregoing.
"Certificate of Designation" means the certificate of designation
governing the Senior Preferred Stock as in effect on the date hereof.
"Chartwell" shall have the meaning set forth in the preamble.
"Chartwell Fund" shall have the meaning set forth in Section
3.2(a)(i).
"Chartwell Percentage" shall have the meaning set forth in Section
3.2(a)(i).
"Closing Date" shall mean the Time of Purchase as defined in the
Purchase Agreement.
"Common Stock" shall mean, collectively, the Unit Common Stock and
Voting Common Stock.
"Commission" shall mean the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Act.
"Demand Registration" shall have the meaning set forth in Section
2.1.
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"Depository" shall mean, with respect to Unit Shares represented by
one or more Global Certificates, The Depository Trust Company or another Person
designated as Depository by the Issuer, which must be a clearing agency
registered under the Exchange Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Exchange Debentures" shall mean the Issuer's 12% Senior
Subordinated Debentures issuable in exchange for the Senior Preferred Stock in
accordance with the terms of the Certificate of Designation.
"Exchange Indenture" means the form of Indenture relating to the
Exchange Debentures as in effect on the Issue Date, a copy of which is on file
with the Transfer Agent.
"Fair Market Value" for a share of Unit Common Stock or a
Registrable Security shall mean the value of such share of Unit Common Stock or
Registrable Security as determined (without any discount for (a) lack of
liquidity, (b) the amount of Unit Common Stock proposed to be sold, (c) the fact
that the shares of Unit Common Stock held by any Holder of such security may
represent a minority interest in a private company or (d) the fact that the Unit
Common Stock is non-voting common stock) by a nationally recognized investment
banking firm mutually acceptable to the Issuer and the Holders of a majority of
the Registrable Securities proposed to be sold pursuant to Section 2.1(a).
"Frasier" shall mean Frasier L.L.C.
"Frasier LLC Agreement" shall mean the limited liability company
operating agreement of Frasier.
"Global Certificate" shall mean a certificate representing all or
part of the Unit Shares issued to the Depository and bearing the legend set
forth in Exhibit A hereto.
"Holder" shall mean a holder of Unit Shares or Registrable
Securities; provided, however, that for all purposes of voting or consent by
holders of Unit Shares, including, without limitation, pursuant to Section
2.1(a) and Section 6(c), neither Chartwell, its Affiliates, nor the Issuer shall
be deemed to be a holder of Unit Shares.
"Holder Representatives" shall have the meaning set forth in Section
3.2(a).
"Included Shares" shall have the meaning set forth in Section 2.1.
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"indemnified party" shall have the meaning set forth in Section
5(c).
"indemnifying party" shall have the meaning set forth in Section
5(c).
"Issuer" shall have the meaning set forth in the preamble and shall
also include the Issuer's successors.
"Initial Purchaser" shall have the meaning set forth in the
preamble.
"MHE Investments" shall mean MHE Investments, Inc., a Delaware
corporation.
"Niles" shall mean Niles L.L.C.
"Niles LLC Agreement" shall mean the limited liability company
operating agreement of Niles.
"Person" shall mean an individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
"Physical Certificate" shall mean a certificate representing Unit
Shares in definitive registered form, other than a Global Certificate.
"Piggy-Back Registration" shall have the meaning set forth in
Section 2.2.
"Pro Rata Share" means the total dollar value of the amount of
consideration to be received in the Transfer multiplied by a fraction (a) the
numerator of which is the total dollar value of the securities or interests
owned by a Person which have tag along rights with a Transfer of securities or
interests by Chartwell L.P. or its Affiliates and (b) the denominator of which
is the sum of the dollar value of all securities or interests of (x) all Persons
to the extent they exercise tag along rights with such Transfer of securities or
interests by Chartwell L.P. or its Affiliates hereunder or under any other
agreement or arrangement and (y) all securities and interests of Chartwell L.P.
and its Affiliates which are subject to tag along rights hereunder or under any
other agreement or arrangement.
"Purchase Agreement" shall have the meaning set forth in the
preamble.
"Purchase Election" shall have the meaning set forth in Section
2.1(b).
"Purchase Election Date" shall have the meaning set forth in Section
2.1(b).
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"Purchase Offer" shall have the meaning set forth in Section 2.1(b).
"Purchase Offer Payment Date" shall have the meaning set forth in
Section 2.1(b)(i).
"Qualified Public Offering" shall have the meaning set forth in
Section 3.2(e).
"Registrable Securities" shall mean the Voting Shares issued to
Holders of Unit Shares in exchange for Unit Shares held by them, which exchange
must occur on or prior to the consummation of any offering pursuant to a
Registration Statement covering Voting Shares into which such Unit Shares are
exchangeable, subject, however, to the provisions of Section 4(iv) hereof, and
provided, however, that for purposes of computing "Requisite Shares" and for all
voting and consenting rights of Registrable Securities, Unit Shares and Voting
Shares of any of the Holders issued or issuable in exchange therefor shall count
as one class of securities and shall vote and consent together as one class of
securities. As to any particular Registrable Securities, such securities shall
cease to be Registrable Securities when (i) a Registration Statement with
respect to such securities shall have been declared effective under the Act and
such securities shall have been disposed of pursuant to such Registration
Statement, (ii) such securities have been sold to the public pursuant to Rule
144 (or any similar provision then in force, but not Rule 144A) under the Act,
(iii) such securities shall have been otherwise Transferred by such Holder and
new certificates for such securities not bearing a legend restricting further
Transfer shall have been delivered by the Issuer or its Transfer Agent and
subsequent disposition of such securities shall not require registration or
qualification under the Act or any similar state law then in force or (iv) such
securities shall have ceased to be outstanding.
"Registration Expenses" shall mean all expenses incident to the
Issuer's performance of or compliance with this Agreement, including, without
limitation, all Commission and stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees and expenses, fees and
expenses of compliance with securities or blue sky laws (including, without
limitation, reasonable fees and disbursements of counsel for the underwriters in
connection with blue sky qualifications of the Registrable Securities), rating
agency fees, printing expenses, messenger, telephone and delivery expenses, fees
and disbursements of counsel for the Issuer and all independent certified public
accountants, the fees and disbursements of underwriters customarily paid by
issuers or sellers of securities (but not including any underwriting discounts
or commissions or Transfer taxes, if any, attributable to the sale of
Registrable Securities by Holders of such Registrable Securities) and other
reasonable out-of-pocket expenses of Holders and all reasonable
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fees and disbursements of one counsel retained by the Holders of a majority of
Registrable Securities intended to be registered in the applicable offering.
"Registration Statement" shall mean any registration statement of
the Issuer which covers any of the Voting Shares into which the Unit Shares are
exchangeable pursuant to the provisions of this Agreement and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Requisite Shares" shall mean a number of Registrable Securities
equal to not less than 25% of the outstanding Registrable Securities held in the
aggregate by all Holders.
"Restricted Security" shall have the meaning set forth in Rule
144(a)(3) under the Act.
"Rule 144" shall mean Rule 144 under the Act, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the Commission providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
"Rule 144A" shall mean Rule 144A under the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission.
"Selling Holder" shall mean a Holder who is selling Unit Shares in
accordance with the provisions of Section 2.1 hereof.
"Senior Preferred Stock" shall have the meaning set forth in the
preamble hereof
"Shares" means, collectively, the Unit Shares and the Voting Shares.
"Transfer" shall mean the sale, assignment, gift, transfer,
exchange, conversion, devising, bequeathing, pledge or other disposition of any
security.
"Transfer Agent" means any transfer agent or registrar appointed by
the Issuer for the Unit Common Stock.
"Triggering Event" shall have the meaning set forth in Section 2.1
hereof.
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"Unit Common Stock" shall have the meaning set forth in the preamble
hereof.
"Unit Shares" means the shares of Unit Common Stock issued to the
Initial Purchaser on the date of this Agreement pursuant to the Purchase
Agreement together with any other shares issued from time to time in respect
thereof.
"Voting Common Stock" shall mean the Voting Common Stock, par value
$.01 per share, of the Issuer.
"Voting Shares" means the shares of Voting Common Stock issued to or
held by Chartwell on the date of this Agreement, together with any other shares
issued from time to time in respect thereof, including exchanged Unit Shares.
"Withdrawal Election" shall have the meaning set forth in Section
2.2.
2. Registration Rights.
2.1 Demand Registration.
(a) Request for Registration. At any time and on or after
April 1, 2003 (the "Triggering Event"), Holders owning, individually or in the
aggregate, at least the Requisite Shares may make a written request for
registration under the Securities Act of their Registrable Securities (a "Demand
Registration"). Any such request will specify the number of Registrable
Securities proposed to be sold and will also specify the intended method of
disposition thereof. Subject to Section 2.1(b), upon a demand, the Issuer will
prepare and file, within 40 days, and cause to be effective, within 120 days, of
such demand, a Registration Statement in respect of all the Registrable
Securities; provided, however, that if at the time of any such request, the
Issuer is engaged or has fixed plans to engage within 30 days of the time of the
request in an acquisition, financing or other material transaction which, in the
good faith determination of the Board of Directors of the Issuer, would be
adversely affected by the requested Demand Registration to the material
detriment of the Issuer, then, in such event, the Issuer may, at its option,
direct that such request be delayed for a period not in excess of 60 days from
the date of the determination by the Board of Directors. The Issuer shall give
written notice of such registration request within 10 days after the receipt
thereof to all other Holders. Within 20 days after receipt of such notice by any
Holder, any such Holder may request in writing that Registrable Securities be
included in such Registration Statement and the Issuer shall include in the
Registration Statement the Registrable Securities of any such Selling Holder
requested to be so included (the "Included
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Shares"). Each such request by such other Selling Holders shall specify the
number of Included Shares proposed to be sold. Subject to Section 2.1(c), the
Issuer shall be required to register Registrable Securities pursuant to this
Section 2.1 on a maximum of one occasion.
(b) Repurchase Election.
(i) Notwithstanding the foregoing provisions of Section
2.1(a), the Issuer shall not be obligated to effect a Demand Registration if the
Issuer elects to make, or cause its designee to make, an offer to repurchase (a
"Purchase Offer") all of the Unit Shares and Registrable Securities (a "Purchase
Election") by mailing notice of such Purchase Offer to all Holders of Unit
Shares and Registrable Securities on a date (the "Purchase Election Date") not
more than 20 days after the receipt of any request for a Demand Registration
made pursuant to Section 2.1(a) and indicating in such Purchase Offer that the
Purchase Election will be consummated on a Business Day (the "Purchase Offer
Payment Date") not more than 60 days after the Purchase Election Date at a price
per share equal to the Fair Market Value per Unit Share or Registrable Security.
(ii) Notice of a Purchase Offer shall be mailed by the
Issuer or its designee (or caused to be mailed by the Issuer or such designee),
not less than 30 days nor more than 40 days before the Purchase Offer Payment
Date to each Holder of Registrable Securities at its last registered address.
The Purchase Offer shall remain open from the time of mailing for at least 20
Business Days and until 5:00 p.m., New York City time, on the Business Day next
preceding the Purchase Offer Payment Date. The notice, which shall govern the
terms of the Purchase Offer, shall include such disclosures as are required by
law and shall state:
(1) that the Purchase Offer is being made pursuant
to this Section 2.1(b) and that all Unit Shares and Registrable
Securities tendered for repurchase will be accepted for payment;
(2) the purchase price per Unit Share and
Registrable Security, the name and address of the investment bank
that determined the Fair Market Value of the Unit Shares and
Registrable Securities and the Purchase Offer Payment Date;
(3) that any Unit Shares and Registrable
Securities accepted for payment pursuant to the Purchase Offer shall
cease to be outstanding after the Purchase Offer Payment Date unless
the Issuer or its designee defaults in making payment therefor of
the respective purchase price;
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(4) that Holders electing to have Registrable
Securities purchased pursuant to a Purchase Offer will be required
to surrender such Unit Shares or Registrable Securities, together
with a completed letter of transmittal, to the Issuer or its
designee (or the Issuer's or its designee's agent as designated in
such notice) at the address specified in the notice no later than
5:00 p.m. New York City time on the Business Day prior to the
Purchase Offer Payment Date;
(5) that Holders will be entitled to withdraw
their election if the Issuer or its designee (or such designated
agent) receives, not later than 5:00 p.m. New York City time on the
Business Day prior to the Purchase Offer Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of
the Holder, the number of Unit Shares or Registrable Securities
delivered for purchase and a statement that such Holder is
withdrawing its election to have such Registrable Securities
purchased and promptly thereafter the Issuer or its designee (or
such designated agent) shall redeliver the withdrawn Registrable
Securities to the Holder;
(6) that a Holder electing not to tender such
Holder's Unit Shares or Registrable Securities for purchase pursuant
to such Purchase Offer by 5:00 p.m. New York City time on the
Business Day prior to the Purchase Offer Payment Date will have no
continuing right to require the Issuer or its designee to repurchase
such Holder's Unit Shares or Registrable Securities or to effect a
Demand Registration; and
(7) that Holders whose Unit Shares or Registrable
Securities are tendered for purchase in part only will be issued new
certificates representing the number of the unpurchased Unit Shares
or Registrable Securities surrendered.
On the Purchase Offer Payment Date, the Issuer or its designee shall
(i) accept for payment Unit Shares or Registrable Securities or portions thereof
tendered pursuant to the Purchase Offer, (ii) promptly deliver to Holders of
Unit Shares or Registrable Securities so accepted payment of the purchase price
therefor and (iii) issue and mail or deliver to such Holders new certificates
representing a number of Unit Shares or Registrable Securities equal to the
unpurchased portion of the Unit Shares or Registrable Securities surrendered.
Upon payment for all Unit Shares or Registrable Securities tendered pursuant to
a Purchase Offer or, to the extent Unit Shares or Registrable Securities are not
tendered as provided in the immediately preceding paragraph, upon compliance by
the Issuer or its designee with their obligations under this Section 2.1(b)
other than payment, the
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Issuer or its designee shall be deemed to have effected the Demand Registration.
The Issuer or its designee shall comply, to the extent applicable,
with the requirements of Sections 13 and 14 of the Exchange Act, and any other
securities laws or regulations in connection with the repurchase of Registrable
Securities pursuant to a Purchase Offer. To the extent that the provisions of
any securities laws or regulations conflict with the provisions of this Section
2.1(b), the Issuer or its designee shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
under this Section 2.1(b) by virtue thereof.
(c) Effective Registration. Except as provided in Section
2.1(b), a registration will not be deemed to have been effective as a Demand
Registration unless it has been declared effective by the Commission and the
Issuer has complied in all material respects with its obligations under this
Agreement with respect thereto; provided that if, after it has become effective,
the offering of the Registrable Securities pursuant to such registration is or
becomes the subject of any stop order, injunction or other order or requirement
of the Commission or any other governmental or administrative agency, or if any
court prevents or otherwise limits the sale of Registrable Securities pursuant
to the registration (for any reason other than the act or omissions of the
Selling Holders), such registration will be deemed not to have been effected. If
(i) a registration requested pursuant to this Section 2.1 is deemed not to have
been effected or (ii) the registration requested pursuant to this Section 2.1
does not remain effective until the earlier of (i) 90 days beyond the effective
date thereof and (ii) the consummation of the distribution by the Selling
Holders of the Included Shares, then the Issuer shall continue to be obligated
to effect an additional registration pursuant to this Section 2.1. The Selling
Holders of Registrable Securities shall be permitted to withdraw all or any part
of the Included Shares from a Demand Registration at any time prior to the
effective date of such Demand Registration. If at any time a Registration
Statement is filed pursuant to a Demand Registration, and subsequently a
sufficient number of Included Shares are withdrawn from the Demand Registration
so that such Registration Statement does not cover at least 25% of the
Registrable Securities held by all Holders, the Selling Holders who have not
withdrawn their Included Shares shall have the opportunity to include an
additional number of Registrable Securities in the Demand Registration so that
such Registration Statement covers at least 25% of the Registrable Securities
held by all Holders. If an additional number of Registrable Securities is not so
included, the Issuer may withdraw the Registration Statement; however, the
Issuer will not be required to withdraw such Registration Statement, and if such
Registration Statement is not withdrawn, the Issuer will not be obligated to
effect an additional Demand Registration. Such withdrawn Registration Statement
will not
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count as a Demand Registration and the Issuer shall continue to be obligated to
effect a registration pursuant to this Section 2.1.
(d) Priority in Demand Registrations Pursuant to Section 2.1.
If a Demand Registration pursuant to this Section 2.1 involves an underwritten
offering and the managing underwriter or underwriters have notified, in writing,
the Issuer and the Selling Holders of the Registrable Securities requesting such
Demand Registration that it is their opinion that the total number of shares
which the Selling Holders and any other Persons (including the Issuer) desiring
to participate in such registration intend to include in such offering
(including securities of the Issuer which are not Registrable Securities) is
such as to materially and adversely affect the success of such offering,
including the price at which such securities can be sold, then the Issuer will
exclude from such registration (i) shares requested to be sold by Persons (other
than the Issuer and the Selling Holders) to the minimum extent necessary to
avoid such effect, and (ii) to the extent additional shares must be excluded in
order to avoid such effect, shares which the Issuer intended to include in such
offering to the minimum extent necessary to avoid such effect. After giving
effect to the immediately preceding sentence, in the event that, in the written
opinion of such managing underwriter or underwriters (delivered as provided
above), the number of Registrable Securities requested to be included in such
registration is still such as to materially and adversely affect the success of
such offering, including the price at which such securities can be sold, the
number of such Registrable Securities to be included in such registration shall
be allocated pro rata among all requesting Holders on the basis of the relative
number of shares of Registrable Securities then held by each such Holder
(provided that any shares thereby allocated to any such Holder that exceed such
Holder's request shall be reallocated among the remaining requesting Holders in
like manner).
(e) Selection of Underwriter. If the Selling Holders so elect,
the offering of such Registrable Securities pursuant to such Demand Registration
shall be in the form of an underwritten offering. The Issuer shall select one or
more nationally recognized firms of investment bankers (who shall be reasonably
acceptable to the Selling Holders holding a majority of the Registrable
Securities proposed to be included in the offering), to act as the managing
underwriter or underwriters in connection with such offering and shall select
any additional investment bankers and managers to be used in connection with the
offering in their sole discretion.
(f) Expenses. The Issuer will pay all Registration Expenses in
connection with the registration requested pursuant to Section 2.1(a). Each
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's
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Registrable Securities pursuant to a registration statement requested pursuant
to this Section 2.1.
2.2 Piggy-Back Registration. If at any time the Issuer proposes to
file a Registration Statement under the Act with respect to an offering by the
Issuer for its own account or for the account of any of its respective
securityholders of any class of its Common Stock (other than (i) a Registration
Statement on Form S-4 or S-8 (or any substitute form that may be adopted by the
Commission), (ii) a Registration Statement filed in connection with an offer or
offering of securities solely to the Issuer's existing securityholders including
the Holders of Unit Shares or Registrable Securities, or (iii) a Demand
Registration, then the Issuer shall give written notice of such proposed filing
to the Holders of Unit Shares or Registrable Securities as soon as practicable
(but in no event less than 20 Business Days before the anticipated filing date),
and such notice shall offer such Holders the opportunity to register such number
of shares of Registrable Securities as each such Holder may request (which
request shall specify the number of Registrable Securities intended to be
disposed of by such Selling Holder, a "Piggy-Back Registration"). The Issuer
shall use its reasonable best efforts to cause the managing underwriter or
underwriters of such proposed underwritten offering to permit the Registrable
Securities requested to be included in a Piggy-Back Registration to be included
on the same terms and conditions as any similar securities of the Issuer or any
other securityholder included therein and to permit the sale or other
disposition of such Registrable Securities in accordance with the intended
method of distribution thereof. Any Selling Holder shall have the right to
withdraw its request for inclusion of its Registrable Securities in any
Registration Statement pursuant to this Section 2.2 by giving written notice to
the Issuer of its request to withdraw; provided, however, that such request to
withdraw (a "Withdrawal Election") shall be irrevocable, and thereafter, a
Selling Shareholder shall no longer have any right to include Registrable
Securities in the Registration Statement as to which such Withdrawal Election
was made. The Issuer may withdraw a Piggy-Back Registration at any time prior to
the time it becomes effective; provided that the Issuer shall give prompt notice
thereof to participating Selling Holders. The Issuer will pay all Registration
Expenses in connection with each registration of Registrable Securities
requested pursuant to this Section 2.2, and each Holder shall pay all
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Holder's Registrable Securities pursuant to a
Registration Statement effected pursuant to this Section 2.2.
No registration effected under this Section 2.2, and no failure to
effect a registration under this Section 2.2, shall relieve the Issuer of its
obligation to effect a registration upon the request of Holders pursuant to
Section 2.1, and no failure to effect a registration under this Section 2.2 and
to
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complete the sale of shares of Registrable Securities in connection therewith
shall relieve the Issuer of any other obligation under this Agreement.
2.3 Reduction of Offering.
(a) If the managing underwriter or underwriters of any
underwritten offering described in Section 2.2 have informed, in writing, the
Selling Holders of the Registrable Securities requesting inclusion in such
offering that it is their opinion that the total number of shares which the
Issuer, the Selling Holders and any other Persons desiring to participate in
such registration intend to include in such offering is such as to materially
and adversely affect the success of such offering, including the price at which
such securities can be sold, then the number of shares to be offered for the
account of the Selling Holders and all other Persons requesting inclusion in
such offering pursuant to "piggy-back" registration rights (other than (i) any
Person initiating such offering pursuant to "demand" registration rights and
(ii) the Issuer) participating in such registration shall be reduced or limited
pro rata among the Selling Holders and such other Persons in proportion to the
respective number of shares requested to be registered by each such Selling
Holder and other Person (provided that any shares thereby allocated to any such
Selling Holder or other Person that exceed such Selling Holder's or other
Person's request shall be reallocated among the remaining requesting Selling
Holder's or Person's in like manner) to the minimum extent necessary to reduce
the total number of shares requested to be included in such offering to the
number of shares, if any, recommended by such managing underwriters.
(b) If, as a result of the proration provisions of this
Section 2.3, any Selling Holder shall not be entitled to include all Registrable
Securities in a Piggy-Back Registration that such Selling Holder has requested
to be included, such Selling Holder may make a Withdrawal Election; provided,
however, that a Withdrawal Election shall be irrevocable and, after making a
Withdrawal Election, a Selling Holder shall no longer have any right to include
Registrable Securities in the registration as to which such Withdrawal Election
was made.
3. Transfers of Common Stock.
3.1 Generally. All shares of Unit Common Stock at any time and from
time to time outstanding that may be exchanged for Registrable Securities, and
all Registrable Securities held by the Holders shall benefit from the rights set
forth in this Section 3 and be held subject to the conditions and restrictions
pertaining to drag-along rights set forth in Section 3.2. All shares of Voting
Stock now or hereafter held by Chartwell or its Affiliates shall be held subject
to the conditions and restrictions set forth in this Section 3. Each certificate
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representing Shares shall contain conspicuous notation on such certificate
indicating that the Transfer of such Shares is subject to the terms and
restrictions of this Agreement, and each Holder and Chartwell consents to the
placement of such legend on the certificate or certificates representing the
Shares owned by such Holder or Chartwell or its Affiliates.
3.2 Tag-Along and Drag-Along Rights.
(a)(i) In the event that Chartwell (or any of its Affiliates)
desires to Transfer (in one or a series of related transactions), after the date
hereof, a portion of the Voting Common Stock which is indirectly economically
beneficially owned by Chartwell or its Affiliates (or any portion of its
interest in any Person in respect thereof) which, when added to the portion
thereof which has been previously Transferred by Chartwell or its Affiliates
(other than to entities, all of the equity interests of which are directly or
indirectly owned by the ultimate parent of Chartwell, L.P. or to another similar
investment fund, the principal partners or managers of which are Todd R. Berman
or Michael S. Shein, hereinafter, a "Chartwell Fund"), constitutes more than 15%
of the Voting Common Stock owned by Chartwell or its Affiliates, as of the date
hereof, to an unaffiliated third party (for purposes hereof, being a Person as
to which Chartwell and its Affiliates own, directly or indirectly, less than 10%
of the capital stock, membership interests or partnership interests or is not
otherwise Affiliated with Chartwell), it shall provide not less than 30 days
prior written notice to each Holder, setting forth therein in detail the terms
and conditions of such sale, and each Holder shall, upon not less than 10 days
notice after receipt of the Chartwell notice, be entitled to sell its same Pro
Rata Share of Unit Shares or Registrable Securities (treated for purposes of
such calculation as if the same were Voting Shares) to the buyer thereof on the
same terms and conditions as the Chartwell sale; provided, that each Holder
shall be required only to represent and warrant on a several, but not joint
basis, title to their respective Unit Shares or Registrable Securities, due
authorization and no conflicts, legal compliance and similar representations as
to such Holder and its status ("Holder Representations"), and shall not be
required to enter into any covenants or agreements other than (i) indemnities as
to such Holder's Representations and other indemnities as to which the
purchaser's recourse is solely to a pro rata escrowed hold back of the purchase
price determined by Chartwell; (ii) as to Persons within such Holder who have
access to confidential information concerning the Issuer or its Affiliates
received from the Issuer or its subsidiaries or Chartwell and/or its Affiliates
or their respective subsidiaries, to maintain the confidentiality thereof on
terms deemed reasonable to Chartwell in light of the nature of the transaction;
and (iii) the use of commercially reasonable efforts to take such actions as are
deemed necessary or appropriate by Chartwell to obtain regulatory consents or
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approvals required to consummate the transaction. For purposes of this Section
3.2(a) (x) Chartwell and its Affiliates shall be deemed to own (A) shares of
Voting Common Stock held directly by Chartwell and its Affiliates (other than
MHE Investments and Niles), (B) shares of Voting Common Stock held by MHE
Investments equal to the product of the number of such shares held thereby
multiplied by the aggregate percentage (the "Chartwell Percentage") equity
interest owned directly or indirectly by Chartwell and its Affiliates, (y)(A)
any Transfer of any interest (direct or indirect) in a Person that owns,
directly or indirectly, Voting Common Stock by Chartwell (or any of its
Affiliates) shall be deemed a Transfer of a portion of the Voting Common Stock
owned by such Person (based on the proportion which the equity interest in such
Person so transferred bears to the equity interest in such Person outstanding
immediately prior to such Transfer) and (B) the purchase price of such Voting
Common Stock (or portion thereof) shall be determined, based on the price being
paid for such indirect interest, without reduction for any liability of such
Person and (z) any Transfer of any Voting Common Stock by MHE Investments shall
be deemed to be a Transfer of such shares (multiplied by the Chartwell
Percentage) of Voting Common Stock by Chartwell and its Affiliates.
(ii) In the event that Chartwell (or any of its
Affiliates) desires to Transfer (in one or a series of related transactions),
after the date hereof, a portion of its shares of Voting Common Stock which,
when added to the portion thereof which has been previously Transferred (other
than to the entities, all the equity interests of which are directly or
indirectly owned by the ultimate parent of Chartwell or to a Chartwell Fund) by
Chartwell or its Affiliates, constitutes more than 15% of the Voting Common
Stock owned by Chartwell or its Affiliates as of the date hereof to a party
other than an unaffiliated third party (as defined above), it shall provide not
less than 30 days prior written notice to each Holder setting forth therein in
detail the terms and conditions of such sale, and each such Holder shall, upon
not less than 10 days notice after receipt of the Chartwell notice, be entitled
to sell to the buyer thereof, on the same terms and conditions as the Chartwell
sale, its Pro Rata Share multiplied by the percentage of the common equity
interests of the buyer prior to such sale not owned, directly or indirectly, by
Chartwell or a Chartwell Fund.
(iii) In the event that the proposed buyer does not
purchase the required Unit Shares or Registrable Securities from the Holders on
the same terms and conditions as purchased from Chartwell, as required under
this Section 3.2(a), then Chartwell shall, or shall cause its Affiliates making
such Transfer to, purchase on such terms and conditions such Unit Shares or
Registrable Securities, if the Transfer occurs.
(iv) Section 3.2(a) shall not apply to the Transfer by
the direct or indirect owners of Chartwell, L.P.
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of any interest therein to family members, estates, trusts, partnerships or
other entities or Persons established for the benefit of family members of such
owners, or to other Persons, so long as in each instance such direct or indirect
owners of Chartwell, L.P. retain control of the management and operations of
Chartwell, L.P.
(v) Section 3.2(a) shall not apply to the Transfer by
Chartwell, L.P. of a portion of its membership interests in Frasier (not to
exceed amounts transferred to management plus an additional $1,500,000 thereof
in the aggregate) to third parties within 60 days after the date hereof at a
price not exceeding the initial cost thereof to Chartwell, L.P.
(b) (i) In the event that Chartwell and its Affiliates desire
to Transfer not less than 85% of the shares of Voting Common Stock which are
indirectly economically beneficially owned by them (or any portion of its
interest in any Person in respect thereof) taken as a whole, to an unaffiliated
third party (as defined in Section 3.2(a)(i) above), Chartwell may, upon not
less than 30 days prior written notice to the Holders, setting forth therein in
detail the terms and conditions of such sale, require all Holders to sell their
shares of Unit Common Stock or Registrable Securities at the same price (pro
rata) as the Chartwell sale and on the same terms and conditions; provided, that
each Holder shall be required only to represent and warrant on a several, but
not joint basis, as to the Holder Representations, and shall not be required to
enter into any covenants or agreements other than (i) indemnities as to such
Holder's Representations and other indemnities as to which the purchaser's
recourse is solely to a pro rata escrowed hold back of the purchase price
determined by Chartwell; (ii) as to Persons within such Holder who have access
to confidential information concerning the Issuer or its Affiliates received
from the Issuer or its subsidiaries or Chartwell and/or its Affiliates and their
respective subsidiaries, to maintain the confidentiality thereof on terms deemed
reasonable to Chartwell in light of the nature of the transaction; (iii) the use
of commercially reasonable efforts to take such actions as are deemed necessary
or appropriate by Chartwell to obtain regulatory consents or approvals required
to consummate the transaction.
(ii) In furtherance of the provisions of this Section
3.2(b), each Holder of Unit Common Stock or Registrable Securities hereby (a)
irrevocably appoints Chartwell as its agent and attorney-in-fact, with full
power of substitution (an "Agent") to execute all agreements, instruments and
certificates and take all actions necessary or desirable to effectuate any sale
under this Section 3.2(b) and (b) grants to such Agent a proxy (which shall be
deemed to be coupled with an interest and irrevocable) to vote the Unit Common
Stock or Registrable Securities held by such Holder (to the extent such
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Unit Common Stock or Registrable Securities is entitled to vote on any matter
pertaining to such Sale) and exercise any consent rights applicable thereto in
favor of any Sale hereunder; provided, however, that no Agent may exercise such
powers-of-attorney or proxies with respect to any Holder of Unit Common Stock or
Registrable Securities unless such Holder is in breach of its obligations under
this Section 3.2(b).
(c) The reasonable costs and expenses incurred by Chartwell
and its Affiliates on the one hand, and Holders of Unit Common Stock or
Registrable Securities on the other, in connection with a sale of Unit Common
Stock pursuant to this Section 3.2 shall be allocated pro rata based upon the
number of shares of Unit Common Stock sold by each holder of such Shares to the
buyer; provided, that the costs and expenses shall not include the fees and
expenses of more than one law firm, which firm shall be selected by Chartwell,
unless representation of Chartwell and the Holders of Unit Common Stock or
Registrable Securities by the same counsel, due to actual or potential differing
interests between them, shall create a conflict of interest, in which case the
costs and expenses shall include the reasonable fees and expenses of one
additional law firm designated by Holders of Unit Common Stock or Registrable
Securities proposing to sell a majority of the Unit Shares proposed to be sold
by all Holders of Unit Common Stock and Registrable Securities.
(d) In connection with any sale by Holders pursuant to
Sections 3.2(a) or (b) above, the consideration to be received by such Holders
shall be of the same type as that to be received by Chartwell and its Affiliates
and, in the case of Section 3.2(b), shall consist of either (x) cash or (y)
securities registered under the Act and listed on a national security exchange
or authorized for quotation on the NASDAQ National Market System; provided, that
in the case of a transaction pursuant to Section 3.2(b), after giving effect to
such transaction, Chartwell shall not beneficially own (within the meaning of
Rule 13d-3 under the Exchange Act), directly or indirectly, more than 15% of the
Common Stock of the Issuer.
(e) The provisions of this Section 3.2 shall terminate upon
the consummation of offerings pursuant to one or more effective Registration
Statements filed with the Commission with respect to Shares of Common Stock in
one or more public offerings generating at least $50 million in aggregate gross
proceeds of the Issuer's Common Stock, which Common Stock would be (i) held by
Persons whom are not Affiliates of the Issuer and (ii) without restriction on
Transfer under the Act (a "Qualified Public Offering").
3.3 Registration of Transfers and Exchanges.
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(a) Transfer and Exchange of Physical Certificates. When
Physical Certificates are presented to the Transfer Agent with a request:
(i) to register the Transfer of the Physical
Certificates; or
(ii) to exchange such Physical Certificates for an equal
number of Physical Certificates of other authorized denominations, the Transfer
Agent shall register the Transfer or make the exchange as requested if the
requirements under this Agreement as set forth in this Section 3.3 for such
transactions are met; provided, however, that the Physical Certificates
presented or surrendered for registration of Transfer or exchange:
(I) shall be duly endorsed or accompanied by a
written instrument of Transfer in form satisfactory to the Transfer Agent, duly
executed by the Holder thereof or his attorney duly authorized in writing; and
(II) in the case of Physical Certificates the
offer and sale of which have not been registered under the Act, such Physical
Certificates shall be accompanied, in the sole discretion of the Issuer, by the
following additional information and documents, as applicable:
(A) if such Physical Certificates are being
delivered to the Transfer Agent by a holder for registration in the name of such
holder, without Transfer, a certification from such holder to that effect (in
substantially the form of Exhibit B hereto); or
(B) if such Physical Certificates are being
Transferred to a "Qualified Institutional Buyer" (as defined in Rule 144A under
the Securities Act (a "Qualified Institutional Buyer")) in accordance with Rule
144A under the Act, a certification to that effect (in substantially the form of
Exhibit B hereto); or
(C) if such Physical Certificates are being
Transferred to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Act (an "Institutional Accredited
Investor")) delivery of a certification to that effect (in substantially the
form of Exhibit B hereto) and a Transferee Certificate for Institutional
Accredited Investors in substantially the form of Exhibit C hereto; or
(D) if such Physical Certificates are being
Transferred in reliance on Regulation S under the Act ("Regulation S"), delivery
of a certification to that effect (in substantially the form of Exhibit B
hereto) and a Transferee Certificate for Regulation S Transfers in substantially
the form
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of Exhibit D hereto and an opinion of counsel reasonably satisfactory to the
Issuer to the effect that such Transfer is in compliance with the Act; or
(E) if such Physical Certificates are being
Transferred in reliance on Rule 144 under the Act, delivery of a certification
to that effect (in substantially the form of Exhibit B hereto) and an opinion of
counsel reasonably satisfactory to the Issuer to the effect that such Transfer
is in compliance with the Act; or
(F) if such Physical Certificates are being
Transferred in reliance on another exemption from the registration requirements
of the Act, a certification to that effect (in substantially the form of Exhibit
B hereto) and an opinion of counsel reasonably satisfactory to the Issuer to the
effect that such Transfer is in compliance with the Act.
(b) Restrictions on Transfer of Physical Certificates for a
Beneficial Interest in a Global Certificate. A Physical Certificate may not be
exchanged for a beneficial interest in a Global Certificate except upon
satisfaction of the requirements set forth below. Upon receipt by the Transfer
Agent of a Physical Certificate, duly endorsed or accompanied by appropriate
instruments of Transfer, in form satisfactory to the Transfer Agent, together
with:
(A) a certification, in substantially the form of
Exhibit B hereto, that such Physical Certificate is being
Transferred to a Qualified Institutional Buyer; and
(B) written instructions directing the Transfer
Agent to make, or to direct the Depository to make, an
endorsement on the Global Certificate to reflect an increase
in the aggregate amount of the shares represented by the
Global Certificate, then the Transfer Agent shall cancel such
Physical Certificate and cause, or direct the Depository to
cause, in accordance with the standing instructions and
procedures existing between the Depository and the Transfer
Agent, the number of shares represented by the Global
Certificate to be increased accordingly. If no Global
Certificate is then outstanding, the Issuer shall issue a new
Global Certificate in the appropriate amount.
(c) Transfer and Exchange of Global Certificates. The Transfer
and exchange of Global Certificates or beneficial interests therein shall be
effected through the Depository, in accordance with this Agreement (including
the restrictions on Transfer set forth herein) and the procedures of the
Depository therefor.
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(d) Transfer of a Beneficial Interest in a Global Certificate
for a Physical Certificate.
(i) Any Person having a beneficial interest in a Global
Certificate may upon request exchange such beneficial interest for a Physical
Certificate if such beneficial interest is being Transferred to an Institutional
Accredited Investor, so long as such Institutional; Accredited Investor delivers
a certification to such effect (in substantially the form of Exhibit B hereto)
and a Certificate for Institutional Accredited Investors in substantially the
form of Exhibit C hereto. Upon receipt by the Transfer Agent of written
instructions or such other form of instructions as is customary for the
Depository from the Depository or its nominee on behalf of any Person having a
beneficial interest in a Global Certificate and upon receipt by the Transfer
Agent of a written order or such other form of instructions as is customary for
the Depository or the Person designated by the Depository as having such a
beneficial interest containing registration instructions and, in the case of any
such Transfer or exchange of a beneficial interest in a Global Certificate the
offer and sale of which have not been registered under the Act.
(ii) Physical Certificates issued in exchange for a
beneficial interest in a Global Certificate shall be registered in such names
and in such authorized denominations as the Depository, pursuant to instructions
from its direct or indirect participants or otherwise, shall instruct the
Transfer Agent in writing. The Transfer Agent shall deliver such Physical
Certificates to the Persons in whose names such Physical Certificates are so
registered.
(e) Restrictions on Transfer and Exchange of Global
Certificates. Notwithstanding any other provisions of this Agreement, a Global
Certificate may not be Transferred as a whole except by the Depository to a
nominee of the Depository or by a nominee of the Depository to the Depository or
another nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) Authentication of Definitive Certificates in Absence of
Depository. If at any time:
(i) (x) the Depository for the Global Certificates
notifies the Issuer that the Depository is unwilling or unable to continue as
Depository for the Global Certificates and a successor Depository for the Global
Certificates is not appointed by the Issuer within 90 days after delivery of
such notice or (y) has ceased to be a clearing agency registered under the
exchange Act; or
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(ii) the Issuer, at its sole discretion, notifies the
Transfer Agent in writing that it elects to cause the issuance of Physical
Certificates; or
(iii) there shall have occurred and be continuing a
Voting Rights Triggering Event;
then the Issuer will execute, and the Transfer Agent, upon written
instructions from the Issuer, will authenticate and deliver Definitive
Certificates, in an aggregate number equal to the aggregate number of shares
represented by the Global Certificates, in exchange for such Global
Certificates.
(g) Legends.
(i) Each Share (and all shares of Common Stock issued in
exchange therefor or substitution thereof) which is a Restricted Security shall
bear a legend substantially to the following effect: THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B)
IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO
REGULATION S (WITHIN THE MEANING OF RULE 903(C)(2) OF REGULATION S UNDER THE
SECURITIES ACT), (2) AGREES THAT IT WILL NOT, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") THAT IS TWO YEARS (OR SUCH SHORTER PERIOD AS MAY
BE PRESCRIBED BY RULE 144(K)(OR ANY SUCCESSOR PROVISION THEREOF) UNDER THE
SECURITIES ACT) AFTER THE LATER OF THE ORIGINAL ISSUE DATE AND THE LAST DATE ON
WHICH THE ISSUER OR ANY AFFILIATE THEREOF WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY), RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT
(A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO
A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (D) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRANSFER AGENT A LETTER SIGNED BY SUCH INVESTOR CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRANSFER
AGENT), (E) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) AND (3) AGREES THAT IT
WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED PRIOR TO THE
RESALE RESTRICTION TERMINATION DATE A
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NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. PRIOR TO ANY OFFER, SALE OR
OTHER TRANSFER OF THIS SECURITY PRIOR TO THE RESALE RESTRICTION TERMINATION DATE
PURSUANT TO CLAUSES (D) AND (F) ABOVE, THE HOLDER WILL BE REQUIRED TO DELIVER TO
THE TRANSFER AGENT AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM OR IN A TRANSACTION NOT
SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
(h) Cancellation and/or Adjustment of a Global Certificate. At
such time as all beneficial interests in a Global Certificate have either been
exchanged for Physical Certificates, redeemed, repurchased or cancelled, such
Global Certificate shall be returned to or retained and cancelled by the
Transfer Agent. At any time prior to such cancellation, if any beneficial
interest in a Global Certificate is exchanged for Physical Certificates,
redeemed, repurchased or cancelled, the number of shares of Common Stock
represented by such Global Certificate shall be reduced and an endorsement shall
be made on such Global Certificate, by the Transfer Agent to reflect such
reduction.
(i) Obligations with Respect to Transfers and Exchanges of
Physical Certificates.
(i) To permit registrations of Transfers and exchanges,
the Issuer shall execute, at the Transfer Agent's request, and the Transfer
Agent shall countersign and register Physical Certificates and Global
Certificates.
(ii) All Physical Certificates and Global Certificates
issued upon any registration, Transfer or exchange of Physical Certificates or
Global Certificates shall be validly issued, fully paid and nonassessable.
4. Registration Procedures. (i) In connection with the obligations
of the Issuer with respect to any Registration Statement pursuant to Sections
2.1 and 2.2 hereof, the Issuer shall:
(a) prepare and file with the Commission a Registration
Statement on the appropriate form under the Act, which form (i) shall be
selected by the Issuer and (ii) shall comply as to form in all material respects
with the requirements of the applicable form and include all financial
statements required by the Commission to be filed therewith, and the Issuer
shall use its reasonable best efforts to cause such Registration
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Statement to become effective and remain effective in accordance with Section 2
hereof;
(b) prepare and file with the Commission such amendments and
post-effective amendments to each Registration Statement as may be necessary to
keep such Registration Statement effective for the applicable period, cause each
prospectus to be supplemented by any required prospectus supplement and, as so
supplemented, to be filed pursuant to Rule 424 under the Securities Act;
(c) furnish to each Holder of Registrable Securities and to
each underwriter of an underwritten offering of Registrable Securities, if any,
without charge, as many copies of each prospectus, including each preliminary
prospectus, and any amendment or supplement thereto and such other documents as
such Holder or underwriter may reasonably request, in order to facilitate the
public sale or other disposition of the Registrable Securities;
(d) use their reasonable best efforts to register or qualify
the Registrable Securities under all applicable state securities or Blue Sky
laws of such jurisdictions as any Holder thereof covered by a Registration
Statement shall reasonably request in writing by the time the applicable
Registration Statement is declared effective by the Commission, and do any and
all other acts and things which may be reasonably necessary or advisable to
enable such Holder to consummate the disposition in each such jurisdiction of
such Registrable Securities owned by such Holder; provided, however, that the
Issuer shall not be required to:
(i) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be required to
qualify but for this Section 4(d);
(ii) file any general consent to service of process; or
(iii) subject itself to taxation in any such
jurisdiction if it is not so subject;
(e) notify each Holder of Registrable Securities promptly and,
if requested by such Holder, confirm such advice in writing:
(i) when a Registration Statement has become effective
and when any post-effective amendments and supplements thereto become effective;
(ii) of any request by the Commission or any state
securities authority for amendments and supplements to a Registration Statement
and prospectus or for additional
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information after the Registration Statement has become effective;
(iii) of the issuance by the Commission or any state
securities authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that purpose;
(iv) if, between the effective date of a Registration
Statement and the closing of any sale of Registrable Securities covered thereby,
the representations and warranties of the Issuer contained in any underwriting
agreement, securities sales agreement or other similar agreement, if any,
relating to the offering cease to be true and correct in all material respects
or if the Issuer receives any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose; and
(v) of the happening of any event during the period a
Registration Statement is effective which makes any statement made in such
Registration Statement or the related prospectus untrue in any material respect
or which requires the making of any changes in such Registration Statement or
prospectus in order to make the statements therein not misleading;
(f) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at the
earliest possible moment;
(g) furnish to each Holder of Registrable Securities and to
the Initial Purchaser, without charge, at least one conformed copy of each
prospectus;
(h) cooperate with the Selling Holders of Registrable
Securities to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any restrictive
legends and registered in such names as the Selling Holders may reasonably
request at least two business days prior to the closing of any sale of
Registrable Securities;
(i) upon the occurrence of any event contemplated by Section
4(e)(v) hereof, use reasonable best efforts to prepare a supplement or
post-effective amendment to a Registration Statement or the related prospectus
or any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Securities, such prospectus will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
Issuer agrees to notify each Selling Holder to suspend use of the prospectus as
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promptly as practicable after the occurrence of such an event, and each Holder
hereby agrees to suspend use of the prospectus until the Issuer has amended or
supplemented the prospectus to correct such misstatement or omission. At such
time as such public disclosure is otherwise made or the Issuer determines in
good faith that such disclosure is not necessary, the Issuer agrees promptly to
notify each Holder of such determination, to amend or supplement the prospectus
if necessary to correct any untrue statement or omission therein and to furnish
each Holder such numbers of copies of the prospectus as so amended or
supplemented as each Holder may reasonably request;
(j) a reasonable time prior to the filing of any Registration
Statement pursuant to Section 2.1(b) or (c) hereof, any prospectus, any
amendment to a Registration Statement or amendment or supplement to a prospectus
or any document which is to be incorporated by reference into a Registration
Statement or a prospectus after initial filing of a Registration Statement,
provide copies of such document to the Holders and make available for discussion
of such document the representatives of the Issuer as shall be reasonably
requested by the Holders of Registrable Securities;
(k) solely in the case of any Demand Registration, enter into
such customary agreements (including an underwriting agreement, in each case in
customary form) and take all such other actions as the Holders of a majority of
the Registrable Securities being covered by such registration statement or the
underwriters participating in such offering, reasonably request in order to
expedite or facilitate the disposition of such Registrable Securities, including
customary representations, warranties, indemnities and agreements;
(l) obtain a CUSIP number for the Common Stock;
(m) (i) make reasonably available for inspection by a
representative of, and counsel for, any underwriter participating in any
disposition pursuant to a Registration Statement, all relevant financial and
other records, pertinent corporate documents and properties of the Issuer and
(ii) cause the Issuer's officers, directors and
employees to supply all relevant information reasonably requested by such
representative, counsel or any such underwriter in connection with any such
Registration Statement; and
(n) if requested by the Holders in connection with any
Registration Statement, shall use its reasonable best efforts to cause (w)
counsel for the Issuer to deliver an opinion relating to the Registration
Statement and the Common Stock, in customary form, (x) its officers to execute
and deliver all customary documents and certificates requested by a
representative of the Holders or any underwriter, as applicable;
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and (y) its independent public accountants to provide a comfort letter in
customary form.
(ii) The Issuer may, as a condition to such Holder's participation in any
Registration Statement, require each Holder of Registrable Securities to furnish
to the Issuer such information regarding the Holder and the proposed
distribution by such Holder of such Registrable Securities as the Issuer may
from time to time reasonably request in writing. No Holder of Registrable
Securities shall be required, in connection with any underwriting agreements
entered into in connection with any registration, to provide any information,
representations or warranties other than in respect of itself, or covenants
other than in respect of the Holder's authority to Transfer the Registrable
Securities and its delivery of good and valid title thereto, and such Holder
shall not be required to provide any indemnification to any Person except as
provided in Section 5 below.
(iii) Each of the Holders agrees, if requested by the Issuer and an
underwriter of equity securities of the Company, not to sell, offer to sell, or
otherwise dispose of or agree to dispose of any Registrable Securities held by
such Holder (other than to an Affiliate of such Holder) in a public offering
during the 10-day period prior to, or the 90-day period (or such longer period
if requested by such underwriter, up to 180 days) following, the effective date
of a registration statement of the Issuer filed under the Act, provided that the
Issuer shall, and shall use its best efforts to cause all officers and directors
of the Issuer to, enter into similar agreements covering its Capital Stock,
provided, however, that such agreements shall exclude issuances of Capital Stock
(x) pursuant to employee stock options or other employee benefit plans or grants
of stock options pursuant to such plans, (y) as consideration paid in connection
with an acquisition by the Issuer or its subsidiaries or (z) pursuant to
outstanding convertible securities and outstanding options other than employee
stock options. If requested by the underwriters, the Holders shall execute a
separate agreement to the foregoing effect.
(iv) The Issuer shall exchange Unit Shares delivered to it by
Holders participating in any registration of Registrable Securities pursuant to
this Agreement for Voting Shares (as required in its Amended and Restated
Certificate of Incorporation as in effect on the date hereof) prior to the
consummation of any offering of Registrable Securities; provided, however, that
if the offering of Voting Shares pursuant to any such Registration Statement is
not consummated, holders of Unit Shares that have exchanged Unit Shares for
Voting Shares shall have the right, but not the obligation, to cause the Issuer
to effect an exchange of such Voting Shares for Unit Shares.
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<PAGE>
5. Indemnification and Contribution. (a) The Issuer agrees to
indemnify and hold harmless each Selling Holder and each Person, if any, who
controls such Holder within the meaning of either Section 15 of the Act or
Section 20 of the Exchange Act, or is under common control with, or is
controlled by, such Holder, from and against all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred by any Holder or any such controlling or affiliated Person
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement (or any amendment thereto) pursuant to which
Registrable Securities were registered under the Act, or caused by any omission
or alleged omission to state therein a material fact necessary to make the
statements therein in light of the circumstances under which they were made not
misleading, or caused by any untrue statement or alleged untrue statement of a
material fact contained in any prospectus (as amended or supplemented if the
Issuer shall have furnished any amendments or supplements thereto), or caused by
any omission or alleged omission to state therein a material fact necessary to
make the statements therein in light of the circumstances under which they were
made not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any Holder
furnished to the Issuer in writing by such Holder expressly for use in any such
Registration Statement or prospectus; provided, that the foregoing indemnity
with respect to any preliminary prospectus shall not inure to the benefit of any
indemnified party from whom the Person asserting such losses, claims, damages,
liabilities and judgments purchased Unit
-27-
<PAGE>
Common Stock or Registrable Securities if such untrue statement or omission or
alleged untrue statement or omission made in such preliminary prospectus is
eliminated or remedied in the prospectus and a copy of the prospectus shall not
have been furnished to such Person in a timely manner due to the wrongful action
or wrongful inaction of such indemnified party.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Issuer, its directors, its officers and each
Person, if any, who controls the Issuer within the meaning of either Section 15
of the Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Issuer to such Holder, but only with reference to information
relating to such Holder furnished to the Issuer in writing by such Holder
expressly for use in any Registration Statement (or any amendment thereto) or
any prospectus (or any amendment or supplement thereto); provided, however, that
the obligations of each of the Holders hereunder shall be limited to an amount
equal to the net proceeds to such Holder of securities sold pursuant to such
registration statement or prospectus.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any Person in respect of which
indemnity may be sought pursuant to either paragraph (a) or (b) above, such
Person (the "indemnified party") shall promptly notify the Person against which
such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the reasonable fees and disbursements of such counsel relating to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed in writing to the retention of such
counsel or (ii) the indemnifying party fails promptly to assume the defense of
such proceeding or fails to employ counsel reasonably satisfactory to such
indemnified party or parties or (iii) the named parties to any such proceeding
(including any impleaded parties) include both such indemnified party or parties
and the indemnifying parties or an affiliate of the indemnifying parties or such
indemnified parties, and there may be one or more defenses available to such
indemnified party or parties that are different from or additional to those
available to the indemnifying parties, in which case, if such indemnified party
or parties notifies the indemnifying parties in writing that it elects to employ
separate counsel of its choice
-28-
<PAGE>
at the expense of the indemnifying parties, the indemnifying parties shall not
have the right to assume the defense thereof and such counsel shall be at the
expense of the indemnifying parties, it being understood, however, that unless
there exists a conflict among indemnified parties, the indemnifying parties
shall not, in connection with any one such proceeding or separate but
substantially similar or related proceedings in the same jurisdiction, arising
out of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (together with appropriate
local counsel) at any time for such indemnified party or parties. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but, if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which any indemnified party is a party,
and indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability or claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in
paragraph (a) or (b) of this Section 5 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the Issuer on the one hand and the Holders on the other hand in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative fault of the Issuer on the one hand and the Holders on the other hand
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Issuer or by the
Holders and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(e) The Issuer and each Holder agrees that it would not be
just or equitable if contribution pursuant to this Section 5 were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph
-29-
<PAGE>
(d) above shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred (and not otherwise
reimbursed) by such indemnified party in connection with investigating or
defending any such action or claim. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 5 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
6. Miscellaneous.
(a) No Inconsistent Agreements. Neither the Issuer nor
Chartwell has entered into nor will the Issuer, Chartwell or any of its
Affiliates on or after the date of this Agreement enter into any agreement which
is inconsistent with the rights granted to the Holders of Registrable Securities
in this Agreement or otherwise conflicts with the provisions hereof. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Issuer's other issued
and outstanding securities, if any, under any such agreements.
(b) Non-Circumvention. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person or any of its Affiliates. Notwithstanding
the foregoing, the direct and indirect stockholders of Chartwell may Transfer
their equity interests in Chartwell or its Affiliates to their Affiliates,
irrespective of the provisions of this Agreement, including, without limitation,
the provisions of Section 3.2 hereof, provided, however, that Chartwell shall,
in good faith, ensure that no such Transfers are made to intentionally frustrate
the purpose and intent of the terms and provisions of this Agreement, including,
without limitation, Section 3.2 hereof.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Issuer has obtained the written consent of Holders
of at least a majority of the outstanding Unit Shares and Registrable Securities
affected by such amendment, modification, supplement, waiver or consent;
provided, however, a waiver or consent to departure from the provisions hereof
that relates exclusively to the rights of Holders of Registrable Securities
whose securities are being sold pursuant to a registration statement and that
does not directly or indirectly affect the rights of other Holders of
-30-
<PAGE>
Registrable Securities may be given by the Holders of a majority of the
Registrable Securities proposed to be sold.
(d) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to the Initial Purchaser, at its address set forth in the
Purchase Agreement; (ii) if to the Issuer or Chartwell, at the Issuer's address
set forth in the Purchase Agreement; (iii) if to a holder of Unit Shares or
Registrable Securities, at such holder's address as set forth in the stock books
of the Issuer. All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered, five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and Transferees of each
of the parties, including without limitation and without the need for an express
assignment, subsequent Holders as holders of Unit Shares or Registrable
Securities; provided that all tranferees have provided proper certification to
the Issuer in substantially the form of Exhibits B, C, or D hereto, as
applicable; provided, further, however, that nothing herein shall cause any
proposed purchaser that acquires Shares pursuant to Section 3.2 hereof to be
deemed a party to this Agreement. If any Transferee of any Holder shall acquire
Unit Shares, in any manner, whether by operation of law or otherwise, such Unit
Shares shall be held subject to all of the terms of this Agreement, and by
taking and holding such Unit Shares such Person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement and such Person shall be entitled to receive the benefits hereof.
(f) Third Party Beneficiary. The Holders as holders of Unit
Shares or Registrable Securities shall be a third party beneficiary to the
agreements made hereunder between the Issuer and Chartwell, on the one hand, and
the Initial Purchaser, on the other hand, and the Initial Purchaser shall have
the right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.
(g) Injunctive Relief. It is acknowledged that it will be
impossible to measure in money the damages that would be suffered if the parties
fail to comply with certain of the obligations imposed on them by this
Agreement, including, without limitation, those obligations set forth in
Sections 2 and 3, and that in the event of any such failure, an aggrieved Person
will
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<PAGE>
be irreparably damaged and will not have an adequate remedy at law. Any such
Person shall, therefore, be entitled to injunctive relief and/or specific
performance to enforce such obligations, and if any action should be brought in
equity to enforce any of such provisions of this Agreement, none of the parties
hereto shall raise the defense that there is an adequate remedy at law.
(h) Exchange of Unit Common Stock for Voting Common Stock.
Prior to or simultaneously with the consummation of any initial public offering
of Common Stock of the Issuer (whether or not a Qualified Public Offering), each
share of Unit Common Stock may be exchanged at the option of the Holder thereof
for one share of Voting Common Stock in accordance with the terms and conditions
set forth in the Amended and Restated Certificate of Incorporation of the Issuer
as in effect on the date hereof; provided, that for all purposes of this
Agreement any such Shares so exchanged shall continue to benefit from the rights
inuring to the Unit Common Stock Shares under this Agreement, notwithstanding
such exchange. The Issuer hereby covenants and agrees that it will offer in
writing to each Holder of Unit Common Stock the opportunity to exchange its Unit
Shares for Voting Shares in advance of any Registration pursuant to Article 2 of
this Agreement or of any initial public offering as contemplated in the
immediately preceding sentence.
(i) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(j) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(k) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
(l) Severability. In the event that any on or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impair thereby.
-32-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Common Stock
Registration Rights and Stockholders' Agreement as of the date first written
above.
MMH HOLDINGS, INC.
By: /s/ David D. Smith
-----------------------------
Name: David D. Smith
Title: Vice President
CHARTWELL, L.P.,
BY: CHARTWELL G.P. CORP.,
ITS GENERAL PARTNER
By: /s/ Donald H. Gales
-----------------------------
Name: Donald H. Gales
Title:
CIBC OPPENHEIMER CORP.
By: /s/ Walter McLallen
-----------------------------
Name: Walter McLallen
Title: Managing Director
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<PAGE>
EXHIBIT A
THIS SECURITY IS A GLOBAL SECURITY AND IS REGISTERED IN THE NAME OF
A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON
OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN LIMITED CIRCUMSTANCES, AND NO
TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY
TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT
IN LIMITED CIRCUMSTANCES DESCRIBED.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
A-1
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF UNIT COMMON STOCK
Re: Unit Common Stock (the "Securities"), of MMH Holdings, Inc.
This Certificate relates to _____________ Securities held in the
form of* |_| a beneficial interest in a Global Certificate or* |_| Physical
Certificates by _______________ (the "Transferor").
The Transferor:*
|_| has requested by written order that the Transfer Agent
deliver in exchange for its beneficial interest in the
Global Certificate held by the Depository a Physical
Certificate or Physical Certificates in definitive,
registered form of authorized denominations and an
aggregate number equal to its beneficial interest in
such Global Certificate (or the portion thereof
indicated above); or
|_| has requested that the Transfer Agent by written order
to exchange or register the Transfer of a Physical
Certificate or Physical Certificates. In connection with
such request and in respect of each such Security, the
Transferor does hereby certify that the Transferor is
familiar with the Common Stock Registration Rights and
Stockholders Agreement relating to the above captioned
Securities and the restrictions on Transfers thereof as
provided in Section 3.3 of such Common Stock
Registration Rights and Stockholders Agreement, and that
the Transfer of these Securities does not require
registration under the Securities Act of 1933, as
amended (the "Act") because*:
|_| Such Security is being acquired for the Transferor's own
account, without Transfer.
|_| Such Security is being Transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the
Act), in reliance on Rule 144A.
B-1
<PAGE>
|_| Such Security is being Transferred to an institutional
"accredited investor" (within the meaning of
subparagraphs (a)(1), (2), (3) or (7) of Rule 501 under
the Act.
|_| Such Security is being Transferred in reliance on
Regulation S under the Act.
|_| Such Security is being Transferred in reliance on Rule
144 under the Act.
|_| Such Security is being Transferred in reliance on and in
compliance with an exemption from the registration
requirements of the Act other than Rule 144A or Rule 144
or Regulation S under the Act to a Person other than an
institutional "accredited investor."
[INSERT NAME OF TRANSFEROR]
By: _________________________
[Authorized Signatory]
Date: _______________________
*Check applicable box.
B-2
<PAGE>
EXHIBIT C
Form of Certificate To Be Delivered in Connection
with Transfers to Institutional Accredited Investors
United States Trust Company of New York
MMH Holdings, Inc.
c/o United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Ladies and Gentlemen:
In connection with our proposed purchase of Units (the "Series A Units")
of MMH Holdings, Inc. ("Holdings") consisting of one share of the Holdings' 12%
Series A Senior Exchangeable Preferred Stock (the "Series A Senior Preferred
Stock"), exchangeable into Holdings' 12% Exchange Debentures (the "Exchange
Debentures") and 720 shares of the Issuer's non-voting Common Stock (the "Unit
Common Stock" and, together with the Series A Senior Preferred Stock, the
Exchange Debentures, if issued, the "Securities"), we confirm that:
1. We understand that any subsequent transfer (i) of the Series A
Senior Preferred Stock is subject to certain restrictions and conditions
set forth in the Certificate of Designation of Holdings and (ii) of the
Unit Common Stock is subject to certain restrictions and conditions set
forth in the Common Stock Registration Rights and Stockholder's Agreement,
and the undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Series A Senior Preferred Stock or the Unit Common
Stock except in compliance with, such restrictions and conditions and the
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that none of the Securities have been registered
under the Securities Act or any other applicable securities laws, the
Securities have not been and will not be qualified for sale under the
securities laws of any non-U.S. jurisdiction, and none of the Securities
may be offered, sold, pledged or otherwise transferred except as permitted
in the following sentence. We agree, on our own behalf and on behalf of
any accounts for which we are acting as hereinafter stated, that if we
should sell or otherwise transfer any of the Securities prior to the date
(the "Resale Restriction Termination Date") which is two years (or such
shorter period as may be required by Rule 144(k) (or any successor
provision) under the Securities Act), after the later of the original
issuance of the Securities or the last date on which Holdings or any
affiliate (within the meaning of Rule 144 under the Securities Act) of
Holdings was the owner of such Securities (or any
C-1
<PAGE>
predecessor thereto), we will do so only (a) to Holdings or any of its
subsidiaries, (b) pursuant to an effective registration statement under
the Securities Act, and we further agree to provide to any person
purchasing any of the Securities from us a notice advising such purchaser
that resales of the Series A Units are restricted as stated herein, (c)
for so long as such securities are eligible for resale pursuant to Rule
144A under the Securities Act ("Rule 144A"), in accordance with Rule 144A
to a "qualified institutional buyer" (as defined in Rule 144A), (d) to an
institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to the Transfer Agent, a signed letter containing certain
representations and agreements relating to the restrictions on transfer of
the Securities (the form of which letter can be obtained from the Transfer
Agent), (e) to non-U.S. Persons outside the United States in an offshore
transaction in accordance with Regulation S under the Securities Act, or
(f) pursuant to any other available exemption from the registration
requirements of the Securities Act.
3. We understand that, on any proposed resale of any Securities
prior to the Resale Restriction Termination Date pursuant to clauses (d)
or (f) in paragraph 2 above, we will be required to deliver to the
Transfer Agent and Holdings such certifications, legal opinions and other
information as either of them may reasonably require to confirm that such
transaction is being made pursuant to an exemption from or in a
transaction not subject to the registration requirements of the Securities
Act. We further understand that the Securities purchased by us will bear a
legend to the foregoing effect. We acknowledge that the Transfer Agent and
Holdings will rely upon the truth and accuracy of such information, and we
agree that if any such information is no longer accurate, we shall
promptly notify the Transfer Agent and Holdings.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Securities, and we and any accounts for which we are acting are each able
to bear the economic risk of our or their investment, as the case may be.
5. We are acquiring the Securities purchased by us for our account
or for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
6. We are not acquiring the Securities with a view toward the
distribution thereof in a transaction that would
C-2
<PAGE>
violate the Securities Act or the securities laws of any state of the
United States or any other applicable jurisdiction.
You, Holdings and others are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
By:______________________________________
Name:
Title:
C-3
<PAGE>
EXHIBIT D
Form of Certificate To Be
Delivered in Connection
with Regulation S Transfers
______________,______
[Transfer Agent]
[ ]
[ ]
Attention: Corporate Trust Administration
Re: MMH Holdings, Inc. (the "Issuer") Unit Common Stock (the
"Securities")
Ladies and Gentlemen:
In connection with our proposed sale of _____________ of the
Securities, we confirm that such sale has been effected pursuant to and in
accordance with Regulation S under the Securities Act of 1933, as amended (the
"Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a Person in the
United States;
(2) either (a) at the time the buy offer was originated, the
Transferee was outside the United States or we and any Person
acting on our behalf reasonably believed that the Transferee
was outside the United States, or (b) the transaction was
executed in, on or through the facilities of a designated
offshore securities market and neither we nor any Person
acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or
Rule 904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Act; and
(5) we have advised the Transferee of the Transfer restrictions
applicable to the Securities.
You and the Issuer are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters
D-1
<PAGE>
covered hereby. Defined terms used herein without definition have the respective
meanings provided in Regulation S.
Very truly yours,
[Name of Transferor]
By:______________________________________
[Authorized Signature]
D-2
================================================================================
CREDIT AGREEMENT
among
MMH HOLDINGS, INC.,
MORRIS MATERIAL HANDLING, INC.,
MATERIAL HANDLING, LLC,
MORRIS MATERIAL HANDLING, LTD.,
MONDEL ULC,
KAVERIT STEEL AND CRANE ULC
and
CANADIAN IMPERIAL BANK OF COMMERCE,
as Administrative Agent,
CREDIT AGRICOLE INDOSUEZ,
as Syndication Agent,
BANKBOSTON, N.A.,
as Documentation Agent,
and
THE LENDING INSTITUTIONS LISTED HEREIN
--------------------
Dated as of March 30, 1998
--------------------
$155,000,000
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. Amount and Terms of Credit......................................2
1.01. Commitments...................................................2
1.02. Minimum Amount of Each Borrowing; Maximum Number
of Borrowings............................................7
1.03. Notice of Borrowings..........................................8
1.04. Disbursement of Funds........................................11
1.05. Notes........................................................12
1.06. Continuations and Conversions................................16
1.07. Pro Rata Borrowings..........................................17
1.08. Interest.....................................................18
1.09. Interest Periods.............................................19
1.10. Special Provisions Governing Reserve Adjusted
Eurodollar Loans and Acceptances........................20
1.11. Capital Requirements.........................................25
1.12. Total Loan Commitments; Limitations on
Outstanding Loan Amounts................................27
1.13. Letters of Credit............................................27
1.14. Computation of Dollar Equivalent Amount of Pounds
Sterling and Canadian Dollars...........................38
1.15. European Monetary Union......................................38
1.16. Acceptances Provisions.......................................39
1.17. Replacement of Banks.........................................40
SECTION 2. Commitments....................................................41
2.01. Voluntary Reduction of Commitments...........................41
2.02. Mandatory Adjustments of Commitments, etc....................41
2.03. Commitment Commission........................................42
2.04. Currency Equivalents Generally...............................43
2.05. Principle of Deemed Reinvestment.............................43
2.06. Maximum Rate of Return.......................................43
SECTION 3. Payments.......................................................44
3.01. Voluntary Prepayments........................................44
3.02. Mandatory Prepayments........................................45
3.03. Method and Place of Payment..................................50
3.04. Net Payments.................................................52
3.05. Currency Exchange Fluctuations...............................56
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3.06. Authorizations...............................................57
SECTION 4. Conditions Precedent...........................................57
4.01. Conditions Precedent to Initial Loans........................57
4.02. Conditions Precedent to All Loans............................68
4.03. Additional Conditions Precedent to Acquisition
Term Loans..............................................70
4.04. Conditions Precedent to All Letters of Credit................74
SECTION 5. Representations, Warranties and Agreements.....................75
5.01. Status.......................................................75
5.02. Corporate Power and Authority; Business......................75
5.03. No Violation.................................................76
5.04. Litigation...................................................76
5.05. Use of Proceeds..............................................77
5.06. Governmental Approvals, etc..................................77
5.07. Investment Company Act.......................................78
5.08. Public Utility Holding Company Act...........................78
5.09. True and Complete Disclosure.................................78
5.10. Transaction..................................................79
5.11. Financial Condition; Financial Statements;
Projections.............................................79
5.12. Security Interests...........................................82
5.13. Tax Returns and Payments.....................................82
5.14. ERISA........................................................83
5.15. Subsidiaries.................................................83
5.16. Patents, etc.................................................83
5.17. Compliance with Laws, etc....................................84
5.18. Properties...................................................84
5.19. Securities...................................................85
5.20. Collective Bargaining Agreements.............................85
5.21. Indebtedness Outstanding; Prior Liens........................85
5.22. Environmental Protection.....................................86
5.23. Environmental Investigations.................................88
5.24. Representations and Warranties in the
Recapitalization Agreement..............................88
SECTION 6. Affirmative Covenants.........................................88
6.01. Information Covenants........................................88
6.02. Books, Records and Inspections...............................94
6.03. Maintenance of Property; Insurance...........................94
6.04. Payment of Taxes.............................................95
6.05. Corporate Franchises.........................................95
6.06. Compliance with Statutes, etc................................96
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6.07. ERISA........................................................96
6.08. Performance of Obligations...................................96
6.09. End of Fiscal Years; Fiscal Quarters.........................96
6.10. Use of Proceeds..............................................97
6.11. Landlord Lien Waivers........................................97
6.12. Equal Security for Loans and Notes; No Further
Negative Pledges........................................97
6.13. Bank Meeting.................................................98
6.14. Pledge of Additional Collateral..............................98
6.15. Security Interests...........................................99
6.16. Subsidiary Guarantees........................................99
6.17. Environmental Events........................................100
6.18. Use of Cash on Hand to Effect Designated
Acquisition............................................100
6.19. Year 2000...................................................101
6.20. Certain Post-Closing Matters................................101
SECTION 7. Negative Covenants............................................102
7.01. Conduct of Business.........................................102
7.02. Amendments or Waivers of Certain Documents..................102
7.03. Liens.......................................................102
7.04. Indebtedness................................................106
7.05. Capital Expenditures........................................107
7.06. Advances, Investments and Loans.............................108
7.07. Prepayments of Indebtedness, etc............................110
7.08. Dividends, etc..............................................111
7.09. Transaction with Affiliates.................................112
7.10. Total Interest Coverage Ratio...............................113
7.11. Fixed Charge Coverage Ratio.................................114
7.12. Leverage Ratio..............................................115
7.13. Minimum Consolidated EBITDA.................................116
7.14. Holdings Equity Sales and Net Financing Proceeds............117
7.15. Sale or Discount of Receivables.............................117
7.16. Issuance of Subsidiary Stock................................118
7.17. Disposition of Assets.......................................118
7.18. Contingent Obligations......................................120
7.19. Merger and Consolidations...................................121
7.20. Sale and Lease-Backs........................................122
SECTION 8. Events of Default............................................122
8.01. Payments....................................................122
8.02. Representations, etc........................................122
8.03. Covenants...................................................122
8.04. Default Under Other Agreements..............................123
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8.05. Bankruptcy, etc.............................................123
8.06. ERISA.......................................................124
8.07. Security Documents..........................................124
8.08. Guarantees..................................................124
8.09. Judgments...................................................125
8.10. Ownership...................................................125
SECTION 9. Definitions...................................................126
SECTION 10. The Agents...................................................173
10.01. Appointment................................................173
10.02. Delegation of Duties.......................................174
10.03. Exculpatory Provisions.....................................174
10.04. Reliance by the Agents.....................................175
10.05. Notice of Default..........................................175
10.06. Non-Reliance on Agents and Other Banks.....................176
10.07. Indemnification............................................176
10.08. The Agents in Its Individual Capacity......................177
10.09. Successor Administrative Agent.............................177
10.10. Resignation by Administrative Agent........................177
10.11. Syndication Agent and Documentation Agent..................178
SECTION 11. Miscellaneous................................................178
11.01. Payment of Expenses, etc...................................178
11.02. Right of Setoff............................................179
11.03. Notices....................................................180
11.04. Benefit of Agreement.......................................181
11.05. No Waiver; Remedies Cumulative.............................183
11.06. Payments Pro Rata..........................................184
11.07. Calculations; Computations.................................184
11.08. Governing Law; Submission to Jurisdiction; Venue...........185
11.09. Counterparts...............................................185
11.10. Effectiveness..............................................186
11.11. Headings Descriptive.......................................186
11.12. Amendment or Waiver........................................186
11.13. Survival...................................................187
11.14. Domicile of Loans..........................................187
11.15. Waiver of Jury Trial.......................................187
11.16. Independence of Covenants..................................187
11.17. Currency Indemnity.........................................187
Annex I - List of Banks
Annex II - Bank Addresses
Annex III - Agreement relating to U.K. Swingline Loans
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Schedule 1.08(b) - Calculation of MLA Cost
Schedule 1.16 - Acceptances Provisions
Schedule 4.01(u)(i) - List of Mortgaged Real Property
Schedule 5.04 - Litigation
Schedule 5.06 - Governmental Approvals
Schedule 5.13 - Tax Returns
Schedule 5.15 - Subsidiaries
Schedule 5.19 - Securities
Schedule 5.20 - Schedule of Collective Bargaining Agreements
Schedule 5.21(a) - Schedule of Existing Debt
Schedule 5.21(b) - Prior Liens
Schedule 5.22 - Environmental
Schedule 6.01(i) - Summary of Corporate Insurance Policies
Schedule 7.06(j) - Joint Venture Commitments
Schedule 7.18(viii) - Schedule of Existing Guarantees and Letters of
Credit
Exhibit A-1 - Form of A Term Note
Exhibit A-2 - Form of B Term Note
Exhibit A-3 - Form of Acquisition Term Note
Exhibit B-1 - Form of Revolving Note
Exhibit B-2 - Form of U.S. Swingline Note
Exhibit B-3 - Form of U.K. Swingline Note
Exhibit B-4 - Form of Canadian Swingline Note
Exhibit C-1 - Form of Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Exhibit C-2 - Form of Opinion of Linklater & Paines
Exhibit C-3(a) - Form of Opinion of McCarthy Tetrault
Exhibit C-3(b) - Form of Opinion of Patterson, Palmer, Hunt, Murphy
Exhibit C-4 - Form of Local Counsel Opinions
Exhibit D - Form of Mortgage
Exhibit E-1 - Form of Holdings Guarantee
Exhibit E-2 - Form of U.S. Subsidiary Guarantee
Exhibit E-3 - Form of Canadian Guarantee
Exhibit F-1 - Form of U.S. Security Agreement
Exhibit G-1 - Form of U.K. Security Document and Guarantee
Exhibit G-2 - Form of Canadian Security Agreement
Exhibit G-3 - Form of Scotland Instrument of Change and Guarantee
Exhibit H-1 - Form of Canadian Securities Pledge Agreement
Exhibit H-2 - Form of Mexican Stock Pledge Agreement
Exhibit H-3 - Form of U.K. Deed of Pledge
Exhibit I-1 - Form of Notice of Assignment
Exhibit I-2 - Form of Assignment and Assumption Agreement
Exhibit J - Form of Notice of Borrowing
Exhibit K - Form of Notice of Continuation/Conversion
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Exhibit L - Form of Borrowing Base Certificate
Exhibit M - Form of Officers' Certificate Regarding Environmental Review
Exhibit N - Form of Officers' Solvency Certificate
Exhibit O - Form of Officers' Certificate Regarding Satisfaction of
Conditions Precedent
Exhibit P - Form of Section 3.04 Certificate
Exhibit Q - Form of Intercreditor Agreement
<PAGE>
CREDIT AGREEMENT, dated as of March 30, 1998, among MMH HOLDINGS,
INC., a Delaware corporation ("Holdings"), MORRIS MATERIAL HANDLING, INC., a
Delaware corporation (the "Company") as a U.S. Borrower, MATERIAL HANDLING, LLC,
a Delaware limited liability company ("Material Handling") as a U.S. Borrower,
MORRIS MATERIAL HANDLING, LTD., a company organized under the laws of England
and Wales ("MHE-U.K.") as the U.K. Borrower, MONDEL ULC, an unlimited liability
company organized under the laws of Nova Scotia ("Mondel") as a Canadian
Borrower, and KAVERIT STEEL AND CRANE ULC, an unlimited liability company
organized under the laws of Nova Scotia ("Kaverit") as a Canadian Borrower, the
lending institutions listed in Annex I (each, a "Bank" and, collectively, the
"Banks") and the New York branch of CREDIT AGRICOLE INDOSUEZ ("Indosuez"), as
syndication agent for the Banks (in such capacity, the "Syndication Agent"),
BANKBOSTON, N.A., as documentation agent for the Banks (in such capacity, the
"Documentation Agent"), and CANADIAN IMPERIAL BANK OF COMMERCE ("CIBC"), as
administrative agent and as collateral agent for the Banks (in such capacities,
the "Administrative Agent" and, together with the Syndication Agent and the
Documentation Agent, the "Agents"). Unless otherwise defined herein, all
capitalized terms used herein and defined in Section 9 are used herein as so
defined.
W I T N E S S E T H :
WHEREAS, pursuant to a Recapitalization Agreement dated as of
January 28, 1998, as amended on March 4, 1998 and March 23, 1998 (the
"Recapitalization Agreement"), among Harnischfeger Corporation ("HarnCo"), the
sellers named therein and MHE Investments, Inc., the Company will acquire the
outstanding interests and capital stock of certain subsidiaries of HarnCo
related to the MHE Business (the "Recapitalization");
WHEREAS, (i) the Company desires to incur Initial Loans from the
Banks, the proceeds of which will be applied, to the extent necessary, to
finance the Recapitalization, to retire certain Indebtedness, to redeem a
portion of its Common Stock owned by Holdings and to pay certain fees and
expenses incurred in connection with the Transaction, and (ii) the Borrowers
desire to incur further Loans from the Banks, the proceeds of which will be used
(a) to provide working capital to the Borrowers and their Subsidiaries and for
general corporate purposes of the Borrowers after the Transaction and (b) with
respect to the Acquisition Term Loans, to provide financing for
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acquisitions and to pay related fees and expenses, subject to the conditions set
forth herein;
WHEREAS, the Guarantors, in accordance with the terms and conditions
hereinafter set forth, have agreed to guarantee the obligations of the Borrowers
hereunder; and
WHEREAS, the Banks are willing to make available the credit
facilities provided for herein.
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01. Commitments. Subject to and upon the terms and conditions
herein set forth, each Bank having a Commitment under the relevant Portion
severally agrees (i) in the case of any Borrowing under the A Term Loan Facility
or the B Term Loan Facility, in each case, on the Closing Date, (ii) in the case
of any Borrowing under the Acquisition Portion after the Closing Date and prior
to the Acquisition Term Loan Commitment Termination Date in connection with
Designated Acquisitions, (iii) in the case of any Borrowing under the Revolving
Portion, at any time and from time to time on or after the Closing Date and
prior to the Revolving Loan Commitment Termination Date, and (iv) in the case of
any Borrowing of Swingline Loans, at any time and from time to time on or after
the Closing Date and prior to the Swingline Expiry Date, to make a Loan or Loans
to the Applicable Borrower, which Loans shall be drawn under the Loan Facility
(including the Term Portion, the Acquisition Portion and Revolving Portion
thereof or which shall be made as Swingline Loans), as set forth below.
(a) Loans under the Term Portion of the Loan Facility (each, a "Term
Loan" and, collectively, the "Term Loans") may be made under the A Term
Loan Facility (each, an "A Term Loan" and, collectively, the "A Term
Loans") and the B Term Loan Facility (each, a "B Term Loan" and,
collectively, the "B Term Loans") to the Company. Once repaid, Term Loans
may not be reborrowed.
(i) Each A Term Loan under the A Term Loan Facility (A) shall be
made as a single drawing on the Closing Date in an amount not to exceed
the Total A Term Loan Commitment, (B) except as hereinafter provided,
shall initially be made as a Base Rate Loan and thereafter shall, at the
Company's option and subject to the terms hereof, be a Base Rate Loan or a
Reserve Adjusted Eurodollar Loan; pro-
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vided that all Term Loans made by all Banks having an A Term Loan
Commitment pursuant to the same Borrowing shall, unless otherwise
specifically provided herein, consist entirely of Loans of the same Type
(provided that partial conversions are permitted in accordance with
Section 1.06) and (C) shall not exceed for any Bank at any time
outstanding that aggregate principal amount which equals the A Term Loan
Commitment of such Bank.
(ii) Each B Term Loan under the B Term Loan Facility (A) shall be
made as a single drawing on the Closing Date in an amount not to exceed
the Total B Term Loan Commitment, (B) except as hereinafter provided,
shall initially be made as a Base Rate Loan and thereafter shall, at the
Company's option and subject to the terms hereof, be a Base Rate Loan or a
Reserve Adjusted Eurodollar Loan; provided that all Term Loans made by all
Banks having a B Term Loan Commitment pursuant to the same Borrowing
shall, unless otherwise specifically provided herein, consist entirely of
Loans of the same Type (provided that partial conversions are permitted in
accordance with Section 1.06) and (C) shall not exceed for any Bank at any
time outstanding that aggregate principal amount which equals the B Term
Loan Commitment of such Bank.
(b) Loans under the Acquisition Portion of the Loan Facility (each
an "Acquisition Term Loan") (i) shall be made to a U.S. Borrower after the
Closing Date and prior to the Acquisition Term Loan Commitment Termination
Date (the date of such Borrowing of an Acquisition Term Loan, the
"Acquisition Term Loan Closing Date") to effect Designated Acquisitions,
(ii) shall, at the option of the Applicable Borrower, be Base Rate Loans
or Reserve Adjusted Eurodollar Loans; provided that all Acquisition Term
Loans made by all Banks having an Acquisition Term Loan Commitment
pursuant to the same Borrowing shall, unless otherwise specifically
provided herein, consist entirely of Loans of the same Type (provided that
partial conversions are permitted in accordance with Section 1.06), (iii)
shall not exceed for any Bank at any time outstanding the Acquisition Term
Loan Commitment of such Bank at such time, and (iv) shall not be made
pursuant to a particular Notice of Borrowing if the aggregate principal
amount of Acquisition Term Loans then outstanding, after giving effect to
the Acquisition Term Loan requested by such Notice of Borrowing, would
exceed the Total Acquisition Term Loan Commitment. Once repaid,
Acquisition Term Loans may not be reborrowed.
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(c) Loans under the Revolving Portion of the Loan Facility (each, a
"Revolving Loan" and, collectively, the "Revolving Loans") (i) shall be
made at any time and from time to time to the U.S. Borrowers after the
Closing Date and prior to the Revolving Loan Commitment Termination Date
in Dollars, (ii) except as hereinafter provided, shall initially be made
as a Base Rate Loan and thereafter shall, at the Applicable Borrower's
option and subject to the terms hereof, be a Base Rate Loan or a Reserve
Adjusted Eurodollar Loan; provided that all Revolving Loans made by all
Banks pursuant to the same Borrowing shall, unless otherwise specifically
provided herein, consist entirely of Loans of the same Type (provided that
partial conversions are permitted in accordance with Section 1.06), (iii)
may be repaid and reborrowed in accordance with the provisions hereof,
(iv) shall not exceed for any Bank at any time outstanding the Revolving
Loan Commitment of such Bank at such time and (v) shall not in any case be
made if the aggregate Dollar Equivalent amount of Revolving Loans and
Swingline Loans then outstanding, after giving effect to the Revolving
Loan requested by the relevant Notice of Borrowing and any Swingline Loans
subject to outstanding Notices of Borrowing, plus the Dollar Equivalent
amount of Letter of Credit Usage, after giving effect to the issuance of
all Letters of Credit subject to outstanding requests for issuance, would
exceed the lesser of (y) the Total Revolving Loan Commitment or (z) the
Borrowing Base as shown in the Borrowing Base Certificate that was last
delivered pursuant to Section 6.01; provided such Borrowing Base
Certificate was required to be delivered pursuant to and was in compliance
with Section 6.01 or was delivered after the Borrowing Base Certificate
last required to be delivered pursuant to Section 6.01.
(d) Swingline Loans (each, a "Swingline Loan" and, collectively, the
"Swingline Loans") (i) shall be made at any time and from time to time on
and after the Closing Date and prior to the Swingline Expiry Date (x) to
the U.S. Borrowers by the U.S. Swingline Banks in Dollars; (y) to each
Canadian Borrower by the Canadian Swingline Banks in Canadian Dollars; and
(z) to the U.K. Borrower by the U.K. Swingline Banks in Pounds Sterling,
(ii) shall be made (x) to the U.S. Borrowers as Base Rate Loans; (y) to
each Canadian Borrower, at its option and subject to the terms hereof, in
the form of an Acceptance (on the terms and conditions provided for herein
and in Schedule 1.16) or a Prime Rate Loan; provided that all Canadian
Swingline Loans made by all Canadian Swingline Banks pursuant to the
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same Borrowing shall, unless otherwise specifically provided for herein,
consist entirely of Loans of the same Type; and (z) to the U.K. Borrower,
at its option and subject to the terms hereof, as U.K. Base Rate Loans or
Reserve Adjusted Eurodollar Loans, (iii) may be repaid and reborrowed in
accordance with the provisions hereof, (iv) shall not exceed the
applicable Maximum Swingline Amount or the Total Revolving Loan
Commitment, (v) shall not in any case be made if the aggregate Dollar
Equivalent amount of Revolving Loans and Swingline Loans then outstanding,
after giving effect to the Dollar Equivalent amount of Swingline Loans
being requested and any Revolving Loans subject to outstanding Notices of
Borrowing, plus the Dollar Equivalent amount of Letter of Credit Usage,
after giving effect to the issuance of all Letters of Credit subject to
outstanding requests for issuance, would exceed the lesser of (y) the
Total Revolving Loan Commitment or (z) the Borrowing Base as shown in the
Borrowing Base Certificate that was last delivered pursuant to Section
6.01; provided such Borrowing Base Certificate was required to be
delivered pursuant to and in compliance with Section 6.01 or was delivered
after the Borrowing Base Certificate last required to be delivered
pursuant to Section 6.01, and (vi) in the case of U.S. Swingline Loans
shall constitute the joint and several obligations of the U.S. Borrowers.
No Swingline Bank shall be obligated to make any Swingline Loans at a time
when a Bank Default exists unless such Swingline Bank has entered into
arrangements satisfactory to it to eliminate such Swingline Bank's risk
with respect to the Defaulting Bank's or Banks' participation in such
Swingline Loans, including by cash collateralizing such Defaulting Bank's
or Banks' Dollar Percentage of the outstanding Swingline Loans.
Notwithstanding anything to the contrary contained in this Section
1.01(d), no Swingline Bank shall make any Swingline Loan after it has
received written notice from any Borrower, the Administrative Agent or the
Required Banks stating that a Default or an Event of Default exists and is
continuing until such time as such Swingline Bank shall have received
written notice (i) of rescission of all such notices from the party or
parties originally delivering such notice, (ii) of the waiver of such
Default or Event of Default by the Required Banks or (iii) that the
Administrative Agent, in good faith, believes such Default or Event of
Default has ceased to exist. The Canadian Swingline Loans shall be deemed
to include the face amount of all issued but unmatured Acceptances in
connection with the amount of the utilization thereof by the Canadian
Bor-
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rowers, but the Canadian Swingline Loans shall not include the face amount
of all issued but unmatured Acceptances in determining the principal
amount of such Loans on which the Canadian Borrowers shall pay interest.
(e) Notice to the Administrative Agent (which shall give notice to
all Revolving Facility Banks) (i) may be given on any Business Day, in the
sole discretion of the U.S. Swingline Bank with respect to the U.S.
Swingline Loans, (ii) may be given by any Swingline Bank upon the
occurrence of an Event of Default under Section 8.01, and (iii) shall be
deemed to be automatically given by each Swingline Bank with respect to
all Swingline Loans upon the occurrence of an Event of Default under
Section 8.05 (with respect to Holdings or the Company or any of its
Significant Subsidiaries) or upon the exercise of any of the remedies
provided in the last paragraph of Section 8, that the Dollar Equivalent of
such Swingline Bank's outstanding Swingline Loans to the Applicable
Borrower shall be funded with a Borrowing in Dollars of Revolving Loans.
In such case, Revolving Loans in Dollars, for the benefit of the U.S.
Borrowers, constituting Base Rate Loans (each such Borrowing, a "Mandatory
Borrowing") shall be made on the immediately succeeding Business Day by
all Revolving Facility Banks (without giving effect to any reductions
thereto pursuant to the last paragraph of Section 8) pro rata based on
each Bank's Dollar Percentage and the proceeds thereof shall be applied
directly to the Applicable Swingline Bank to repay such Swingline Bank for
such outstanding Swingline Loans. Each Revolving Facility Bank hereby
irrevocably agrees to make Revolving Loans upon one Business Day's notice
pursuant to each Mandatory Borrowing in the amount and in the manner
specified in the preceding sentence and on the date specified in writing
by the Applicable Swingline Bank notwithstanding (i) that the amount of
any Mandatory Borrowing may not comply with the Minimum Borrowing Amount
otherwise required hereunder, (ii) whether any conditions specified in
Section 4 are then satisfied, (iii) whether a Default or an Event of
Default then exists, (iv) the date of such Mandatory Borrowing and (v) the
amount of the Total Revolving Loan Commitment at such time. In the event
that any Mandatory Borrowing cannot for any reason be made on the date
otherwise required above (including, without limitation, as a result of
the commencement of a proceeding under the Bankruptcy Code with respect to
any of the Borrowers), then each such Revolving Facility Bank hereby
agrees that it shall forthwith purchase (as of the date the Mandatory
Borrowing
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would otherwise have occurred, but adjusted for the Dollar Equivalent of
any payments received from the Applicable Borrower (or Borrowers) on or
after such date and prior to such purchase) from the Swingline Bank such
participations in the outstanding Swingline Loans as shall be necessary to
cause such Revolving Facility Banks to share in the Dollar Equivalent of
such Swingline Loans ratably based upon their Dollar Percentage; provided
that (x) all interest payable on the Swingline Loans shall be for the
account of the applicable Swingline Bank until the date as of which the
respective participation is required to be purchased and, to the extent
attributable to the purchased participation, shall be payable to the
participant from and after such date and (y) at the time any purchase of
participations pursuant to this sentence is actually made, the purchasing
Revolving Facility Bank shall be required to pay the applicable Swingline
Bank interest on the principal amount of the participation purchased for
each day from and including the day upon which the Mandatory Borrowing
would otherwise have occurred to but excluding the date of payment for
such participation, and at the rate otherwise applicable to Revolving
Loans maintained as Base Rate Loans hereunder.
1.02. Minimum Amount of Each Borrowing; Maximum Number of
Borrowings. (a) The minimum aggregate principal amount of a Borrowing of Term
Loans consisting of Reserve Adjusted Eurodollar Loans or Base Rate Loans shall
be the Minimum Borrowing Amount and, if greater, shall be in integral multiples
of $100,000; provided, however, that the Borrowing of the A Term Portion and the
B Term Portion of the Initial Loans shall be in an aggregate principal amount of
$20,000,000 and $35,000,000, respectively.
(b) The minimum aggregate principal amount of a Borrowing of
Acquisition Term Loans consisting of Reserve Adjusted Eurodollar Loans or Base
Rate Loans shall be the Minimum Borrowing Amount and, if greater, shall be in
integral multiples of $100,000; provided, however, that the Banks' Acquisition
Term Loan Commitment shall terminate, on a pro rata basis, with respect to any
portion of the Total Acquisition Term Loan Commitments not utilized by the U.S.
Borrowers prior to the Acquisition Term Loan Commitment Termination Date.
(c) The minimum aggregate principal amount of a Borrowing of
Revolving Loans consisting of Reserve Adjusted Eurodollar Loans or Base Rate
Loans shall be the Minimum Borrowing Amount (other than a Borrowing of Base Rate
Loans such that the
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total amount of Revolving Loans to be outstanding after giving effect to such
Borrowing shall be equal to the Total Revolving Loan Commitment) and, if
greater, shall be in integral multiples of $100,000.
(d) More than one Borrowing may be incurred on any date; provided
that at no time shall there be outstanding more than twenty-four Borrowings of
Dollar Reserve Adjusted Eurodollar Loans or such higher number of Borrowings as
the Administrative Agent may agree.
(e) The minimum aggregate principal amount of a Borrowing of
Swingline Loans shall be the Borrowing Amount for Acceptances or the applicable
currency equivalent (determined in accordance with Section 2.04) of amounts as
agreed between the Applicable Borrower and the applicable Swingline Bank. More
than one Borrowing may be incurred on any date; provided that at no time shall
there be outstanding more than the number of Borrowings of U.K. Swingline Loans
as agreed between the U.K. Borrower and the U.K. Swingline Bank or the number of
outstanding Acceptances as agreed between the Canadian Borrowers and the
Canadian Swingline Banks.
1.03. Notice of Borrowings. (a) Each notice to be given pursuant to
this Section 1.03, which shall be substantially in the form of Exhibit J hereto
(each, a "Notice of Borrowing"), shall be irrevocable, shall be deemed a
representation by the Applicable Borrower that all conditions precedent to such
Borrowing set forth in Section 4.02 and, in the case of a Loan under the
Acquisition Portion, that all additional conditions under Section 4.03 have been
satisfied and shall specify (i) whether such Borrowing is a Swingline Loan or is
to be made from the A Term Loan Facility, the B Term Loan Facility, the
Acquisition Portion or the Revolving Portion, (ii) the aggregate principal
amount in Dollars, Canadian Dollars or Pounds Sterling of the Loans to be made
pursuant to such Borrowing, all of which shall be specified in such manner as is
necessary to comply with all limitations on Swingline Loans, Term Loans,
Acquisition Loans and Revolving Loans, as the case may be, outstanding
hereunder, including without limitation, availability under the Borrowing Base
and the applicable Maximum Swingline Amount limitations, (iii) the date of
Borrowing (which shall be a Business Day) and (iv) for notices delivered after
the Closing Date, whether the respective Borrowing shall consist of Base Rate
Loans, U.K. Base Rate Loans, Prime Rate Loans or Reserve Adjusted Eurodollar
Loans (or Acceptances) and, if Reserve Adjusted Eurodollar Loans, whether such
Reserve Adjusted Eurodollar Loans are U.S. Dollar Loans or Pounds Sterling
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Loans, the Interest Period to be initially applicable thereto and, if
Acceptances, the term applicable thereto. The Administrative Agent shall as
promptly as practicable give each Bank written notice (or telephonic notice
promptly confirmed in writing) of each proposed Borrowing, of such Bank's
proportionate share thereof and of the other matters covered by the Notice of
Borrowing.
(b) The provisions of this Section 1.03(b) shall not apply to any
Borrowings of Swingline Loans. Whenever the Company desires that the Banks make
the Initial Loans, an Authorized Officer of the Company shall give the
Administrative Agent at the Administrative Agent's Office prior to Noon (New
York time) at least one Business Day's prior written notice (or telephonic
notice promptly confirmed in writing) of such Borrowing. Whenever a U.S.
Borrower desires that the Banks make U.S. Dollar Loans which are Reserve
Adjusted Eurodollar Loans under the Loan Facility after the Closing Date, an
Authorized Officer of the Applicable Borrower shall give the Administrative
Agent at the Administrative Agent's Office prior to Noon (New York time) at
least three Business Days' prior written notice (or telephonic notice promptly
confirmed in writing) of each such Borrowing of Reserve Adjusted Eurodollar
Loans. Whenever a U.S. Borrower desires that the Banks make Base Rate Loans
(other than Swingline Loans or Borrowings of Revolving Loans incurred pursuant
to a Mandatory Borrowing) under the Loan Facility after the Closing Date, which
shall only be made in U.S. Dollars, an Authorized Officer of the Applicable
Borrower shall give the Administrative Agent at the Administrative Agent's
Office prior to 11:00 A.M. (New York time) on the date of the requested
Borrowing prior written notice (or telephonic notice promptly confirmed in
writing) of each such Borrowing of Base Rate Loans.
(c) Whenever a U.S. Borrower desires to incur U.S. Swingline Loans
hereunder, it shall give the Administrative Agent at the Administrative Agent's
Office and the U.S. Swingline Bank at the office designated by the U.S.
Swingline Bank not later than the time agreed between the U.S. Borrowers and the
U.S. Swingline Banks on the date that a U.S. Swingline Loan is to be incurred,
written notice or telephonic notice promptly confirmed in writing of each
Swingline Loan to be incurred hereunder.
(d) Whenever the U.K. Borrower desires to incur U.K. Swingline Loans
hereunder, it shall give the Administrative Agent at the Administrative Agent's
Office and the U.K. Swingline Bank at the office designated by the U.K.
Swingline Bank
<PAGE>
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not later than 1:00 P.M. (London time) in the case of U.K. Base Rate Loans and
10:00 A.M. (London time) in the case of Reserve Adjusted Eurodollar Loans on the
date that a U.K. Swingline Loan is to be incurred written notice (or telephonic
notice promptly confirmed in writing) of each such Borrowing of U.K. Swingline
Loans.
(e) Whenever a Canadian Borrower desires that the Canadian Swingline
Banks make Canadian Swingline Loans which are in the form of Acceptances after
the Closing Date, an Authorized Officer of such Canadian Borrower shall give the
Administrative Agent at the Administrative Agent's Office prior notice (or
telephonic notice promptly confirmed in writing) at such time as the
Administrative Agent may designate from time to time of each such Borrowing in
the form of Acceptances and shall otherwise comply with Schedule 1.16. Whenever
a Canadian Borrower desires that the Canadian Swingline Banks make Canadian
Swingline Loans which are Prime Rate Loans after the Closing Date, an Authorized
Officer of such Canadian Borrower shall give the Administrative Agent at the
Administrative Agent's Office and the Canadian Swingline Banks at the office
designated by the Canadian Swingline Banks prior written notice (or telephonic
notice promptly confirmed in writing) at such time as the Administrative Agent
may designate from time to time of each such Borrowing of Prime Rate Loans.
(f) The Dollar Equivalent amount of any Borrowing of Swingline Loans
in an Applicable Currency will be determined by the Administrative Agent for
such Borrowing on the Computation Date therefor in accordance with Section 1.14.
(g) Mandatory Borrowings shall be made upon the notice specified in
Section 1.01(e), with each U.S. Borrower irrevocably agreeing to the making of
the Mandatory Borrowings by it as set forth in Section 1.01(e).
(h) Without in any way limiting the obligation of any Borrower to
confirm in writing any telephonic notice permitted to be given hereunder, the
Administrative Agent or any Swingline Bank may act without liability upon the
basis of such telephonic notice, believed by the Administrative Agent or such
Swingline Bank in good faith to be from an Authorized Officer of such Borrower
prior to receipt of written confirmation. In each such case, each Borrower
hereby waives the right to dispute the Administrative Agent's or such Swingline
Bank's record of the terms of such telephonic notice.
<PAGE>
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1.04. Disbursement of Funds. (a) No later than 1:00 P.M. (New York
time) on the date specified in each Notice of Borrowing of Loans (other than
U.S. Swingline Loans) in U.S. Dollars (or in the case of Mandatory Borrowings,
not later than Noon (New York time) on the date specified in Section 1.01(e)),
each Bank will make available its pro rata portion of each Borrowing requested
to be made on such date in the manner provided below (x) with respect to Loans
denominated in Dollars, to the Administrative Agent at the Administrative
Agent's Office, (y) with respect to Loans denominated in Pounds Sterling, as
agreed between the U.K. Swingline Bank and the U.K. Borrower, and (z) with
respect to Prime Rate Loans denominated in Canadian Dollars, or Acceptances, in
accordance with Schedule 1.16, in each case as agreed between the Canadian
Swingline Banks and the Canadian Borrowers. The proceeds of such Borrowings of
Dollar Loans will be made available, as provided in Section 1.04(b), to the
Applicable Borrower in the amounts made available to the Administrative Agent
and in like funds received by the Administrative Agent by 2:00 P.M. (New York
time) on the date specified in the Notice of Borrowing. The proceeds of other
Loans will be made available to the Applicable Borrower as agreed with the
applicable Swingline Bank.
(b) Each Bank shall make available all amounts it is to fund under
any Borrowing of Term Loans, Acquisition Term Loans or Revolving Loans on or
after the Closing Date in immediately available funds to the Administrative
Agent to the account specified therefor by the Administrative Agent or if no
account is so specified at the Administrative Agent's Office and the
Administrative Agent will make such funds available to the Applicable Borrower
by depositing to the account specified therefor by the Applicable Borrower or if
no account is so specified to its account at the Administrative Agent's Office
the aggregate of the amounts so made available in the type of funds received.
Unless the Administrative Agent shall have been notified by any Bank prior to
the date of any such Borrowing that such Bank does not intend to make available
to the Administrative Agent its portion of the Borrowing or Borrowings to be
made on such date, the Administrative Agent may assume that such Bank has made
such amount available to the Administrative Agent on such date of Borrowing, and
the Administrative Agent, in reliance upon such assumption, may (in its sole
discretion and without any obligation to do so) make available to the Applicable
Borrower a corresponding amount. If such corresponding amount is not in fact
made available to the Administrative Agent by such Bank and the Administrative
Agent has made such corresponding amount available to the Applicable Borrower,
the Administrative Agent shall be entitled to recover
<PAGE>
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such amount from such Bank. If such Bank does not pay such corresponding amount
forthwith upon the Administrative Agent's demand therefor, the Administrative
Agent shall promptly notify the Applicable Borrower, and the Applicable Borrower
shall immediately pay such corresponding amount to the Administrative Agent (it
being understood that if the Applicable Borrower makes a request for a Revolving
Loan to reimburse the Administrative Agent, such Revolving Loan, if made, shall
be an immediate repayment). The Administrative Agent shall also be entitled to
recover from such Bank or the Applicable Borrower, as the case may be, interest
on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Administrative Agent to the
Applicable Borrower to the date such amount is recovered by the Administrative
Agent, at a rate per annum equal to (x) if paid by such Bank, the Federal Funds
Rate for payments in U.S. Dollars, or (y) if paid by the Applicable Borrower
(and/or one or more other Credit Parties), the then applicable rate of interest,
calculated in accordance with Section 1.08, for the respective Loans. The
Administrative Agent shall also be entitled to recover from any Bank an amount
equal to any other losses incurred by the Administrative Agent as a result of
the failure of such Bank to provide such amount as provided in this Agreement.
(c) Nothing herein shall be deemed to relieve any Bank from its
obligation to fulfill its Commitment hereunder or to prejudice any rights which
any Borrower or any other Credit Party may have against any Bank as a result of
any default by such Bank hereunder.
1.05. Notes. (a) Each Borrower's obligation to pay the principal of
and interest on all the Loans made to it by each Bank shall be evidenced: (i) if
A Term Loans, by a promissory note (each, an "A Term Note" and, collectively,
the "A Term Notes") duly executed and delivered by the U.S. Borrowers,
substantially in the form of Exhibit A-1 hereto, each with blanks appropriately
completed in conformity herewith; (ii) if B Term Loans, by a promissory note
(each, a "B Term Note" and, collectively, the "B Term Notes") duly executed and
delivered by the U.S. Borrowers, substantially in the form of Exhibit A-2
hereto, each with blanks appropriately completed in conformity herewith; (iii)
if Acquisition Term Loans, by a promissory note (each, an "Acquisition Term
Note" and, collectively, the "Acquisition Term Notes") duly executed and
delivered by the U.S. Borrowers, substantially in the form of Exhibit A-3
hereto, each with blanks appropriately completed in conformity herewith; (iv) if
Revolving Loans, by a promissory note (each,
<PAGE>
-13-
a "Revolving Note" and, collectively, the "Revolving Notes") duly executed and
delivered by the U.S. Borrowers substantially in the form of Exhibit B-1 hereto,
with blanks appropriately completed in conformity herewith; (v) if U.S.
Swingline Loans, by a promissory note (each, a "U.S. Swingline Note" and,
collectively, the "U.S. Swingline Notes") duly executed and delivered by the
U.S. Borrowers substantially in the form of Exhibit B-2 hereto, with blanks
appropriately completed in conformity herewith; (vi) if U.K. Swingline Loans, by
a promissory note (each, a "U.K. Swingline Note" and, collectively, the "U.K.
Swingline Notes") duly executed and delivered by the U.K. Borrower substantially
in the form of Exhibit B-3 hereto, with blanks appropriately completed in
conformity herewith; and (vii) if Canadian Swingline Loans, by a promissory note
(each, a "Canadian Swingline Note" and, collectively, the "Canadian Swingline
Notes") duly executed and delivered by each Canadian Borrower substantially in
the form of Exhibit B-4 hereto, with blanks appropriately completed in
conformity herewith.
(b) The A Term Note of the U.S. Borrowers issued to each Bank with
an A Term Loan Commitment shall (i) be executed by the U.S. Borrowers (and shall
constitute the joint and several obligations of the U.S. Borrowers), (ii) be
payable to the order of such Bank and be dated the Effective Date, (iii) be in a
stated principal amount equal to the A Term Loan Commitment of such Bank and be
payable in Dollars in the aggregate principal amount of the A Term Loans
evidenced thereby, (iv) mature, with respect to each Loan evidenced thereby, on
the Final A Term Loan Maturity Date, (v) be subject to mandatory prepayment as
provided in Section 3.02, (vi) bear interest as provided in the appropriate
clause of Section 1.08 in respect of the Base Rate Loans and Reserve Adjusted
Eurodollar Loans, as the case may be, evidenced thereby and (vii) be entitled to
the benefits of this Agreement and the other applicable Credit Documents.
(c) The B Term Note of the U.S. Borrowers issued to each Bank with a
B Term Loan Commitment shall (i) be executed by the U.S. Borrowers (and shall
constitute the joint and several obligations of the U.S. Borrowers), (ii) be
payable to the order of such Bank and be dated the Effective Date, (iii) be in a
stated principal amount equal to the B Term Loan Commitment of such Bank and be
payable in Dollars in the aggregate principal amount of the B Term Loans
evidenced thereby, (iv) mature, with respect to each Loan evidenced thereby, on
the Final B Term Loan Maturity Date, (v) be subject to mandatory prepayment as
provided in Section 3.02, (vi) bear interest as provided in the appropriate
clause of Section 1.08 in respect of
<PAGE>
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the Base Rate Loans and Reserve Adjusted Eurodollar Loans, as the case may be,
evidenced thereby and (vii) be entitled to the benefits of this Agreement and
the other applicable Credit Documents.
(d) The Acquisition Term Note of the U.S. Borrowers issued to each
Bank with an Acquisition Term Loan Commitment shall (i) be executed by the U.S.
Borrowers (and shall constitute the joint and several obligations of the U.S.
Borrowers), (ii) be payable to the order of such Bank and be dated the Closing
Date, (iii) be in a stated principal amount equal to the Acquisition Term Loan
Commitment of such Bank and be payable in Dollars in the aggregate principal
amount of the Acquisition Term Loan evidenced thereby, (iv) mature, with respect
to each Loan evidenced thereby, on the Final Acquisition Term Loan Maturity
Date, (v) be subject to mandatory prepayment as provided in Section 3.02, (vi)
bear interest as provided in the appropriate clause of Section 1.08 in respect
of the Base Rate Loans and Reserve Adjusted Eurodollar Loans, as the case may
be, evidenced thereby and (vii) be entitled to the benefits of this Agreement
and the other applicable Credit Documents.
(e) The Revolving Note of the U.S. Borrowers issued to each Bank
with a Revolving Loan Commitment shall (i) be executed by the U.S. Borrowers
(and shall constitute the joint and several obligations of the U.S. Borrowers),
(ii) be payable in Dollars to the order of such Bank and be dated the Effective
Date, (iii) be in a stated principal amount equal to the Revolving Loan
Commitment of such Bank and be payable in Dollars in the aggregate principal
amount of the Revolving Loans evidenced thereby, (iv) mature, with respect to
each Loan evidenced thereby, on the Revolving Maturity Date, (v) be subject to
mandatory prepayment as provided in Section 3.02, (vi) bear interest as provided
in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Reserve Adjusted Eurodollar Loans, as the case may be, evidenced thereby and
(vii) be entitled to the benefits of this Agreement and the other applicable
Credit Documents.
(f) The U.S. Swingline Note of the U.S. Borrowers issued to each
U.S. Swingline Bank shall (i) be executed by the U.S. Borrowers (and shall
constitute the joint and several obligations of the U.S. Borrowers), (ii) be
payable to the order of such U.S. Swingline Bank and be dated the Effective
Date, (iii) be in a stated principal amount equal to the U.S. Swingline Loan
Commitment of such Bank and be payable in Dollars in the principal amount of the
outstanding U.S. Swingline Loans evidenced thereby, (iv) mature, with respect to
each U.S. Swin-
<PAGE>
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gline Loan evidenced thereby, on the Swingline Expiry Date, (v) be subject to
mandatory prepayment as provided in Section 3.02, (vi) bear interest as provided
in the appropriate clause of Section 1.08 in respect of the Base Rate Loans
evidenced thereby and (vii) be entitled to the benefits of this Agreement and
the other applicable Credit Documents.
(g) The U.K. Swingline Note of the U.K. Borrower issued to each U.K.
Swingline Bank shall (i) be executed by the U.K. Borrower, (ii) be payable to
the order of such U.K. Swing-line Bank and be dated the Effective Date, (iii) be
in a stated principal amount equal to the U.K. Swingline Loan Commitment of such
Bank (expressed in Dollars) and be payable in Pounds Sterling in the principal
amount of the outstanding U.K. Swingline Loans evidenced thereby, (iv) mature,
with respect to each U.K. Swingline Loan evidenced thereby, on the Swingline
Expiry Date, (v) be subject to mandatory prepayment as provided in Section 3.02,
(vi) bear interest as provided in the appropriate clause of Section 1.08 in
respect of the U.K. Base Rate and Reserve Adjusted Eurodollar Loans evidenced
thereby and (vii) be entitled to the benefits of this Agreement and the other
applicable Credit Documents.
(h) The Canadian Swingline Note of each Canadian Borrower issued to
each Canadian Swingline Bank shall (i) be executed by such Canadian Borrower,
(ii) be payable to the order of such Canadian Swingline Bank and be dated the
Effective Date, (iii) be in a stated principal amount equal to the Canadian
Swingline Loan Commitment of such Bank expressed in U.S. Dollars and be payable
in Canadian Dollars in the aggregate principal amount of the Canadian Swingline
Loans evidenced thereby, (iv) mature, with respect to each Loan evidenced
thereby, on the Swingline Expiry Date, (v) be subject to mandatory prepayment as
provided in Section 3.02, (vi) bear interest as provided in the appropriate
clause of Section 1.08 in respect of the Prime Rate Loans evidenced thereby and
(vii) be entitled to the benefits of this Agreement and the other applicable
Credit Documents.
(i) Each Borrower hereby authorizes each Bank to note on its
internal records the date and amount of each Loan made by it, the date and
amount of each payment in respect thereof, the interest rates payable by the
Applicable Borrower in respect of each Loan and any Interest Period applicable
thereto, Acceptances issued under the Canadian Swingline Loan facility and the
amount of the Obligations which remain payable to such Bank in respect of such
Loan and will, prior to any transfer of any of its Notes, endorse on the reverse
side
<PAGE>
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thereof the outstanding principal amount of Loans evidenced thereby. Failure to
make any such notation shall not affect any Borrower's or any Credit Party's
obligations hereunder or under the other applicable Credit Documents in respect
of such Loans. All amounts and other information so recorded shall be prima
facie evidence thereof and binding on the Borrowers in the absence of manifest
error.
(j) Notwithstanding anything to the contrary contained above or
elsewhere in this Agreement, A Term Notes, B Term Notes, Acquisition Term Notes,
Revolving Notes and Swingline Notes shall only be delivered to Banks with Loans
of the respective kind which at any time specifically request the delivery of
such Notes. No failure of any Bank to request or obtain a Note evidencing its
Loans of any kind or to any Borrower shall affect or in any manner impair the
obligations of the respective Borrower or Borrowers to pay the Loans (and all
related Obligations) which would otherwise be evidenced thereby in accordance
with the requirements of this Agreement, and shall not in any way affect the
security or guarantees therefor provided pursuant to the various Credit
Documents. Any Bank which does not have a Note evidencing its outstanding Loans
shall in no event be required to make the notations on a Note otherwise
described in the preceding clause (i) but shall make notations on its internal
records. At any time when any Bank requests the delivery of a Note to evidence
its Loans of any kind, the respective Borrower or Borrowers shall promptly
execute and deliver to the respective Bank the requested Note or Notes in the
appropriate amount or amounts to evidence such Loans.
1.06. Continuations and Conversions. The provisions of this Section
1.06 shall not apply to (i) any continuations or conversions of Canadian
Swingline Loans and (ii) U.S. Swingline Loans, which at all times shall be
maintained as Base Rate Loans. The Applicable Borrower shall have the option to
convert on any Business Day all or a portion (which portion shall not be less
than the Minimum Borrowing Amount) of the outstanding principal amount of the
Loans owing by the Applicable Borrower pursuant to a single Portion of the Loan
Facility into a Borrowing or Borrowings pursuant to such Portion of another Type
of Loan; provided that (i) except as otherwise provided in Section 1.10(b),
Reserve Adjusted Eurodollar Loans may be converted into Base Rate Loans or U.K.
Base Rate Loans, as the case may be, or continued as Reserve Adjusted Eurodollar
Loans only on the last day of an Interest Period applicable thereto, (ii) no
such partial conversion of Reserve Adjusted Eurodollar Loans shall reduce the
outstanding principal amount
<PAGE>
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of Reserve Adjusted Eurodollar Loans under the Loan Facility (or Portion
thereof) made pursuant to a single Borrowing to less than the Minimum Borrowing
Amount and (iii) Revolving Loans and U.K. Swingline Loans may only be continued
as or converted into Reserve Adjusted Eurodollar Loans if no Default or Event of
Default is in existence on the date of the conversion and (iv) U.K. Swingline
Loans may only be continued as U.K. Swingline Loans and shall otherwise be
subject to the provisions of Section 1.01(e). Each such conversion (or
continuation) of Revolving Loans shall be effected by the Applicable Borrower by
giving the Administrative Agent at the Administrative Agent's Office prior to
Noon (New York time) at least three Business Days' (or the same Business Day in
the case of a conversion into Base Rate Loans) prior written notice (or
telephonic notice promptly confirmed in writing) (each, a "Notice of
Continuance/Conversion"), substantially in the form of Exhibit K hereto,
specifying the Loans to be so converted or continued, the Type of Loans to be
converted into and, if to be converted into or continued as Reserve Adjusted
Eurodollar Loans, the Interest Period to be initially applicable thereto. The
Administrative Agent shall give each Bank notice as promptly as practicable of
any such proposed conversion affecting any of its Loans. Each such continuation
of U.K. Swingline Loans shall be effected by giving the Administrative Agent at
the Administrative Agent's Office, and the U.K. Swingline Bank at the U.K.
Swingline Bank's Agent's Office prior to 10:00 A.M. (London time), a Notice of
Continuation/Conversion on the Business Day thereof specifying the Loans to be
continued and the Interest Period applicable thereto. If no Notice of
Continuance/Conversion has been duly delivered (i) on or before the third
Business Day prior to the last day of the Interest Period applicable thereto
with respect to a Reserve Adjusted Eurodollar Loan denominated in Dollars, such
Dollar Reserve Adjusted Eurodollar Loan shall be automatically converted into a
Base Rate Loan, and (ii) on the Business Day on which the Interest Period
applicable thereto with respect to a U.K. Swingline Loan, such U.K. Swingline
Loan shall be automatically converted into a U.K. Base Rate Loan.
1.07. Pro Rata Borrowings. All Borrowings under this Agreement
(including Mandatory Borrowings) shall be loaned by the Banks pro rata on the
basis of their A Term Loan Commitments, B Term Loan Commitments, Acquisition
Term Loan Commitments, Swingline Loan Commitments (except for Acceptances, which
may be rounded to multiples of $100,000 at the discretion of the Administrative
Agent) or Revolving Loan Commitments, as the case may be. No Bank shall be
responsible for any default by any other Bank in its obligation to make Loans
hereunder and
<PAGE>
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each Bank shall be obligated to make the Loans provided to be made by it
hereunder, regardless of the failure of any other Bank to fulfill its
commitments hereunder.
1.08. Interest. (a) Subject to Section 1.08(d) hereof, the unpaid
principal amount of each Base Rate Loan (for Dollar Loans) or U.K. Base Rate
Loan (for Pound Sterling Loans), as the case may be, shall bear interest from
the date of the Borrowing thereof until maturity (whether by acceleration or
otherwise) (or unless sooner converted into a Reserve Adjusted Eurodollar Loan)
at a rate per annum which shall at all times be equal to the sum of (i) the Base
Rate or U.K. Base Rate, as the case may be, in effect from time to time and (ii)
the applicable Interest Margin.
(b) Subject to Section 1.08(d) hereof, the unpaid principal amount
of each Reserve Adjusted Eurodollar Loan shall bear interest from the date of
the Borrowing thereof until maturity (whether by acceleration or otherwise) (or
unless sooner converted to a Base Rate Loan) at a rate per annum which shall at
all times be equal to the sum of (i) the relevant Eurodollar Rate, (ii) the
applicable Interest Margin and (iii) in the case of Loans made in Pounds
Sterling, the MLA Cost.
(c) Subject to Section 1.08(d) hereof, the unpaid principal amount
of each Prime Rate Loan shall bear interest from the date of the Borrowing
thereof until maturity (whether by acceleration or otherwise) or until repaid at
a rate per annum which shall at all times be equal to the sum of (i) the Prime
Rate in effect from time to time and (ii) the applicable Interest Margin. With
respect to Acceptances, stamping fees shall be payable in connection therewith
as provided in clause 1.04 of Schedule 1.16. Until maturity of the respective
Acceptances, interest shall not otherwise be payable with respect thereto.
(d) The unpaid principal amount of each Loan, upon the occurrence
and during the continuance of a Default, overdue principal and, to the extent
permitted by law, overdue interest in respect of each Loan shall bear interest
at a rate per annum equal to 2% plus the rate (including any applicable Interest
Margin) in effect from time to time, both before and after demand, maturity and
judgment.
(e) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, U.K. Base Rate Loan or Prime Rate
Loan, quarterly in
<PAGE>
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arrears on the last Business Day of each March, June, September and December
beginning June 30, 1998; (ii) in respect of each Reserve Adjusted Eurodollar
Loan, in arrears on the last day of each Interest Period applicable thereto and,
in the case of an Interest Period in excess of three months, on each date
occurring at three-month intervals after the first date of such Interest Period;
and (iii) in respect of each Reserve Adjusted Eurodollar Loan, on any prepayment
(on the amount prepaid), at maturity (whether by acceleration or otherwise) and,
after such maturity, on demand. Notwithstanding the foregoing, interest payable
at the rate provided in Section 1.08(d) shall be payable on demand.
(f) All computations of interest hereunder shall be made in
accordance with Section 11.07(b).
(g) The Administrative Agent, upon determining the interest rate for
any Borrowing of Dollar Reserve Adjusted Eurodollar Loans for any Interest
Period, shall promptly notify the Applicable Borrower and the Banks thereof.
Such determination shall, absent manifest error, be final, conclusive and
binding upon all parties hereto.
(h) The U.K. Swingline Bank, upon determining the interest rate for
any Borrowing of Pounds Sterling Reserve Adjusted Eurodollar Loan for any
Interest Period, shall promptly notify the U.K. Borrower and the Administrative
Agent thereof. Such determination shall, absent manifest error, be final,
conclusive and binding upon all parties thereto.
1.09. Interest Periods. At the time the Applicable Borrower gives a
Notice of Borrowing or Notice of Continuance/Conversion in respect of the making
of, continuance of, or conversion into, a Borrowing of Reserve Adjusted
Eurodollar Loans, it shall have the right to elect, by giving the Administrative
Agent (and, in the case of U.K. Swingline Loans, the U.K. Swingline Bank)
written notice (or telephonic notice promptly confirmed in writing), the
Interest Period for Reserve Adjusted Eurodollar Loans applicable to such
Borrowing, which Interest Period shall, at the option of the Applicable
Borrower, be a one, two, three, six or, if available by all the Banks and only
with respect to Dollar Loans, twelve month period. Notwithstanding anything to
the contrary contained above:
(a) the initial Interest Period for any Borrowing of Reserve
Adjusted Eurodollar Loans shall commence on the date of such Borrowing
(including the date of any conver-
<PAGE>
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sion from a Borrowing of Base Rate Loans or U.K. Base Rate Loans, as
applicable) and each Interest Period occurring thereafter in respect of
such Borrowing shall commence on the date on which the next preceding
Interest Period expires;
(b) if any Interest Period relating to a Borrowing of Reserve
Adjusted Eurodollar Loans begins on a date for which there is no
numerically corresponding date in the calendar month in which such
Interest Period ends, such Interest Period shall end on the last Business
Day of such calendar month;
(c) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that if any Interest Period in respect
of a Reserve Adjusted Eurodollar Loan would otherwise expire on a day
which is not a Business Day but is a day of the month after which no
further Business Day occurs in such month, such Interest Period shall
expire on the next preceding Business Day;
(d) no Interest Period shall extend with respect to A Term Loans,
beyond the Final A Term Loan Maturity Date, with respect to B Term Loans,
beyond the Final B Term Loan Maturity Date, with respect to Acquisition
Term Loans, beyond the Final Acquisition Term Loan Maturity Date, with
respect to Revolving Loans, beyond the Revolving Loan Maturity Date and
with respect to U.K. Swingline Loans, beyond the Swingline Expiry Date;
and
(e) no Interest Period with respect to any Borrowing of Dollar
Reserve Adjusted Eurodollar Loans shall extend beyond any date upon which
a U.S. Borrower is required to make a scheduled payment of principal with
respect to the Term Loans or Acquisition Term Loans if, after giving
effect to the selection of such Interest Period, the aggregate principal
amount of Term Loans or Acquisition Term Loans maintained as Reserve
Adjusted Eurodollar Loans with Interest Periods ending after such date of
scheduled payment of principal would exceed the amount of Term Loans or
Acquisition Term Loans permitted to be outstanding after such scheduled
payment of principal.
1.10. Special Provisions Governing Reserve Adjusted Eurodollar Loans
and Acceptances. Notwithstanding any other provision of this Agreement, the
following provisions shall
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govern with respect to Reserve Adjusted Eurodollar Loans and Acceptances as to
the matters covered:
(a) On an Interest Rate Determination Date, the Administrative Agent
(or the U.K. Swingline Bank, with respect to U.K. Swingline Loans) shall
determine (which determination shall, absent manifest error, be final,
conclusive and binding upon all parties hereto) the interest rate which
shall apply to the Reserve Adjusted Eurodollar Loans for which an interest
rate is then being determined for the applicable Interest Period and shall
promptly give notice thereof (in writing or by telephone confirmed in
writing) to the Applicable Borrower and to each Bank.
(b) In the event that (x) in the case of clause (i) below, the
Administrative Agent, (y) in the case of clause (ii) below, the U.K.
Swingline Bank, or (z) in the case of clause (iii) or (iv) below, any
Bank, shall have determined (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any
Interest Period that, by reason of any changes arising on or after
the Effective Date affecting the interbank eurodollar market,
adequate and fair means do not exist for ascertaining the applicable
interest rate on the basis provided for in the definition of
Eurodollar Rate;
(ii) on any date for determining the Sterling Eurodollar Rate
for any Interest Period that, by reason of any changes arising on or
after the Effective Date affecting the interbank eurodollar market,
adequate and fair means do not exist for ascertaining the applicable
interest rate on the basis provided for in the definition of
Sterling Eurodollar Rate;
(iii) at any time that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with
respect to any Reserve Adjusted Eurodollar Loans or its obligation
to make Reserve Adjusted Eurodollar Loans because of (x) any change
since the Effective Date (including changes proposed or published
prior to the Effective Date but taking effect thereafter) in any
applicable law, governmental rule, regulation, guideline or order,
whether or not having the force of law, or in the interpretation or
administration thereof by any court
<PAGE>
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or governmental or monetary authority charged with the
interpretation or administration thereof and including the
introduction of any new law or governmental rule, regulation,
guideline or order such as, for example, but not limited to: (A) a
change in the basis of taxation of payments to any Bank of the
principal of or interest on the Notes or any other amounts payable
hereunder (except for changes in the rate of tax on the net income
or profits of such Bank or any tax on or measured by the capital of
a Bank or any franchise tax based on the net income or net profits
of such Bank, in any case pursuant to the laws of the jurisdiction
in which its principal office or applicable lending office is
located) or (B) a change in official reserve requirements, but, in
all events, excluding reserves required under Regulation D to the
extent included in the computation of the Eurodollar Rate and/or (y)
other circumstances affecting such Bank, the interbank eurodollar
market, or the position of such Bank in either such market; or
(iv) at any time that the making or continuance of any Reserve
Adjusted Eurodollar Loan has become unlawful by compliance by such
Bank in good faith with any law, governmental rule, regulation,
guideline or order (or would conflict with any such governmental
rule, regulation, guideline or order not having the force of law
even though the failure to comply therewith would not be unlawful);
then, and in any such event, the Administrative Agent in the case of
clause (i) above, the U.K. Swingline Bank in the case of clause (ii)
above, or such Bank in the case of clause (iii) or (iv) above shall on
such date give notice (by telephone confirmed in writing) to the
Applicable Borrower and, in the case of clause (iii) or (iv), to the
Administrative Agent, of such determination (which notice the
Administrative Agent shall promptly transmit to each of the other Banks).
Thereafter (x) in the case of clauses (i) and (ii) above, Reserve Adjusted
Eurodollar Loans shall no longer be available until such time as the
Administrative Agent or the U.K. Swingline Bank, as the case may be,
notifies the Applicable Borrower and the Banks that the circumstances
giving rise to such notice by the Administrative Agent or the U.K.
Swingline Bank, as the case may be, no longer exist, and any Notice of
Borrowing or Notice of Continuance/Conversion given by the
<PAGE>
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Applicable Borrower with respect to the borrowing of or conversion into
(including continuance of) Reserve Adjusted Eurodollar Loans which have
not yet been incurred shall be deemed rescinded by the Applicable
Borrower, (y) in the case of clause (iii) above, the Applicable Borrower
shall pay to such Bank, upon written demand therefor, such additional
amounts (in the form of an increased rate of, or a different method of
calculating, interest or otherwise as such Bank in its reasonable
discretion shall determine) as shall be required to compensate such Bank
for such increased costs or reductions in amounts receivable hereunder (a
written notice as to the additional amounts owed to such Bank, showing the
basis for the calculation thereof, submitted to the Applicable Borrower
shall, absent manifest error, be final, conclusive and binding upon all
parties hereto) and (z) in the case of clause (iv) above, the Applicable
Borrower shall take one of the actions specified in Section 1.10(c) as
promptly as possible and, in any event, within the time period required by
law. Each Bank shall notify the Applicable Borrower of any event occurring
after the date hereof entitling such Bank to compensation under this
Section 1.10(b) as promptly as practicable, but in any event within 90
days, after such Bank obtains actual knowledge thereof; provided that if
any Bank fails to give such notice within 90 days after it obtains actual
knowledge of such an event, such Bank shall, with respect to compensation
payable pursuant to this Section 1.10(b) in respect of any costs or other
amounts resulting from or relating to such event, only be entitled to
payment under this Section 1.10(b) for such costs or other amounts from
and after the date 90 days prior to the date that such Bank does give such
notice.
(c) At any time that any Reserve Adjusted Eurodollar Loan is
affected by the circumstances described in Section 1.10(b)(iii) or (iv),
the Applicable Borrower may (and in the case of a Loan affected pursuant
to Section 1.10(b)(iv) shall) either (i) if a Notice of Borrowing or
Notice of Continuance/Conversion has been given with respect to the
affected Loan cancel said Notice of Borrowing or Notice of
Continuance/Conversion by giving the Administrative Agent or the U.K.
Swingline Bank, as applicable, telephonic notice (confirmed promptly in
writing) thereof on the same date that Applicable Borrower was notified by
a Bank pursuant to Section 1.10(b)(iii) or (iv), or (ii) if the affected
Reserve Adjusted Eurodollar Loan is then outstanding, upon at least three
Business Days' notice to
<PAGE>
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the Administrative Agent or the U.K. Swingline Bank, as the case may be,
require the affected Bank to convert each such Reserve Adjusted Eurodollar
Loan into a Base Rate Loan or U.K. Base Rate Loan, as the case may be;
provided that if more than one Bank is affected at any time, then all
affected Banks must be treated the same pursuant to this Section 1.10(c);
and provided, further, that the Applicable Borrower shall compensate any
such affected Banks as set forth in Section 1.10(f).
(d) Anything herein to the contrary notwithstanding, if on any
Interest Rate Determination Date no Eurodollar Rate is available by reason
of the inability of the Administrative Agent or U.K. Swingline Bank, as
the case may be, to determine such interest rate in accordance with the
definition thereof, the Administrative Agent or U.K. Swingline Bank, as
the case may be, shall give the Applicable Borrower and each Bank prompt
notice thereof and the Loans requested to be made as Reserve Adjusted
Eurodollar Loans shall, subject to the applicable notice requirements, be
made as Base Rate Loans or U.K. Base Rate Loans, as the case may be.
(e) Each Bank agrees that, as promptly as practicable after it
becomes aware of the occurrence of any event or the existence of a
condition that would cause it to be an affected Bank under Section
1.10(b)(iii) or (iv), it will, to the extent not inconsistent with such
Bank's internal policies, use reasonable efforts to make, fund or maintain
the affected Reserve Adjusted Eurodollar Loans of such Bank through
another lending office of such Bank if as a result thereof the additional
moneys which would otherwise be required to be paid in respect of such
Loans pursuant to Section 1.10(b)(iii) would be materially reduced or the
illegality or other adverse circumstances which would otherwise require
prepayment of such Loans pursuant to Section 1.10(b)(iv) would cease to
exist, and if, as determined by such Bank, in its reasonable discretion,
the making, funding or maintaining of such Loans through such other
lending office would not otherwise adversely affect such Loans or such
Bank. The Applicable Borrower hereby agrees to pay all reasonable expenses
incurred by any Bank in transferring the Loans to another lending office
of such Bank pursuant to this Section 1.10(e).
(f) The Applicable Borrower shall compensate each Bank, upon written
request by that Bank, for all reason-
<PAGE>
-25-
able losses, expenses and liabilities (including, without limitation, such
factors as any interest paid by that Bank to Banks of funds borrowed by it
to make or carry its Reserve Adjusted Eurodollar Loans and any loss
sustained by that Bank in connection with re-employment of such funds
(based upon the difference between the amount earned in connection with
re-employment of such funds and the amount payable by the Applicable
Borrower if such funds had been borrowed or remained outstanding) which
that Bank may sustain with respect to the Applicable Borrower's Reserve
Adjusted Eurodollar Loans: (i) if for any reason (other than a default or
error by that Bank) a Borrowing of any such Reserve Adjusted Eurodollar
Loan does not occur on a date specified therefor in a Notice of Borrowing
or Notice of Continuance/Conversion or in a telephonic request for
borrowing or conversion, or a successive Interest Period in respect of any
such Reserve Adjusted Eurodollar Loan does not commence after notice
therefor is given pursuant to Section 1.06, (ii) if any prepayment (as
required by Sections 3.01 and 3.02, by acceleration or otherwise) or
conversion of any of such Bank's Reserve Adjusted Eurodollar Loans to the
Applicable Borrower occurs on a date which is not the last day of the
Interest Period applicable to that Loan, (iii) if any prepayment of any
such Bank's Reserve Adjusted Eurodollar Loans to the Applicable Borrower
is not made on any date specified in a notice of prepayment given by the
Applicable Borrower, or (iv) as a consequence of any other failure by the
Applicable Borrower to repay such Bank's Reserve Adjusted Eurodollar Loans
to the Applicable Borrower when required by the terms of this Agreement.
(g) If at any time prior to the acceptance of Acceptances by the
Canadian Swingline Bank, such Bank shall have determined in good faith
(which determination shall be conclusive) that, by reason of circumstances
affecting the market for bankers' acceptances, adequate and fair means do
not exist for determining discount rates on bankers' acceptances, neither
Canadian Borrower shall have the right to obtain a Credit Extension by
means of Acceptances.
1.11. Capital Requirements. If any Bank shall have determined that
the adoption or effectiveness after the Effective Date of any applicable law,
rule or regulation regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
<PAGE>
-26-
interpretation or administration thereof, or compliance by such Bank or such
Bank's parent with any request or directive regarding capital adequacy (whether
or not having the force of law) of any such authority, central bank or
comparable agency (including in each case any such change proposed or published
prior to the date hereof but taking effect thereafter), has or would have the
effect of reducing the rate of return on such Bank's or such Bank's parent's
capital or assets as a consequence of such Bank's obligations hereunder to a
level below that which such Bank or such Bank's parent could have achieved but
for such adoption, effectiveness or change or as a consequence of an increase in
the amount of capital required to be maintained by such Bank (including in each
case, without limitation, with respect to any Bank's Commitment or any Loan),
then from time to time, within 15 days after demand by such Bank (with a copy to
the Administrative Agent), the Applicable Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank or such Bank's parent,
as the case may be, for such reduction. Each Bank, upon determining in good
faith that any additional amounts will be payable pursuant to this Section 1.11,
will give written notice thereof to the Applicable Borrower, which notice shall
set forth in reasonable detail the basis of the calculation of such additional
amounts. Each Bank shall notify the Applicable Borrower of any event occurring
after the date hereof entitling such Bank to compensation under this Section
1.11 as promptly as practicable, but in any event within 90 days, after such
Bank obtains actual knowledge thereof; provided that if any Bank fails to give
such notice within 90 days after it obtains actual knowledge of such an event,
such Bank shall, with respect to compensation payable pursuant to this Section
1.11 in respect of any costs or other amounts resulting from or relating to such
event, only be entitled to payment under this Section 1.11 for such costs or
other amounts from and after the date 90 days prior to the date that such Bank
does give such notice.
Each Bank agrees that, as promptly as practicable after it becomes
aware of the occurrence of any event or the existence of a condition that would
cause it to be an affected Bank under this Section 1.11, it will, to the extent
not inconsistent with such Bank's internal policies, use reasonable efforts to
make, fund or maintain the affected Loans of such Bank through another lending
office of such Bank if, as a result thereof, the additional moneys which would
otherwise be required to be paid in respect of such Loans pursuant to this
Section 1.11 would be materially reduced and if, as determined by such Bank, in
its reasonable discretion, the making, funding or maintaining of such Loans
through such other lending office
<PAGE>
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would not otherwise materially adversely affect such Loans or such Bank. The
Applicable Borrower hereby agrees to pay all reasonable expenses incurred by any
Bank in transferring the Loans to another lending office of such Bank pursuant
to this Section 1.11.
1.12. Total Loan Commitments; Limitations on Outstanding Loan
Amounts. The original amount of the (i) Total Commitments is $155,000,000, (ii)
Total A Term Loan Commitment is $20,000,000, (iii) Total B Term Loan Commitment
is $35,000,000, (iv) Total Acquisition Term Loan Commitment is $30,000,000, (v)
Total Revolving Loan Commitment is $70,000,000, including up to $20,000,000 of
Letters of Credit, (vi) Total U.S. Swingline Commitment is $10,000,000, (vii)
Total U.K. Swingline Commitment is $15,000,000 and (viii) Total Canadian
Swingline Commitment is $5,000,000. Anything contained in this Agreement to the
contrary notwithstanding, (a) in no event shall the sum of the aggregate
principal amount of all Term Loans, Acquisition Term Loans and Revolving Loans
of any Bank at any time exceed such Bank's portion of the Total Commitments, (b)
in no event shall the sum of the aggregate principal amount of all Term Loans,
Acquisition Term Loans, Revolving Loans and the Dollar Equivalent of Swingline
Loans from all Banks at any time exceed the Total Commitments, (c) in no event
shall the aggregate principal amount of all Acquisition Term Loans exceed the
Total Acquisition Term Loan Commitment, (d) in no event shall the Revolving
Loans, the Dollar Equivalent of Swingline Loans and the Dollar Equivalent of
Letter of Credit Usage, after giving effect to all Revolving Loans, Swingline
Loans and Letters of Credit then requested, exceed the Total Revolving Loan
Commitments, (e) in no event shall the aggregate principal amount of all
Revolving Loans, the Dollar Equivalent of Swingline Loans and the Dollar
Equivalent of Letter of Credit Usage, after giving effect to all Revolving
Loans, Swingline Loans and Letters of Credit then requested, exceed the
Borrowing Base and (f) in no event shall the aggregate principal Dollar
Equivalent of Swingline Loans exceed the applicable Maximum Swingline Amount.
1.13. Letters of Credit.
(a) Letters of Credit. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of the
Borrowers set forth herein and in the other Credit Documents, in addition to
requesting that the Banks make Revolving Loans pursuant to Section 1.03, the
U.S. Borrowers may request, in accordance with the provisions of this Section
1.13, that one or more Issuing Banks issue Letters
<PAGE>
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of Credit for the account of the Borrowers; provided that (i) no Borrower shall
request that any Bank issue any Letter of Credit and a Bank shall not issue any
Letter of Credit, if after giving effect to such issuance the sum of (A) the
Dollar Equivalent amount of Letter of Credit Usage on the date of such issuance,
after giving effect to the issuance of all Letters of Credit subject to
outstanding requests for issuance, plus (B) the Dollar Equivalent amount of
Revolving Loans and Swingline Loans then outstanding, after giving effect to the
making of all Revolving Loans and Swingline Loans then requested by all
outstanding but unfunded Notices of Borrowing, would exceed the Total Revolving
Loan Commitment then in effect, (ii) no Borrower shall request that any Bank
issue any Letter of Credit and a Bank shall not issue any Letter of Credit if
after giving effect to such issuance, the sum of the amounts described in clause
(i) above would exceed the Borrowing Base as would be shown in the Borrowing
Base Certificate that was last delivered pursuant to Section 6.01; provided such
Borrowing Base Certificate was required to be delivered pursuant to and was in
compliance with Section 6.01 or was delivered after the Borrowing Base
Certificate last required to be delivered pursuant to Section 6.01, (iii) in no
event shall any Issuing Bank issue (A) any Letter of Credit having an expiration
date later than thirty (30) Business Days prior to the Revolving Maturity Date,
as applicable, after giving effect to any possible renewal of such Letter of
Credit pursuant to the proviso to the following clause (iii)(B), (B) subject to
the foregoing clause (iii)(A), any Letter of Credit having an expiration date
more than one year after its date of issuance; provided that, subject to the
foregoing clause (iii)(A), this clause (B) shall not prevent any Issuing Bank
from issuing a Letter of Credit containing a provision to the effect that such
Letter of Credit will automatically be renewed annually for a period not to
exceed one year, so long as such renewable Letter of Credit provides that it
shall not at any time be renewed for an additional year if (I) the Applicable
Borrower notifies the Issuing Bank in writing at least one Business Day prior to
the applicable renewal date that the Applicable Borrower elects to allow the
Letter of Credit to expire without being renewed, or (II) the Issuing Bank or
the Required Banks notify the Applicable Borrower in writing, prior to the date
set forth in such Letter of Credit as the date by which the beneficiary thereof
is to be notified whether such Letter of Credit is to be renewed, that such
Letter of Credit shall not be so renewed, in which case such Letter of Credit
shall not be so renewed, or (C) any Letter of Credit the initial stated amount
of which is less than $10,000 or the Dollar Equivalent thereof and (iv) the U.S.
Borrowers shall not request that any Issuing Bank issue and no Issuing
<PAGE>
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Bank shall issue any Letter of Credit if, after giving effect to such issuance
and the issuance of all other requested Letters of Credit, the then outstanding
Letter of Credit Usage in respect of the Dollar Equivalent of all Letters of
Credit would exceed $20,000,000.
The issuance of any Letter of Credit in accordance with the
provisions of this Section 1.13 shall be given effect in the calculation of the
aggregate principal amount of Revolving Loans outstanding and the Dollar
Equivalent of Letter of Credit Usage (except as provided in the definition of
Letter of Credit Usage) and shall require the satisfaction of each condition set
forth in Section 4.04.
Immediately upon the issuance of each Letter of Credit, each Bank
with a Revolving Loan Commitment other than the Issuing Bank or Banks shall be
deemed to, and hereby agrees to, have irrevocably purchased from the Issuing
Bank a participation (such participation of each Bank in each Letter of Credit
being hereinafter referred to as its "Letter of Credit Participation") in the
Dollar Equivalent of such Letter of Credit and each drawing thereunder in an
amount equal to such Bank's pro rata share (determined on the basis of such
Bank's Revolving Loan Commitment) of the maximum amount which is or at any time
may become available to be drawn thereunder.
Each Letter of Credit may provide that the Issuing Bank may (but
shall not be required to) pay the beneficiary thereof upon the occurrence of an
Event of Default and the acceleration of the maturity of the Revolving Loans or,
if payment is not then due to the beneficiary, provide for the deposit of funds
in an account to secure payment to the beneficiary and that any funds so
deposited shall be paid to the beneficiary of the Letter of Credit if conditions
to such payment are satisfied or returned to the Issuing Bank for distribution
to the Banks (or, if all Obligations shall have been paid in full, to the
Applicable Borrower) if no payment to the beneficiary has been made and the
final date available for drawings under the Letter of Credit has passed. Each
payment or deposit of funds by an Issuing Bank as provided in this paragraph
shall be treated for all purposes of this Agreement as a drawing duly honored by
such Issuing Bank under the related Letter of Credit.
(b) Request for Issuance. Whenever a U.S. Borrower desires the
issuance of a Letter of Credit, it shall deliver to the Administrative Agent a
request for issuance of a Letter of Credit no later than Noon (New York time) at
least three Busi-
-30-
<PAGE>
ness Days, or such shorter period as may be agreed to by any Issuing Bank in
any particular instance, in advance of the proposed date of issuance; provided
that a Letter of Credit denominated in a currency other than U.S. Dollars,
Canadian Dollars or Pounds Sterling will be issued as soon as available, which
may be more than three Business Days after the request therefor. The request for
issuance with respect to any Letter of Credit shall specify (i) the proposed
date of issuance (which shall be a business day under the laws of the
jurisdiction of the Issuing Bank) of such Letter of Credit, (ii) the face amount
and currency of such Letter of Credit, (iii) the expiration date of such Letter
of Credit and (iv) the name and address of the beneficiary of such Letter of
Credit. As soon as practicable after delivery of such request for issuance of a
Letter of Credit, the Issuing Bank for such Letter of Credit shall be determined
as provided in Section 1.13(c). Prior to the date of issuance, the Applicable
Borrower shall specify a precise description of the documents and the verbatim
text of any certificate to be presented by the beneficiary of such Letter of
Credit which, if presented by such beneficiary prior to the expiration date of
the Letter of Credit, would require the Issuing Bank to make payment under the
Letter of Credit; provided that the Issuing Bank, in its sole judgment, may
require changes in any such documents and certificates; and provided, further,
that no Letter of Credit shall require payment against a conforming draft to be
made thereunder earlier than Noon in the time zone of the Issuing Bank on the
Business Day (which shall be a business day under the laws of the jurisdiction
of the Issuing Bank) next succeeding the Business Day (which shall be a Business
Day under the laws of the jurisdiction of the Issuing Bank) that such draft is
presented. In determining whether to pay under any Letter of Credit, the Issuing
Bank shall be responsible only to determine that the documents and certificates
required to be delivered under that Letter of Credit have been delivered and
that they comply on their face with the requirements of that Letter of Credit.
Promptly after receipt of a request for issuance of a Letter of Credit and the
determination of the Issuing Bank thereof, the Administrative Agent shall notify
each Bank having a Revolving Loan Commitment of the proposed issuance, the
identity of the Issuing Bank and the amount of each other Bank's respective
participation therein, determined in accordance with Section 1.13(a).
(c) Determination of Issuing Bank.
(1) Upon receipt by the Administrative Agent of a request for
issuance pursuant to Section 1.13(b) with respect to a Letter of Credit, in the
event the Administrative Agent
<PAGE>
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elects to issue such Letter of Credit, the Administrative Agent shall so notify
the Applicable Borrower, and the Administrative Agent shall be the Issuing Bank
with respect thereto. In the event that the Administrative Agent, in its sole
discretion, elects not to issue such Letter of Credit, the Administrative Agent
shall promptly so notify the Applicable Borrower, and the Applicable Borrower
may request any other Bank having a Revolving Loan Commitment to issue such
Letter of Credit. Each such Bank so requested to issue such Letter of Credit
shall promptly notify the Applicable Borrower and the Administrative Agent
whether or not, in its sole discretion, it has elected to issue such Letter of
Credit, and any such Bank that so elects to issue such Letter of Credit shall be
the Issuing Bank with respect thereto. In the event that each other Bank elects
not to issue such Letter of Credit, the Administrative Agent agrees to issue
such Letter of Credit and to be the Issuing Bank with respect thereto.
(2) Each Issuing Bank that elects to issue a Letter of Credit shall
promptly give written notice to the Administrative Agent and each other Bank of
the information required under Section 1.13(b)(i)-(iv) relating to the Letter of
Credit.
(d) Payment of Amounts Drawn Under Letters of Credit. In the event
of any request for drawing under any Letter of Credit by the beneficiary
thereof, the Issuing Bank shall notify the Applicable Borrower and the
Administrative Agent on or before the date on which such Issuing Bank intends to
honor such drawing, and the Applicable Borrower shall reimburse such Issuing
Bank on the day on which such drawing is honored in an amount in same day funds
equal to the amount of and in the same currency as such drawing; provided that,
anything contained in this Agreement to the contrary notwithstanding, (i) unless
the Applicable Borrower shall have notified the Administrative Agent and such
Issuing Bank prior to Noon (New York time) on the Business Day of the date of
such drawing that the Applicable Borrower intends to reimburse such Issuing Bank
for the amount of such drawing with funds other than the proceeds of Revolving
Loans, the Applicable Borrower shall be deemed to have timely given a Notice of
Borrowing to the Administrative Agent requesting the Banks having Revolving Loan
Commitments to make Revolving Loans that are Base Rate Loans on the Business Day
following the date on which such drawing is honored in an amount equal to the
Dollar Equivalent amount of such drawing, and (ii) the Banks shall, on the date
of such drawing, make Revolving Loans that are Base Rate Loans in the amount of
such drawing, the proceeds of which shall be applied directly by the
Administrative Agent to reimburse such Issuing
<PAGE>
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Bank for the Dollar Equivalent amount of such drawing; and further provided that
if, for any reason, proceeds of Revolving Loans are not received by such Issuing
Bank on such date in an amount equal to the amount of such drawing, such Issuing
Bank shall be entitled to reimbursement in accordance with Section 1.04, on the
Business Day (which shall be a business day under the laws of the jurisdiction
of such Issuing Bank) immediately following the date of such drawing, in an
amount in same day funds equal to the excess of the amount of such drawing over
the amount of such Revolving Loans, if any, that are so received, plus accrued
interest on such amount at the rate set forth in Section 1.13(f)(1)(i).
(e) Payment by Banks. In the event that the Applicable Borrower
shall fail to reimburse an Issuing Bank as provided in Section 1.13(d) in an
amount equal to the Dollar Equivalent amount of any drawing honored by such
Issuing Bank under a Letter of Credit issued by it, such Issuing Bank shall
promptly notify each Bank having a Revolving Loan Commitment of the unreimbursed
Dollar Equivalent amount of such drawing and of such Bank's respective
participation therein. Each Bank having a Revolving Loan Commitment shall make
available to such Issuing Bank an amount equal to the Dollar Equivalent amount
of its respective participation in same day funds at the office of such Issuing
Bank specified in such notice, not later than 1:00 P.M. (New York time) on the
Business Day (which shall be a business day under the laws of the jurisdiction
of such Issuing Bank) after the date notified by such Issuing Bank. In the event
that any Bank having a Revolving Loan Commitment fails to make available to such
Issuing Bank the Dollar Equivalent amount of such Bank's participation in such
Letter of Credit as provided in this Section 1.13(e), such Issuing Bank shall be
entitled to recover such amount on demand from such Bank together with interest
at the customary rate set by the Administrative Agent for the correction of
errors among banks for three Business Days and thereafter at the Base Rate. Each
Issuing Bank shall distribute to each other Bank having a Revolving Loan
Commitment which has paid all amounts payable by it under this Section 1.13(e)
with respect to any Letter of Credit issued by such Issuing Bank such other
Bank's pro rata share of all payments received by such Issuing Bank from the
Applicable Borrower in reimbursement of drawings honored by such Issuing Bank
under such Letter of Credit when such payments are received. Nothing in this
Section 1.13(e) shall be deemed to relieve any Bank from its obligation to pay
all amounts payable by it under this Section 1.13(e) with respect to any Letter
of Credit issued by an Issuing Bank or to prejudice any rights
<PAGE>
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that the Applicable Borrower or any other Bank may have against a Bank as a
result of any default by such Bank hereunder.
(f) Compensation.
(1) The Applicable Borrower agrees to pay the following amounts with
respect to all Letters of Credit:
(i) with respect to drawings made under any Letter of Credit,
interest, payable on demand, on the amount paid by such Issuing Bank in
respect of each such drawing from and including the date of the drawing
through the date such amount is reimbursed by the Applicable Borrower
(including any such reimbursement out of the proceeds of Revolving Loans
pursuant to Section 1.13(d)) at a rate which is equal to the interest rate
then applicable to Base Rate Loans for the period from the date of such
drawing to and including the first Business Day after the date of such
drawing and thereafter at a rate equal to 2% per annum in excess of the
rate of interest otherwise payable under this Agreement for Base Rate
Loans during such period; provided that amounts reimbursed after 2:00 p.m.
(New York time) on any date shall be deemed to be reimbursed on the next
succeeding Business Day;
(ii) with respect to the issuance, amendment or transfer of each
Letter of Credit and each drawing made thereunder, documentary and
processing charges (it being understood that such charges are without
duplication of the fees set forth in clause (3) below) in accordance with
such Issuing Bank's standard schedule for such charges in effect at the
time of such amendment, transfer or drawing, as the case may be.
(2) The Applicable Borrower agrees to pay to the Administrative
Agent for distribution to each Bank having a Revolving Loan Commitment in
respect of each Letter of Credit outstanding such Bank's pro rata share of a
commission equal to 2.25% per annum of the maximum amount available from time to
time to be drawn under such outstanding Letters of Credit, payable in arrears on
and through the last day of each fiscal quarter of the Applicable Borrower and
calculated on the basis of a 360-day year and the actual number of days elapsed.
Upon the happening and during the continuance of an Event of Default described
in Section 8.01, the commission referred to in the preceding sentence shall be
4.25% per annum.
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(3) The Applicable Borrower agrees to pay to each Issuing Bank in
respect of each Letter of Credit a commission equal to .125% per annum of the
maximum amount available at any time to be drawn under such Letter of Credit
issued by such Issuing Bank, payable in arrears on and through the last day of
each fiscal quarter of the Applicable Borrower and calculated on the basis of a
360-day year and the actual number of days elapsed or, if the maximum amount
available to be drawn under such Letter of Credit is the Dollar Equivalent of
$40,000 or less, $500 per annum, payable in arrears on the last day of each
fiscal quarter.
Amounts payable under clauses (1)(i) and (2) of this Section 1.13(f)
shall be paid to the Administrative Agent on behalf of the Banks having a
Revolving Loan Commitment. The Administrative Agent shall distribute promptly to
each Bank having a Revolving Loan Commitment its pro rata share of such amount.
Amounts payable under clauses (1)(ii) and (3) of this Section 1.13(f) shall be
paid directly to the Issuing Bank.
(g) Obligations Absolute. The obligation of the Applicable Borrower
to reimburse each Issuing Bank for drawings made under the Letters of Credit
issued by it and the obligations of the Banks under Section 1.13(e) shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances including, without limitation,
the following circumstances:
(1) any lack of validity or enforceability of any Letter of Credit;
(2) the existence of any claim, setoff, defense or other right that
the Applicable Borrower or any Affiliate of the Applicable Borrower or any
other Person may have at any time against a beneficiary or any transferee
of any Letter of Credit (or any persons or entities for whom any such
beneficiary or transferee may be acting), such Issuing Bank, any Bank or
any other Person, whether in connection with this Agreement, the
Transaction contemplated herein or any unrelated transaction;
(3) any draft, demand, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
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(4) payment by such Issuing Bank under any Letter of Credit against
presentation of a demand, draft or certificate or other document that does
not comply with the terms of such Letter of Credit;
(5) any other circumstance or happening whatsoever that is similar
to any of the foregoing; or
(6) the fact that a Default or Event of Default shall have occurred
and be continuing;
provided, in each case, that payment by the applicable Issuing Bank under the
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Bank under the circumstances in question (as
determined by a court of competent jurisdiction).
(h) Additional Payments. If by reason of (a) any change after the
Effective Date in applicable law, regulation, rule, decree or regulatory
requirement or any change in the interpretation or application by any judicial
or regulatory authority of any law, regulation, rule, decree or regulatory
requirement or (b) compliance by any Issuing Bank or any Bank with any
direction, request or requirement (whether or not having the force of law) of
any governmental or monetary authority including, without limitation, Regulation
D:
(i) such Issuing Bank or any Bank shall be subject to any tax, levy,
charge or withholding of any nature or to any variation thereof (except
for changes in the rate of tax imposed on the net income or net profits of
such Bank or any tax on or measured by the capital of a Bank or any
franchise tax based on the net income or net profits of such Bank, in any
case pursuant to the laws of the jurisdiction in which its principal
office or applicable lending office is located) or to any penalty with
respect to the maintenance or fulfillment of its obligations under this
Section 1.13, whether directly or by such being imposed on or suffered by
such Issuing Bank or any Bank;
(ii) any reserve, deposit or similar requirement is or shall be
applicable, imposed or modified in respect of any Letter of Credit issued
by such Issuing Bank or participations therein purchased by any Bank; or
(iii) there shall be imposed on such Issuing Bank or any Bank any
other condition regarding this Section 1.13, any Letter of Credit or any
participation therein;
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and the result of the foregoing is to directly or indirectly increase the cost
to such Issuing Bank or any Bank of issuing, making or maintaining any Letter of
Credit or of purchasing or maintaining any participation therein, or to reduce
the amount receivable in respect thereof by such Issuing Bank or any Bank, then
and in any such case such Issuing Bank or such Bank shall, as promptly as
practical, but in any event within 90 days, after such Bank obtains actual
knowledge that the additional cost is incurred or the amount received is
reduced, notify the Applicable Borrower and the Applicable Borrower shall pay on
demand such amounts as such Issuing Bank or such Bank may specify to be
necessary to compensate such Issuing Bank or such Bank for such additional cost
or reduced receipt, together with interest on such amount from the date demanded
until payment in full thereof at a rate per annum equal at all times to the rate
applicable to Base Rate Loans then in effect; provided, however, that if any
Bank fails to give such notice within 90 days after it obtains actual knowledge
of such an event, such Bank shall, with respect to compensation payable pursuant
to this Section 1.13(h), only be entitled to payment under this Section 1.13(h)
for such costs or other amounts from and after the date 90 days prior to the
date that such Bank does give such notice. A certificate in reasonable detail as
to the amount of such increased cost or reduced receipt, submitted to the
Applicable Borrower and the Administrative Agent by that Issuing Bank or any
Bank, as the case may be, shall, absent manifest error, be final, conclusive and
binding for all purposes.
(i) Indemnification; Nature of Issuing Bank's Duties. In addition to
amounts payable as elsewhere provided in this Section 1.13, without duplication,
the U.S. Borrowers hereby agree, jointly and severally, to protect, indemnify,
pay and save each Issuing Bank (and if the other Banks have been requested to
participate pursuant to Section 1.13(e), the Banks) harmless from and against
any and all claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys' fees and allocated costs of internal
counsel) which such Bank may incur or be subject to as a consequence, direct or
indirect, of (i) the issuance of the Letters of Credit or (ii) the failure of
such Issuing Bank to honor a drawing under any Letter of Credit as a result of
any act or omission, whether rightful or wrongful, of any present or future de
jure or de facto government or Governmental Authority (all such acts or
omissions herein called "Government Acts").
As between the U.S. Borrowers and each Issuing Bank, the U.S.
Borrowers assume all risks of the acts and omissions
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of, or misuse of the Letters of Credit issued by such Issuing Bank at any U.S.
Borrower's request by, the respective beneficiaries of such Letters of Credit.
In furtherance and not in limitation of the foregoing, such Issuing Bank shall
not be responsible: (i) for the form, validity, sufficiency, accuracy,
genuineness or legal effects of any document submitted by any party in
connection with the application for and issuance of such Letters of Credit, even
if it should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
such Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, that may prove to be invalid or ineffective for any reason;
(iii) for failure of the beneficiary of any such Letter of Credit to comply
fully with conditions required in order to draw upon such Letter of Credit; (iv)
for errors, omissions, interruptions or delays in transmission or delivery of
any messages, by mail, cable, telegraph, telex or otherwise, whether or not they
are in cipher; (v) for errors in interpretation of technical terms; (vi) for any
loss or delay in the transmission or otherwise of any document required in order
to make a drawing under any such Letter of Credit or of the proceeds thereof;
(vii) for the misapplication by the beneficiary of any such Letter of Credit of
the proceeds of any drawing under such Letter of Credit; and (viii) for any
consequences arising from causes beyond the control of such Issuing Bank,
including, without limitation, any Government Acts. None of the above shall
affect, impair, or prevent the vesting of any of such Issuing Bank's rights or
powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by any Issuing
Bank in connection with the Letters of Credit issued by it or the related
certificates, if taken or omitted in good faith, shall not put such Issuing Bank
under any resulting liability to the Borrowers.
Notwithstanding anything to the contrary contained in this Section
1.13, the U.S. Borrowers shall have no obligation to indemnify any Issuing Bank
in respect of any liability incurred by such Issuing Bank arising solely out of
and to the extent of the gross negligence or willful misconduct of such Issuing
Bank or out of the wrongful dishonor by such Issuing Bank of a proper demand for
payment under the Letters of Credit issued by it.
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1.14. Computation of Dollar Equivalent Amount of Pounds Sterling and
Canadian Dollars. The Administrative Agent (or, with respect to Pounds Sterling
loans referred to in paragraph (a), the U.K. Swingline Bank) will determine the
Dollar Equivalent amount with respect to:
(a) any Borrowing comprised of U.K. Swingline Loans or Canadian
Swingline Loans, the day of the requested Borrowing with respect to Pounds
Sterling Reserve Adjusted Eurodollar Loans and U.K. Base Rate Loans, one
Business Day prior to the requested date of Borrowing with respect to
Acceptances, and the date of the requested Borrowing with respect to Prime
Rate Loans,
(b) any issuance of a Letter of Credit in a currency other than
Dollars as of the requested date of issuance thereof,
(c) all outstanding U.K. Swingline Loans and Canadian Swingline
Loans, plus the Letter of Credit Usage under Letters of Credit issued in a
currency other than Dollars as of the last Business Day of each month and
as of any other date selected by the Administrative Agent,
(d) the aggregate sum of the amount of all U.K. Swingline Loans and
Canadian Swingline Loans, plus all Letter of Credit Usage, immediately
prior to and after giving effect to any Revolving Loan made under Section
1.13(d) as of the proposed date of the making of any such Revolving Loan,
(e) all outstanding U.K. Swingline Loans or Canadian Swingline Loans
on the date notice (or deemed notice) is given of a Mandatory Borrowing as
provided in Section 1.01(e), and
(f) all U.K. Swingline Loans and Canadian Swingline Loans, plus all
Letter of Credit Usage on any date on which the Total Revolving
Commitments are reduced pursuant to Section 2.01 or 2.02.
1.15. European Monetary Union. (a) If, as a result of the
implementation of European monetary union, (i) Pounds Sterling cease to be
lawful currency of the United Kingdom and are replaced by a European single
currency or (ii) Pounds Sterling and a European single currency are at the same
time recognized by the central bank or comparable authority of the United
Kingdom as lawful currency of such nation and the U.K. Swin-
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gline Bank shall so request in a notice delivered to the U.K. Borrower, then any
amount payable hereunder by the U.K. Swingline Bank to the U.K. Borrower, or by
the U.K. Borrower to the U.K. Swingline Bank, in such currency shall instead be
payable in the European single currency and the amount so payable shall be
determined by translating the amount payable in such currency to such European
single currency at the exchange rate recognized by the European Central Bank for
the purpose of implementing European monetary union.
(b) The U.K. Borrower agrees, at the request of the U.K. Swingline
Bank, to compensate such U.K. Swingline Bank for any reasonable loss, cost,
expense or reduction in return that shall be incurred or sustained by such U.K.
Swingline Bank (other than as a result of such U.K. Swingline Bank's gross
negligence or willful misconduct) as a result of the implementation of European
monetary union, that would not have been incurred or sustained but for the
transactions provided for herein and that, to the extent that such loss, cost,
expense or reduction is of a type generally applicable to extensions of credit
similar to the extensions of credit hereunder, is generally being requested from
borrowers subject to similar provisions. A certificate of the U.K. Swingline
Bank (x) setting forth the amount or amounts necessary to compensate such U.K.
Swingline Bank, (y) describing the nature of the loss or expense sustained or
incurred by such U.K. Swingline Bank as a consequence thereof and (z) setting
forth a reasonably detailed explanation of the calculation thereof shall be
delivered to the U.K. Borrower and shall be conclusive absent manifest error.
The U.K. Borrower shall pay to such U.K. Swingline Bank the amount shown as due
on any such certificate within 10 days after receipt thereof.
(c) The U.K. Borrower agrees, at the request of the U.K. Swingline
Bank or the Required Revolving Banks, at the time of or at any time following
the implementation of European monetary union, to enter into an agreement
amending this Agreement (subject to obtaining the approval of the U.K. Swingline
Bank and the Required Banks) in such manner as the U.K. Swingline Bank and the
Required Revolving Banks shall specify in order to reflect the implementation of
such monetary union to place the parties hereto in the position they would have
been in had such monetary union not been implemented.
1.16. Acceptances Provisions. The parties hereto agree that the
provisions of Schedule 1.16 shall apply to all Acceptances created hereunder,
and that the provisions of Schedule 1.16 shall be deemed incorporated by
reference into
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this Agreement as if such provisions were set forth in their entirety herein.
1.17. Replacement of Banks. (a) If at any time the Obligations of
the Borrowers shall have increased, or will increase, as the result of
occurrences, as to any one or more Banks, as described in Sections 1.10 (other
than Section 1.10(f)), 1.11, 1.13(h) or 3.04 and such increase can be avoided or
minimized if such Banks were no longer Banks hereunder, the Company shall have
the right to replace such Banks with another Person; provided that (a) no Event
of Default shall have occurred and be continuing; (b) such increased costs shall
not be generally charged by the other Banks hereunder; (c) such new Person is of
one of the types discussed in Section 11.04(b)(A) (other than the requirement
therein that consents be given) and such new Person shall execute an Assignment
and Assumption Agreement substantially in the form of Exhibit I-2; and (d)
neither the Administrative Agent nor any Bank shall have any obligation to find
such other Person.
(b) If at any time the U.K. Swingline Bank notifies the U.K.
Borrower that the Swingline Expiry Date for the U.K. Swingline Loans will not be
extended (as provided in the definition of Swingline Expiry Date), the Company
and the U.K. Borrower shall have the right to replace the U.K. Swingline Bank
with another Person; provided that (a) no Event of Default shall have occurred
and be continuing; (b) such new Person is of one of the types discussed in
Section 11.04(b)(A) (other than the requirement therein that consents be given)
and such new Person shall execute an Assignment and Assumption Agreement
substantially in the form of Exhibit I-2; and (c) neither the Administrative
Agent nor any Bank shall have any obligation to find such other Person.
(c) Each Bank agrees to its replacement at the option of the Company
pursuant to Section 1.17(a) or (b), as the case may be, and in accordance with
Section 11.04(b)(A) (except to the extent inconsistent with this Section 1.17);
provided that the successor Bank shall purchase without recourse (except as to
matters of title) such replaced Bank's interest in the Obligations of the
Borrowers and shall assume such replaced Bank's Commitments hereunder for cash
in an aggregate amount equal to the aggregate unpaid principal of such
Obligations, all unpaid interest accrued thereon, all unpaid commitment and
other fees accrued for the account of such replaced Bank, any breakage costs
incurred by the replaced Bank because of the repayment of Reserve Adjusted
Eurodollar Loans and all other
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amounts then owing to such replaced Bank under this Agreement or any other
Credit Document.
SECTION 2. Commitments.
2.01. Voluntary Reduction of Commitments. Upon at least one Business
Day's prior written notice (or telephonic notice promptly confirmed in writing)
to the Administrative Agent at the Administrative Agent's Office (which notice
the Administrative Agent shall promptly transmit to each of the Banks), the
Applicable Borrower or Borrowers shall have the right, without premium or
penalty, to terminate in whole or in part the unutilized portion of any or all
of (i) the Total Revolving Loan Commitments and (ii) the Total Acquisition Term
Loan Commitments, in each case, in part or in whole; provided that (x) any such
termination shall proportionately and permanently reduce the Revolving Loan
Commitment or Acquisition Term Loan Commitment, as applicable, of each of the
Banks and (y) any partial reduction of the Total Revolving Loan Commitments or
the Total Acquisition Term Loan Commitments pursuant to this Section 2.01 shall,
in each case, be in the amount of at least $100,000 and integral multiples of
$100,000 in excess of that amount; provided, further, that (A) the Total
Revolving Loan Commitments shall not be reduced to an amount less than the
aggregate Revolving Loans and the Dollar Equivalent amount of Swingline Loans
and Letter of Credit Usage then outstanding and (B) the Total Acquisition Term
Loan Commitments shall not be reduced to an amount less than the aggregate
Acquisition Term Loans then outstanding. The Applicable Borrower or Borrowers
shall have the right, without premium or penalty, to terminate the unutilized
portion, in whole or in part, of the U.S. Swingline Commitment, the U.K.
Swingline Commitment or the Canadian Swingline Commitment.
2.02. Mandatory Adjustments of Commitments, etc. (a) The Total
Revolving Loan Commitment shall terminate on the Revolving Loan Commitment
Termination Date.
(b) The Total A Term Loan Commitment shall be reduced (i) on the
Closing Date to the amount of A Term Loans then outstanding and (ii) on the date
on which any payments of principal on the A Term Loans are made (other than
pursuant to Section 3.02(A)(a)) in an aggregate amount equal to such payments.
(c) The Total B Term Loan Commitment shall be reduced (i) on the
Closing Date to the amount of B Term Loans then outstanding and (ii) on the date
on which any payments of
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principal on the B Term Loans are made (other than pursuant to Section
3.02(A)(a)) in an aggregate amount equal to such payments.
(d) The Total Acquisition Term Loan Commitment shall be reduced (i)
on the Acquisition Term Loan Commitment Termination Date to the amount of
Acquisition Term Loans then outstanding and (ii) on the date on which any
payments of principal on the Acquisition Term Loans are made (other then
pursuant to Section 3.02(A)(a)) in an aggregate amount equal to such payment.
(e) The Total Revolving Loan Commitment and the Maximum Swingline
Amount shall be permanently reduced, in each case, in the amount and at the time
of any payment on the Loans required to be applied to the Revolving Loans,
Swingline Loans, Revolving Loan Commitments or Maximum Swingline Amount or to
cash collateralize Letters of Credit or Acceptances pursuant to Section
3.02(B)(a).
(f) Each reduction or termination of the A Term Loan Commitment, the
B Term Loan Commitment, Acquisition Term Loan Commitment or the Total Revolving
Loan Commitment pursuant to this Section 2.02 shall apply proportionately to the
A Term Loan Commitment, the B Term Loan Commitment, Acquisition Term Loan
Commitment or the Revolving Loan Commitment, as the case may be, of each Bank.
2.03. Commitment Commission. (a) The Company agrees to pay the
Administrative Agent a commitment commission ("Commitment Commission") for the
account of each Bank for the period from and including the Closing Date to but
not including the date the Total Commitments have been terminated, computed at a
rate equal to 1/2% per annum on the daily average Unutilized Commitment of such
Bank. Accrued Commitment Commission shall be due and payable quarterly in
arrears on the last Business Day of each March, June, September and December,
commencing with June 30, 1998 and on the Revolving Loan Commitment Termination
Date, based on the actual number of days elapsed over a year of 360 days.
(b) The Company agrees to pay ABN AMRO Bank N.V., Chicago Branch,
the commitment and other fees at the times required by, and pursuant to, the
letter agreement between the Company and ABN AMRO Bank N.V., Chicago Branch,
dated March 30, 1998, in respect of the U.K. Swingline Loan.
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2.04. Currency Equivalents Generally. For all purposes of any Loan
or other Credit Extension pursuant to this Agreement (but not for purposes of
the preparation of any financial statements delivered pursuant hereto), the
equivalent in Pounds Sterling or Canadian Dollars of an amount in U.S. Dollars,
and the equivalent in U.S. Dollars of an amount in Pounds Sterling or Canadian
Dollars, shall be determined at the Spot Rate. For purposes of determining
compliance with any restriction limited to a Dollar Equivalent amount in this
Agreement, the Dollar Equivalent amount of any transaction occurring prior to
the date of determination shall be calculated based on the Spot Rate on the date
of determination; provided, however, that if such Dollar Equivalent amount shall
be exceeded, such restriction shall nonetheless be deemed not violated if such
Dollar Equivalent amount of such transaction was calculated based on the
relevant currency exchange rate in effect on the date of each such transaction;
provided, further, that the Borrowers shall comply with Section 3.02(A).
2.05. Principle of Deemed Reinvestment. Except to the extent
permitted under applicable law, all calculations of interest and fees hereunder
are to be made on the basis of the nominal interest rate set forth herein and
not using the effective rate method of calculation or on any basis which gives
effect to the principle of deemed reinvestment. For the purposes of disclosure
under the Interest Act (Canada), if and to the extent applicable, whenever
interest is to be paid hereunder and such interest is to be calculated on the
basis of a period of less than a calendar year, the yearly rate of interest to
which the rate determined pursuant to such calculation is equivalent is the rate
so determined multiplied by the actual number of days in the calendar year in
which the same is to be ascertained and divided by the number of days in such
period.
2.06. Maximum Rate of Return. Notwithstanding any provision to the
contrary contained in this Agreement, in no event shall the aggregate "interest"
(as defined in section 347 of the Criminal Code, Revised Statutes of Canada,
1985, c. 46 as the same may be amended, replaced or re-enacted from time to
time) payable under this Agreement by either Canadian Borrower or the Credit
Documents to which such Canadian Borrower is a party exceed the effective annual
rate of interest on the "credit advanced" (as defined in that section) to such
Canadian Borrower under this Agreement lawfully permitted under that section
and, if any payment, collection or demand pursuant to this Agreement or any
other Credit Document relating to such Canadian Borrower in respect of
"interest" (as defined in that section) is determined to be contrary to the
provisions of that
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section, such payment, collection or demand shall be deemed to have been made by
mutual mistake of such Canadian Borrower and the Banks and the amount of such
payment or collection shall be refunded to such Canadian Borrower. For purposes
of this Agreement the effective annual rate of interest shall be determined in
accordance with generally accepted actuarial practices and principles over the
term of the Canadian Swingline Loan facility on the basis of annual compounding
of the lawfully permitted rate of interest and, in the event of dispute, a
certificate of a Fellow of the Canadian Institute of Actuaries appointed by the
Administrative Agent will be conclusive for the purposes of such determination.
If it is not determinable which particular payment or collection is contrary to
the provisions of the section of the Criminal Code referred to hereinabove, the
Canadian Swingline Banks will, in consultation with the applicable Canadian
Borrower, determine the payments or collections to be refunded.
SECTION 3. Payments.
3.01. Voluntary Prepayments. Each Borrower shall have the right to
prepay Term Loans, Acquisition Term Loans, Swingline Loans and Revolving Loans
incurred by it in whole or in part from time to time, without premium or penalty
(except for breakage costs, if any) on the following terms and conditions: (i)
the Applicable Borrower shall give the Administrative Agent at the
Administrative Agent's Office (with respect to U.K. Swingline Loans, notice
shall also be given to the U.K. Swingline Bank) written notice (or telephonic
notice promptly confirmed in writing) of its intent to prepay the Loans, the
amount of such prepayment and the Types of Loans and the specific Borrowing or
Borrowings which are to be prepaid, which notice shall be given by the
Applicable Borrower at least one Business Day prior to the date of such
prepayment (or in the case of a Swingline Loan, the date of such prepayment) and
which notice shall promptly be transmitted by the Administrative Agent to each
of the Banks; (ii) each partial prepayment of any Borrowing (other than
Borrowings of Swingline Loans) shall be in an aggregate principal amount of the
Borrowing Amount or at least $100,000 and integral multiples of $100,000 in
excess of that amount (or the Dollar Equivalent); provided that no partial
prepayment of Reserve Adjusted Eurodollar Loans made pursuant to a single
Borrowing under the Loan Facility (or Portion thereof) shall reduce the
outstanding Loans made pursuant to such Borrowing to an amount less than the
Minimum Borrowing Amount or Borrowing Amount, as the case may be; provided,
further, that the minimum prepayment amount for a Swingline Loan shall be an
amount as agreed between the Applicable
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Borrower and the applicable Swingline Bank; (iii) Reserve Adjusted Eurodollar
Loans may only be prepaid pursuant to this Section 3.01 on the last day of an
Interest Period applicable thereto unless any breakage costs set forth in
Section 1.10(f) accompany such prepayment; and (iv) each prepayment in respect
of any Term Loans made pursuant to a Borrowing shall be applied pro rata to the
A Term Loans, B Term Loans and Acquisition Term Loans then outstanding.
Voluntary prepayments of Term Loans or Acquisition Term Loans shall be applied
to the prepayment of the outstanding principal amount of Loans relating to such
Portion pro rata such that each principal payment then remaining with respect to
such Portion shall be reduced by an amount equal to the product of (A) such
payment and (B) a fraction of which the numerator is equal to the amount of such
principal payments then remaining with respect to such Portion and the
denominator is equal to the amount of all principal payments remaining with
respect to such Portion. In the absence of a designation by the Borrowers, the
Administrative Agent shall apply such prepayments first to Base Rate Loans and
thereafter to Reserve Adjusted Eurodollar Loans.
3.02. Mandatory Prepayments.
(A) Requirements:
(a) Subject to Section 3.05(b), the Applicable Borrowers shall
prepay the outstanding principal amount of the A Term Loans, the B Term
Loans, the Acquisition Term Loans, the Revolving Loans or Swingline Loans
made to them on any date on which the aggregate outstanding principal
amount of such Loans (after giving effect to any other repayments or
prepayments on such day and together with the outstanding principal amount
of Letter of Credit Usage) exceeds the Total A Term Loan Commitment, the
Total B Term Loan Commitment, the Total Acquisition Term Loan Commitment,
the Total Revolving Loan Commitments or the applicable Maximum Swingline
Amount, as the case may be, in the amount of such excess, the Applicable
Borrowers to determine among themselves the amount of such excess to be
prepaid by each.
(b) Subject to Section 3.05(b), if the aggregate principal amount of
outstanding Revolving Loans, and the Dollar Equivalent amount of Swingline
Loans and Letter of Credit Usage exceeds the lesser of (i) the Total
Revolving Loan Commitment and (ii) the Borrowing Base as set forth in the
most recent Borrowing Base Certificate last delivered pursuant to Section
6.01 (provided such Borrowing
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Base Certificate was required to be delivered pursuant to and was in
compliance with Section 6.01 or was delivered after the Borrowing Base
Certificate last required to be delivered pursuant to Section 6.01 of this
Agreement), then the Applicable Borrowers shall prepay Revolving Loans or
Swingline Loans made to them in a principal amount equal to such excess no
later than two (2) Business Days after the determination of such excess,
the Applicable Borrowers to determine among themselves the amount to be
prepaid by each; provided they comply with the limits set forth herein.
(c) The U.S. Borrowers shall cause to be paid Scheduled A Term Loans
Principal Payments on the A Term Loans until the A Term Loans are paid in
full in the amounts and at the times specified in the definition of
Scheduled A Term Loans Principal Payments to the extent that prepayments
have not previously been applied to such Scheduled A Term Loans Principal
Payments (and such Scheduled A Term Loans Principal Payments have not
otherwise been reduced) pursuant to the terms hereof.
(d) The U.S. Borrowers shall cause to be paid each Scheduled B Term
Loans Principal Payment on the B Term Loans until all B Term Loans are
paid in full in the amounts and at the times specified in the definition
of Scheduled B Term Loans Principal Payments to the extent that
prepayments have not previously been applied to such Scheduled B Term
Loans Principal Payments (and such Scheduled B Term Loans Principal
Payments have not otherwise been reduced) pursuant to the terms hereof.
(e) The U.S. Borrowers shall cause to be paid Scheduled Acquisition
Term Loans Principal Payments on the Acquisition Term Loans until the
Acquisition Term Loans are paid in full in the amounts and at the times
specified in the definition of Scheduled Acquisition Term Loans Principal
Payments to the extent that prepayments have not previously been applied
to such Scheduled Acquisition Term Loans Principal Payments (and such
Scheduled Acquisition Term Loans Principal Payments have not otherwise
been reduced) pursuant to the terms hereof.
(f) After the Closing Date, on the Business Day after the date of
receipt thereof by the Company and/or any of its Subsidiaries of Net Cash
Proceeds (after giving effect to the ability to reinvest any such Net Cash
Proceeds pursuant to Section 7.17) or Net Financing Proceeds
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(including the receipt of Net Financing Proceeds by Holdings, the proceeds
of which are required to be contributed to the Company in accordance with
the provisions of Section 7.14) (without duplication of prepayments
required by clause (h) of this Section 3.02(A) and other than the proceeds
of Indebtedness permitted by Section 7.04), the Company shall apply or
cause to be applied an amount equal to 100% of such Net Cash Proceeds or
Net Financing Proceeds as provided in Section 3.02(B)(a).
(g) On the date which is 90 days after the last day of the Company's
fiscal year, commencing with the fiscal year ending October 31, 1999, the
Company shall apply or cause to be applied an amount equal to 75% of the
Company's Excess Cash Flow for such fiscal year as provided in Section
3.02(B)(a); provided that (i) such amount shall be 50% with respect to the
fiscal year ending October 31, 1999 and (ii) such amount shall be 50% for
subsequent years if the ratio of Indebtedness for borrowed money of the
Company and its Subsidiaries on the last day of such fiscal year to
Consolidated EBITDA of the Company for the Test Period ending at the end
of such fiscal year, on a pro forma basis after giving effect to any
Designated Acquisitions made during such year, shall be less than 3.5:1.0;
provided further that any funds used for any Designated Acquisition made
subsequent to the end of such fiscal year and prior to the date of payment
shall reduce Excess Cash Flow (before applying the prepayment percentage)
for purposes of this Section 3.02(A)(g) except to the extent funded with
Acquisition Term Loans or from the $12,500,000 Revolving Loan basket set
forth in Section 6.18.
(h) On the Business Day after the date of the receipt thereof by the
Company and/or any of its Subsidiaries, the Company shall apply or cause
to be applied an amount equal to 100% of the proceeds received by such
Person (net of underwriting discounts and commissions and other reasonably
incurred costs and expenses directly associated therewith) of the sale
after the Closing Date of equity (including the sale of equity by
Holdings, the proceeds of which are required to be contributed to the
Company in accordance with the provisions of Section 7.14 but excluding
sales to directors constituting directors qualifying shares, where
required by law) as provided in Section 3.02(B)(a).
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(i) At the Administrative Agent's discretion, on the Business Day
after the date of receipt thereof by the Company and/or any of its
Subsidiaries, the Company shall apply or cause to be applied an amount
equal to (x) 100% of any insurance proceeds other than Net Proceeds or
insurance proceeds of the type referred to in clause (y) below (less
reasonably incurred costs to recover) received less any portion of such
proceeds not in excess of $10,000,000 attributable to a casualty, so long
as there exists no Event of Default, that is applied or committed to be
applied within a reasonable period of time to repair or replace the
damaged property; provided that any insurance proceeds received in respect
of an inventory loss shall not be counted towards the $10,000,000 limit
and shall not be required to be applied as a mandatory prepayment pursuant
to this Section 3.02(A)(i), and (y) 100% of any business interruption
insurance proceeds (less reasonably incurred costs to recover) over
$5,000,000 attributable to a casualty, in each case as provided in Section
3.02(B)(a).
(j) If any of the Mortgaged Real Property is the subject of a Taking
or Destruction and either the Company or its applicable Subsidiary has
elected not to effect a Restoration or neither the Collateral Agent nor
the Company or its applicable Subsidiary, as the case may be, has elected
to effect a Restoration, in each case, in accordance with the provisions
of the applicable Mortgage, then on the first Business Day following the
last day the Company or its applicable Subsidiary can elect to effect a
Restoration (in the event that the Company or its applicable Subsidiary
has the right to make such an election) or, in the event that the Net
Award or Net Proceeds, as the case may be, are in excess of $10,000,000
and the Company or its applicable Subsidiary does not otherwise have the
right to make an election to effect a Restoration, the day the Collateral
Agent has notified the Company or its applicable Subsidiary that a
Restoration will not be required in the case of any of the Mortgaged Real
Property being the subject of a Taking or Destruction, the Company shall
apply or cause to be applied an amount equal to the applicable Net Award
or Net Proceeds, as the case may be, as a result of such Taking or
Destruction, as provided in Section 3.02(B)(a).
(k) On the date of the receipt thereof by the Company and/or any of
its Subsidiaries, the Company shall apply or cause to be applied an amount
equal to 75% of any
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surplus assets of any Pension Plan returned to the Company or such
Subsidiary as provided in Section 3.02(B)(a).
(l) Notwithstanding anything to the contrary contained herein, no
Acceptance may be prepaid prior to the maturity date thereof.
(B) Application:
(a) Prepayments to be applied pursuant to this Section 3.02(B)(a)
shall be applied as follows: (i) first, on a pro rata basis among the A
Term Loans, the B Term Loans and any outstanding Acquisition Term Loans,
in each case, in inverse order of maturity with respect to the remaining
Scheduled A Term Loans Principal Payments, the remaining Scheduled B Term
Loans Principal Payments and the remaining Scheduled Acquisition Term Loan
Principal Payments; provided that each holder of B Term Loans may, upon
reasonable notice to the Borrowers and the Administrative Agent, decline
such prepayment, in which case such prepayment shall be applied to
Scheduled A Term Loans Principal Payments and Scheduled Acquisition Term
Loan Principal Payments as aforesaid; (ii) second, to permanently reduce
the Revolving Loan Commitment (and (y) to the extent such Total Revolving
Loan Commitment exceeds the Maximum Swingline Amount, the Maximum
Swingline Amount on a pro rata basis and (z) if required as a result of
such reduction, to prepay Swingline Loans or Revolving Loans, or, if no
such Loans are outstanding, to cash collateralize Letters of Credit and
Acceptances on a pro rata basis in a manner reasonably satisfactory to the
Administrative Agent); and (iii) third, the Acquisition Term Loan
Commitment, if any, will be permanently reduced in an amount equal to the
amount otherwise required to be prepaid. Amounts applied pursuant to this
Section 3.02(B)(a) may not be reborrowed; and
(b) With respect to each prepayment of Loans required by Section
3.02(A), the Borrowers shall give the Administrative Agent two Business
Days notice and may designate the Types of Loans and the specific
Borrowing or Borrowings which are to be prepaid; provided that (i)(x)
Reserve Adjusted Eurodollar Loans may be designated for prepayment
pursuant to this Section 3.02 only on the last day of an Interest Period
applicable thereto unless all Reserve Adjusted Eurodollar Loans with
Interest Periods ending on such date of required prepayment and all Base
Rate Loans and Prime Rate Loans have been or are con-
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currently being paid in full and (y) if any prepayment of Reserve Adjusted
Eurodollar Loans made pursuant to a single Borrowing shall reduce the
outstanding Loans made pursuant to such Borrowing to an amount less than
the Minimum Borrowing Amount, such Borrowing shall immediately be
converted into Base Rate Loans; and (ii) in the case a Reserve Adjusted
Eurodollar Loan is required to be prepaid pursuant to this Section 3.02
prior to the last day of the Interest Period applicable thereto, the
Borrowers may in order to avoid paying any amount pursuant to Section
1.10(f) deposit such prepayment in escrow with the Administrative Agent
(or U.K. Swingline Bank in the case of Pounds Sterling Reserve Adjusted
Eurodollar Loans), which escrow shall be satisfactory to the
Administrative Agent (or U.K. Swingline Bank in the case of Pounds
Sterling Reserve Adjusted Eurodollar Loans), and which amount in escrow
shall be applied as of the last day of the applicable Interest Period to
the repayment of the applicable Loan. In the absence of a designation by
the Borrowers, the Administrative Agent shall, subject to the above, apply
prepayments first to Base Rate Loans and thereafter to Reserve Adjusted
Eurodollar Loans. All prepayments shall include payment of accrued
interest on the principal amount so prepaid, shall be applied to the
payment of interest before application to principal and shall include
amounts payable, if any, under Section 1.10(f).
(c) Any proceeds received by the Company or any of its Subsidiaries
as discussed in Section 3.02(A)(i) or (j) shall be deposited, on the date
of receipt thereof by the Company or any such Subsidiary, with the
Administrative Agent in escrow (or pursuant to other arrangements
satisfactory to the Administrative Agent) until such funds are used in
accordance with either such Section.
3.03. Method and Place of Payment. (a) Except as otherwise
specifically provided herein, all payments under this Agreement shall be made to
the Administrative Agent (or U.K. Swingline Bank in the case of Pounds Sterling
Reserve Adjusted Eurodollar Loans), for the ratable account of the Banks
entitled thereto, not later than 2:00 P.M. (New York time) in the case of Loans
in U.S. Dollars or Canadian Dollars and no later than the time specified by the
U.K. Swingline Bank in the case of Loans in Pounds Sterling on the date when due
and shall be made in immediately available funds (i) with respect to principal
of, interest on, and any other amount relating to any U.K. Swingline Loan, shall
be made in Pounds Sterling, (ii) with respect to principal of, interest on and
any other amount relat-
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ing to any Canadian Swingline Loan, shall be made in Canadian Dollars and (iii)
with respect to all other amounts payable hereunder, shall be made in U.S.
Dollars to the account specified therefor by the Administrative Agent or if no
account has been so specified at the Administrative Agent's Office, it being
understood that written notice by the Borrowers to the Administrative Agent or
U.K. Swingline Bank, as the case may be, to make a payment from the funds in the
Borrowers' account at the Administrative Agent's Office or the office designated
by the U.K. Swingline Bank, as the case may be, shall constitute the making of
such payment to the extent of such funds held in such account. The
Administrative Agent or U.K. Swingline Bank, as the case may be, will thereafter
cause to be distributed on the same day (if payment is actually received by the
Administrative Agent in New York prior to 2:00 P.M. (New York time) or by the
U.K. Swingline Bank in London prior to 2:00 P.M. (London time), as the case may
be, on such day) funds relating to the payment of principal or interest or fees
ratably to the Banks entitled to receive any such payment in accordance with the
terms of this Agreement. If and to the extent that any such distribution shall
not be so made by the Administrative Agent or U.K. Swingline Bank, as the case
may be, in full on the same day (if payment is actually received by the
Administrative Agent prior to 2:00 P.M. (New York time) or by the U.K. Swingline
Bank prior to 2:00 P.M. (London time) in the case of Loans in Pounds Sterling on
such day), the Administrative Agent or U.K. Swingline Bank, as the case may be,
shall pay to each Bank its ratable amount thereof and each such Bank shall be
entitled to receive from the Administrative Agent or U.K. Swingline Bank, as the
case may be, upon demand, interest on such amount at (i) the Federal Funds Rate
(according to the U.S. Council on International Banking Interbank Compensation
Rules) in the case of a payment in U.S. Dollars, (ii) the Canadian Federal Funds
Rate in the case of a payment in Canadian Dollars and (iii) the Overnight Rate
in the case of a payment in Pounds Sterling for each day from the date such
amount is paid to the Administrative Agent or U.K. Swingline Bank, as the case
may be, until the date the Administrative Agent or U.K. Swingline Bank, as the
case may be, pays such amount to such Bank.
(b) Any payments under this Agreement which are made by the
Borrowers on the date required but later than 2:00 P.M. (New York time) (or 2:00
P.M. (London time) in the case of Loans in Pounds Sterling) shall, solely for
purposes of the calculation of interest and not for purposes of Section 8.01, be
deemed to have been made on the next succeeding Business Day. Whenever any
payment to be made hereunder shall be stated to be due on a day which is not a
Business Day, the due date
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thereof shall be extended to the next succeeding Business Day and, with respect
to payments of principal, interest shall be payable during such extension at the
applicable rate in effect immediately prior to such extension, except that with
respect to Reserve Adjusted Eurodollar Loans, if such next succeeding applicable
Business Day is not in the same month as the date on which such payment would
otherwise be due hereunder or under any Note, the due date with respect thereto
shall be the next preceding applicable Business Day.
3.04. Net Payments. (a) All payments by each Borrower under this
Agreement and/or under any Credit Document shall be made without setoff or
counterclaim and in such amounts as may be necessary in order that all such
payments (after deduction or withholding for or on account of any present or
future taxes, levies, imposts, duties or other charges of whatsoever nature
imposed by any Governmental Authority, other than any tax (including any
franchise tax) imposed on or measured by the net income or net profits of a
Bank, or any tax on or measured by the capital of a Bank, pursuant to the income
tax laws of the jurisdictions where such Bank's principal or applicable lending
office is located (collectively, "Taxes")) shall not be less than the amounts
otherwise specified to be paid under this Agreement and/or under any Credit
Document. If any Borrower is required by law to make any deduction or
withholding on account of Taxes from any payment due hereunder or under the
Notes, then (a) such Borrower shall timely remit such Taxes to the Governmental
Authority imposing the same and (b) the amount payable hereunder or under the
Notes will be increased to such amount which, after deduction from such
increased amount of all amounts required to be deducted or withheld therefrom,
will not be less than the amount otherwise due and payable hereunder. Without
prejudice to the foregoing, if any Bank or any Agent is required to make any
payment on account of Taxes, the Applicable Borrower will, upon notification by
the Bank or the Agent promptly indemnify such person against such Taxes,
together with any interest, penalties and expenses payable or incurred in
connection therewith. Each Borrower shall also reimburse each Bank, upon the
written request of such Bank, for taxes imposed on or measured by the net income
or net profits of such Bank pursuant to the laws of the jurisdiction in which
the principal office or applicable lending office of such Bank is located or
under the laws of any political subdivision or taxing authority of any such
jurisdiction as such Bank shall determine are payable by such Bank in respect of
Taxes paid to or on behalf of such Bank pursuant to this Section 3.04. For
purposes of this Section, the term "Taxes" includes interest, penalties and
expenses payable or incurred
<PAGE>
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in connection therewith. A certificate as to any additional amounts payable to a
Bank under this Section 3.04 submitted to the Borrower by such Bank shall,
absent manifest error, be final, conclusive and binding for all purposes upon
all parties hereto. With respect to each deduction or withholding for or on
account of any Taxes, the Borrowers shall promptly furnish to each Bank such
certificates, receipts and other documents as may be required (in the judgment
of such Bank) to establish any tax credit to which such Bank may be entitled.
(b) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) that makes a Loan to a U.S. Borrower
agrees to deliver to the U.S. Borrowers and the Administrative Agent on or prior
to the Closing Date, or in the case of a Bank that is an assignee or transferee
of an interest under this Agreement pursuant to Section 11.04 (unless the
respective Bank was already a Bank hereunder immediately prior to such
assignment or transfer), on the date of such assignment or transfer to such
Bank, (i) two accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001 (or successor or additional forms) certifying to such
Bank's entitlement to a complete exemption from United States withholding tax
with respect to payments to be made under this Agreement and under any Note or
other Credit Document, or (ii) if the Bank is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate
substantially in the form of Exhibit P (any such certificate, a "Section 3.04
Certificate") and (y) two accurate and complete original signed copies of
Internal Revenue Service Form W-8 (or successor or additional forms) certifying
to such Bank's entitlement to a complete exemption from United States
withholding tax with respect to payments to be made under this Agreement and
under any Note or other Credit Document. In addition, each Bank agrees that from
time to time after the Closing Date, when a lapse in time or change in
circumstances renders the previous certification obsolete or inaccurate in any
material respect, it will deliver to the U.S. Borrowers and the Administrative
Agent two new accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001, or Form W-8 and a Section 3.04 Certificate, as the
case may be, and such other forms as may be required in order to confirm or
establish the entitlement of such Bank to a continued exemption from or
reduction in United States withholding tax with respect to payments under this
Agreement and any Note, or it shall immediately notify the U.S. Borrowers and
the Administrative Agent of its inability to deliver any such Form or
Certificate, in which case such Bank
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shall not be required to deliver any such form or certificate pursuant to this
Section 3.04(b). Notwithstanding anything to the contrary contained in Section
3.04(a), but subject to Section 11.04(b) and Section 3.04(c), (x) the Borrowers
shall be entitled, to the extent they are required to do so by law, to deduct or
withhold income or similar taxes imposed by the United States (or any political
subdivision or taxing authority thereof or therein) from interest, fees or other
amounts payable hereunder for the account of any Bank which is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) for
U.S. Federal income tax purposes to the extent that such Bank has not provided
to the Borrowers U.S. Internal Revenue Service Forms that establish a complete
exemption from such deduction or withholding and (y) the Borrowers shall not be
obligated pursuant to Section 3.04(a) hereof to gross up payments to be made to
a Bank in respect of income or similar taxes imposed by the United States if (I)
such Bank has not provided to the Borrowers the Internal Revenue Service Forms
required to be provided to Borrower pursuant to this Section 3.04(b) or (II) in
the case of a payment, other than interest, to a Bank described in clause (ii)
above, to the extent that such Forms do not establish a complete exemption from
withholding of such taxes.
(c) Notwithstanding anything to the contrary contained elsewhere in
this Section 3.04, the Borrowers, jointly and severally, agree to pay additional
amounts and to indemnify each Bank in the manner set forth in Section 3.04(a)
(without regard to the identity of the jurisdiction requiring the deduction or
withholding) in respect of any amounts deducted or withheld by it as described
in the last sentence of Section 3.04(b) as a result of any changes after the
Closing Date in any applicable law, treaty, governmental rule, regulation,
guideline or order, or in the interpretation thereof, relating to the deduction
or withholding of income or similar Taxes.
(d) Each Bank which is resident for tax purposes in the United
Kingdom and which is making a loan to a U.K. Borrower or which is making a loan
to a U.K. Borrower through a U.K. branch hereby represents that it is a "bank"
within the meaning of section 840A Income and Corporation Taxes Act 1988, and
that it is beneficially entitled to the interest payable to it under this
Agreement, undertakes to notify the U.K. Borrower and the Administrative Agent
if either representation ceases to be correct, and further agrees to ensure that
such interest is brought within the charge to United Kingdom corporation tax by
the person beneficially entitled to the interest.
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(e) Each Bank which is not resident for tax purposes in the United
Kingdom and which is making a loan to a U.K. Borrower through a branch located
outside the United Kingdom agrees to furnish to the tax authorities of the
country in which such Bank is resident for tax purposes on or prior to the
Closing Date (or if such Bank becomes a Bank after the Closing Date, at or prior
to the time the Bank becomes a Bank), for certification and forwarding by such
tax authorities to the United Kingdom Inland Revenue, the form specified by the
United Kingdom Inland Revenue for such purposes. For the avoidance of doubt, a
Bank shall be entitled to receive additional amounts pursuant to Section 3.04(a)
which are attributable to the withholding or deduction imposed during the period
that the form is being processed by the United Kingdom Inland Revenue.
(f) In addition, the Applicable Borrower agrees to pay any present
or future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies which arise from any payment made by or to it
hereunder or under its Note or from the execution and delivery by it or
registration of, or otherwise with respect to, its participation in this
Agreement or the Notes (hereinafter referred to as "Other Taxes").
(g) If Holdings or any Credit Party pays any additional amount under
this Section 3.04 to a Bank and such Bank determines in its sole discretion that
it has actually received or realized in connection therewith any refund or any
reduction of, or credit against, its tax liabilities in or with respect to the
taxable year in which the additional amount is paid (a "Tax Benefit"), such Bank
shall pay to such Person an amount that the Bank shall, in its sole discretion,
determine is equal to the net benefit, after tax, which was obtained by the Bank
in such year as a consequence of such Tax Benefit; provided, however, that (i)
such Bank shall not be required to make any payment under this paragraph of this
Section 3.04 if an Event of Default shall have occurred and be continuing; (ii)
any taxes that are imposed on a Bank as a result of a disallowance or reduction
(including through the expiration of any tax credit carryover or carryback of
such Bank that otherwise would not have expired) of any Tax Benefit with respect
to which such Bank has made a payment to Holdings or any Credit Party pursuant
to this paragraph of this Section 3.04 shall be treated as a tax for which
Holdings or such Credit Party is obligated to indemnify such Bank pursuant to
this Section 3.04 without any exclusions or defenses; (iii) such Bank shall not
be required to make any payment under this paragraph of this Section 3.04 in
excess of such additional amounts received by such Bank; and
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(iv) nothing in this paragraph of this Section 3.04 shall require the Bank to
disclose to any obligor any information determined by such Bank in its sole
discretion to be confidential (including its tax returns).
3.05. Currency Exchange Fluctuations (a) The Company and its
Subsidiaries will implement and maintain internal controls to monitor the
borrowings and repayments of Loans by the Borrowers and the issuance of and
drawings under Letters of Credit, with the object of preventing any request for
a Credit Extension that would result in (i) the aggregate outstanding Revolving
Loans and the Dollar Equivalent amount of the Swingline Loans and Letter of
Credit Usage being in excess of the lesser of (y) the Total Revolving Loan
Commitments available pursuant to Section 1.01(d) and (z) the Borrowing Base as
shown in the Borrowing Base Certificate that was last delivered pursuant to
Section 6.01; provided such Borrowing Base Certificate was required to be
delivered pursuant to and was in compliance with Section 6.01 or was delivered
after the Borrowing Base Certificate last required to be delivered pursuant to
Section 6.01, or (ii) the aggregate amount of U.K. Swingline Loans or Canadian
Swingline Loans exceeding the applicable Maximum Swingline Amount and of
promptly identifying and remedying any circumstance where, by reason of changes
in exchange rates, such limits have been exceeded.
(b) Subject to Section 1.10(f), if on any Computation Date the
Administrative Agent shall have determined that (i) the aggregate outstanding
Revolving Loans and the Dollar Equivalent amount of the Swingline Loans and
Letter of Credit Usage exceed the lesser of (y) the Total Revolving Loan
Commitment and (z) the Borrowing Base as shown in the Borrowing Base Certificate
that was last delivered pursuant to Section 6.01, provided such Borrowing Base
Certificate was required to be delivered pursuant to and was in compliance with
Section 6.01 or was delivered after the Borrowing Base Certificate last required
to be delivered pursuant to Section 6.01, by more than the Dollar Equivalent
amount of U.S. $750,000, (ii) the aggregate outstanding U.K. Swingline Loans
exceed the applicable Maximum Swingline Amount by more than the Dollar
Equivalent amount of U.S. $750,000 or (iii) the aggregate outstanding Canadian
Swingline Loans exceed the applicable Maximum Swingline Amount by more than the
Dollar Equivalent amount of U.S. $250,000, in each such case due to a change in
applicable rates of exchange between U.S. Dollars, on the one hand, and Pounds
Sterling or Canadian Dollars, on the other hand, then the Administrative Agent
shall give notice to the Applicable Borrowers that a prepayment of Revolving
Loans (or, if no Revolving
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Loans are outstanding, payment of unreimbursed drawings under Letters of Credit
or, if none thereof, Cash collateralization of outstanding Letters of Credit),
U.K. Swingline Loans or Canadian Swingline Loans, as the case may be, is
required under this subsection, and the Applicable Borrowers agree if such
excess shall not have been prepaid within five Business Days of such notice or
during five Business Days such excess has not been eliminated by changes in
currency exchange rates thereupon to make prepayments (by such repayment of
Loans, payment of unreimbursed drawings or Cash collateralization) such that,
after giving effect to such prepayment (or payment or Cash collateralization and
changes in currency exchange rates), (i) the aggregate outstanding Revolving
Loans and the Dollar Equivalent amount of the Swingline Loans and Letter of
Credit Usage do not exceed the lesser of (y) the Total Revolving Loan
Commitments then available pursuant to Section 1.01(d) or (z) the Borrowing Base
as shown in the Borrowing Base Certificate that was last delivered pursuant to
Section 6.01; provided such Borrowing Base Certificate was required to be
delivered pursuant to and was in compliance with Section 6.01 or was delivered
after the Borrowing Base Certificate last required to be delivered pursuant to
Section 6.01, and (ii) the aggregate outstanding U.K. Swingline Loans and
Canadian Swingline Loans do not exceed the applicable Maximum Swingline Amount.
3.06. Authorizations. Without prejudice to the obligations to prepay
as set out in this Section 3, any Applicable Borrower proposing to make any
prepayment under this Section 3 will, prior to making any such prepayment, take
all steps required of it to obtain any consents, authorizations or other
approvals or take any other action which may at any relevant time be required of
it in respect of any such prepayment to be made by it (including taking all
requisite steps under Chapter VI of the Companies Act 1985 of Great Britain).
SECTION 4. Conditions Precedent.
4.01. Conditions Precedent to Initial Loans. The obligations of the
Banks to make the Initial Loans to the Borrowers hereunder are subject, at the
time of the making of each such Initial Loans (except as otherwise hereinafter
indicated), to the substantially contemporaneous satisfaction of the following
conditions:
(a) Officers' Certificate. On the Closing Date, the Agents shall
have received certificates dated such date signed by appropriate officers
of Holdings and each of the Borrowers, stating that all of the applicable
conditions
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set forth in Sections 4.01, 4.02 and, if applicable, 4.03 and 4.04 (in
each case disregarding any reference therein that such condition be deemed
satisfactory by the Agents and/or the Required Banks) have been satisfied
or waived as of such date.
(b) Opinions of Counsel. On the Closing Date, the Agents shall have
received an opinion or opinions addressed to each of the Banks and dated
the Closing Date, each in form and substance satisfactory to the Agents,
from (i) Akin, Gump, Strauss, Hauer & Feld, L.L.P., New York counsel to
each Credit Party, which opinion shall be in the form of Exhibit C-1
hereto, (ii) Linklaters & Paines, United Kingdom counsel to each United
Kingdom Credit Party, which opinion shall be in the form of Exhibit C-2
hereto, (iii) McCarthy Tetrault, Canadian counsel to each Canadian Credit
Party, and Patterson, Palmer, Hunt, Murphy, Canadian counsel to each
Canadian Credit Party, which opinions shall be in the form of Exhibit
C-3(a) and (b) hereto, respectively, (iv) local counsel to the Borrowers
in each jurisdiction in which Collateral is located, which opinions shall
be in the form of Exhibit C-4 hereto, (v) foreign local counsel opinions,
satisfactory in form and substance to the Agents, and (vi) a reliance
letter from Kirkland & Ellis, counsel to HarnCo, entitling the Banks to
rely upon its opinion delivered pursuant to the Recapitalization
Agreement.
(c) Corporate Proceedings. All corporate and legal proceedings in
connection with the Transaction contemplated by the Documents shall be
satisfactory in form and substance to the Agents, and the Agents shall
have received all information and copies of all certificates, documents
and papers, including records of corporate proceedings and governmental
approvals, if any, which the Agents reasonably may have requested from any
Credit Party or any Affiliate of either thereof in connection therewith,
such documents and papers where appropriate to be certified by proper
corporate or governmental authorities. Without limiting the foregoing, the
Agent shall have received (i) evidence satisfactory to them that the
Boards of Directors or Board of Managers or the foreign equivalent, as the
case may be, of each Credit Party, shall have approved the Transaction
contemplated by the Documents, (ii) resolutions of the Boards of Directors
or Board of Managers or the foreign equivalent, as the case may be, of
each Credit Party, approving and authorizing such documents and actions as
are contemplated hereby in form and
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substance reasonably satisfactory to the Agents including without
limitation the execution and delivery of all Documents to be executed by
such Person, certified by its corporate secretary or an assistant
secretary as being in full force and effect without modification or
amendment, and (iii) signature and incumbency certificates of officers of
each Credit Party executing instruments, documents or agreements required
to be executed in connection with the Transaction contemplated by the
Documents.
(d) Transaction Documents; Transaction.
(i) Full, complete and accurate copies of the Transaction Documents
shall have been provided to the Agents. The Transaction Documents and any
amendments thereto shall be in form and substance reasonably satisfactory
to the Agents, and each of the Transaction Documents required to be
executed and delivered on or prior to the Closing Date shall have been
duly authorized, executed and delivered by each of the parties thereto and
shall be in full force and effect. No term or provision of the Transaction
Documents shall have been modified, and no condition to the consummation
of the Transaction shall have been waived, in either case in a manner
detrimental (provided the Agents may waive non-material changes in their
reasonable discretion) to any Credit Party, by any of the parties thereto.
Each Credit Party and any of their Affiliates shall have in all material
respects done and performed such acts and observed such covenants which
each is required to do or perform under the Transaction Documents and in
order to consummate the Transaction on or prior to the Effective Date.
(ii) Each Credit Party shall have provided evidence satisfactory in
form and substance to the Agents that the Transaction is being consummated
contemporaneously.
(e) Additional Financing.
(i) Holdings shall have received gross proceeds (before deducting
the initial purchasers' discount) of at least $60.0 million from the
issuance of the Series A Preferred Units and MHE Investments shall have
received gross cash proceeds of $54 million from the issuance of equity
securities, and the terms and conditions of such Preferred Units, equity
investment and such capital contribution shall be satisfactory to the
Agents.
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(ii) Holdings shall have issued the Series B Preferred Units to
HarnCo.
(iii) The Company shall have received gross proceeds (before
deducting the initial purchasers' discount) of $200 million from the
issuance of Public Notes, and the terms and conditions of such Public
Notes shall be satisfactory to the Agents.
(f) Organizational Documentation, etc. On or prior to the Closing
Date, the Banks shall have received copies of true and complete certified
copies of the following documents of each Credit Party, the provisions of
which shall be reasonably satisfactory to the Agents:
(i) Each such Person's respective Certificate or Articles of
Incorporation or Certificate of Formation or the foreign equivalent,
which shall be certified and be accompanied by a good standing
certificate or the foreign equivalent, if any, from the jurisdiction
of its organization and good standing certificates, if any, from the
jurisdictions in which it is qualified to do business as a foreign
corporation, each to be dated a recent date prior to the Closing
Date; and
(ii) Each such Person's respective By-laws or operating
agreement or the foreign equivalent, certified as of the Closing
Date by its corporate secretary.
(g) Credit Documents. Each of this Agreement and each other Credit
Document shall (i) be in form and substance satisfactory to the Agents and
(ii) have been, on or prior to the Closing Date, duly authorized, executed
and delivered by each of the parties signatory thereto.
(h) Notes. There shall have been delivered to the Administrative
Agent for the account of each of the Banks which has so requested the Term
Notes, the Acquisition Term Notes, the Revolving Notes and the Swingline
Notes executed by the applicable Borrower in the amounts and maturities
and as otherwise provided herein.
(i) Certain Fees.
(i) All costs, fees and expenses (including, without limitation,
legal fees and expenses) payable to CIBC and
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Indosuez pursuant to the letter agreement between Chartwell and Indosuez
dated March 4, 1998 shall have been paid in full.
(ii) The Borrowers shall have paid or have caused to be paid the
commitment and other fees and expenses (including, without limitation,
reasonable legal fees and expenses) contemplated hereby and/or in
connection with the other Documents.
(j) Financial Statements, etc.
(i) Prior to the Closing Date, the Agents shall have received
combined financial statements audited by Price Waterhouse LLP, including a
balance sheet as of October 31, 1996 and October 31, 1997 and statements
of income and cash flows of the MHE Business for the fiscal years ended
October 31, 1995, October 31, 1996 and October 31, 1997 and unaudited
financial statements for the thirteen-week period ended January 31, 1998,
and the pro forma balance sheet of the Company as of January 31, 1998,
after giving effect to the Transaction and the Borrowings under this
Agreement. The Company shall have delivered to the Agents five-year
financial projections, accompanied by a statement by the Company that such
projections are based on assumptions believed by it in good faith to be
reasonable as to the future financial performance of the Company at the
time made, reasonably satisfactory to the Agents, it being recognized by
the Banks that such projections as to future events are not to be viewed
as facts and that actual results during the period or periods covered by
any such projections may differ from the projected results.
(ii) Prior to the Closing Date, the Agents shall have received an
accounting review prepared by Coopers & Lybrand LLP in form and substance
reasonably satisfactory to the Agents.
(k) Insurance.
(i) Set forth on Schedule 6.01(i) is a summary of all insurance
policies maintained by the Company and its Subsidiaries, and the insurance
coverage provided for the Company and its Subsidiaries by such insurance
policies shall be reasonably satisfactory to the Agents.
(ii) Prior to the Closing Date, the Agents shall have received an
insurance review prepared by J.H. Marsh &
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McLennan in form and substance reasonably satisfactory to the Agents.
(iii) On the Closing Date, the Agents shall have received the
insurance certificates in respect of the Collateral required by the
Security Documents.
(l) Performance Bonds; Surety Lines.
(i) On the Closing Date, the Agents shall be reasonably satisfied
that the Borrowers will be able to service and maintain any performance
bonds that may be required in the ordinary course of business on
reasonable terms and conditions.
(ii) Prior to the Closing Date, the Company and its Subsidiaries
shall have established independent surety lines on terms satisfactory to
the Banks.
(m) Indebtedness, etc. On or prior to the Closing Date and except as
set forth on Schedule 5.21(a) (which shall only cover balance sheet
categories), the Credit Parties and their respective Subsidiaries shall
have repaid or defeased all existing Indebtedness of the categories
specified in clauses (i), (iii), (iv), (v) and (vii) of the definition of
Indebtedness in a manner satisfactory to the Agents.
(n) Security Documents and Guarantees. The Security Documents and
the Guarantees shall have been duly executed and delivered by the
respective parties thereto and there shall have been delivered to the
Collateral Agent (i) certificates representing all Pledged Securities (if
certificated), together with executed and undated stock powers and/or
assignments in blank, (ii) evidence of the filing or making of arrangement
for filing of appropriate financing statements or comparable documents
under the provisions of the UCC and applicable domestic, foreign or local
laws, rules or regulations in each of the offices (including, without
limitation, the United States Patent and Trademark Office and the United
States Copyright Office) where such filing is necessary or appropriate to
grant to the Collateral Agent a perfected first priority Lien in such
Collateral superior to and prior to the rights of all third persons other
than the holders of Prior Liens and subject to no other Liens except Liens
expressly permitted by the applicable Security Document, (iii) tax lien
and judgment searches, to the extent avail-
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able, and certified copies of Requests for Information (Form UCC-11 or the
equivalent) or equivalent reports or lien search reports in the United
States, the United Kingdom and Canada listing all effective financing
statements or comparable documents which name any Credit Party or any of
its Subsidiaries (prior to and after giving effect to the Transaction) as
debtor and which are filed in those jurisdictions in which any of the
Collateral is located and the jurisdictions in which any Credit Party or
any of its Subsidiaries maintains its chief executive office, none of
which shall encumber the Collateral covered or intended or purported to be
covered by the Security Documents except Prior Liens and other Liens
expressly permitted by the applicable Security Document and (iv) evidence
of the completion of all recordings and filings of each Security Document
and delivery of such other security and other documents as may be
necessary (which, in respect of the U.K., will be provided reasonably
contemporaneously with the execution and delivery of the Security
Documents and the Guarantees) or, in the opinion of the Collateral Agent,
desirable to perfect the Liens created, or purported or intended to be
created, by the Security Documents.
(o) No Material Adverse Change. From October 31, 1997 to and
including the Closing Date, there shall have been no material adverse
change in the business, assets, properties, condition (financial or
otherwise) or prospects of the MHE Business or the Company and its
Subsidiaries, taken as a whole, or in the industries in which they
compete, other than the Transaction and the obligations incurred under the
Credit Documents.
(p) Consents, etc. All material governmental and third party
approvals and consents (including, without limitation, all material
approvals and consents required in connection with any environmental
statutes, rules or regulations), if any, in connection with the
Transaction, the transactions contemplated by the Credit Documents and the
Transaction Documents, and in either case otherwise referred to herein or
therein to be completed on or before the Closing Date shall have been
obtained and remain in effect, and all applicable waiting periods shall
have expired without any action being taken by any competent authority
which restrains, prevents or imposes, in the judgment of the Agents,
materially adverse conditions upon the consummation of the Transaction.
There shall not exist any judgment, order, injunction or other restraint
is-
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sued or filed with respect to the making of the Loans hereunder or the
consummation of the Transaction.
(q) Environmental Review. Prior to the Closing Date, there shall
have been delivered to the Agents for each of the Banks an Officers'
Certificate of the Company in substantially the form of Exhibit M hereto
and environmental reviews in form and substance satisfactory to the Agents
from Collier, Shannon, Rill & Scott with respect to the assets of the
Company and its Subsidiaries.
(r) Borrowing Base Certificate. Prior to the initial Revolving Loan,
the Agents and the Banks shall have received and the Agents shall be
satisfied (both as to form and substance) with a Borrowing Base
Certificate which shall be prepared as of a date prior to the Closing Date
that is satisfactory to the Agents which Borrowing Base Certificate shall
indicate that the Borrowing Base as of February 28, 1998 will exceed the
Revolving Loan Borrowing to be incurred on the Closing Date by at least
$1,000,000.
(s) Leases. All material Capital Leases of the Credit Parties or
their respective Subsidiaries and all material Operating Leases of the
Credit Parties or their respective Subsidiaries outstanding immediately
prior to the Transaction shall remain in force after giving effect to the
Transaction.
(t) Solvency. On the Closing Date, the Banks shall have received an
opinion from Valuation Research Corporation and an Officers' Solvency
Certificate in the form of Exhibit N hereto, in each case supporting the
conclusions that, before and after giving effect to the Transaction, the
contemplated borrowings of the full amounts which will be available under
the Total Term Loan Commitments and the Total Revolving Loan Commitments,
the execution of the Guarantees and the Security Documents, none of the
Credit Parties will be insolvent, will be rendered insolvent by the
indebtedness incurred in connection therewith, will be left with
unreasonably small capital with which to engage in its business or will
have incurred debts, including Contingent Obligations, beyond its ability
to pay such debts as they mature.
(u) Conditions Relating to Mortgaged Real Property and Real
Property. On or prior to the Closing Date, the Company shall have caused
to be delivered to the Collat-
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eral Agent, on behalf of the Banks, the following documents and
instruments:
(i) Mortgages encumbering each Mortgaged Real Property set
forth on Schedule 4.01(u)(i) in favor of the Collateral Agent, for
the benefit of the Banks, duly executed and acknowledged by the
Applicable Borrower, and otherwise in form for recording in the
recording office where each such Mortgaged Real Property is
situated, together with such certificates, affidavits,
questionnaires or returns as shall be required in connection with
the recording or filing thereof to create a lien under applicable
law, and such UCC-1 financing statements and other similar
statements as are contemplated by the counsel opinions described in
Section 4.01(b)(iv) in respect of such Mortgage, all of which shall
be in form and substance satisfactory to the Collateral Agent, and
any other instruments necessary to grant a mortgage lien under the
laws of any applicable jurisdiction, which Mortgage and financing
statements and other instruments shall when recorded be effective to
create a first priority Lien on such Mortgaged Real Property subject
to no Liens other than Prior Liens and other Liens expressly
permitted by such Mortgage;
(ii) with respect to each Mortgaged Real Property, (x) such
consents, approvals, amendments, supplements and (y) except in
respect of such property in the United Kingdom, estoppels and tenant
subordination agreements or other instruments as necessary or
required to consummate the Transaction contemplated hereby or as
shall reasonably be deemed necessary by the Collateral Agent in
order for the owner or holder of the fee or leasehold interest
constituting such Mortgaged Real Property to grant the Lien
contemplated by the Mortgage with respect to such Mortgaged Real
Property;
(iii) with respect to each Mortgage of real property located in
the United States, a policy (or commitment to issue a policy) of
title insurance insuring (or committing to insure) the Lien of such
Mortgage as a valid first mortgage Lien on the real property and
fixtures described therein in an amount not less than 115% of the
fair market value thereof, which policies (or commitments) shall (w)
be issued by the Title Company, (x) include such reinsurance
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arrangements (with provisions for direct access) as shall be
reasonably acceptable to the Collateral Agent, (y) contain a
"tie-in" or "cluster" endorsement (if available under applicable
law) (i.e., policies which insure against losses regardless of
location or allocated value of the insured property up to a stated
maximum coverage amount) and have been supplemented by such
endorsements (or where such endorsements are not available, opinions
of special counsel, architects or other professionals reasonably
acceptable to the Collateral Agent to the extent that such opinions
can be obtained at a cost which is reasonable with respect to the
value of the real property subject to such Mortgage) as shall be
reasonably requested by the Collateral Agent (including, without
limitation, endorsements on matters relating to usury, first loss,
last dollar, zoning, contiguity, revolving credit, doing business
and so-called comprehensive coverage over covenants and
restrictions) and (z) contain only such exceptions to title as shall
be Prior Liens or are otherwise agreed to by the Collateral Agent on
or prior to the Closing Date with respect to such Mortgaged Real
Property;
(iv) with respect to each Mortgage of Real Property in Canada,
a legal opinion of counsel to the applicable Credit Party as to
title, encumbrances, priorities and other matters in form and
substance reasonably satisfactory to the Administrative Agent;
(v) with respect to each Mortgaged Real Property, policies or
certificates of insurance as required by the Mortgage relating
thereto, which policies or certificates shall comply with the
insurance requirements contained in such Mortgage;
(vi) with respect to each Mortgaged Real Property, a survey;
(vii) with respect to each Mortgaged Real Property (other than
Mortgaged Real Property in the United Kingdom), UCC, judgment and
tax lien searches (or foreign jurisdiction equivalents, to the
extent available) confirming that the personal property comprising a
part of such Real Property or Mortgaged Real Property is subject to
no Liens other than Prior Liens;
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(viii) with respect to each Mortgaged Real Property (other
than Mortgaged Real Property in the United Kingdom), such
affidavits, certificates, information (including financial data) and
instruments of indemnification (including, without limitation, a
so-called "gap" indemnification) as shall be required to induce the
Title Company to issue the policy or policies (or commitment) and
endorsements contemplated in subparagraph (iii) above;
(ix) evidence acceptable to the Collateral Agent of payment
(should it be required to be made on or prior to the Closing Date)
by the appropriate Credit Party or Subsidiary thereof of all
applicable title insurance premiums (if applicable), search and
examination charges, survey costs and related charges, mortgage
recording taxes, fees, charges, costs and expenses required for the
recording of the Mortgages and issuance of the title insurance
policies (if applicable) referred to in subparagraph (iii) above;
(x) with respect to each Real Property or Mortgaged Real
Property, copies of all Leases, leases in which a Credit Party or
Subsidiary thereof holds the tenant's interest or other agreements
relating to possessory interests. To the extent any of the foregoing
affect any Mortgaged Real Property, the interest of any tenant of a
Credit Party created by such agreement shall be subordinate to the
Mortgage to be recorded against such Mortgaged Real Property (other
than Mortgaged Real Property in the United Kingdom) and otherwise
acceptable to the Collateral Agent; and
(xi) with respect to each Mortgaged Real Property (other than
Mortgaged Real Property in the United Kingdom), an Officers'
Certificate or other evidence satisfactory to the Collateral Agent
that as of the date thereof there (x) has been issued and is in
effect a valid and proper certificate of occupancy or other local
equivalent, if any, for the use then being made of such Mortgaged
Real Property and that there is not outstanding any citation,
violation or similar notice indicating that such Mortgaged Real
Property contains conditions which are not in compliance with local
codes or ordinances relating to building or fire safety or
structural soundness, (y) has not occurred any Taking or Destruction
of any Mortgaged Real Property or Real Property and (z) are
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no disputes regarding boundary lines, location, encroachment or
possession of any Real Property or Mortgaged Real Property and no
state of facts existing which could give rise to any such claim
which could reasonably be expected to have a material adverse effect
on the value or utility of such Real Property or Mortgaged Real
Property.
(v) Labor Matters. There shall be no labor disputes, strikes or work
stoppages, pending or threatened, involving any Credit Party or any of
their Subsidiaries that could reasonably be expected to adversely affect
the consummation of the Transaction or that could reasonably be expected
to have a Material Adverse Effect.
(w) Recapitalization Documents, etc. There shall be no litigation by
any Person pending, or to any Borrower's knowledge threatened, with
respect to the Recapitalization documents that, in the Agents' good faith
judgment, could reasonably be expected to have a Material Adverse Effect
after giving effect to the Recapitalization, and the Agents shall be
reasonably satisfied with the capital, organizational and management
structure of Holdings and the Borrowers and each of their Subsidiaries.
The acceptance of the proceeds of each Borrowing of Initial Loans
shall constitute a representation and warranty by each Borrower to each of the
Banks that all of the applicable conditions specified above have been satisfied
or waived as of that time and that, at the time of a Borrowing of such Initial
Loan (or substantially contemporaneous therewith), the conditions specified in
Section 4.02 have been satisfied, in all material respects, or waived. All of
the certificates, legal opinions and other documents and papers referred to in
this Section 4.01, unless otherwise specified, shall be delivered to each Agent
at the Administrative Agent's Office (or such other location as may be specified
by the Agents) for the account of each of the Banks and in sufficient
counterparts for each of the Banks and shall be satisfactory in form and
substance to the Agents.
4.02. Conditions Precedent to All Loans. The obligation of the Banks
to make all Loans (which term shall not include a conversion or continuation of
a Loan), including the Initial Loans, is subject, at the time of each such Loan,
to the satisfaction of the following conditions:
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(a) Effectiveness. This Agreement shall have become effective as
provided in Section 11.10.
(b) No Default; Representations and Warranties. At the time of the
making of each Loan and also after giving effect thereto (i) there shall
exist no Default or Event of Default and (ii) all representations and
warranties contained herein or in the other Credit Documents in effect at
such time shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on and
as of the date of the making of such Loan, unless such representation and
warranty expressly indicates that it is being made as of any other
specific date in which case on and as of such other date.
(c) Adverse Change, etc. (i) Since October 31, 1997, nothing shall
have occurred or become known which the Required Banks or the
Administrative Agent shall have determined could reasonably be expected to
have a Material Adverse Effect.
(ii) All material governmental and third party approvals and consents
(including, without limitation, all material approvals and consents
required in connection with any environmental statutes, rules or
regulations), if any, in connection with the conduct of the business of
the Company and its Subsidiaries, taken as a whole, shall have been
obtained and remain in effect.
(iii) There shall not exist any judgment, order, injunction or other
restraint issued or filed with respect to the making of any Loan hereunder
in accordance with the terms of this Agreement.
(d) Documentation and Opinions of Counsel. The Administrative Agent
shall have received such documentation and opinion or opinions, addressed
to each of the Banks, from counsel to each Credit Party as may be
reasonably required, with reasonable notice under the circumstances, by
and shall be reasonably satisfactory to the Administrative Agent from (i)
such counsel to each Credit Party and (ii) appropriate local counsel,
which opinions shall cover such matters as reasonably requested by, and be
in form and substance satisfactory to, the Administrative Agent.
(e) Margin Rules. On the date of each Borrowing of Loans, neither
the making of any Loan nor the use of the
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proceeds thereof will violate the provisions of Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System.
(f) Borrowing Base Certificate. The Administrative Agent and the
Required Banks shall have received and shall be reasonably satisfied (both
as to form and substance) with the Borrowing Base Certificate last
delivered to the Banks.
(g) Real Property Disclosure. Each Credit Party shall have made all
notifications, registrations, and filings in accordance with all State,
Local and Foreign Disclosure Requirements applicable to the Real Property,
including the use of forms provided by state or local agencies, where such
forms exist, whether to the Borrowers or to or with the state or local
agency to the extent failure to make such filings could reasonably be
expected to have a Material Adverse Effect.
The acceptance of the proceeds of each Borrowing of Loans shall
constitute a representation and warranty by each Borrower to each of the Banks
that all of the applicable conditions specified in Section 4.02 have been
satisfied or waived.
All of the certificates, legal opinions and other documents and
papers referred to in this Section 4.02, unless otherwise specified, shall be
delivered to the Administrative Agent at the Administrative Agent's Office (or
such other location as may be specified by the Administrative Agent) for the
account of each of the Banks and in sufficient counterparts for each of the
Banks and shall be satisfactory in form and substance to the Administrative
Agent.
4.03. Additional Conditions Precedent to Acquisition Term Loans. The
obligations of the Banks to make the Acquisition Term Loans (which shall not
include a conversion or continuation of any such Loan), including any
Acquisition Term Loan made on the Closing Date, are subject to the satisfaction
of the following additional conditions:
(a) Each Acquisition Term Loan shall be made solely to effect a
Designated Acquisition and costs and expenses incurred therewith, or to
repay Indebtedness incurred pursuant to Section 7.04(i);
(b) No later than ten Business Days (or four Business Days with
respect to a Designated Acquisition for
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which the consent of the Required Banks is not required) prior to the
Acquisition Term Loan Closing Date (except to the extent the
Administrative Agent agrees to a shorter period), the Administrative Agent
shall have received each of the following with respect to the consummation
of the Designated Acquisition to be financed with the proceeds of such
Acquisition Term Loan; provided that if the Designated Acquisition
involves a total acquisition price of $5,000,000 or less the information
specified in (y) clause (i) below need not be audited or reviewed and
shall only be provided if available from the Designated Acquisition or can
be prepared without undue expense and (z) clause (iii) below need not be
furnished:
(i) (A) audited financial statements, prepared in accordance
with GAAP, including a balance sheet and statements of income and
cash flows of the entity listed as the Designated Acquisition for
the most recent full fiscal year or years that would be required to
be included in any filing made with the SEC; provided that if such
audited financial statements are not available, then a detailed
accounting review similar to those undertaken and completed in
transactions previously consummated by the Company and its
Subsidiaries shall be performed by a "Big Five" accounting firm (or
other firm reasonably satisfactory to the Administrative Agent) and
(B) unaudited financial statements, prepared in accordance with
GAAP, including a balance sheet and statements of income and cash
flows of the entity listed as the Designated Acquisition for each of
the interim periods subsequent to the audited financial statements
referred to in clause (A) above;
(ii) a pro forma Borrowing Base Certificate and a pro forma
balance sheet and pro forma consolidated statements of income and
cash flows of the Company and its Subsidiaries, after giving effect
to the consummation of the Designated Acquisition, as at the end of
the most recent month for which financial statements are available;
(iii) projections for the Designated Acquisition, substantially
in the form of the projections provided pursuant to Section 4.01(j)
or otherwise in a form acceptable to the Administrative Agent, for
the Designated Acquisition's then current calendar year or the
Company's then current fiscal year and the next
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four succeeding calendar years of the Designated Acquisition or
fiscal years of the Company, prepared in accordance with the
Designated Acquisition's normal accounting procedures (and which
will represent management's reasonable estimate of the projected
performance of the Designated Acquisition and its Subsidiaries
during such periods) applied on a consistent basis, including,
without limitation (i) forecasted consolidated balance sheets,
consolidated statements of operations, of stockholders' equity and
of cash flows of the Designated Acquisition and its Subsidiaries on
a consolidated basis for such periods, (ii) the amount of forecasted
capital expenditures for the Designated Acquisition for such
periods, and (iii) an appropriate discussion of the principal
assumptions on which such projections are based; provided, however,
that if any such forecast indicates that the Company may not be in
compliance with any provision of this Agreement at some future date,
such forecast shall not constitute a Default or Event of Default or
anticipatory or other breach hereof,
(iv) an Officers' Certificate of the Company with respect to
the Designated Acquisition,
(x) certifying to the preparation of the pro forma
financial statements referenced in subclauses (ii) and (iii),
if required, and certifying that, both before and after giving
effect to such Designated Acquisition, no Default or Event of
Default shall exist, and that, on a pro forma basis, the
Company and its Subsidiaries (including any direct or indirect
Subsidiary of the Company to be acquired in the contemplated
Designated Acquisition) will be in compliance with the
covenants set forth herein (based on the latest twelve months
results of operations), and setting forth the calculations
required to establish such pro forma compliance;
(y) certifying that from the date of the financial
statements delivered pursuant to Section 4.03(b)(i)(A) to and
including the Acquisition Term Loan Closing Date, there shall
have been no material adverse change in the business, assets,
properties, condition (financial or otherwise) or prospects of
the Company and its Sub-
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sidiaries, taken as a whole, or the Designated Acquisition
entity; and
(z) certifying that the conditions set forth in each of
Sections 4.02 and 4.03 (other than the completion of filings
and recordings to be performed upon the Acquisition Term Loan
Closing Date) have been satisfied with respect to such
proposed Acquisition Term Loan Borrowing;
(c) If the Designated Acquisition involves a Borrowing of
Acquisition Term Loans or the use of proceeds of other Indebtedness of
$10,000,000 or more or a total acquisition price of $15,000,000 or more,
the consent of the Required Banks;
(d) The Company and its Subsidiaries shall have complied, in all
material respects, with the provisions of Sections 6.14, 6.15 (including a
Phase I (or a review similar in scope for foreign Designated Acquisitions)
environmental review of the Designated Acquisition entity or an additional
review at the request of the Administrative Agent from an environmental
assessment firm of national standing, in a form satisfactory to the
Administrative Agent) and 6.16 as to any property acquired or to be
acquired in connection with such Designated Acquisition, except for any
such provisions with which compliance is waived by the Administrative
Agent in its sole discretion, including, without limitation and to the
extent required by the referenced Sections, that the Company and its
Subsidiaries (including any Subsidiary so acquired) shall execute and
deliver to the Administrative Agent any additional Security Documents (or
Guarantees) required to provide the Administrative Agent for the benefit
of the Banks with a valid, perfected Lien in any Collateral to be acquired
in such Designated Acquisition;
(e) The Administrative Agent shall be reasonably satisfied that the
Company and its Subsidiaries shall have completed their appropriate and
customary due diligence with respect to the Designated Acquisition entity,
including but not limited to environmental, legal, accounting and
operational reviews similar to those undertaken and completed in
transactions previously consummated by the Company;
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(f) There shall be delivered to the Administrative Agent upon
consummation of the Designated Acquisition, a complete set of the
documents effecting such acquisition, together with all schedules and
exhibits (including, without limitation the acquisition agreement);
(g) Any fees or expenses of any Agent or the Banks which are then
due and payable, whether due in connection with such Acquisition Term Loan
Borrowing or otherwise, shall have been paid in full prior to, or
simultaneously with, the Acquisition Term Loan Closing; and
(h) From the date of the financial statements delivered pursuant to
Section 4.03(b)(i)(A) to and including the date of the Acquisition Term
Loan Borrowing, there shall have been no material adverse change in the
business, assets, properties, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries, taken as a whole, or the
Designated Acquisition entity.
4.04. Conditions Precedent to All Letters of Credit. The right of
any Borrower to obtain the issuance of any Letter of Credit that the relevant
Issuing Bank determines to issue in its sole discretion hereunder is subject to
prior or concurrent satisfaction of all of the following conditions:
(A) Required Documentation. On or prior to the date of issuance of a
Letter of Credit, the Administrative Agent shall have received, in
accordance with the provisions of Section 1.13, a request for issuance
with respect to such Letter of Credit (the furnishing by such Borrower of
each such request for issuance shall be deemed to constitute a
representation and warranty of the Borrower to the effect that the
conditions set forth in Sections 4.01 (to the extent Letters of Credit are
issued on the date the Initial Loans are made) and 4.02 are satisfied as
of the date of delivery and will be satisfied on the relevant date of
issuance), all other information specified in Section 1.13, and such other
documents as the Issuing Bank may reasonably require in connection with
the issuance of such Letter of Credit.
(B) Conditions. On the date of issuance of each such Letter of
Credit, all conditions precedent described in Sections 4.01 (to the extent
Letters of Credit are issued on the date the Initial Loans are made) and
4.02 shall be satisfied to the same extent as though the issu-
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ance of such Letter of Credit were the making of a Revolving Loan.
SECTION 5. Representations, Warranties and Agreements. In order to
induce the Agents and the Banks to enter into this Agreement and to make the
Loans provided for herein, the Borrowers, jointly and severally, make the
following representations and warranties to, and agreements with, the Agents and
the Banks, all of which shall survive the execution and delivery of this
Agreement and the making of the Loans (with the execution and delivery of this
Agreement and the making of each Loan thereafter being deemed to constitute a
representation and warranty that the matters specified in this Section 5 are
true and correct in all material respects both before and after giving effect to
the Transaction and the related transactions and as of the date of each such
Loan unless such representation and warranty expressly indicates that it is
being made as of any specific date):
5.01. Status. (a) The Company and each of the Company's Subsidiaries
(i) is a duly organized and validly existing corporation, limited liability
company or other entity in good standing under the laws of the jurisdiction of
its organization; (ii) has the requisite corporate or other organizational power
and authority and has obtained all requisite governmental licenses,
authorizations, consents and approvals to own and operate its property and
assets and to transact the business in which it is engaged and presently
proposes to engage, except for those governmental licenses, authorizations,
consents or approvals the failure of which to be so obtained would not have a
Material Adverse Effect and (iii) is duly qualified, or as of the Closing Date
has taken appropriate steps to qualify, and is authorized to do business, or as
of the Closing Date has taken appropriate steps to be authorized to do business,
and is in good standing in all jurisdictions where it is required to be so
qualified and where the failure to be so qualified would have a Material Adverse
Effect.
(b) The Company was incorporated on March 4, 1998. Prior to the
Closing Date, the Company has not engaged in any business or incurred any
liabilities except for activities, expenses and liabilities incident to its
organization and to the carrying out of the Transaction or the Transaction
Documents.
5.02. Corporate Power and Authority; Business. Each Credit Party and
each of its respective Subsidiaries has the requisite corporate or other
organizational power and authority to execute, deliver and carry out the terms
and provisions of
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the Documents to which it is a party and has taken all necessary corporate or
other organizational action to authorize the execution, delivery and performance
of the Documents to which it is a party. Each Credit Party and each of its
respective Subsidiaries has duly executed and delivered each Document to which
it is a party and each such Document constitutes the legal, valid and binding
obligation of such Person enforceable in accordance with its terms except as
such enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
5.03. No Violation. Neither the execution, delivery and performance
by any Credit Party or its respective Subsidiaries of this Agreement or the
other Documents to which it is a party nor compliance with the terms and
provisions hereof and thereof, nor the consummation of the Transaction
contemplated herein and therein (i) will contravene any applicable provision of
any law, statute, rule, regulation, order, writ, injunction or decree of any
court or governmental instrumentality, (ii) will conflict or be inconsistent
with or result in any breach of any of the terms, covenants, conditions or
provisions of, or constitute a default under, or (other than pursuant to the
Security Documents, the Surety Arrangement or trustee liens under the Indenture)
result in the creation or imposition of (or the obligation to create or impose)
any Lien upon any of the property or assets of any Credit Party or its
respective Subsidiaries pursuant to the terms of any indenture, mortgage, deed
of trust, agreement or other instrument to which any Credit Party or its
respective Subsidiaries is a party or by which it or any of its property or
assets is bound or to which it may be subject or (iii) will violate any
provision of the charter or by-laws or the certificate of formation or operating
agreement, or the foreign equivalent of such documents, as applicable, of any
Credit Party or its respective Subsidiaries, except, in each case, where such
contravention, conflict, inconsistency, breach, default, creation, imposition,
obligation or violation would not have a Material Adverse Effect.
5.04. Litigation. Schedule 5.04 lists all outstanding litigation of
the Company and its Subsidiaries. There are no actions, judgments, suits or
proceedings pending or, to any Borrower's knowledge, threatened with respect to
(i) the transactions contemplated by the Documents or (ii) any Credit Party or
its respective Subsidiaries which could reasonably be expected to have a
Material Adverse Effect.
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5.05. Use of Proceeds. (a) The proceeds of all A Term Loans and B
Term Loans to be made to the Company hereunder shall be utilized by the Company
to finance the Recapitalization and to pay related fees and expenses.
(b) Proceeds the Revolving Loans and proceeds of the Swingline Loans
shall be utilized for working capital and other general corporate purposes;
provided that on and after the earlier to occur of (x) the Acquisition Term Loan
Commitment Termination Date or (y) after the Acquisition Term Loans have been
fully borrowed, if the applicable borrowing conditions have been met, up to
$12,500,000 aggregate principal amount at any time outstanding of Revolving
Loans (plus at any time an amount, determined in accordance with Section 6.18,
of Cash that is used to pay or replace Revolving Loans that may be reborrowed to
finance Designated Acquisitions) may be used to finance Designated Acquisitions
if, on a pro forma basis after giving effect to the Designated Acquisition, the
ratio of Indebtedness for borrowed money of the Company and its Subsidiaries,
after giving effect to the Revolving Loans to be made, on the last day of the
fiscal quarter immediately preceding the date of calculation to Consolidated
EBITDA of the Company for the Test Period ending at the end of such fiscal
quarter is less than 4.75 to 1.00 on a pro forma basis after giving effect to
any Designated Acquisitions made during the Test Period and there would be at
least $10,000,000 of Revolving Loans available to be borrowed, after giving
effect to the Borrowing for the Designated Acquisition.
(c) All the proceeds of each of the Acquisition Term Loans to be
made hereunder shall be utilized to provide the financing required to consummate
Designated Acquisitions, to pay related fees and expenses and to pay
Indebtedness permitted by Section 7.04(i).
(d) Neither the making of any Loan hereunder, nor the use of the
proceeds thereof, will violate or be inconsistent with the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System.
5.06. Governmental Approvals, etc. Except as set forth on Schedule
5.06, no order, consent, approval, license, authorization, or validation of, or
filing, recording or registration with, or exemption by, any third party or any
foreign or domestic governmental or public body or authority, or by any
subdivision thereof (other than those orders, consents, approvals, licenses,
authorizations or validations which, if not obtained or made, would not
reasonably be expected to have a Ma-
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terial Adverse Effect or which have previously been obtained or made, or filings
to perfect security interests granted pursuant to the Security Documents, which
will be accomplished on or prior to the Closing Date), is required to authorize
or is required in connection with (i) the execution, delivery and performance of
any Document or the Transaction contemplated therein or (ii) the legality,
validity, binding effect or enforceability of any Document. At the time of the
making of the Initial Loans, there does not exist any judgment, order,
injunction or other restraint issued or filed with respect to the consummation
of the Transaction or the making of Loans or the performance by the Credit
Parties or their respective Subsidiaries of their respective obligations under
the Documents.
5.07. Investment Company Act. No Credit Party or any of its
respective Subsidiaries is, or will be after giving effect to the transactions
contemplated hereby, an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended, or subject to any foreign, federal or local statute or regulation
limiting its ability to incur indebtedness for money borrowed or guarantee such
indebtedness as contemplated hereby or by any other Credit Document.
5.08. Public Utility Holding Company Act. No Credit Party or any of
its respective Subsidiaries is, or will be after giving effect to the
transactions contemplated hereby, a "holding company," or a "subsidiary company"
of a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
5.09. True and Complete Disclosure. All factual information (taken
as a whole) heretofore or contemporaneously furnished by or on behalf of the
Credit Parties in writing to any Bank (including, without limitation, all
information contained in the Credit Documents) pursuant to this Agreement is (or
was, on the date of making the Initial Loans), and all other such factual
information (taken as a whole) hereafter furnished by any such Person in writing
to any Bank pursuant to this Agreement will be, true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any material fact necessary to make such
information not misleading at such time in light of the circumstances under
which such information was provided. The projections and pro forma financial
information contained in such materials are based on good faith estimates and
assumptions believed by such Persons to be reasonable
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at the time made, it being recognized by the Banks that such projections as to
future events are not to be viewed as facts and that actual results during the
period or periods covered by any such projections may differ from the projected
results. There is no fact known to any Credit Party which materially and
adversely affects the business, operations, property, assets, nature of assets,
liabilities, condition (financial or otherwise) or prospects of the Credit
Parties, taken as a whole, which has not been disclosed herein or in such other
documents, certificates and written statements furnished to the Banks.
5.10. Transaction. At the time of making the Initial Loans, all
necessary governmental and third-party approvals in connection with the
Transaction have been or, prior to the time when required, will have been,
obtained and remain in effect, and all applicable waiting periods have or, prior
to the time when required, will have, expired without, in all such cases, any
action being taken by any competent authority which is reasonably likely to have
a Material Adverse Effect on the Transaction.
5.11. Financial Condition; Financial Statements; Projections. (a) No
Credit Party is entering into the arrangements contemplated hereby and by the
other Credit Documents, or intends to make any transfer or incur any obligations
hereunder or thereunder with actual intent to hinder, delay or defraud either
present or future creditors. On and as of the Closing Date, on a pro forma basis
after giving effect to the Transaction and to all Indebtedness incurred and
Liens and Guarantees created, or to be created, by each Credit Party or its
respective Subsidiaries in connection with the Transaction, (w) none of the
Borrowers expects that final judgments against any Credit Party or its
respective Subsidiaries in actions for money damages with respect to pending or,
to its knowledge, threatened litigation will be rendered at a time when, or in
an amount such that, such Credit Party will be unable to satisfy any such
judgments promptly in accordance with their terms (taking into account the
maximum reasonable amount of such judgments in any such actions and the earliest
reasonable time at which such judgments might be rendered and the cash available
to each Credit Party or its respective Subsidiaries, after taking into account
all other anticipated uses of the cash of such Credit Party or its respective
Subsidiaries (including the payments on or in respect of debts and insurance
proceeds (including their Contingent Obligations)); (x) no Credit Party or its
respective Subsidiaries will have incurred or intends to, or believes that it
will, incur debts beyond its ability to pay such debts as such debts mature
(taking into account the
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timing and amounts of cash to be received by such Credit Party or its respective
Subsidiaries from any source, and of amounts to be payable on or in respect of
debts of such Credit Party or its respective Subsidiaries and the amounts
referred to in the preceding clause (w)); (y) each Credit Party or its
respective Subsidiaries, after taking into account all other anticipated uses of
the cash of such Credit Party or its respective Subsidiaries, anticipates being
able to pay all amounts on or in respect of debts of such Credit Party or its
respective Subsidiaries when such amounts are required to be paid; and (z) each
Credit Party and its respective Subsidiaries will have sufficient capital with
which to conduct its present and presently proposed business and the property of
such Credit Party and its respective Subsidiaries does not constitute
unreasonably small capital with which to conduct its present or proposed
business, taking into account the particular capital requirements of the
business conducted by such Credit Party, the projected capital requirements
thereof and the capital availability thereof. For purposes of this Section 5.11,
"debt" means any liability on a claim, and "claim" means a (i) right to payment
whether or not such a right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured; or (ii) right to an equitable remedy for breach of
performance if such breach gives rise to a payment, whether or not such right to
an equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured. On the date of each
Borrowing and the issuance of each Letter of Credit (and after giving effect to
all Borrowings and Letters of Credit as of such date), the representations set
forth in this Section 5.11(a) shall be true and correct with respect to such
Borrower on such date and any Credit Party which is a guarantor with respect to
any or all of such Borrowings or Letters of Credit.
(b) The Company has heretofore delivered to the Banks combined
financial statements audited by Price Waterhouse LLP including a balance sheet
as of the years ended October 31, 1996 and October 31, 1997 and statements of
income and of cash flows of the MHE Business for the fiscal years ended October
31, 1995, October 31, 1996 and October 31, 1997 and unaudited financial
statements for the thirteen-week period ended January 31, 1998. Except as
otherwise noted therein, the financial statements referred to in the preceding
sentence were prepared in accordance with GAAP consistently applied and fairly
present the financial position and results of operations of the MHE Business for
the periods covered thereby. There has also been delivered the pro forma (after
giving effect to the Transac-
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tion) balance sheet of the Company and its Subsidiaries as of January 31, 1998,
which presents a good faith estimate of the consolidated pro forma financial
position of the Company and its Subsidiaries for such periods.
The assumptions made in preparing such pro forma balance sheet are
reasonable as of the date of such statements and as of the Closing Date and all
material assumptions are set forth therein. Except as contemplated hereby, since
October 31, 1997 (on a pro forma basis after giving effect to the Transaction)
no event or events have occurred that could reasonably be expected to have a
Material Adverse Effect.
(c) There have heretofore been delivered to the Banks pro forma
consolidated income projections for the Company and its Subsidiaries, pro forma
consolidated balance sheet projections for the Company and its Subsidiaries and
pro forma consolidated cash flow projections for the Company and its
Subsidiaries, all for the fiscal years ending October 31, 1998 through October
31, 2002, inclusive (the "Projected Financial Statements"), which give effect to
the Transaction and all Indebtedness incurred or created in connection with the
Transaction. The assumptions made in preparing the Projected Financial
Statements are reasonable as of the date of such projections and as of the
Closing Date and all material assumptions with respect to the Projected
Financial Statements are set forth therein, it being recognized by the Banks
that such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections may
differ from the projected results.
(d) As of the Closing Date, except as fully reflected or reserved
against in the financial statements and the notes thereto described in Section
5.11(b), to the knowledge of the Borrowers there were no liabilities or
obligations with respect to the Company or its Subsidiaries of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether or
not due) which, either individually or in aggregate, would reasonably be
expected to result in a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole. As of the Closing Date, no Borrower knows of any
basis for the assertion against the Company or its Subsidiaries of any liability
or obligation of any nature whatsoever that is not fully reflected in the
financial statements described in Section 5.11(b) or (c), except as incurred by
the Company or its Subsidiaries in connection with the Transaction, which,
either individually or in the aggregate, could reasonably be expected
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to be material to the Company and its Subsidiaries, taken as a whole.
5.12. Security Interests. The Security Documents, taken as a whole,
if a filing will perfect a Lien, when filed and/or recorded, will create, in
favor of the Collateral Agent for the benefit of the Banks, as security for the
obligations purported to be secured thereby, a valid and enforceable perfected
first priority security interest in and Lien upon all of the Collateral,
superior to and prior to the rights of all third persons other than holders of
Prior Liens and subject to no other Liens except Liens expressly permitted by
the applicable Security Document. The mortgagor under each Mortgage has good and
marketable (or indefeasible) title to the Mortgaged Real Property owned by such
Credit Party free and clear of all Liens other than Prior Liens. The respective
Pledgor or assignor, as the case may be, has (or on and after the time it
executes the respective Security Document, will have) good and marketable title
(subject to securities laws affecting such transferability) to all items of
Collateral (other than real property subject to a Mortgage and except as set
forth on Schedule 5.21(b) hereto) owned by such Credit Party covered by such
Security Document free and clear of all Liens except Prior Liens and other Liens
expressly permitted by the applicable Security Document. No filings or
recordings are required in order to perfect the security interests created under
any Security Document except for filings or recordings required in connection
with any such Security Document which shall have been made prior to or
reasonably contemporaneously with the execution and delivery thereof.
5.13. Tax Returns and Payments. Each of the Credit Parties and each
of its respective Subsidiaries has timely filed all material federal, state,
provincial and other material returns, statements, forms and reports for taxes
(the "Returns") required to be filed by it with respect to its income,
properties or operations and has paid all material taxes (including, without
limitation, taxes based on net income or net profits) and assessments payable by
it which have become due, other than those not yet delinquent and except for
those contested in good faith and for which adequate reserves have been
established. Each of the Credit Parties and each of its respective Subsidiaries
has paid, or has provided adequate reserves (in accordance with GAAP) for the
payment of, all federal, state, local and foreign income taxes (including,
without limitation, franchise taxes based upon income or profits) applicable for
all prior fiscal years and for the current fiscal year to the date hereof other
than as set forth on Schedule
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5.13. No Borrower knows of any proposed tax assessment against any Credit Party
or any of its respective Subsidiaries that could reasonably be expected to have
a Material Adverse Effect which is not being actively contested in good faith by
such Person to the extent affected thereby in good faith and by appropriate
proceedings; provided that such reserves or other appropriate provisions, if
any, as shall be required in conformity with GAAP shall have been made or
provided therefor. The pro forma financial statements delivered pursuant to
Section 5.11(b) reflected all taxes reasonably believed at the time of delivery
thereof to result from the transactions contemplated by the Transaction.
5.14. ERISA. No ERISA Event has occurred or is reasonably expected
to occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations of all underfunded Pension Plans (based on the assumptions
used for purposes of Statement of Financial Accounting Standards No. 87) did
not, as of the date of the most recent financial statements reflecting such
amounts, exceed by more than $250,000 the fair market value of the assets of all
such underfunded Pension Plans. Each ERISA Entity is in compliance in all
material respects with the presently applicable provisions of ERISA and the Code
with respect to each Employee Benefit Plan. Each ERISA Entity and each of the
Foreign Plans are in compliance in all material respects with all applicable
laws and regulations with respect to the Foreign Plans and the terms of the
Foreign Plans, and all required contributions have been made to the Foreign
Plans.
5.15. Subsidiaries. After giving effect to the Transaction, all of
the outstanding units or common stock, as the case may be, of each Credit Party
shall be validly issued, fully paid and nonassessable and shall be owned
beneficially and of record by each Credit Party as set forth as Schedule 5.15
hereto, subject to no Liens other than Liens in favor of the Collateral Agent.
Other than as set forth on Schedule 5.19, after giving effect to the
Transaction, there shall be no preemptive rights on the part of any holder of
any class of securities of any Credit Party or other rights, such as warrants or
options, to acquire any class of securities of any Credit Party.
5.16. Patents, etc. Each Credit Party or its respective Subsidiaries
owns or possesses adequate licenses or other rights to use all material patents,
patent applications,
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trademark registrations, trademark applications, servicemark registrations,
servicemark applications, trade names, copyright registrations, trade secrets
and know how (collectively, the "Intellectual Property") that are necessary for
the operation of its respective businesses as presently conducted and as
currently proposed to be conducted. No claim is pending or, to the knowledge of
each Credit Party and its respective Subsidiaries, threatened to the effect that
any Credit Party or its respective Subsidiaries infringes upon or conflicts with
the asserted rights of any other person under any Intellectual Property, and, to
the knowledge of each Borrower, there is no basis for any such claim (whether or
not pending or threatened), except for such claims that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect. No
claim is pending or, to the knowledge of each Borrower, threatened to the effect
that any such Intellectual Property owned or licensed by any Credit Party or its
respective Subsidiaries or which any Credit Party or its respective Subsidiaries
otherwise has the right to use, is invalid or unenforceable by such Credit Party
or its respective Subsidiaries, and, to the knowledge of each Borrower, there is
no basis for any such claim (whether or not pending or threatened).
5.17. Compliance with Laws, etc. Each Credit Party and its
respective Subsidiaries is in material compliance with all laws and regulations
in all jurisdictions in which it is presently doing business, and each Credit
Party and its respective Subsidiaries will comply with all such laws and
regulations which may be imposed in the future in jurisdictions in which it or
such Subsidiary may then be doing business, except to the extent the
non-compliance with such laws and regulations would not reasonably be expected
to have a Material Adverse Effect. To the knowledge of each Borrower, no Credit
Party is currently under investigation for the violation of any crime the
conviction for which would reasonably be expected to have a Material Adverse
Effect.
5.18. Properties. Each Credit Party or its respective Subsidiaries
has good and marketable (or indefeasible) title to and beneficial ownership of
all material properties owned by it, including after giving effect to the
Transaction all property reflected in the pro forma balance sheet referred to in
Section 5.11(b) (except as sold or otherwise disposed of since the date of such
balance sheet in the ordinary course of business or as permitted by this
Agreement or the Security Documents), free and clear of all Liens, other than,
in the case of property not constituting Collateral, Permitted Encumbrances and,
in the case of property constituting Collateral,
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Prior Liens and other Liens expressly permitted by the applicable Security
Document. Each Credit Party or its respective Subsidiaries holds all licenses,
certificates of occupancy or operation and similar certificates and clearances
of municipal and other authorities necessary to own and operate its properties
in the manner and for the purposes currently operated by such party except where
the failure to hold such licenses, certificates or clearances would not
reasonably be expected to have a Material Adverse Effect. Each Real Property and
each Mortgaged Real Property is suitable for its intended purposes and is served
by such utilities as are necessary for the operation thereof. Except as
disclosed to the Administrative Agent in writing, there are no actual,
threatened or alleged defaults of a material nature with respect to any material
Leases of Real Property under which any Credit Party or any of its respective
Subsidiaries is lessor or lessee.
5.19. Securities. Except as set forth on Schedule 5.19 hereto, there
are not, as of the Closing Date, any existing options, warrants, calls,
subscriptions, convertible or exchangeable securities, rights, agreements,
commitments or arrangements for any Person to acquire any equity security of any
Credit Party or any other securities convertible into, exchangeable for or
evidencing the right to subscribe for any such equity security.
5.20. Collective Bargaining Agreements. Set forth on Schedule 5.20
hereto is a list and description (including dates of termination) of all
collective bargaining or similar agreements between or applicable to any Credit
Party or its respective Subsidiaries as of the date hereof and any union, labor
organization or other bargaining agent in respect of the employees of any Credit
Party or its respective Subsidiaries on the date indicated in Schedule 5.20
hereto.
5.21. Indebtedness Outstanding; Prior Liens. (a) Set forth on
Schedule 5.21(a) hereto is a list and description of (i) all Indebtedness of the
types specified in clauses (i), (iii), (iv), (v) and (vii) of the definition of
Indebtedness of the Credit Parties and their respective Subsidiaries (other than
the Loans) that shall be outstanding immediately after the Closing Date and (ii)
all Indebtedness of the Credit Parties and their respective Subsidiaries that
was repaid, defeased, transferred or otherwise terminated on or prior to the
Closing Date in connection with the Transaction.
(b) Schedule 5.21(b) hereto sets forth a true list, with respect to
assets in the United States, United Kingdom and
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Canada and, to the Company's knowledge, other jurisdictions, of all Liens other
than Permitted Encumbrances as described in Sections 7.03(a)-(n) on the property
of the Credit Parties immediately following the Closing Date.
5.22. Environmental Protection. Except as set forth on Schedule 5.22
hereto and except as would not be reasonably expected to have a Material Adverse
Effect,
(a) Each Credit Party and its respective Subsidiaries has obtained
all permits, licenses and other authorizations (hereinafter collectively
referred to as "Authorizations") which are required with respect to the
operation of the business and assets, and use, ownership and operation of
Real Property of the Company and its Subsidiaries, in each case taken as a
whole, under any Environmental Law and each such authorization is in full
force and effect.
(b) Each Credit Party and its respective Subsidiaries is in
compliance with all terms and conditions of the permits, licenses and
authorizations specified in subsection 5.22(a) above, and is also in
compliance with, and not subject to liability under, any Environmental
Laws applicable to it and its business, assets, operations and Real
Property (including, without limitation, compliance with standards,
schedules and timetables therein).
(c) There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, investigation, proceeding,
notice or demand letter or request for information pending or, to the
knowledge of any Borrower, threatened against any Credit Party or any of
its respective Subsidiaries under any Environmental Law.
(d) None of the Credit Parties nor any of its respective
Subsidiaries has received written notice that it has been identified as a
potentially responsible party under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (CERCLA) or
any comparable state or foreign law nor has any Credit Party or any of its
respective Subsidiaries received any written notification that any
Hazardous Materials that it, or any of its Subsidiaries, or any of their
respective predecessors in interest has used, generated, stored, treated,
handled, transported or disposed of, or arranged for disposal or treatment
of, or arranged with a transporter for transport for disposal or treatment
of, have been found at
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any site at which any governmental agency or private party is conducting
or plans to conduct a remedial investigation or other action pursuant to
any Environmental Law.
(e) There have been no releases (i.e., any past or present
releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, disposing or dumping) of
Hazardous Materials by any Credit Party or any of its respective
Subsidiaries or their respective predecessors in interest on, at, upon,
under, into or from any of the Real Properties. To the knowledge of each
Borrower after due inquiry there have been no such releases on, at, upon,
under, from or into any real property in the vicinity of any of the Real
Properties that, through soil, air, surface water or groundwater migration
or contamination, may have migrated to or under such Real Properties.
(f) No asbestos is present in, on, or at any Real Properties or any
facility or equipment of any Credit Party or any of its respective
Subsidiaries.
(g) No Real Properties of any Credit Party or any of its respective
Subsidiaries or, to the knowledge of each Credit Party, any of their
respective predecessors in interest are (i) listed or proposed for listing
on the National Priorities List under CERCLA or (ii) listed in the
Comprehensive Environmental Response, Compensation, Liability Information
System List promulgated pursuant to CERCLA or (iii) included on any
comparable lists maintained by any governmental authority.
(h) There are no past or present events, conditions, circumstances,
activities, practices, incidents, actions or plans which may interfere
with or prevent compliance with any Environmental Law, or which may give
rise to any liability under any Environmental Law, including, without
limitation, liability under CERCLA or similar state, local or foreign
laws, or otherwise form the basis of any claim, action, demand, suit,
proceeding, hearing or notice of violation, notice of potential liability
or investigation, based on or related to the manufacture, processing,
distribution, use, generation, treatment, storage, disposal, transport,
shipping or handling, or the emission, discharge, release or threatened
release into the environment, of any Hazardous Materials.
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(i) No Lien has been recorded under any Environmental Law with
respect to any assets, facility, inventory or Real Property owned,
operated, leased or controlled by any Credit Party or any of its
respective Subsidiaries.
(j) No Credit Party has assumed by contract, agreement or otherwise
any liability or obligation under any Environmental Law.
5.23. Environmental Investigations. To the knowledge of senior
management of the Company, all environmental investigations, studies, audits,
assessments or reviews in the possession, custody or control of any Credit Party
which relates to the current or prior business or assets of any Credit Party or
any of its respective Subsidiaries or any Real Property, assets or facility now
or previously owned, operated, leased, used or controlled by any Credit Party or
any of its respective Subsidiaries have been delivered to the Administrative
Agent.
5.24. Representations and Warranties in the Recapitalization
Agreement. To each Borrower's knowledge, all representations and warranties set
forth in the Recapitalization Agreement were true and correct as of the time as
of which such representations and warranties were made, except as disclosed in
supplemental schedules thereto, and shall be true and correct as of the Closing
Date as if such representations and warranties were made on and as of such date
(unless such representation or warranty is given as of a specific date).
SECTION 6. Affirmative Covenants. Each Borrower, jointly and
severally, covenants and agrees that on the Effective Date and thereafter for so
long as this Agreement is in effect and until the Commitments have terminated
and the Loans together with interest and fees are paid in full and all other
Obligations incurred hereunder, to the extent due and payable, are paid in full:
6.01. Information Covenants. The Company will furnish or cause to be
furnished to each Bank:
(a) As soon as available and in any event within 90 days after the
close of each fiscal year of the Company, the consolidated balance sheets
of the Company and its Subsidiaries as at the end of such fiscal year and
the related consolidated statements of income, of stockholders' equity and
of cash flows for such fiscal year, setting forth comparative consolidated
figures for the preceding
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fiscal year and a report on such consolidated balance sheets and financial
statements by independent certified public accountants of recognized
national standing (which shall be one of the "Big Five" accounting firms),
which report shall not be qualified as to the scope of audit or as to the
status of the Company and its Subsidiaries as a going concern and shall
state that such consolidated financial statements present fairly the
consolidated financial position of the Company and its Subsidiaries as at
the dates indicated and the results of their operations and their cash
flows for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years (except for such changes with which the
independent certified public accountants concur) and the examination by
such accountants was conducted in accordance with generally accepted
auditing standards.
(b) As soon as practicable and in any event (x) within 30 days after
the end of the each month ending after the Closing Date, (i) the
consolidated balance sheet of the Company and its Subsidiaries as at the
end of such period and (ii) the related statements of income and cash
flows of the Company and its Subsidiaries, in each case for such fiscal
month and for the period from the beginning of the then current fiscal
year to the end of such fiscal month, setting forth in comparative form
the corresponding periods of the prior fiscal year commencing with fiscal
year 1999, the corresponding periods of the current fiscal year's budget,
and (y) within 45 days after the end of each of the Company's first three
fiscal quarters in each fiscal year and within 90 days after the end of
each of the Company's fiscal years, a Management's Discussion and Analysis
for such financial statements covering the quarter then ended and the year
to date.
(c) Together with each delivery of financial statements of the
Company and its Subsidiaries pursuant to subsection (a) above, a written
statement by the independent public accountants giving the report thereon
(i) stating that their audit examination has included a review of the
terms of Sections 6, 7, 8 and 9 of this Agreement as they relate to
accounting matters but without having conducted any special auditing
procedures in connection therewith, (ii) stating whether, in connection
with their audit examination, any condition or event which constitutes a
Default or Event of Default has come to their attention, and if such a
condition or event has come to their attention, specifying the nature and
period of existence thereof;
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provided that such accountants shall not be liable by reason of any
failure to obtain knowledge of any such Default or Event of Default that
would not be disclosed in the course of their audit examination, and (iii)
stating that based on their audit examination nothing has come to their
attention which causes them to believe that as of the end of such fiscal
year of the Company there existed a Default or an Event of Default related
to the breach of any covenant set forth in Section 6 or 7 as they relate
to accounting matters and if such a condition or event has come to their
attention, specifying the nature and period of existence thereof and what
action the Company has taken, is taking and propose to take with respect
thereto.
(d) At the time of the delivery of the financial statements provided
for in Sections 6.01(a) and (b), (y) a certificate of the chief financial
officer or other Authorized Officer of the Company to the effect that no
Default or Event of Default exists, or, if any Default or Event of Default
does exist, specifying the nature and extent thereof and what actions have
been or will be taken in respect thereof, which certificate shall be
accompanied on a quarterly basis (i.e., within 45 days after the end of
each of the Company's first three fiscal quarters in each fiscal year and
within 90 days after the end of the Company's fiscal year) by a Compliance
Certificate in a form reasonably acceptable to the Administrative Agent
setting forth the calculations required to establish whether the Company
was in compliance with the covenants in this Agreement (including without
limitation the covenants set forth in Sections 7.05 and 7.10 through 7.13
inclusive) as at the end of such fiscal period or year, as the case may
be, and (z) a comparison of the current year to date financial results
against the plan/budget required to be submitted pursuant to subsection
(k) shall be presented.
(e) Promptly upon receipt thereof, a copy, if any, of each annual
"management letter" submitted to the Company by its independent
accountants in connection with any annual audit made by them of the books
of the Company or any of its Subsidiaries.
(f) Promptly upon their becoming available, copies of all
consolidating and consolidated financial statements, reports, notices and
proxy statements sent or made available generally by the Company or any
Subsidiary of the Company to its security holders in their capacity as
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such (other than to the Company or another Subsidiary) of all regular and
periodic reports and all registration statements and prospectuses, if any,
filed by the Company or any of its Subsidiaries with any securities
exchange or with the SEC and of all press releases and other statements
made available generally by the Company or any Subsidiary of the Company
to the public concerning material developments in the business of the
Company and its Subsidiaries.
(g) Promptly upon any senior officer of any Borrower obtaining
knowledge (w) of any condition or event which constitutes a Default or
Event of Default, or becoming aware that any Bank has given any written
notice or taken any other action with respect to a claimed Default or
Event of Default under this Agreement, (x) that any Person has given any
written notice to any Borrower or taken any other action with respect to a
claimed default or event or condition of the type referred to in Section
8.04, or (y) of a material adverse change in the business, operations,
properties, assets, nature of assets, condition (financial or otherwise)
or prospects of the Company and its Subsidiaries, taken as a whole, an
Officers' Certificate specifying the nature and period of existence of any
such condition or event, or specifying the notice given or action taken by
such holder or Person and the nature of such claimed Default, Event of
Default, event or condition, or material adverse change, and what action
the Company has taken, is taking and propose to take with respect thereto.
(h) (w) Promptly upon any senior officer of any Borrower obtaining
knowledge of the institution of, or written threat of, any action, suit,
proceeding, governmental investigation or arbitration against or affecting
any Credit Party or its respective Subsidiaries or any property of any
Credit Party or its respective Subsidiaries not previously disclosed to
the Banks, which action, suit, proceeding, governmental investigation or
arbitration seeks (or in the case of multiple actions, suits, proceedings,
governmental investigations or arbitrations arising out of the same
general allegations or circumstances which seek) recovery from any Credit
Party or its respective Subsidiaries aggregating $5,000,000 or more
(exclusive of claims covered by insurance policies unless the insurers of
such claims have disclaimed coverage or reserved the right to disclaim
coverage on such claims), the Company shall give notice thereof to the
Banks and provide such
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other information as may be reasonably available to enable the Banks and
their counsel to evaluate such matters; (x) as soon as practicable and in
any event within 45 days after the end of each fiscal quarter, the Company
shall provide a quarterly report to the Banks covering the institution of,
or written threat of, any action, suit, proceeding, governmental
investigation or arbitration (not previously reported) against or
affecting any Credit Party or its respective Subsidiaries or any property
of any Credit Party or its respective Subsidiaries not previously
disclosed to the Banks, which action, suit, proceedings, governmental
investigation or arbitration seeks (or in the case of multiple actions,
suits, proceedings, governmental investigations or arbitrations arising
out of the same general allegations or circumstances which seek) recovery
from any Credit Party or its respective Subsidiaries aggregating
$5,000,000 or more (exclusive of claims covered by insurance policies
unless the insurers of such claims have disclaimed coverage or reserved
the right to disclaim coverage on such claims), and shall provide such
other information at such time as may be reasonably available to enable
the Banks and their counsel to evaluate such matters; (y) in addition to
the requirements set forth in clauses (w) and (x) of this Section 6.01(h),
the Company upon the written request of the Administrative Agent shall
promptly give notice of the status of any action, suit, proceeding,
governmental investigation or arbitration covered by a report delivered to
the Banks pursuant to clause (w) or (x) above to the Banks and provide
such other information as may be reasonably available to them to enable
the Banks and their counsel to evaluate such matters and (z) promptly upon
any senior officer of any Borrower obtaining knowledge of any dispute in
respect of or the institution of, or written threat of, any action, suit,
proceeding, governmental investigation or arbitration in respect of any
material contract of any Credit Party or its respective Subsidiaries, the
Company shall give notice thereof to the Banks and shall provide such
other information as may be reasonably available to enable the Banks and
their counsel to evaluate such matters.
(i) Within 15 days of any material changes to the terms of any
material insurance policy as in effect on the Effective Date and described
on Schedule 6.01(i) or any cancellation of any such material policy
without replacement with a substantially similar policy, a report in form
and substance reasonably satisfactory to the Administra-
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tive Agent outlining such changes or the terms of the replacement policy,
as the case may be.
(j) To the extent reasonably requested by the Administrative Agent,
as soon as practicable and in any event within ten days of the later of
such request and the making of any such amendment or waiver, copies of
amendments or waivers with respect to Indebtedness of any Credit Party or
its respective Subsidiaries.
(k) On or prior to November 1, 1998 and each November 1 thereafter,
a consolidated plan/budget for each month in the succeeding fiscal year,
prepared in accordance with the Company's normal accounting procedures,
including, without limitation, (i) forecasted consolidated balance sheets,
consolidated statements of operations and of cash flows of the Company and
its Subsidiaries on a consolidated basis for such periods, (ii) the amount
of forecasted capital expenditures for such fiscal periods, (iii)
forecasted compliance with Sections 7.05 and 7.10-7.13 and (iv) an
appropriate discussion of the principal assumptions on which such
plan/budget is based; provided that if any such forecast indicates that
the Company may not be in compliance with any provision of this Agreement
at some future date, such forecast shall not constitute a Default or an
Event of Default or anticipatory or other breach hereof.
(l) Within ten (10) Business Days after the last Business Day of
each month and, at the Company's option, on any other day, a borrowing
base certificate in the form of Exhibit L hereto (the "Borrowing Base
Certificate") detailing Eligible Accounts Receivable and Eligible
Inventory as of the last day of such month (or as of the day specified in
any optional Borrowing Base Certificate), certified as complete and
correct on behalf of the Company by the chief financial officer or other
Authorized Officer of the Company. In addition, each Borrowing Base
Certificate shall have attached to it such additional schedules and/or
other information as the Administrative Agent may reasonably request. If
the Company fails to deliver any such required Borrowing Base Certificate
within twenty-five (25) days after the end of any such month, then the
Borrowing Base shall be deemed to be $0 until such time as the Company
shall deliver such required Borrowing Base Certificate.
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(m) With reasonable promptness, such other information and data with
respect to any Credit Party or its respective Subsidiaries or any other
similar entity in which the Company has an investment, as from time to
time may be reasonably requested by the Administrative Agent; provided
that no information or data shall be required to be delivered hereunder or
under any other provision of this Agreement to the extent it is
determined, after consultation with the Administrative Agent, that
providing such information would constitute a waiver of an attorney-client
privilege.
6.02. Books, Records and Inspections. The Company will, and will
cause each of its Subsidiaries to, keep true books of records and accounts in
which full and correct entries will be made of all of its business transactions,
and will reflect in its financial statements adequate accruals and
appropriations to reserves, all in accordance with GAAP. The Company will, and
will cause each of its Subsidiaries to, permit officers and designated
representatives of the Administrative Agent or any Bank to visit and inspect any
of the properties or assets of the Company or any of its Subsidiaries in
whosesoever possession, and to examine the books of account of the Company or
any of its Subsidiaries and discuss the affairs, finances and accounts of the
Company or any of its Subsidiaries with, and be advised as to the same by, its
and their officers and independent accountants (in the presence of such
officers), all at such reasonable times and intervals and to such reasonable
extent as the Administrative Agent or any Bank may reasonably request.
6.03. Maintenance of Property; Insurance. (a) The Company and its
Subsidiaries will exercise commercially reasonable efforts to maintain or cause
to be maintained in good repair, working order and condition (subject to normal
wear and tear) all properties used in its businesses and from time to time will
make or cause to be made all appropriate repairs, renewals and replacements
thereof and will maintain and renew as necessary all licenses, permits and other
clearances necessary to use and occupy such properties.
(b) Subject to the provisions of subsections 6.03(c) and (d) below,
the Company and its Subsidiaries will maintain or cause to be maintained, with
financially sound and reputable insurers, insurance with respect to its
properties and business against loss or damage of the kinds customarily insured
against by corporations of established reputation engaged in the same or similar
businesses and similarly situated, of such types and
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in such amounts as are customarily carried under similar circumstances by such
other corporations to the extent that such types and such amounts of insurance
are available at commercially reasonable rates. The Company will, and will cause
each of its Subsidiaries to, furnish to each Bank, upon reasonable request,
information as to the insurance carried, and will not cancel, without
replacement with a substantially similar policy, any such material insurance
without the reasonable consent of the Required Banks.
(c) The Company will, and will cause each of its Subsidiaries to,
maintain in full force the insurance coverages in respect of the Collateral as
set forth in the Security Documents.
(d) Where the lease under which any Real Property is held provides
that insurance is to be effected by the landlord and/or that insurance may not
be effected by the tenant, Section 6.03(b) shall be interpreted as requiring the
Company and its Subsidiaries to use all reasonable endeavors to ensure that the
landlord complies with its obligations (if any) to effect such insurance.
6.04. Payment of Taxes. The Company will, and will cause each of its
Subsidiaries to, pay and discharge all material taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which material
penalties attach thereto, and all lawful claims which, if unpaid, might become a
Lien or charge upon any properties of the Company or any of its Subsidiaries or
cause a failure or forfeiture of title thereto; provided that neither the
Company nor any of its Subsidiaries shall be required to pay any such tax,
assessment, charge, levy or claim that is being contested in good faith and by
proper proceedings promptly instituted and diligently conducted, which
proceedings have the effect of preventing the forfeiture or sale of the property
or asset that may become subject to such Lien, if it has maintained adequate
reserves with respect thereto in accordance with and to the extent required
under GAAP.
6.05. Corporate Franchises. The Company will, and will cause each of
its Subsidiaries to, do or cause to be done all things necessary to preserve and
keep in full force and effect its existence, rights and authority, and its
Intellectual Property, except where such failure to keep in full force and
effect such rights and authority would not have a Material Adverse Effect.
<PAGE>
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6.06. Compliance with Statutes, etc. The Company will, and will
cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including applicable statutes,
regulations, orders and restrictions relating to environmental standards and
controls) other than non-compliance which could not reasonably be expected to
have a Material Adverse Effect.
6.07. ERISA. The Company will furnish to each of the Banks:
(a) promptly, upon the occurrence of any ERISA Event that, alone or
together with any other ERISA Events that have occurred, could reasonably
be expected to result in liability of the Credit Parties in an aggregate
amount exceeding $150,000, a written notice specifying the nature thereof,
what action the Credit Parties or members of their ERISA Group have taken,
are taking or propose to take with respect thereto, and, when known, any
action taken or threatened by the Internal Revenue Service, Department of
Labor, PBGC or Multiemployer Plan sponsor with respect thereto; and
(b) upon request by the Administrative Agent, copies of: (i) each
Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
filed by an ERISA Entity with the Internal Revenue Service with respect to
each Pension Plan; (ii) the most recent actuarial valuation report for
each Pension Plan; (iii) all notices received by an ERISA Entity from a
Multiemployer Plan sponsor or any governmental agency concerning an ERISA
Event; and (iv) such other documents or governmental reports or filings
relating to any Employee Benefit Plan as the Administrative Agent shall
reasonably request.
6.08. Performance of Obligations. The Company will, and will cause
each of its Subsidiaries to, perform in all material respects all of their
respective obligations under the terms of each mortgage, indenture, security
agreement, other debt instrument and material contract by which they are bound
or to which they are a party, except where such nonperformance would not have a
Material Adverse Effect.
6.09. End of Fiscal Years; Fiscal Quarters. Each Credit Party will,
for financial reporting purposes, and will
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cause each of its Subsidiaries to, have its (i) fiscal years end on October 31,
and (ii) fiscal quarters end on or about January 31, April 30, July 31, and
October 31.
6.10. Use of Proceeds. All proceeds of the Loans shall be used as
provided in Section 5.05.
6.11. Landlord Lien Waivers. The Company shall, and shall cause each
of its applicable Subsidiaries to, use commercial best efforts to obtain within
60 days after the Closing Date agreements from the respective landlords of such
of the Real Property in the United States and Canada, as applicable, that is
being leased by such Credit Party and on which inventory or equipment of such
Credit Party is maintained confirming that such landlords have subordinated
their landlord liens on such Credit Party's personal property to the security
interests held by the Collateral Agent pursuant to the applicable Security
Documents and that such landlords will provide the Collateral Agent with
reasonable access to such facilities to exercise the Collateral Agent's remedies
pursuant to such applicable Security Documents.
6.12. Equal Security for Loans and Notes; No Further Negative
Pledges. (a) If the Company or any of its Subsidiaries shall create or assume
any Lien upon any of its property or assets, whether now owned or hereafter
acquired and whether or not such property or assets constitute Collateral, other
than Liens permitted to exist with respect to such property or assets pursuant
to Section 7.03 hereof or other than Prior Liens or Liens otherwise permitted to
exist pursuant to the Security Documents (unless prior written consent to the
creation or assumption thereof shall have been obtained from the Administrative
Agent and the Required Banks), the Company shall, and shall cause any applicable
Subsidiary to, make or cause to be made effective provisions whereby the
Obligations will be secured by such Lien equally and ratably with any and all
other Indebtedness thereby secured as long as any such Indebtedness shall be
secured; provided that this covenant shall not be construed as consent by the
Administrative Agent and the Required Banks to any violation by the Company of
the provisions of Section 7.03.
(b) Except (i) with respect to prohibitions against other
encumbrances on specific property encumbered to secure payment of particular
Indebtedness permitted hereunder, (ii) the restriction on Liens set forth in the
indenture governing the Public Notes and (iii) restrictions on Liens that may be
contained in the Indebtedness permitted by Sections
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7.04(f) and (g), neither the Company nor any of its Subsidiaries shall enter
into any agreement prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired.
6.13. Bank Meeting. The Company will participate in a meeting of the
Banks once during each fiscal year (with the first meeting to be held within
twelve months of the Closing Date) relating to the financial statements of the
previous fiscal year to be held at a location and a time selected by the Company
and reasonably acceptable to the Administrative Agent.
6.14. Pledge of Additional Collateral. Subject to Section 6.12(b),
and in any event within 30 days after the acquisition by the Company or any of
its Subsidiaries of (i) Real Property in the United States or the United
Kingdom, (ii) assets (other than the Real Property) of the type that would have
constituted Collateral (pursuant to the appropriate Security Document on the
Closing Date or Effective Date, as applicable, executed by such Person) at the
Closing Date or the Effective Date or (iii) capital stock or other equity
interest of any Subsidiary (other than a Subsidiary of a Non-Guarantor
Subsidiary), which shall be limited to 65% of the capital stock or other equity
interest in the case of a Foreign Subsidiary that is not a pass-through entity
and where the pledge would have the effects set forth in clause (a)(i) or (ii)
of the definition of Non-Guarantor Subsidiary (whether by capital contribution
or acquisition) (collectively, (i), (ii), (iii) and the assets of any Subsidiary
described in (iii), the "Additional Collateral"), the Company will, and will
cause each of its Subsidiaries to, take all necessary action, including the
filing of appropriate financing statements under the provisions of the UCC,
applicable foreign, domestic or local laws, rules or regulations in each of the
offices where such filing is necessary or appropriate, entering into or amending
Security Documents or, in the case the Company or any of its Subsidiaries
creates or acquires a Subsidiary, entering into such additional pledge
agreements and security agreements in form and substance satisfactory to the
Collateral Agent (and, in the case of the acquisition of Real Property in the
United States or the United Kingdom, satisfaction of the conditions set forth in
Sections 4.01(b)(iv), 4.01(q) and 4.01(u) and, in the case of the acquisition of
personal property, satisfaction of the conditions set forth in Sections
4.01(b)(iv) and 4.01(n)), to grant to the Collateral Agent a perfected first
priority Lien in such Collateral subject to no other Liens other than Prior
Liens and other Liens expressly permitted by the applicable Security Document
pursuant to and to the full extent required by
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the Security Documents and this Agreement. Notwithstanding the foregoing, (i)
Non-Guarantor Subsidiaries, (ii) to the extent that such Additional Collateral
consisting of inventory and receivables is not permitted to be pledged to the
Banks by Indebtedness incurred pursuant to Section 7.04(f), Foreign Subsidiaries
acquired pursuant to a Designated Acquisition and (iii) the Company's
Subsidiaries in Mexico, Singapore and South Africa shall not be required to
comply with the provisions of the foregoing sentence and no Liens will be
required if prohibited by a prohibition on Liens permitted to exist by Section
6.12(b). The Borrowers shall use their reasonable best efforts to limit the
collateral that Foreign Subsidiaries acquired pursuant to a Designated
Acquisition or otherwise shall provide to lenders providing the facilities
permitted by Sections 7.04(f) and 7.04(g). All actions taken by the parties in
connection with the pledge of Additional Collateral, including, without
limitation, costs of counsel for the Agents or the Collateral Agent, shall be
for the account of the Borrowers, which shall pay all sums due on demand.
6.15. Security Interests. The Company will, and will cause its
Subsidiaries to, perform any and all acts and execute any and all documents
(including, without limitation, the execution, amendment or supplementation of
any financing statement and continuation statement) for filing in any
appropriate jurisdiction under the provisions of the UCC, local law or any
statute, rule or regulation of any applicable jurisdiction which are necessary
in order to maintain or confirm in favor of the Collateral Agent for the benefit
of the Banks a valid and perfected Lien on the Collateral and any Additional
Collateral, subject to no Liens except for Prior Liens and other Liens expressly
permitted by the applicable Security Document. The Company shall, as promptly as
practicable after the filing of any financing statements, deliver or cause to be
delivered to the Administrative Agent acknowledgment copies of, or copies of
lien search reports confirming the filing of, financing statements duly filed
under the UCC of all jurisdictions as may be necessary or, in the reasonable
judgment of the Administrative Agent, desirable to perfect the Lien created, or
purported or intended to be created, by each Security Document.
6.16. Subsidiary Guarantees. In the event the Company or any of its
Subsidiaries creates or acquires a Subsidiary (other than a Non-Guarantor
Subsidiary), the Company will cause such Subsidiary to execute and deliver to
the Collateral Agent for the benefit of the Banks a subsidiary guarantee, in
form and substance satisfactory to the Collateral Agent, guaranteeing the
Obligations.
<PAGE>
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6.17. Environmental Events. (a) The Company will promptly give
notice to the Administrative Agent upon becoming aware thereof (i) of any
violation of any Environmental Law, (ii) of any inquiry, proceeding,
investigation or other action, including a request for information or a notice
of potential liability under any Environmental Law from any Person or (iii) of
the discovery of the release or threatened release of any Hazardous Material at,
on, upon, under or from any of the Real Properties or any facility or equipment
thereat in excess of reportable quantities or allowable standards or levels
under any Environmental Law, or in a manner and/or amount which could reasonably
be expected to result in liability under any Environmental Law, in each case
which would have a Material Adverse Effect.
(b) In the event of the presence of any Hazardous Material on, at,
upon or under any of the Real Properties which is in violation of, or which
could reasonably be expected to result in liability under, any Environmental
Law, in each case which would have a Material Adverse Effect, the Company or any
of its Subsidiaries, upon discovery thereof, shall take all necessary steps to
initiate and expeditiously complete all response, corrective and other action
required under any Environmental Law to mitigate and eliminate any such adverse
effect.
(c) The Company shall as promptly as practicable notify the
Administrative Agent of the occurrence of any event specified in Section 6.17(b)
and shall thereafter keep the Administrative Agent informed on a periodic basis
of any actions taken in response to such event and the results of such actions.
(d) The Company shall provide the Administrative Agent with copies
of any notice, submittal or documentation provided by the Company or any of its
Subsidiaries to any governmental authority or third party under any
Environmental Law if the matter which is the subject of the notice, submittal or
other documentation could reasonably be expected to result in a materially
Adverse Effect. Such notice, submittal or documentation shall be provided to the
Administrative Agent promptly and, in any event, within 5 Business Days after
such material is provided to the governmental authority or third party.
6.18. Use of Cash on Hand to Effect Designated Acquisition. The
Company may use (i) Cash on hand (including Borrowings under the Revolving Loans
to the extent Cash on hand calculated pursuant to this clause (i) was used to
prepay Revolving Loans and to the extent of clause (iii) below) in an
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amount not to exceed the Company's Excess Cash Flow for the preceding six months
(plus an amount equal to the cumulative amounts calculated hereunder for prior
periods which have not been used to make a Designated Acquisition), determined
semi-annually as of each October 31 and April 30, commencing October 31, 1998;
provided that such Cash on hand need not be used in the six-month period or the
fiscal year in which generated but shall be available in future years, together
with any additional Cash available in such future years as calculated hereunder;
provided, further, that this clause (i) shall not be deemed to prevent payments
otherwise due under and in accordance with Section 3.02(A)(g) but such Section
3.02(A)(g) calculation will be made after taking into account the expenditure of
funds for such Designated Acquisitions in accordance with such Section
3.02(A)(g) and the definition of Excess Cash Flow, plus (ii) up to $12,500,000
of Revolving Loans at any time outstanding as provided in Section 5.05(b), plus
(iii) $15,000,000 to effect Designated Acquisitions.
6.19. Year 2000. The Company and its Subsidiaries will take all
action necessary to assure that their computer-based systems are able to
effectively process data, including dates on or after January 1, 2000. At the
request of the Administrative Agent or any Bank, the Borrowers shall provide the
Administrative Agent or such Bank, as the case may be, with assurance reasonably
acceptable to the Administrative Agent or such Bank, as the case may be, of the
year 2000 capability of the Company and its Subsidiaries.
6.20. Certain Post-Closing Matters. (a) Notwithstanding the
provisions of Section 4.01(u) hereof, the Company shall and shall cause its
applicable Subsidiaries to use all commercially reasonable efforts to enable the
applicable Canadian Credit Party to deliver the documents required under Section
4.01(u) with respect to the Real Property located in Edmonton, Canada within 90
days of the date hereof and if such documents cannot be delivered within such 90
day period, the Company shall discuss alternative actions that may be taken with
the Administrative Agent and take such actions as may be agreed.
(b) The Company shall and shall cause its applicable Subsidiaries to
take all actions reasonably necessary to obtain within 120 days of the date
hereof from the trustee or other holder of the industrial revenue bonds relating
to the property of Birmingham Crane & Hoist, Inc. in Birmingham, Alabama any
waiver or consent necessary to permit Birmingham Crane & Hoist, Inc. to
guarantee and pledge its assets to secure the Obliga-
<PAGE>
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tions pursuant to the applicable Security Documents; provided, that in the event
that such trustee or holder does not deliver such waiver or consent within such
120 day period, the Company and its applicable Subsidiaries shall deliver the
guarantee and pledge contemplated above.
(c) The Company shall, and shall cause its South African Subsidiary
to, use all commercially reasonable efforts to obtain the necessary governmental
or regulatory authority required to enable the South African Subsidiary to
execute a Subsidiary Guarantee.
SECTION 7. Negative Covenants. The Company and the Borrowers,
jointly and severally, hereby covenant and agree that as of the Closing Date and
thereafter for so long as this Agreement is in effect and until the Commitments
have terminated and the Loans together with interest and fees are paid in full
and all other Obligations incurred hereunder, to the extent due and payable, are
paid in full:
7.01. Conduct of Business. The Company will not, and will not permit
any of its Subsidiaries to, engage in any business other than the business
conducted by the Company and its Subsidiaries prior to the Closing Date, the MHE
Business and any businesses or activities similar or reasonably related thereto.
Holdings will not engage in any business other than holding the capital stock of
its Subsidiaries; provided that Holdings may hold the capital stock of
Subsidiaries which may engage in other businesses so long as (i) management of
the Company and its Subsidiaries continues to devote substantially all of its
time to the affairs of the Company and its Subsidiaries, (ii) no resources of
the Company and its Subsidiaries are utilized in any such business, except for
Dividends permitted by Section 7.08 and (iii) Holdings may not provide credit
support for any such Subsidiary except for a limited guarantee to the extent of
the value of the shares of such Subsidiary and supported solely by a pledge of
the shares of such Subsidiary.
7.02. Amendments or Waivers of Certain Documents. After the Closing
Date, no Credit Party or its respective Subsidiaries will amend or otherwise
change the terms of the Transaction Documents in a manner adverse to the Banks
without the prior written consent of the Required Banks.
7.03. Liens. The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or permit or
suffer to exist any Lien upon or with respect to any item constituting
Collateral, whether
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now owned or hereafter acquired, or sell any such Collateral subject to an
understanding or agreement, contingent or otherwise, to repurchase such
Collateral or assign any right to receive income, or file or permit the filing
of any financing statement under the UCC (other than notice filings in respect
of true leases) or any other similar notice of Lien under any similar recording
or notice statute, except for the Lien of the Security Document relating
thereto, Prior Liens applicable thereto and other Liens expressly permitted by
such Security Document. The Company will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets of the Company or any Subsidiary which does
not constitute Collateral whether now owned or hereafter acquired, or sell any
Collateral, property or assets subject to an understanding or agreement,
contingent or otherwise, to repurchase such property or assets or assign any
right to receive income, or file or permit the filing of any financing statement
under the UCC (other than notice filings in respect of true leases) or any other
similar notice of Lien under any similar recording or notice statute, except the
following, which are herein collectively referred to as "Permitted
Encumbrances":
(a) Liens for taxes, assessments or governmental charges or claims
not yet delinquent or Liens for taxes, assessments or governmental charges
or claims being contested in good faith and by appropriate proceedings for
which adequate reserves, as may be required by GAAP, have been
established;
(b) Liens in respect of property or assets of the Company and its
Subsidiaries imposed by law (i) which were incurred in the ordinary course
of business, such as carriers', warehousemen's, supplier's, materialman's,
repairman's and mechanics' Liens and other similar Liens arising in the
ordinary course of business, and (x) which do not in the aggregate
materially detract from the value of such property or assets or materially
impair the use thereof in the operation of the business of the Company and
its Subsidiaries, taken as a whole, or (y) which are being contested in
good faith by appropriate proceedings, which proceedings have the effect
of preventing the forfeiture or sale of the property or asset subject to
such Lien or (ii) which do not relate to material liabilities of the
Company or any of its Subsidiaries and do not in the aggregate materially
detract from the value of the property and assets of the Company and its
Subsidiaries taken as a whole;
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(c) Liens in connection with any attachment or judgment (including
judgment or appeal bonds) not in excess of $5,000,000 in the aggregate for
the Company and its Subsidiaries (exclusive of any amount adequately
covered by insurance as to which the insurance company has acknowledged
coverage) unless the judgment it secures shall, within 60 days after the
entry thereof, not have been discharged or execution thereof not stayed
pending appeal, or shall not have been discharged within 30 days after the
expiration of any such stay;
(d) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, including any Lien securing letters of credit issued in the
ordinary course of business in connection therewith, or to secure the
performance of tenders, statutory or regulatory obligations, surety and
appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds, warranty requirements and other similar obligations
incurred in the ordinary course of business (exclusive of obligations in
respect of the payment for borrowed money or the equivalent);
(e) Subject to the provisions of Section 7.20 and, with respect to
any Mortgaged Real Property, to the provisions of any applicable Mortgage,
Leases with respect to the assets or properties of the Company or its
Subsidiaries entered into in the ordinary course of the Company's or such
Subsidiary's business and subordinate in all respects to the Liens granted
and evidenced by the Security Documents;
(f) Easements, rights of way, zoning restrictions, other
restrictions, minor defects or irregularities in title or equivalent
rights and restrictions under the laws of foreign jurisdictions not
interfering in any material respect with the business of the Company or
its Subsidiaries, in each case incurred in the ordinary course of business
and which do not materially impair for its intended purposes the use or
value of the Real Property to which it relates;
(g) Liens (whether incurred in connection with such acquisition or
existing prior to and acquired in connection with such acquisition) upon
real or tangible personal property acquired by the Company or its
Subsidiaries or
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Persons that became Subsidiaries of the Company after the Closing Date;
provided that (i) any such Lien is created solely for the purpose of
securing Indebtedness representing, or incurred to finance, the cost of
the item of property subject thereto, (ii) the principal amount of the
Indebtedness secured by such Lien does not exceed 100% of the fair value
(plus reasonable costs and expenses) (as determined in good faith by the
board of directors or members of the appropriate entity) of the respective
property at the time it was so acquired, (iii) such Lien does not extend
to or cover any other property other than such item of property and any
additions or accessions thereto permitted hereunder and proceeds thereof
and (iv) the incurrence of such Indebtedness secured by such Lien is
permitted by Section 7.04;
(h) Any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(i) Liens contemplated by the Intercreditor Agreement and other
Surety Arrangements subject to an Intercreditor Arrangement;
(j) Liens securing reimbursement obligations with respect to
Commercial Letters of Credit permitted hereunder which encumber documents
and other property relating to such letters of credit and products and
proceeds thereof;
(k) Liens securing Indebtedness permitted by Section 7.04(f) and
(g);
(l) Liens in favor of the trustee under the indenture governing the
Public Notes;
(m) In respect of the Canadian Borrowers or any Canadian Subsidiary,
reservations and exceptions contained in, or implied by statute in, the
original grant or disposition of real property from the Crown of Canada or
a Province thereof;
(n) Any rights of expropriation, access or use, or any other similar
rights conferred or reserved by or in any statute of Canada or any
province thereof;
<PAGE>
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(o) Existing Liens as set forth on Schedule 5.21(b); and
(p) Liens not otherwise permitted by the foregoing clauses (a)
through (o) as long as such Liens are not on the assets constituting
Collateral on the Closing Date and the sum of the principal amount of
Indebtedness secured by such Liens does not exceed, in the aggregate at
any one time outstanding, $12,500,000.
The Company and the Borrowers shall use their commercially
reasonable best efforts to obtain the waiver of any Lien referred to in clause
(b)(i) above on or in respect of any Equipment or Inventory.
7.04. Indebtedness. The Company will not, and will not permit any of
its Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to the Credit Documents; provided
that the aggregate principal amount of Indebtedness incurred pursuant to
this Agreement shall in no event exceed the Total Commitments subject to
the provisions of Section 3.05;
(b) Indebtedness of the Company and the Subsidiaries represented by
the Public Notes;
(c) Surety Obligations and Surety Arrangements;
(d) Existing Debt and any refinancing thereof; provided that any
such refinancing of Existing Debt shall be on terms which, both taken as a
whole and specifically as such terms relate to the identity of the
obligors (provided the Company may refinance Indebtedness of a
Wholly-Owned Subsidiary), repayments of principal, covenants, events of
default and security in property of the debtor, are in each event no more
favorable to the creditor than the correlative terms of the Existing Debt;
(e) (x) $5,000,000 of Indebtedness in the aggregate principal amount
outstanding at any time for the Company and its Subsidiaries incurred to
finance the cost of the acquisition of real or tangible personal property
(including Capital Leases) and (y) $10,000,000 of Indebtedness in the
aggregate principal amount outstanding at any one time to finance the cost
of the acquisition of computer hardware and software and related tangible
per-
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sonal property (including Capital Leases) in connection with the Company's
(or its Subsidiaries') management information systems; provided in each
case of (x) and (y), that at the time of incurrence such Indebtedness
shall not exceed 100% of the fair value of such property (plus reasonable
costs and expenses); and provided, further, that such Indebtedness is not
secured by any Lien other than a Lien referred to in clause (g) of Section
7.03;
(f) Indebtedness of Foreign Subsidiaries incurred to provide working
capital for Designated Acquisitions in an amount not to exceed $15,000,000
aggregate principal amount at any one time outstanding until January 31,
2000 and $20,000,000 aggregate principal amount at any one time
outstanding thereafter;
(g) up to $11,000,000 aggregate principal amount of Indebtedness at
any one time outstanding of the Company's Subsidiaries, the jurisdiction
of incorporation, organization or formation of which is located in Mexico,
Singapore or South Africa; provided that the amount of Indebtedness in
each such country shall not exceed the following: (i) $2,000,000 aggregate
principal amount at any one time outstanding in Mexico; (ii) $4,000,000
aggregate principal amount at any one time outstanding in Singapore; or
(iii) $5,000,000 aggregate principal amount at any one time outstanding in
South Africa;
(h) Contingent Obligations permitted by Section 7.18;
(i) Indebtedness to sellers in connection with a Designated
Acquisition in an amount not to exceed $5,000,000 aggregate principal
amount at any time outstanding; provided that such Indebtedness is
unsecured and contains subordination and other terms satisfactory to the
Administrative Agent; and provided, further, that the Company is in pro
forma compliance with its covenants, after giving effect to the issuance
of such notes;
(j) Intercompany Advances; and
(k) other Indebtedness not exceeding $12,500,000 aggregate principal
amount for the Company and its Subsidiaries at any time outstanding.
7.05. Capital Expenditures. The Company will not, and will not
permit any of its Subsidiaries to, make Consoli-
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dated Capital Expenditures for any purpose in excess of the amounts set forth
below for the fiscal year end set forth on the date listed below; provided that
Consolidated Capital Expenditures for the period ended October 31, 1998 shall be
for the period beginning on the Closing Date and ending on October 31, 1998:
Amount
Period in $ Millions
------ -------------
October 31, 1998...................... $7.5
October 31, 1999...................... 9.0
October 31, 2000...................... 9.0
October 31, 2001...................... 9.0
October 31, 2002...................... 9.0
October 31, 2003...................... 9.0
October 31, 2004...................... 9.0
In addition, the amount of Consolidated Capital Expenditures
permitted by this Section 7.05 for any fiscal year shall be increased by an
amount equal to 75% of the excess of (x) the permitted Consolidated Capital
Expenditures for the immediately preceding fiscal year (without giving effect to
this sentence) over (y) the amount of Consolidated Capital Expenditures actually
made in such immediately preceding fiscal year; provided that after the
consummation of any Designated Acquisition, the amount set forth in the table
above for any period ending after such Designated Acquisition shall be increased
by an amount equal to 20% of the Consolidated EBITDA of the acquired entity
included in the pro forma consolidated statement of income for the then current
twelve-month period delivered to the Administrative Agent pursuant to Section
4.03(b)(ii) and for years following the year of acquisition the greater of 20%
of projected Consolidated EBITDA for the Designated Acquisition (as set forth in
the data provided to the Banks pursuant to Section 6.01) and 20% of the actual
Consolidated EBITDA for the Designated Acquisition for the last fiscal year.
7.06. Advances, Investments and Loans. The Company will not, and
will not permit any of its Subsidiaries to, lend money or credit or make
advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to any
Person, except:
(a) investments in Cash and Cash Equivalents;
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(b) receivables owing to them and advances (including deposits) to
customers and suppliers, in each case if created, acquired or made in the
ordinary course of business and payable or dischargeable in accordance
with customary trade terms;
(c) investments (including debt obligations) received in connection
with the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other disputes with,
customers and suppliers arising in the ordinary course of business or upon
foreclosure of any Lien in favor of the Company or its Subsidiaries;
(d) Intercompany Advances;
(e) the acceptance of a form of consideration other than Cash or
Cash Equivalents in connection with the sale or disposition of assets to
the extent provided in Section 7.17;
(f) guarantees by Subsidiary Guarantors of the Company's obligations
under the Public Notes;
(g) investments in Holdings permitted by Section 7.08 and
investments permitted by Section 7.09;
(h) Contingent Obligations permitted by Section 7.18;
(i) investments contemplated by the Transaction Documents;
(j) investments which the Company and its Subsidiaries are
contractually committed to make pursuant to contracts existing on the
Closing Date as set forth on Schedule 7.06(j), plus an amount not to
exceed $2,000,000 in the aggregate;
(k) investments held by a Person prior to its becoming a Subsidiary
of the Company; provided that such investment was not incurred in
contemplation of such acquisition;
(l) advances to officers and employees of the Company and its
Subsidiaries in the ordinary course of business not to exceed $500,000
outstanding at any time;
<PAGE>
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(m) additional loans, advances and/or investments of a nature not
contemplated by the foregoing clauses (a) through (l) and (n) through (p);
provided that all loans, advances and investments made pursuant to this
clause (m) shall not exceed $3,000,000 in the aggregate at any time
outstanding in any fiscal year and $15,000,000 in the aggregate at any
time outstanding during the term of this Agreement for the Company and its
Subsidiaries;
(n) prepaid expenses and workers' compensation, utility, lease and
similar deposits in the ordinary course of business;
(o) Designated Acquisitions; and
(p) loans or advances to officers and employees of the Company and
its Subsidiaries on or within 30 days after the Closing Date which amounts
are used to acquire Management Stock; provided such loans or advances are
repaid within one year of the Closing Date.
7.07. Prepayments of Indebtedness, etc. The Company will not, and
will not permit any of its Subsidiaries to: (a) after the issuance thereof,
amend or modify (or permit the amendment or modification of) any of the terms or
provisions, to the extent any such amendment or modification would be adverse to
the issuer thereof or to the interests of the Banks, of any of the Indebtedness
(or any agreement relating thereto) of the type described in Section 7.04(b),
(c), (d) (other than the Industrial Revenue Bonds of Birmingham Crane & Hoist,
Inc.) or (i); (b) make (or give any notice in respect of) any voluntary or
optional payment or prepayment or redemption or acquisition for value of
(including, without limitation, by way of depositing with any trustee with
respect thereto money or securities before such Indebtedness is due for the
purpose of paying such Indebtedness when due) or exchange of any such
Indebtedness, except that Indebtedness of the type described in Section 7.04(i)
may be prepaid with Acquisition Term Loans in accordance with Section 4.03 and
the Industrial Revenue Bonds of Birmingham Crane & Hoist, Inc. permitted under
Section 7.04(d); and/or (c) amend, modify or change any of its respective
Certificate of Incorporation or operating agreement, or any agreement entered
into by the Company or its Subsidiaries with respect to its equity securities,
or enter into any new agreement with respect to the equity securities of the
Company or any Subsidiary the result of which is reasonably likely to be adverse
to the interests of the Banks (in their capacity as such) hereunder.
<PAGE>
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7.08. Dividends, etc. The Company will not, and will not permit any
of its Subsidiaries to, declare or pay any dividends or return any capital to,
its shareholders or members or authorize or make any other distribution, payment
or delivery of property or cash to its shareholders or members as such, or
redeem, retire, purchase or otherwise acquire, directly or indirectly, for any
consideration, any of its equity interest now or hereafter outstanding (or any
warrants for or options or stock appreciation rights in respect of any of such
equity interests), or set aside any funds for any of the foregoing purposes, or
permit any of its Subsidiaries to purchase or otherwise acquire for
consideration any equity interest of the Company or any other Subsidiary, as the
case may be, now or hereafter outstanding (or any options or warrants or stock
appreciation rights issued by such Person with respect to its equity interest)
(all of the foregoing, "Dividends"), except that (i) any Subsidiary of a
Borrower may pay Dividends to its parent corporation (and pro rata to its other
shareholders if such Subsidiary is not wholly-owned) if such parent corporation
is (x) a Borrower or (y) a Subsidiary of a Borrower; (ii) the payment to
Holdings or any other Person in respect of which Holdings is a member of its
consolidated tax group, for so long as Holdings owns such amount of the capital
stock of the Company as will permit it or a member of the consolidated tax group
of Holdings to be entitled to file consolidated federal tax returns with the
Company, for income taxes pursuant to the Tax Allocation Agreement or for the
purpose of enabling Holdings or any such members to pay taxes other than income
taxes, to the extent actually owed and attributable to the operations of the
Company and its Subsidiaries or to Holdings' ownership thereof; (iii) payments
to Holdings, for so long as it owns no less than a majority of the outstanding
common stock of the Company, in amounts sufficient to pay the ordinary operating
and administrative expenses of Holdings (including all reasonable professional
fees and expenses), including in connection with its complying with its
reporting obligations (including filings with the SEC and any exchange on which
Holdings' securities are traded) and obligations to prepare and distribute
business records in the ordinary course of business and Holdings' costs and
expenses relating to taxes, other than those referred to in clause (ii) (which
taxes are attributable to the operations of the Company and its Subsidiaries or
to Holdings' ownership thereof); provided that the aggregate payments paid in
each fiscal year pursuant to this clause (iii) will not exceed 0.20% of the
consolidated net sales of the Company and its Subsidiaries for such fiscal year;
(iv) as long as no Default or Event of Default shall have occurred and be
continuing or would result therefrom, the Company may purchase, or may pay
Dividends
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to Holdings to enable Holdings to purchase, Management Stock and Vested Options
from the members of management of Holdings and its Subsidiaries, in an amount
not to exceed $500,000 in any fiscal year and $2,500,000 in the aggregate;
provided that such payments may only be made in connection with purchases of
Management Stock and Vested Options upon the termination of employment, death or
disability of the person to whom such shares of Management Stock or Vested
Options were initially issued; (v) payments in respect of the Transaction; and
(vi) from and after the fifth anniversary of the Closing Date, the Company may
pay Dividends to Holdings in order to permit Holdings to pay cash dividends on
the Preferred Stock if the ratio of Indebtedness for borrowed money of the
Company and its Subsidiaries on the last day of the fiscal quarter immediately
preceding the date of calculation to Consolidated EBITDA of the Company for the
Test Period ending at the end of the fiscal quarter immediately preceding the
date of calculation, on a pro forma basis after giving effect to any Designated
Acquisitions made during such Test Period, is less than 3.5 to 1.0.
7.09. Transaction with Affiliates. The Company will not, and will
not permit any of its Subsidiaries to, enter into any transaction or series of
transactions, whether or not in the ordinary course of business, with any holder
of 5% or more of the equity securities of the Company or with any Affiliate of
the Company other than on terms and conditions substantially as favorable to the
Company or any Subsidiary as would be obtainable by the Company or such
Subsidiary at the time in a comparable arm's-length transaction with a Person
other than a holder of 5% or more of the equity securities of the Company or an
Affiliate of the Company; provided that the foregoing restrictions shall not
apply to (i) transactions between or among any Borrower and its Subsidiaries
(provided that for purpose of this clause (i), the definition of Subsidiary
shall be deemed to require 66 2/3% instead of 50% ownership) and Intercompany
Advances; (ii) transactions with HarnCo and its Affiliates set forth in the
Transaction Documents; (iii) payments permitted by Section 7.08(ii), (iii), (iv)
and (v); (iv) the payment of fees to the Agents and their Affiliates for
financial services, such fees not to exceed Agents' usual and customary fees for
similar services; (v) payments to Chartwell (x) pursuant to the Chartwell
Financial Advisory Agreement on the Closing Date and (y) for management services
pursuant to the Chartwell Management Consulting Agreement not to exceed
$1,000,000 in any fiscal year, plus expenses; provided, in the case of (y), that
any such fees may accrue but shall not be paid by the Company at any time after
the occurrence and during the continuance of an Event of Default pursuant to
Section 8.01 until such Event of
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Default is cured, whereupon such accrued and unpaid fees may be paid in addition
to other permitted fees; (vi) reasonable fees and compensation paid to and
indemnity provided on behalf of officers, directors or employees of the Company
or any Subsidiary of the Company as determined in good faith by the Company's
Board of Directors or senior management; (vii) loans or advances to employees
and officers of the Company or any of its Subsidiaries in the ordinary course of
business to provide for the payment of reasonable expenses incurred by such
persons in the performance of their responsibilities to Holdings or such
Subsidiary or in connection with any relocation, not to exceed $500,000 at any
time outstanding; and (viii) loans or advances to employees and officers of the
Company or its Subsidiaries on or within 30 days after the Closing Date the
proceeds of which are used to acquire Management Stock and which loans or
advances are repaid within one year of the Closing Date.
7.10. Total Interest Coverage Ratio. The ratio of (i) Consolidated
EBITDA to (ii) Consolidated Interest Expense for the Company and its
Subsidiaries set forth below for the Test Period ending on each date listed
below shall not be less than the ratio set forth opposite such date below:
Test Period Ratio
----------- -----
July 31, 1998 ............................... 1.35 to 1.0
October 31, 1998 ............................ 1.35 to 1.0
January 31, 1999 ............................ 1.35 to 1.0
April 30, 1999 .............................. 1.35 to 1.0
July 31, 1999 ............................... 1.35 to 1.0
October 31, 1999 ............................ 1.40 to 1.0
January 31, 2000 ............................ 1.40 to 1.0
April 30, 2000 .............................. 1.40 to 1.0
July 31, 2000 ............................... 1.40 to 1.0
October 31, 2000 ............................ 1.50 to 1.0
January 31, 2001 ............................ 1.50 to 1.0
April 30, 2001 .............................. 1.50 to 1.0
July 31, 2001 ............................... 1.50 to 1.0
October 31, 2001 ............................ 1.75 to 1.0
January 31, 2002 ............................ 1.75 to 1.0
April 30, 2002 .............................. 1.75 to 1.0
July 31, 2002 ............................... 1.75 to 1.0
October 31, 2002 ............................ 2.00 to 1.0
January 31, 2003 ............................ 2.00 to 1.0
April 30, 2003 .............................. 2.00 to 1.0
July 31, 2003 ............................... 2.00 to 1.0
October 31, 2003 ............................ 2.00 to 1.0
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January 31, 2004 ............................ 2.00 to 1.0
April 30, 2004 .............................. 2.00 to 1.0
July 31, 2004 ............................... 2.00 to 1.0
October 31, 2004 ............................ 2.00 to 1.0
January 31, 2005 ............................ 2.00 to 1.0
7.11. Fixed Charge Coverage Ratio. The Company will not permit the
ratio of (i) Consolidated EBITDAC of the Company and its Subsidiaries minus
Consolidated Cash Taxes to (ii) the Consolidated Interest Expense of the Company
and its Subsidiaries plus the amount of scheduled mandatory payments on account
of principal of Indebtedness of the Company and its Subsidiaries (excluding
payments required to be made pursuant to Section 3.02(A)(f), (g), (h), (i), (j),
(k) and (l)) for the Test Period ending on each date listed below, to be less
than the ratio set forth opposite such date below:
Test Period Ratio
----------- -----
July 31, 1998 ............................... 1.05 to 1.0
October 31, 1998 ............................ 1.05 to 1.0
January 31, 1999 ............................ 1.05 to 1.0
April 30, 1999 .............................. 1.05 to 1.0
July 31, 1999 ............................... 1.05 to 1.0
October 31, 1999 ............................ 1.05 to 1.0
January 31, 2000 ............................ 1.10 to 1.0
April 30, 2000 .............................. 1.10 to 1.0
July 31, 2000 ............................... 1.10 to 1.0
October 31, 2000 ............................ 1.10 to 1.0
January 31, 2001 ............................ 1.10 to 1.0
April 30, 2001 .............................. 1.10 to 1.0
July 31, 2001 ............................... 1.10 to 1.0
October 31, 2001 ............................ 1.10 to 1.0
January 31, 2002 ............................ 1.10 to 1.0
April 30, 2002 .............................. 1.10 to 1.0
July 31, 2002 ............................... 1.10 to 1.0
October 31, 2002 ............................ 1.10 to 1.0
January 31, 2003 ............................ 1.10 to 1.0
April 30, 2003 .............................. 1.10 to 1.0
July 31, 2003 ............................... 1.10 to 1.0
October 31, 2003 ............................ 1.10 to 1.0
January 31, 2004 ............................ 1.10 to 1.0
April 30, 2004 .............................. 1.10 to 1.0
July 31, 2004 ............................... 1.10 to 1.0
October 31, 2004 ............................ 1.10 to 1.0
January 31, 2005 ............................ 1.10 to 1.0
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7.12. (a) Total Leverage Ratio. The Company will not permit the
ratio of (i) Indebtedness for borrowed money of the Company and its Subsidiaries
on each date listed below to (ii) Consolidated EBITDA of the Company and its
Subsidiaries for the Test Period ending on each date listed below to be more
than the ratio set forth below:
Test Period Ratio
----------- -----
October 31, 1998 ............................ 6.75 to 1.0
January 31, 1999 ............................ 6.70 to 1.0
April 30, 1999 .............................. 6.65 to 1.0
July 31, 1999 ............................... 6.60 to 1.0
October 31, 1999 ............................ 6.50 to 1.0
January 31, 2000 ............................ 6.50 to 1.0
April 30, 2000 .............................. 6.30 to 1.0
July 31, 2000 ............................... 6.10 to 1.0
October 31, 2000 ............................ 5.75 to 1.0
January 31, 2001 ............................ 5.75 to 1.0
April 30, 2001 .............................. 5.50 to 1.0
July 31, 2001 ............................... 5.35 to 1.0
October 31, 2001 ............................ 5.00 to 1.0
January 31, 2002 ............................ 4.90 to 1.0
April 30, 2002 .............................. 4.75 to 1.0
July 31, 2002 ............................... 4.60 to 1.0
October 31, 2002 ............................ 4.40 to 1.0
January 31, 2003 ............................ 4.20 to 1.0
April 30, 2003 .............................. 4.00 to 1.0
July 31, 2003 ............................... 4.00 to 1.0
October 31, 2003 ............................ 4.00 to 1.0
January 31, 2004 ............................ 4.00 to 1.0
April 30, 2004 .............................. 4.00 to 1.0
July 31, 2004 ............................... 4.00 to 1.0
October 31, 2004 ............................ 4.00 to 1.0
January 31, 2005 ............................ 4.00 to 1.0
(b) Credit Agreement Leverage Ratio. The Company will not permit the
ratio of (i) Indebtedness for borrowed money under this Agreement of the Company
and its Subsidiaries on each date listed below to (ii) Consolidated EBITDA of
the Company and its Subsidiaries for the Test Period ending on each date listed
below to be more than the ratio set forth below:
Test Period Ratio
----------- -----
July 31, 1998 ............................... 2.50 to 1.0
October 31, 1998 ............................ 2.50 to 1.0
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January 31, 1999 ............................ 2.50 to 1.0
April 30, 1999 .............................. 2.50 to 1.0
July 31, 1999 ............................... 2.50 to 1.0
October 31, 1999 ............................ 2.50 to 1.0
January 31, 2000 ............................ 2.50 to 1.0
April 30, 2000 .............................. 2.50 to 1.0
July 31, 2000 ............................... 2.50 to 1.0
October 31, 2000 ............................ 2.25 to 1.0
January 31, 2001 ............................ 2.25 to 1.0
April 30, 2001 .............................. 2.25 to 1.0
July 31, 2001 ............................... 2.25 to 1.0
October 31, 2001 ............................ 2.25 to 1.0
January 31, 2002 ............................ 2.25 to 1.0
April 30, 2002 .............................. 2.25 to 1.0
July 31, 2002 ............................... 2.25 to 1.0
October 31, 2002 ............................ 2.00 to 1.0
January 31, 2003 ............................ 2.00 to 1.0
April 30, 2003 .............................. 2.00 to 1.0
July 31, 2003 ............................... 2.00 to 1.0
October 31, 2003 ............................ 2.00 to 1.0
January 31, 2004 ............................ 2.00 to 1.0
April 30, 2004 .............................. 2.00 to 1.0
July 31, 2004 ............................... 2.00 to 1.0
October 31, 2004 ............................ 2.00 to 1.0
January 31, 2005 ............................ 2.00 to 1.0
7.13. Minimum Consolidated EBITDA. The Company will maintain a
Consolidated EBITDA of at least the amount set forth below for the Test Period
ending on each date listed below:
Minimum EBITDA
Test Period ($ Millions)
----------- -------------
October 31, 1998 ............................ 39.5
January 31, 1999 ............................ 39.5
April 30, 1999 .............................. 40.1
July 31, 1999 ............................... 40.1
October 31, 1999 ............................ 41.5
January 31, 2000 ............................ 41.5
April 30, 2000 .............................. 44.0
July 31, 2000 ............................... 44.0
October 31, 2000 ............................ 47.5
January 31, 2001 ............................ 47.5
April 30, 2001 .............................. 50.4
July 31, 2001 ............................... 50.4
October 31, 2001 ............................ 54.6
January 31, 2002 ............................ 54.6
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Minimum EBITDA
Test Period ($ Millions)
----------- -------------
April 30, 2002 .............................. 57.2
July 31, 2002 ............................... 57.2
October 31, 2002 ............................ 61.0
January 31, 2003 ............................ 61.0
April 30, 2003 .............................. 61.0
July 31, 2003 ............................... 61.0
October 31, 2003............................. 61.0
January 31, 2004 ............................ 61.0
April 30, 2004 .............................. 61.0
July 31, 2004 ............................... 61.0
October 31, 2004 ............................ 61.0
January 31, 2005 ............................ 61.0
7.14. Holdings Equity Sales and Net Financing Proceeds. Holdings
shall (i) upon the sale of any of the equity of itself or of the Company (except
sales to Holdings, the Company or one of its Subsidiaries), contribute an amount
equal to 100% of the net proceeds thereof received by Holdings to the Company in
the form of Cash or Cash Equivalents and (ii) on the date of receipt by Holdings
of any Net Financing Proceeds, contribute an amount equal to 100% of such Net
Financing Proceeds to the Company in the form of Cash or Cash Equivalents;
provided that Holdings need not contribute to the Company (i) amounts received
for its equity in connection with the Transaction or with respect to the
refinancing of its Preferred Stock with the proceeds of the sale of new equity
securities consummated substantially concurrently with such refinancing, (ii)
amounts received in respect of Management Stock and Vested Options, (iii) unless
from an underwritten public offering, amounts received by Holdings from the sale
of its equity securities (x) in an amount of $5,000,000 in the aggregate and (y)
in contemplation of a particular acquisition transaction which are applied to
such transactions within 45 days of receipt thereof by Holdings.
7.15. Sale or Discount of Receivables. The Company will not, and
will not permit its Subsidiaries to, sell, with or without recourse, or discount
(other than in connection with trade discounts in the ordinary course of
business consistent with past practice) or otherwise sell for less than the face
value thereof, notes or accounts receivable, other than receivables that have
been written-off or are otherwise determined in good faith to be uncollectible;
provided that the Company and its Subsidiaries may sell or discount accounts
receivable in an aggregate face value of $3.0 million in any fiscal year.
<PAGE>
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7.16. Issuance of Subsidiary Stock. The Company will not, and will
not permit any of its Subsidiaries, directly or indirectly, to issue, sell,
assign, pledge or otherwise encumber or dispose of any shares of any
Subsidiaries' capital stock or other securities or equity interests (or
warrants, rights or options to acquire capital stock or convertible securities
or other equity securities) of such Subsidiary, other than (i) pursuant to the
Security Documents, (ii) as contemplated by the Transaction, (iii) transfers of
assets to the Company or to Subsidiary Guarantors permitted by this Agreement
(including as an Intercompany Advance), (iv) the issuance of directors'
qualifying shares, (v) sales of 100% of the capital stock of the Company's
Subsidiaries in accordance with Section 7.17 and (vi) sales of capital stock to
the Company or to one of its Subsidiaries to the extent permitted by Section
7.06.
7.17. Disposition of Assets. (a) The Company will not, and will not
permit any of its Subsidiaries to, make any Asset Sale, except that the Company
and its Subsidiaries may make Asset Sales so long as (i) such Asset Sales are
for at least the fair market value of such assets and (ii) the Company complies
with the mandatory prepayment and commitment reduction provisions of this
Agreement and, in the case of Collateral, so long as the conditions to the
release of Collateral described herein and in the applicable Security Documents
are met; provided that the Company need not comply with such mandatory
prepayment and commitment reduction provisions if the Company reinvests such
proceeds in substantially similar lines of business within 270 days of the
receipt of such proceeds; and provided, further, the Company need not comply
with such mandatory prepayment and commitment reduction provisions until the
aggregate amount of such Asset Sales is (A) $3.0 million or greater in any
fiscal year or (B) $15.0 million in the aggregate and then only in the amount of
such excess. For the purposes of clarification, the amount of proceeds received
and reinvested pursuant to the first proviso of this Section shall count towards
the amounts set forth in clauses (A) and (B) of this Section.
The consideration received by the Company or its Subsidiaries from
each Asset Sale permitted above shall be received in whole at the time of sale
and at least 85% of the consideration from each sale shall consist of Cash or
Cash Equivalents or Replacement Assets; provided that the amount of any
liabilities (as shown on the Company's or such Subsidiary's most recent balance
sheet) of the Company or any Subsidiary (other than contingent liabilities,
liabilities subordinated in right of payment to the Loans or non-recourse
Indebtedness)
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that are assumed or forgiven by the transferee of any such assets will be deemed
to be Cash if the Company or such Subsidiary is released from any liability for
such liabilities. Any non-cash proceeds received from the sale of Collateral
shall be pledged to the Collateral Agent pursuant to and in accordance with the
applicable Security Documents and shall constitute Collateral.
(b) Upon compliance with the conditions in subsection (a) of this
Section 7.17, the Release Conditions and the Partial Release Conditions (each as
hereinafter defined), the Company shall be entitled to receive from the
Collateral Agent an instrument in form and substance reasonably satisfactory to
the Borrower (each, a "Release") releasing the Lien of the Mortgage with respect
to all or any portion of a Mortgaged Real Property (each, a "Released Real
Property"). The Company shall exercise its rights under this Section by
delivering to the Collateral Agent a notice (each, a "Release Notice"), which
shall refer to this Section, describe with particularity the proposed Released
Real Property and be accompanied by (i) four counterparts of the Release fully
executed and acknowledged by all necessary parties other than Collateral Agent,
(ii) executed counterparts of UCC or other applicable termination statements
necessary to terminate the Lien of the applicable Mortgage and (iii) an
Officers' Certificate certifying that no Default or Event of Default shall have
occurred and the parties executing any and all documents in connection with the
Release (other than the Collateral Agent) were duly authorized to do so
(collectively, the "Release Conditions"). In the event the proposed Released
Real Property consists of less than all of the Mortgaged Real Property subject
to a single Mortgage, the Partial Release Conditions must be satisfied in order
for the Company to receive the Release.
(c) The Collateral Agent's obligation to deliver a Release in
respect of less than all of the Mortgaged Real Property subject to a single
Mortgage shall be contingent upon the satisfaction of the conditions in
subsection (a) of this Section 7.17 and the Release Conditions as well as the
following conditions (collectively, the "Partial Release Conditions"):
(i) following the sale, transfer or other disposition of and release
of the Lien of the applicable Mortgage with respect to the proposed
Released Real Property, the remaining Mortgaged Real Property shall have
utility services and access to public roads, rail spurs and other
transportation structures sufficient and necessary for the
<PAGE>
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continued use of such Mortgaged Real Property in the manner utilized prior
to the Release;
(ii) following the sale, transfer or other disposition of the
proposed Released Real Property, the remaining Mortgaged Real Property
shall comply in all respects with applicable laws, rules, regulations and
ordinances relating to environmental protection, zoning, land use,
configuration and building and workplace safety;
(iii) the Title Company shall have issued an endorsement to the Banks'
title insurance policy relating to the Mortgaged Real Property confirming
that after the proposed release, the Lien of the applicable Mortgage
continues unimpaired as a first priority Lien upon the remaining Mortgaged
Real Property subject only to Prior Liens; and
(iv) the Company shall cause to have been delivered to the Collateral
Agent an Officers' Certificate certifying that the conditions set forth in
subsections (i) through (iii) have been satisfied.
(d) The Collateral Agent shall execute, acknowledge (if applicable)
and deliver to the Company counterparts of the documents described in
subsections (b)(i) and (ii) within 10 Business Days after receipt by the
Collateral Agent of a Release Notice provided that the Release Conditions and
the Partial Release Conditions (if applicable) have been satisfied. The Company
shall (i) execute, deliver, obtain and record such instruments as the Collateral
Agent may require, including, without limitation, amendments to the Security
Documents or this Agreement and (ii) deliver to the Collateral Agent such
evidence of the satisfaction of the Release Conditions and the Partial Release
Conditions as the Collateral Agent may require. The Borrower shall reimburse the
Collateral Agent, Administrative Agent and the Banks upon demand for all costs
or expenses incurred in connection with any actions taken pursuant to this
Section 7.17.
7.18. Contingent Obligations. The Company will not, and will not
permit any of its Subsidiaries to, directly or indirectly, create or become or
be liable with respect to any Contingent Obligation except:
(i) guarantees resulting from endorsement of negotiable instruments
for collection in the ordinary course of business;
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(ii) Interest Rate Agreements and Currency Protection Agreements;
(iii) Contingent Obligations arising under the Surety Obligations
and the Surety Arrangement;
(iv) Contingent Obligations arising as a direct consequence of the
Transaction or in connection with Designated Acquisitions;
(v) guarantees of the Company's obligations under the Public Notes
by its Subsidiaries;
(vi) contingent reimbursement obligations under letters of credit
(including Letters of Credit) permitted hereunder;
(vii) other Contingent Obligations not to exceed $500,000 in the
aggregate for the Company and its Subsidiaries outstanding at any one
time;
(viii) existing guarantees and letters of credit set forth on
Schedule 7.18(viii);
(ix) reserves for adjustment in respect of the sales price in
connection with any Asset Sale established in accordance with GAAP;
(x) guarantees by the Company of obligations of its Subsidiaries not
constituting Indebtedness; and
(xi) customary indemnification and liquidated damage obligations in
connection with sales of assets in the ordinary course of business.
7.19. Merger and Consolidations. No Credit Party will merge,
consolidate or amalgamate with or into any other entity; provided that (x) any
Borrower (other than the Company) may be merged, consolidated or amalgamated
with or into any other Borrower and (y) any Subsidiary (other than any Borrower)
of the Company may be merged, consolidated or amalgamated with or into (i) a
Borrower, if the Applicable Borrower is the continuing or surviving entity, (ii)
any other such Subsidiary, if the continuing or surviving entity is a
Wholly-Owned Subsidiary of a Borrower and, if such Credit Party is a Subsidiary
Guarantor, the continuing or surviving entity shall become a Subsidiary
Guarantor, or (iii) a Person that is not an Affiliate if
<PAGE>
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the Subsidiary is not a Borrower and such merger or consolidation complies with
Section 7.17.
7.20. Sale and Lease-Backs. Unless constituting a permitted
disposition of assets under Section 7.17 hereof, the Company will not, and will
not permit its Subsidiaries to, directly or indirectly, become or thereafter
remain liable as lessee or as guarantor or other surety with respect to the
lessee's obligations under any lease, whether an Operating Lease or a Capital
Lease, of any property (whether real or personal or mixed) whether now owned or
hereafter acquired (i) which the Company or its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than in
connection with the Transaction) or (ii) which the Company or its Subsidiaries
intends to use for substantially the same purpose as any other property which
has been or is to be sold or transferred by the Company or its Subsidiaries to
any Person in connection with such lease, if in the case of clause (i) or (ii)
above, such sale and such lease are part of the same transaction or a series of
related transactions or such sale and such lease occur within one year of each
other or are with the same other Person.
SECTION 8. Events of Default. Upon the occurrence and during the
continuance of any of the following specified events (each, an "Event of
Default"):
8.01. Payments. Any Borrower shall (i) default in the payment when
due of any principal of the Loans, (ii) default, and such default shall continue
for two or more Business Days, in the payment when due of any interest on the
Loans or under any other Credit Document or (iii) fail to pay any other amounts
owing hereunder for five days after receiving notice from the Administrative
Agent of such default; or
8.02. Representations, etc. Any representation, warranty or
statement made or deemed made by any Credit Party or its respective Subsidiaries
herein or in any other Credit Document or in any statement or certificate
delivered or required to be delivered pursuant hereto or thereto shall prove to
be untrue in any material respect on the date as of which made or deemed made;
or
8.03. Covenants. Holdings or any Credit Party or its respective
Subsidiaries shall (a) default in the due performance or observance by it of any
term, covenant or agreement contained in Section 6.11, 6.12, 6.14, 6.15 or
Section 7 hereof or Section 1.1 of any Mortgage of Real Property in the United
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States or (b) default in the due performance or observance by it of any other
term, covenant or agreement contained in this Agreement or any Security Document
(other than those referred to in Section 8.01, 8.02 or 8.03(a)) and such default
shall continue unremedied for a period of at least thirty days after the date of
such default; or
8.04. Default Under Other Agreements. (a) Any Credit Party or its
respective Subsidiaries shall (i) default in any payment with respect to any
Indebtedness (other than Obligations) having a principal amount in excess of
$5,000,000 in the aggregate for all Credit Parties and their Subsidiaries,
beyond the period of grace, if any, provided in the instrument or agreement
under which such Indebtedness was created or (ii) default in the observance or
performance of any agreement or condition relating to any such Indebtedness or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause any such Indebtedness to become due prior to its stated
maturity; or (b) any such Indebtedness of any Credit Party or any of its
respective Subsidiaries shall be declared to be due and payable, or required to
be prepaid other than by a regularly scheduled required prepayment (excluding
offers to acquire the Public Notes pursuant to the disposition of assets
covenant applicable thereto; provided that no other Event of Default under the
Public Notes has occurred and is continuing and such offer does not constitute a
default under Section 8.03 hereof), prior to the stated maturity thereof; or
8.05. Bankruptcy, etc. Holdings or any Credit Party or its
respective Subsidiaries shall commence a voluntary case concerning itself under
Title 11 of the United States Code entitled "Bankruptcy," as now or hereafter in
effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case
is commenced against Holdings or any Credit Party or any of its respective
Subsidiaries and the petition is not controverted within 10 days, or is not
dismissed within 60 days, after commencement of the case; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of Holdings or any Credit Party or any of its
respective Subsidiaries; or Holdings or any Credit Party or any of its
respective Subsidiaries commences any other proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction
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whether now or hereafter in effect, including without limitation, the Bankruptcy
and Insolvency Act (Canada) and the Companies' Creditors Arrangement Act
(Canada), relating to Holdings or any Credit Party or any of its respective
Subsidiaries; or there is commenced against Holdings or any Credit Party or any
of its respective Subsidiaries any such proceeding which remains undismissed for
a period of 60 days; or a receiver, receiver and manager, administrator,
liquidator, trustee or other person or officer with like powers shall be
appointed, either by private appointment or by order of a court of competent
jurisdiction, with respect to, or an encumbrancer shall take possession of,
assets of Holdings or any Credit Party or any of its Subsidiaries; or any person
presents a petition for the winding-up or the administration of Holdings or any
Credit Party or any of its Subsidiaries and such petition remains undismissed
for a period of 60 days; or Holdings or any Credit Party or any of its
respective Subsidiaries is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or
Holdings or any Credit Party or any of its respective Subsidiaries suffers any
appointment of any custodian or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of 60 days; or
Holdings or any Credit Party or any of its respective Subsidiaries makes a
general assignment for the benefit of creditors; or any corporate action is
taken by Holdings or any Credit Party or any of its respective Subsidiaries for
the purpose of discussing or effecting any of the foregoing; or
8.06. ERISA. An ERISA Event or noncompliance with respect to Foreign
Plans shall have occurred that, in the opinion of the Required Banks, when taken
together with all other ERISA Events that have occurred, could reasonably be
expected to result in liability of the Credit Parties in an aggregate amount
exceeding $1,000,000; or
8.07. Security Documents. Any Security Document shall cease to be
in full force and effect, or shall cease to give the Collateral Agent the Liens,
rights, powers and privileges purported to be created thereby, in favor of the
Collateral Agent, superior to and prior to the rights of all third Persons other
than holders of Prior Liens and subject to no other Liens other than Liens
expressly permitted by the applicable Security Document; or
8.08. Guarantees. Any Guarantee (except with respect to any
Guarantor individually or together with other Guarantors which do not have total
assets of $2,500,000 or
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more) or any provisions thereof shall cease to be in full force or effect in all
material respects (except in accordance with its terms or as permitted under
this Agreement), or the Guarantor thereunder or Person acting by or on behalf of
such Guarantor shall deny or disaffirm such Guarantor's obligations under such
Guarantee or the Guarantor shall default in the due performance or observance of
any term, covenant or agreement on its part to be performed or observed pursuant
to any Guarantee; or
8.09. Judgments. One or more judgments or decrees shall be entered
against any Credit Party or any of its respective Subsidiaries involving a
liability of $2,000,000 or more in the case of any one such judgment or decree
and $5,000,000 or more in the aggregate for all such judgments and decrees for
all Credit Parties and their respective Subsidiaries (in either case in excess
of the amount covered by insurance as to which the insurance company has
acknowledged coverage) and (i) any such judgments or decrees shall not have been
vacated, discharged, bonded or enforcement thereof stayed pending appeal within
30 days from the entry thereof or (ii) any enforcement proceeding therefor shall
have been commenced; or
8.10. Ownership. (i) Chartwell, together with any other Person
controlled by or under common control with Chartwell, shall cease to
beneficially own (as defined in Rule 13d-3 or any successor rule or regulation
promulgated under the Securities Exchange Act of 1934) (x) at least 30% (on a
fully diluted basis) of the issued and outstanding Voting Stock of Holdings or
(y) a higher percentage of such Voting Stock of Holdings than any other Person;
or (ii) individuals who constituted the board of directors of Holdings on the
Closing Date (together with any new directors whose proposal for election by
Holdings was approved by a vote of 51% of the directors of Holdings then still
in office who either were directors on the Closing Date or whose election or
nomination for election was previously so approved) shall cease for any reason
to constitute a majority of the members of the board of directors of Holdings
still in office; or (iii) Holdings shall cease to own, directly or indirectly,
100% of the issued and outstanding shares of capital stock of the Company (each,
a "Change in Control").
Then, and in any such event, and at any time thereafter, if any
Event of Default shall then be continuing, the Administrative Agent shall, upon
the written request of the Required Banks, by written notice to the Borrowers,
take any or all of the following actions, without prejudice to the rights
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of the Administrative Agent or any Bank to enforce its claims against the
Borrowers, except as otherwise specifically provided for in this Agreement
(provided that, if an Event of Default specified in Section 8.05 shall occur,
with respect to Holdings or the Company or any of its Significant Subsidiaries,
the result which would occur upon the giving of written notice by the
Administrative Agent as specified in clauses (i) and (ii) below shall occur
automatically without the giving of any such notice): (i) declare the Total
Commitments terminated, whereupon the Commitment of each Bank shall forthwith
terminate immediately and any accrued and unpaid Commitment Commission shall
forthwith become due and payable without any other notice of any kind; (ii)
declare the principal of and accrued interest in respect of all Loans and all
Obligations owing hereunder and thereunder to be, whereupon the same shall
become, forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by each Credit Party; and/or
(iii) enforce, as Collateral Agent (or direct the Collateral Agent to enforce),
any or all of the remedies created pursuant to the Security Documents. If an
Event of Default is cured or waived in accordance with the terms of the
Agreement, it ceases (and, if waived, pursuant to the terms, and to the extent,
of such waiver).
SECTION 9. Definitions. As used herein, the following terms shall
have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"A Term Loan" has the meaning provided in Section 1.01(a).
"A Term Loan Commitment" means, with respect to each Bank, the
amount set forth below such Bank's name on the signature pages hereto directly
across from the entry entitled "A Term Loan Commitment," as the same may be
reduced from time to time pursuant to Sections 2.02, 3.02 and/or 8.
"A Term Loan Facility" means the Loan Facility evidenced by the
Total A Term Loan Commitment.
"A Term Note" has the meaning provided in Section 1.05(a).
"A Term Portion" means, at any time, the portion of the Loan
Facility evidenced by the Total A Term Loan Commitment.
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"Acceptance" means a bill of exchange drawn by a Canadian Borrower
and accepted by a Bank having a Canadian Swingline Loan Commitment and payable
in Canada.
"Acceptance Discount Proceeds" means with respect to any Acceptance,
an amount (rounded to the nearest full cent) calculated on the applicable date
of borrowing which is equal to the face amount of such Acceptance divided by the
sum of one plus the product of (i) the BA Discount Rate applicable to such
Acceptance multiplied by (ii) a fraction, the numerator of which is the term of
such Acceptance and the denominator of which is 365.
"Account" means all of the "accounts" (as that term is defined in
Section 9-106 of the Uniform Commercial Code as in effect in the State of New
York) of the Company and its Subsidiaries whether or not such Account has been
earned by performance, whether now existing or existing in the future,
including, without limitation, all (i) accounts receivable, including, without
limitation, all accounts created by or arising from all of the Company's and its
Subsidiaries' sales of goods or rendering of services or licensing or subleasing
of any of the Company's and its Subsidiaries' Intellectual Property and
including accounts for goods shipped or goods subject to a progress, percentage
of completion or similar accounting or payment method, which accounts are
unbilled; provided the invoice for such goods is sent within 15 days of the date
the goods were shipped; (ii) unpaid seller's rights (including rescission,
replevin, reclamation and stopping in transit) relating to the foregoing or
arising therefrom; (iii) rights to any goods represented by any of the
foregoing, including returned or repossessed goods; (iv) reserves and credit
balances held by the Company and its Subsidiaries with respect to any such
accounts receivable or any account debtor; (v) guarantees or collateral for any
of the foregoing; and (vi) insurance policies or rights relating to any of the
foregoing.
"Acquisition Portion" means, at any time, the portion of the Loan
Facility evidenced by the Total Acquisition Term Loan Commitment.
"Acquisition Term Loan" has the meaning provided in Section 1.01(b).
"Acquisition Term Loan Closing Date" has the meaning provided in
Section 1.01(b).
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"Acquisition Term Loan Commitment" means, with respect to each Bank,
the amount set forth below such Bank's name on the signature pages hereto beside
the column entitled "Acquisition Term Loan Commitment", as same may be reduced
from time to time pursuant to Sections 2.01, 2.02, 3.02 and/or 8.
"Acquisition Term Loan Commitment Termination Date" means (i) the
earlier of the date on which the Acquisition Term Loan Commitments are reduced
to zero and (ii) the last Business Day of March 2001.
"Acquisition Term Note" has the meaning provided in Section
1.05(a)(ii).
"Additional Collateral" has the meaning provided in Section 6.14.
"Administrative Agent's Office" or "Agent's Office" means (i) the
office of the Administrative Agent located at 425 Lexington Avenue, New York,
New York 10017, or such other office as the Administrative Agent may hereafter
designate in writing as such to the other parties hereto or (ii) with respect to
U.K. Swingline Loans, such office as the U.K. Swingline Bank shall from time to
time designate in writing, as such to the other parties hereto.
"Affiliate" means with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors,
managers and executive officers of such Person), controlled by, or under direct
or indirect common control with, such Person. A Person shall be deemed to
control a corporation or a limited liability company for the purposes of this
definition if such Person possesses, directly or indirectly, the power (i) to
vote 10% or more of the securities having ordinary voting power for the election
of directors or managers of such corporation or limited liability company or
(ii) to direct or cause the direction of the management and policies of such
corporation or limited liability company, whether through the ownership of
voting securities, by contract or otherwise. For purposes of this Agreement,
CIBC and Indosuez and their Affiliates shall not be deemed Affiliates of
Holdings and its Affiliates.
"Agent" or "Agents" has the meaning provided in the first paragraph
of this Agreement and shall include any successor or successors thereto
appointed in accordance herewith.
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"Agreement" means this Credit Agreement, as the same may after its
execution be amended, supplemented or otherwise modified from time to time in
accordance with the terms hereof.
"Applicable Borrower" means, with respect to any Loan, either U.S.
Borrower, the Canadian Borrower or the U.K. Borrower, as applicable, which is
the Borrower to whom such Loan was, or is to be, made.
"Applicable Currency" means, as to any particular payment or
Loan, U.S. Dollars, Canadian Dollars or Pounds Sterling.
"Approved Fund" means, with respect to any Bank that is a fund that
invests in bank loans, any other fund that invests in bank loans and is advised
or managed by the same investment advisor as such Bank or by an Affiliate of
such investment advisor.
"Asset Sale" means the sale, transfer or other disposition, to the
extent consummated after the Closing Date, by the Company or any of its
Subsidiaries of any asset of the Company or its Subsidiaries to any Person
(other than (i) transactions included in the definition of Net Financing
Proceeds, (ii) the Exempt Sale-Leaseback Transaction, (iii) any sale, transfer
or other disposition of assets the gross proceeds of which (exclusive of
indemnities) do not exceed $100,000, (iv) sales, transfers or other dispositions
of inventory in the ordinary course of business, (v) sales of accounts
receivable permitted by Section 7.15, (vi) any sales, leases, conveyances,
transfers or other dispositions of property or equipment that has become worn
out, obsolete or damaged or otherwise unsuitable for use in connection with the
business of the Company or any of its Subsidiaries, as the case may be, (vii)
the incurrence of any Permitted Encumbrances and Prior Liens, (viii) transfers
of cash and sales of Cash Equivalents, (ix) Intercompany Advances and (x)
Dividends permitted by Section 7.08).
"Authorizations" has the meaning provided in Section 5.22(a).
"Authorized Officer" means any senior officer of a Borrower
designated as such in writing to the Administrative Agent by such Borrower, to
the extent acceptable to the Administrative Agent.
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"B Term Loan" has the meaning provided in Section 1.01(a).
"B Term Loan Commitment" means, with respect to each Bank, the
amount set forth below such Bank's name on the signature pages hereto directly
across from the entry entitled "B Term Loan Commitment," as the same may be
reduced from time to time pursuant to Sections 2.02, 3.02 and/or 8.
"B Term Loan Facility" means the Loan Facility evidenced by the
Total B Term Loan Commitment.
"B Term Note" has the meaning provided in Section 1.05(a).
"B Term Portion" means, at any time, the portion of the Loan
Facility evidenced by the Total B Term Loan Commitment.
"BA Discount Rate" means the BA Schedule I Discount Rate or the BA
Schedule II Discount Rate, as the case may be.
"BA Equivalent Note" means a non-interest-bearing promissory note of
each Canadian Borrower in favor of a Non-Acceptance Bank in the principal amount
of a loan made by such Bank pursuant to Section 1.10 of Schedule 1.16 hereof,
having the same maturity date as the Acceptances issued contemporaneously
therewith, stating that it is given pursuant to, and is subject to, the terms of
this Agreement and otherwise being in form and substance satisfactory to the
Non-Acceptance Bank acting reasonably.
"BA Schedule I Discount Rate" means, with respect to an issue of
Acceptances with the same maturity date to be accepted by a Schedule I Bank, the
CDOR for bankers' acceptances having a comparable face value and identical
maturity date to the face value and maturity date of such issue of Acceptances.
"BA Schedule II Discount Rate" means, with respect to an issue of
Acceptances with the same maturity date to be accepted by a Schedule II Bank,
the lesser of:
(i) the annual rate determined by the Administrative Agent as being
the arithmetic average (rounded upwards to the nearest multiple of 0.01%)
of the discount rates of the Schedule II Reference Banks determined in
accordance with their normal practices at or about 10:00 a.m. on the date
of issue and acceptance of such Acceptances, for
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bankers' acceptances having a comparable face value and an identical
maturity date to the face value and maturity date of such Acceptances; and
(ii) the CDOR at or about 10:00 a.m. on the date of issue and
acceptance of such Acceptances for bankers' acceptances having a
comparable face value and an identical maturity date to the face value and
maturity date of such Acceptances plus 0.10% per annum.
"Bank" has the meaning provided in the first paragraph of this
Agreement and in Section 11.04.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) or the failure of a Bank to make available its portion of any
Borrowing (including any Mandatory Borrowing) or to fund its portion of any
unreimbursed payment under Section 1.13(e) or (ii) a Bank having notified in
writing any Borrower and/or the Administrative Agent that such Bank does not
intend to comply with its obligations under Section 1.01 or 1.13.
"Bankruptcy Code" has the meaning provided in Section 8.05.
"Base Rate" means the higher of (x) 1/2% per annum in excess of the
Federal Funds Rate and (y) the rate which the Administrative Agent announces
from time to time as its prime lending rate, as in effect from time to time. The
rate the Administrative Agent announces as its prime lending rate is a reference
rate and does not necessarily represent the lowest or best rate actually charged
to any customer. The Administrative Agent may make commercial loans or other
loans at rates of interest at, above or below the rate it announces as its prime
lending rate.
"Base Rate Loan" means each Loan bearing interest at the rate
provided in Section 1.08(a). Base Rate Loans may only be made in U.S. Dollars.
"Borrowers" means the Canadian Borrowers, the U.K. Borrower and the
U.S. Borrowers.
"Borrowing" means the incurrence pursuant to a Notice of Borrowing
and to the Loan Facility of one Type of Loan by a Borrower from all of the Banks
on a pro rata basis on a given date (or resulting from conversions on a given
date), having in
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the case of Reserve Adjusted Eurodollar Loans the same Interest Periods.
"Borrowing Amount" means, in the case of an Acceptance, a minimum
aggregate amount of Cdn.$1,000,000 plus any whole multiple of Cdn.$100,000.
"Borrowing Base" means an amount equal to the sum of (i) 85% of the
Eligible Accounts Receivable; provided that the rate shall be 50% for the
additional $10,000,000 of Eligible Accounts Receivable specified in clause (e)
of the definition thereof, and (ii) 50% of the Eligible Inventory.
"Borrowing Base Certificate" has the meaning assigned to that term
in Section 6.01.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in London, England or New York, New York (and in
the case of disbursements and payments in Canadian Dollars, in Toronto, Canada)
and (i) with respect to disbursements and payments in U.S. Dollars relating to
Reserve Adjusted Eurodollar Loans, a day on which dealings are carried on in the
applicable offshore U.S. Dollar interbank market, and (ii) with respect to
disbursements and payments in and calculations pertaining to Pounds Sterling, a
day on which commercial banks are open for foreign exchange business in London,
England, and on which dealings in Pounds Sterling are carried on in the
applicable foreign exchange interbank market in which disbursement of or payment
in Pounds Sterling will be made or received hereunder.
"Canadian Borrower" means each of Mondel ULC, an unlimited liability
company organized under the laws of Nova Scotia, and Kaverit Steel and Crane
ULC, an unlimited liability company organized under the laws of Nova Scotia, and
in each case its respective successors.
"Canadian Dollars" and "Cdn. $" each mean lawful money of Canada.
"Canadian Federal Funds Rate" means the overnight rate (expressed as
an annual rate) established by the Administrative Agent based on its customary
practice.
"Canadian Pledge Agreement" means each Securities Pledge Agreement
executed by the Canadian Subsidiaries of the Company substantially in the form
of Exhibit H-1 hereto, except for such changes as shall have been approved by
the Agents, as
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the same may after its execution be amended, supplemented or otherwise modified
from time to time in accordance with its terms and the terms hereof.
"Canadian Security Agreements" means each Security Agreement
executed by the Canadian Subsidiaries of the Company substantially in the form
of Exhibit G-2 hereto, except for such changes as shall have been approved by
the Agents, as the same may after its execution be amended, supplemented or
otherwise modified from time to time in accordance with its terms and the terms
hereof.
"Canadian Subsidiary" means any Subsidiary of the Company organized
under the laws of Canada or any Province thereof.
"Canadian Subsidiary Guarantee" means each guarantee executed by the
Canadian Subsidiaries of the Company substantially in the form of Exhibit E-3
hereto, except for such changes as shall have been approved by the Agents, as
the same may after its execution be amended, supplemented or otherwise modified
from time to time in accordance with its terms and the terms hereof.
"Canadian Swingline Bank" means each Bank with a Canadian Swingline
Loan Commitment.
"Canadian Swingline Loan" means any Swingline Loan made by the
Canadian Swingline Bank to a Canadian Borrower.
"Canadian Swingline Loan Commitment" means, with respect to each
Bank, the amount set forth below such Bank's name on the signature pages hereto
directly across from the entry entitled "Canadian Swingline Loan Commitment," as
such amount may be reduced from time to time pursuant to Sections 2.01, 2.02,
3.02 and/or 8.
"Canadian Swingline Note" has the meaning provided in Section
1.05(a).
"Capital Lease" of any Person means any lease of any property
(whether real, personal or mixed) by that Person as lessee which, in conformity
with GAAP, is, or is required to be, accounted for as a capital lease on the
balance sheet of that Person, together with any renewals of such leases (or
entry into new leases) on substantially similar terms.
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"Capitalized Lease Obligations" of any Person means all obligations
under Capital Leases of such Person or any of its Subsidiaries in each case
taken at the amount thereof accounted for as liabilities in accordance with
GAAP.
"Cash" means money, currency or a credit balance in a Deposit
Account.
"Cash Equivalents" means (i) marketable direct obligations issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof) having maturities of
not more than one year from the date of acquisition, (ii) marketable direct
obligations issued by any State of the United States of America, any foreign
country recognized by the United States of America, or any local government or
other political subdivision thereof rated (at the time of acquisition of such
security) at least AA by Standard & Poor's Ratings Group ("S&P") or the
equivalent thereof by Moody's Investors Service, Inc. ("Moody's") having
maturities of not more than one year from the date of acquisition, (iii) time
deposit accounts, deposit accounts, certificates of deposit and bankers'
acceptances of (x) any Bank, (y) any domestic commercial bank of recognized
standing having capital and surplus in excess of $250,000,000 or (z) any bank
organized under the laws of any jurisdiction recognized by the United States of
America and in which the Borrowers or their Subsidiaries actively conduct
business whose short-term commercial paper rating (at the time of acquisition of
such security) by S&P is at least A-1 or the equivalent thereof or by Moody's is
at least P-1 or the equivalent thereof (any such bank, an "Approved Bank"), in
each case with maturities of not more than six months from the date of
acquisition, (iv) commercial paper and variable or fixed rate notes issued by
any Bank or Approved Bank or by the parent company of any Bank or Approved Bank
and commercial paper and variable rate notes issued by, or guaranteed by, any
industrial or financial company with a short-term commercial paper rating (at
the time of acquisition of such security) of at least A-1 or the equivalent
thereof by S&P or at least P-1 or the equivalent thereof by Moody's, or
guaranteed by any industrial company with a long-term unsecured debt rating (at
the time of acquisition of such security) of at least AA or the equivalent
thereof by S&P or the equivalent thereof by Moody's and in each case maturing
within one year after the date of acquisition, (v) repurchase agreements with
any Bank or any primary dealer maturing within 30 days from the date of
acquisition that are fully collateralized by investment instruments that would
oth-
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erwise be Cash Equivalents; provided that the terms of such repurchase
agreements comply with the guidelines set forth in the Federal Financial
Institutions Examination Council Supervisory Policy -- Repurchase Agreements of
Depository Institutions With Securities Dealers and Others, as adopted by the
Comptroller of the Currency on October 31, 1985, (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above, and (vii) foreign bank
deposits and cash equivalents in jurisdictions where the Company or its
Subsidiaries are then actively conducting business; provided that (a) all such
deposits are required to be made in the ordinary course of business, (b) such
deposits do not exceed $1,000,000 in the aggregate and (c) the funds so
deposited do not remain in such bank for more than ten days.
"CDOR" means, for any day and relative to Acceptances (or BA
Equivalent Notes) having any specified term, the average of the annual rates
(calculated on the basis of a year of 365 days) for Canadian Dollar bankers'
acceptances, having such specified term (or a term as closely as possible
comparable to such specified term) of the Schedule I chartered banks of Canada
that appears on the Reuters Screen CDOR Page as at 10:00 a.m. on such day (or,
if such day is not a Business Day, as at 10:00 a.m. on the immediately preceding
Business Day); provided that if such rate does not appear on the Reuters Screen
CDOR page at such time on such date, the rate for such date will be the discount
rate quoted by the Administrative Agent, having such specified term (or a term
as closely as possible comparable to such specified term) for bankers'
acceptances at such time and on such date.
"CERCLA" has the meaning provided in Section 5.22(d).
"Change in Control" has the meaning provided in Section 8.10.
"Chartwell" means Chartwell Investments Inc. and its Affiliates.
"Chartwell Financial Advisory Agreement" means the Financial
Advisory Fee Letter dated March 30, 1998 between the Company and Chartwell, as
in effect on the Closing Date.
"Chartwell Management Consulting Agreement" means the Management
Consulting Agreement dated March 30, 1998 between the Company and Chartwell, as
in effect on the Closing Date.
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"CIBC" has the meaning provided in the first paragraph of this
Agreement.
"Closing Date" means March 30, 1998.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral" means all of the Pledged Collateral, Pledged Securities
and Mortgaged Real Property.
"Collateral Agent" means CIBC in its capacity as collateral agent
for the Banks.
"Commercial Letter of Credit" means any letter of credit or similar
instrument issued for the account of the Applicable Borrower for the purpose of
providing the primary payment mechanism in connection with the purchase of any
materials, goods or services by a Borrower or any of its Subsidiaries in the
ordinary course of business of the Company or its Subsidiaries.
"Commitment" means, with respect to each Bank, such Bank's Term Loan
Commitment, Acquisition Term Loan Commitment, Swingline Loan Commitment and
Revolving Loan Commitment.
"Commitment Commission" has the meaning provided in Section 2.03.
"Company" means Morris Material Handling, Inc., a Delaware
corporation.
"Compliance Certificate" means a certificate issued pursuant to
Section 6.01(d) signed by a chief financial officer, controller, chief
accounting officer or other Authorized Officer of the Company.
"Computation Date" means any date on which the Administrative Agent
or the U.K. Swingline Bank, as the case may be, determines the Dollar Equivalent
amount of any Pounds Sterling Loans or Canadian Dollar Loans pursuant to Section
1.14 or Section 3.05(b).
"Consolidated Amortization Expense" for any Person means, for any
period, the consolidated amortization expense of such Person for such period,
determined on a consolidated basis for such Person and its Subsidiaries in
conformity with GAAP.
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"Consolidated Capital Expenditures" of any Person means, for any
period, the amount required to be included in capital assets on the consolidated
balance sheet of such Person in conformity with GAAP, but excluding expenditures
made in connection with the replacement, substitution or restoration of assets
(i) to the extent financed from insurance proceeds paid on account of the loss
of or damage to the assets being replaced or restored, (ii) with awards of
compensation arising from the taking by eminent domain or condemnation of the
assets being replaced, (iii) with regard to equipment that is purchased
simultaneously with the trade-in of existing equipment, fixed assets or
improvements, the credit granted by the seller of such equipment for the
trade-in of such equipment, fixed assets or improvements or (iv) assets
purchased with Net Cash Proceeds in accordance with Section 7.17 or with
proceeds from sales covered by clause (iii) of the definition of Asset Sale;
provided that Consolidated Capital Expenditures shall (other than with respect
to Designated Acquisitions) in any event include the purchase price paid in
connection with the acquisition of any other Person (including through the
purchase of all of the capital stock or other ownership interests of such Person
or through merger or consolidation).
"Consolidated Cash Taxes" of any Person means, for any period, the
amount of cash taxes actually paid in such period by such Person or the
consolidated tax group of which such Person is a member based on the income of
such Person or group.
"Consolidated Depreciation Expense" for any Person means, for any
period, the consolidated depreciation expense of such Person for such period,
determined on a consolidated basis for such Person and its consolidated
Subsidiaries in conformity with GAAP.
"Consolidated EBITDA" means, for any Person, for any period, an
amount equal to (a) the sum of (i) Consolidated Net Income for such period, plus
(ii) the provision for taxes for such period based on income or profits to the
extent such income or profits were included in computing Consolidated Net Income
(minus any provision for taxes utilized in computing net loss under clause (i)
hereof to the extent such provision reduced the net loss), plus (iii)
Consolidated Interest Expense for such period, plus (iv) Consolidated
Depreciation Expense for such period to the extent reducing Consolidated Net
Income, plus (v) Consolidated Amortization Expense for such period to the extent
reducing consolidated net income, plus (vi) without duplication of clause (v),
amortization of original issue discount to the extent it arises from the
issuance of capital
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stock of the Company, plus (vii) any charge related to any premium or penalty
paid in connection with redeeming or retiring any Indebtedness prior to its
stated maturity to the extent reducing Consolidated Net Income, plus (viii) any
other non-cash items reducing Consolidated Net Income for such period, minus (b)
all non-cash items increasing Consolidated Net Income for such period, minus (c)
all cash payments during such period relating to non-cash charges that were
added back in determining Consolidated EBITDA in any prior period (provided that
payment of such cash amounts did not reduce Consolidated Net Income), all for
such Person and its Subsidiaries determined in accordance with GAAP. For
purposes of computations made pursuant to Sections 7.10-7.13, Consolidated
EBITDA for a given Test Period (x) shall mean Consolidated EBITDA for such Test
Period and (y) shall also include the EBITDA (with appropriate adjustments set
forth in financials delivered pursuant to Section 4.03(b)(ii)) derived from and
pro forma for any Designated Acquisition consummated during such Test Period and
which is consolidated with the Company and its Subsidiaries as of the last day
of such Test Period, for the portion of such Test Period before the business was
so acquired.
"Consolidated EBITDAC" for any Person means, for any period,
Consolidated EBITDA minus Consolidated Capital Expenditures of such Person and
its Consolidated Subsidiaries determined in conformity with GAAP.
"Consolidated Interest Expense" means, with respect to any Person,
for any period, without duplication, (i) the aggregate amount of interest
charges (excluding fees and expenses incurred in connection with the
Transaction), whether expensed or capitalized, incurred or accrued by such
Person and its Subsidiaries, determined on a consolidated basis in conformity
with GAAP for such period, plus (ii) to the extent not included in clause (i)
above, an amount equal to the sum of: (A) imputed interest included in
Capitalized Lease Obligations, (B) all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, (C) the net costs associated with Interest Rate Agreements, Currency
Protection Agreements and other hedging obligations, (D) the interest portion of
any deferred payment obligations, (E) [intentionally omitted], (F) all
capitalized interest and all accrued interest, (G) all interest incurred or paid
under any guarantee of Indebtedness (including a guarantee of principal,
interest or any combination thereof) of any Person, and (H) all dividends or
distributions on preferred capital stock if payable to a Person other than the
Company or a Subsidiary (other than dividends paid or payable in shares of
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capital stock of the Company) declared and payable in cash, minus (iii) to the
extent included in clause (i) or (ii) above, amortization or write-off of
deferred financing costs (and original issue discount to the extent it arises
from the issuance of capital stock of the Company) during such period and,
without duplication, any charge related to any premium or penalty paid in
connection with redeeming or retiring any Indebtedness of the Company or its
Subsidiaries prior to the stated maturity thereof.
"Consolidated Net Income" means with respect to any Person, for any
period, the aggregate of the net income (loss) of such Person and its
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided, however, that (a) the net income (loss) of any Person that
is not a Subsidiary, (b) the net income of any Subsidiary of the Person in
question that is subject to any restriction or limitation on the payment of
dividends or the making of other distributions (other than pursuant to this
Agreement, the Public Notes, the indenture related to the Public Notes or any
other Indebtedness of any Subsidiary of the Company containing, in the good
faith judgment of the Board of Directors of the Company, substantially the same
or less restrictive limitations on the payment of dividends or the making of
other distributions than those contained in this Agreement, the Public Notes or
the indenture related to the Public Notes) shall be excluded to the extent of
such restriction or limitation (regardless of any waiver thereof), (c)(i) the
net income (loss) of any Person acquired in a pooling of interests transaction
for any period prior to the date of such acquisition and (ii) any net after-tax
gain (but not loss) resulting from an Asset Sale by the Person in question or
any of its Subsidiaries other than in the ordinary course of business shall be
excluded, (d) non-cash gains and losses due solely to fluctuations in currency
values shall be excluded, (e) in the case of a successor to the referent Person
by consolidation or merger or as a transferee of the referent Person's assets,
any earnings (or losses) of the successor corporation prior to such
consolidation, merger or transfer of assets shall be excluded, and (f) all items
classified as extraordinary, unusual or nonrecurring, including all items
relating to the Transaction and the preclosing events relating thereto shall be
excluded (including the fees and expenses incurred at or prior to the closing of
the Transaction and write-offs or other costs associated or arising in
connection with the Transaction).
"Consolidated Tangible Assets" of any Person means the consolidated
tangible assets of such Person and its Sub-
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sidiaries determined on a consolidated basis in accordance with GAAP.
"Contingent Obligations" means, as to any Person, without
duplication, any obligation of such Person guaranteeing or intended to guarantee
any Indebtedness, leases, dividends or other obligations ("primary obligations")
of any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (d) otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business and amounts that are included in Section 7.18. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the maximum
amount that such Person may be obligated to expend pursuant to the terms of such
Contingent Obligation or, if such Contingent Obligation is not so limited, the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Credit Documents" means (i) this Agreement, (ii) each Note, (iii)
each Guarantee and (iv) each Security Document.
"Credit Extension" means the making of any Loan, the issuance of
Acceptances or the issuance of any Letter of Credit hereunder.
"Credit Party" means at all times the Borrowers and each Subsidiary
thereof that pledges any stock, grants any Lien or issues any guarantee pursuant
to any Credit Document.
"Currency Protection Agreement" shall mean any foreign exchange
contract, currency swap agreement, or other fi-
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nancial agreements or arrangements designed to protect any Borrower against
fluctuations in currency values.
"Default" means any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Deposit Account" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"Designated Acquisition" means such acquisition as shall be effected
by the U.S. Borrowers in compliance with Section 4.03 and Section 6.18; provided
that the Designated Acquisition entity engages in the MHE Business, and
businesses or activities similar or reasonably related thereto.
"Destruction" has the meaning assigned to that term in each
Mortgage.
"Dividends" has the meaning provided in Section 7.08.
"Documents" means each Credit Document and each Transaction
Document.
"Dollar Equivalent" means, at any time, (a) as to any amount
denominated in U.S. Dollars, the amount thereof at such time, and (b) as to any
amount denominated in Canadian Dollars or Pounds Sterling, the equivalent amount
in U.S. Dollars as determined by the Administrative Agent at such time on the
basis of the Spot Rate for the purchase of U.S. Dollars with such Canadian
Dollars or Pounds Sterling on the most recent Computation Date provided for in
Section 1.14(a) or such other date as is specified herein; provided that the
U.K. Swingline Bank shall determine the Spot Rate with respect to any Borrowings
of U.K. Swingline Loans.
"Dollar Percentage" of any Bank at any time shall mean a fraction
(expressed as a percentage) the numerator of which is the Revolving Loan
Commitment of such Bank at such time and the denominator of which is the Total
Revolving Loan Commitment. Notwithstanding anything to the contrary contained
above, if the Dollar Percentage of any Bank is to be determined after the Total
Revolving Loan Commitment has been terminated,
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then the Dollar Percentages of the Banks shall be determined immediately prior
(and without giving effect) to such termination.
"Dollars" or "$" means United States Dollars.
"Effective Date" has the meaning provided in Section 11.10.
"Effective Time" has the meaning provided in Section 11.10.
"Eligible Accounts Receivable" means, as at any applicable date of
determination, the aggregate face amount of the Accounts of the Credit Parties
included in clause (i) of the definition of Account hereunder (excluding any
Accounts set forth in clauses (ii) through (vi) of such definition), without
duplication, in each case less (without duplication) the aggregate amount of all
reserves, limits and deductions with respect to such Accounts set forth below
and less the aggregate amount of all returns, discounts, claims, rebates,
offsets, credits, charges (including warehouseman's charges) and allowances of
any nature with respect to such Accounts (whether issued, owing, granted or
outstanding). Unless otherwise approved in writing by the Administrative Agent
in its sole discretion, no individual Account shall be deemed to be an Eligible
Account Receivable if:
(a) a Credit Party does not have legal and valid title to the
Account; or
(b) the Account is not the valid, binding and legally enforceable
obligation of the account debtor subject, as to enforceability, only to
(i) applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws at the time in effect affecting the enforceability of
creditors' rights generally and (ii) judicial discretion in connection
with the remedy of specific performance and other equitable remedies; or
(c) the Account arises out of a sale made by a Credit Party to an
Affiliate of such Credit Party other than sales to Harnco or Joint
Ventures in the ordinary course of business; or
(d) the Account or any portion thereof is unpaid more than
90 days after the original invoice date; or
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(e) such Account, when aggregated with all other Accounts of the
same account debtor (or any Affiliate thereof), exceeds the greater of $10
million or ten percent in face value of all Accounts of the Credit Parties
then outstanding, to the extent of such excess, unless such excess is
supported by a letter of credit satisfactory to the Administrative Agent
(as to form, substance and issuer); provided that up to an additional
$10,000,000 of Accounts, which would otherwise be ineligible under this
clause (e), shall be Eligible Accounts Receivable at the reduced advance
rate set forth in the definition of Borrowing Base; or
(f) (i) the account debtor for such Account is also a creditor of a
Credit Party, to the extent of the amount owed by such Credit Party to the
account debtor and the account debtor has not entered into an agreement
with respect to the waiver of the rights of setoff, (ii) the Account is
subject to any claim on the part of the account debtor disputing liability
under such Account in whole or in part, to the extent of the amount of
such dispute or (iii) the Account otherwise is or is reasonably likely to
become subject to any right of setoff or any counterclaim, claim or
defense by the account debtor, to the extent of the amount of such setoff
or counterclaim, claim or defense; or
(g) the account debtor for such Account has commenced a voluntary
case or proceeding under applicable bankruptcy or insolvency laws, as now
constituted or hereafter amended, or made an assignment for the benefit of
creditors or if a decree or order for relief has been entered by a court
having jurisdiction in the premises in respect of the account debtor in an
involuntary case or proceeding under applicable bankruptcy or insolvency
laws, as now constituted or hereafter amended, or if any other petition or
other application for relief under applicable bankruptcy or insolvency
laws has been filed by or against the account debtor, or if the account
debtor has failed, suspended business, ceased to be solvent, or consented
to or suffered a receiver, trustee, liquidator or custodian to be
appointed for it or for all or a significant portion of its assets or
affairs; or
(h) the Administrative Agent does not have a valid and perfected
first priority security interest in such Account except with respect to
Accounts securing Surety Arrangements subject to an Intercreditor
Agreement, the face
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amount of which do not exceed the lesser of $5,000,000 and 10% of the
total face amount of all Eligible Accounts Receivable; or
(i) the sale to the account debtor for such Account is on a
consignment, sale on approval, guaranteed sale or sale-and-return basis or
pursuant to any written agreement requiring repurchase or return; or
(j) such Account is from an account debtor (or any Affiliate
thereof) and fifty percent (50%) or more, in face amount, of other
Accounts from such account debtor are due or unpaid for more than 90 days
after the original invoice date; or
(k) fifty percent (50%) or more, in face amount, of other Accounts
from the same account debtor for such Account are not deemed Eligible
Accounts Receivable hereunder, other than pursuant to clause (a), (e), (h)
or (i) hereunder; or
(l) such Account is an Account a security interest in which would be
subject to the Federal Assignment of Claims Act of 1940, as amended (31
U.S.C. ss. 3727 et seq.) or the Financial Administration Act (Canada) or
foreign equivalent, unless the Credit Party has assigned the Account to
the Agent in compliance with the provisions of such Act; or
(m) the Administrative Agent determines in good faith that (i)
collection of the account is insecure or (ii) such Account may not be paid
by reason of the account debtor's financial inability to pay; provided,
however, that any Account referred to in this clause (m) shall not become
ineligible until the Administrative Agent shall have given the Credit
Party three Business Days' advance notice of such determination; or
(n) except with respect to Accounts generated from projects on which
a progress, percentage of completion or similar accounting or payment
method is used, the goods giving rise to such Account have not been
shipped or the services giving rise to such Account have not been
performed by a Credit Party or the Account otherwise does not represent a
final sale; or
(o) such Account does not comply in all material respects with all
applicable legal requirements, including,
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where applicable, the Federal Consumer Credit Protection Act, the Federal
Truth in Lending Act and Regulation Z of the Board of Governors of the
Federal Reserve System, in each case as amended.
In addition to the foregoing, Eligible Accounts Receivable includes
such Accounts as a Credit Party requests and that the Administrative Agent
approves in advance, in writing and in its sole discretion (or if the aggregate
face amount to be approved exceeds $1,000,000 at any one time, the approval of
the Required Banks has been obtained in writing).
"Eligible Inventory" means (A) the gross amount of Inventory of the
Credit Parties, valued at the lower of cost (on a FIFO basis) or market, which
(i) is owned solely by a Credit Party and with respect to which such Credit
Party has good, valid and marketable (or indefeasible) title; (ii) is stored on
property leased by a Credit Party or that is either (a) owned or leased by a
Credit Party or (b) owned or leased by a warehouseman that has contracted with a
Credit Party to store Inventory on such warehouseman's property (provided that
with respect to Inventory stored on property located in the United States or
Canada leased by a Credit Party or owned or leased by a warehouseman, such
Credit Party has delivered to the Administrative Agent an agreement of the type
described in Section 6.11 hereof satisfactory to the Administrative Agent
executed by such lessor or warehouseman); (iii) is subject to a valid,
enforceable and first priority Lien in favor of the Administrative Agent except
with respect to Inventory securing Surety Arrangements subject to an
Intercreditor Agreement, the value (at the lower of cost (on a FIFO basis) or
market) of which does not exceed the lesser of $5,000,000 or 10% of the total
value of all Eligible Inventory; and (iv) is not obsolete or slow moving in
relation to customary industry practice, and which otherwise conforms to the
requirements for eligibility contained herein; less (B) the amount of any goods
returned or rejected by the Credit Parties' customers and goods in transit to
third parties (other than to the Credit Parties' agents or warehousemen that
comply with clause (A)(ii)(b) above which are not resaleable); less (C) the
amount of any reserves. In addition to the foregoing, Eligible Inventory shall
include such items of the Credit Parties' Inventory as the Company shall request
and that the Administrative Agent approves in advance, in writing and in its
sole discretion (or if the aggregate amount to be approved exceeds $500,000 at
any one time, the approval of the Required Banks has been obtained).
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"Employee Benefit Plan" shall mean an employee benefit plan (as
defined in Section 3(3) of ERISA) that is maintained or contributed to by any
ERISA Entity or with respect to which a Credit Party could incur liability.
"Environmental Laws" means the common law and all federal, state,
provincial, local and foreign laws or regulations, codes, orders, decrees,
judgments or injunctions issued, promulgated, approved or entered thereunder,
now or hereafter in effect, relating to pollution or protection of public or
employee health and safety or the environment, including, without limitation,
laws relating to (i) emissions, discharges, releases or threatened releases of
Hazardous Materials, into the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata),
(ii) the manufacture, processing, distribution, use, generation, treatment,
storage, disposal, transport or handling of Hazardous Materials, and (iii)
underground and aboveground storage tanks, and related piping, and emissions,
discharges, releases or threatened releases therefrom.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Entity" shall mean any member of an ERISA Group.
"ERISA Event" shall mean (a) any "reportable event," as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Pension Plan (other than an event for which the 30-day notice period is waived);
(b) the existence with respect to any Pension Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived, the failure to make by its due date a required
installment under Section 412(m) of the Code with respect to any Pension Plan or
the failure to make any required contribution to a Multiemployer Plan; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Pension Plan; (d) the incurrence by any ERISA Entity of any liability under
Title IV of ERISA with respect to the termination of any Pension Plan; (e) the
receipt by any ERISA Entity from the PBGC or a plan administrator of any notice
relating to an intention to terminate any Pension Plan or to appoint a trustee
to administer any Pension Plan, or the occurrence of any event or condition
which could reasonably be expected to constitute grounds under ERISA for the
termination of or the appointment of a trustee to adminis-
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ter, any Pension Plan; (f) the incurrence by any ERISA Entity of any liability
with respect to the withdrawal or partial withdrawal from any Pension Plan or
Multiemployer Plan; (g) the receipt by an ERISA Entity of any notice, or the
receipt by any Multiemployer Plan from any ERISA Entity of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA; (h) the failure to make any payment or
contribution to any Pension Plan or the making of any amendment to any Pension
Plan which could result in the imposition of a lien or the posting of a bond or
other security; or (i) the occurrence of a nonexempt prohibited transaction
(within the meaning of Section 4975 of the Code or Section 406 of ERISA) which
could result in liability to a Credit Party.
"ERISA Group" shall mean each Credit Party and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with a Credit Party, are
treated as a single employer under Section 414 of the Code.
"Eurodollar Rate" means the rate per annum that appears on page 3750
of the Dow Jones Telerate Screen or any successor page for Dollar deposits with
maturities comparable to the Interest Period applicable to the Reserve Adjusted
Eurodollar Loans subject to the respective Borrowing commencing two Business
Days thereafter as of 11:00 a.m. (London time) on the date which is two Business
Days prior to the commencement of the respective Interest Period; provided that,
to the extent that an interest rate is not ascertainable pursuant to the
foregoing provisions of this definition, the rate to be used for purposes of
this definition shall be the interest rate per annum determined by the
Administrative Agent to be the rate per annum at which deposits in Dollars are
offered for such relevant Interest Period to major banks in the London interbank
market in London, England by the Administrative Agent at approximately 11:00
A.M. (London time) on the date which is two Business Days prior to the beginning
of such Interest Period, divided (and rounded, if necessary, upward to the
nearest whole multiple of 1/16 of 1%).
"Event of Default" has the meaning provided in Section 8.
"Excess Cash Flow" means, for any period, the amount by which
Consolidated EBITDAC of the Company and its Subsidiaries exceeds the sum of (a)
cash payments of Consolidated Inter-
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est Expense of the Company and its Subsidiaries for such period, plus (b)
principal payments made on the Indebtedness of the Company and its Subsidiaries
in such period (excluding repayments of Revolving Loans not made as a result of
a reduction in the Total Commitment), plus (c) Consolidated Cash Taxes paid in
such period, plus (d) voluntary prepayments on the Term Loans and Acquisition
Term Loans and voluntary prepayments on Revolving Loans resulting in a permanent
commitment reduction made in such period (other than any prepayment required to
be made pursuant to Section 3.02(A)(a)or(b)), plus (e) for the period from
November 1, 1998 through October 31, 2001, 100%, and for periods thereafter, a
percentage equal to 100% minus the applicable percentage to be paid to the Banks
pursuant to Section 3.02(A)(g), of the funds used on or prior to the date
payments are due under Section 3.02(A)(g), for the applicable period to make
Designated Acquisitions (other than to the extent Acquisition Term Loans or the
$12,500,000 Revolving Loan basket is used).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exempt Sale and Lease-Back Transaction" means the sale for less
than $1,000,000 of approximately five acres of undeveloped real property at the
Oak Creek, Wisconsin facility and the leasing back of such real property and a
building to be constructed thereon.
"Existing Debt" means the Indebtedness of the Credit Parties set
forth on Schedule 5.21(a).
"Federal Funds Rate" means on any one day the weighted average of
the rate on overnight Federal funds Transaction with members of the Federal
Reserve System only arranged by Federal funds brokers as published as of such
day by the Federal Reserve Bank of New York, or if not so published, the rate
then used by first class banks in extending overnight loans to other first class
banks.
"Final A Term Loan Maturity Date" means the last Business Day of
March 2003.
"Final Acquisition Term Loan Maturity Date" means the last Business
Day of March 2005.
"Final B Term Loan Maturity Date" means the last Business Day of
March 2005.
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"Financing Proceeds" for any Person means the cash (other than Net
Cash Proceeds) received by such Person and/or any of its Subsidiaries, directly
or indirectly, from any financing transaction of whatever kind or nature,
including without limitation from any incurrence of Indebtedness, any mortgage
or pledge of an asset or interest therein (including a transaction which is the
substantial equivalent of a mortgage or pledge but excluding an Asset Sale),
from the sale of tax benefits, or from a lease to a third party and a pledge of
the lease payments due thereunder to secure Indebtedness. Proceeds from the
issuance and sale of the Public Notes and equity securities of Holdings in
connection with the Transaction (and refinancings of such equity securities with
the proceeds of a substantially concurrent sale of equity securities of
Holdings), from the Exempt Sale and Lease-Back Transaction, from the sale of
director's qualifying shares of any Subsidiary, from the sales of equity of the
Company's Subsidiaries and from transactions covered by Section 7.14 where
Holdings is permitted to keep the proceeds shall not be Financing Proceeds.
"Foreign Plan" shall mean any employee benefit plan, program,
policy, arrangement or agreement maintained or contributed to by, or entered
into with, a Credit Party with respect to employees employed outside the United
States.
"Foreign Subsidiary" of any specified Person means any Subsidiary
the jurisdiction of incorporation, organization or formation of which is outside
of the United States, Canada, the United Kingdom and South Africa.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, it being understood and agreed
that determinations in accordance with GAAP for purposes of Section 7, including
defined terms as used therein, are subject (to the extent provided therein) to
Section 11.07(a).
"Government Acts" shall have the meaning provided in Section
1.13(i).
"Governmental Authority" shall mean any federal, state, provincial,
local, foreign or other governmental or administrative body, instrumentality,
department or agency or any court, tribunal, administrative hearing body,
arbitration panel, commission, or other similar dispute-resolving panel or body.
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"Guarantees" means and includes, once executed and delivered, the
Holdings Guarantee, the Canadian Subsidiary Guarantees, the U.K. Subsidiary
Guarantee and the Subsidiary Guarantee, and any subsidiary guarantee delivered
pursuant to Section 6.17.
"Guarantors" for purposes of this Agreement means Holdings, each
Subsidiary of the Company delivering a Guarantee on the Closing Date and any
subsidiary that delivers a guarantee pursuant to Section 6.16, in each case
other than any Non-Guarantor Subsidiary of the Company.
"Hazardous Materials" means any pollutant, contaminant, chemical or
industrial, toxic or hazardous substance, constituent or waste, or any other
constituent, compound, waste, substance or material, including without
limitation, petroleum including crude oil or any fraction thereof, or any
petroleum product, subject to regulation under any Environmental Law.
"Hercules" means Hercules S.A. de C.V., a corporation under the laws
of the Republic of Mexico.
"Holdings Guarantee" means the guarantee executed by Holdings
substantially in the form of Exhibit E-1 hereto, except for such changes as
shall have been approved by the Agents, as the same may after its execution be
amended, supplemented or otherwise modified from time to time in accordance with
its terms and the terms hereof.
"Indebtedness" of any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services which in accordance with GAAP would be shown on the
liability side of the balance sheet of such Person, (iii) the face amount of all
letters of credit issued for the account of such Person and, without
duplication, all unreimbursed drafts drawn thereunder, (iv) all Indebtedness of
a second Person secured by any Lien on any property owned by such first Person,
whether or not such Indebtedness has been assumed by such first Person, (v) all
Capitalized Lease Obligations of such Person, (vi) all obligations of such
Person to pay a specified purchase price for goods or services whether or not
delivered or accepted, i.e., take-or-pay and similar obligations, (vii) all net
obligations of such Person under Interest Rate Agreements or Currency Protection
Agreements and (viii) all net Contingent Obligations of such Person; provided
that Indebtedness shall not include trade payables, liabilities arising from
advance payments or customer
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deposits for goods and services sold by the Company and its Subsidiaries in the
ordinary course of business, accrued expenses and liabilities, accrued
dividends, stock redemption payments, royalty payments, accrued retirees or
employees benefits, deferred taxes and accrued income taxes, in each case
arising in the ordinary course of business. For purposes of clause (iv) above
(where the relevant Indebtedness has not been assumed by such first Person), the
amount of Indebtedness is equal to the lesser of the amount of Indebtedness
secured or the fair market value of the property subject to the Lien.
"Indosuez" has the meaning provided in the first paragraph of this
Agreement.
"Initial Bank" means a Bank that was an original signatory to this
Agreement.
"Initial Loans" means the initial Loans made under this Agreement on
the Closing Date.
"Intellectual Property" has the meaning provided in Section 5.16.
"Intercompany Advances" means the incurrence of Indebtedness, the
purchase or acquisition of stock, obligations or securities of, or any other
interest in, or capital contributions between the Company and its respective
Subsidiaries (including the de minimis initial investment by which a Person
becomes a Subsidiary) or between Subsidiaries of the Company; provided that the
aggregate amount of Intercompany Advances made to a Foreign Subsidiary of the
Company which is a Non-Guarantor Subsidiary shall not exceed an amount at any
time outstanding equal to the amount of Intercompany Advances outstanding on the
Closing Date plus $15,000,000; and provided further that (i) trade receivables
arising in the ordinary course of business between the Company and its
Subsidiaries or between Subsidiaries or (ii) investments made in connection with
Designated Acquisitions, shall not be subject to the limitations set forth in
the preceding proviso.
"Intercreditor Agreement" means the Intercreditor Agreement among
Reliance Surety Company, Reliance Insurance Company, United Pacific Insurance
Company and Reliance National Indemnity Company, as sureties, and Canadian
Imperial Bank of Commerce, as Collateral Agent, as the same may be amended,
modified, renewed, replaced or restated from time to time with the consent of
the Collateral Agent and any such other intercreditor agreement entered into
with the Collateral Agent.
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"Interest Margin" shall mean, in respect of (i) Base Rate Loans that
are (a) A Term Loans, 0.75%, (b) B Term Loans, 1.25%, (c) Acquisition Term
Loans, 1.25% and (d) Revolving Loans, 0.75%; and (ii) Reserve Adjusted
Eurodollar Loans that are (a) A Term Loans, 2.25%, (b) B Term Loans, 2.75%, (c)
Acquisition Term Loans, 2.75% and (d) Revolving Loans, 2.25%. The Interest
Margin in respect of Swingline Loans shall be that margin agreed among the
Applicable Borrower, the applicable Swingline Bank and the Administrative Agent.
"Interest Period" means, with respect to any Reserve Adjusted
Eurodollar Loan, the interest period applicable thereto, as determined pursuant
to Section 1.09.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, interest rate
futures contract, interest rate option contract or other similar agreement or
arrangement to which the Borrower is a party, designed to protect the Borrower
or any of its Subsidiaries against fluctuations in interest rates.
"Interest Rate Determination Date" means each date for calculating
the Eurodollar Rate for purposes of determining the interest rate in respect of
an Interest Period. The Interest Rate Determination Date shall be the second
Business Day prior to the first day of the related Interest Period for a Reserve
Adjusted Eurodollar Loan.
"Inventory" means all of the inventory of the Company and its
Subsidiaries (on a consolidated basis) including without limitation: (i) all raw
materials, work in process, parts, components, assemblies, supplies and
materials used or consumed in the business of the Company and its Subsidiaries;
(ii) all goods, wares and merchandise, finished or unfinished, held for sale or
lease or leased or furnished or to be furnished under contracts of service; and
(iii) all goods returned or repossessed by the Company or any of its
Subsidiaries.
"Issuing Bank" means the Bank that agrees to issue a Letter of
Credit, determined as provided in Section 1.13(c).
"Joint Venture" of any specified Person means any corporation,
partnership, joint venture, limited liability company, association or other
business entity, whether now existing or hereafter organized or acquired, and
(a) which is engaged in a similar line of business as the Company at the date of
determination and (b)(i) in the case of a corporation, of
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which not more than 50% of the total voting power of the Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by the Company or any
Subsidiary, or (ii) in the case of a partnership, joint venture, limited
liability company, association or other business entity, with respect to which
the Company or any Subsidiary has not more than 50% of the ownership and voting
power relating to the policies, management and affairs thereof.
"Lease" means any lease, sublease, franchise agreement, license,
occupancy or concession agreement.
"Letter of Credit" or "Letters of Credit" means (i) Standby Letter
or Letters of Credit and (ii) Commercial Letter or Letters of Credit, in each
case, issued or to be issued by Issuing Banks for the account of the Applicable
Borrower pursuant to Section 1.13.
"Letter of Credit Participation" has the meaning assigned to
that term in Section 1.13(a).
"Letter of Credit Usage" means, as at any date of determination, the
sum of (i) the maximum aggregate amount that is or at any time thereafter may
become available under all Letters of Credit then outstanding; provided that (y)
there shall be excluded from this clause (i) undrawn Letters of Credit providing
credit support for bonds issued pursuant to the Surety Arrangement or other
Surety Obligations in an aggregate amount not to exceed $15 million and (z) this
proviso shall not increase the Revolving Loan Commitment of any Bank or the
Total Revolving Loan Commitment, plus (ii) the aggregate amount of all drawings
under Letters of Credit honored by all Issuing Banks and not theretofore
reimbursed by the Applicable Borrower.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien, claim, hypothecation, assignment for security, statutory deemed trust,
diligence or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement or any lease
in the nature thereof).
"Loan" means each and every Term Loan, Acquisition Term Loan,
Revolving Loan or Swingline Loan.
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"Loan Facility" means the credit facility evidenced by the Total
Term Loan Commitment, the Total Acquisition Term Loan Commitment and the Total
Revolving Loan Commitment.
"Management Stock" means common stock or equivalent interests of
Holdings or any parent entity of Holdings held by members of the board of
directors and management and employees of Holdings and the Company and its
Subsidiaries.
"Mandatory Borrowing" has the meaning set forth in Section 1.01(e).
"Material Adverse Effect" means (i) any materially adverse effect
(both before (excluding the effects of the Transaction) and after giving effect
to the Transaction and the financing thereof and the other transactions
contemplated hereby and by the other Documents) with respect to the operations,
business, properties, assets, nature of assets, liabilities (contingent or
otherwise), financial condition or prospects of the Company and its
Subsidiaries, taken as a whole, (ii) any fact or circumstance (whether or not
the result thereof would be covered by insurance) as to which singly or in the
aggregate there is a reasonable likelihood of (w) a materially adverse change
described in clause (i) with respect to the Company and its Subsidiaries, taken
as a whole, (x) the inability of any Credit Party to perform in any material
respect its Obligations hereunder or under any of the other Documents or the
inability of the Banks to enforce in any material respect their rights purported
to be granted hereunder or under any of the other Documents or the Obligations
(including realizing on the Collateral), or (y) a materially adverse effect on
the ability to effect (including hindering or unduly delaying) the Transaction
and the other transactions contemplated hereby and by the Credit Documents on
the terms contemplated hereby and thereby or (iii) any fact or circumstance
relating to any Credit Party as to which singly or in the aggregate there is a
reasonable likelihood of any significant liability on the part of the Banks or
the Administrative Agent.
"Maximum Swingline Amount" shall mean (x) with respect to U.S.
Swingline Loans, the Total U.S. Swingline Loan Commitment; (y) with respect to
Canadian Swingline Loans, the Total Canadian Swingline Loan Commitment and (z)
with respect to U.K. Swingline Loans, the Total U.K. Swingline Loan Commitment.
"Mexican Pledge Agreement" means the Stock Pledge Agreement executed
and delivered by the Company and PHMH Hold-
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ing Company substantially in the form of Exhibit H-2 hereto, except for such
changes as shall have been approved by the Agents, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with its
terms and the terms hereof.
"MHE Business" means (i) the original equipment business for
industrial cranes, hoists, winches, and other related types of industrial
"through-the-air" material handling equipment, (ii) aftermarket products, parts
and services for the products described in clause (i), including inspection,
repair, modernization and maintenance, and (iii) other service activities
conducted at or through distribution service center locations.
"MHE U.K." means Morris Material Handling, Ltd., a company organized
under the laws of England and Wales and a wholly-owned subsidiary of the
Company.
"Minimum Borrowing Amount" means $100,000.
"MLA Cost" means the cost imputed to a Bank making a Loan in Pounds
Sterling of compliance with the Mandatory Liquid Assets requirements of the Bank
of England during the Interest Period of that Loan determined in accordance with
Schedule 1.08(b).
"Mortgage" means a term loan and revolving credit mortgage or deed
of trust, assignment of rents, security agreement and fixture filing, debenture
creating and evidencing a Lien, legal charge or other document creating and
evidencing a Lien on each Mortgaged Real Property, which shall be substantially
in the form of Exhibit D hereto (or such other form for foreign jurisdictions,
as the Administrative Agent may approve), in each such case containing such
schedules and including such additional provisions and other deviations from
such Exhibit as shall be necessary to conform such document to applicable or
local law or as shall be customary under local law and made and which shall be
dated the date of delivery thereof and made by the owner of the Mortgaged Real
Property described therein for the benefit of the Collateral Agent, as
mortgagee, assignee and secured party, as the same may at any time be amended or
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof.
"Mortgaged Real Property" means each Real Property designated on
Schedule 4.01(u)(i) and all other Mortgaged Property under each Mortgage.
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"Multiemployer Plan" shall mean a multiemployer plan within the
meaning of Section 4001(a)(3) of ERISA (i) to which any ERISA Entity is then
making or accruing an obligation to make contributions (ii) to which any ERISA
Entity has within the preceding five plan years made contributions, including
for these purposes any Person which ceased to be an ERISA Entity during such
five year period, or (iii) with respect to which a Credit Party could incur
liability.
"Net Award" has the meaning assigned to that term in each Mortgage.
"Net Cash Proceeds" means the aggregate cash payments received by
the Company and/or any of its Subsidiaries, as the case may be, from any Asset
Sale (other than amounts due to minority shareholders of a Subsidiary of the
Company), net of all commissions, brokerage fees and other reasonably incurred
direct expenses of sale; provided that (i) with respect to taxes, expenses shall
only include taxes to the extent that taxes are payable in cash in the current
year or in the next succeeding year with respect to the current year as a result
of such Asset Sale; (ii) Net Cash Proceeds shall not include any amounts or
items included in the definition of Financing Proceeds or Net Financing Proceeds
(including in any proviso appearing therein or exclusion therefrom); and (iii)
Net Cash Proceeds shall not include appropriate amounts to be provided by the
Company or a Subsidiary as a reserve, in accordance with GAAP, against any
liabilities associated with the assets sold or disposed of in such Asset Sale
and retained by the Company or a Subsidiary after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with the assets sold or disposed of in such Asset Sale,
provided, however, that at such time as such amounts are no longer reserved or
such reserve is no longer necessary (but in no event longer than 18 months from
the receipt of such proceeds), any remaining amounts shall become Net Cash
Proceeds to be allocated in accordance with Section 3.02(A)(f).
"Net Financing Proceeds" means Financing Proceeds, net of all
commissions, brokerage fees and other reasonably incurred direct expenses of the
transaction and net of taxes (including income taxes) paid or payable in cash as
a result thereof in the current year or in the next succeeding year with respect
to the current year as a result of the transaction generating Net Financing
Proceeds.
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"Net Proceeds" has the meaning assigned to that term in each
Mortgage.
"Non-Acceptance Bank" means a Bank having a Canadian Swingline Loan
Commitment that is not a Canadian chartered bank.
"Non-Guarantor Subsidiary" means (a) any Foreign Subsidiaries of the
Company for so long as the issuance of a guarantee by such Foreign Subsidiary
would (i) result in a material increase in the aggregate amount of income tax in
respect of such Foreign Subsidiary or (ii) be illegal under the laws of the
jurisdiction in which such Foreign Subsidiary is organized, provided that, in
either case, the Company shall have delivered to the Administrative Agent an
Officers' Certificate and an opinion of counsel so stating on the date of such
acquisition or creation, (b) any Subsidiary of the Company existing on the
Closing Date and any other newly acquired or created Foreign Subsidiary after
the Closing Date which is not a One Percent Subsidiary, but only for so long as
it is not a One Percent Subsidiary, provided that the Company shall have
delivered to the Administrative Agent an Officers' Certificate to such effect on
the Closing Date, with respect to existing One Percent Subsidiaries, and on the
date of such acquisition or creation for newly acquired or created One Percent
Subsidiaries and (c) Hercules and its Subsidiaries, at such time as the Board of
Directors of the Company shall determine; provided that (i) all Intercompany
Advances to Hercules or its Subsidiaries made by the Company or any of its
Subsidiaries, in excess of amounts outstanding as of the Closing Date, shall be
deemed made as of such date of determination and (ii) the Company shall have
delivered to the Administrative Agent an Officers' Certificate to such effect on
the date of such determination. Notwithstanding the foregoing, no Subsidiary
shall be permitted to be a Non-Guarantor Subsidiary if any of its Subsidiaries
are Guarantors.
"Notes" means any Revolving Note, Swingline Note, Acquisition
Term Note, Term Note or BA Equivalent Note.
"Notice of Borrowing" has the meaning provided in Section 1.03.
"Notice of Continuance/Conversion" has the meaning provided in
Section 1.06.
"Obligations" means all amounts, direct or indirect, contingent or
absolute, of every type or description, and at any time existing, owing to the
Agents or any Bank pursuant to
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the terms of this Agreement or any other Credit Document or secured by any of
the Security Documents.
"Officers' Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its Chairman of the Board
(if an officer), Chief Executive Officer, Chief Operating Officer or its
President or one of its Vice Presidents and by its Chief Financial Officer or
its Treasurer or any Assistant Treasurer and, as to any entity that is not a
corporation, Persons holding comparable positions; provided that every Officers'
Certificate with respect to compliance with a condition precedent to the making
of any Loan hereunder shall include, on behalf of the Borrower, (i) a statement
that the officers making or giving such Officers' Certificate have read such
condition and any definitions or other provisions contained in this Agreement
relating thereto, (ii) a statement that, in the opinion of the signers, they
have made or have caused to be made such examination or investigation as is
necessary to enable them to express an informed opinion as to whether or not
such condition has been complied with, and (iii) a statement as to whether, in
the opinion of the signers, such condition has been complied with.
"Officers' Solvency Certificate" means the Officers' Solvency
Certificate in the form set forth as Exhibit N hereto.
"One Percent Subsidiary" means, at any date of determination, any
Subsidiary that, together with its Subsidiaries, (i) for the most recent fiscal
year of the Company accounted for more than 1.0% of the consolidated revenues of
the Company and the Subsidiaries or (ii) as of the end of such fiscal year owned
more than 1.0% of the Consolidated Tangible Assets of the Company and its
Subsidiaries, all as set forth on the consolidated financial statements of the
Company and its Subsidiaries for such year prepared in conformity with GAAP. For
purposes of this definition, any Subsidiary which, when aggregated with all
other Subsidiaries that are not otherwise One Percent Subsidiaries, would
constitute a One Percent Subsidiary shall be deemed to a be a One Percent
Subsidiary.
"Operating Lease" of any Person, shall mean any lease (including,
without limitation, leases which may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) by such Person as Lessee which is
not a Capital Lease.
"Overnight Rate" means for any day, the rate of interest per annum
at which overnight deposits in the Applicable
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Currency, in an amount approximately equal to the amount with respect to which
such rate is being determined, would be offered for such day by the
Administrative Agent's London Branch to major banks in the London or other
applicable offshore interbank market. The Overnight Rate for any day which is
not a Business Day shall be the Overnight Rate for the preceding Business Day.
"PBGC" shall mean the United States Pension Benefit Guaranty
Corporation or any successor thereto.
"Pension Plan" shall mean an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Code or Section 302 of
ERISA and is maintained or contributed to by an ERISA or with respect to which a
Credit Party could incur liability.
"Permitted Encumbrances" has the meaning provided in Section 7.03.
"Person" means any individual, partnership, limited liability
company, joint venture, firm, corporation, association, trust, fund or other
enterprise or any government or political subdivision or any agency, department
or instrumentality thereof.
"Pledge Agreements" means and includes the Canadian Pledge
Agreement, the U.K. Pledge Agreement, the Mexican Pledge Agreement and any
securities pledge agreements delivered pursuant to Section 6.14 or 6.15.
"Pledged Collateral" means all the Pledged Collateral as defined in
the Security Agreements.
"Pledged Securities" means all Pledged Securities under the U.S.
Security Agreement, the U.K. Security Agreement and the Canadian Pledge
Agreement.
"Portion" means the Term Portion, the Acquisition Term Portion or
the Revolving Portion.
"Pounds Sterling" means the lawful money of the United Kingdom.
"Preferred Stock" means the preferred stock comprising part of the
Preferred Units.
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"Preferred Units" means the Series A Preferred Units, the Series B
Preferred Units and the Series C Preferred Units.
"Prime Rate" means, on any day and with respect to all Prime Rate
Loans, the greater of:
(a) the variable rate of interest expressed as a percentage per annum
(calculated on the basis of a year of 365 days) which CIBC
establishes as the reference rate of interest in order to determine
interest rates it will charge on that day for demand loans in
Canadian Dollars to its Canadian customers and which it refers to as
its "prime lending rate" or "prime rate"; and
(b) 0.75% above CDOR for 30 day bankers' acceptance;
Changes in the rate of interest on that portion of any Loans
maintained as Prime Rate Loans will take effect simultaneously with each change
in the Prime Rate. The Administrative Agent shall give notice to each Canadian
Borrower and each Bank of the Prime Rate from time to time quoted by CIBC and
such notice shall be conclusive and binding for all purposes absent error.
"Prime Rate Loan" means a Canadian Swingline Loan that bears
interest based on the Prime Rate.
"Prior Liens" means Liens which, to the extent permitted by the
provisions of any Security Document, are or may be superior to the Lien of such
Security Document.
"Projected Financial Statements" has the meaning provided in Section
5.11(c).
"Public Notes" means the 9 1/2% Senior Notes due 2008 of the Company
in an aggregate principal amount of $200,000,000, which term shall include
unsecured guarantees by Subsidiaries of the Company and obligations owing under
the indenture governing such notes.
"Real Property" means all right, title and interest of any Credit
Party or its respective Subsidiaries (including, without limitation, any
leasehold estate) in and to a parcel of real property acquired by any Credit
Party together with, in each case, all improvements and appurtenant fixtures and
equipment, easements and other property and rights incidental to the ownership,
lease or operation thereof.
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"Recapitalization" has the meaning set forth in the WHEREAS clauses
hereto.
"Recapitalization Agreement" has the meaning set forth in the
preamble hereto.
"Reference Banks" means CIBC and Indosuez.
"Register" has the meaning provided in Section 11.04(b)(A) of this
Agreement.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.
"Regulation G" means Regulation G of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"Regulation T" means Regulation T of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"Replacement Assets" means (x) properties or assets (other than Cash
or Cash Equivalents or any capital stock or other security) that will be used in
a business of the Company and its Subsidiaries conducted on the date of
determination or in a business similar or reasonably related thereto or (y)
capital stock of any Person engaged in a business of the type referred to in
clause (x) that will become on the date of acquisition thereof a Guarantor as a
result of such acquisition.
"Required Banks" shall mean at any time one or more Banks holding at
least 51% of the Total Commitments held by
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Banks (or, if the Total Commitments shall have been terminated, Banks holding at
least 51% of the outstanding Loans); provided that for the purposes of Section
4, the requirement that any document, agreement, certificate or other writing is
to be satisfactory to the Required Banks shall be satisfied if (x) such
document, agreement, certificate or other writing was delivered in its final
form to the Banks prior to the Effective Date (or if amended or modified
thereafter, the Administrative Agent has reasonably determined such amendment or
modification not to be material), (y) such document, agreement, certificate or
other writing is satisfactory to the Administrative Agent and (z) Banks holding
more than 33-1/3% of the Total Commitments held by Banks have not objected in
writing to such document, agreement, certificate or other writing to the Agent
prior to the Closing Date.
"Required Revolving Banks" means at any time Banks holding at least
51% of the Total Revolving Loan Commitments held by Banks (or, if the Total
Revolving Loan Commitments shall have been terminated, Banks holding at least
51% of the outstanding Revolving Loans).
"Reserve Adjusted Eurodollar Loan" means each Loan bearing interest
based on the Eurodollar Rate or, with respect to Pounds Sterling Loans, the
Sterling Eurodollar Rate as provided in Section 1.08(b).
"Restoration" has the meaning assigned to that term in each
Mortgage.
"Revolving Facility Banks" means any Bank which has a Revolving Loan
Commitment.
"Revolving Loan Commitment" means, with respect to each Bank, the
amount set forth below such Bank's name on the signature pages hereto directly
across from the entry entitled "Revolving Loan Commitment," as such amount may
be reduced from time to time pursuant to Sections 2.01, 2.02, 3.02 and/or 8.
"Revolving Loan Commitment Termination Date" means the
Business Day immediately preceding the Revolving Maturity Date.
"Revolving Loans" has the meaning provided in Section 1.01(c).
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"Revolving Maturity Date" means the last Business day of March, 2003
or such earlier date on which all Revolving Loan Commitments have been
terminated.
"Revolving Note" has the meaning provided in Section 1.05(a).
"Revolving Portion" means, at any time, the Portion of the Loan
Facility evidenced by the Total Revolving Loan Commitments.
"Schedule I Bank" means, at any time, a Bank having a Canadian
Swingline Loan Commitment that is listed in Schedule I to the Bank Act (Canada)
at such time.
"Schedule II Bank" means, at any time, a Bank having a Canadian
Swingline Loan Commitment that is listed in Schedule II to the Bank Act (Canada)
at such time.
"Schedule II Reference Banks" means, if there is only one Schedule
II Bank, such Schedule II Bank and if there is more than one Schedule II Bank, a
reference group of up to three Schedule II Banks, the composition of which shall
be acceptable to the Administrative Agent and the Canadian Borrowers, all acting
reasonably.
"Scheduled A Term Loans Principal Payments" means, with respect to
the principal payments on the A Term Loans on the last Business Day of each
month set forth below, the U.S. dollar amount set forth opposite thereto:
Scheduled A Term Loan
Date Principal Payment
---- ---------------------
June 1998 $250,000
September 1998 250,000
December 1998 250,000
March 1999 250,000
June 1999 625,000
September 1999 625,000
December 1999 625,000
March 2000 625,000
June 2000 1,000,000
September 2000 1,000,000
December 2000 1,000,000
March 2001 1,000,000
June 2001 1,375,000
September 2001 1,375,000
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Scheduled A Term Loan
Date Principal Payment
---- ---------------------
December 2001 1,375,000
March 2002 1,375,000
June 2002 1,750,000
September 2002 1,750,000
December 2002 1,750,000
March 2003 1,750,000
"Scheduled Acquisition Term Loan Principal Payments" means, with
respect to the principal payments on the Acquisition Term Loan to be made on the
last Business Day of each calendar quarter specified in the table below, in each
case, for each such date, in the Dollar amount which is the product of (x) the
total outstanding principal amount of the Acquisition Term Loan as of the close
of business on the Acquisition Term Loan Commitment Termination Date (after
giving effect to any Borrowings of the Acquisition Term Loan on such date) and
(y) the percentage for the applicable assumed outstanding principal amount
specified opposite such date in such table:
Percentage to Obtain
Acquisition Term Loan
Period Principal Payment
------ ----------------------
Commencing with the calendar
quarter ending three months
following the Acquisition
Term Loan Termination Date
to and including March 31,
2003 0.25%
and with respect to the principal payments on the Acquisition Term
Loan to be made on the last Business Day of each calendar quarter specified in
the table below, in each case, for each such date, in the Dollar amount which is
the product of (x) the total outstanding principal amount of the Acquisition
Term Loan as of the close of business on April 1, 2003 and (y) the percentage
for the applicable assumed outstanding principal amount specified opposite such
date in such table:
Percentage to Obtain
Acquisition Term Loan
Period Principal Payment
------ ----------------------
Commencing June 30,
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2003 to and including
March 31, 2005 12.5%
"Scheduled B Term Loans Principal Payments" means with respect to
the principal payments on the B Term Loans on the last Business Day of each
month set forth below, the U.S. Dollar amount set forth opposite thereto:
Total B Term Loans
Date Principal Payments
---- ------------------
June 1998 $ 87,500
September 1998 87,500
December 1998 87,500
March 1999 87,500
June 1999 87,500
September 1999 87,500
December 1999 87,500
March 2000 87,500
June 2000 87,500
September 2000 87,500
December 2000 87,500
March 2001 87,500
June 2001 87,500
September 2001 87,500
December 2001 87,500
March 2002 87,500
June 2002 87,500
September 2002 87,500
December 2002 87,500
March 2003 87,500
June 2003 4,156,250
September 2003 4,156,250
December 2003 4,156,250
March 2004 4,156,250
June 2004 4,156,250
September 2004 4,156,250
December 2004 4,156,250
March 2005 4,156,250
"SEC" means the Securities and Exchange Commission or any successor
thereto.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreements" means and includes the U.S. Security
Agreement, the U.K. Security Agreements, the Canadian
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Security Agreements and any other security agreements delivered pursuant to
Section 6.14 or 6.15.
"Security Documents" means each of the Security Agreements, the
Mortgages, the Pledge Agreements, the Intercreditor Agreement and any other
documents utilized to grant a security interest as Collateral for the
Obligations in respect of any property or assets of whatever kind or nature.
"Series A Preferred Units" means the units consisting of the 12%
Series A Exchangeable Preferred Stock and Common Stock of Holdings.
"Series B Preferred Units" means the units consisting of the Series
B Junior Exchangeable Preferred Stock and Common Stock of Holdings.
"Series C Preferred Units" means the units consisting of the Series
C Junior Voting Exchangeable Voting Preferred Stock and Common Stock of
Holdings.
"Significant Subsidiary" has the meaning set forth in Rule 1-02 of
Regulation S-X under the Securities Act and Exchange Act.
"South African Subsidiary" means Morris Mechanical Handling (Pty)
Limited.
"Spot Rate" means with respect to any Applicable Currency, at any
date of determination thereof, the spot rate of exchange with respect to U.S.
Dollars for such date in London that appears on the display page applicable to
such Applicable Currency on the Telerate System Incorporated Service (or such
other page as may replace such page on such service for the purpose of
displaying the spot rate of exchange in London); provided, however, that if
there shall at any time no longer exist such a page or a relevant spot rate is
not shown on such service, the spot rate of exchange shall be determined by
reference to another similar rate publishing service selected by the
Administrative Agent and if no such similar rate publishing service is available
by reference to the published rate of the Administrative Agent in effect at such
date for similar commercial Transaction.
"Standby Letter of Credit" means any letter of credit other than a
Commercial Letter of Credit.
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"State, Local and Foreign Real Property Disclosure Requirements"
means any state or local laws requiring notification of the buyer of real
property, or notification, registration, or filing to or with any state or local
agency, prior to the sale of any real property or transfer of control of an
establishment, of the actual or threatened presence or release into the
environment, or the use, disposal, or handling of Hazardous Materials on, at,
under, or near the real property to be sold or the establishment for which
control is to be transferred.
"Sterling Eurodollar Rate" means (i) the rate per annum that appears
on page 3750 of the Dow Jones Telerate Screen (or any successor page) for Pounds
Sterling deposits with maturities comparable to the Interest Period applicable
to the U.K. Swingline Loans subject to the respective Borrowing as of 11:00 A.M.
(London time) on the date of Borrowing or, (ii) if such a rate does not appear
on page 3750 of the Dow Jones Telerate Screen (or any successor page), the
offered quotation to first-class banks in the London interbank Eurodollar market
by the U.K. Swingline Bank for Pounds Sterling deposits of amounts in
immediately available funds comparable to the outstanding principal amount of
the U.K. Swingline Loan of the U.K. Swingline Bank with maturities comparable to
the Interest Period applicable to such U.K. Swingline Loan as of 11:00 A.M.
(London time) on the date of Borrowing.
"Subsidiary" of any Person means and includes (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(excluding stock of any class or classes of such corporation that might have
voting power solely by reason of the happening of any contingency) is at the
time owned by such Person directly or indirectly through Subsidiaries and (ii)
any partnership, limited liability company, unlimited liability company,
association, joint venture or other entity in which such Person directly or
indirectly through Subsidiaries has more than a 50% equity interest at the time.
"Subsidiary Guarantee" means each subsidiary guarantee executed by
the U.S. subsidiaries of the Company, Hercules and, at the time and to the
extent provided in Section 6.20, the South African Subsidiary, substantially in
the form of Exhibit E-2 hereto, except for such changes as shall have been
approved by the Agents, as the same may after its execution be amended,
supplemented or otherwise modified from time to time in accordance with its
terms and the terms hereof.
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"Subsidiary Guarantor" means each Subsidiary of the Company which
delivers a Guarantee.
"Surety Arrangement" means one or more surety arrangements
providing, inter alia, for the issuance of Surety Obligations, between the
Company or its Subsidiaries and one or more providers, provided to the Company
or its Subsidiaries including, in each case, any related notes, guarantees,
collateral documents (including the Intercreditor Agreement), instruments and
agreements executed in connection therewith.
"Surety Obligations" means any bonds, including bid bonds, advance
bonds, or performance bonds, letters of credit, warranties, and similar
arrangements between the Company or its Subsidiaries and one or more surety
providers, for the benefit of the Company's or its Subsidiaries' suppliers,
vendors, insurers, or customers including, in each case, any related notes,
guarantees, collateral documents (including the Intercreditor Agreement),
instruments and agreements executed in connection therewith.
"Survey" means a survey of any Mortgaged Real Property (and all
improvements thereon): (i) prepared by a surveyor or engineer licensed to
perform surveys in the sate where such Mortgaged Real Property is located, (ii)
dated (or redated) not earlier than six months prior to the date of delivery
thereof unless there shall have occurred within six months prior to such date of
delivery any exterior construction on the site of such Mortgaged Real Property,
in which event such survey shall be dated (or redated) after the completion of
such construction or if such construction shall not have been completed as of
such date of delivery, not earlier than 20 days prior to such date of delivery,
(iii) certified by the surveyor (in a manner reasonably acceptable to the
Agents) to the Agents and the Title Company and (iv) complying in all respects
with the minimum detail requirements of the American Land Title Association as
such requirements are in effect on the date of preparation of such survey.
"Swingline Bank" means any U.S. Swingline Bank, U.K. Swingline
Bank or Canadian Swingline Bank.
"Swingline Expiry Date" means, with respect to each of the U.S.
Swingline Loans and the Canadian Swingline Loans, the date five Business Days
prior to the Revolving Maturity Date and, with respect to the U.K. Swingline
Loans, 364 days after the Closing Date; provided that the U.K. Swingline Bank
shall give the U.K. Borrower notice 90 days in advance of the
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then current Swingline Expiry Date of whether the U.K. Swingline Bank will enter
into a new agreement, substantially in the form of Annex III, with respect to
new U.K. Swingline Loans on the same terms and conditions as this Agreement for
a further period of 364 days (or such longer or shorter period as the U.K.
Borrower and the U.K. Swingline Bank may agree) but not to expire later than the
date five Business Days prior to the Revolving Maturity Date.
"Swingline Loan Commitment" means, with respect to each Bank, such
Bank's Canadian Swingline Loan Commitment, U.K. Swingline Loan Commitment or
U.S. Swingline Loan Commitment.
"Swingline Loans" has the meaning set forth in Section 1.01(d).
"Swingline Notes" means the U.S. Swingline Notes, the U.K. Swingline
Notes and the U.S. Swingline Notes.
"Taking" has the meaning assigned to that term in each Mortgage.
"Tax Allocation Agreement" means the Tax Sharing Agreement among MHE
Investments, Holdings and certain of Holdings' Subsidiaries dated March 30,
1998, as in effect on the Closing Date.
"Taxes" has the meaning provided in Section 3.04.
"Term Loans" has the meaning provided in Section 1.01(a).
"Term Note" means an A Term Note or B Term Note.
"Term Portion" means, at any time, the portion of the Loan Facility
evidenced by the Total Term Loan Commitment.
"Test Period" means the four consecutive complete fiscal quarters of
the Company or its predecessors then last ended.
"Title Company" means First American Title Insurance Company or such
other title insurance or abstract company as shall be designated by the Agent.
"Total A Term Loan Commitment" means the sum of the A Term Loan
Commitments of each of the Banks.
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"Total Acquisition Term Loan Commitment" means the sum of the
Acquisition Term Loan Commitments of each of the Banks.
"Total B Term Loan Commitment" means the sum of the B Term Loan
Commitments of each of the Banks.
"Total Canadian Swingline Loan Commitment" means the sum of the
Canadian Swingline Loan Commitments of each Bank.
"Total Commitment" means the sum of the Total Term Loan Commitments,
the Total Acquisition Term Loan Commitment and the Total Revolving Loan
Commitments.
"Total Revolving Loan Commitment" means the sum of the Revolving
Loan Commitments of each of the Banks.
"Total Term Loan Commitment" means the sum of the A Term Loan
Commitments and B Term Loan Commitments of each of the Banks.
"Total U.K. Swingline Loan Commitment" means the sum of the U.K.
Swingline Loan Commitments of each Bank.
"Total U.S. Swingline Loan Commitment" means the sum of the U.S.
Swingline Loan Commitments of each of the Banks.
"Transaction" means the transactions contemplated by the Transaction
Documents.
"Transaction Documents" means the Recapitalization Agreement, the
documents related to the issuance and sale of the Public Notes, the documents
related to the issuance and sale of the Preferred Units and all exhibits
thereto.
"Type" means (i) a Base Rate Loan or Reserve Adjusted Eurodollar
Loan with respect to Loans which are Loans denominated in Dollars, (ii) a U.K.
Base Rate Loan or Reserve Adjusted Eurodollar Loan with respect to Loans which
are denominated in Pounds Sterling and (iii) a Prime Rate Loan or Acceptance
with respect to Loans which are denominated in Canadian Dollars.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York.
"U.K. Base Rate" means the rate which the U.K. Swingline Bank
announces from time to time as its prime lending
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rate, as in effect from time to time. The rate the U.K. Swingline Bank announces
as its prime lending rate is a reference rate and does not necessarily represent
the lowest or best rate actually charged to any customer. The U.K. Swingline
Bank may make commercial loans or other loans at rates of interest at, above or
below the rate it announces as its prime lending rate.
"U.K. Base Rate Loan" means each U.K. Swingline Loan bearing
interest at the rate provided in Section 1.08(a). U.K. Base Rate Loans may only
be made in Pounds Sterling.
"U.K. Borrower" means Morris Material Handling, Ltd., a company
organized under the laws of England and Wales, and its successors.
"U.K. Pledge Agreement" means each Deed of Pledge executed and
delivered by each applicable UK Subsidiary that is a Guarantor substantially in
the form of Exhibit H-3 hereto, except for such changes as shall have been
approved by the Agents, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms and the terms hereof.
"U.K. Security Agreement" means each Security Document and Guarantee
or Instrument of Charge and Guarantee executed and delivered by each applicable
UK Subsidiary that is a Guarantor substantially in the form of Exhibit G-1 or
Exhibit G-3 hereto, except for such changes as shall have been approved by the
Agents, as the same may be amended, supplemented or otherwise modified from time
to time in accordance with its terms and the terms hereof.
"U.K. Subsidiary Guarantees" means the guarantees contained in each
U.K. Security Agreement.
"U.K. Swingline Bank" means any Bank with a U.K. Swingline Loan
Commitment.
"U.K. Swingline Loan" means any Swingline Loan by a U.K. Swingline
Bank to a U.K. Borrower.
"U.K. Swingline Loan Commitment" means, with respect to each Bank,
the amount set forth below such Bank's name on the signature pages hereto
directly across from the entry entitled "U.K. Swingline Loan Commitment," as
such amount may be reduced from time to time pursuant to Sections 2.01, 2.02,
3.02 and/or 8.
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"U.K. Swingline Note" has the meaning provided in Section 1.05(a).
"Unutilized Commitment" for any Bank at any time means, on and after
the Closing Date, the unutilized Revolving Loan Commitment of such Bank, after
taking into effect the Letter of Credit Usage, plus, for purposes of Section
2.03 only, an amount not covered by Letter of Credit Usage representing the
amount of undrawn Letters of Credit excluded by the proviso in the definition
thereof, and the unutilized Acquisition Term Loan Commitment of such Bank.
"U.S. Borrowers" means the Company and Material Handling.
"U.S. Dollar" or "U.S. $" each mean lawful money of the United
States.
"U.S. Security Agreement" means the Security Agreement executed and
delivered by Holdings, the U.S. Borrowers and each U.S. Subsidiary substantially
in the form of Exhibit F-1 hereto, except for such changes as shall have been
approved by the Agents, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms and the terms hereof.
"U.S. Swingline Bank" means any Bank with a U.S. Swingline Loan
Commitment.
"U.S. Swingline Loan" means any Swingline Loan by a U.S. Swingline
Bank to any U.S. Borrower.
"U.S. Swingline Loan Commitment" means, with respect to each Bank,
the amount set forth below such Bank's name on the signature pages hereto
directly across from the entry entitled "U.S. Swingline Loan Commitment," as
such amount may be reduced from time to time pursuant to Sections 2.01, 2.02,
3.02 and/or 8.
"U.S. Swingline Note" has the meaning provided in Section 1.05(a).
"Vested Options" means exercisable options to purchase common stock
or equivalent interests of Holdings or any parent entity of Holdings granted to
any member of the board of directors or management or employee of Holdings
pursuant to a stock option plan or any similar plan approved by its Board of
Directors.
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"Voting Stock" of any Person means the capital stock or equivalent
interests of such person which ordinarily has voting power for the election of
directors (or persons performing similar functions) of such Person, whether at
all times or only so long as no senior class of securities has such voting power
by reason of any contingency.
"Wholly-Owned Subsidiary" of any Person means any Subsidiary of such
Person to the extent all of the capital stock or other ownership interests in
such Subsidiary, other than directors' or nominees' qualifying shares, are owned
directly or indirectly by such Person.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part 1 of Subtitle E of Title IV of ERISA.
"Written" or "in writing" means any form of written communication or
a communication by means of telex, telecopier device, telegraph or cable.
SECTION 10. The Agents.
10.01. Appointment. Each Bank hereby irrevocably designates and
appoints CIBC as Administrative Agent (such term to include the Administrative
Agent acting as Collateral Agent or in any other representative capacity under
any other Credit Document), Indosuez as Syndication Agent and BankBoston, N.A.
as Documentation Agent, of such Bank to act as specified herein and in the other
Credit Documents and each such Bank hereby irrevocably authorizes the Agents to
take such action on its behalf under the provisions of this Agreement and the
other Credit Documents and to exercise such powers and perform such duties as
are expressly delegated to the Agents by the terms of this Agreement and the
other Credit Documents, together with such other powers as are reasonably
incidental thereto. The Agents agree to act as such upon the express conditions
contained in this Section 10. Notwithstanding any provision to the contrary
elsewhere in this Agreement, the Agents shall not have any duties or
responsibilities, except those expressly set forth herein or in the other Credit
Documents, or any fiduciary relationship with any Bank, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or otherwise exist against the Agents. The
provisions of this Section 10 are solely for the benefit of the Agents and the
Banks, and no Credit Party shall have any rights as a third party beneficiary of
any of
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the provisions hereof. In performing its functions and duties under this
Agreement, the Agents shall act solely as agent of the Banks and do not assume
and shall not be deemed to have assumed any obligation or relationship of agency
or trust with or for any Credit Party. The Borrowers, jointly and severally,
hereby agree to pay the Administrative Agent an annual agency fee as previously
agreed with the Administrative Agent.
10.02. Delegation of Duties. The Agents may execute any of their
respective duties under this Agreement or any other Credit Document by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. No Agent shall be responsible
for the negligence or misconduct of any agents or attorneys- in-fact selected by
it with reasonable care except to the extent otherwise required by Section
10.03.
10.03. Exculpatory Provisions. None of the Agents nor any of their
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement (except
for its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Banks for any recitals, statements,
representations or warranties by the Company, any Subsidiary of the Company or
any of their respective officers contained in this Agreement, any other Document
or in any certificate, report, statement or other document referred to or
provided for in, or received by such Agent under or in connection with, this
Agreement or any other Document or for any failure of the Company or any
Subsidiary of the Company or any of their respective officers to perform its
obligations hereunder or thereunder. No Agent shall be under any obligation to
any Bank to ascertain or to inquire as to the observance or performance of any
of the agreements contained in, or conditions of, this Agreement, or to inspect
the properties, books or records of the Company or any Subsidiary of the
Company. No Agent shall be responsible to any Bank for the effectiveness,
genuineness, validity, enforceability, collectibility or sufficiency of this
Agreement or any Credit Document or for any representations, warranties,
recitals or statements made herein or therein or made in any written or oral
statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith
furnished or made by such Agent to the Banks or by or on behalf of any Borrower
to such Agent or any Bank or be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or
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agreements contained herein or therein or as to the use of the proceeds of the
Loans or of the existence or possible existence of any Default or Event of
Default.
10.04. Reliance by the Agents. Each Agent shall be entitled to rely,
and shall be fully protected in relying, upon any note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Credit Parties), independent accountants and
other experts selected by such Agent. Each Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Credit
Document unless it shall first receive such advice or concurrence of the
Required Banks as it deems appropriate or it shall first be indemnified to its
satisfaction by the Banks against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action. Each
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the other Credit Documents in accordance with a
request of the Required Banks (or to the extent specifically provided in Section
11.12, all the Banks), and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Banks.
10.05. Notice of Default. No Agent shall be deemed to have knowledge
of the occurrence of any Default or Event of Default unless it has received
notice in writing from a Bank or Holdings or any Credit Party referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Administrative Agent
receives such a notice, the Administrative Agent shall give prompt notice
thereof to the Banks. The Administrative Agent shall take such action with
respect to such Default or Event of Default as shall be reasonably directed by
the Required Banks; provided that, unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Banks (except to the extent that this Agreement expressly
requires that such action be taken, or not be taken, only with the consent of
the Required Banks as required hereunder).
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10.06. Non-Reliance on Agents and Other Banks. Each Bank expressly
acknowledges that neither of the Agents nor any of their respective officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by any Agent hereinafter
taken, including any review of the affairs of Holdings or any Subsidiary of
Holdings, shall be deemed to constitute any representation or warranty by such
Agent to any Bank. Each Bank represents to each Agent that it has, independently
and without reliance upon such Agent or any other Bank, and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, assets, operations, property, financial
and other conditions, prospects and creditworthiness of Holdings and its
Subsidiaries and made its own decision to make its Loans hereunder and enter
into this Agreement and the other agreements contemplated hereby. Each Bank also
represents that it will, independently and without reliance upon any Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement, and to make
such investigation as it deems necessary to inform itself as to the business,
assets, operations, property, financial and other conditions, prospects and
creditworthiness of Holdings and its Subsidiaries. Except for notices, reports
and other documents expressly required to be furnished to the Banks by the
Administrative Agent hereunder, no Agent shall have any duty or responsibility
to provide any Bank with any credit or other information concerning the
business, operations, assets, property, financial and other conditions,
prospects or creditworthiness of Holdings or any of its Subsidiaries which may
come into the possession of such Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates. None of the Agents nor any
Bank shall be deemed to be a fiduciary or have any fiduciary duty to any other
Bank, Holdings or Credit Party.
10.07. Indemnification. The Banks agree to indemnify each Agent in
its capacity as such or in any other representative capacity under any other
Credit Document ratably according to their aggregate Commitments, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, reasonable expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Obligations) be imposed on, incurred by or
asserted against such Agent in its capacity as such in any way relating to or
arising out of this Agreement or any other Credit Docu-
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ment, or any documents contemplated by or referred to herein or the Transaction
contemplated hereby or any action taken or omitted to be taken by such Agent
under or in connection with any of the foregoing, but only to the extent that
any of the foregoing is not paid by Holdings or any of its Subsidiaries;
provided that no Bank shall be liable to any Agent for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements to the extent resulting from
such Agent's gross negligence or willful misconduct. If any indemnity furnished
to any Agent for any purpose shall, in the opinion of such Agent, be
insufficient or become impaired, such Agent may call for additional indemnity
and cease, or not commence, to do the acts indemnified against until such
additional indemnity is furnished. The agreements in this Section 10.07 shall
survive the payment of all Obligations.
10.08. The Agents in Its Individual Capacity. The Agents and their
respective Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with Holdings, its Subsidiaries and other
Affiliates of Holdings as though such Agent were not an Agent hereunder. With
respect to the Loans made by it and all Obligations owing to it, each Agent
shall have the same rights and powers under this Agreement as any Bank and may
exercise the same as though it were not an Agent, and the terms "Bank" and
"Banks" shall include each Agent in its individual capacity.
10.09. Successor Administrative Agent. Upon the acceptance of any
appointment as Administrative Agent and Collateral Agent hereunder by a
successor Agent, the term "Administrative Agent" shall include such successor
administrative agent effective upon its appointment, and the resigning
Administrative Agent's rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Agent or any of the parties to this Agreement. After the retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this Section 10 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Administrative Agent under this
Agreement.
10.10. Resignation by Administrative Agent. (a) The Administrative
Agent may resign from the performance of all its functions and duties hereunder
at any time by giving 15 Business Days' prior written notice to the Borrowers
and the Banks. Such resignation shall take effect upon the acceptance
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by a successor Administrative Agent of appointment pursuant to subsections
(b)and (c) below or as otherwise provided below.
(b) Upon any such notice of resignation of the Administrative Agent,
the Required Banks shall appoint a successor Administrative Agent acceptable to
the Company and which shall be an incorporated bank or trust company or other
qualified financial institution with operations in the United States and Canada
and total assets of at least $1 billion.
(c) If a successor Administrative Agent shall not have been so
appointed within said 15 Business Day period, the resigning Administrative Agent
with the consent of the Company shall then appoint a successor Administrative
Agent (which shall be an incorporated bank or trust company or other qualified
financial institution with operations in the United States and Canada and total
assets of at least $1 billion) who shall serve as Administrative Agent until
such time, if any, as the Required Banks appoint a successor Administrative
Agent as provided above.
(d) If no successor Administrative Agent has been appointed pursuant
to subsection (b) or (c) by the 20th Business Day after the date such notice of
resignation was given by the resigning Administrative Agent, such Administrative
Agent's resignation shall become effective and the Required Banks shall
thereafter perform all the duties of Administrative Agent hereunder until such
time, if any, as the Required Banks with the consent of Borrower appoint a
successor Administrative Agent as provided above.
10.11. Syndication Agent and Documentation Agent. Notwithstanding
anything to the contrary in this Agreement, the Syndication Agent and
Documentation Agent, in such capacities, shall have no obligations, duties or
responsibilities, and shall incur no liabilities, under this Agreement or any
other Document.
SECTION 11. Miscellaneous.
11.01. Payment of Expenses, etc. The Borrowers agree to: (i) whether
or not the Transaction herein contemplated are consummated, pay all
out-of-pocket costs and expenses (x) of the Agents in connection with the
negotiation, preparation, execution and delivery of the Credit Documents and the
documents and instruments referred to therein and any amendment, waiver or
consent relating thereto (including, without limitation, the reasonable fees and
disbursements of Cahill
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Gordon & Reindel and local counsel to the Banks) with prior notice to the
Borrowers of the engagement of any counsel and (y) of each of the Banks in
connection with the enforcement of the Credit Documents (including in connection
with any "work-out" or other restructuring of the Borrowers' Obligations or in
connection with any bankruptcy, reorganization or similar proceeding with
respect to any Credit Party or its Subsidiaries) and the documents and
instruments referred to therein (including, without limitation, the reasonable
fees and disbursements of counsel for each of the Banks) with prior notice to
the Borrowers of the engagement of any counsel and the reasonable fees and
expenses of any appraisers or any consultants or other advisors engaged with
prior notice to the Borrowers of any such engagement with respect to
environmental or other matters; (ii) pay all out-of-pocket costs and expenses
(including reasonable attorneys' fees) of the Agents or in connection with the
assignment or attempted assignment to any other Person of all or any portion of
the Agents' interest under this Agreement pursuant to Section 11.04 incurred
prior to 120 days following the Closing Date; (iii) pay and hold each of the
Banks harmless from and against any and all present and future stamp and other
similar taxes with respect to the foregoing matters and save each of the Banks
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to such Bank)
to pay such taxes; and (iv) indemnify each Bank, its officers, directors,
employees, representatives and agents from and hold each of them harmless
against any and all losses, liabilities, claims, damages or expenses (including,
without limitation, any and all losses, liabilities, claims, damages or expenses
arising under Environmental Laws) incurred by any of them as a result of, or
arising out of, or in any way related to the entering into and/or performance of
any Document or the use of the proceeds of any Loans hereunder or the
Transaction or the consummation of any other transaction contemplated in any
Credit Document, including, without limitation, the documented reasonable fees
and disbursements of counsel incurred by any of them (but excluding any such
losses, liabilities, claims, damages or expenses to the extent incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified).
11.02. Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence and during the continuance of an Event of
Default, each Bank is hereby authorized at any time or from time to time,
without presentment, demand, protest or other notice of any kind to any Credit
Party or to any other Person, any such no-
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tice being hereby expressly waived, to set off and to appropriate and apply any
and all deposits (general or special) and any other Indebtedness at any time
held or owing by such Bank (including, without limitation, by branches and
agencies of such Bank wherever located) to or for the credit or the account of
any Credit Party against and on account of the Obligations and liabilities of
such Credit Party to such Bank under this Agreement or under any of the other
Credit Documents, including, without limitation, all interests in Obligations of
such Credit Party purchased by such Bank pursuant to Section 11.06(b), and all
other claims of any nature or description arising out of or connected with this
Agreement or any other Credit Document, irrespective of whether or not such Bank
shall have made any demand hereunder and although said Obligations, liabilities
or claims, or any of them, shall be contingent or unmatured.
11.03. Notices. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(which may include telecopier communication) and couriered for delivery of the
next Business Day, and shall be sent, if to Holdings or any Credit Party, to:
Morris Material Handling, Inc.
315 West Forest Hill Avenue
Oak Creek, Wisconsin 53154
Telecopy No. 414-764-8596
Attention: Vice President - Finance
with copies to:
Morris Material Handling, Inc.
315 West Forest Hill Avenue
Oak Creek, Wisconsin 53154
Telecopy No. 414-764-8594
Attention: General Counsel
and
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Telecopy No. 202-887-4288
Attention: Russell W. Parks, Jr.
if to any Bank, at its address specified for such Bank on Annex II
hereto; or, at such other address as shall be
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designated by any party in a written notice to the other parties hereto. All
such notices and communications shall, when telecopied or sent by overnight
courier, be effective when sent by telecopier or delivered to the overnight
courier, as the case may be, except that notices and communications to the
Administrative Agent shall not be effective until received by the Administrative
Agent.
11.04. Benefit of Agreement. (a) This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto, all
future holders of the Notes, and their respective successors and assigns;
provided that no Credit Party may assign or transfer any of its interests
hereunder without the prior written consent of all of the Banks in their sole
discretion; and provided, further, that the rights of each Bank to transfer,
assign or grant participations in its rights and/or obligations hereunder shall
be limited as set forth below in this Section 11.04; provided that nothing in
this Section 11.04 shall prevent or prohibit any Bank, without the consent of
the Administrative Agent or the Company, from (i) pledging its Loans hereunder
to a Federal Reserve Bank in support of borrowings made by such Bank from such
Federal Reserve Bank or, with respect to any bank that is a fund that invests in
bank loans, pledging all or any portion of its interests, rights and obligations
under this Agreement (including all or a portion of the Loans owing to it) to
any trustee or any other representative of holders of obligations owed or
securities issued by such fund as security for such obligations or securities,
and (ii) subject to Section 11.04(b)(B), granting participations in or
assignments of all or a portion of such Bank's Loans, Notes and/or Commitments
hereunder (y) to its parent company and/or to any Affiliate of such Bank that is
at least 50% owned by such Bank or its parent company or to an Approved Fund of
any Bank (z) to an entity managed by a Person referred to in Section
11.04(a)(ii)(y).
(b) Each Bank shall have the right to transfer, assign or grant
participations in all or any part of its remaining Loans, Notes and/or
Commitments hereunder on the basis set forth below in this clause (b). Each Bank
may furnish any information concerning the Borrower in the possession of such
Bank from time to time to assignees and participants (including prospective
assignees and participants).
(A) Assignments. Each Bank, with the written consent of the
Administrative Agent and the Company, which consent shall not be
unreasonably withheld or delayed, which shall be evidenced on the notice
in the form of Ex-
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hibit I-1 hereto, may assign pursuant to an Assignment and Assumption
Agreement substantially in the form of Exhibit I-2 hereto all or a portion
of its Loans, Notes and/or Commitments hereunder pursuant to this clause
(b)(A) to (x) one or more Banks or (y) one or more commercial banks, funds
or other financial or lending institutions; provided that any such
assignment pursuant to this clause (y) shall be in an amount equal to at
least $5,000,000 or such Bank's remaining Loans, Notes or Commitments. Any
assignment pursuant to this clause (b)(A) will become effective no later
than five Business Days after the Agent's receipt of (i) a written notice
in the form of Exhibit I-1 hereto from the assigning Bank and the assignee
Bank and (ii) a processing and recordation fee of $3,500 from the
assigning Bank in connection with the Agent's recording of such sale,
assignment, transfer or negotiation; provided that such fee shall only be
payable if the assignment is between a Bank and a party that is not a
Bank, a Bank's parent or its Affiliate prior to the assignment. The
Borrowers shall issue new Notes to the assignee in conformity with Section
1.05 and the assignor shall return the old Notes to the Borrowers. Upon
the effectiveness of any assignment in accordance with this clause (b)(A),
the assignee will become a "Bank" for all purposes of this Agreement and
the other Credit Documents and, to the extent of such assignment, the
assigning Bank shall be relieved of its obligations hereunder with respect
to the Loans, Notes or Commitments being assigned. The Administrative
Agent shall maintain at its address specified in Annex II hereto a copy of
each Assignment Agreement delivered to and accepted by it and a register
in which it shall record the names and addresses of the Banks and the
Commitment of, and principal amount of the Loans owing to, each Bank from
time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent demonstrable error, and
the Borrower, the Administrative Agent and the Banks may treat each Person
whose name is recorded in the Register as a Bank hereunder for all
purposes of this Agreement. The Register shall be available for inspection
by the Borrower, the Administrative Agent or any Bank at any reasonable
time and from time to time upon reasonable prior notice.
(B) Participations. Each Bank may transfer, grant or assign
participations in all or any part of such Bank's Loans, Notes and/or
Commitments hereunder pursuant to this clause (b)(B) to any Person;
provided that (i) such Bank
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shall remain a "Bank" for all purposes of this Agreement and the
transferee of such participation shall not constitute a Bank hereunder and
(ii) no participant under any such participation shall have rights to
approve any amendment to or waiver of this Agreement or any other Credit
Document except to the extent such amendment or waiver would (x) extend
the scheduled final maturity date of any of the Loans, Notes or
Commitments in which such participant is participating or (y) reduce the
principal amount, interest rate or fees applicable to any of the Loans,
Notes or Commitments in which such participant is participating or
postpone the payment of any interest or fees or (z) release all or
substantially all of the Collateral (except as expressly permitted by the
Credit Documents). In the case of any such participation, the participant
shall not have any rights under this Agreement or any of the other Credit
Documents (the participant's rights against the granting Bank in respect
of such participation to be those set forth in the agreement with such
Bank creating such participation) and all amounts payable by the Borrower
hereunder shall be determined as if such Bank had not sold such
participation; provided that such participant shall be considered to be a
"Bank" for purposes of Sections 11.02 and 11.06(b).
(C) Canadian Borrower. Notwithstanding anything else contained in
this Agreement including Section 3.04, neither Canadian Borrower will be
responsible for withholding tax resulting from interest payments on the
Canadian Swingline Loan made by it to a Bank that is a non-resident of
Canada.
11.05. No Waiver; Remedies Cumulative. No failure or delay on the
part of the Administrative Agent or any Bank in exercising any right, power or
privilege hereunder or under any other Credit Document and no course of dealing
between any Credit Party and the Administrative Agent or any Bank shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power, or privilege hereunder or under any other Credit Document preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege hereunder or thereunder. The rights and remedies herein expressly
provided are cumulative and not exclusive of any rights or remedies which the
Agents or any Bank would otherwise have. No notice to or demand on any Credit
Party in any case shall entitle any Credit Party to any other or further notice
or demand in similar or other circumstances or constitute a waiver
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of the rights of the Agents or the Banks to any other or further action in any
circumstances without notice or demand.
11.06. Payments Pro Rata. (a) The Administrative Agent agrees that
promptly after its receipt of each payment from or on behalf of Holdings or any
Credit Party in respect of any Obligations of Holdings or such Credit Party, it
shall distribute such payment to the Banks pro rata based upon their respective
shares, if any, of the Obligations with respect to which such payment was
received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans, of a sum which with respect to any related sum or sums that are
received by other Banks is proportionately greater as measured (immediately
prior to receipt of all related amounts) relative to the total of such
Obligations then owed and due to such Bank to the total of such Obligations then
owed and due to all of the Banks, then such Bank receiving such excess amount
shall promptly purchase for cash without recourse or warranty from the other
Banks an interest in the Obligations of the respective Credit Party to such
Banks in such amount as shall result in a proportional participation by all of
the Banks in such excess amount pro rata in accordance with their respective
shares of the Obligations with respect to which such amount was received;
provided that if all or any portion of such excess amount is thereafter
recovered from such Bank, such purchase shall be rescinded and the purchase
price restored to the extent of such recovery, but without interest.
11.07. Calculations; Computations. (a) The financial statements to
be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by Borrower to the Banks); provided that, except as otherwise specifically
provided herein, all computations determining compliance with Section 7 and all
definitions used herein for any purpose shall utilize accounting principles and
policies in effect at the Closing Date.
(b) All computations of interest and fees hereunder shall be made on
the actual number of days elapsed over a year of 365 days; provided, however,
that all computations of inter-
<PAGE>
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est on Reserve Adjusted Eurodollar Loans that are Dollar Loans, Letter of Credit
commissions and Commitment Commission shall be made on the actual number of days
elapsed over a year of 360 days.
11.08. Governing Law; Submission to Jurisdiction; Venue. (a) This
Agreement and the rights and obligations of the parties hereunder shall be
construed and enforced in accordance with and be governed by the laws of the
State of New York applicable to contracts made and to be performed wholly
therein. Any legal action or proceeding with respect to this Agreement or any
other Credit Document may be brought in the courts of the State of New York or
of the United States for the Southern District of New York, and, by execution
and delivery of this Agreement, Holdings and each Borrower hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts. Each
Credit Party and its respective Subsidiaries further irrevocably consents to the
service of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to Lexis Document Services, Inc., 150 East 58th Street, 25th
Floor, New York, New York 10155, its agent for service of process, such service
to become effective 30 days after such mailing. Holdings and each Borrower and
its respective Subsidiaries hereby irrevocably appoints Lexis Document Services,
Inc., 150 East 58th Street, 25th Floor, New York, New York 10155, to serve as
its agent for service of process in respect of any such action or proceeding.
Nothing herein shall affect the right of the Administrative Agent or any Bank to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against Holdings or any Credit Party or its
respective Subsidiaries in any other jurisdiction.
(b) Holdings and each Borrower hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out of or in connection with this
Agreement or any other Credit Document brought in the courts referred to in
clause (a) above and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum.
11.09. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed
<PAGE>
-186-
and delivered shall be an original, but all of which shall together constitute
one and the same instrument. A set of counterparts executed by all the parties
hereto shall be lodged with the Borrowers and the Administrative Agent.
11.10. Effectiveness. This Agreement shall become effective on the
date (the "Effective Date") and at the time (the "Effective Time") on which
Holdings, the Borrowers and each of the Banks shall have signed a copy hereof
(whether the same or different copies) and shall have delivered the same to the
Administrative Agent at the Administrative Agent's Office or, in the case of the
Banks, shall have given to the Administrative Agent telephonic (confirmed in
writing), written, telex or telecopy notice (actually received) at such office
that the same has been signed and mailed to it. The Administrative Agent will
give Holdings, the Borrowers and each Bank prompt written notice of the
occurrence of the Effective Date.
11.11. Headings Descriptive. The headings of the several sections
and subsections of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
11.12. Amendment or Waiver. Neither this Agreement nor any other
Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated (other than pursuant to the terms hereof) unless such
change, waiver, discharge or termination is in writing signed by the Required
Banks; provided that no such change, waiver, discharge or termination shall,
without the consent of each affected Bank and the Agent, (i) extend the
scheduled final maturity date of any Loan, or any portion thereof, or reduce the
rate or extend the time of payment of interest thereon or fees or reduce the
principal amount thereof, or increase the Commitments of any Bank or the Total
Commitments, in each case over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default shall not constitute
a change in the terms of any Commitment of any Bank), (ii) release all or
substantially all of the Collateral or Guarantees (except as expressly permitted
by the Credit Documents), (iii) amend, modify or waive any provision of Section
1.10, 1.11, 3.04, 8.01, 8.05, 10.07, 11.01, 11.02, 11.04, 11.06, 11.07(b) or
11.12, (iv) reduce any percentage specified in, or otherwise modify, the
definition of Required Banks, (v) modify the definition of Scheduled A Term
Loans Principal Payments, Scheduled B Term Loans Principal Payments or Scheduled
Acquisition Term Loan Principal Payments (or otherwise modify the date upon
which any scheduled amortization payment is due) or (vi) consent to the
<PAGE>
-187-
assignment or transfer by any Credit Party of any of its rights and obligations
under this Agreement. No provision of Section 10 may be amended without the
consent of the Administrative Agent and no provision of Section 10.11 may be
amended without the written consent of the Syndication Agent and the
Documentation Agent. No provision relating to the U.K. Swingline Loan or the
Canadian Swingline Loan may be amended without the written consent of Banks
holding at least 51% of the U.K. Swingline Loan Commitments or Canadian
Swingline Commitments, respectively (or, if U.K. Swingline Loan Commitments or
Canadian Swingline Loan Commitments have been terminated, Banks holding at least
51% of the outstanding U.K. Swingline Loans or Canadian Swingline Loans,
respectively).
11.13. Survival. All indemnities set forth herein including, without
limitation, in Section 1.11, 1.13, 3.04, 10.07, 11.01 or 11.17 shall survive the
execution and delivery of this Agreement and the making of the Loans, the
repayment of the Obligations and the termination of the Total Commitments.
11.14. Domicile of Loans. Each Bank may transfer and carry its Loans
at, to or for the account of any branch office, Subsidiary or Affiliate of such
Bank.
11.15. Waiver of Jury Trial. Each of the parties to this Agreement
hereby irrevocably waives all right to a trial by jury in any action, proceeding
or counterclaim arising out of or relating to this Agreement, the Credit
Documents or the Transaction contemplated hereby or thereby.
11.16. Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitation of, another covenant shall
not avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.
11.17. Currency Indemnity. If, for the purposes of obtaining
judgment in any court in any jurisdiction with respect to this Agreement or any
other Credit Document, it becomes necessary to convert into the currency of such
jurisdiction (the "Judgment Currency") any amount due under this Agreement or
under any other Credit Document in any currency other than the Judgment Currency
(the "Currency Due"), then conversion shall be made at the rate of exchange
prevailing on the Business Day before the day on which judgment is given. For
this purpose "rate of exchange" means the rate at which the Ad-
<PAGE>
-188-
ministrative Agent is able, on the relevant date, to purchase the Currency Due
with the Judgement Currency in accordance with its normal practice at its Main
Branch in Toronto, Ontario. In the event that there is a change in the rate of
exchange prevailing between the Business Day before the day on which the
judgment is given and the date of payment of the amount due, the Applicable
Borrower will, on the date of payment, pay such additional amounts, if any, as
may be necessary to ensure that the amount paid on such date is the amount in
the Judgment Currency which when converted at the rate of exchange prevailing on
the date of payment is the amount then due under this Agreement or such other
Credit Document in the Currency Due. If the amount of the Currency Due which the
Administrative Agent is so able to purchase is less than the amount of the
Currency Due originally due to it, the Applicable Borrower shall indemnify and
save the Banks harmless from and against loss or damage arising as a result of
such deficiency. This indemnity shall constitute an obligation separate and
independent from the other obligations contained in this Agreement and the other
Credit Documents, shall give rise to a separate and independent cause of action,
shall apply irrespective of any indulgence granted by the Banks from time to
time and shall continue in full force and effect notwithstanding any judgment or
order for a liquidated sum in respect of an amount due under this Agreement or
any other Credit Document or under any judgment or order.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, all as of the date first written above.
MMH HOLDINGS, INC.
By: /s/ Michael Erwin
------------------------------
Name: Michael Erwin
Title: President
MORRIS MATERIAL HANDLING, INC.
By: /s/ Michael Erwin
------------------------------
Name: Michael Erwin
Title: President
MATERIAL HANDLING, LLC
By: /s/ David Smith
------------------------------
Name: David Smith
Title: Vice President
MORRIS MATERIAL HANDLING LTD.
By: /s/ Martin Ditkof
------------------------------
Name: Martin Ditkof
Title: Director
MONDEL ULC
By: /s/ Martin Ditkof
------------------------------
Name: Martin Ditkof
Title: Secretary
KAVERIT STEEL AND CRANE ULC
By: /s/ Martin Ditkof
------------------------------
Name: Martin Ditkof
Title: Secretary
<PAGE>
Credit Agreement among Morris Material Handling, Inc., MMH Holdings,
Inc., Material Handling, LLC, Morris Material Handling, Ltd., Mondel ULC,
Kaverit Steel and Crane ULC and Canadian Imperial Bank of Commerce, as
Administrative Agent, the other Agents listed herein, and the Banks listed
herein.
CREDIT AGRICOLE INDOSUEZ,
as Syndication Agent and
as a Bank
By: /s/ Kenneth J. Kencel
------------------------------
Name: Kenneth J. Kencel
Title: First Vice President
By: /s/ [Illegible]
------------------------------
Name:
Title:
A Term Loan Commitment: $1,833,333.33
B Term Loan Commitment: $4,000,000.00
Acquisition Term Loan Commitment: $2,750,000.00
Revolving Loan Commitment: $6,416,666,.67
Canadian Swingline Commitment: $0.00
U.K. Swingline Commitment: $0.00
U.S. Swingline Commitment: $0.00
<PAGE>
Credit Agreement among Morris Material Handling, Inc., MMH Holdings,
Inc., Material Handling, LLC, Morris Material Handling, Ltd., Mondel ULC,
Kaverit Steel and Crane ULC and Canadian Imperial Bank of Commerce, as
Administrative Agent, the other Agents listed herein, and the Banks listed
herein.
CANADIAN IMPERIAL BANK OF
COMMERCE, as Administrative
Agent and Collateral Agent
and as a Bank
By: /s/ Timothy E. Doyle
------------------------------
Name: Timothy E. Doyle
Title: Managing Director
CIBC Oppenheimer Corp., As Agent
A Term Loan Commitment: $0
B Term Loan Commitment: $0
Acquisition Term Loan Commitment: $0
Revolving Loan Commitment: $0
Canadian Swingline Commitment: $5,000,000.00
U.K. Swingline Commitment: $0
U.S. Swingline Commitment: $0
<PAGE>
Credit Agreement among Morris Material Handling, Inc., MMH Holdings,
Inc., Material Handling, LLC, Morris Material Handling, Ltd., Mondel ULC,
Kaverit Steel and Crane ULC and Canadian Imperial Bank of Commerce, as
Administrative Agent, the other Agents listed herein, and the Banks listed
herein.
CIBC Inc., as a Bank
By: /s/ Timothy E. Doyle
------------------------------
Name: Timothy E. Doyle
Title: Managing Director
CIBC Oppenheimer Corp., As Agent
A Term Loan Commitment: $2,500,000.00
B Term Loan Commitment: $19,000,000.00
Acquisition Term Loan Commitment: $3,750,000.00
Revolving Loan Commitment: $8,750,000.00
Canadian Swingline Commitment: $0.00
U.K. Swingline Commitment: $0.00
U.S. Swingline Commitment: $0.00
<PAGE>
Credit Agreement among Morris Material Handling, Inc., MMH Holdings,
Inc., Material Handling, LLC, Morris Material Handling, Ltd., Mondel ULC,
Kaverit Steel and Crane ULC and Canadian Imperial Bank of Commerce, as
Administrative Agent, the other Agents listed herein, and the Banks listed
herein.
BANKBOSTON, N.A.
as Documentation Agent and
as a Bank
By: /s/ Gregory R. D. Clark
------------------------------
Name: Gregory R. D. Clark
Title: Managing Director
By: /s/ Gregory R. D. Clark
------------------------------
Name: Gregory R. D. Clark
Title: Managing Director
A Term Loan Commitment: $2,000,000.00
B Term Loan Commitment: $0.00
Acquisition Term Loan Commitment: $3,000,000.00
Revolving Loan Commitment: $7,000,000.00
Canadian Swingline Commitment: $0.00
U.K. Swingline Commitment: $0.00
U.S. Swingline Commitment: $0.00
<PAGE>
Credit Agreement among Morris Material Handling, Inc., MMH Holdings,
Inc., Material Handling, LLC, Morris Material Handling, Ltd., Mondel ULC,
Kaverit Steel and Crane ULC and Canadian Imperial Bank of Commerce, as
Administrative Agent, the other Agents listed herein, and the Banks listed
herein.
ABN-AMRO BANK N.V., as a Bank
By: /s/ Joann L. Holman
------------------------------
Name: Joann L. Holman
Title: Vice President
By: /s/ Thomas F. Comfort
------------------------------
Name: Thomas F. Comfort
Title: Vice President
A Term Loan Commitment: $1,500,000.00
B Term Loan Commitment: $0.00
Acquisition Term Loan Commitment: $2,250,000.00
Revolving Loan Commitment: $5,250,000.00
Canadian Swingline Commitment: $0.00
U.K. Swingline Commitment: $15,000,000.00
U.S. Swingline Commitment: $0.00
<PAGE>
Credit Agreement among Morris Material Handling, Inc., MMH Holdings,
Inc., Material Handling, LLC, Morris Material Handling, Ltd., Mondel ULC,
Kaverit Steel and Crane ULC and Canadian Imperial Bank of Commerce, as
Administrative Agent, the other Agents listed herein, and the Banks listed
herein.
CREDITANSTALT CORPORATE FINANCE Inc.,
as a Bank
By: /s/ Jack R. Bertges
------------------------------
Name: Jack R. Bertges
Title: Senior Vice President
By: /s/ Patrick J. Rounds
------------------------------
Name: Patrick J. Rounds
Title: Vice President
A Term Loan Commitment: $1,833,333.34
B Term Loan Commitment: $0.00
Acquisition Term Loan Commitment: $2,750,000.00
Revolving Loan Commitment: $6,416,666.66
Canadian Swingline Commitment: $0.00
U.K. Swingline Commitment: $0.00
U.S. Swingline Commitment: $0.00
<PAGE>
Credit Agreement among Morris Material Handling, Inc., MMH Holdings,
Inc., Material Handling, LLC, Morris Material Handling, Ltd., Mondel ULC,
Kaverit Steel and Crane ULC and Canadian Imperial Bank of Commerce, as
Administrative Agent, the other Agents listed herein, and the Banks listed
herein.
ARCHIMEDES FUNDING, L.L.C.
By: ING Capital Advisors, Inc., as
Collateral Manager
By: /s/ Michael D. Hatley
------------------------------
Name: Michael D. Hatley
Title: Vice President & Portfolio
Manager
A Term Loan Commitment: $0.00
B Term Loan Commitment: $5,000,000.00
Acquisition Term Loan Commitment: $0.00
Revolving Loan Commitment: $0.00
Canadian Swingline Commitment: $0.00
U.K. Swingline Commitment: $0.00
U.S. Swingline Commitment: $0.00
<PAGE>
Credit Agreement among Morris Material Handling, Inc., MMH Holdings,
Inc., Material Handling, LLC, Morris Material Handling, Ltd., Mondel ULC,
Kaverit Steel and Crane ULC and Canadian Imperial Bank of Commerce, as
Administrative Agent, the other Agents listed herein, and the Banks listed
herein.
THE FIRST NATIONAL BANK OF CHICAGO,
as a Bank
By: /s/ Suzanne Ergastolo
------------------------------
Name: Suzanne Ergastolo
Title: Underwriter
A Term Loan Commitment: $1,500,000.00
B Term Loan Commitment: $0.00
Acquisition Term Loan Commitment: $2,250,000.00
Revolving Loan Commitment: $5,250,000.00
Canadian Swingline Commitment: $0.00
U.K. Swingline Commitment: $0.00
U.S. Swingline Commitment: $10,000,000.00
<PAGE>
Credit Agreement among Morris Material Handling, Inc., MMH Holdings,
Inc., Material Handling, LLC, Morris Material Handling, Ltd., Mondel ULC,
Kaverit Steel and Crane ULC and Canadian Imperial Bank of Commerce, as
Administrative Agent, the other Agents listed herein, and the Banks listed
herein.
FIRST UNION NATIONAL BANK, as a Bank
By: /s/ Jorge Gonzalez
------------------------------
Name: Jorge Gonzalez
Title: Senior Vice President
A Term Loan Commitment: $1,833,333.34
B Term Loan Commitment: $0.00
Acquisition Term Loan Commitment: $2,750,000.00
Revolving Loan Commitment: $6,416,666.66
Canadian Swingline Commitment: $0.00
U.K. Swingline Commitment: $0.00
U.S. Swingline Commitment: $0.00
<PAGE>
Credit Agreement among Morris Material Handling, Inc., MMH Holdings,
Inc., Material Handling, LLC, Morris Material Handling, Ltd., Mondel ULC,
Kaverit Steel and Crane ULC and Canadian Imperial Bank of Commerce, as
Administrative Agent, the other Agents listed herein, and the Banks listed
herein.
FLEET NATIONAL BANK, as a Bank
By: /s/ James T. Andersen
------------------------------
Name: James T. Andersen
Title: Managing Director
A Term Loan Commitment: $1,833,333.00
B Term Loan Commitment: $0.00
Acquisition Term Loan Commitment: $2,750,000.00
Revolving Loan Commitment: $6,416,667.00
Canadian Swingline Commitment: $0.00
U.K. Swingline Commitment: $0.00
U.S. Swingline Commitment: $0.00
<PAGE>
Credit Agreement among Morris Material Handling, Inc., MMH Holdings,
Inc., Material Handling, LLC, Morris Material Handling, Ltd., Mondel ULC,
Kaverit Steel and Crane ULC and Canadian Imperial Bank of Commerce, as
Administrative Agent, the other Agents listed herein, and the Banks listed
herein.
SANWA BUSINESS CREDIT CORPORATION, as a Bank
By: /s/ John J. McKenna
------------------------------
Name: John J. McKenna
Title: First Vice President
A Term Loan Commitment: $1,500,000.00
B Term Loan Commitment: $0.00
Acquisition Term Loan Commitment: $2,250,000.00
Revolving Loan Commitment: $5,250,000.00
Canadian Swingline Commitment: $0.00
U.K. Swingline Commitment: $0.00
U.S. Swingline Commitment: $0.00
<PAGE>
Credit Agreement among Morris Material Handling, Inc., MMH Holdings,
Inc., Material Handling, LLC, Morris Material Handling, Ltd., Mondel ULC,
Kaverit Steel and Crane ULC and Canadian Imperial Bank of Commerce, as
Administrative Agent, the other Agents listed herein, and the Banks listed
herein.
CRESCENT/MACH I PARTNERS, L.P.
by: TCW Asset Management
Company, Its Investment Manager
By: /s/ Justin L. Driscoll
------------------------------
Name: Justin L. Driscoll
Title: Senior Vice President
A Term Loan Commitment: $0.00
B Term Loan Commitment: $7,000,000.00
Acquisition Term Loan Commitment: $0.00
Revolving Loan Commitment: $0.00
Canadian Swingline Commitment: $0.00
U.K. Swingline Commitment: $0.00
U.S. Swingline Commitment: $0.00
<PAGE>
Credit Agreement among Morris Material Handling, Inc., MMH Holdings,
Inc., Material Handling, LLC, Morris Material Handling, Ltd., Mondel ULC,
Kaverit Steel and Crane ULC and Canadian Imperial Bank of Commerce, as
Administrative Agent, the other Agents listed herein, and the Banks listed
herein.
RIGGS BANK N.A., as a Bank
By: /s/ Ana G. Tejblum
------------------------------
Name: Ana G. Tejblum
Title: Vice President
A Term Loan Commitment: $1,833,333.00
B Term Loan Commitment: $0.00
Acquisition Term Loan Commitment: $2,750,000.00
Revolving Loan Commitment: $6,416,667.00
Canadian Swingline Commitment: $0.00
U.K. Swingline Commitment: $0.00
U.S. Swingline Commitment: $0.00
<PAGE>
Credit Agreement among Morris Material Handling, Inc., MMH Holdings,
Inc., Material Handling, LLC, Morris Material Handling, Ltd., Mondel ULC,
Kaverit Steel and Crane ULC and Canadian Imperial Bank of Commerce, as
Administrative Agent, the other Agents listed herein, and the Banks listed
herein.
WELLS FARGO BANK, N.A., as a Bank
By: /s/ Dana D. Cagle
------------------------------
Name: Dana D. Cagle
Title: Vice President
A Term Loan Commitment: $1,833,333.33
B Term Loan Commitment: $0.00
Acquisition Term Loan Commitment: $2,750,000.00
Revolving Loan Commitment: $6,416,666.67
Canadian Swingline Commitment: $0.00
U.K. Swingline Commitment: $0.00
U.S. Swingline Commitment: $0.00
HOLDINGS GUARANTEE
GUARANTEE, dated as of March 30, 1998, ("Guarantee") by MMH
Holdings, Inc. (the "Guarantor"), in favor and for the benefit of CANADIAN
IMPERIAL BANK OF COMMERCE ("CIBC"), having an office at 425 Lexington Avenue,
New York, New York 10017, and in its capacity as collateral agent (in such
capacities and together with any successors in such capacity, the "Collateral
Agent") for the ratable benefit of the lending institutions (the "Banks") from
time to time party to the Credit Agreement (as hereinafter defined).
R E C I T A L S :
A. Pursuant to a certain Credit Agreement, dated as of March 30,
1998 (as amended, amended and restated, supplemented or otherwise modified from
time to time, the "Credit Agreement"; capitalized terms used herein and not
defined shall have the meanings assigned to them in the Credit Agreement), among
MORRIS MATERIAL HANDLING, INC. ("MMH"), as a U.S. Borrower, MATERIAL HANDLING,
LLC, as a U.S. Borrower (together with MMH, the "U.S. Borrowers"), MORRIS
MATERIAL HANDLING LIMITED, as U.K. Borrower (the "U.K. Borrower"), KAVERIT STEEL
AND CRANE ULC and MONDEL ULC, as Canadian Borrowers (the "Canadian Borrowers",
and together with the U.S. Borrowers and the U.K. Borrower, the "Borrowers"),
the Guarantor, CREDIT AGRICOLE INDOSUEZ, as Syndication Agent, BANKBOSTON, N.A.,
as Documentation Agent, the Banks and CIBC, as Administrative Agent and
Collateral Agent for the Banks (together with the Syndication Agent and the
Documentation Agent, the "Agents"), the Banks have agreed (i) to make to or for
the account of MMH certain Term Loans up to an aggregate principal amount of
$55,000,000, to make to or for the account of the U.S. Borrowers certain
Acquisition Term Loans up to an aggregate principal amount of $30,000,000 and to
make certain Revolving Loans to the Borrowers up to an aggregate principal
amount of $70,000,000 and (ii) to make certain Swingline Loans and to issue
certain Letters of Credit for the account of the Borrowers.
B. It is contemplated that the Borrowers may enter into one or more
agreements with one or more of the Banks ("Interest Rate Agreements") fixing the
interest rates with respect to Loans under the Credit Agreement (all obligations
of the Borrowers now existing or hereafter arising under such Interest Rate
Agreements, collectively, the "Interest Rate Obligations").
C. It is a condition to the obligations of the Banks to make the
Loans under the Credit Agreement and a condition to any Bank issuing Letters of
Credit or Acceptances under the Credit Agreement or entering into the Interest
Rate Agreements that the Guarantor shall have executed and delivered this
Guarantee and that this Guarantee shall be in full force and effect.
<PAGE>
-2-
D. This Guarantee is given by the Guarantor in favor of the
Collateral Agent for its benefit and the benefit of the Banks to guarantee all
of the Obligations of the Borrowers in accordance with the terms of the Credit
Agreement.
E. All of the Guarantor's obligations hereunder shall be secured
pursuant to the Security Documents to which the Guarantor is a party.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Guarantor hereby agrees as follows:
1. Guarantee. (a) To induce the Banks to execute and deliver the
Credit Agreement and to make the Loans and issue the Letters of Credit upon the
terms and conditions set forth in the Credit Agreement, and in consideration
thereof, the Guarantor hereby unconditionally and irrevocably (i) guarantees to
the Banks and their respective successors, endorsees, transferees and assigns,
the prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) and at all times thereafter of the
Obligations of the Borrowers (including amounts which would become due but for
the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code); and (ii) agrees to pay any and all reasonable expenses (including
reasonable attorneys' fees and disbursements) which may be paid or incurred by
the Banks, the Agents or the Collateral Agent in enforcing any rights with
respect to, or collecting, any or all of the Obligations and/or enforcing any
rights with respect to, or collecting against, the Guarantor under this
Guarantee (collectively, the "Guaranteed Obligations").
(b) The Guarantor agrees that this Guarantee constitutes a guarantee
of payment when due and not of collection and waives any right to require that
any resort be had by the Collateral Agent, the Agents or any Bank to any of the
security held for payment of any of the Guaranteed Obligations or to any balance
of any deposit account or credit on the books of the Agents, the Collateral
Agent or any Bank in favor of any Borrower or any other Person.
(c) No payment or payments made by the Guarantor or any other Person
or received or collected by the Banks (or the Collateral Agent or Agents on
behalf of the Banks) from the Guarantor or any other Person by virtue of any
action or proceeding or any set-off or appropriation or application at any time
or from time to time in reduction of or in payment of the Guaranteed Obligations
shall be deemed to modify, reduce, release or otherwise affect the liability or
obligations of the Guarantor hereunder which shall, notwithstanding any such
payment or payments
<PAGE>
-3-
other than payments made to the Banks (or the Collateral Agent or Agents on
behalf of the Banks) by the Guarantor or payments received or collected by the
Banks (or the Collateral Agent or Agents on behalf of the Banks) from the
Guarantor, remain liable for the Guaranteed Obligations until the Guaranteed
Obligations are paid in full in Cash or Cash Equivalents.
2. Waiver by Guarantor. The Guarantor hereby waives absolutely and
irrevocably any claim which it may have against any Borrower or any of their
respective Affiliates by reason of any payment to the Agents, Collateral Agent
or any Bank, or to any other Person pursuant to or in respect of this Guarantee,
including any claims by way of subrogation, contribution, reimbursement,
indemnity or otherwise, until the Guaranteed Obligations are paid in full.
3. Consent by Guarantor. The Guarantor hereby consents and agrees
that, without the necessity of any reservation of rights against the Guarantor
and without notice to or further assent by the Guarantor, any demand for payment
of any of the Guaranteed Obligations made by the Agents, the Collateral Agent or
any Bank may be rescinded by the Banks (or the Agents or Collateral Agent on
behalf of the Banks) and any of the Guaranteed Obligations continued, and the
Guaranteed Obligations, or the liability of any other party upon or for any part
thereof, or any collateral security or guarantee therefor or right of offset
with respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by the Banks (or the Agents or the Collateral Agent on behalf of the
Banks); and the Credit Agreement or any other Credit Document, or other
guarantee or documents in connection therewith, or any of them, may be amended,
modified, supplemented or terminated, in whole or in part, as the Banks (or the
Agents or Collateral Agent on behalf of the Banks) may deem advisable from time
to time (in accordance with the terms thereof); and any Guarantee or right of
offset or any collateral may be sold, exchanged, waived, surrendered or
released, all without the necessity of any reservation of rights against the
Guarantor and without notice to or further assent by the Guarantor, which will
remain bound hereunder, notwithstanding any such renewal, extension,
modification, acceleration, compromise, amendment, supplement, termination,
sale, exchange, waiver, surrender or release. Neither the Banks nor the Agents
or the Collateral Agent shall have any obligation to protect, secure, perfect or
insure any collateral or property at any time held as security for the
Guaranteed Obligations or this Guarantee. When making any demand hereunder
against the Guarantor, the Agents, the Collateral Agent or the Banks may, but
shall be under no obligation to, make a similar demand on any other Credit Party
or any such other guarantor, and any failure by the Agents, the Collateral Agent
or the Banks to make any such demand or to collect
<PAGE>
-4-
any payments from such other Credit Party or any such other guarantor or any
release of such other Credit Party or any such other guarantor or of the
Guarantor's obligations or liabilities hereunder shall not impair or affect the
rights and remedies, express or implied, or as a matter of law, of the Agents,
the Collateral Agent or the Banks against the Guarantor hereunder. For the
purposes hereof "demand" shall include the commencement and continuance of any
legal proceedings.
4. Waivers; Successors and Assigns. The Guarantor waives any and all
notice of the creation, renewal, extension or accrual of any of the Guaranteed
Obligations and notice of or proof of reliance by the Banks upon this Guarantee
or acceptance of this Guarantee, and the Guaranteed Obligations shall
conclusively be deemed to have been created, contracted or incurred in reliance
upon this Guarantee, and all dealings between the Guarantor and any other Credit
Party, on the one hand, and the Banks, on the other hand, shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Guarantee. The Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or non-payment to or upon any Credit Party or the
Guarantor with respect to the Guaranteed Obligations. This Guarantee shall be
construed as a continuing, absolute and unconditional Guarantee of payment
without regard to the validity, regularity or enforceability of the Credit
Agreement, the other Credit Documents, any of the Guaranteed Obligations or any
guarantee therefor or right of offset with respect thereto at any time or from
time to time held by the Banks and without regard to any defense (other than the
defense of payment), set off or counterclaim which may at any time be available
to or be asserted by any Credit Party against the Banks, or by any other
circumstance whatsoever (with or without notice to or knowledge of the
Guarantor) which constitutes, or might be construed to constitute, an equitable
or legal discharge of the Guaranteed Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance, and the obligations and
liabilities of the Guarantor hereunder shall not be conditioned or contingent
upon the pursuit by the Banks or any other Person at any time of any right or
remedy against any Credit Party or against any other Person which may be or
become liable or obligated in respect of all or any part of the Guaranteed
Obligations or against any collateral security or guarantee therefor or right of
offset with respect thereto. This Guarantee shall remain in full force and
effect and be binding in accordance with and to the extent of its terms upon the
Guarantor and the successors and assigns thereof, and shall inure to the benefit
of the Banks, and their respective successors, indorsees, transferees and
assigns permitted under the Credit Agreement (including each holder from time to
time of Guaranteed Obligations) until all of the Guaranteed Obligations and the
obligations of the Guarantor under this Guarantee shall have been satisfied by
payment in full in Cash or
<PAGE>
-5-
Cash Equivalents, notwithstanding that from time to time during the term of the
Credit Agreement any Credit Party may be released from all of its Guaranteed
Obligations thereunder.
5. Guarantee Secured. Payment under this Guarantee is secured by
pledges, encumbrances and mortgages of Collateral pursuant to applicable
Security Documents in accordance with the Credit Agreement. Reference is hereby
made to the Credit Agreement and the applicable Security Documents for a
description of the Collateral pledged and the right of the respective parties to
such property, to secure all the obligations of the Guarantor hereunder.
6. Rights of Set-Off. The Banks, and the Agents and Collateral Agent
on behalf of the Banks, are each hereby irrevocably authorized upon the
occurrence and during the continuance of an Event of Default without notice to
the Guarantor (any such notice being expressly waived by the Guarantor to the
extent permitted by applicable law) to set-off and appropriate and apply any and
all deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect or contingent or matured or unmatured, at
any time held or owing by the Banks to or for the credit or the account of the
Guarantor, or any part thereof, in such amounts as the Banks, or the Agents or
Collateral Agent on behalf of the Banks, may elect, against and on account of
the obligations and liabilities of the Guarantor to the Banks, in any currency,
whether arising hereunder or otherwise, as the Banks, or the Agents or
Collateral Agent on behalf of the Banks, may elect, whether or not the Banks, or
the Agents or Collateral Agent on behalf of the Banks, have made any demand for
payment but only to the extent that such obligations, liabilities and claims
shall have become due and payable (whether as stated, by acceleration or
otherwise). The Banks, or the Agents or Collateral Agent on behalf of the Banks,
agree to notify the Guarantor promptly of any such set-off and the application
made by the Banks, or the Agents or Collateral Agent on behalf of the Banks;
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Banks, or the Agents or
Collateral Agent on behalf of the Banks, under this Section 6 are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) which the Banks, or the Agents or Collateral Agent on behalf of the
Banks, may otherwise have.
7. Effectiveness; Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Guaranteed Obligations is rescinded or must
otherwise be restored or returned by the Banks upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of any Credit Party, or
<PAGE>
-6-
upon or as a result of the appointment of a receiver, intervenor or conservator
of, or trustee or similar officer for, any Credit Party or any substantial part
of its property, or otherwise, all as though such payments had not been made.
8. Payments of Guaranteed Obligations. The Guarantor hereby
guarantees that the Guaranteed Obligations will be paid for the ratable benefit
of the Banks without set-off or counterclaim in lawful currency of the United
States of America at the office of the Collateral Agent located at 425 Lexington
Avenue, New York, New York 10017. The Guarantor shall make any payments required
hereunder upon receipt of written notice thereof from the Agents or Collateral
Agent or any Bank; provided, however, that the failure of the Agents or
Collateral Agent or any Bank to give such notice shall not affect the
Guarantor's obligations hereunder.
9. Default. If (x) any Borrower has failed to pay or perform when
due its Guaranteed Obligations or (y) there is an event with respect to the
Guarantor that would require or permit the acceleration pursuant to Section 8.04
of the Credit Agreement of any outstanding Loan, or (z) the Guarantor's
obligations, if any, under the Credit Agreement are accelerated, then in the
case of clause (x) all of the Guaranteed Obligations with respect to the
Borrowers and in the case of clause (y) or clause (z) all of the Guaranteed
Obligations shall be immediately due and payable by the Guarantor, regardless of
whether in the case of clause (x) the payment of the Guaranteed Obligations has
been accelerated or in the case of clause (y) or clause (z) the Borrowers are in
default with respect to the Guaranteed Obligations.
10. Representations and Warranties. To induce the Banks to enter
into the Credit Agreement and to make Loans and to issue Letters of Credit, the
Guarantor represents and warrants to each Bank that the following statements are
true, correct and complete on and as of the Closing Date:
A. Organization and Powers. (a) The Guarantor is a duly organized
and validly existing corporation in good standing under the laws of the
jurisdiction of its organization and has the corporate power and authority to
own its property and assets and to transact the business in which it is engaged
and presently proposes to engage. (b) The Guarantor has duly qualified and is
qualified to do business, or as of the Closing Date has taken appropriate steps
to qualify, and is in good standing in all jurisdictions in which the conduct of
its business or the ownership of its properties requires such qualification,
except where the failure to be so qualified would not have a Material Adverse
Effect. (c) The Guarantor has all requisite power and authority and all
requisite governmental licenses, authorizations, consents and approvals to own
and carry on its businesss as now conducted
<PAGE>
-7-
and as contemplated to be conducted by the Documents, including, without
limitation, those in compliance with or required by the Environmental Laws other
than such licenses, authorizations, consents and approvals the failure to obtain
which has not had and will not have a Material Adverse Effect. (d) The Guarantor
has all authority to enter into each of the Security Documents to which it is or
is to be a party and to carry out the transactions contemplated thereby and to
execute and deliver this Guarantee.
B. No Violations. Neither the execution, delivery or performance by
the Guarantor of any of the Credit Documents to which it is a party, nor
compliance with any of the terms and provisions thereof, nor the consummation of
any of the transactions contemplated therein, nor the grant and perfection of
the security interests pursuant to the Security Documents (a) will contravene
any provision of any law, statute, rule, regulation, order, writ, injunction or
decree of any Governmental Authority, (b) will conflict or be inconsistent with
or result in any breach of, any of the terms, covenants, conditions or
provisions of, or constitute (with notice or lapse of time or both) a default
under any material contractual obligation of the Guarantor, or (other than as
contemplated by the Security Documents) result in the creation or imposition of
(or the obligation to create or impose), any Lien upon any of the property or
assets of the Guarantor pursuant to any material contractual obligation or (c)
will violate any provision of the organizational documents of the Guarantor.
C. Approvals. The execution, delivery and performance by the
Guarantor of the Credit Documents to which it is, or is to be, a party do not
and will not require any registration with, consent or waiver or approval of, or
notice to, or other action to, with or by, any Governmental Authority or other
Person except filings required for the perfection or maintenance of perfection
of security interests granted pursuant to the Security Documents or enforcement
of the Liens or remedies provided by the Credit Documents. Except for such
filings, all consents and approvals from or notices to or filings with any
Governmental Authority or other Person required to be obtained by Guarantor have
been obtained and are in full force and effect except where the failure to
obtain such consents or approvals will not result in a Material Adverse Effect
and except for filings required to perfect or maintain the perfection of the
Liens granted by the Credit Documents and filings listed on Schedule 5.06 to the
Credit Agreement.
D. Binding Obligation. This Guarantee constitutes the legal, valid
and binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, fraudulence conveyance or transfer, moratorium or
<PAGE>
-8-
similar laws relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability whether enforcement is sought by
proceedings in equity or at law.
E. Investment Company. The Guarantor is not an "investment company"
or a company "controlled" by an "investment company" (as each of such quoted
terms is defined or used in the Investment Company Act of 1940, as amended) or
subject to any foreign, federal or local statute or regulation limiting its
ability to incur indebtedness for money borrowed or guarantee such indebtedness
as contemplated hereby or by any other Credit Document.
11. Ratable Sharing. The Banks by acceptance of this Guarantee agree
among themselves that with respect to all amounts received by them which are
applicable to the payment of obligations of the Guarantor under this Guarantee,
if the Banks, or the Agents or Collateral Agent on behalf of the Banks, exercise
their rights hereunder, including, without limitation, acceleration of the
obligations of the Guarantor hereunder, equitable adjustment will be made so
that, in effect, all such amounts will be shared among the Banks pro rata based
on the relative outstanding Guaranteed Obligations.
12. Merger. If the Guarantor shall merge into or consolidate with
another corporation, or liquidate, wind up or dissolve itself in a transaction
not prohibited by the Credit Agreement the Guarantor hereby covenants and
agrees, that upon any such merger, consolidation, liquidation, or dissolution,
the guarantee given in this Guarantee and the due and punctual performance and
observance of all of the covenants and conditions of the Credit Agreement to be
performed by the Guarantor, shall be expressly assumed (in the event that the
Guarantor is not the surviving corporation in the merger) by supplemental
agreements satisfactory in form to the Banks, or the Agents or Collateral Agent
on behalf of the Banks, by the corporation or corporations formed by such
consolidation, or into which the Guarantor shall have been merged. In addition,
the Guarantor shall deliver to the Banks, or the Agents or Collateral Agent on
behalf of the Banks, an Officers' Certificate and an opinion of counsel, each
stating that such merger or consolidation and such supplemental agreements
comply with this Guarantee and that all conditions precedent herein provided
relating to such transaction have been complied with. In case of any such
consolidation or merger and upon the assumption by the successor corporation or
corporations, by supplemental agreements executed and delivered to the Banks or
the Agents or Collateral Agent on behalf of the Banks, and satisfactory in form
to the Banks, or the Agents or Collateral Agent on behalf of the Banks, of the
guarantee given in this Guarantee and the due and punctual performance of all of
the covenants and conditions of the Credit Agreement to be performed by the
Guaran-
<PAGE>
-9-
tor, such successor corporation or corporations shall succeed to and be
substituted for the Guarantor, with the same effect as if it or they had been
named herein as a Guarantor.
13. No Waiver. (a) No failure to exercise and no delay in
exercising, on the part of the Banks, or the Agents or Collateral Agent on
behalf of the Banks, any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof, or the exercise of any
other power or right. The rights and remedies herein provided are cumulative and
not exclusive of any rights or remedies provided by law. (b) In the event the
Banks, the Agents or the Collateral Agent on behalf of the Banks, shall have
instituted any proceeding to enforce any right, power or remedy under this
Guarantee by sale or otherwise, and such proceeding shall have been discontinued
or abandoned for any reason or shall have been determined adversely to the
Banks, the Agents or the Collateral Agent on behalf of the Banks, then and in
every such case, the Guarantor, the Banks, the Agents or the Collateral Agent on
behalf of the Banks, and each Bank shall be restored to its respective former
position and rights hereunder, and all rights, remedies and powers of the Banks,
the Agents or the Collateral Agent on behalf of the Banks, shall continue as if
no such proceeding had been instituted.
14. Notices. All notices, demands, instructions or other
communications required or permitted to be given to or made upon any party
hereto shall be given in accordance with the provisions of the Credit Agreement
and at the address either set forth therein or as provided on the signature page
hereof.
15. Amendments, Waivers, etc. No provision of this Guarantee shall
be waived, amended, terminated or supplemented except by a written instrument
executed by the Guarantor and the Agents or Collateral Agent, on behalf of the
Banks.
16. Notice of Exercise. Upon exercise of its rights hereunder, the
Banks, or the Agents or Collateral Agent on behalf of the Banks, as the case may
be, shall provide written notice on the date of such exercise to the Banks, or
the Agents or the Collateral Agent on behalf of the Banks, as the case may be,
of such exercise; provided, however, that the failure by the Agents, the
Collateral Agent, or any of the Banks to provide such written notice shall not
in any way relieve the Guarantor of its obligations under this Guarantee.
17. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
<PAGE>
-10-
18. CONSENT TO JURISDICTION AND SERVICE PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST THE GUARANTOR WITH RESPECT TO THIS GUARANTEE MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF
NEW YORK AND BY EXECUTION AND DELIVERY OF THIS GUARANTEE THE GUARANTOR ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS GUARANTEE. THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND THE GUARANTOR HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS. THE GUARANTOR DESIGNATES AND APPOINTS LEXIS
DOCUMENT SERVICES, INC. WITH AN ADDRESS AT 150 EAST 58TH STREET, 25TH FLOOR, NEW
YORK, NEW YORK 10155, AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE
GUARANTOR, AFTER WRITTEN NOTICE TO THE AGENT, IRREVOCABLY AGREEING IN WRITING TO
SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY THE
GUARANTOR TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF SUCH
PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO THE GUARANTOR AS
PROVIDED IN SECTION 14 HEREOF. IF ANY AGENT APPOINTED BY THE GUARANTOR REFUSES
TO ACCEPT SERVICE, THE GUARANTOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL
SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF
ANY BANK TO BRING PROCEEDINGS AGAINST THE GUARANTOR IN THE COURTS OF ANY OTHER
JURISDICTION.
19. Severability of Provisions. Any provision of this Guarantee
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
20. Headings. The Section headings used in this Guarantee are for
convenience of reference only and shall not affect the construction of this
Agreement.
21. Future Advances. This Guarantee shall guarantee the payment of
any amounts advanced from time to time pursuant to the Credit Agreement.
22. Counterparts. This Guarantee and any amendments, waivers,
consents or supplements may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be
<PAGE>
-11-
deemed an original, but all such counterparts together shall constitute but one
and the same instrument.
<PAGE>
-12-
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed and delivered by its duly authorized officer on the day and year
first above written.
MMH HOLDINGS, INC.
By: /s/ Martin Ditkof
-------------------------------
Name: Martin Ditkof
Title: Secretary
SUBSIDIARY GUARANTEE
GUARANTEE, dated as of March 30, 1998, ("Guarantee") by each person
which is a party hereto as set forth on the signature pages hereto (each, a
"Guarantor" and, collectively, the "Guarantors"), in favor and for the benefit
of CANADIAN IMPERIAL BANK OF COMMERCE ("CIBC"), having an office at 425
Lexington Avenue, New York, New York 10017, and in its capacity as collateral
agent (in such capacities and together with any successors in such capacity, the
"Collateral Agent") for the ratable benefit of the lending institutions (the
"Banks") from time to time party to the Credit Agreement (as hereinafter
defined).
R E C I T A L S :
A. Pursuant to a certain Credit Agreement, dated as of March 30,
1998 (as amended, amended and restated, supplemented or otherwise modified from
time to time, the "Credit Agreement"; capitalized terms used herein and not
defined shall have the meanings assigned to them in the Credit Agreement), among
MORRIS MATERIAL HANDLING, INC. ("MMH"), as a U.S. Borrower, MATERIAL HANDLING,
LLC, as a U.S. Borrower (together with MMH, the "U.S. Borrowers"), MORRIS
MATERIAL HANDLING LIMITED, as U.K. Borrower (the "U.K. Borrower"), KAVERIT STEEL
AND CRANE ULC and MONDEL ULC, as Canadian Borrowers (the "Canadian Borrowers",
and together with the U.S. Borrowers and the U.K. Borrower, the "Borrowers"),
MMH HOLDINGS, INC. ("Holdings"), CREDIT AGRICOLE INDOSUEZ, as Syndication Agent,
BANKBOSTON, N.A., as Documentation Agent, the Banks and CIBC, as Administrative
Agent and Collateral Agent for the Banks (together with the Syndication Agent
and the Documentation Agent, the "Agents"), the Banks have agreed (i) to make to
or for the account of MMH certain Term Loans up to an aggregate principal amount
of $55,000,000, to make to or for the account of the U.S. Borrowers certain
Acquisition Term Loans up to an aggregate principal amount of $30,000,000 and to
make certain Revolving Loans to the Borrowers up to an aggregate principal
amount of $70,000,000 and (ii) to make certain Swingline Loans to and to issue
certain Letters of Credit for the account of the Borrowers.
B. It is contemplated that the Borrowers may enter into one or more
agreements with one or more of the Banks ("Interest Rate Agreements") fixing the
interest rates with respect to Loans under the Credit Agreement (all obligations
of the Borrowers now existing or hereafter arising under such Interest Rate
Agreements, collectively, the "Interest Rate Obligations").
C. It is a condition to the obligations of the Banks to make the
Loans under the Credit Agreement and a condition to any Bank issuing Letters of
Credit or Acceptances under the Credit Agreement or entering into the Interest
Rate Agreements
<PAGE>
-2-
that the Guarantors shall have executed and delivered this Guarantee and that
this Guarantee shall be in full force and effect.
D. This Guarantee is given by each Guarantor in favor of the
Collateral Agent for its benefit and the benefit of the Banks to guarantee all
of the Obligations of the Borrowers in accordance with the terms of the Credit
Agreement.
E. Each Guarantor's obligations hereunder shall be joint and several
with the obligations of each other Guarantor hereunder, and shall be secured
pursuant to the Security Documents to which such Guarantor is a party.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, each Guarantor hereby agrees as follows:
1. Guarantee. (a) To induce the Banks to execute and deliver the
Credit Agreement and to make the Loans and issue the Letters of Credit upon the
terms and conditions set forth in the Credit Agreement, and in consideration
thereof, each Guarantor hereby unconditionally and irrevocably (i) guarantees to
the Banks and their respective successors, endorsees, transferees and assigns,
the prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) and at all times thereafter of the
Obligations of the Borrowers (including amounts which would become due but for
the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code); and (ii) agrees to pay any and all reasonable expenses (including
reasonable attorneys' fees and disbursements) which may be paid or incurred by
the Banks, the Agents or the Collateral Agent in enforcing any rights with
respect to, or collecting, any or all of the Obligations and/or enforcing any
rights with respect to, or collecting against, each Guarantor under this
Guarantee (collectively, the "Guaranteed Obligations").
(b) Each Guarantor agrees that this Guarantee constitutes a
guarantee of payment when due and not of collection and waives any right to
require that any resort be had by the Collateral Agent, the Agents or any Bank
to any of the security held for payment of any of the Guaranteed Obligations or
to any balance of any deposit account or credit on the books of the Agents, the
Collateral Agent or any Bank in favor of any Borrower or any other Person.
(c) No payment or payments made by any Guarantor or any other Person
or received or collected by the Banks (or the Collateral Agent or Agents on
behalf of the Banks) from any Guarantor or any other Person by virtue of any
action or proceeding or any set-off or appropriation or application at any time
or
<PAGE>
-3-
from time to time in reduction of or in payment of the Guaranteed Obligations
shall be deemed to modify, reduce, release or otherwise affect the liability or
obligations of the Guarantors hereunder which shall, notwithstanding any such
payment or payments other than payments made to the Banks (or the Collateral
Agent or Agents on behalf of the Banks) by any Guarantor or payments received or
collected by the Banks (or the Collateral Agent or Agents on behalf of the
Banks) from any Guarantor, remain liable for the Guaranteed Obligations until
the Guaranteed Obligations are paid in full in Cash or Cash Equivalents, subject
to the provisions of Section 1(d) hereof.
(d) Notwithstanding any other provisions of this Guarantee, the
maximum aggregate amount of Guaranteed Obligations which each Guarantor agrees
to guarantee pursuant to this Guarantee shall equal the lesser of (i) the excess
of the fair saleable value of the property of such Guarantor over the total
liabilities of such Guarantor (including the maximum amount reasonably expected
to become due in respect of contingent liabilities, other than any such
contingent liabilities under the Credit Agreement and the other Credit
Documents), such excess to be determined on the date of this Guarantee or the
date on which, from time to time, such enforcement or realization is effected,
whichever is higher and (ii) that amount of Guaranteed Obligations which does
not result in a violation of applicable laws relating to fraudulent conveyance,
after giving effect to the value of any rights to subrogation, reimbursement,
indemnification or contribution (including without limitation rights to
contribution from any other Subsidiary Guarantor) whether by agreement or under
applicable law. The obligations of each Guarantor hereunder shall be joint and
several with the obligations of each other Guarantor hereunder. Subject to the
preceding sentences, each Guarantor understands, agrees and confirms that this
is a guarantee of payment when due and not of collection and that each Bank may,
from time to time, enforce this Guarantee against any Guarantor up to the full
amount of the Guaranteed Obligations owed to such Bank without proceeding
against any other Credit Party, against any security for the Guaranteed
Obligations, against any other guarantor or under any other guarantee covering
the Guaranteed Obligations.
Each Guarantor that makes a payment or distribution under this
Guarantee shall be entitled to a contribution from each other Subsidiary
Guarantor in an amount pro rata, based on the net assets of each Subsidiary
Guarantor.
2. Waiver by Guarantor. Each Guarantor hereby waives absolutely and
irrevocably any claim which it may have against any Borrower or any of their
respective Affiliates (other than any right to contribution pursuant to Section
1(d) hereof) by reason of any payment to the Agents, Collateral Agent or any
<PAGE>
-4-
Bank, or to any other Person pursuant to or in respect of this Guarantee,
including any claims by way of subrogation, contribution, reimbursement,
indemnity or otherwise, until the Guaranteed Obligations are paid in full.
3. Consent by Guarantor. Each Guarantor hereby consents and agrees
that, without the necessity of any reservation of rights against such Guarantor
and without notice to or further assent by such Guarantor, any demand for
payment of any of the Guaranteed Obligations made by the Agents, the Collateral
Agent or any Bank may be rescinded by the Banks (or the Agents or Collateral
Agent on behalf of the Banks) and any of the Guaranteed Obligations continued,
and the Guaranteed Obligations, or the liability of any other party upon or for
any part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Banks (or the Agents or the Collateral Agent on
behalf of the Banks); and the Credit Agreement or any other Credit Document, or
other guarantee or documents in connection therewith, or any of them, may be
amended, modified, supplemented or terminated, in whole or in part, as the Banks
(or the Agents or Collateral Agent on behalf of the Banks) may deem advisable
from time to time (in accordance with the terms thereof); and any Guarantee or
right of offset or any collateral may be sold, exchanged, waived, surrendered or
released, all without the necessity of any reservation of rights against such
Guarantor and without notice to or further assent by such Guarantor, which will
remain bound hereunder, notwithstanding any such renewal, extension,
modification, acceleration, compromise, amendment, supplement, termination,
sale, exchange, waiver, surrender or release. Neither the Banks, the Agents nor
the Collateral Agent shall have any obligation to protect, secure, perfect or
insure any collateral or property at any time held as security for the
Guaranteed Obligations or this Guarantee. When making any demand hereunder
against any Guarantor, the Agents, the Collateral Agent or the Banks may, but
shall be under no obligation to, make a similar demand on any other Credit Party
or any such other guarantor, and any failure by the Agents, the Collateral Agent
or the Banks to make any such demand or to collect any payments from such other
Credit Party or any such other guarantor or any release of such other Credit
Party or any such other guarantor or of each Guarantor's obligations or
liabilities hereunder shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of the Agents, the Collateral Agent
or the Banks against each Guarantor hereunder. For the purposes hereof "demand"
shall include the commencement and continuance of any legal proceedings.
4. Waivers; Successors and Assigns. Each Guarantor waives any and
all notice of the creation, renewal, extension or
<PAGE>
-5-
accrual of any of the Guaranteed Obligations and notice of or proof of reliance
by the Banks upon this Guarantee or acceptance of this Guarantee, and the
Guaranteed Obligations shall conclusively be deemed to have been created,
contracted or incurred in reliance upon this Guarantee, and all dealings between
any Guarantor and any other Credit Party, on the one hand, and the Banks, on the
other hand, shall likewise be conclusively presumed to have been had or
consummated in reliance upon this Guarantee. Each Guarantor waives diligence,
presentment, protest, demand for payment and notice of default or non-payment to
or upon any Credit Party or any Guarantor with respect to the Guaranteed
Obligations. This Guarantee shall be construed as a continuing, absolute and
unconditional Guarantee of payment without regard to the validity, regularity or
enforceability of the Credit Agreement, the other Credit Documents, any of the
Guaranteed Obligations or any guarantee therefor or right of offset with respect
thereto at any time or from time to time held by the Banks and without regard to
any defense (other than the defense of payment), set off or counterclaim which
may at any time be available to or be asserted by any Credit Party against the
Banks, or by any other circumstance whatsoever (with or without notice to or
knowledge of any Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Guaranteed Obligations, or of
any Guarantor under this Guarantee, in bankruptcy or in any other instance, and
the obligations and liabilities of each Guarantor hereunder shall not be
conditioned or contingent upon the pursuit by the Banks or any other Person at
any time of any right or remedy against any Credit Party or against any other
Person which may be or become liable or obligated in respect of all or any part
of the Guaranteed Obligations or against any collateral security or guarantee
therefor or right of offset with respect thereto. This Guarantee shall remain in
full force and effect and be binding in accordance with and to the extent of its
terms upon each Guarantor and the successors and assigns thereof, and shall
inure to the benefit of the Banks, and their respective successors, indorsees,
transferees and assigns permitted under the Credit Agreement (including each
holder from time to time of Guaranteed Obligations) until all of the Guaranteed
Obligations and the obligations of each Guarantor under this Guarantee shall
have been satisfied by payment in full in Cash or Cash Equivalents,
notwithstanding that from time to time during the term of the Credit Agreement
any Credit Party may be released from all of its Guaranteed Obligations
thereunder.
5. Guarantee Secured. Payment under this Guarantee is secured by
pledges, encumbrances and mortgages of Collateral pursuant to applicable
Security Documents in accordance with the Credit Agreement. Reference is hereby
made to the Credit Agreement and the applicable Security Documents for a
description of the Collateral pledged and the right of the respective parties to
<PAGE>
-6-
such property, to secure all the obligations of any Guarantor hereunder which
may be party to such documents.
6. Rights of Set-Off. The Banks, and the Agents and Collateral Agent
on behalf of the Banks, are each hereby irrevocably authorized upon the
occurrence and during the continuance of an Event of Default without notice to
any Guarantor (any such notice being expressly waived by each Guarantor to the
extent permitted by applicable law) to set-off and appropriate and apply any and
all deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect or contingent or matured or unmatured, at
any time held or owing by the Banks to or for the credit or the account of any
Guarantor, or any part thereof, in such amounts as the Banks, or the Agents or
Collateral Agent on behalf of the Banks, may elect, against and on account of
the obligations and liabilities of any Guarantor to the Banks, in any currency,
whether arising hereunder or otherwise, as the Banks, or the Agents or
Collateral Agent on behalf of the Banks, may elect, whether or not the Banks, or
the Agents or Collateral Agent on behalf of the Banks, have made any demand for
payment but only to the extent that such obligations, liabilities and claims
shall have become due and payable (whether as stated, by acceleration or
otherwise). The Banks, or the Agents or Collateral Agent on behalf of the Banks,
agree to notify any such Guarantor promptly of any such set-off and the
application made by the Banks, or the Agents or Collateral Agent on behalf of
the Banks; provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Banks, or the Agents
or Collateral Agent on behalf of the Banks, under this Section 6 are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) which the Banks, or the Agents or Collateral Agent on behalf of the
Banks, may otherwise have.
7. Effectiveness; Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Guaranteed Obligations is rescinded or must
otherwise be restored or returned by the Banks upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of any Credit Party, or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, any Credit Party or any substantial part of its
property, or otherwise, all as though such payments had not been made.
8. Payments of Guaranteed Obligations. Each Guarantor hereby
guarantees that the Guaranteed Obligations will be paid for the ratable benefit
of the Banks without set-off or counterclaim in lawful currency of the United
States of America at the office of the Collateral Agent located at 425 Lexington
<PAGE>
-7-
Avenue, New York, New York 10017. Each Guarantor shall make any payments
required hereunder upon receipt of written notice thereof from the Agents or
Collateral Agent or any Bank; provided, however, that the failure of the Agents
or Collateral Agent or any Bank to give such notice shall not affect any
Guarantor's obligations hereunder.
9. Default. If (x) any Borrower has failed to pay or perform when
due its Guaranteed Obligations or (y) there is an event with respect to any
Guarantor that would require or permit the acceleration pursuant to Section 8.04
of the Credit Agreement of any outstanding Loan, or (z) any Guarantor's
obligations, if any, under the Credit Agreement are accelerated, then in the
case of clause (x) all of the Guaranteed Obligations with respect to the
Borrowers and in the case of clause (y) or clause (z) all of the Guaranteed
Obligations shall be immediately due and payable by the Guarantors, regardless
of whether in the case of clause (x) the payment of the Guaranteed Obligations
has been accelerated or in the case of clause (y) or clause (z) the Borrowers
are in default with respect to the Guaranteed Obligations.
10. Representations and Warranties. To induce the Banks to enter
into the Credit Agreement and to make Loans and to issue Letters of Credit, each
Guarantor represents and warrants to each Bank that the following statements are
true, correct and complete on and as of the Closing Date:
A. Organization and Powers. (a) Such Guarantor is a duly organized
and validly existing corporation in good standing under the laws of the
jurisdiction of its organization and has the corporate power and authority to
own its property and assets and to transact the business in which it is engaged
and presently proposes to engage. (b) Such Guarantor has duly qualified and is
qualified to do business, or as of the Closing Date has taken appropriate steps
to qualify, and is in good standing in all jurisdictions in which the conduct of
its business or the ownership of its properties requires such qualification,
except where the failure to be so qualified would not have a Material Adverse
Effect. (c) Such Guarantor has all requisite power and authority and all
requisite governmental licenses, authorizations, consents and approvals to own
and carry on its businesss as now conducted and as contemplated to be conducted
by the Documents, including, without limitation, those in compliance with or
required by the Environmental Laws other than such licenses, authorizations,
consents and approvals the failure to obtain which has not had and will not have
a Material Adverse Effect. (d) Such Guarantor has all authority to enter into
each of the Security Documents to which it is or is to be a party and to carry
out the transactions contemplated thereby and to execute and deliver this
Guarantee.
<PAGE>
-8-
B. No Violations. Neither the execution, delivery or performance by
such Guarantor of any of the Credit Documents to which it is a party, nor
compliance with any of the terms and provisions thereof, nor the consummation of
any of the transactions contemplated therein, nor the grant and perfection of
the security interests pursuant to the Security Documents (a) will contravene
any provision of any law, statute, rule, regulation, order, writ, injunction or
decree of any Governmental Authority, (b) will conflict or be inconsistent with
or result in any breach of, any of the terms, covenants, conditions or
provisions of, or constitute (with notice or lapse of time or both) a default
under any material contractual obligation of such Guarantor, or (other than as
contemplated by the Security Documents) result in the creation or imposition of
(or the obligation to create or impose), any Lien upon any of the property or
assets of such Guarantor pursuant to any material contractual obligation or (c)
will violate any provision of the organizational documents of such Guarantor.
C. Approvals. The execution, delivery and performance by such
Guarantor of the Credit Documents to which it is, or is to be, a party do not
and will not require any registration with, consent or waiver or approval of, or
notice to, or other action to, with or by, any Governmental Authority or other
Person except filings required for the perfection or maintenance of perfection
of security interests granted pursuant to the Security Documents or enforcement
of the Liens and remedies provided by the Credit Documents. Except for such
filings, all consents and approvals from or notices to or filings with any
Governmental Authority or other Person required to be obtained by such Guarantor
have been obtained and are in full force and effect except where the failure to
obtain such consents or approvals will not result in a Material Adverse Effect
and except for filings required to perfect or maintain the perfection of Liens
granted by the Credit Documents and filings listed on Schedules 5.06 to the
Credit Agreement.
D. Binding Obligation. This Guarantee constitutes the legal, valid
and binding obligation of such Guarantor, enforceable against such Guarantor in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium or
similar laws relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability whether enforcement is sought by
proceedings in equity or at law.
E. Investment Company. Such Guarantor is not an "investment company"
or a company "controlled" by an "investment company" (as each of such quoted
terms is defined or used in the Investment Company Act of 1940, as amended) or
subject to any foreign, federal or local statute or regulation limiting its
<PAGE>
-9-
ability to incur indebtedness for money borrowed or guarantee such indebtedness
as contemplated hereby or by any other Credit Document.
11. Ratable Sharing. The Banks by acceptance of this Guarantee agree
among themselves that with respect to all amounts received by them which are
applicable to the payment of obligations of any Guarantor under this Guarantee,
if the Banks, or the Agents or Collateral Agent on behalf of the Banks, exercise
their rights hereunder, including, without limitation, acceleration of the
obligations of any Guarantor hereunder, equitable adjustment will be made so
that, in effect, all such amounts will be shared among the Banks pro rata based
on the relative outstanding Guaranteed Obligations.
12. Merger. If any Guarantor shall merge into or consolidate with
another corporation, or liquidate, wind up or dissolve itself in a transaction
not prohibited by the Credit Agreement, or if all of the stock of the Guarantor
shall be sold or otherwise disposed of in a manner not prohibited by the Credit
Agreement, such Guarantor hereby covenants and agrees, that upon any such
merger, consolidation, liquidation, or dissolution, the guarantee given in this
Guarantee and the due and punctual performance and observance of all of the
covenants and conditions of the Credit Agreement to be performed by such
Guarantor, shall be expressly assumed (in the event that such Guarantor is not
the surviving corporation in the merger) by supplemental agreements satisfactory
in form to the Banks, or the Agents or Collateral Agent on behalf of the Banks,
by the corporation or corporations formed by such consolidation, or into which
such Guarantor shall have been merged, or by the corporation or corporations
which shall have acquired such property unless such sale or transfer is
permitted under Section 7.16 or Section 7.17 of the Credit Agreement in which
case the Guarantor shall be released from this Guarantee. In addition, such
Guarantor shall deliver to the Banks, or the Agents or Collateral Agent on
behalf of the Banks, an Officers' Certificate and an opinion of counsel, each
stating that such merger, consolidation or transfer and such supplemental
agreements comply with this Guarantee and that all conditions precedent herein
provided relating to such transaction have been complied with. In case of any
such consolidation, merger, sale or conveyance and upon the assumption by the
successor corporation or corporations, by supplemental agreements executed and
delivered to the Banks or the Agents or Collateral Agent on behalf of the Banks,
and satisfactory in form to the Banks, or the Agents or Collateral Agent on
behalf of the Banks, of the guarantee given in this Guarantee and the due and
punctual performance of all of the covenants and conditions of the Credit
Agreement to be performed by such Guarantor, such successor corporation or
corporations shall succeed to and be substituted for such Guaran-
<PAGE>
-10-
tor, with the same effect as if it or they had been named herein as a Guarantor.
13. No Waiver. (a) No failure to exercise and no delay in
exercising, on the part of the Banks, or the Agents or Collateral Agent on
behalf of the Banks, any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof, or the exercise of any
other power or right. The rights and remedies herein provided are cumulative and
not exclusive of any rights or remedies provided by law. (b) In the event the
Banks, the Agents or the Collateral Agent on behalf of the Banks, shall have
instituted any proceeding to enforce any right, power or remedy under this
Guarantee by sale or otherwise, and such proceeding shall have been discontinued
or abandoned for any reason or shall have been determined adversely to the
Banks, the Agents or the Collateral Agent on behalf of the Banks, then and in
every such case, each Guarantor, the Banks, the Agents or the Collateral Agent
on behalf of the Banks, and each Bank shall be restored to its respective former
position and rights hereunder, and all rights, remedies and powers of the Banks,
the Agents or the Collateral Agent on behalf of the Banks, shall continue as if
no such proceeding had been instituted.
14. Notices. All notices, demands, instructions or other
communications required or permitted to be given to or made upon any party
hereto shall be given in accordance with the provisions of the Credit Agreement
and at the address either set forth therein or as provided on the signature page
hereof.
15. Amendments, Waivers, etc. No provision of this Guarantee shall
be waived, amended, terminated or supplemented except by a written instrument
executed by each Guarantor and the Agents or Collateral Agent, on behalf of the
Banks.
16. Notice of Exercise. Upon exercise of its rights hereunder, the
Banks, or the Agents or Collateral Agent on behalf of the Banks, as the case may
be, shall provide written notice on the date of such exercise to the Banks, or
the Agents or the Collateral Agent on behalf of the Banks, as the case may be,
of such exercise; provided, however, that the failure by the Agents, the
Collateral Agent, or any of the Banks to provide such written notice shall not
in any way relieve any Guarantor of its obligations under this Guarantee.
17. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
<PAGE>
-11-
18. CONSENT TO JURISDICTION AND SERVICE PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR WITH RESPECT TO THIS GUARANTEE MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF
NEW YORK AND BY EXECUTION AND DELIVERY OF THIS GUARANTEE EACH GUARANTOR ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS GUARANTEE. THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND EACH GUARANTOR HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS. EACH GUARANTOR DESIGNATES AND APPOINTS LEXIS
DOCUMENT SERVICES, INC., WITH AN ADDRESS AT 150 EAST 58TH STREET, 25TH FLOOR,
NEW YORK, NEW YORK 10155, AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY
ANY GUARANTOR, AFTER WRITTEN NOTICE TO THE AGENT, IRREVOCABLY AGREEING IN
WRITING TO SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF, SERVICE OF ALL PROCESS
IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY EACH GUARANTOR TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO
EACH GUARANTOR AS PROVIDED IN SECTION 14 HEREOF. IF ANY AGENT APPOINTED BY ANY
GUARANTOR REFUSES TO ACCEPT SERVICE, SUCH GUARANTOR HEREBY AGREES THAT SERVICE
UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT
THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE RIGHT OF ANY BANK TO BRING PROCEEDINGS AGAINST THE GUARANTOR IN THE COURTS
OF ANY OTHER JURISDICTION.
19. Severability of Provisions. Any provision of this Guarantee
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
20. Headings. The Section headings used in this Guarantee are for
convenience of reference only and shall not affect the construction of this
Agreement.
21. Future Advances. This Guarantee shall guarantee the payment of
any amounts advanced from time to time pursuant to the Credit Agreement.
22. Release of Hercules. Upon a determination of the Board of
Directors of the Company certified to the Administrative Agent, Hercules shall
be deemed released from all obligations un-
<PAGE>
-12-
der this Guarantee without any further action required on the part of the Agents
or any Bank.
23. Counterparts. This Guarantee and any amendments, waivers,
consents or supplements may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.
<PAGE>
-13-
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee to be duly executed and delivered by its duly authorized officer on
the day and year first above written.
MORRIS MATERIAL HANDLING, INC.
By: /s/ Michael Erwin
----------------------------------
Name: Michael Erwin
Title: President
MATERIAL HANDLING, LLC
By: /s/ Martin Ditkof
----------------------------------
Name: Martin Ditkof
Title: Secretary
CMH MATERIAL HANDLING, LLC
By: /s/ Martin Ditkof
----------------------------------
Name: Martin Ditkof
Title: Manager
EPH MATERIAL HANDLING, LLC
By: /s/ Martin Ditkof
----------------------------------
Name: Martin Ditkof
Title: Manager
<PAGE>
-14-
HARNISCHFEGER DISTRIBUTION &
SERVICE LLC
By: /s/ David Smith
----------------------------------
Name: David Smith
Title: Manager
HPH MATERIAL HANDLING, LLC
By: /s/ Martin Ditkof
----------------------------------
Name: Martin Ditkof
Title: Manager
MORRIS MATERIAL HANDLING, LLC
By: /s/ Martin Ditkof
----------------------------------
Name: Martin Ditkof
Title: Manager
MORRIS MECHANICAL HANDLING, INC.
By: /s/ Martin Ditkof
----------------------------------
Name: Martin Ditkof
Title: Secretary
MPH CRANE, INC.
By: /s/ Martin Ditkof
----------------------------------
Name: Martin Ditkof
Title: Secretary
<PAGE>
-15-
NPH MATERIAL HANDLING, INC.
By: /s/ Martin Ditkof
----------------------------------
Name: Martin Ditkof
Title: Secretary
PHME SERVICE, INC.
By: /s/ Martin Ditkof
----------------------------------
Name: Martin Ditkof
Title: Secretary
SPH CRANE & HOIST, INC.
By: /s/ Martin Ditkof
----------------------------------
Name: Martin Ditkof
Title: Secretary
HERCULES S.A. DE C.V.
By: /s/ David Smith
----------------------------------
Name: David Smith
Title: Director
<PAGE>
MHE TECHNOLOGIES, INC.,
as a Guarantor
By: /s/ J.P. Garniewski, Jr.
----------------------------------
Name: J.P. Garniewski, Jr.
Title: President
<PAGE>
PHMH HOLDING COMPANY,
as a Guarantor
By: /s/ J.P. Garniewski, Jr.
----------------------------------
Name: J.P. Garniewski, Jr.
Title: President
<PAGE>
MATERIAL HANDLING EQUIPMENT
NEVADA CORPORATION,
as a Guarantor
By: /s/ Patrick C. Dorn
----------------------------------
Name: Patrick C. Dorn
Title: President
================================================================================
STOCKHOLDERS
AND REGISTRATION RIGHTS AGREEMENT
Dated as of March 30, 1998
by and among
MMH HOLDINGS, INC.
MHE INVESTMENTS, INC.,
AND
HARNISCHFEGER CORPORATION
================================================================================
<PAGE>
TABLE OF CONTENTS
Section 1. Preemptive Rights................................................1
Section 2. Transfer Restrictions............................................1
Section 3. Registration Rights..............................................4
Section 4. Operating Policies..............................................16
Section 5. Legends.........................................................18
Section 6. Specific Performance, Etc.......................................18
Section 7. Termination.....................................................19
Section 8. Miscellaneous...................................................19
Section 9. Definitions.....................................................21
i
<PAGE>
STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement") is entered into as of
March 30, 1998, by and among (i) MMH Holdings, Inc., a Delaware corporation (the
"Company"), (ii) MHE Investments, Inc., a Delaware corporation ("Investor"), and
(iii) Harnischfeger Corporation, a Delaware corporation ("HarnCo"). HarnCo and
Investor are sometimes collectively referred to herein as the "Stockholders."
Unless otherwise defined herein, capitalized terms shall have the meanings set
forth in Section 8 hereof.
WHEREAS, pursuant to the terms of the Recapitalization Agreement,
dated as of January 28, 1998, among Investor, HarnCo and each of the Sellers
listed therein (the "Recapitalization Agreement"), Investor and HarnCo will own
approximately 77.8% and 22.2%, respectively, of the voting common stock of the
Company and, 88.2% and 11.8%, respectively, of the total voting power of the
Company, and Investors, HarnCo and the other stockholders of the Company will
own approximately 72.6%, 20.8% and 6.6%, respectively, of the total voting and
nonvoting common stock; and
WHEREAS, it is a condition precedent to the obligations of each of
Investor and HarnCo to close the transactions contemplated in the
Recapitalization Agreement that each of Investor and HarnCo shall have entered
into this Agreement.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, Investor and HarnCo
hereby agree as follows:
Section 1. Preemptive Rights. The Company shall not be permitted to
issue (an "Issuance") additional shares of Common Stock or Convertible
Securities, other than pursuant to an Exempt Issuance, unless, prior to such
Issuance, the Company notifies HarnCo in writing of the Issuance and grants to
HarnCo the right (the "Right") to subscribe for and purchase such additional
shares of Common Stock or Convertible Securities so issued at the same price and
on substantially the same terms as contemplated by the Issuance such that, after
giving effect to the Issuance and exercise of the Right, the Shares (including,
for purposes of this calculation, the shares of Common Stock issuable upon
conversion, exchange or exercise of any Covered Convertible Security, including
those issued in the Issuance or subject to the Right) owned by HarnCo (rounded
to the nearest whole share) shall represent the same percentage of the Fully
Diluted Shares as was owned by HarnCo prior to the Issuance. The Right may be
exercised by HarnCo by written notice to the Company received by the Company
within 15 days after receipt of notice from the Company of the Issuance, and the
closing of the purchase and sale pursuant to the exercise of the Right shall
occur at least 10 days after the Company receives notice of the exercise of the
Right and prior to or concurrently with the closing of the Issuance.
The provisions of this Section 1 shall terminate as to any Share or
Covered Convertible Security on the date such Share or Covered Convertible
Security is sold or otherwise transferred by HarnCo to any unaffiliated third
party.
Section 2. Transfer Restrictions
<PAGE>
(a) Tag-Along Rights. With respect to any proposed transfer, sale or
other disposition (collectively, a "proposed transfer") of shares of Common
Stock, whether now owned or hereafter acquired, by Investor to a Person (such
other Person being hereafter referred to as the "proposed purchaser"), other
than pursuant to an Exempt Transfer, HarnCo shall have the right (the "Tag-Along
Right") to require Investor to require the proposed purchaser to purchase from
HarnCo the number of shares of Common Stock equaling the number derived by
multiplying the total number of shares of Common Stock Investor proposes to
transfer by a fraction, the numerator of which is the total number of shares of
Common Stock owned by HarnCo, and the denominator of which is the total number
of shares of Common Stock owned by Investor plus the number of shares of Common
Stock owned by HarnCo. Any Shares purchased from HarnCo pursuant to this Section
2 shall be at the same price and upon substantially the same terms and
conditions as such proposed transfer by Investor. Investor shall, not less than
30 nor more than 45 days prior to each proposed transfer, notify, or cause to be
notified, HarnCo in writing of each such proposed transfer. Such notice shall
set forth: (i) the name of the transferor and the number of Shares proposed to
be transferred, (ii) the name and address of the proposed purchaser, (iii) the
proposed amount and form of consideration and terms and conditions of payment
offered by such proposed purchaser and (iv) that the proposed purchaser has been
informed of the Tag-Along Right provided for in this Section 2.
The Tag-Along Right may be exercised by HarnCo by delivery of a
written notice to Investor (the "Tag-Along Notice") within 30 days following its
receipt of the notice specified in the last sentence of the preceding paragraph.
The Tag-Along Notice shall state the amount of Shares that HarnCo proposes to
include in such transfer to the proposed purchaser determined as aforesaid. In
the event that the proposed purchaser does not purchase Shares from HarnCo on
the same terms and conditions as specified in the notice referred to in the last
sentence of the preceding paragraph to the extent required by the preceding
paragraph, then Investor shall not be permitted to sell any Shares to the
proposed purchaser in the proposed transfer unless Investor or its designee so
purchases such Shares from HarnCo. If no Tag-Along Notice is received during the
30-day period referred to above (or if the number of Shares included in such
Tag-Along Notice is less than the aggregate number of Shares that HarnCo could
have elected to sell to the proposed purchaser), Investor shall have the right,
for a 30-day period after the expiration of the 30-day period referred to above,
to transfer the Shares specified in the notice referred to in the last sentence
of the preceding paragraph (less the amount, if any, of Shares included in any
Tag-Along Notice) on terms and conditions no more favorable than those stated in
such notice and in accordance with the provisions of this Section 2.
The Tag-along Right shall also apply to any Convertible Securities
which Investor or HarnCo may acquire in the future, and the calculations under
this Section 2(a) shall be made on the basis of Fully Diluted Shares (but
excluding Convertible Securities which are "out-of-the-money").
The Company agrees not to effect any transfer of Common Stock by
Investor until it has received evidence reasonably satisfactory to it that the
Tag-Along Right, if applicable to such transfer, has been complied with.
2
<PAGE>
(b) Drag-Along Rights.
(i) If Investor proposes to make a bona fide sale of at least
85% of its Shares and Convertible Securities to an Independent Third Party,
Investor shall have the right (a "Drag-Along Right"), exercisable upon 10 days'
prior written notice to HarnCo, to require HarnCo to sell the same percentage of
its Shares and Convertible Securities to the Independent Third Party on the same
financial terms as Investor. Notwithstanding anything to the contrary, to the
extent Investor exercises its Drag-Along Right pursuant to this Section 2(b),
the provisions of Section 2(a) hereof shall not be applicable to the transaction
that triggered such Drag-Along Right.
(ii) Investor shall deliver a written notice to HarnCo setting
forth the identity of, and the consideration per share to be paid by, the
Independent Third Party (the "Drag-Along Notice"). Not later than 10 days
following the delivery of the Drag-Along Notice, HarnCo shall deliver to
Investor certificates representing all of the Shares and Convertible Securities
owned by it to be sold pursuant to this Section 2(b), accompanied by all
necessary documents and instructions to effect such transfer. HarnCo hereby
appoints Investor as its attorney-in-fact for the purpose of effectuating the
sale to the Independent Third Party, including the execution and delivery of
customary documents (including agreements containing customary representations,
warranties and indemnifications on terms no less favorable to HarnCo than
Investor; provided, that, in no event shall HarnCo be required to indemnify the
buyer (or other parties) for any amount in excess of the proceeds received by
HarnCo) necessary or proper to effectuate the sale to the Independent Third
Party. The power of attorney represented by such appointment shall be coupled
with an interest and shall be irrevocable.
(iii) If HarnCo should fail to deliver certificates
representing all of the Shares and Convertible Securities owned by it to be sold
pursuant to this Section 2(b), Investor shall cause the books and records of the
Company to show that such Shares and Convertible Securities are bound by the
provisions of this Section 2 and that such Shares and Convertible Securities
shall be transferred only to the Independent Third Party upon surrender for
transfer by the holder thereof.
(iv) If, within 120 days after the delivery of the Drag-Along
Notice, such sale to the Independent Third Party is not completed, Investor
shall return to HarnCo all certificates representing Shares and Convertible
Securities that HarnCo delivered for sale pursuant hereto.
(c) Right of First Refusal.
(i) Except for a transfer pursuant to Section 2(a) or (b)
above, if HarnCo desires to make a transfer of all or any portion of its Shares
to a bona fide prospective purchaser for value in a transaction, HarnCo shall
give a written notice ("First Refusal Notice") signed by HarnCo to the Company
and Investor of HarnCo's desire to do so. The Notice shall set forth in
reasonable detail the terms and provisions of the proposed transfer, including,
without limitation, (A) the Shares to be transferred (the "Offered Shares"), (B)
the identity and
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the address of the Person to whom HarnCo proposes to transfer the Offered Shares
and (C) the price, terms and conditions of the proposed transfer.
(ii) The Investor and the Company shall have the irrevocable
and exclusive option, but not the obligation, to purchase some or all of the
Offered Shares, at the same price and upon terms and conditions substantially
equivalent to those offered by the prospective purchaser (as evidenced by a copy
of such offer to purchase which shall accompany the First Refusal Notice). If
the Company elects to purchase some or all of the Offered Shares, it shall give
notice of such election to HarnCo and Investor within 45 days after the receipt
of the First Refusal Notice. If the Company has not elected to purchase all of
the Offered Shares, the Investor may elect to purchase all of the remaining
Offered Shares which the Company has not elected to purchase, to be transferred
upon the same terms and conditions as those set forth in the First Refusal
Notice by delivering a written notice of such election to HarnCo and the Company
within 45 days after the receipt of the First Refusal Notice.
(iii) If the Company and/or Investor give notice of their
election to purchase pursuant to the foregoing provisions, they shall be
obligated to purchase from HarnCo, and HarnCo shall be obligated to sell to the
Company and/or Investor, the Offered Shares stated therein, at the price and on
the terms and conditions determined pursuant to the foregoing provisions within
45 days after their election.
(iv) If HarnCo gives the First Refusal Notice and the Company
and Investor, together, do not elect, pursuant to the foregoing provisions, to
purchase all of the Offered Shares, HarnCo may, at any time or times after the
45th day following receipt of the First Refusal Notice by the Company and
Investor (or such earlier date that the Company and Investor shall notify HarnCo
of their intent not to elect to purchase the Offered Shares) and for 30 days
thereafter (the "Disposition Period"), transfer the Offered Shares to the Person
or Persons specified in the First Refusal Notice, at the price and on the terms
and conditions therein, and any Offered Shares not so transferred by HarnCo
during the Disposition Period may not thereafter be transferred, except in
compliance with the foregoing provisions.
(v) For purposes of this Section 2(c), Investor may designate
any Person to exercise its right to acquire the Offered Shares.
(vi) The Company agrees not to effect any transfer of Offered
Shares by HarnCo until it has received evidence reasonably satisfactory to it
that the right of first refusal described above, if applicable to such transfer,
has been complied with.
(d) The restrictions in this Agreement shall not apply to any
transfer of Shares or Convertible Securities by HarnCo to any of its Affiliates
(an "Affiliate Transferee"). Any such Affiliate Transferee shall be entitled to
all of the rights of HarnCo, and shall be subject to all of the obligations of
HarnCo, under this Agreement. Any such Affiliate Transferee shall execute and
deliver to the Company a written agreement to be bound by the terms hereof as a
condition to such transfer.
Section 3. Registration Rights.
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(a) Piggyback Registration Rights.
(1) Right to Piggyback. Subject to the last sentence of this
subsection (1), whenever the Company proposes to register any Common Stock under
the Act and the registration form to be used may be used for the registration of
the Registrable Securities (other than a registration statement on Forms S-4 or
S-8 or any similar successor forms) (a " Piggyback Registration"), the Company
will give written notice to all holders of Registrable Securities, at least 30
days prior to the anticipated filing date, of its intention to effect such a
registration, which notice will specify the proposed offering price, the kind
and number of securities proposed to be registered, the distribution
arrangements and such other information that at the time would be appropriate to
include in such notice, and will, subject to subsection (a)(2) below, include in
such Piggyback Registration all Registrable Securities with respect to which the
Company has received written requests for inclusion therein within 20 business
days after the delivery of the Company's notice; provided, however, that if, at
any time after giving written notice of its intention to register any securities
and prior to the effective date of the Registration Statement filed in
connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to each holder and,
thereupon, (A) in the case of a determination not to register, the Company shall
be relieved of its obligation to register any Registrable Securities under this
Section 3(a)(1) in connection with such registration (but not from its
obligation to pay the registration expenses incurred in connection therewith)
and (B) in the case of a determination to delay registering, the Company shall
be permitted to delay registering any Registrable Securities under this Section
3(a)(1) during the period that the registration of such other securities is
delayed. The Company further agrees to supplement or amend a Registration
Statement if required by applicable laws, rules or regulations or by the
instructions applicable to the registration form used by the Company for such
Registration Statement. Each holder shall be permitted to withdraw all or any
part of such holder's Registrable Securities from a registration at any time
prior to the effective date of the Registration Statement by notifying the
Company of such withdrawal not later than two business days prior to such
effective date. Any holder of Registrable Securities who withdraws any such
securities from a registration shall pay to the Company any incremental expenses
of such registration specifically attributable to the withdrawal of such holder.
Except as may otherwise be provided in this Agreement, Registrable Securities
with respect to which such request for registration has been received will be
registered by the Company and offered to the public in a Piggyback Registration
pursuant to this Section 3 on the terms and conditions at least as favorable as
those applicable to the registration of shares of Common Stock to be sold by the
Company and by any other Person selling under such Piggyback Registration.
(2) Priority on Piggyback Registrations. If the managing underwriter
or underwriters, if any, advise the holders of Registrable Securities in writing
that in its or their reasonable opinion or, in the case of a Piggyback
Registration not being underwritten, the Company shall reasonably determine (and
notify the holders of Registrable Securities of such determination), after
consultation with an investment banker of nationally recognized standing, that
the number or kind of securities proposed to be sold in such registration
(including Registrable Securities to be included pursuant to subsection (a)(1)
above) will adversely affect
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the success of such offering, the Company will include in such registration the
number of securities, if any, which, in the opinion of such underwriter or
underwriters, or the Company, as the case may be, can be sold as follows: (A) if
such registration was initiated by the Company, (i) first, the shares the
Company proposes to sell and (ii) second, the Registrable Securities and other
shares of Common Stock requested to be included in such registration by the
holders thereof entitled to participate in such registration and (B) if such
registration was initiated as the result of the exercise of a demand
registration right of holders of Common Stock other than HarnCo (i) first, the
shares of Common Stock requested to be included in such registration by the
demanding holders pro rata among those requesting such registration on the basis
of the number of shares of Common Stock requested to be included and (ii)
second, shares to be issued and sold by the Company and shares held by Persons
other than the demanding holders and requested to be included in such
registration (including Registrable Securities). To the extent that the
privilege of including Registrable Securities or other shares of Common Stock in
any Piggyback Registration must be allocated among the holders thereof pursuant
to clause (A)(ii) or (B)(ii) above, the allocation shall be made pro rata based
on the number of shares of Common Stock that each such participant shall have
requested to include therein.
(3) Selection of Underwriters. If any Piggyback Registration is an
underwritten offering, the Company will select a managing underwriter or
underwriters to administer the offering, which managing underwriter or
underwriters will be of nationally recognized standing.
(4) Expenses. In each Piggyback Registration, the Company shall pay
up to $25,000 in fees and expenses of one counsel for all holders of Registrable
Securities included therein.
(b) Demand Registration Rights.
(1) Right to Demand by HarnCo. On any two occasions after 270 days
after the first registration of shares of Common Stock under the Act (other than
any registrations on Forms S-4 or S-8 or any similar successor form) HarnCo may
make a written request of the Company for registration with the Securities and
Exchange Commission (the "SEC"), under and in accordance with the provisions of
the Act, of all or part of its Registrable Securities (a "Demand Registration");
provided, however, that (x) the Company need not effect a Demand Registration
unless such Demand Registration shall include a number of Registrable Securities
equal to at least 25% of the Shares held by HarnCo as of the date hereof
(subject to adjustment only for stock splits and recombinations and pro rata
stock dividends and the like), (y) the Company may, if the Board of Directors
determines in the exercise of its reasonable judgment that to effect such Demand
Registration at such time would require premature disclosure of corporate
developments or interfere with a material transaction, defer such Demand
Registration for a single period not to exceed 75 days, and (z) if the Company
elects to defer any Demand Registration pursuant to the terms of this sentence,
no Demand Registration shall be deemed to have occurred for purposes of this
Agreement during the term of such deferral. Within 10 days after receipt of the
request for a Demand Registration, the Company will send written notice (the
"Demand Notice") of such registration request and its intention to comply
therewith to each of the other holders of Registrable Securities and, subject to
subsection (3) below, the Company
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will include in such registration all Registrable Securities of such holders
with respect to which the Company has received written requests for inclusion
therein within 20 business days after the effectiveness of the Demand Notice.
All requests made pursuant to this subsection (b)(1) will specify the aggregate
number of Registrable Securities requested to be registered and will also
specify the intended methods of disposition thereof.
(2) Number of Demand Registrations. HarnCo shall be entitled to up
to two Demand Registrations as provided in subsection (b)(1) above, and the
expenses of each (including the fees and expenses of a total of one counsel for
HarnCo in an amount up to $25,000 per Demand Registration) shall be borne by the
Company. A Demand Registration shall not be counted as a Demand Registration
hereunder unless HarnCo has the right to sell at least 75% of the Registrable
Securities it originally requested to be registered and until such Demand
Registration has been declared effective by the SEC and maintained continuously
effective for a period of 90 days in the case of an immediate offering or 180
days in the case of a shelf registration or such shorter period when all
Registrable Securities included therein have been sold in accordance with such
Demand Registration.
(3) Priority on Demand Registrations. If in any Demand Registration
the managing underwriter or underwriters thereof (or in the case of a Demand
Registration not being underwritten, in the opinion of the holders of a majority
of the Registrable Securities included therein), advise the Company in writing
that in its or their reasonable opinion the number of securities proposed to be
sold in such Demand Registration exceeds the number that can be sold in such
offering without having an adverse effect on the success of the offering
(including, without limitation, any impact on the selling price or the number of
shares that any participant may sell), the Company will include in such
registration only the number of securities that, in the reasonable opinion of
such underwriter or underwriters (or holders of Registrable Securities, as the
case may be) can be sold without having an adverse effect on the success of the
offering as follows: (i) first, the Registrable Securities requested to be
included in such Demand Registration by HarnCo; and (ii) second, shares to be
issued and sold by the Company and shares held by Persons other than HarnCo and
requested to be included in such Demand Registration. To the extent that the
privilege of including shares of Common Stock in any Demand Registration must be
allocated among the holders thereof pursuant to clause (ii) above, the
allocation shall be made pro rata based on the number of shares of Common Stock
that each such participant shall have requested to include therein.
(4) Selection of Underwriters. If a Demand Registration is an
underwritten offering, the Company will select a managing underwriter or
underwriters of recognized national standing to administer the offering;
provided, however, that such underwriter or underwriters must be reasonably
satisfactory to HarnCo.
(c) Registration Procedures. With respect to any Piggyback
Registration or Demand Registration (generically, a "Registration"), the Company
will, subject to subsections (3)(a)(2) and (3)(b)(3) above, as expeditiously as
practicable:
(1) prepare and file with the SEC, within 90 days after mailing the
applicable notice, a Registration Statement or Registration Statements relating
to the applicable
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Registration on any appropriate form under the Act, which form shall be
available for the sale of the Registrable Securities in accordance with the
intended method or methods of distribution thereof; provided, however, that the
Company will include in any Registration Statement on a form other than Form S-1
all information that the holders of the Registrable Securities so to be
registered shall reasonably request, including all financial statements required
by the SEC to be filed with Form S-1, cooperate and assist in any filings
required to be made with the National Association of Securities Dealers, Inc.
("NASD"), and use its reasonable best efforts to cause such Registration
Statement to become effective; provided further, that before filing a
Registration Statement or Prospectus related thereto or any amendments or
supplements thereto, the Company will furnish to the holders of the Registrable
Securities covered by such Registration Statement and the underwriters, if any,
copies of all such documents proposed to be filed, which documents will be
subject to the reasonable review of such holders and underwriters and their
respective counsel;
(2) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep each
Registration Statement effective for the applicable period, or such shorter
period which will terminate when all Registrable Securities covered by such
Registration Statement have been sold; cause each Prospectus to be supplemented
by any required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the Act; and comply with the provisions of the Act
with respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus; the Company shall not be deemed to
have used its reasonable best efforts to keep a Registration Statement effective
during the applicable period if it voluntarily takes any action that would
result in selling holders of the Registrable Securities covered thereby not
being able to sell such Registrable Securities during that period unless such
action is required under applicable law, provided, however, that the foregoing
shall not apply to actions taken by the Company in good faith and for valid
business reasons, including without limitation the acquisition or divestiture of
assets, so long as the Company promptly thereafter complies with the
requirements of subsection (11) of this subsection (c), if applicable;
(3) notify the selling holders of Registrable Securities and the
managing underwriters, if any, promptly, and (if requested by any such Person)
confirm such advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective, (B) of any request by the SEC for amendments or supplements to the
Registration Statement or the Prospectus or for additional information, (C) of
the issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose,
(D) if at any time the representations and warranties of the Company
contemplated by subsection (14) below cease to be true and correct, (E) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose and (F) of the
happening of any event which makes any statement made in the Registration
Statement, the Prospectus or any document incorporated therein by reference
untrue or which requires the making of any changes
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in the Registration Statement, the Prospectus or any document incorporated
therein by reference in order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(4) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(5) if requested by the managing underwriter or underwriters or a
holder of Registrable Securities being sold in connection with an underwritten
offering, promptly incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriters and the holders of a
majority of the Registrable Securities being sold agree should be included
therein relating to the plan of distribution with respect to such Registrable
Securities, including, without limitation, information with respect to the
number of Registrable Securities being sold to such underwriters, the purchase
price being paid therefor by such underwriters and with respect to any other
terms of the underwritten (or best efforts underwritten) offering of the
Registrable Securities to be sold in such offering; and make all required
filings of such Prospectus supplement or post-effective amendment promptly after
being notified of the matters to be incorporated in such Prospectus supplement
or post-effective amendment;
(6) furnish to each selling holder of Registrable Securities and
each managing underwriter, without charge, at least one signed copy of the
Registration Statement and any amendment thereto, including financial statements
and schedules, all documents incorporated therein by reference and all exhibits
(including those incorporated by reference);
(7) deliver to each selling holder of Registrable Securities and the
underwriters, if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement thereto
as such selling holder of Registrable Securities and underwriters may reasonably
request; the Company consents to the use of each Prospectus or any amendment or
supplement thereto by each of the selling holders of Registrable Securities and
the underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by such Prospectus or any amendment or supplement
thereto;
(8) prior to any public offering of Registrable Securities, register
or qualify or cooperate with the selling holders of Registrable Securities, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification of such Registrable Securities for offer and sale
under the securities or "blue sky" laws of such jurisdictions as any seller or
underwriter reasonably requests in writing, and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the Registrable Securities covered by the Registration Statement; provided,
however, that the Company will not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take any
action that would subject it to general service of process in any such
jurisdiction where it is not then so subject, unless this limitation would
materially adversely impair the ability of HarnCo to sell the Registrable
Securities covered by the Registration Statement;
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(9) cooperate with the selling holders of Registrable Securities and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and not
bearing any restrictive legends and to be in such denominations and registered
in such names as the managing underwriters may request at least two business
days prior to any sale of Registrable Securities to the underwriters;
(10) use its reasonable best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriters, if any,
to consummate the disposition of such Registrable Securities;
(11) upon the occurrence of any event contemplated by subsection
(3)(F) above, prepare a supplement or post-effective amendment to the
Registration Statement or the related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities, the Prospectus will
not contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(12) cause all Registrable Securities covered by any Registration
Statement to be listed on each securities exchange on which similar securities
issued by the Company are then listed, or cause such Registrable Securities to
be authorized for trading on the Nasdaq National Market if any similar
securities issued by the Company are then so authorized, if requested by the
holders of a majority of such Registrable Securities or the managing
underwriters, if any;
(13) provide a CUSIP number for all Registrable Securities, not
later than the effective date of the applicable Registration Statement;
(14) enter into such agreements (including an underwriting
agreement) and take all such other actions in connection therewith in order to
expedite or facilitate the disposition of such Registrable Securities and in
such connection, upon the request of the holders of a majority of the Common
Stock entitled to participate in any Registration, (A) make such representations
and warranties to the holders of such Common Stock and the underwriters, if any,
in form, substance and scope as are customarily made by issuers to underwriters
in primary underwritten offerings; (B) obtain opinions of counsel to the Company
and updates thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriters, if any, and the
holders of a majority of the Common Stock being sold) addressed to each selling
holder and the underwriters, if any, covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as may be
reasonably requested by such holders and underwriters; (C) obtain "comfort" or
"procedures" letters and updates thereof from the Company's independent
certified public accountants addressed to the selling holders of Common Stock
and the underwriters, if any, such letters to be in customary form and covering
matters of the type customarily covered in "comfort" or "procedures" letters to
underwriters in connection with primary underwritten offerings; (D) if an
underwriting agreement is entered into, the same shall set forth in full the
indemnification provisions and procedures set forth in subsection (f) below with
respect to all
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parties to be indemnified pursuant to said subsection; and (E) the Company shall
deliver such documents and certificates as may be requested by the holders of a
majority of the Common Stock being sold and the managing underwriters, if any,
to evidence compliance with subsection 3(F) above and with any customary
conditions contained in the underwriting agreement or other agreement entered
into by the Company;
(15) make available for inspection by a representative of HarnCo,
any underwriter participating in any disposition pursuant to such Registration,
and any attorney or accountant retained by the sellers or underwriter, all
relevant financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all information, reasonably requested by any such
representative, underwriter, attorney or accountant in connection with such
Registration Statement; provided, however, that any records, information or
documents that are designated by the Company in writing as confidential shall be
kept confidential by such Persons unless disclosure of such records, information
or documents is required by court or administrative order or any regulatory body
having jurisdiction;
(16) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC, and make generally available to its
security holders, earnings statements satisfying the provisions of Section 11(a)
of the Act, no later than 45 days after the end of any 12-month period (or 90
days, if such period is a fiscal year) (A) commencing at the end of any fiscal
quarter in which Registrable Securities are sold to underwriters in a firm or
best efforts underwritten offering, or (B) if not sold to underwriters in such
an offering, beginning with the first month of the Company's first fiscal
quarter commencing after the effective date of the Registration Statement, which
statements shall cover said 12-month periods; and
(17) promptly prior to the filing of any document that is to be
incorporated by reference into any Registration Statement or Prospectus (after
initial filing of the Registration Statement), provide copies of such document
to counsel to the selling holders of Registrable Securities and to the managing
underwriters, if any, make the Company's representatives available for
discussion of such document and make such changes in such document prior to the
filing thereof as counsel for such selling holders or underwriters may
reasonably request.
The Company may require each seller of Registrable Securities as to
which any Registration is being effected to furnish to the Company such
information regarding the proposed distribution of such securities as the
Company may from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in subsection (3)(F) of this
subsection (c), such holder will forthwith discontinue disposition of
Registrable Securities pursuant to the Registration Statement until such
holder's receipt of copies of the supplemented or amended Prospectus as
contemplated by subsection (11) of this subsection (c), or until it is advised
in writing (the "Advice") by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings that
are incorporated by reference in the Prospectus, and, if so
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directed by the Company, such holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
holder's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice. In the event the Company shall
give any such notice, the time periods referred to in subsection (2) of this
subsection (c) shall be extended by the number of days during the period from
and including the date of the giving of such notice to and including the date
when each seller of Registrable Securities covered by such Registration
Statement shall have received the copies of the supplemented or amended
prospectus contemplated by subsection (11) of this subsection (c) or the Advice.
(d) Restrictions on Public Sale.
(1) Public Sale by Holders of Registrable Securities. To the extent
not inconsistent with applicable law, each party whose Registrable Securities
are included in a Registration Statement hereunder, if requested by the managing
underwriter or underwriters for such Registration, agrees not to effect any
public sale or distribution of Registrable Securities, including a sale pursuant
to Rule 144, during the 10 business days prior to, and during the 180-day period
(or such shorter period as may be agreed to by such underwriters) beginning on,
the effective date of a Registration Statement pursuant to such Piggyback
Registration or Demand Registration (except as part of such Piggyback or Demand
Registration).
(2) Public Sale by the Company and Others. If requested by the
managing underwriter or underwriters for any underwritten Registration, or by
the holder or holders initially requesting a Demand Registration that is not
being underwritten, neither the Company nor Investor will effect any public sale
or distribution of Common Stock for its own account (or securities convertible
into or exchangeable or exercisable for Common Stock) during the 10 business
days prior to, and during the 180-day period beginning on, the effective date of
such Registration, except pursuant to such Registration.
(3) Other Registrations. If the Company has previously filed a
Registration Statement with respect to Registrable Securities, and if such
previous Registration has not been withdrawn or abandoned, the Company will not
file or cause to be effected any other registration of any of its Common Stock
(or securities convertible into or exchangeable for, or options to purchase,
Common Stock) under the Act (except on Forms S-4 or S-8 or any similar successor
form), whether on its own behalf or at the request of any holder or holders of
Common Stock (or securities convertible into or exchangeable or exercisable for
Common Stock), until a period of at least 90 days has elapsed from the effective
date of such previous Registration; provided, however, that if the holders of
50% or more of the aggregate number of Registrable Securities included in such
previous Registration shall agree in writing, such period may be shortened by
the Company but not to a period shorter than one month.
(e) Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Agreement will be borne by the Company,
including, without limitation, all registration and filing fees, the fees and
expenses of the counsel and accountants for the Company (including the expenses
of any "comfort" or "procedures" letters and special audits required by or
incident to the performance of such persons), all other costs and
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expenses of the Company incident to the preparation, printing and filing under
the Act of the Registration Statement (and all amendments and supplements
thereto) and furnishing copies thereof and of the Prospectus included therein,
the costs and expenses incurred by the Company in connection with the
qualification of the Registrable Securities under the state securities or "blue
sky" laws of various jurisdictions, the costs and expenses associated with
filings required to be made with the NASD (including, if applicable, the fees
and expenses of any "qualified independent underwriter" and its counsel as may
be required by the rules and regulations of the NASD), the costs and expenses of
listing the Registrable Securities for trading on a national securities exchange
or authorizing them for trading on the Nasdaq National Market and all other
costs and expenses incurred by the Company in connection with any Registration
hereunder; provided, however, that, except as otherwise provided in subsection
(a)(4) and (b)(2) above, the Company shall not bear the costs and expenses of
HarnCo or any other holder of Registrable Securities for underwriters'
commissions or expenses, brokerage fees, transfer taxes, or the fees and
expenses of any counsel, accountants or other representative retained by HarnCo
or any other holder of Registrable Securities.
(f) Indemnification.
(1) Indemnification by the Company. The Company agrees to indemnify
and hold harmless (i) each Stockholder and (ii) each Person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") any Stockholder
(any of the Persons referred to in this clause (ii) being hereinafter referred
to as a "controlling person") and (iii) the respective officers, directors,
partners, employees, representatives and agents of any Stockholder or any
controlling person (any person referred to in clause (i), (ii) or (iii) may
hereinafter be referred to as an "Indemnified Stockholder"), to the fullest
extent lawful, from and against any and all losses, claims, damages, liabilities
and judgments caused by any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or Prospectus (or any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except, with respect to any Stockholder,
insofar as such losses, claims, damages, liabilities or judgments (1) are caused
by any such untrue statement or omission or alleged untrue statement or omission
based upon information furnished in writing to the Company by such Stockholder
expressly for use therein or (2) with respect to any preliminary prospectus,
result from the fact that such Stockholder sold Common Stock to a Person to whom
there was not sent or given, at or prior to the written confirmation of such
sale, a copy of the final prospectus, as amended or supplemented, if the Company
shall have previously furnished copies thereof to the Stockholders in accordance
with this Agreement and the final prospectus, as amended or supplemented, would
have corrected such untrue statement or omission.
In case any action shall be brought against any of the Indemnified
Stockholders or any Person controlling any of the Indemnified Stockholders,
based upon any Registration Statement or Prospectus, or any amendment or
supplement thereto, and with respect to which indemnity may be sought against
the Company, such Indemnified Stockholder (or the Indemnified Stockholder
controlled by such controlling person) shall promptly notify the
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Company in writing and the Company shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified
Stockholder and payment of all fees and expenses. Such Indemnified Stockholder
or any such controlling person shall have the right to employ separate counsel
in any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be paid by such Indemnified Stockholder, unless
(i) the employment of such counsel shall have been specifically authorized in
writing by the Company, (ii) the Company shall have failed to assume the defense
and employ counsel or (iii) the named parties to any such action (including any
impleaded parties) include both such Indemnified Stockholder or such controlling
person and the Company and such Indemnified Stockholder or such controlling
person shall have been advised by such counsel that it would be inappropriate
for the same counsel to represent the Indemnified Stockholder and the Company
(in which case the Company shall not have the right to assume the defense of
such action on behalf of such Indemnified Stockholder or such controlling
person, it being understood, however, that the Company shall not, in connection
with any one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for the Indemnified
Stockholders and all controlling persons, which firm shall be designated in
writing by the Indemnified Stockholders and that all such fees and expenses
reasonably incurred shall be reimbursed as they are incurred). The Company shall
not be liable for any settlement of any such action effected without the written
consent of the Company, but if settled with the written consent of the Company,
the Company agrees to indemnify and hold harmless any Indemnified Stockholder
and any such controlling person from and against any amounts payable pursuant to
such written consent in connection with such settlement. Notwithstanding the
immediately preceding sentence, if in any case where the fees and expenses of
counsel are at the expense of the Company and an Indemnified Stockholder shall
have requested the Company to reimburse such Indemnified Stockholder for such
fees and expenses of counsel as incurred, the Company agrees that they shall be
liable for any settlement of any action effected without their written consent
if (i) such settlement is entered into more than 30 business days after the
receipt by the Company of the aforesaid request and (ii) the Company shall have
failed to reimburse such Indemnified Stockholder in accordance with such request
for reimbursement prior to the date of such settlement. The Company shall not,
without the prior written consent of such Indemnified Stockholder, effect any
settlement of any pending or threatened proceeding in respect of which such
Indemnified Stockholder is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Stockholder, unless such settlement
includes an unconditional release of such Indemnified Stockholder from all
liability on claims that are the subject matter of such proceeding at no cost to
such Indemnified Stockholder.
(2) Indemnification by Stockholders. Each Stockholder agrees to
indemnify and hold harmless the Company and any Person controlling the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
to the same extent as the foregoing indemnity from the Company to the each of
the Indemnified Stockholders, but only with reference to information relating to
such Stockholder that was furnished in writing by such Stockholder expressly for
use in any Registration Statement. In no event shall the liability of any
selling Stockholder hereunder be greater in amount than the dollar amount of the
proceeds
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received by such Stockholder upon the sale of the Common Stock giving rise to
such indemnification obligation.
(3) Contribution. If the indemnification provided for in this
Section 3(f) is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments in such proportion as
is appropriate to reflect the relative fault of the Company, on the one hand,
and such Stockholder, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
fault of the Company, on the one hand, and such Stockholder, on the other hand,
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company, on the
one hand, or such Stockholder, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and each Stockholder agree that it would not be just and
equitable if contribution pursuant to this Section 3(f)(3) were determined by
pro rata allocation (even if the Stockholders were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The losses, claims, damages, liabilities or judgments of an
indemnified party referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim prior to the indemnifying
party's assumption of the defense thereof or subsequent thereto to the extent
permitted by the second sentence of the second paragraph of Section 3(f) hereof.
Notwithstanding the provisions of this Section 3(f), none of the Stockholders
(and their related Indemnified Stockholders) shall be required to contribute, in
the aggregate, any amount in excess of the amount by which the net proceeds
received by such Stockholder with respect to the sale of shares of Common Stock
exceeds the amount of any damages which such Stockholder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Stockholders' obligations to contribute pursuant to this Section 3(f)(3) are
several in proportion to the respective amount of Common Stock sold by each of
the Stockholders pursuant to any Registration and not joint.
(g) Rule 144 or 144A. The Company agrees that at all times after it
has filed a Registration Statement pursuant to the requirements of the Act
relating to any class of equity securities of the Company, it will file in a
timely manner all reports required to be filed by it pursuant to the Act and the
Exchange Act and will take such further action as any holder of Registrable
Securities may reasonably request in order that such holder may effect sales of
Shares pursuant to Rule 144. At any reasonable time and upon request of HarnCo,
the Company
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will furnish HarnCo and others with such information as may be necessary to
enable HarnCo to effect sales of Common Stock pursuant to Rule 144 under the Act
and will deliver to HarnCo a written statement as to whether the Company has
complied with such requirements. Notwithstanding the foregoing, the Company may
deregister any class of its equity securities under Section 12 of the Exchange
Act or suspend its duty to file reports with respect to any class of its
securities pursuant to Section 15(d) of the Exchange Act if it is then permitted
to do so pursuant to the Exchange Act and the rules and regulations thereunder.
(h) Participation in Underwritten Registrations. No Stockholder may
participate in any underwritten Registration hereunder unless such Stockholder
(i) agrees to sell its Shares of Common Stock on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to select
the underwriter pursuant to subsections (3)(a)(3) and (3)(b)(4) above, and (ii)
accurately completes in a timely manner and executes all questionnaires, powers
of attorney, underwriting agreements, lock-up agreements and other documents
customarily required under the terms of such underwriting arrangements.
(i) Other Registration Rights. The Company will not grant to any
Person (including HarnCo) any demand or piggyback registration rights with
respect to the Common Stock of the Company other than demand or piggyback
registration rights that are not inconsistent with the terms of this Section 3.
To the extent that the Company grants to any Person registration rights with
respect to Convertible Securities of a class then held by HarnCo, the Company
will confer comparable rights to HarnCo with respect to such Convertible
Securities.
(j) Termination. HarnCo's rights pursuant to this Section 3 shall
terminate upon the last to occur of the following: (i) the third anniversary of
an initial public offering of the Common Stock, (ii) such time as HarnCo is
eligible to sell its Shares under Rule 144(k) under the Act, and (iii) such time
as the Company has established a market capitalization of at least $250,000,000,
having at least $100,000,000 of publicly traded Common Stock. The provisions of
this Section 3 shall terminate as to any Registrable Security on the date such
Registrable Security is sold pursuant to an effective Registration Statement or
pursuant to Rule 144 (or any similar provision then in force under the Act).
Section 4. Operating Policies.
(a) Board of Directors.
(i) The Board of Directors shall consist of not less than
three (3) Directors. HarnCo (or its successors or permitted assigns) shall have
the right to nominate one (1) director, reasonably acceptable to Investor.
(ii) HarnCo (or its successors or permitted assigns) shall
have the right to replace its existing nominee at any time with another nominee
reasonably acceptable to Investor. Investor shall not vote its Shares to remove
HarnCo's nominee elected as Director unless HarnCo has agreed to that nominee's
removal.
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(iii) Investor shall vote its Shares to elect HarnCo's
nominee. Meetings of the Board of Directors shall be governed in accordance with
this Agreement and the Company's Certificate of Incorporation and Bylaws.
(iv) HarnCo's rights pursuant to this Section 4(a) shall
terminate in the event that a third party acquires control of Harnischfeger
Industries, Inc. and such third party then or thereafter, directly or
indirectly, engages in the Competing Business on a significant level (a "Sale").
(b) Insurance. The Company shall maintain in full force and effect a
policy or policies of insurance issued by insurers of recognized responsibility,
insuring it and its properties and business against such losses and risks, and
in such amounts, as are customary in the case of an entity engaged in the same
or substantially similar business as the Company.
(c) Management Services. The Stockholders agree and acknowledge that
Chartwell Investments Inc., or an affiliate thereof, ("Chartwell") shall provide
the Company with such services related to the operations of the Company and
other management services necessary or desirable for its conduct of business in
consideration for payment of compensation to Chartwell on terms and conditions
to be agreed between the Company and Chartwell. Notwithstanding the foregoing,
the Compensation arrangements to be entered into at the closing of the
Recapitalization Agreement shall provide no greater than (i) closing fees of 1%
of total committed debt and equity plus expense reimbursement and (ii)
management fees of $1,000,000 per annum plus expense reimbursement.
(d) Pay Taxes and Other Liabilities. The Company shall pay and
discharge, before the same become delinquent and before penalties accrue
thereon, all taxes, assessments and governmental charges upon or against it or
any of its properties, except to the extent and so long as (i) the same are
being contested in good faith and by appropriate proceedings in such manner as
not to cause any materially adverse effect upon its financial condition or the
loss of any right of redemption from any sale thereunder and (ii) it shall have
set aside on its books reserves (segregated to the extent required by generally
accepted accounting principles) deemed by it adequate with respect thereto.
(e) Corporate Existence. The Company shall at all times preserve and
keep in full force and effect its corporate existence and all rights and
franchises (including licenses, authorizations and permits material to its
business.
(f) HarnCo Consent for Certain Actions. The following actions will
require HarnCo's consent:
(i) (A) Repurchases by the Company of Common Stock or
Convertible Securities (other than (1) repurchases of Shares and Convertible
Securities from Investor and HarnCo on a pro rata basis and (2) repurchases of
Common Stock or Convertible Securities from departing management members); and
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(B) repurchases of Series B Preferred Stock and Series C
Preferred Stock from Investor and HarnCo on a pro rata basis based on the
aggregate liquidation value of the shares of such series held by them.
(ii) Post-closing affiliate and insider transactions
(including changes in management fees), other than transactions approved by the
Board which are fair and reasonable and at market terms and conditions.
(iii) Granting conflicting rights or entering into conflicting
agreements (other than covenants in third-party debt documents) relative to this
Agreement.
(g) Books and Records. The Company shall keep the books and records
of the Company in accordance with generally accepted accounting principles as
applied in the United States. The Company shall furnish each Stockholder:
(i) promptly after transmission, copies of (x) all reports,
officers' certificates, and other information furnished by the Company to equity
holders of the Company generally and (y) all reports filed by the Company or its
officers and directors with any securities exchange or the SEC; and
(ii) With reasonable promptness, such other information
relating to the finances, properties, business and affairs of the Company, as
any Stockholder reasonably may request from time to time;
provided, however, that HarnCo's right to receive non-public
information shall terminate in the event of a Sale (as defined in Section 4(a)
above).
Section 5. Legends.
(i) Investor and HarnCo agree that each certificate representing
shares of Common Stock shall bear the following legends until such time as the
same are no longer applicable:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM."
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE TERMS OF, AND ARE ENTITLED TO THE BENEFITS SET FORTH
IN, A STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT DATED AS OF
MARCH 30, 1998, A COPY OF WHICH IS ON FILE AT THE OFFICE OF MMH
HOLDINGS,
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INC. MMH HOLDINGS, INC. WILL FURNISH A COPY OF SUCH STOCKHOLDERS AND
REGISTRATION RIGHTS AGREEMENT TO THE RECORD HOLDER HEREOF WITHOUT
CHARGE UPON WRITTEN REQUEST TO MMH HOLDINGS, INC. AT ITS PRINCIPAL
PLACE OF BUSINESS OR REGISTERED OFFICE."
Section 6. Specific Performance, Etc. The Company, Investor and
HarnCo, in addition to being entitled to exercise all rights provided herein, in
the Company's Certificate of Incorporation or granted by law, including recovery
of damages, will be entitled to specific performance of its rights under this
Agreement. The Company, Investor and HarnCo agree that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Agreement and hereby agree to waive the defense in any
action for specific performance that a remedy at law would be adequate.
Section 7. Termination. Except where an earlier time is provided
herein, the rights and obligations of the parties other than those set forth in
Sections 2(b) and 3 (which shall survive for the periods indicated therein)
shall terminate upon a Termination Event.
Section 8. Miscellaneous.
(a) Notices. All notices and other communications provided for or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally or sent by telecopy, overnight courier or
registered or certified mail (return receipt requested) postage prepaid to the
parties at the following addresses (or such other address for any party as shall
be specified by like notice, provided, however, that notices of a change of
address shall be effective only upon receipt thereof). Notice sent by mail shall
be effective five days after mailing.
(i) If to the Company at:
MMH Holdings, Inc.
315 West Forest Hill Avenue
Oak Creek, Wisconsin 53154
Telecopy No.: (414) 764-8594
Attention: President
(ii) If to the Investor at:
MHE Investments, Inc.
c/o Chartwell Investments Inc.
717 Fifth Avenue
23rd Floor
New York, New York 10022
Telecopy No.: (212) 521-5533
Attention: President
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with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Telecopy No.: (202) 887-4288
Attention: Russell W. Parks, Jr.
(iii) If to HarnCo at:
Harnischfeger Corporation
3600 South Lake Drive
St. Francis, Wisconsin 53235
Telecopy No.: (414) 486-6717
Attention: President
with copies to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Telecopy No.: (312) 861-2000
Attention: Keith S. Crow
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers of or consents to departures from the provisions
hereof may not be given unless approved by the Company in writing and the
Company has obtained the written consent of Investor and HarnCo. No action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action. The waiver by any party hereto of a breach of any provision
of this Agreement shall not operate or be construed as waiver of any preceding
or succeeding breach and no failure by any party to exercise any right or
privilege hereunder shall be deemed a waiver of such party's rights or
privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
(c) Successors and Assigns; Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the parties and
their respective successors and permitted assigns.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same instrument.
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(e) Headings. The headings in this Agreement are for convenience of
reference only and shall not affect the meaning of any provision of this
Agreement.
(f) Governing Law. The validity, performance, construction and
effect of this Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware applicable to agreements made and to be
performed therein. The parties hereto agree to submit to the jurisdiction of the
courts of the State of Delaware in any action or proceeding arising out of or
relating to this Agreement.
(g) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held to be invalid,
illegal or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(h) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings other than those set forth or referred to herein with
respect to the registration rights granted by the Company with respect to the
Registrable Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
Section 9. Definitions.
The following terms, as used herein, have the following respective
meanings:
Affiliate shall mean (i) any person or entity directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company (including, without limitation, each of Investor and its Related
Parties), (ii) any spouse, immediate family member or other relative who has the
same principal residence of any person described in clause (i) above, (iii) any
trust in which any such persons or entities described in clause (i) or (ii)
above has a beneficial interest and (iv) any corporation or other organization
of which any such persons or entities described in clause (i) or (ii) above
collectively own more than 50% of the equity of such entity; provided, however,
that in no event shall HarnCo be deemed to be an Affiliate of the Company. For
purposes of this definition, ownership of 10% or more of the voting common
equity of a person or entity shall be deemed to be control of such person or
entity.
Common Stock shall mean the shares of common stock, par value $.01
per share, of the Company and all other classes of the Company's voting or
non-voting common stock which may exist on the date of this Agreement or which
may be created in the future.
Competing Business shall mean a business or enterprise that is
competitive with the MHE Business (as defined in the Recapitalization Agreement)
as conducted on the date of the Confidentiality and Non-Competition Agreement,
attached as Exhibit B to the Recapitalization Agreement and to be executed in
connection with the closing thereof; provided, that, Competing Business will not
include inspection, repair, modernization, maintenance or
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other services related to mining, paper or any other type of equipment (except
industrial cranes, hoists, winches, and other related types of industrial
"through the air" material handling equipment).
Convertible Securities shall mean securities convertible into or
exchangeable for, or options to purchase, Common Stock.
Covered Convertible Securities shall mean Convertible Securities
that have been issued to holders of Shares pursuant to Section 1 plus any
additional Convertible Securities issued to holders of Shares or Covered
Convertible Securities as part of a dividend on, subdivision of, or other
distribution in respect of, Shares or any type of Convertible Security that is
made pro rata to all holders of such Shares or type of Convertible Security.
Exempt Issuance shall mean (i) any issuance of Common Stock or
Convertible Securities to officers, employees, consultants or directors of the
Company or any Subsidiary thereof primarily for compensatory purposes, (ii) any
issuance, pro rata to all holders of Common Stock, of Common Stock or
Convertible Securities as a dividend on, subdivision of, or other distribution
in respect of, the Common Stock and (iii) any issuance of Common Stock or
Convertible Securities which are sold in an underwritten offering registered
under the Securities Act of 1933, as amended (the "Act").
Exempt Transfer shall mean (i) transfers by Investor to its Related
Parties; (ii) transfers by Investor's Related Parties to Investor; (iii)
transfers by Investor or any of Investor's Related Parties to any other Person
pursuant to an effective registration statement under the Act and/or pursuant to
Rule 144 under the Act; (iv) other transfers by Investor to any unaffiliated
third party in a cumulative aggregate amount not to exceed 10% of the total
number of shares of Common Stock outstanding on such date; (v) any transfers by
Investor or any of Investor's Related Parties pursuant to a merger,
consolidation, reorganization, recapitalization or other similar transaction
involving an unaffiliated third party in which all holders of such Common Stock
or Convertible Securities are offered the right to receive the same
consideration, and on the same terms, as Investor or such Related Party and (vi)
transfers by Investor to any other Person in connection with the closing of the
transactions contemplated by the Recapitalization Agreement; provided that any
such Related Party transferee shall be entitled to all of the rights of, and
subject to all of the obligations of, Investor under this Agreement; and further
provided that such Related Party shall agree in writing to become bound by the
terms of this Agreement as a condition to such transfer.
Family Member shall mean, for any individual person, the spouse or
sibling of such person and such person's and his or her spouse's or siblings'
respective estates, lineal descendants, adoptive children, heirs, executors,
personal representatives, administrators and trusts exclusively for any of their
benefit or exclusively for the benefit of their respective spouses, siblings,
estates, lineal descendants, adoptive children or heirs.
Fully Diluted Shares shall mean all issued and outstanding shares of
Common Stock and all shares of Common Stock issuable upon conversion, exchange
or exercise of Convertible Securities.
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Independent Third Party means any person (a) who, immediately prior
to the contemplated transaction, does not own in excess of 10% of the Common
Stock on a fully-diluted basis, (b) who is not controlling, controlled by or
under common control with (1) any such 10% owner of the Common Stock, (2)
Investor or (3) any Related Party and (c) who is not a Family Member of any such
person.
Initial Shares shall mean the Shares owned by Investor and HarnCo as
of the date hereof.
Person shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
Prospectus shall mean the Prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement and all other amendments and supplements
to the Prospectus, including post-effective amendments, and all material
incorporated by reference in such Prospectus.
Registrable Securities means the Shares, but with respect to any
Share, only until such time as such Share (i) has been effectively registered
under the Act and disposed of in accordance with the Registration Statement
covering it or (ii) has been sold to the public pursuant to Rule 144 (or any
similar provision then in force) under the Act and the legend referred to in
Section 5 has been removed or the Company has authorized the removal thereof
from the certificate representing such Share.
Registration Statement means any registration statement of the
Company filed pursuant to the Act and which covers any of the Registrable
Securities pursuant to the provisions of this Agreement, including the
Prospectus amendments and supplements to such Registration Statement, including
post-effective amendments, and all exhibits and all material incorporated by
reference in such Registration Statement.
Related Party with respect to Investor shall mean: (i) any partner,
controlling stockholder, Subsidiary or Family Member (in the case of an
individual) of Investor or (ii) any trust, corporation, partnership or other
entity, the beneficiaries, stockholders, partners, owners or Persons directly or
indirectly beneficially holding a 51% or more controlling interest of which
consist of Investor and/or such other Persons referred to in the immediately
preceding clause (i).
Shares shall mean the Initial Shares plus (i) any additional shares
of Common Stock issued to holders of Shares as part of a dividend on,
subdivision of, or other distribution in respect of Common Stock that is made
pro rata to all holders of Common Stock, (ii) any additional shares of Common
Stock issued to holders of Shares or Covered Convertible Securities pursuant
Section 1 hereof, and (iii) any additional shares of Common Stock issued to
holders of Covered Convertible Securities upon conversion of such Covered
Convertible Security.
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Subsidiary shall mean with respect to any Person, (i) a corporation
a majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, one or more Subsidiaries thereof or such
Person and one or more Subsidiaries thereof, directly or indirectly, at the date
of determination thereof has at least a majority ownership interest and the
power to direct the policies, management and affairs thereof.
Termination Event shall mean either (i) a public offering of Common
Stock pursuant to an effective registration statement under the Act covering the
offer and sale of Common Stock for the account of the Company, in which the
aggregate proceeds to the Company equal or exceed $50,000,000, or (ii) HarnCo
ceasing to own at least 5% of the Company's outstanding voting Common Stock.
[Signature page follows]
24
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Stockholders and
Registration Rights Agreement as of the date first above written.
MMH HOLDINGS, INC.
By: /s/ David D. Smith
-----------------------------------
Name: David D. Smith
Title: Vice President
MHE INVESTMENTS, INC.
By: /s/ Michael S. Shein
-----------------------------------
Name: Michael S. Shein
Title: Vice President
Number of shares of Common Stock held:
____________________________________________
HARNISCHFEGER CORPORATION
By: /s/ Eric B. Fonstad
----------------------------------
Name: Eric B. Fonstad
Title: Assistant Secretary
Number of shares of Common Stock held:
____________________________________________
INDENTURE
Dated as of [ ]
among
MMH HOLDINGS, INC.,
as the Issuer,
and
[ ],
as Trustee
------------------
$[ ]
12% Exchange Debentures due 2009
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- -------
310(a)(1)......................................................... 7.10
(a)(2)......................................................... 7.10
(a)(3)......................................................... N.A.
(a)(4)......................................................... N.A.
(a)(5)......................................................... 7.10
(b)............................................................ 7.8; 7.10
(c)............................................................ N.A.
311(a)............................................................ 7.11
(b)............................................................ 7.11
(c)............................................................ N.A.
312(a)............................................................ 2.6
(b)............................................................ 10.3
(c)............................................................ 10.3
313(a)............................................................ 7.6
(b)(1)......................................................... 7.6
(b)(2)......................................................... 7.6; 7.7
(c)............................................................ 7.5; 7.6;
10.2
(d)............................................................ 7.6
314(a)............................................................ 4.8; 4.10;
10.2
(b)............................................................ N.A.
(c)(1)......................................................... 4.8; 10.4
(c)(2)......................................................... 10.4
(c)(3)......................................................... 4.8; 10.4
(d)............................................................ N.A.
(e)............................................................ 10.5
(f)............................................................ N.A.
315(a)............................................................ 7.1(b)
(b)............................................................ 7.5; 10.2
(c)............................................................ 7.1(a)
(d)............................................................ 7.1(c)
(e)............................................................ 6.11
316(a)(last sentence)............................................. 2.9
(a)(1)(A)...................................................... 6.5
(a)(1)(B)...................................................... 6.4
(a)(2)......................................................... N.A.
(b)............................................................ 6.7; 9.4
(c)............................................................ 9.4
317(a)(1)......................................................... 6.8
(a)(2)......................................................... 6.9
(b)............................................................ 2.4
318(a)............................................................ 10.1
(c)............................................................ 10.1
- --------------------
"N.A." means Not Applicable.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE...........................1
Section 1.1. Definitions....................................................1
Section 1.2. Incorporation by Reference of TIA.............................24
Section 1.3. Rules of Construction.........................................24
ARTICLE 2. THE NOTES..........................................................25
Section 2.1. Amount of Notes...............................................25
Section 2.2. Form and Dating...............................................25
Section 2.3. Execution and Authentication..................................25
Section 2.4 Registrar and Paying Agent.....................................26
Section 2.5 Paying Agent To Hold Assets in Trust...........................26
Section 2.6 Noteholder Lists...............................................27
Section 2.7 Transfer and Exchange..........................................27
Section 2.8 Replacement Notes..............................................28
Section 2.9 Outstanding Notes..............................................28
Section 2.10 Treasury Notes................................................29
Section 2.11 Temporary Notes...............................................29
Section 2.12 Cancellation..................................................29
Section 2.13 Defaulted Interest............................................29
Section 2.14 CUSIP Number..................................................30
Section 2.15 Deposit of Moneys.............................................30
Section 2.16 Book-Entry Provisions for Global Notes........................30
Section 2.17 Special Transfer Provisions...................................32
Section 2.18 Computation of Interest.......................................32
ARTICLE 3. REDEMPTION.........................................................32
Section 3.1 Notices to Trustee.............................................32
Section 3.2 Selection of Notes To Be Redeemed..............................32
Section 3.3 Notice of Redemption...........................................32
Section 3.4 Effect of Notice of Redemption.................................33
Section 3.5 Deposit of Redemption Price....................................33
Section 3.6 Notes Redeemed in Part.........................................34
ARTICLE 4. COVENANTS..........................................................34
Section 4.1. Payment of Notes..............................................34
Section 4.2. Maintenance of Office or Agency...............................34
Section 4.3. Limitation on Additional Indebtedness.........................35
Section 4.4. Limitation on Restricted Payments.............................35
Section 4.5. Legal Existence...............................................38
Section 4.6. Taxes ........................................................38
Section 4.7. Maintenance of Properties; Insurance; Books and Records.......38
Section 4.8. Compliance Certificate........................................39
<PAGE>
Section 4.9. [Reserved.]...................................................39
Section 4.10. Reports to Commission and Holders............................39
Section 4.11. Waiver of Stay, Extension or Usury Laws......................40
Section 4.12. Limitation on Certain Asset Sales............................40
Section 4.13. Limitation on Preferred Stock of Restricted Subsidiaries.....43
Section 4.14. Limitation on Other Senior Subordinated Indebtedness.........43
Section 4.15. Limitations on Transactions with Affiliates..................44
Section 4.16. Limitation on Capital Stock of Restricted Subsidiaries.......45
Section 4.17. [Reserved.]..................................................45
Section 4.18. Payments for Consent.........................................45
Section 4.19. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.....................................46
Section 4.20. Change of Control Offer......................................47
ARTICLE 5. SUCCESSOR CORPORATION..............................................50
Section 5.1. Mergers, Consolidations and Sales of Assets...................50
Section 5.2. Successor Corporation Substituted.............................51
ARTICLE 6. DEFAULT AND REMEDIES...............................................51
Section 6.1. Events of Default.............................................51
Section 6.2. Acceleration..................................................53
Section 6.3. Other Remedies................................................53
Section 6.4. Waiver of Past Defaults.......................................54
Section 6.5. Control by Majority...........................................54
Section 6.6. Limitation on Suits...........................................55
Section 6.7. Rights of Holders To Receive Payment..........................55
Section 6.8. Collection Suit by Trustee....................................55
Section 6.9. Trustee May File Proofs of Claim..............................55
Section 6.10. Priorities...................................................56
Section 6.11. Undertaking for Costs........................................56
Section 6.12. Restoration of Rights and Remedies...........................56
ARTICLE 7. TRUSTEE............................................................57
Section 7.1. Duties of Trustee.............................................57
Section 7.2. Rights of Trustee.............................................58
Section 7.3. Individual Rights of Trustee..................................59
Section 7.4. Trustee's Disclaimer..........................................59
Section 7.5. Notice of Default.............................................59
Section 7.6. Reports by Trustee to Holders.................................59
Section 7.7. Compensation and Indemnity....................................60
Section 7.8. Replacement of Trustee........................................61
Section 7.9. Successor Trustee by Consolidation, Merger, Etc...............62
Section 7.10. Eligibility; Disqualification................................62
Section 7.11. Preferential Collection of Claims Against Company............62
Section 7.12. Paying Agents................................................62
ii
<PAGE>
ARTICLE 8. AMENDMENTS, SUPPLEMENTS AND WAIVERS................................64
Section 8.1. Without Consent of Holders....................................64
Section 8.2. With Consent of Holders.......................................64
Section 8.3. Compliance with TIA...........................................65
Section 8.4. Revocation and Effect of Consents.............................66
Section 8.5. Notation on or Exchange of Securities.........................66
Section 8.6. Trustee To Sign Amendments, Etc...............................66
ARTICLE 9. DISCHARGE OF INDENTURE, DEFEASANCE.................................67
Section 9.1. Discharge of Indenture........................................67
Section 9.2. Legal Defeasance..............................................68
Section 9.3. Covenant Defeasance...........................................68
Section 9.4. Conditions to Legal Defeasance or Covenant Defeasance.........68
Section 9.5. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions.......................70
Section 9.6. Reinstatement.................................................70
Section 9.7. Moneys Held by Paying Agent...................................71
Section 9.8. Moneys Held by Trustee........................................71
ARTICLE 10. MISCELLANEOUS.....................................................72
Section 10.1. Trust Indenture Act Controls.................................72
Section 10.2. Notices......................................................72
Section 10.3. Communications by Holders with Other Holders.................73
Section 10.4. Certificate and Opinion as to Conditions Precedent...........73
Section 10.5. Statements Required in Certificate and Opinion...............74
Section 10.6. Rules by Trustee and Agents..................................75
Section 10.7. Business Days; Legal Holidays................................75
Section 10.8. Governing Law................................................75
Section 10.9. No Adverse Interpretation of Other Agreements................75
Section 10.10. No Recourse Against Others..................................75
Section 10.11. Successors..................................................76
Section 10.12. Multiple Counterparts.......................................76
Section 10.13. Table of Contents, Headings, etc............................76
Section 10.14. Separability................................................76
ARTICLE 11. SUBORDINATION.....................................................76
Section 11.1. Notes Subordinated to Senior Indebtedness....................77
Section 11.2. No Payment on Notes in Certain Circumstances................77
Section 11.3. Payment Over of Proceeds upon Dissolution, Etc...............78
Section 11.4. Payments May Be Paid Prior to Dissolution....................79
Section 11.5. Subrogation..................................................79
Section 11.6. Obligations of the Company Unconditional.....................79
Section 11.7. Notice to Trustee............................................80
Section 11.8. Reliance on Judicial Order or Certificate of Liquidating
Agent......................................................80
Section 11.9. Trustee's Relation to Senior Indebtedness....................80
iii
<PAGE>
Section 11.10. Subordination Rights Not Impaired by Acts or Omissions of
the Company or Holders of Senior Indebtedness.............81
Section 11.11. Holders Authorize Trustee To Effectuate Subordination
of Notes..................................................81
Section 11.12. This Article Eleven Not To Prevent Events of Default........82
Section 11.13. Trustee's Compensation Not Prejudiced.......................82
iv
<PAGE>
EXHIBITS
- --------
Exhibit A ............. Form of Note
Exhibit B ............. Form of Legend and Assignment for Global Note
SCHEDULES
- ---------
Schedule A ............ Permitted Affiliate Agreements
Schedule B ............ Permitted Investments
v
<PAGE>
INDENTURE dated as of [ , ], among MMH HOLDINGS, INC., a Delaware
corporation (the "Company"), as the Issuer, and [ ], as Trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Company's 12%
Exchange Debentures due 2009:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.
"Acquired Indebtedness" means (a) Indebtedness of a Person
(including an Unrestricted Subsidiary) existing at the time such Person becomes
a Restricted Subsidiary or assumed in connection with the acquisition of assets
from such Person and (b) any Seller Note.
"Additional Excess Proceeds Offer" shall have the meaning provided
in Section 4.12(4).
"Affiliate" of any specified Person means any other Person
(including, without limitation, such Person's issue, siblings and spouse) that
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
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, means 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. For purposes of this Indenture, the term "Affiliate," as it relates
to the Company, shall (a) include HarnCo for so long as HarnCo is entitled to
designate at least one member of the Board of Directors of the Company or any
successor to the Company and (b) not include CIBC Oppenheimer Corp. or Indosuez
Capital, a division of Credit Agricole Indosuez or their respective Affiliates.
"Affiliate Transaction" shall have the meaning provided in Section
4.15.
"Agent" means the Registrar, Paying Agent or agent for service of
notices or demands.
"Agent Members" shall have the meaning provided in Section 2.16.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person becomes a Restricted Subsidiary of the Company, or is merged with or into
the Company or any Restricted Subsidiary of the Company or (b) the acquisition
by the Company or any Restricted Subsidiary of the Company of the assets of any
Person (other than a Restricted Subsidiary of the Company) which constitute all
or substantially all of the assets of such Person or comprise any division or
<PAGE>
line of business of such Person or any other properties or assets of such Person
other than in the ordinary course of business.
"Asset Sale" means the sale, transfer or other disposition
(including, without limitation, by merger or consolidation) (other than to the
Company or any of its Restricted Subsidiaries) in any single transaction or
series of related transactions of (a) any Capital Stock of or other equity
interest in any Restricted Subsidiary of the Company (other than directors'
qualifying shares to the extent required by applicable law), (b) all or
substantially all of the assets of the Company or of any Restricted Subsidiary
thereof, (c) real property or (d) all or substantially all of the assets, or any
Property, or part thereof, owned by the Company or any Restricted Subsidiary
thereof, or a division, line of business or comparable business segment of the
Company or any Restricted Subsidiary thereof; provided that Asset Sales shall
not include (i) sales, leases, conveyances, transfers or other dispositions to
the Company or to a Restricted Subsidiary or to any other Person if after giving
effect to such sale, lease, conveyance, transfer or other disposition such other
Person becomes a Restricted Subsidiary, (ii) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole as permitted by Section
5.1(a), (iii) any transfer, conveyance, sale, lease or other disposition of
Property or assets, the gross proceeds of which (exclusive of indemnities) do
not exceed $500,000, (iv) any sales, leases, conveyances, transfers or other
dispositions of Property or equipment that has become worn out, obsolete or
damaged or otherwise unsuitable for use in connection with the business of the
Company or any Restricted Subsidiary, as the case may be, (v) the incurrence of
any Liens, (vi) the making of any Restricted Payment permitted by Section 4.4,
(vii) transfers of cash and sales of Cash Equivalents and (viii) sales, leases,
conveyances, transfers or other dispositions of Property or equipment in the
ordinary course of business.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i)
cash or Cash Equivalents received by the Company or any Restricted Subsidiary
from such Asset Sale, after (a) provision for all income or other taxes measured
by or resulting from such Asset Sale, (b) payment of all brokerage commissions,
underwriting and other fees and expenses related to such Asset Sale, (c)
provision for minority interest holders in any Restricted Subsidiary as a result
of such Asset Sale and (d) deduction of appropriate amounts to be provided by
the Company or a Restricted Subsidiary as a reserve, in accordance with GAAP,
against any liabilities associated with the assets sold or disposed of in such
Asset Sale and retained by the Company or a Restricted Subsidiary after such
Asset Sale, including, without limitation, pension and other post employment
benefit liabilities and liabilities related to environmental matters or against
any indemnification obligations associated with the assets sold or disposed of
in such Asset Sale; provided, that at such time as such amounts are no longer
reserved or such reserve is no longer necessary, any remaining amounts shall
become Asset Sale Proceeds to be allocated in accordance with Section 4.12 and
(ii) promissory notes and other noncash consideration received by the Company or
any Restricted Subsidiary from such Asset Sale or other disposition upon the
liquidation or conversion of such Notes or noncash consideration into cash.
"Agent" means any Registrar or Paying Agent.
2
<PAGE>
"Available Asset Sale Proceeds" means, with respect to any Asset
Sale, the aggregate Asset Sale Proceeds from such Asset Sales that have not been
applied in accordance with clause (iii)(a), and which has not yet been the basis
for an Excess Proceeds Offer in accordance with clause (iii)(b), of Section
4.12.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
"Bankruptcy Proceedings" shall have the meaning provided in Section
11.3.
"Blockage Period" shall have the meaning provided in Section 5.1(c).
"Board of Directors" means (i) in the case of a Person that is a
limited partnership, the board of directors of its corporate general partner or
any committee authorized to act therefor (or, if the general partner is itself a
limited partnership, the board of directors of such general partner's corporate
general partner or any committee authorized to act therefor), (ii) in the case
of a Person that is a corporation, the board of directors of such Person or any
committee authorized to act therefor and (iii) in the case of any other Person,
the board of directors, management committee or similar governing body or any
authorized committee thereof responsible for the management of the business and
affairs of such Person.
"Board Resolution" means a copy of a resolution certified pursuant
to an Officers' Certificate to have been duly adopted by the Board of Directors
of the Company and to be in full force and effect on the date of such
certificate, and delivered to the Trustee.
"Business Day" has the meaning provided in Section 10.7.
"Capital Stock" means, with respect to any Person, any and all
shares or other equivalents (however designated and whether or not voting) of
capital stock, partnership interests or any other participation, right or other
interest in the nature of an equity interest in such Person or any option,
warrant or other security convertible into any of the foregoing.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Cash Equivalents" means any of the following Investments: (i)
marketable direct obligations issued by, or unconditionally guaranteed by, the
United States Government or issued by any agency thereof and backed by the full
faith and credit of the United States maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any foreign country recognized by the United
States or any political subdivision of any such state or foreign country, as the
case may be, or any public instrumentality thereof (including any taxing
authority) maturing within one year from the date of acquisition thereof and, at
the time of acquisition, having one of the two highest ratings obtainable from
either Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service,
3
<PAGE>
Inc. ("Moody's"); (iii) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit,
time deposit accounts, operating accounts or bankers' acceptances maturing
within one year from the date of acquisition thereof issued or guaranteed by any
commercial banking institution organized under the laws of any jurisdiction
recognized by the United States of America and in which the Company or its
Subsidiaries actively conduct business, having at the date of acquisition
thereof combined capital and surplus of not less than U.S. $250,000,000 or the
foreign currency equivalent thereof; (v) repurchase obligations with a term of
not more than 30 days for underlying securities of the types described in clause
(i) above entered into with any bank meeting the qualifications specified in
clause (iv) above; (vi) investments in money market funds which invest
substantially all their assets in securities of the types described in clauses
(i) through (v) above; and (vii) foreign bank deposits and cash equivalents in
jurisdictions where the Company or its Subsidiaries are then actively conducting
business, provided, that (a) all such deposits are required to be made in the
ordinary course of business, (b) such deposits do not exceed $1,000,000 in the
aggregate, and (c) the funds so deposited do not remain in such bank for more
than 10 days.
A "Change of Control" of the Company will be deemed to have occurred
at such time as (i) any Person (including a Person's Affiliates) or any Persons
acting together that would constitute a group (for purposes of Section 13(d) of
the Exchange Act, or any successor provision thereto) (a "Group"), other than a
Permitted Holder, becomes the beneficial owner (as defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of (a) 50%
or more of the total Voting Stock of the Company or (b) 50% of all classes of
Common Stock (whether voting or non-voting), taken as a whole, of the Company,
(iii) any Person (including a Person's Affiliates) or Group, other than a
Permitted Holder, becomes the beneficial owner of more than 30% of the total
Voting Stock of the Company, and the Permitted Holders beneficially own, in the
aggregate, a lesser percentage of the total Voting Stock of the Company than
such other Person or Group and the Permitted Holders do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of the Company, (iv) there shall
be consummated any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which the Common
Stock of the Company would be converted into cash, securities or other Property,
other than a merger or consolidation of the Company in which the holders of the
Common Stock of the Company outstanding immediately prior to the consolidation
or merger hold, directly or indirectly, at least a majority of the Common Stock
of the surviving corporation immediately after such consolidation or merger, or
(v) during any period of two consecutive years, individuals who at the beginning
of such period constituted the Board of Directors of the Company (together with
any new directors whose election by such Board of Directors or whose nomination
for election by the shareholders of the Company has been approved by 66-2/3% of
the directors then still in office who either were directors at the beginning of
such period or whose election or recommendation for election was previously so
approved) cease to constitute a majority of the Board of Directors of the
Company.
"Change of Control Offer" shall have the meaning provided in Section
4.20.
4
<PAGE>
"Change of Control Payment Date" shall have the meaning provided in
Section 4.20.
"Change of Control Purchase Price" shall have the meaning provided
in Section 4.20.
"Chartwell" means Chartwell Investments Inc. and its Affiliates.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Common Stock" of any Person means all Capital Stock of such Person
that does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding-up of such Person, to any other class of Capital Stock of
such Person.
"Company" means the party named as such in the first paragraph of
this Indenture until a successor replaces such party pursuant to Article 5 of
this Indenture and thereafter means such successor.
"Company Request" means any written request signed in the name of
the Company by the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Chief Financial Officer or the Treasurer of
the Company and attested to by the Secretary or any Assistant Secretary of the
Company.
"Consolidated Interest Coverage Ratio" of any Person means the ratio
of (i) EBITDA of such Person for the four most recent consecutive fiscal
quarters for which financial statements are available or, if the Company is not
in compliance with its obligations in Section 4.10 on the date of determination,
the four most recent consecutive quarters ending on or prior to the date of
determination (in either such case, the "Four Quarter Period") to (ii)
Consolidated Interest Expense of such Person for such Four Quarter Period. In
addition to and without limitation of the foregoing, for purposes of this
definition, "EBITDA" and "Consolidated Interest Expense" shall be calculated
after giving effect on a pro forma basis to (i)(a) the incurrence of any
Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and (b) any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), occurring on or after the first day of the
Four Quarter Period and on or prior to the date of determination, in each case
set forth in clauses (i)(a) and (b), as if such incurrence or repayment, as the
case may be (and the application of the proceeds thereof), occurred on the first
day of the Four Quarter Period (except that Indebtedness under any revolving
credit facility shall be deemed to be the average daily balance of such
Indebtedness during such Four Quarter Period) and (ii) any Asset Sales or Asset
Acquisitions (including (x) any Person who becomes a Restricted Subsidiary as a
result of any such Acquisition and including any Asset Sale or Asset Acquisition
during such Four Quarter Period by any such Person determined as if such Person
had been a Restricted Subsidiary at the time of such transaction; provided, that
all Indebtedness of such Person and any such
5
<PAGE>
Restricted Subsidiaries shall be deemed to have been incurred on the first day
of the Four Quarter Period and (y) the increase or decrease, as the case may be,
in EBITDA directly attributable to such Asset Sale or Asset Acquisition, as the
case may be) occurring on or after the first day of the Four Quarter Period and
on or prior to the date of determination, as if such Asset Sale or Asset
Acquisition, as the case may be, (including the incurrence, assumption or
liability for any such Acquired Indebtedness) occurred on the first day of the
Four Quarter Period. For purposes of this definition, whenever pro forma effect
is to be given to an Asset Acquisition, the amount of income or earnings
relating thereto and the amount of Consolidated Interest Expense associated with
any Indebtedness incurred in connection therewith shall be determined in good
faith by a responsible financial or accounting officer of the Company.
"Consolidated Interest Expense" means, with respect to any Person,
for any period, without duplication, (i) the aggregate amount of interest
charges (excluding fees and expenses incurred in connection with the
Transactions), whether expensed or capitalized, incurred or accrued by such
Person and its Restricted Subsidiaries, determined on a consolidated basis in
conformity with GAAP for such period, plus (ii) to the extent not included in
clause (i) above, an amount equal to the sum of: (A) imputed interest included
in Capitalized Lease Obligations, (B) all commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers' acceptance
financing, (C) the net costs associated with Interest Rate Agreements, Currency
Agreements and other hedging obligations, (D) the interest portion of any
deferred payment obligations, (E) amortization of discount or premium on
Indebtedness, if any, (F) all capitalized interest and all accrued interest, (G)
all other non-cash interest expense, (H) all interest incurred or paid under any
guarantee of Indebtedness (including a guarantee of principal, interest or any
combination thereof) of any Person, and (I) all dividends or distributions on
Disqualified Capital Stock if payable to a Person other than the Company or a
Restricted Subsidiary (other than dividends paid or payable in shares of Capital
Stock (other than Disqualified Capital Stock) of the Company) declared and
payable in cash, minus (iii) to the extent included in clause (i) or (ii) above,
amortization or write-off of deferred financing costs (and original issue
discount to the extent it arises from the issuance of Capital Stock (other than
Disqualified Capital Stock) of the Company) during such period and, without
duplication, any charge related to any premium or penalty paid in connection
with redeeming or retiring any Indebtedness of the Company or its Restricted
Subsidiaries prior to the stated maturity thereof. If any Indebtedness
outstanding or to be incurred (x) bears a floating rate of interest, the
interest expense on such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
Four Quarter Period (taking into account on a pro forma basis any Interest Rate
Agreement that has a remaining term as of the date of determination in excess of
12 months), and/or (y) was incurred under a revolving credit facility, the
interest expense on such Indebtedness shall be computed based upon the average
daily balance of such Indebtedness during the applicable period. If any
Indebtedness to be incurred bears, at the option of the Company or a Restricted
Subsidiary, a fixed or floating rate of interest, the interest expense on such
Indebtedness shall be computed by applying, at the option of the Company or such
Restricted Subsidiary, either a fixed or floating rate.
"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
6
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consolidated basis, determined in accordance with GAAP; provided, that (a) the
Net Income of any Person that is not a Restricted Subsidiary shall be included
only to the extent of the amount of dividends or other distributions
representing the Company's proportionate share of such Person's Net Income for
such period actually paid in cash to the Company or a Restricted Subsidiary
(subject to clause (b) below) by such Person during such period, (b) the Net
Income of any Subsidiary of the Person in question that is subject to any
restriction or limitation on the payment of dividends or the making of other
distributions (other than pursuant to the New Credit Facility, the Senior Notes,
the Note Indenture or any other Indebtedness of the Company or any Restricted
Subsidiary of the Company containing, in the good faith judgment of the Board of
Directors of the Company, substantially the same or less restrictive limitations
on the payment of dividends or the making of other distributions than those
contained in the New Credit Facility, the Senior Notes, the Note Indenture, the
Notes or this Indenture) shall be excluded to the extent of such restriction or
limitation (regardless of any waiver thereof), (c)(i) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition and (ii) any net after tax gain (but not loss)
resulting from an Asset Sale by the Person in question or any of its
Subsidiaries other than in the ordinary course of business shall be excluded,
(d) non-cash gains and losses due solely to fluctuations in currency values
shall be excluded, (e) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings (or losses) of the successor corporation prior to such consolidation,
merger or transfer of assets shall be excluded, and (f) all items classified as
extraordinary, unusual or nonrecurring, including all items relating to the
Transactions and the pre-closing events relating thereto shall be excluded
(including the fees and expenses incurred in connection with the Transactions
and write-offs or other costs associated or arising in connection with the
Transactions). In computing Consolidated Net Income under clause (c) of the
first paragraph of Section 4.4, the Company or such Restricted Subsidiary (i)
shall use audited financial statements for the portion of the relevant period
for which such statements are available on the date of determination and
unaudited financial statements and other current financial data based on the
books and records of the Company for the remaining portion of such period and
(ii) shall be permitted to rely in good faith for the balance of the relevant
period for which audited financial statements are not available on the financial
statements and other financial data derived from the books and records of the
Company or such Restricted Subsidiary that are available on the date of
determination.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person and its Restricted Subsidiaries determined
on a consolidated basis in accordance with GAAP, less (to the extent included)
amounts attributable to Disqualified Capital Stock of such Person.
"Consolidated Tangible Assets" of any Person means the consolidated
tangible assets of such Person and its Restricted Subsidiaries determined on a
consolidated basis in accordance with GAAP as of the end of the most recent
fiscal quarter for which financial statements are available or, if the Company
is not in compliance with its obligations in Section 4.10 on the date of
determination, the end of the most recent quarter ending on or prior to the date
of determination.
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"Corporate Trust Office" means _________________.
"Covenant Defeasance" has the meaning provided in Section 9.3.
"Credit Facilities" means one or more senior secured or unsecured
credit facilities providing, inter alia, for revolving credit loans, term loans,
bankers' acceptances and/or letters of credit between the Company or its
Restricted Subsidiaries and one or more lenders, including, in each case, any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced, restated 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 designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means any condition or event that is, or with the passing
of time or giving of any notice expressly required under Section 6.1 (or both)
would be, an Event of Default.
"Depository" means, with respect to the Notes issued in the form of
one or more Global Notes, The Depository Trust Company or another Person
designated as Depository by the Company, which Person must be a "clearing
agency" registered under the Exchange Act.
"Designated Senior Indebtedness" as to the Company or any
Subsidiary, as the case may be, means any Senior Indebtedness (a) under the
Credit Facilities, (b) under any Surety Arrangements or (c) which has at the
time of initial issuance an aggregate principal amount outstanding or available
under a committed facility in excess of $10 million and which has been so
designated as Designated Senior Indebtedness by the Board of Directors of the
Company at the time of initial issuance in a Board Resolution.
"Designation" shall have the meaning provided in the definition of
Restricted Payment contained in this Indenture.
"Discharge" shall have the meaning provided in Section 8.2(1).
"Disqualified Capital Stock" means any Capital Stock of the Company
or a Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the Final Maturity Date of the Notes for any consideration other than
Capital Stock of the Company which is not Disqualified Capital Stock; provided,
that Preferred Stock of the Company that is issued with the benefit of
provisions requiring a change of control offer to be
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made for such Preferred Stock in the event of a change of control of the
Company, which provisions have substantially the same effect as the provisions
of this Indenture described in Section 4.20 shall not be deemed to be
Disqualified Capital Stock solely by virtue of such provisions. Without
limitation of the foregoing, Disqualified Capital Stock shall be deemed to
include any Preferred Stock of a Restricted Subsidiary of the Company except for
Permitted Foreign Restricted Subsidiary Preferred Stock.
"EBITDA" means, for any Person, for any period, an amount equal to
(a) the sum of (i) Consolidated Net Income for such period, plus (ii) the
provision for taxes for such period based on income or profits to the extent
such income or profits were included in computing Consolidated Net Income (minus
any provision for taxes utilized in computing net loss under clause (i) hereof
to the extent such provision reduced the net loss), plus (iii) Consolidated
Interest Expense for such period, plus (iv) depreciation for such period on a
consolidated basis to the extent reducing Consolidated Net Income, plus (v)
amortization of intangibles for such period on a consolidated basis to the
extent reducing Consolidated Net Income, plus (vi) amortization of original
issue discount to the extent it arises from the issuance of Capital Stock (other
than Disqualified Capital Stock) of the Company to the extent reducing
Consolidated Net Income, plus (vii) any charge related to any premium or penalty
paid in connection with redeeming or retiring any Indebtedness prior to its
stated maturity to the extent reducing Consolidated Net Income, plus (viii) any
other non-cash items reducing Consolidated Net Income for such period, minus (b)
all non-cash items increasing Consolidated Net Income for such period, minus (c)
all cash payments during such period relating to non-cash charges that were
added back in determining EBITDA in any prior period, (provided that payment of
such cash amounts did not reduce Consolidated Net Income) all for such Person
and its Restricted Subsidiaries determined in accordance with GAAP.
"Equity Investment" means the investment by MHE Investments, the
purchase by certain institutional investors of Units being issued by the
Company, and a retained equity investment by HarnCo, in each case, in the
Company.
"Event of Default" has the meaning provided in Section 6.1.
"Excess Proceeds Offer" shall have the meaning provided in Section
4.12.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulation of the Commission promulgated thereunder.
"Fair Market Value" means, with respect to any asset or Property,
the price which could be negotiated in an arm's-length, free market transaction,
for cash, between a willing seller and a willing and able buyer, neither of whom
is under undue pressure or compulsion to complete the transaction. Fair Market
Value shall be determined by the Board of Directors of the Company acting in
good faith and, in the case of determination involving assets or property in
excess of $2 million, shall be evidenced by a Board Resolution.
"Final Maturity Date" means April 1, 2009.
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"Financings" means, collectively, the offering by Morris of the
Senior Notes, the borrowings by Morris and its Restricted Subsidiaries under the
New Credit Facility and the Equity Investment.
"Foreign Restricted Subsidiary" of any specified Person means any
Restricted Subsidiary the jurisdiction of incorporation, organization or
formation of which is outside of the United States, Canada, the United Kingdom
and South Africa.
"Four Quarter Period" shall have the meaning provided in the
definition of "Consolidated Interest Coverage Ratio."
"GAAP" means generally accepted accounting principles consistently
applied as in effect in the United States from time to time.
"Global Notes" shall have the meaning provided in Section 2.16.
"Guarantee" means a guarantee of the Senior Notes by a guarantor
under the Note Indenture, as in effect from time to time.
"guarantee" means, as applied to any obligation, (i) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the performance
(or payment of damages in the event of non-performance) of all or any part of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit. A guarantee shall include, without
limitation, any agreement to preserve or maintain any other Person's financial
condition or to cause any other Person to achieve certain levels of operating
results.
"Guarantor" shall have the meaning assigned thereto in the Note
Indenture.
"HarnCo" means Harnischfeger Corporation, a Delaware corporation.
"Holder" or "Noteholder" means a Person in whose name a Note is
registered on the Registrar's books.
"incur" means, with respect to any Indebtedness or other obligation
of any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or other obligation on the balance sheet of such Person
(and "incurrence," "incurred," "incurrable," and "incurring" shall have meanings
correlative to the foregoing); provided, that a change in GAAP that results in
an obligation of such Person that exists at such time becoming Indebtedness
shall not be deemed an incurrence of such Indebtedness.
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"Indebtedness" means (without duplication), with respect to any
Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any Property (excluding, without limitation, any balances that
constitute accounts payable or trade payables or liabilities arising from
advance payments or customer deposits for goods and services sold by such Person
or its Restricted Subsidiaries in the ordinary course of business, and other
accrued liabilities, in each case, arising in the ordinary course of business)
if and to the extent any of the foregoing indebtedness would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP,
and shall also include, to the extent not otherwise included (i) any Capitalized
Lease Obligations, (ii) guarantees of items of other Persons which would be
included within this definition for such other Persons (whether or not such
items would appear upon the balance sheet of the guarantor), including, without
limitation, guarantees of dividends for which such Person may be liable directly
or indirectly, (iii) all obligations for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction (provided
that in the case of any such letters of credit, the items for which such letters
of credit provide credit support are those of other Persons which would be
included within this definition for such other Persons), (iv) Disqualified
Capital Stock of the Company or any Restricted Subsidiary thereof, including,
without limitation, any liquidation preference and mandatory redemption payment
obligations in respect thereof and (v) obligations of any such Person under any
Interest Rate Agreement or Currency Agreement applicable to any of the foregoing
(if and to the extent such Interest Rate Agreement or Currency Agreement
obligations would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP). The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and, with respect to contingent obligations
included within the definition of Indebtedness, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, provided, that (i)
the amount outstanding at any time of any Indebtedness issued with original
issue discount is the principal amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP but such Indebtedness shall only be
deemed to have been incurred on the date of original issuance thereof and in the
case of any securities constituting Indebtedness, the payment of interest upon
which is in such securities, such Indebtedness shall only be deemed to have been
incurred on the date of issuance of the original securities constituting such
Indebtedness, (ii) Indebtedness shall not include any liability for federal,
state, local, foreign or other taxes and (iii) contingent obligations of the
Company or any of its Restricted Subsidiaries under any Surety Obligation will
be deemed to be Indebtedness only upon the earlier of (a) the Company's or any
Restricted Subsidiary's obtaining knowledge of any payment by or in respect of
any provider in respect of any Surety Obligation, (b) the demand by any provider
for any reimbursement by the Company or any of its Restricted Subsidiaries of
any Surety Obligation or (c) the time at which the Company or any of its
Restricted Subsidiaries becomes obligated to make payment in respect of any
Surety Obligation as a result of the provider having made a payment in respect
of such Surety Obligation or as a result of such payment being required to be
made by such provider. Notwithstanding any other provision of the foregoing
definition, any trade or accounts payable arising from the purchase of goods or
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materials or for services obtained in the ordinary course of business shall not
be deemed to be "Indebtedness" of the Company or any Restricted Subsidiaries for
purposes of this definition. Furthermore, guarantees of (or obligations with
respect to letters of credit supporting) Indebtedness otherwise included in the
determination of such amount shall not also be included.
"Indenture" means this Indenture, as amended, restated or
supplemented from time to time.
"Initial Blockage Period" shall have the meaning provided in Section
11.2(b).
"Interest Payment Date" means the stated maturity of an installment
of interest on the Notes as specified on the Notes.
"Interest Rate Agreement" means, for any Person, any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance (or other
extension of credit), loan or capital contribution to (by means of transfers of
Property to others, payments for Property or services for the account or use of
others or otherwise), any guarantee of any obligations or Indebtedness of any
other Person, the purchase of any stock, bonds, notes, debentures, partnership
or joint venture interests or other securities of, the acquisition, by purchase
or otherwise, of any evidence of beneficial ownership of, or interest in, any
Person. Upon the designation of an Unrestricted Subsidiary as a Restricted
Subsidiary or the acquisition by the Company or a Restricted Subsidiary of an
interest in any Person that, as a result thereof, becomes a Restricted
Subsidiary, the Company shall be deemed to have made an Investment equal to the
Fair Market Value of all Investments owned by such new Restricted Subsidiary.
Investments shall exclude (i) accounts receivable and other extensions of trade
credit, in each case, on commercially reasonable terms in accordance with normal
trade practices, (ii) prepaid expenses and workers' compensation, utility, lease
and similar deposits, in the ordinary course of business and (iii) acquisitions
of Property or assets paid for solely by the issuance of Capital Stock (other
than Disqualified Capital Stock) of the Company.
"Issue Date" means the date of original issuance of the Series A
Senior Preferred Stock.
"Joint Venture" of any specified Person means any corporation,
partnership, joint venture, limited liability company, association or other
business entity, whether now existing or hereafter organized or acquired, and
(a) which is engaged in a similar line of business as the Company or any
Restricted Subsidiary at the date of determination and (b)(i) in the case of a
corporation, of which not more than 50% of the total voting power of the Capital
Stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, officers or trustees thereof is held by the Company
or any of its Restricted Subsidiaries, or (ii) in the case of a partnership,
joint venture, limited liability company, association or other business entity,
with respect to which the Company or any of its Restricted Subsidiaries has not
more than 50% of the ownership and voting power relating to the policies,
management and affairs thereof.
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"Junior Capital Stock" means Capital Stock of the Company, including
the Series B Junior Preferred Stock and the Series C Junior Voting Preferred
Stock, that does not rank, as to the payment of dividends or other comparable
distributions or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Company, prior to or
on a parity with the Series A Senior Preferred Stock.
"Legal Defeasance" shall have the meaning provided in Section 9.2.
"Lien" means with respect to any Property or assets of any Person,
any mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such Property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"MHE Investments" means MHE Investments, Inc., a Delaware
corporation.
"Moody's" has the meaning provided such term in the definition of
Cash Equivalents contained herein.
"Morris" means Morris Material Handling, Inc., a Delaware
corporation.
"Net Income" means, with respect to any Person for any period, the
net income (loss) of such Person determined in accordance with GAAP, plus the
amount of any decrease in the deferred tax asset for such period relating to the
actual cash tax benefit realized by such Person or the consolidated tax group of
which such Person is a member resulting from the election under Section
338(h)(10) of the Code in respect of the Transactions.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by
the Company, the aggregate net proceeds received by the Company, after payment
of expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in Property (valued at the Fair Market Value
thereof at the time of receipt) and (b) in the case of any exchange, exercise,
conversion or surrender of outstanding securities of any kind for or into shares
of Capital Stock of the Company which is not Disqualified Stock, the net book
value of such outstanding securities on the date of such exchange, exercise,
conversion or surrender (plus any additional amount required to be paid by the
holder to the Company upon such exchange, exercise, conversion or surrender)
less any and all payments made to the holders, e.g., on account of fractional
shares and less all expenses incurred by the Company in connection therewith.
"New Credit Facility" means the Credit Agreement, dated as of March
30, 1998, among the Company, Morris, Material Handling LLC, Morris Material
Handling, Ltd., Mondel ULC, Kaverit Steel and Crane ULC, and Canadian Imperial
Bank of Commerce, as Administrative Agent, Credit Agricole Indosuez, as
Syndication Agent, BankBoston, N.A., as Documentation Agent, and the lending
institutions named therein.
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"Non-Payment Event of Default" means any event (other than a Payment
Default) the occurrence of which entitles one or more Persons to accelerate the
maturity of any then outstanding Designated Senior Indebtedness.
"Note Indenture" means the Indenture relating to the Senior Notes,
as in effect on the Issue Date.
"Notes" means the Company's 12% Exchange Debentures due 2009, that
are issued pursuant to this Indenture, including the Secondary Notes.
"October 1997 Drop Down" means the transfer in October 1997 by
HarnCo of the assets of its Material Handling Equipment Division to Material
Handling, LLC, a wholly-owned subsidiary of the Company, or to one of its
Affiliates and the assumption by such entities of substantially all of the
liabilities of HarnCo and its Affiliates attributable thereto.
"Offering Memorandum" means the Offering Memorandum dated March 23,
1998 relating to the Company's offering and placement of the Series A Senior
Preferred Stock.
"Officer" with respect to any Person (other than the Trustee), means
the Chairman of the Board, the Chief Executive Officer, the President, any Vice
President and the Chief Financial Officer, the Treasurer or the Secretary of
such Person, or any other officer designated by the Board of Directors of such
Person, as the case may be.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman of the Board, the Chief Executive Officer,
the President or any Vice President and the Chief Financial Officer or any
Treasurer of such Person that shall comply with applicable provisions of this
Indenture.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, which opinion meets the requirements of
Sections 10.4 and 10.5 hereof. The counsel may be an employee of or counsel to
the Company, any Subsidiary of the Company or the Trustee.
"Payment Blockage Period" shall have the meaning provided in Section
11.2(b).
"Payment Default" means any Default in the payment of principal of
(or premium, if any) or interest on or any other amount payable in connection
with Designated Senior Indebtedness.
"Permitted Affiliate Agreements" means the agreements between or
among the Company and any of MHE Investments, HarnCo, Chartwell or their
respective Affiliates described in Schedule A in effect immediately after the
initial issuance of the Series A Senior Preferred Stock on the Issue Date, and
as the same may be amended from time to time subject to the provisions of
Section 4.15; provided, that notwithstanding such provision, such agreements may
be extended from time to time or otherwise amended, to the extent that a
majority of the disinterested members of the Board of Directors of the Company
has determined in good faith
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that no material adverse effect on the creditworthiness of the Company and its
Restricted Subsidiaries, taken as a whole, shall result as a consequence
thereby.
"Permitted Foreign Restricted Subsidiary Preferred Stock" means
securities of Foreign Restricted Subsidiaries of the Company denominated in
Preferred Stock that (a) otherwise have substantially the same characteristics
of voting or non-voting Common Stock of a Delaware corporation, (b) do not
obligate the issuer to pay current dividends or distributions in cash or
otherwise and (c) are not subject to any requirement of redemption or
repurchase.
"Permitted Holder" means Chartwell.
"Permitted Indebtedness" means:
(i) Indebtedness of the Company or any Restricted Subsidiary arising
under or in connection with the Credit Facilities or Acquired Indebtedness in an
aggregate principal amount at any one time outstanding not to exceed the sum of
(a) $55 million, less the aggregate amount of all Net Proceeds of Asset Sales
applied to permanently reduce the outstanding amount of such Indebtedness, and
(b) the greater of (1) $75 million, less the aggregate amount of all Net
Proceeds of Asset Sales applied to permanently reduce the outstanding amount of
such Indebtedness or (2) the sum of (x) 80% of the book value of accounts
receivable of the Company and its Restricted Subsidiaries and (y) 45% of the
book value of consolidated inventory of the Company and its Restricted
Subsidiaries, in each case, determined at the time of such incurrence, less the
aggregate amount of all Net Proceeds of Asset Sales applied to permanently
reduce the outstanding amount of such Indebtedness; provided, that $15 million
of the Indebtedness incurred under this clause (b) may be incurred solely to
obtain letters of credit and to fund draws thereunder to provide credit support
for the Surety Arrangement or other Surety Obligations or other letters of
credit reasonably necessary in the ordinary course of business;
(ii) Indebtedness under Surety Obligations and under the Surety
Arrangement, in either case, that are due not later than 10 days after the
earlier of (a) the Company's or any Restricted Subsidiary's obtaining knowledge
of any payment by or in respect of any provider in respect of any Surety
Obligation, (b) the demand by any provider for any reimbursement by the Company
or any of its Restricted Subsidiaries of any Surety Obligation or (c) the time
at which the Company or any of its Restricted Subsidiaries becomes obligated to
make payment in respect of any Surety Obligation as a result of the provider
having made a payment in respect of such Surety Obligation or as a result of
such payment being required to be made by such provider;
(iii) Indebtedness under the Notes, this Indenture, the Senior
Notes, the Note Indenture and the Guarantees;
(iv) Indebtedness not covered by any other clause of this definition
which is outstanding on the Issue Date other than under the South African Credit
Facility;
(v) Indebtedness of the Company to any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary to the Company or another Restricted
Subsidiary; provided that Indebtedness of the Company or any Wholly-Owned
Subsidiary to any Restricted
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Subsidiary (other than a Wholly-Owned Subsidiary) is incurred for borrowed
money; provided, further, that any Indebtedness otherwise referred to in this
clause (v) that is no longer held by a Restricted Subsidiary or the Company
(whether (i) as a result of a sale or transfer of such Indebtedness, (ii) as a
result of such Person no longer being the Company or a Restricted Subsidiary or
(iii) otherwise), shall, in each case, be deemed incurred at such time;
(vi) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire Property in the ordinary course of business, which
Indebtedness and Capitalized Lease Obligations, in the aggregate, outstanding on
any date of incurrence (and any Refinancing Indebtedness in respect thereof), do
not exceed 4% of the Consolidated Tangible Assets of the Company and its
Restricted Subsidiaries;
(vii) Interest Rate Agreements and Currency Agreements;
(viii) guarantees of obligations of the Company or its Restricted
Subsidiaries;
(ix) additional Indebtedness of the Company or its Restricted
Subsidiaries not to exceed an aggregate of $10 million in principal amount
outstanding at any time; and
(x.) Refinancing Indebtedness in respect of Indebtedness incurred
under clauses (iii), (iv), (v) and (vii) above or incurred pursuant to Section
4.3(a).
"Permitted Investments" means, for any Person, Investments made on
or after the Issue Date consisting of:
(i) Investments by the Company, or by a Restricted Subsidiary, in
the Company or a Restricted Subsidiary;
(ii) Cash Equivalents;
(iii) Investments by the Company, or by a Restricted Subsidiary
thereof, in a Person, if as a result of such Investment (a) such Person becomes
a Restricted Subsidiary of the Company or (b) such person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets (including the proceeds of such Investment) to, or is
liquidated into, the Company or a Restricted Subsidiary thereof;
(iv) non-cash consideration received in conjunction with the
consummation of an Asset Sale that is otherwise permitted by Section 4.12;
(v) Interest Rate Agreements and Currency Agreements;
(vi) any Investment existing on the Issue Date;
(vii) Investments received in settlement of obligations owed to the
Company or any Restricted Subsidiary as a result of bankruptcy or insolvency
proceedings or upon the foreclosure or enforcement of any Lien in favor of the
Company or any Restricted Subsidiary;
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(viii) Investments required pursuant to any agreement or obligation
of the Company or a Restricted Subsidiary to make such Investments in effect on
the Issue Date, as described on Schedule B;
(ix) Investments required to be made pursuant to the Transactions,
as contemplated by the Permitted Affiliate Agreements; and
(x) Investments by the Company or any Restricted Subsidiary not
otherwise permitted under this definition, in an aggregate amount not to exceed
$15 million at any one time outstanding.
For purposes of clause (x) above, the amount of any Investment
outstanding, in respect of any Investment and the issuer thereof (and its
Subsidiaries), shall be equal to the excess of (a) the aggregate amount of all
Investments made therein by the Company or any Restricted Subsidiary on or after
the Issue Date (including the Fair Market Value of all such Investments not made
in cash or Cash Equivalents, valued at the time of such Investment) over (b) the
aggregate amount returned in cash or Cash Equivalents on or with respect to
Investments in such Person (whenever such Investment was made) whether through
the sale or other disposition of the Investment in such Person (or portion
thereof) or through interest payments, principal payments, dividends or other
distributions or payments; provided, that such payments or distributions shall
not be (and have not been) included in clause (c)(3) of the first paragraph of
Section 4.4 or otherwise included in Consolidated Net Income.
"Permitted Junior Securities" means debt or equity securities of the
Company or any successor corporation provided for by a plan of reorganization or
readjustment that are subordinated to the Notes at least to the same extent that
the Notes are subordinated to the payment of all Senior Indebtedness then
outstanding.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"Physical Notes" means certificated Notes in registered form in
substantially the form set forth in Exhibit A.
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"Property" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person and its
Subsidiaries under GAAP.
"Public Equity Offering" means any underwritten public offering of
shares of Common Stock (however designated and whether voting or non-voting) of
the Company or
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Morris and any and all rights, warrants or options to acquire such Common Stock
pursuant to an effective registration statement (other than a registration
statement on Form S-4 or S-8) filed with the Commission in accordance with the
Securities Act.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including sales and
excise taxes, installation and delivery charges and other direct costs of, and
other direct expenses paid or charged in connection with, such purchase or
construction) of an item of Property, the principal amount of which Indebtedness
does not exceed the sum of (i) 100% of such cost and (ii) reasonable fees and
expenses of such Person incurred in connection therewith.
"Recapitalization" means the recapitalization of the Company
pursuant to the Recapitalization Agreement.
"Recapitalization Agreement" means the Recapitalization Agreement,
dated as of January 28, 1998, among HarnCo, the sellers named therein and MHE
Investments., together with Amendment No. 1 thereto, dated as of March 4, 1998,
and Amendment No. 2 thereto, dated as of March 23, 1998.
"Record Date" means the Record Dates specified in the Notes.
"Redemption" shall have the meaning provided in Section 4.4(ii).
"Redemption Date" when used with respect to any Note to be redeemed,
means the date fixed for such redemption pursuant to the terms of the Notes.
"Redemption Price" means, when used with respect to any Note or part
thereof to be redeemed, the price fixed for redemption of such Note pursuant to
the terms of the Notes and this Indenture, plus accrued and unpaid interest
thereon, if any.
"Refinancing Indebtedness" means Indebtedness that refunds or
refinances any Indebtedness of the Company or its Restricted Subsidiaries
outstanding on the Issue Date or other Indebtedness permitted to be incurred by
the Company or its Restricted Subsidiaries pursuant to this Indenture but only
to the extent that (i) if the Indebtedness being refunded or refinanced is
Subordinated Indebtedness, the Refinancing Indebtedness is subordinated to
Notes, to at least the same extent as the Indebtedness being refunded or
refinanced, (ii) the Refinancing Indebtedness is scheduled to mature either (a)
no earlier than the Indebtedness being refunded or refinanced (b) at least 91
days after the Final Maturity Date, (iii) the portion, if any, of the
Refinancing Indebtedness that is scheduled to mature on or prior to the Final
Maturity Date has a weighted average life to maturity at the time such
Refinancing Indebtedness is incurred that is equal to or greater than the
weighted average life to maturity of the portion of the Indebtedness being
refunded or refinanced that is scheduled to mature on or prior to the Final
Maturity Date, and, in the case of clause (ii) above and this clause (iii), such
Refinancing Indebtedness by its terms, or by the terms of any agreement or
instrument pursuant to which such Indebtedness is issued, does not permit
redemption or other retirement (including pursuant to any required offer to
purchase to be made by the Company or a Restricted Subsidiary) of such
Indebtedness at the
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option of the holder thereof prior to the final stated maturity of the
Indebtedness being refinanced, other than a redemption or other retirement at
the option of the holder of such Indebtedness (including pursuant to a required
offer to purchase made by the Company or a Restricted Subsidiary) which is
conditioned on a change of control of the Company pursuant to provisions
substantially similar to those contained in this Indenture described in Section
4.20 or 4.12 or otherwise on terms substantially similar to those in such
Indebtedness being refinanced, (iv) such Refinancing Indebtedness is in an
aggregate principal amount that is equal to or less than the sum of (a) the
aggregate principal amount then outstanding under the Indebtedness being
refunded or refinanced, (b) the amount of accrued and unpaid interest, if any,
and premiums owed, if any, not in excess of pre-existing prepayment provisions
on such Indebtedness being refunded or refinanced and (c) the amount of
customary fees, expenses and costs related to the incurrence of such Refinancing
Indebtedness, and (v) such Refinancing Indebtedness is incurred by the same
Person that initially incurred the Indebtedness being refunded or refinanced,
except that the Company may incur Refinancing Indebtedness to refund or
refinance Indebtedness of any Wholly-Owned Subsidiary of the Company and any
Restricted Subsidiary may incur Refinancing Indebtedness to refund or refinance
Indebtedness of any other Restricted Subsidiary.
"Registrar" has the meaning provided in Section 2.3.
"Reinvestment Date" shall have the meaning provided in Section
4.12(iii).
"Replacement Assets" means (x) Properties or assets (other than cash
or Cash Equivalents or any Capital Stock or other security) that will be used in
a business of the Company and the Restricted Subsidiaries conducted on the Issue
Date or in a business reasonably related thereto or (y) Capital Stock of any
Person that will become on the date of acquisition thereof a Restricted
Subsidiary as a result of such acquisition.
"Representative" shall have the meaning provided in Section 11.2.
"Responsible Officer," when used with respect to the Trustee, means
an officer or assistant officer assigned to the corporate trust department of
the Trustee (or any successor group of the Trustee) including any vice
president, assistant vice president, assistant secretary, treasurer or assistant
treasurer or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"Restricted Payment" means any of the following: (i) the declaration
or payment of any dividend or any other distribution or payment of any kind or
character (whether in cash, Property or securities) on Capital Stock of the
Company or any Restricted Subsidiary of the Company or any payment made to the
direct or indirect holders (in their capacities as such) of Capital Stock of the
Company or Capital Stock of any Restricted Subsidiary of the Company (other than
(x) dividends or distributions payable solely in Capital Stock (other than
Disqualified Capital Stock) of the Company and (y) dividends or distributions
payable to the Company or to a Restricted Subsidiary of the Company and (z)
dividends or distributions from a Restricted Subsidiary of the Company that are
paid ratably to all Persons holding the Capital Stock of such
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Restricted Subsidiary in proportion to the Capital Stock held by such Persons),
(ii) the purchase, redemption or other acquisition or retirement for value of
any Junior Capital Stock of the Company or any Capital Stock of any of its
Restricted Subsidiaries or any options, warrants or rights to purchase or
acquire such shares or any securities convertible or exchangeable into such
shares (other than any such shares, options, warrants, rights or securities (a)
that are owned by the Company or a Restricted Subsidiary of the Company;
provided, that such options, warrants, rights or securities are purchased,
redeemed or otherwise acquired for value by the issuer thereof, or (b) the
issuer of which is a Restricted Subsidiary; provided that, for purposes of this
clause (b), such purchase, redemption or other acquisition or retirement for
value is (A) permitted under clauses (viii) or (x) of the definition of
Permitted Investments or (B) in an amount, which, when added to all other
Restricted Payments made pursuant to this clause (b), is not greater than 10% of
Consolidated Tangible Assets of the Company and its Restricted Subsidiaries),
(iii) the making of any principal payment on, or the purchase, defeasance,
repurchase, redemption or other acquisition or retirement for value, prior to
any scheduled maturity, scheduled repayment or scheduled sinking fund payment,
of any Subordinated Indebtedness (other than Subordinated Indebtedness acquired
in anticipation of satisfying a scheduled sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of
acquisition), (iv) the making of any Investment other than a Permitted
Investment, (v) any designation (other than pursuant to clause (x) of the
definition of Permitted Investments) of a Restricted Subsidiary as an
Unrestricted Subsidiary (a "Designation"), provided, that the Designation of a
Subsidiary of the Company as an Unrestricted Subsidiary shall be deemed to
include the Designation of all of the Subsidiaries of such Subsidiary that were
Restricted Subsidiaries, (vi) forgiveness of any Indebtedness of an Affiliate of
the Company to the Company or a Restricted Subsidiary, and (vii) any advisory
fee paid to an Affiliate with respect to a specific transaction (other than fees
payable on the Issue Date upon consummation of the Transactions). For purposes
of determining the amount expended for Restricted Payments, (a) cash distributed
or invested shall be valued at the face amount thereof and Property other than
cash shall be valued at its Fair Market Value, except that in determining the
amount of any Restricted Payment made under clause (v) above, the amount of such
Restricted Payment shall be equal to the greater of (i) the book value or (ii)
the Fair Market Value of the Company's direct and indirect proportionate
interest in such Subsidiary on such date and (b) upon the designation of an
Unrestricted Subsidiary as a Restricted Subsidiary, or the acquisition by the
Company or a Restricted Subsidiary of an interest in any Person that, as a
result thereof, becomes a Restricted Subsidiary, the Company shall be deemed to
have made a Restricted Payment equal to the Fair Market Value of the Capital
Stock or Subordinated Indebtedness of the Company or its Restricted Subsidiaries
owned by such new Restricted Subsidiaries.
"Restricted Subsidiary" means a Subsidiary of the Company other than
an Unrestricted Subsidiary and includes all of the Subsidiaries of the Company
existing as of the Issue Date. The Board of Directors of the Company may
designate any Unrestricted Subsidiary or any Person that is to become a
Subsidiary as a Restricted Subsidiary if immediately after giving effect to such
action (and treating any Acquired Indebtedness as having been incurred at the
time of such action), (i) no Default or Event of Default shall have occurred and
be continuing, (ii) Indebtedness of such Person and its Subsidiaries outstanding
immediately following such redesignation would, if incurred at such time, be
permitted to be incurred this Indenture and (iii)
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the provisions referred to in clause (b) of the last sentence of the definition
of Restricted Payment is complied with and any Investments pursuant to the
second sentence of the definition of Investments are permitted to be made
pursuant to this Indenture.
"Secondary Notes" shall have the meaning provided in the Notes.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Seller Note" means any Indebtedness of the Company or any
Restricted Subsidiary issued to a seller as a portion of the purchase price in
any Asset Acquisition by the Company or such Restricted Subsidiary from such
seller.
"Senior Indebtedness" means the principal of and premium, if any,
and interest (including post-petition interest) on, and any and all other fees,
expense reimbursement obligations and other amounts due pursuant to the terms of
all agreements, documents and instruments providing for, creating, securing or
evidencing or otherwise entered into in connection with (a) all Indebtedness of
the Company owed to lenders under any Credit Facility or any Surety Arrangement,
(b) all obligations of the Company with respect to any Interest Rate Agreement
or any Currency Agreement, (c) all obligations of the Company to reimburse any
bank or other person in respect of amounts paid under letters of credit,
banker's acceptances or other similar instruments, (d) all other Indebtedness of
the Company which does not provide that it is to rank in right of payment pari
passu with or subordinate to the Notes, and (e) all deferrals, renewals,
extensions and refundings of, and amendments, modifications and supplements to,
any of the Senior Indebtedness described above. Notwithstanding anything to the
contrary in the foregoing, Senior Indebtedness will not include (i) Indebtedness
of the Company to any of its Subsidiaries, (ii) Indebtedness represented by the
Notes, (iii) any Indebtedness which by the express terms of the agreement or
instrument creating, evidencing or governing the same is junior or subordinate
in right of payment to any item of Senior Indebtedness (including, without
limitation, Indebtedness represented by Disqualified Capital Stock), (iv) any
trade payable arising from the purchase of goods or materials or for services
obtained in the ordinary course of business, (v) Indebtedness incurred in
violation of this Indenture or (vi) any Indebtedness which, when incurred and
without respect to any election under Section 1111(b) of Title 11, United States
Code, is without recourse to such Person.
"Senior Notes" means the $200,000,000 aggregate principal amount of
9 1/2% Senior Notes due 2008 of Morris.
"Series A Senior Preferred Stock" means the 12% Series A Senior
Exchangeable Preferred Stock of the Company, liquidation preference $1,000 per
share.
"Series B Junior Preferred Stock" means the 12 1/4% Series B Junior
Exchangeable Preferred Stock of the Company, liquidation preference $1,000 per
share.
"Series C Junior Preferred Stock" means the 12 1/2% Series C Junior
Exchangeable Preferred Stock of the Company, liquidation preference $1,000 per
share.
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"Significant Subsidiary" has the meaning set forth in Rule 1-02 of
Regulation S-X under the Securities Act and the Exchange Act, but shall not
include any Unrestricted Subsidiary.
"South African Credit Facility" means a Credit Facility in an
aggregate principal amount or with aggregate commitments not to exceed $5
million to be entered into by Morris Mechanical Handling (Pty) Ltd.
"Subordinated Indebtedness" of the Company means any Indebtedness
(whether outstanding on the date hereof or hereafter incurred) which is by its
terms expressly subordinate or junior in right of payment to the Notes to
substantially the same extent as the Notes are subordinated to Senior
Indebtedness.
"Subsidiary" of any specified Person means any corporation,
partnership, joint venture, limited liability company, association or other
business entity, whether now existing or hereafter organized or acquired, (i) in
the case of a corporation, of which more than 50% of the total Voting Stock is
held by such first-named person or any of its Subsidiaries or (ii) in the case
of a partnership, joint venture, limited liability company, association or other
business entity, with respect to which such first-named Person or any of its
Subsidiaries has at least a majority ownership and voting power relating to the
policies, management and affairs thereof.
"Surety Arrangement" means one or more surety arrangements
providing, inter alia, for the issuance of Surety Obligations between the
Company or any of its Restricted Subsidiaries and one or more providers,
provided to the Company or its Restricted Subsidiaries including, in each case,
any related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case, as amended, modified,
renewed, refunded, replaced, restated or refinanced from time to time.
"Surety Obligations" means any bonds, including bid bonds, advance
bonds, or performance bonds, letters of credit, warranties, and similar
arrangements between the Company and any of its Restricted Subsidiaries and one
or more providers, for the benefit of the Company's or any Restricted
Subsidiary's suppliers, vendors, insurers or customers including, in each case,
any related Notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case, as amended, modified,
renewed, refunded, replaced, restated or refinanced from time to time.
"Tax Allocation Agreement" means a tax allocation agreement among
the Company, Morris and MHE Investments, as in effect on the Issue Date and as
the same may be amended from time to time subject to the provisions of Section
4.15 and provided, that no material adverse effect on the Company or on the
Holders of the Notes shall result as a consequence thereby.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb), as amended, as in effect on the date of the execution of this
Indenture, except as otherwise provided in Section 9.3.
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"Transactions" means, collectively, the Recapitalization, the
Financings and the October 1997 Drop Down and other related transactions
described in the section "The Transactions" contained in the Offering
Memorandum.
"Unrestricted Subsidiary" means (a) any Subsidiary of an
Unrestricted Subsidiary and (b) any Subsidiary of the Company which is
classified (whether on or after the Issue Date) as an Unrestricted Subsidiary by
a resolution adopted by the Board of Directors of the Company; provided, that a
Subsidiary may be so classified as an Unrestricted Subsidiary only if (i) such
classification in compliance with the covenant set forth in Section 4.4, (ii)
such Subsidiary does not own beneficially any Capital Stock of the Company or
any Restricted Subsidiary (other than any Restricted Subsidiary of such
Subsidiary that is being designated as an Unrestricted Subsidiary at the time of
such classification) and (iii) all Indebtedness of the Company or any Restricted
Subsidiary to such Subsidiary is deemed incurred at the time of such
classification or at the time such Capital Stock is no longer so owned. The
Trustee shall be given prompt notice by the Company of each resolution adopted
by the Board of Directors of the Company under this provision, together with a
copy of each such resolution adopted. The Company shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly, at any time, (a) be
liable for any Indebtedness of any Unrestricted Subsidiary or (b) be liable for
any Indebtedness that provides that the holder thereof may (upon notice, lapse
of time or both) declare a Default thereon or cause the payment thereof to be
accelerated or payable prior to its final maturity upon the occurrence of a
Default with respect to any Indebtedness of any Unrestricted Subsidiary.
"U.S. Government Obligations" means (a) securities that are direct
obligations of the United States of America for the payment of which its full
faith and credit are pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or a specific payment of principal or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt.
"Voting Stock" of any Person means the Capital Stock of such Person
which ordinarily has voting power for the election of directors (or persons
performing similar functions) of such Person, whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency.
"Wholly-Owned Subsidiary" means any Restricted Subsidiary, all of
the outstanding Voting Stock (other than directors' qualifying shares) of which
are owned, directly or indirectly, by the Company.
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Section 1.2. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, the portion of
such provision required to be incorporated herein in order for this Indenture to
be qualified under the TIA is incorporated by reference in and made a part of
this Indenture. The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Holder or a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined in the TIA by reference to another statute or defined by Commission rule
have the meanings assigned to them therein.
Section 1.3. Rules of Construction.
Unless the context otherwise requires:
(i) a term has the meaning assigned to it herein, whether defined
expressly or by reference;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in the
plural include the singular;
(v) words used herein implying any gender shall apply to every
gender;
(vi) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement or successor sections or
rules adopted by the Commission from time to time;
(vii) the principal amount of any non-interest bearing or other
discount security at any date shall be the principal amount that would be shown
on a balance sheet of the issuer thereof dated such date in accordance with
generally accepted accounting principles; and
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(viii) all references to $ means U.S. Dollars.
ARTICLE 2.
THE NOTES
Section 2.1. Amount of Notes
The Trustee shall authenticate (i) Notes for original issue on the
date of issuance hereof in the aggregate principal amount of $[ ] upon a written
order of the Company signed by two Officers of the Company and (ii) Secondary
Notes in accordance with terms of the Notes. Such written order shall specify
the amount of Notes to be authenticated and the date on which the Notes are to
be authenticated.
Section 2.2. Form and Dating.
The Notes and the Trustee's certificate of authentication with
respect thereto shall be substantially in the form set forth in Exhibit A, which
is incorporated in and forms a part of this Indenture. The Notes may have
notations, legends or endorsements required by law, rule or usage to which the
Company is subject. Any such notations, legends or endorsements shall be
furnished to the Trustee in writing. Each Note shall be dated the date of its
authentication.
The terms and provisions contained in the Notes shall constitute,
and are expressly made, a part of this Indenture and, to the extent applicable,
the Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and agree to be bound thereby.
The Notes may be presented for registration of transfer or exchange
at the offices of the Registrar in the Borough of Manhattan, The City of New
York, State of New York.
Section 2.3. Execution and Authentication.
Two officers shall sign, or one Officer shall sign and one Officer
(each of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to, the Notes for the Company by manual or
facsimile signature.
If an officer whose signature is on a Note was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Note, the Note shall be valid nevertheless.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder. Notwithstanding the foregoing, if
any Note shall have been authenticated and delivered hereunder but never issued
and sold by the Company, and the Company shall deliver such Note to the Trustee
for cancellation as provided in
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Section 2.12, for all purposes of this Indenture such Note shall be deemed never
to have been authenticated and delivered hereunder and shall not be entitled to
the benefits of this Indenture.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Notes. Unless otherwise provided
in the appointment, an authenticating agent may authenticate the Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.
Each Paying Agent is designated as an authenticating agent for purposes of this
Indenture.
The Notes shall be issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof; provided, that
Notes may be issued in denominations of less than $1,000 (but not less than
$1.00) upon the exchange of the Series A Senior Preferred Stock for the Notes
such that each holder of Series A Senior Preferred Stock shall receive Notes in
a principal amount equal to the full liquidation preference of the Series A
Senior Preferred Stock on the date of exchange; provided, further, that
Secondary Notes may be issued in denominations of less than $1,000 (but not less
than $1.00).
Section 2.4 Registrar and Paying Agent.
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in The City of New York, State of New York)
where Notes may be presented for registration of transfer or for exchange (the
"Registrar"), and an office or agency where Notes may be presented for payment
(the "Paying Agent") and an office or agency where notices and demands to or
upon the Company, if any, in respect of the Notes and this Indenture may be
served. The Registrar shall keep a register of the Notes and of their transfer
and exchange. The Company may have one or more additional Paying Agents. The
term "Paying Agent" includes any additional Paying Agent. Neither the Company
nor any Affiliate thereof may act as Paying Agent. The Company may change any
Paying Agent or Registrar without notice to any Noteholder.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which shall incorporate the provisions
of the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee of the name and
address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such and shall be entitled to compensation in accordance with Section 7.7.
The Company initially designates the Trustee as Registrar, Paying
Agent and agent for service of notices and demands in connection with the Notes
and this Indenture.
Section 2.5 Paying Agent To Hold Assets in Trust.
Each Paying Agent shall hold in trust for the benefit of the
Noteholders or the Trustee all money held by the Paying Agent for the payment of
principal of or premium or
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interest on the Notes (whether such money has been paid to it by the Company or
any other obligor on the Notes), and the Company and the Paying Agent shall
notify the Trustee of any Default by the Company (or any other obligor on the
Notes) in making any such payment. Money held in trust by the Paying Agent need
not be segregated except as required by law and in no event shall the Paying
Agent be liable for any interest on any money received by it hereunder. The
Company at any time may require the Paying Agent to pay all money held by it to
the Trustee and account for any funds disbursed and the Trustee may at any time
during the continuance of any Event of Default specified in Section 6.1(i) or
(ii), upon written request to the Paying Agent, require such Paying Agent to pay
forthwith all money so held by it to the Trustee and to account for any funds
disbursed. Upon making such payment, the Paying Agent shall have no further
liability for the money delivered to the Trustee.
Section 2.6 Noteholder Lists
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Noteholders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee at least five Business Days before each Interest Payment Date,
and at such other times as the Trustee may request in writing, a list in such
form and as of such date as the Trustee may reasonably require of the names and
addresses of the Noteholders.
Section 2.7 Transfer and Exchange
Subject to Section 2.16, when Notes are presented to the Registrar
with a request from the Holder of such Notes to register a transfer or to
exchange them for an equal principal amount of Notes of other authorized
denominations, the Registrar shall register the transfer or make the exchange as
requested; provided, that every Note presented or surrendered for registration
of transfer or exchange shall be duly endorsed or be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Registrar,
duly executed by the Holder thereof or his attorneys duly authorized in writing.
To permit registrations of transfers and exchanges, the Company shall issue and
execute and the Trustee shall authenticate new Notes evidencing such transfer or
exchange at the Registrar's request. No service charge shall be made to the
Noteholder for any registration of transfer or exchange. The Company may require
from the Noteholder payment of a sum sufficient to cover any transfer taxes or
other governmental charge that may be imposed in relation to a transfer or
exchange, but this provision shall not apply to any exchange pursuant to Section
2.11, 3.6, 4.12, 4.20 or 8.5 (in which events the Company shall be responsible
for the payment of such taxes). The Trustee shall not be required to exchange or
register a transfer of any Note for a period of 15 days immediately preceding
the selection of Notes to be redeemed or any Note selected for redemption (or
portion thereof selected for redemption).
Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of the beneficial interests in such Global Note may
be effected only through a book-entry system maintained by the Holder of such
Global Note (or its agent), and that
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ownership of a beneficial interest in the Global Note shall be required to be
reflected in a book entry.
Each Holder of a Note agrees to indemnify the Company and the
Trustee against any liability that may result from the transfer, exchange or
assignment of such Holder's Note in violation of any provision of this Indenture
and/or applicable U.S. federal or state securities law.
Except as expressly provided herein, neither the Trustee nor the
Registrar shall have any duty to monitor the Company's compliance with or have
any responsibility with respect to the Company's compliance with any federal or
state securities laws.
Section 2.8 Replacement Notes
If a mutilated Note is surrendered to the Registrar or the Trustee,
or if the Holder of a Note claims that the Note has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate a
replacement Note if the Holder of such Note furnishes to the Company and the
Trustee evidence reasonably acceptable to them of the ownership and the
destruction, loss or theft of such Note and if the requirements of Section 8-405
of the New York Uniform Commercial Code as in effect on the date of this
Indenture are met. If required by the Trustee or the Company, an indemnity bond
shall be posted, sufficient in the judgment of both to protect the Company, the
Trustee or any Paying Agent from any loss that any of them may suffer if such
Note is replaced. The Company and the Trustee may each charge such Holder for
its respective expenses (including, without limitation, reasonable attorneys'
fees and disbursements) in replacing such Note. Every replacement Note shall
constitute an additional contractual obligation of the Company.
Section 2.9 Outstanding Notes.
The Notes outstanding at any time are all Notes that have been
authenticated by the Trustee except for (a) those canceled by it, (b) those
delivered to it for cancellation, (c) to the extent set forth in Sections 9.1
and 9.2, on or after the date on which the conditions set forth in Section 9.1
or 9.2 have been satisfied, those Notes theretofore authenticated and delivered
by the Trustee hereunder and (d) those described in this Section 2.9 as not
outstanding. Subject to Section 2.10, a Note does not cease to be outstanding
because the Company or one of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.8, it ceases to be
outstanding unless the Trustee receives written notice that the replaced Note is
held by a bona fide purchaser in whose hands such Note is a legal, valid and
binding obligation of the Company.
If the Paying Agent holds, in its capacity as such, on any
Redemption Date, any Change of Control Payment Date, any Excess Proceeds Offer
date or on the Final Maturity Date, money sufficient to pay all accrued interest
and principal with respect to the Notes payable on that date and is not
prohibited from paying such money to the Holders thereof pursuant to the terms
of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
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Section 2.10 Treasury Notes.
In determining whether the Holders of the required principal amount
of Notes have concurred in any declaration of acceleration or notice of Default
or direction, waiver or consent or any amendment, modification or other change
to this Indenture, Notes owned by the Company or any Affiliate of the Company
shall be disregarded as though they were not outstanding, except that for the
purposes of determining whether the Trustee shall be protected in relying on any
such declaration, notice, direction, waiver or consent or any amendment,
modification or other change to this Indenture, only Notes as to which a
Responsible Officer of the Trustee has received an Officers' Certificate stating
that such Notes are so owned shall be so disregarded. Notes so owned which have
been pledged in good faith shall not be disregarded if the pledgee establishes
the pledgee's right so to act with respect to the Notes and that the pledgee is
not the Company, any other obligor or guarantor on the Notes or any of their
respective Affiliates.
Section 2.11 Temporary Notes.
Until definitive Notes are prepared and ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Notes.
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Company consider appropriate for temporary Notes.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Notes in exchange for temporary Notes. Until such
exchange, temporary Notes shall be entitled to the same rights, benefits and
privileges as definitive Notes.
Section 2.12 Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall (subject to the
record-retention requirements of the Exchange Act) destroy canceled Notes and
deliver a certificate of destruction thereof to the Company. The Company may not
reissue or resell, or issue new Notes to replace, Notes that the Company has
redeemed or paid, or that have been delivered to the Trustee for cancellation.
Section 2.13 Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, such
interest shall cease to be payable to the registered Holder on the relevant
Record Date and the Company shall pay the defaulted interest, plus (to the
extent permitted by law) any interest payable on the defaulted interest,
pursuant to Section 4.1 hereof, to the Persons who are Noteholders on a
subsequent special record date, which date shall be at least five Business Days
prior to the payment date. The Company shall fix such special record date and
payment date and provide the Trustee at least 20 days' notice of the proposed
amount of defaulted interest to be paid and the special payment date and at the
same time the Company shall deposit with the Trustee the
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aggregate amount proposed to be paid in respect of such defaulted interest. At
least 15 days before such special record date, the Company shall mail to each
Noteholder a notice that states the special record date, the payment date and
the amount of defaulted interest, and interest payable on defaulted interest, if
any, to be paid. The Company may make payment of any defaulted interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Notes are listed and, upon such notice as may be required
by such exchange, if, after written notice given by the Company to the Trustee
of the proposed payment pursuant to this sentence, such manner of payment shall
be deemed practicable by the Trustee.
Section 2.14 CUSIP Number.
The Company in issuing the Notes may use a "CUSIP" number, and if
so, such CUSIP number shall be included in notices of redemption or exchange as
a convenience to Holders; provided, that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes, and that reliance may be placed only on
the other identification numbers printed on the Notes. The Company shall
promptly notify the Trustee of any such CUSIP number used by the Company in
connection with the issuance of the Notes and of any change in the CUSIP number.
Section 2.15 Deposit of Moneys.
Prior to 10:00 a.m. New York City time on each Interest Payment Date
and the Final Maturity Date the Company shall have deposited with the Paying
Agent in immediately available funds or money sufficient to make cash payments,
or Secondary Notes, as the case may be, if any, due on such Interest Payment
Date or the Final Maturity Date, as the case may be, in a timely manner which
permits the Trustee to remit payment or Secondary Notes, as the case may be, to
the Holders on such Interest Payment Date or the Final Maturity Date, as the
case may be. The principal and interest on Global Notes shall be payable to the
Depository or its nominee, as the case may be, as the sole registered owner and
the sole holder of the Global Notes represented thereby. The principal and
interest on Physical Notes shall be payable at the office of the Paying Agent.
Section 2.16 Book-Entry Provisions for Global Notes.
(a) The Notes initially shall be represented by one or more notes in
registered Global form without interest coupons (the "Global Notes") and shall
bear legends as set forth in Exhibit B. The Global Notes initially shall be
registered in the name of the Depository or the nominee of such Depository, in
each case for credit to an account of an Agent Member and be delivered to the
Trustee as custodian for such Depository. The aggregate principal amount of any
Global Note shall be adjusted by the Trustee as necessary to reflect the
issuance of Secondary Notes, if any, relating to such Global Notes.
Members of, or direct or indirect participants in, the Depository
("Agent Members") shall have no rights under this Indenture with respect to any
Global Note held on their behalf by the Depository, or the Trustee as its
custodian, or under the Global Notes, and the
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Depository may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner of the Global Note for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Note.
(b) Transfers of Global Notes shall be limited to transfer in whole,
but not in part, to the Depository, its successors or their respective nominees.
Interests of beneficial owners in the Global Notes may be transferred or
exchanged for Physical Notes in accordance with the rules and procedures of the
Depository. In addition, a Global Note shall be exchangeable for Physical Notes
if (i) the Depository (x) notifies the Company that it is unwilling or unable to
continue as depository for such Global Note and the Company thereupon fails to
appoint a successor depository within 90 days of such notice or (y) has ceased
to be a clearing agency registered under the Exchange Act and the Company
thereupon fails to appoint a successor depository within 90 days of such notice,
(ii) the Company, at its option, notifies the Trustee in writing that it elects
to cause the issuance of such Physical Notes or (iii) there shall have occurred
and be continuing a Default or an Event of Default with respect to the Notes and
the registrar has received a written notice from the Depository to issue
Physical Notes. In all cases, Physical Notes delivered in exchange for any
Global Note or beneficial interests therein shall be registered in the names,
and issued in any approved denominations, requested by or on behalf of the
Depository (in accordance with its customary procedures).
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, and the Trustee shall upon receipt of a written order from the
Company authenticate and make available for delivery, one or more Physical Notes
of like tenor and amount.
(d) In connection with the transfer of Global Notes as an entirety
to beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed
to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depository in writing in exchange for its beneficial
interest in the Global Notes, an equal aggregate principal amount of Physical
Notes of authorized denominations.
(e) Any beneficial interest in one of the Global Notes that is
transferred to a Person who takes delivery in the form of an interest in another
Global Note shall, upon transfer, cease to be an interest in such Global Note
and become an interest in such other Global Note and, accordingly, shall
thereafter be subject to all transfer restrictions and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
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(f) The Holder of any Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
Section 2.17 Computation of Interest.
Interest on the Notes shall be computed on the basis of a 360-day
year of twelve 30-day months.
ARTICLE 3.
REDEMPTION
Section 3.1 Notices to Trustee.
If the Company elects to redeem Notes pursuant to paragraph 5 of the
Notes, at least 45 days but not more than 60 days prior to the Redemption Date
or during such other period as the Trustee may agree to (which agreement shall
not unreasonably be withheld) the Company shall notify the Trustee in writing of
the Redemption Date, the principal amount of Notes to be redeemed and the
Redemption Price and deliver to the Trustee an Officers' Certificate stating
that such redemption will comply with the conditions for optional redemption
contained in paragraph 5 of the Notes, as appropriate.
Section 3.2 Selection of Notes To Be Redeemed.
In the event that fewer than all of the Notes are to be redeemed,
the Trustee shall select the Notes to be redeemed, if the Notes are listed on a
national securities exchange, in accordance with the rules of such exchange or,
if the Notes are not so listed, either on a pro rata basis or by lot, or such
other method as it shall deem fair and equitable; provided, however, that the
Company shall have previously notified the Trustee in writing of any such
exchange on which the Notes are listed. The Trustee shall promptly notify the
Company of the Notes selected for redemption and, in the case of any Notes
selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture unless the context otherwise requires,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.3 Notice of Redemption.
At least 30 days and no more than 60 days before a Redemption Date,
the Company shall mail or cause to be mailed a notice of redemption by
first-class mail, to each Holder whose Notes are to be redeemed at his or her
last address as the same appears on the registry books maintained by the
Registrar pursuant to Section 2.3. Each notice for redemption shall identify the
Notes to be redeemed (including the CUSIP numbers thereof) and shall state:
(i) the Redemption Date;
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(ii) the Redemption Price and the amount of premium and accrued
interest, if any, to be paid;
(iii) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date, and upon surrender of such Note, a new Note or Notes in
aggregate principal amount equal to the unredeemed portion thereof will be
issued;
(iv) the name and address of the Paying Agent;
(v) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest, if
any;
(vi) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the Redemption Date;
(vii) the provision of paragraph 5 of the Notes pursuant to which
the Notes called for redemption are being redeemed; and
(viii) the aggregate principal amount of Notes that are being
redeemed.
At the Company's written request made at least five Business Days
prior to the date on which notice is to be given, the Trustee shall give the
notice of redemption in the Company's name and at the Company's sole expense.
Section 3.4 Effect of Notice of Redemption.
Once the notice of redemption described in Section 3.3 is mailed,
Notes called for redemption become due and payable on the Redemption Date and at
the Redemption Price, including any premium, plus interest accrued to the
Redemption Date, if any. Upon surrender to the Paying Agent, such Notes called
for redemption shall be paid at the Redemption Price, including any premium,
plus interest accrued thereon to the Redemption Date; provided, that if the
Redemption Date is after a regular Record Date and on or prior to the Interest
Payment Date, the accrued interest shall be payable to the Holder of the
redeemed Notes registered on the relevant record date, and provided, further,
that if a Redemption Date is a Legal Holiday, payment shall be made on the next
succeeding Business Day and no interest shall accrue for the period from such
Redemption Date to such succeeding Business Day.
Section 3.5 Deposit of Redemption Price.
On or prior to 11:00 a.m., New York City time, on each Redemption
Date, the Company shall deposit with the Paying Agent in immediately available
funds money sufficient to pay the Redemption Price of and accrued interest on
all Notes to be redeemed on that date other than Notes or portions thereof
called for redemption on that date which have been delivered by the Company to
the Trustee for cancellation. The Paying Agent shall promptly return to the
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Company any money deposited with the Paying Agent by the Company in excess of
the amounts necessary to pay the Redemption Price of, and accured interest on,
all Notes to be redeemed.
On and after any Redemption Date, if money sufficient to pay the
redemption price of and accrued interest on Notes called for redemption shall
have been made available in accordance with the preceding paragraph and the
payment thereof is not prohibited pursuant to the terms of this Indenture, the
Notes called for redemption will cease to accrue interest and the only right of
the Holders of such Notes will be to receive payment of the redemption price of
and, subject to the first proviso in Section 3.4, accrued and unpaid interest on
such Notes to the Redemption Date. If any Note surrendered for redemption shall
not be so paid, interest will be paid, from the Redemption Date until such
redemption payment is made, on the unpaid principal of the Note and any interest
not paid on such unpaid principal, in each case, at the rate and in the manner
provided in the Notes.
Section 3.6 Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Trustee shall
authenticate for a Holder a new Note equal in principal amount to the unredeemed
portion of the Note surrendered.
ARTICLE 4.
COVENANTS
Section 4.1. Payment of Notes.
The Company shall pay the principal of and interest on the Notes on
the dates and in the manner provided in the Notes and this Indenture. An
installment of principal of or interest, and the Change of Control Purchase
Price and the Excess Proceeds Offer Purchase Price, on the Notes shall be
considered paid on the date it is due if the Trustee or Paying Agent holds on
that date money designated for and sufficient to pay or, if interest is to be
paid in Secondary Notes, if the Trustee or Paying Agent holds on that date duly
authenticated Secondary Notes in an aggregate principal amount equal to, the
applicable installment of interest.
The Company shall pay interest on overdue principal (including
post-petition interest in a proceeding under any Bankruptcy Law), and overdue
interest, to the extent lawful, at the rate specified in the Notes.
Section 4.2. Maintenance of Office or Agency.
The Company shall maintain an office or agency where Notes may be
surrendered for registration of transfer or exchange or for presentation for
payment and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Company shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such
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presentations, surrenders, notices and demands may be made or served at the
address of the Trustee as set forth in Section 10.2.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations. The
Company shall give prompt written notice to the Trustee of such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby initially designates the address of the Trustee
as such office of the Company.
Section 4.3. Limitation on Additional Indebtedness
(a) The Company will not, and will not cause or permit any
Restricted Subsidiary of the Company to, directly or indirectly, incur (as
defined) any Indebtedness (including any Acquired Indebtedness); provided, that
if no Default or Event of Default shall have occurred and be continuing at the
time or as a consequence of the incurrence of such Indebtedness, the Company or
any Restricted Subsidiary may incur Indebtedness (including any Acquired
Indebtedness) if the Company's Consolidated Interest Coverage Ratio is greater
than 2.0 to 1.
(b) Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may incur Permitted Indebtedness.
Section 4.4. Limitation on Restricted Payments.
The Company will not make, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make, any Restricted Payment after the
Issue Date, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such Restricted
Payment;
(b) immediately after giving pro forma effect to such Restricted
Payment, the Company could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under Section 4.3(a); and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date does
not exceed the sum (without duplication) of (1) 50% of the cumulative
Consolidated Net Income of the Company (or minus 100% of any cumulative deficit
in Consolidated Net Income) for the period (treated as one accounting period)
from the first day of the fiscal quarter in which the Issue Date occurs through
the last day of the fiscal quarter immediately preceding such Restricted
Payment, (2) 100% of the aggregate Net Proceeds in cash received by the Company
from the issuance or sale, after the Issue Date (other than to a Restricted
Subsidiary), of (A) Capital Stock (other than Disqualified
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Capital Stock) of the Company or (B) any Indebtedness or other securities of the
Company that are convertible into or exercisable or exchangeable for Capital
Stock (other than Disqualified Capital Stock) of the Company which have been so
converted or exercised or exchanged (other than by a Restricted Subsidiary of
the Company) and (3) 100% of the net reduction in Investments (other than
Permitted Investments), subsequent to the Issue Date, in any Person, resulting
from payments of interest on Indebtedness, dividends, repayments of loans or
advances or other transfers or distributions of Property or return of capital
(but only to the extent such interest, dividends or repayments or other
transfers or distributions of Property or return of capital are not included in
the calculation of Consolidated Net Income), in each case to the Company or any
Restricted Subsidiary from any Person (including Unrestricted Subsidiaries) or
from redesignations (the designation of which did not constitute a Permitted
Investment) of Unrestricted Subsidiaries as Restricted Subsidiaries in
accordance with this Indenture, not to exceed in the case of any Person the
amount of Investments (other than Permitted Investments) previously made by the
Company or any Restricted Subsidiary in such Person. For purposes of determining
the amount expended for Restricted Payments under this clause (c), Property
other than cash (including a distribution of assets) shall be valued at its Fair
Market Value.
The provisions of this Section 4.4 shall not prohibit:
(i) the payment of any distribution within 60 days after the date of
declaration thereof, if at such date of declaration such payment would
comply with the provisions of this Indenture;
(ii) the retirement of any shares of Capital Stock of the Company or
Subordinated Indebtedness by conversion into, or by or in exchange for,
shares of Capital Stock (other than Disqualified Capital Stock) of the
Company, or out of, the Net Proceeds of the substantially concurrent sale
(other than to a Restricted Subsidiary of the Company) of other shares of
Capital Stock of the Company (other than Disqualified Capital Stock);
provided, that any such Net Proceeds are excluded from clause (c)(2) of
the immediately preceding paragraph for the purposes of this calculation
(and were not included therein at any time);
(iii) the redemption, repayment or retirement of Subordinated
Indebtedness in exchange for, by conversion into, or out of the Net
Proceeds of, (x) a substantially concurrent sale or incurrence of
Subordinated Indebtedness (other than any Indebtedness owed to a
Restricted Subsidiary) or (y) a substantially concurrent sale (other than
to a Restricted Subsidiary of the Company) of shares of Capital Stock of
the Company; provided, that any such Net Proceeds are excluded from clause
(c)(2) of the immediately preceding paragraph (and were not included
therein at any time);
(iv) the retirement of any shares of Disqualified Capital Stock by
conversion into, or by exchange for, shares of Disqualified Capital Stock
of the Company, or out of the Net Proceeds of the substantially concurrent
sale (other than to a Restricted Subsidiary of the Company) of other
shares of Disqualified Capital Stock of the Company;
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(v) payments to MHE Investments or any other Person in respect of
which MHE Investments or such other Person is a member of the consolidated
tax group of the Company, for so long as MHE Investments or such other
Person owns such amount of the Capital Stock of the Company as will permit
it or a member of the consolidated tax group of MHE Investments or such
other Person to be entitled to file consolidated federal tax returns with
the Company, for income taxes pursuant to the Tax Allocation Agreement or
for the purpose of enabling MHE Investments or such other Person or any
such members to pay taxes other than income taxes, to the extent actually
owed and attributable to the operations of the Company and its
Subsidiaries or to MHE Investments' or such other Persons' ownership
thereof;
(vi) payments to MHE Investments, for so long as it owns not less
than a majority of the outstanding Common Stock of the Company, in amounts
sufficient to pay the ordinary operating and administrative expenses of
MHE Investments (including all reasonable professional fees and expenses),
including in connection with its complying with the Company's reporting
obligations (including filings with the Commission and any exchange on
which the Company's securities are traded) and obligations to prepare and
distribute business records in the ordinary course of business and the
Company's costs and expenses relating to taxes, other than those referred
to in clause (v) (which taxes are attributable to the operations of the
Company and its Restricted Subsidiaries or to MHE Investments' ownership
thereof); provided, that the aggregate payments paid in each fiscal year
pursuant to this clause (vi) will not exceed 0.20% of the consolidated net
sales of the Company and its Restricted Subsidiaries for such fiscal year;
(vii) the purchase, redemption, retirement or other acquisition for
value of Capital Stock of the Company or of any Person that directly or
indirectly controls (as defined in the definition of Affiliate) the
Company held by employees or former employees of the Company or any
Restricted Subsidiary (or their estates or beneficiaries under their
estates) upon death, disability, retirement, termination of employment and
pursuant to the terms of any agreement under which such Capital Stock was
issued, provided, that the aggregate Fair Market Value of the
consideration paid for such purchase, redemption, retirement or other
acquisition of such Capital Stock does not exceed $500,000 in any fiscal
year;
(viii) payments due under the Permitted Affiliate Agreements (other
than payments pursuant to clause (v) above) that would otherwise
constitute Restricted Payments; and
(ix) payments that would otherwise constitute Restricted Payments,
not to exceed $750,000 in the aggregate;
provided, that in calculating the aggregate amount of Restricted Payments made
subsequent to the Issue Date for purposes of clause (c) of the immediately
preceding paragraph, amounts expended pursuant to clause (i) (but only if the
declaration thereof has not been counted in a prior
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period), (vi) (other than to the extent otherwise reducing Consolidated Net
Income), (vii) and (ix) shall be included, without duplication, in such
calculation and (ii), (iii), (iv), (v) and (viii) shall not be included in such
calculation. Nothing in the immediately preceding proviso is meant to affect
whether any amount expended pursuant to clause (v) should be reflected in
Consolidated Net Income.
If the Company makes a Restricted Payment which, at the time of the
making of such Restricted Payment, in the good faith determination of the Board
of Directors of the Company, would be permitted under the requirements of this
Indenture, such Restricted Payment shall be deemed to have been made in
compliance with this Indenture notwithstanding any subsequent adjustment made in
good faith to the Company's financial statements affecting Consolidated Net
Income.
Section 4.5. Legal Existence
Subject to Article 5 hereof, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect its
legal existence and the corporate, partnership or other existence of each
Restricted Subsidiary in accordance with the respective organizational documents
(as the same may be amended from time to time) of each Restricted Subsidiary and
the rights (charter and statutory), licenses and franchises of the Company and
its Restricted Subsidiaries; provided, however, that the Company shall not be
required to preserve any such right, license or franchise, or the corporate,
partnership or other existence of its Restricted Subsidiaries, taken as a whole,
and that the loss thereof is not adverse in any material respect to the
Noteholders.
Section 4.6. Taxes
The Company shall, and shall cause each of its Restricted
Subsidiaries to, pay prior to delinquency all material taxes, assessments, and
governmental levies except as contested in good faith and by appropriate
proceedings.
Section 4.7. Maintenance of Properties; Insurance; Books and Records
(a) The Company shall, and shall cause each of its Restricted
Subsidiaries at all times to cause, all material properties used in and
necessary to the conduct of its and their business to be maintained and kept in
good condition, repair and working order (reasonable wear and tear excepted) and
shall cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereto; provided, however, that nothing in this
Section 4.7 shall prevent the Company or any of its Restricted Subsidiaries from
discontinuing the use, operation or maintenance of any of such Properties, or
disposing of any of them, if such discontinuance or disposal is, in the judgment
of the Board of Directors of the Company or the Restricted Subsidiary of the
Company so concerned, or of an officer (or other agent employed by the
Restricted Company or of the Restricted Subsidiary so concerned) of the Company
or a Restricted Subsidiary having managerial responsibility for any such
Property, desirable in the
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conduct of the business of the Company or such Restricted Subsidiary of the
Company, and if such discontinuance or disposal is not adverse in any material
respect to the Holders.
(b) To the extent available at commercially reasonable rates, the
Company shall maintain and shall cause its Restricted Subsidiaries, to the
extent such Restricted Subsidiaries maintain operations, to maintain insurance
with responsible carriers against such risks and in such amounts, and with such
deductibles, retentions, self-insured amounts and co-insurance provisions, as
are customarily carried by similar businesses, of similar size.
(c) The Company shall, and shall cause each of its Restricted
Subsidiaries to, keep proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets and
business of the Company and each Subsidiary of the Company, in accordance with
GAAP consistently applied to the Company and its Restricted Subsidiaries taken
as a whole.
(d) The Company shall and shall cause each of its Restricted
Subsidiaries to comply with all applicable statutes, laws, ordinances or
government rules and regulations to which they are subject, non-compliance with
which would materially adversely affect the business, earnings, assets or
financial condition of the Company and its Restricted Subsidiaries taken as a
whole.
Section 4.8. Compliance Certificate.
The Company will deliver to the Trustee on or after 90 days after
the end of the Company's fiscal year and on or before 45 days after the end of
each of the first, second and third fiscal quarters in each year an Officers'
Certificate stating whether or not the signers know of any Default or Event of
Default that has occurred during such fiscal quarter or such fiscal year. If
they do, the certificate shall describe all such Defaults or Events of Default,
their status and the intended method of cure, if any.
Section 4.9.
[Reserved.]
Section 4.10. Reports to Commission and Holders.
Whether or not required by the rules and regulations of the
Commission, so long as any Notes are outstanding, the Company shall furnish to
the Trustee and to the Holders of the Notes within 10 days after it is or would
have been required to file them with the Commission, (i) all annual and
quarterly financial information that would be required to be contained in a
filing with the Commission on Forms 10-K and 10-Q (without exhibits) if the
Company were required to file such forms, including a section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations and, with respect to the annual information only, a report thereon by
the Company's certified independent accountants and (ii) all current reports
that would be required to be filed with the Commission on Form 8-K (without
exhibits) if
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the Company were required to file such reports. In addition, whether or not
required by the rules and regulations of the Commission, the Company will file a
copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing). In addition,
the Company shall furnish to the Trustee, the Holders of the Notes and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144(d)(4) under the
Securities Act and the exhibits omitted from the information furnished pursuant
to the preceding sentence, for so long as the Notes are not freely transferable
under the Securities Act. The Company will also comply with the other provisions
of ss. 314(a) of the Trust Indenture Act.
Section 4.11. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon or plead (as a defense or otherwise)
or in any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law or any usury law which would prohibit or forgive the Company
from paying all or any portion of the principal of, premium, if any and/or
interest on the Notes as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of
this Indenture, and (to the extent that it may lawfully do so) the Company
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
Section 4.12. Limitation on Certain Asset Sales.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(i) the Company or any of its Restricted Subsidiaries, as the case
may be, receives consideration at the time of such sale or other disposition
equal to the Fair Market Value thereof;
(ii) not less than 85% of the consideration received by the Company
or any of its Restricted Subsidiaries, as the case may be, is in the form of (a)
cash or Cash Equivalents; provided, that the amount of any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet) of
the Company or any Restricted Subsidiary (other than contingent liabilities or
liabilities (including Subordinated Indebtedness) subordinated to the Notes or
Indebtedness without general recourse to the obligor thereof) that are assumed
or forgiven by the transferee of any such assets will be deemed to be cash for
the purposes of this clause (ii) if the Company or such Restricted Subsidiary is
released from any liability for such liabilities and (b) Replacement Assets; and
(iii) the Asset Sale Proceeds received by the Company or such
Restricted Subsidiaries are applied (a) either (x) to the extent the Company
elects, or is required, to the prepayment, repayment or purchase of Senior
Indebtedness of the Company or Indebtedness or
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Capital Stock of any Restricted Subsidiary within 360 days following the receipt
of the Asset Sale Proceeds from any Asset Sale; provided, that any such
repayment shall result in a permanent reduction of the commitments thereunder in
an amount equal to the principal amount so repaid; or (y) to the extent the
Company elects, to acquisitions of assets (and Investments otherwise permitted
to be made in accordance with the terms of this Indenture) used or useful in
businesses similar or reasonably related to the business of the Company or its
Restricted Subsidiaries as conducted at the time of such Asset Sale; provided,
that such acquisitions or Investments occur on or prior to the 365th day
following receipt of such Asset Sale Proceeds (the "Reinvestment Date"); and (b)
if on the Reinvestment Date with respect to any Asset Sale, the Available Asset
Sale Proceeds exceed $10 million, the Company shall apply an amount equal to
such Available Asset Sale Proceeds to an offer to repurchase the Notes (and at
its option, to an offer to repurchase other pari passu Indebtedness; provided,
that the stated maturity date of such Indebtedness is no later than the stated
maturity date of the Notes), at a purchase price in cash equal to 100% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of repurchase (an "Excess Proceeds Offer"). To the extent that any amount of
Available Asset Sale Proceeds remains after the completion of such Excess
Proceeds Offer, the Company may use such remaining amount in any manner
permitted by this Indenture and the amount of Available Asset Sale Proceeds then
required to be otherwise applied in accordance with this Section 4.12 shall be
reset to zero.
The Company will comply with the following provisions in connection
with any Excess Proceeds Offer required to be made pursuant to this Section
4.12(iii):
(a) The Excess Proceeds Offer will remain open for a period of at
least 30 days following its commencement but not longer than 60 days, except to
the extent that a longer period is required by applicable law (the "Excess
Proceeds Offer Period"). On the Business Day following the termination of the
Excess Proceeds Offer Period (the "Excess Proceeds Offer Purchase Date"), the
Company will purchase the principal amount of Notes required to be purchased
pursuant to this Section 4.12(iii) (the "Excess Proceeds Offer Amount") or, if
less than the Excess Proceeds Offer Amount has been so validly tendered and not
properly withdrawn, all Notes validly tendered and not properly withdrawn in
response to the Excess Proceeds Offer. Payment for any Notes so purchased will
be made in the same manner as cash interest payments are made on the Notes. If
the Excess Proceeds Offer Purchase Date is on or after a Record Date and on or
before the related Interest Payment Date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such Record Date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Excess Proceeds Offer.
(b) Upon the commencement of an Excess Proceeds Offer, the Company
shall send, by first class mail, within 30 days following the Reinvestment Date,
a notice to the Trustee and each of the Holders. The notice shall contain all
instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Excess Proceeds Offer. The Excess Proceeds Offer shall be made
to all Holders. The notice, which shall govern the terms of the Excess Proceeds
Offer, shall state:
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(i) that the Excess Proceeds Offer is being made pursuant to this
Section 4.12, the Excess Proceeds Offer Period during which the Excess
Proceeds Offer shall remain open and whether the Company has elected to
offer to repurchase other pari passu Indebtedness;
(ii) the Excess Proceeds Offer Amount (including the calculations
used in determining the amount of Available Asset Sale Proceeds), the
Excess Proceeds Offer Purchase Price and the Excess Proceeds Offer
Purchase Date;
(iii) that any Notes which are not validly tendered or are not
otherwise accepted for payment shall continue to accrue interest;
(iv) that, unless the Company defaults in making such payment, any
Note accepted for payment pursuant to the Excess Proceeds Offer shall
cease to accrue interest after the Excess Proceeds Offer Purchase Date;
(v) that any Holder electing to have a Note purchased pursuant to
any Excess Proceeds Offer shall be required to surrender the Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Note completed, or transfer by book-entry transfer, to the Company, a
depository, if appointed by the Company, or a Paying Agent at the address
specified in the notice at least three days before the Excess Proceeds
Offer Purchase Date;
(vi) that Holders shall be entitled to withdraw their election if
the Company, the depository or the Paying Agent, as the case may be,
receives, no later than the expiration of the Excess Proceeds Offer
Period, a telegram, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Note the Holder delivered
for purchase and a statement that such Holder is withdrawing his election
to have such Note purchased;
(vii) that, if the aggregate principal amount of Notes surrendered
by Holders exceeds the Excess Proceeds Offer Amount, the Company shall
select the Notes to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only Notes
in denominations of $1,000, or integral multiples thereof, shall be
purchased); and
(viii) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered (or transferred by book-entry transfer).
(c) On or before the Excess Proceeds Offer Purchase Date, the
Company shall, to the extent lawful, (1) accept for payment, on a pro rata basis
to the extent necessary, the Excess Proceeds Offer Amount of Notes or portions
thereof so validly tendered and not properly withdrawn pursuant to the Excess
Proceeds Offer, or if less than the Excess Proceeds Offer Amount has been so
validly tendered and not properly withdrawn, all Notes validly tendered and
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not properly withdrawn, (2) deposit by 11:00 a.m. New York City time, on such
date with the Paying Agent, an amount equal to Excess Proceeds Offer Amount,
plus accrued and unpaid interest in respect of all Notes, or portions thereof,
so accepted and (3) shall deliver to the Trustee an Officers' Certificate
stating that such Notes or portions thereof were accepted for payment by the
Company in accordance with the terms of this Section 4.12. The Company, the
depository or the Paying Agent, as the case may be, shall promptly (but in any
case not later than five days after the Excess Proceeds Offer Purchase Date)
mail or deliver to each tendering Holder an amount equal to the Excess Proceeds
Offer Purchase Price of the Notes validly tendered and not properly withdrawn by
such Holder and accepted by the Company for purchase. Upon surrender and
cancellation of a Physical Note that is purchased in part, the Company shall
promptly issue and the Trustee shall authenticate and deliver to the
surrendering Holder of such Physical Note a new Physical Note; provided, that
each such new Physical Note shall be in a principal amount at the Final Maturity
Date of $1,000 or an integral multiple thereof. Upon surrender of a Global Note
that is purchased in part pursuant to an Excess Proceeds Offer, the Paying Agent
shall forward such Global Note to the Trustee who shall make a notation on
Schedule A thereof to reduce the principal amount of such Global Note to an
amount equal to the unpurchased portion of such Global Note, as provided in the
Notes. Any Note not so accepted shall be promptly mailed or delivered by the
Company to the Holder thereof. The Company shall publicly announce the results
of the Excess Proceeds Offer on the Excess Proceeds Offer Purchase Date. For
purposes of this Section 4.12, the trustee shall act as the Paying Agent.
If at any time the Company is required to make an Excess Proceeds
Offer, the Company is also required to make one or more similar offers (each, an
"Additional Excess Proceeds Offer") for any of its securities or those of any of
its Affiliates, the Company shall be entitled to make any such Additional Excess
Proceeds Offers simultaneously with such Excess Proceeds Offer; provided, that,
to the extent the Company is required to purchase any such other securities
pursuant to such Additional Excess Proceeds Offers, Available Asset Sale
Proceeds shall be reduced by an amount equal to the aggregate purchase price of
all such other securities purchased pursuant to such Additional Excess Proceeds
Offers.
In the event that the Company makes an Excess Proceeds Offer, the
Company shall comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1 under,
the Exchange Act.
Section 4.13. Limitation on Preferred Stock of Restricted Subsidiaries.
The Company will not permit any of its Restricted Subsidiaries to
issue any Preferred Stock (other than to the Company or a Wholly-Owned
Subsidiary), other than Permitted Foreign Restricted Subsidiary Preferred Stock,
or permit any Person (other than the Company or a Wholly-Owned Subsidiary) to
hold any such Preferred Stock unless the Company or such Restricted Subsidiary
would be entitled to incur or assume Indebtedness described in Section 4.3 in
the aggregate principal amount equal to the aggregate liquidation value of the
Preferred Stock to be issued or so held.
Section 4.14. Limitation on Other Senior Subordinated Indebtedness.
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The Company will not incur, contingently or otherwise, any
Indebtedness that is both (i) subordinate in right of payment to any Senior
Indebtedness of the Company and (ii) senior in right of payment to the Notes.
For purposes of this Section 4.14, Indebtedness is deemed to be senior in right
of payment to the Notes if it is not explicitly subordinate in right of payment
to Senior Indebtedness at least to the same extent as the Notes are subordinate
to Senior Indebtedness.
Section 4.15. Limitations on Transactions with Affiliates.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, Property or services) with any
Affiliate (each, an "Affiliate Transaction") or extend, renew, waive or
otherwise modify the terms of any Affiliate Transaction entered into prior to
the Issue Date unless (i) such Affiliate Transaction is between or among the
Company and the Restricted Subsidiaries or between or among Restricted
Subsidiaries; or (ii) the terms of such Affiliate Transaction are fair to the
Company or such Restricted Subsidiary, as the case may be, and the terms of such
Affiliate Transaction are at least as favorable as the terms which could be
obtained by the Company or such Restricted Subsidiary, as the case may be, in a
comparable transaction made on an arm's-length basis between unaffiliated
parties. In any Affiliate Transaction (or any series of related Affiliate
Transactions) involving an amount or having a Fair Market Value in excess of $2
million which is not permitted under clause (i) of the immediately preceding
sentence, the Company shall deliver to the Trustee a resolution of a majority of
the disinterested members of the Board of Directors of the Company which
reflects the approval of such Affiliate Transaction and a determination that
such Affiliate Transaction complies with clause (ii) of the immediately
preceding sentence. In any Affiliate Transaction (or series or related Affiliate
Transactions) which includes the payment of fees of $1 million or more to
Chartwell, the Company shall deliver to the Trustee a resolution of a majority
of the disinterested members of the Board of Directors of the Company which
reflects the approval of such affiliate Transaction. In addition, in any
Affiliate Transaction (or any series of related Affiliate Transactions)
involving an amount or having a Fair Market Value in excess of $10 million which
is not permitted under clause (i) of the immediately preceding sentence, the
Company must deliver to the Trustee, prior to the consummation of the
transaction or transactions, a written opinion from a nationally recognized
investment banking firm or other expert stating that such transaction or
transactions are fair to the Company or such Restricted Subsidiary, as the case
may be, from a financial point of view; provided, that no such opinion shall be
required in respect of the provision of services or sales of inventory or
products by the Company or any of its Restricted Subsidiaries to a Joint Venture
in the ordinary course of business.
(b) The provisions in clause (a) above will not apply to: (i) any
transaction or series of related transactions pursuant to the terms of the
Permitted Affiliate Agreements; (ii) reasonable fees and compensation paid to
and indemnity provided on behalf of officers, directors or employees of the
Company or any Restricted Subsidiary of the Company as determined in good faith
by the Company's Board of Directors or senior management; (iii) any payment that
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would be permitted under the first paragraph or clauses (v) or (vi) of the
second paragraph of Section 4.4; (iv) any Permitted Investment (other than
Permitted Investments made pursuant to clause (x) of the definition of Permitted
Investments); or (v) loans or advances to employees and officers of the Company
or any of its Subsidiaries in the ordinary course of business to provide for the
payment of reasonable expenses incurred by such persons in the performance of
their responsibilities to the Company or such Subsidiary or in connection with
any relocation. The aggregate management, consulting and similar fees paid by
the Company or its Subsidiaries (excluding expenses and amounts paid pursuant to
the last sentence of this Section 4.15(b) or pursuant to clause (iii) of this
paragraph) to Chartwell shall not exceed $1 million during any fiscal year;
provided, that any such fees may accrue but shall not be paid by the Company any
time after the occurrence and during the continuance of a Default or Event of
Default until such Default or Event of Default is cured, whereupon such accrued
and unpaid fees may be paid in addition to other permitted fees. In addition,
the Company may pay advisory fees to an Affiliate of the Company (including
Chartwell) with respect to specific transactions, provided, that such payments
would be permitted under the first paragraph of Section 4.4. In addition, for
purposes of this Section 4.15, any transaction or series of related transactions
between the Company or any Restricted Subsidiary and an Affiliate of the Company
that is approved by a majority of the disinterested members of its Board of
Directors shall be deemed to comply with clause (ii) of the first sentence of
the preceding paragraph.
Section 4.16. Limitation on Capital Stock of Restricted Subsidiaries.
The Company will not (i) sell or otherwise convey or dispose of any
Capital Stock of a Restricted Subsidiary other than to a Wholly-Owned
Subsidiary, (ii) permit any of its Restricted Subsidiaries to sell or otherwise
convey or dispose of any Capital Stock of a Restricted Subsidiary of the Company
other than to the Company or a Wholly-Owned Subsidiary or (iii) permit any of
its Restricted Subsidiaries to issue any Capital Stock, other than to the
Company or a Wholly-Owned Subsidiary of the Company. The foregoing restrictions
shall not apply to (a) an Asset Sale consisting of not less than 85% of the
Capital Stock of a Restricted Subsidiary owned by the Company made in compliance
with Section 4.12, (b) the issuance of Preferred Stock in compliance with the
Section 4.13, (c) the issuance of director's qualifying shares if required by
applicable law or (d) the issuance of Capital Stock of a Foreign Restricted
Subsidiary to third parties; provided, that, immediately after such transaction
such Foreign Restricted Subsidiary remains a Foreign Restricted Subsidiary or
(e) the pledge or hypothecation of, or creation of any security interest on, any
Capital Stock by the Company or any of its Restricted Subsidiaries.
Section 4.17.
[Reserved.]
Section 4.18. Payments for Consent.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any
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Noteholder for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of this Indenture or the Notes unless such consideration
is offered to be paid or agreed to be paid to all holders of the Notes which so
consent, waive or agree to amend in the time frame set forth in solicitation
documents relating to such consent, waiver or agreement.
Section 4.19. Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (A) on its Capital Stock or
(B) with respect to any other interest or participation in, or measured by, its
profits, (ii) pay any Indebtedness owed to the Company or any of its Restricted
Subsidiaries, (iii) make loans or advances or capital contributions to the
Company or any of its Restricted Subsidiaries that is a stockholder of such
Person or (iv) transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries that is a stockholder of such Person, except for
such encumbrances or restrictions existing under or by reason of:
(i) encumbrances or restrictions as in effect on the Issue Date;
(ii) any Credit Facility (existing on the Issue Date), this
Indenture, the Notes, the Note Indenture, the Senior Notes, the Guarantees
and any Surety Arrangement (existing on the Issue Date) or any Surety
Arrangement arising after the Issue Date which, in the good faith judgment
of the Board of Directors of the Company, contains substantially the same
or less restrictive encumbrances or restrictions than those contained in
any Surety Arrangements existing on the Issue Date and any permitted
amendment, modification or supplement thereto and any permitted renewal,
refinancing, replacement or refunding thereof; provided that, in the good
faith judgment of the Board of Directors of the Company, such encumbrances
or restrictions are in the aggregate no more restrictive than those
contained in the agreements governing the Indebtedness being amended,
modified, supplemented, extended, refinanced, renewed, replaced, defeased
or refunded;
(iii) applicable law;
(iv) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries or of
any Person that becomes a Restricted Subsidiary as in effect at the time
of such acquisition or such Person becoming a Restricted Subsidiary
(except to the extent such Indebtedness was incurred in connection with or
in contemplation of such acquisition of such Person becoming a Restricted
Subsidiary), 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 (including any Subsidiary of the
Person), so acquired;
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(v) customary non-assignment provisions in leases, licenses or other
agreements entered into in the ordinary course of business and consistent
with past practices;
(vi) Refinancing Indebtedness; provided, that, in the good faith
judgment of the Board of Directors of the Company, such encumbrances or
restrictions are in the aggregate no more restrictive than those contained
in the agreements governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded;
(vii) Indebtedness having restrictions and encumbrances no more
restrictive than those contained in this Indenture and the Notes or the
Note Indenture, the Senior Notes and the Guarantees; provided, that the
Company or Morris is the primary obligor under such Indebtedness;
(viii) customary restrictions in security agreements or mortgages
securing Indebtedness of the Company or a Restricted Subsidiary to the
extent such restrictions restrict the transfer of the Property subject to
such security agreements and mortgages;
(ix) customary restrictions in stock or asset purchase agreements to
the extent such restrictions apply to the Person selling stock or assets
(and/or such Person's Subsidiaries) solely during the period prior to the
closing under such agreements; or
(x) any encumbrance or restriction pursuant to an agreement relating
to an acquisition of Property, so long as the encumbrances or restrictions
in any such agreement relate solely to the Property so acquired (and are
not or were not created in anticipation of or in connection with the
acquisition thereof).
Nothing contained in this Section 4.19 shall prevent the Company or
any Restricted Subsidiary from (i) creating, incurring, assuming or suffering to
exist any Liens or (ii) restricting the sale or other disposition of property or
assets of the Company or any of its Restricted Subsidiaries that secure
Indebtedness of the Company or any of its Restricted Subsidiaries incurred in
accordance with this Indenture.
Section 4.20. Change of Control Offer.
Upon the occurrence of a Change of Control, the Company shall be
obligated to make an offer to purchase (the "Change of Control Offer") the
outstanding Notes at a purchase price (the "Change of Control Purchase Price")
equal to 101% of the principal amount thereof plus any accrued and unpaid
interest thereon to the Change of Control Payment Date (as hereinafter defined)
in accordance with the procedures set forth in this covenant.
Within 30 days of the occurrence of a Change of Control, the Company
shall (i) cause a notice of the Change of Control Offer to be sent at least once
to the Dow Jones News Service or similar business news service in the United
States and (ii) send by first-class mail,
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postage prepaid, to the Trustee and to each Holder of the Notes, at the address
appearing in the register maintained by the Registrar of the Notes, a notice
stating:
(a) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes validly tendered will be accepted for payment;
(b) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day not earlier than 30 days nor later than 60 days
from the date such notice is mailed (the "Change of Control Payment Date"));
(c) that any Note not validly tendered will continue to accrue
interest;
(d) that, unless the Company defaults in the payment of the Change
of Control Purchase Price, any Notes accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest after the Change of Control
Payment Date;
(e) that Holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the Notes to
the Paying Agent at the address specified in the notice prior to the close of
business on the Business Day preceding the Change of Control Payment Date;
(f) that Holders will be entitled to withdraw their acceptance if
the Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Notes delivered for purchase, and a statement that such
holder is withdrawing his election to have such Notes purchased;
(g) that Holders whose Notes are being purchased only in part will
be issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered, provided, that each Note purchased and each such new Note
issued shall be in an original principal amount in denominations of $1,000 and
integral multiples thereof;
(h) any other procedures that a Holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance; and
(i) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) accept for payment Notes or portions thereof validly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Notes or portions thereof so
tendered and (iii) deliver or cause to be delivered to the Trustee Notes or
portions thereof so accepted for cancellation. The Paying Agent shall promptly
mail to each Holder of Notes so accepted payment in an amount equal to the
purchase price for such Notes, and the Company shall execute and issue, and the
Trustee shall promptly authenticate and mail to such Holder, a new Note equal in
principal amount to any unpurchased portion of the
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Notes surrendered; provided, that each such new Note shall be issued in an
original principal amount in denominations of $1,000 and integral multiples
thereof.
If any Credit Facilities are in effect or if the Senior Notes are
outstanding or if any other Indebtedness of the Company or its Restricted
Subsidiaries that requires a payment upon a Change of Control is outstanding, or
any amounts are owing thereunder or in respect thereof, at the time of the
occurrence of a Change of Control, prior to the mailing of the notice to Holders
described in the preceding second paragraph, but in any event within 30 days
following any Change of Control, the Company shall be required to (i) cause the
borrowers thereunder to repay in full all obligations under or in respect of
such Credit Facility or such other Indebtedness or offer to repay in full all
obligations under or in respect of such Credit Facility or such other
Indebtedness and repay within such 30-day period the obligations under or in
respect of such Credit Facility or such other Indebtedness of each lender who
has then irrevocably accepted such offer and cause the Company to repay within
such 30-day period in full all obligations in respect of the Senior Notes or
offer to repay in full all obligations in respect of the Senior Notes of each
holder who has then irrevocably accepted such offer or (ii) cause such borrowers
and the Company to obtain the requisite consent under such Credit Facility, or
such other Indebtedness, the holders of such other Indebtedness and from the
holders of the Senior Notes, respectively, to permit the repurchase of the Notes
as described above. The Company must first comply with the terms of the
preceding sentence before it shall be required to purchase Notes in the event of
a Change of Control; provided, that the Company's failure to comply with the
terms of the preceding sentence constitutes an Event of Default described in
clause (iii) of Section 6.01.
If the Company has issued any outstanding (i) Subordinated
Indebtedness or (ii) Capital Stock, and the Company is required to make a Change
of Control Offer or to make a distribution with respect to such Subordinated
Indebtedness or Capital Stock in the event of a Change of Control, the Company
shall not consummate any such offer or distribution with respect to such
Subordinated Indebtedness or Capital Stock until such time as the Company shall
have paid the Change of Control Purchase Price in full to the holders of Notes
that have validly accepted the Company's Change of Control Offer and shall
otherwise have consummated the Change of Control Offer made to holders of the
Notes.
In the event that a Change of Control occurs and the Holders of
Notes exercise their right to require the Company to purchase Notes, if such
purchase constitutes a "tender offer" for purposes of Rule 14e-1 under the
Exchange Act at that time, the Company will comply with the requirements of Rule
l4e-1 as then in effect with respect to such repurchase.
The Company will not be required to make a Change of Control Offer
upon a Change of Control if a third party makes such Change of Control Offer
contemporaneously with or upon a Change of Control in the manner, at the times
and otherwise in compliance with the requirements of this Indenture and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
ARTICLE 5.
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SUCCESSOR CORPORATION
Section 5.1. Mergers, Consolidations and Sales of Assets.
(a) The Company will not consolidate or merge with or into any
Person, or sell, assign, lease, convey or otherwise dispose of (or cause or
permit any of its Restricted Subsidiaries to sell, assign, lease, convey or
otherwise dispose of (however effected, including, without limitation, by merger
or consolidation)) all or substantially all of the Company's assets (determined
on a consolidated basis for the Company and its Restricted Subsidiaries),
whether as an entirety or substantially an entirety in one transaction or a
series of related transactions, including by way of liquidation or dissolution,
to any Person unless, in each such case: (i)(x) the Company shall be the
continuing Person, or (y) the Person (if other than the Company) formed by such
consolidation or into which the Company or the Restricted Subsidiary, as the
case may be, is merged or to which the Properties and assets of the Company or
any Restricted Subsidiary, as the case may be, are transferred (such Person, the
"Surviving Entity") (1) shall be a corporation organized and existing under the
laws of the United States or any State thereof or the District of Columbia and
(2) shall expressly assume, by a supplemental indenture, executed and delivered
to the Trustee, in form satisfactory to the Trustee, all of the obligations of
the Company under the Notes and this Indenture (upon which assumption the
Company shall be discharged of any and all obligations on the Notes and this
Indenture), and the obligations under this Indenture shall remain in full force
and effect; (ii) immediately before and immediately after giving effect to such
transaction (including, without limitation, giving effect to any Indebtedness
and Acquired Indebtedness incurred or anticipated to be incurred and any Lien
granted in connection with or in respect of the transaction), no Default or
Event of Default shall have occurred and be continuing; and (iii) immediately
after giving effect to such transaction on a pro forma basis (including, without
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions) the
Company (or the Surviving Entity if the Company is not continuing) (A) shall
have a Consolidated Net Worth equal to or greater than the Consolidated Net
Worth of the Company immediately prior to such transaction and (B) could incur
at least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
under Section 4.3; provided, that a Restricted Subsidiary may merge with and
into the Company without complying with this clause (iii)(B).
(b) In connection with any consolidation, merger or transfer of
assets contemplated by this Section 5.1, the Company shall deliver, or cause to
be delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or transfer and the supplemental indenture in
respect thereto comply with this Section 5.1 and that all conditions precedent
herein provided for relating to such transaction or transactions have been
complied with.
(c) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the Properties or assets of one or
more Subsidiaries of the Company, the Capital Stock of which
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constitutes all or substantially all of the Properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
assets of the Company.
Section 5.2. Successor Corporation Substituted.
(a) Upon any transaction or series of transactions that are of the
type described in Section 5.1, and are effected in accordance with, conditions
described in the immediately preceding paragraphs, the Surviving Entity shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such Surviving
Entity had been named as the Company therein; and when a Surviving Entity duly
assumes all of the obligations and covenants of the Company pursuant to this
Indenture and the Notes, except in the case of a lease, the predecessor Person
shall be relieved of all such obligations.
(b) For all purposes of this Indenture and the Notes, Subsidiaries
of any Surviving Entity will, upon such transaction or series of transactions,
become Restricted Subsidiaries or Unrestricted Subsidiaries, to the extent and
as provided pursuant to this Indenture.
(c) If the successor corporation shall have succeeded to and been
substituted for the Company, such successor corporation may cause to be signed,
and may issue either in its on name or in the name of the Company prior to such
succession any or all of the Notes issuable hereunder which theretofore shall
not have been signed by the Company and delivered to the Trustee; and, upon the
order of such successor corporation, instead of the Company, and subject to all
the terms, conditions and limitations in this Indenture prescribed, the Trustee
shall authenticate and shall deliver any Notes which previously shall have been
signed and delivered by the Officers of the Company to the Trustees for
authentication, and any Notes which such successor corporation thereafter shall
cause to be signed and delivered to the Trustee for that purpose. All of the
Notes so issued and so endorsed shall in all respects have the same legal rank
and benefit under this Indenture as the notes theretofore or thereafter issued
and endorsed in accordance with the terms of this Indenture as though all such
Notes had been issued and endorsed at the date of the execution hereof.
ARTICLE 6.
DEFAULT AND REMEDIES
Section 6.1. Events of Default.
An "Event of Default" occurs if there is a:
(i) default in payment of any principal of, or premium, if any, on
the Notes when due (whether or not prohibited by Article 11 hereto);
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(ii) default in the payment of any interest on any Notes when due,
which Default continues for 30 days or more (whether or not prohibited by
Article 11 hereto);
(iii) Default by the Company in the observance or performance of any
other covenant in the Notes or this Indenture for 60 days after written
notice from the Trustee or the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding (except in the case of a
Default with respect to Sections 4.12, 4.20 or 5.1 which shall constitute
an Event of Default with such notice requirement but without such passage
of time requirement);
(iv) failure to pay when due (within any applicable grace period)
principal, interest or premium with respect to any Indebtedness of the
Company or any Restricted Subsidiary thereof in an aggregate principal
amount of $5 million of more, or the acceleration of any such Indebtedness
in an aggregate principal amount of $5 million or more which Default shall
not be cured or waived;
(v) any final judgment or judgments which can no longer be appealed
for the payment of money in excess of $5 million shall be rendered against
the Company or any Restricted Subsidiary thereof (in excess of amounts
covered by insurance and as to which the insurance company has
acknowledged coverage) by a court of competent jurisdiction, and shall not
be bonded (such that a judgment creditor cannot proceed against assets of
the Company or any Subsidiary), vacated, discharged or satisfied for any
period of 60 consecutive days during which a stay of enforcement shall not
be in effect; or
(vi) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it
in an involuntary case,
(c) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(d) makes a general assignment for the benefit of its
creditors, or
(e) generally is not paying its debts as they become due;
(vii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(a) is for relief against either of the Company or any
Significant Subsidiary in an involuntary case,
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(b) appoints a Custodian of the Company or any Significant
Subsidiary or for all or substantially all of the
property of either of the Company or any Significant
Subsidiary, or
(c) orders the liquidation of the Company or any Significant
Subsidiary,
and the order or decree remains unstayed and in effect for 60 days; or
For purposes of clauses (vi) and (vii) above, any Restricted
Subsidiary which, when aggregated with all other Restricted Subsidiaries that
are not otherwise Significant Subsidiaries and as to which any event described
in clauses (vi) or (vii) above has occurred, would constitute a Significant
Subsidiary.
Section 6.2. Acceleration.
If an Event of Default (other than an Event of Default arising under
Section 6.1(vi) or (vii)) shall have occurred and be continuing, then the
Trustee or the Holders of not less than 25% in aggregate principal amount of the
Notes then outstanding may declare to be immediately due and payable, the entire
principal amount of all the Notes then outstanding, premium, if any, and accrued
and unpaid interest to the date of acceleration and such amounts shall
immediately become due and payable; provided, that after such acceleration but
before a judgment or decree based on acceleration is obtained by the Trustee,
the Holders of a majority in aggregate principal amount of outstanding Notes may
rescind and annul such acceleration if (i) all Events of Default, other than
nonpayment of principal, premium or interest, that has become due solely because
of acceleration, have been cured or waived as provided in this Indenture, (ii)
to the extent the payment of such interest is lawful, interest on overdue
installments of interest and overdue principal, which has become due otherwise
than by such declaration of acceleration, has been paid, (iii) if the Company
has paid the Trustee its reasonable compensation and reimbursed the Trustee for
its expenses, disbursements and advances and (iv) in the event of the cure or
waiver of an Event of Default described in clause (vi) and (vii) of Section 6.1,
the Trustee shall have received an Officers' Certificate and an Opinion of
Counsel that such Event of Default has been cured or waived.
In the case that an Event of Default arising under Section 6.1 (vi)
or (vii) shall occur, the principal, premium, if any, and accrued and unpaid
interest with respect to all of the Notes shall be due and payable immediately
without any declaration or other act on the part of the Trustee or the Holders
of Notes. If, after the delivery of any such notice of acceleration with respect
to an Event of Default under Section 6.1(iv), any such payment Default or
acceleration relating to such other Indebtedness shall have been cured or
rescinded or such Indebtedness shall have been discharged within 30 days of such
default or acceleration in respect of such Indebtedness, then such Event of
Default specified in Section 6.1(iv) shall be deemed cured for all purposes of
this Indenture.
Section 6.3. Other Remedies.
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If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, premium, if any, and any interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture and may
take any necessary action requested of it as Trustee to settle, compromise,
adjust or otherwise conclude any proceedings to which it is a party.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
Section 6.4. Waiver of Past Defaults.
Subject to Section 6.7, the holders of a majority in principal
amount of the Notes then outstanding have the right to waive any existing
Default or compliance with any provision of this Indenture or the Notes and its
consequences hereunder, except (i) an existing Default or Event of Default in
the payment of the principal of, premium, if any, on, or interest on, the Notes
(including in connection with an offer to purchase) or (ii) an existing Default
or Event of Default in respect of a provision that under Section 8.2 cannot be
amended without the consent of each Holder affected thereby. Upon any such
waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon. The Company shall deliver to the Trustee an
Officers' Certificate stating that the requisite percentage of Holders have
consented to such waiver and attaching copies of such consents. In case of any
such waiver, the Company, the Trustee and the Holders shall be restored to their
former position and rights hereunder and under the Securities, respectively.
Section 6.5. Control by Majority.
The Holders of a majority in aggregate principal amount of the Notes
then outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee by this Indenture or subject to Section 7.1 and
the TIA. The Trustee, however, may refuse to follow any direction that conflicts
with law or this Indenture, that the Trustee determines may be unduly
prejudicial to the rights of another Noteholder, not taking part in such
direction, and the Trustee shall have the right to decline to follow any such
direction if the Trustee, being advised by counsel, determines that the action
so directed may not lawfully be taken or if the Trustee in good faith shall, by
a Responsible Officer, determine that the proceedings so directed may involve it
in personal liability; provided that the Trustee may take any other action
deemed proper by the Trustee which is not inconsistent with such direction.
Prior to taking any action hereunder, the Trustee shall be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
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Section 6.6. Limitation on Suits
No Holder of any Note will have any right to institute any
proceeding with respect to this Indenture or for any remedy thereunder, unless
such Holder shall have previously given to the Trustee written notice of a
continuing Event of Default and unless the Holders of at least 25% in aggregate
principal amount of the outstanding Notes shall have made written request and
offered reasonable indemnity to the Trustee to institute such proceeding as
trustee, and unless the Trustee shall not have received from the Holders of a
majority in aggregate principal amount of the outstanding Notes a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. Notwithstanding the foregoing, such limitations shall
not apply to a suit instituted on such Notes on or after the due dates expressed
in such Notes. A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
Section 6.7. Rights of Holders To Receive Payment
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal of, or premium, if any, and
interest on the Note on or after the respective due dates expressed in the Note,
or to bring suit for the enforcement of any such payment on or after such
respective dates, is absolute and unconditional and shall not be impaired or
affected without the consent of the Holder.
Section 6.8. Collection Suit by Trustee.
If an Event of Default in payment of principal, premium or interest
specified in clause (i) or (ii) of Section 6.1 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company or any other obligor on the Notes for the whole amount of
unpaid principal, premium, if any, and accrued interest remaining unpaid,
together with interest on overdue principal and, to the extent that payment of
such interest is lawful, interest on overdue installments of interest, in each
case at the rate per annum set forth in the Notes and such further amounts as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
Section 6.9. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Noteholders allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Notes), its creditors or its Property and shall be
entitled and empowered to collect and receive any monies or other Property
payable or deliverable on any such claims and to distribute the same after
deduction of its charges and expenses to the extent
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that any such charges and expenses are not paid out of the estate in any such
proceedings and any custodian in any such judicial proceeding is hereby
authorized by each Noteholder to make such payments to the Trustee, and in the
event that the Trustee shall consent to the making of such payments directly to
the Noteholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.7 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
or reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Noteholder in any such proceedings.
Section 6.10. Priorities.
If the Trustee collects any money or property pursuant to this
Article 6, it shall pay out the money or property in the following order:
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: to Noteholders for amounts due and unpaid on the Notes for
principal, premium, if any, and interest as to each,
ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any payment
to Noteholders pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.7, or a suit by a Holder or Holders of more than 10% in
aggregate principal amount of the Notes then outstanding.
Section 6.12. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any
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reason, or has been determined adversely to the Trustee or to such Holder, then
and in every case, subject to any determination in such proceeding, the Company,
the Trustee and the Holders shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
ARTICLE 7.
TRUSTEE
Section 7.1. Duties of Trustee.
(a) If an Event of Default actually known to a Responsible Officer
of the Trustee has occurred and is continuing, the Trustee shall exercise such
of the rights and powers vested in it by this Indenture and use the same degree
of care and skill in their exercise as a prudent man would exercise or use under
the same circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties that are specifically
set forth in this Indenture and no others and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture but,
in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture (but need not
confirm or investigate the accuracy of mathematical calculations or other
facts stated therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) This paragraph does not limit the effect of paragraph (b) of
this Section 7.1.
(ii) The Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
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(iii) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.2, 6.5 or 6.6 hereof.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its rights, powers or duties or to take or omit to take
any action under this Indenture or take any action at the request or direction
of Holders if it shall have reasonable grounds for believing that repayment of
such funds is not assured to it or it does not receive an indemnity satisfactory
to it in its sole discretion against such risk, liability, loss, fee or expense
which may be incurred by it in connection with such performance.
(e) Whether or not therein expressly so provided, paragraphs (a),
(b), (c), (d) and (e) of this Section 7.1 shall govern every provision of this
Indenture that in any way relates to the Trustee.
(f) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity satisfactory to it in its sole discretion
against any loss, liability, expense or fee.
(g) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by the law.
Section 7.2. Rights of Trustee.
Subject to Section 7.1 hereof:
(i) The Trustee may rely on any document reasonably believed by it
to be genuine and to have been signed or presented by the proper person.
The Trustee need not investigate any fact or matter stated in the
document.
(ii) Before the Trustee acts or refrains from acting, it may consult
with counsel, require an Officers' Certificate or an Opinion of Counsel,
or both, which shall conform to the provisions of Section 10.4 and Section
10.5 hereof. The Trustee shall be protected and shall not be liable for
any action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(iii) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
by it with due care.
(iv) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers.
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(v) The Trustee may consult with counsel of its selection, and the
written advice or opinion of such counsel as to matters of law shall be
full and complete authorization and protection from liability in respect
of any action taken, omitted or suffered by it hereunder in good faith and
in accordance with the advice or opinion of such counsel.
Section 7.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may make loans to, accept deposits from, perform
services for or otherwise deal with either of the Company, or any Affiliates
thereof, with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. The Trustee, however, shall be subject to
Sections 7.10 and 7.11 hereof.
Section 7.4. Trustee's Disclaimer
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the sale of Notes or any
money paid to the Company pursuant to the terms of this Indenture and it shall
not be responsible for any statement in the Notes or this Indenture other than
its certificate of authentication.
Section 7.5. Notice of Default
If a Default occurs and is continuing and if it is known to the
Trustee, the Trustee shall mail to each Noteholder notice of the Default within
90 days after it occurs. Except in the case of a Default in payment of the
principal of, or premium, if any, or interest on any Note the Trustee may
withhold the notice if and so long as the board of directors, the executive
committee, a committee of its Responsible Officers in good faith determines)
that withholding the notice is in the interests of the Noteholders.
Section 7.6. Reports by Trustee to Holders
If required by TIA Section 313(a), within 60 days after May 15 of
any year, commencing [ ], the Trustee shall mail to each Noteholder a brief
report dated as of such May 15 that complies with TIA Section 313(a). The
Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also
transmit by mail all reports as required by TIA Section 313(c) and TIA Section
313(d).
Reports pursuant to this Section 7.6 shall be transmitted by mail:
(i) to all registered Holders of Notes, as the names and addresses
of such Holders appear on the Registrar's books; and
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(ii) to such Holder of Notes as have, within the two years preceding
such transmission, filed their names and addresses with the Trustee for
that purpose.
A copy of each report at the time of its mailing to Noteholders
shall be filed with the Commission and each stock exchange on which the Notes
are listed. The Company shall promptly notify the Trustee when the Notes are
listed on any securities exchange or of any delisting thereof.
Section 7.7. Compensation and Indemnity.
The Company shall pay to the Trustee and Agents from time to time
such compensation as shall be agreed in writing between the Company and the
Trustee for its services hereunder (which compensation shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust). The Company shall reimburse the Trustee and Agents upon request for all
reasonable disbursements, expenses and advances incurred or made by it in
connection with its duties under this Indenture, including the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify each of the Trustee, any predecessor
Trustee and their agents for, and hold each of them harmless against, any and
all loss, damage, claim, liability or expense, including without limitation
taxes (other than taxes based on the income of the Trustee or such Agent) and
reasonable attorneys' fees and expenses incurred by each of them in connection
with the acceptance or performance of its duties under this Indenture, including
the reasonable costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder (including, without limitation, reasonable costs and expenses
of enforcing this Indenture against the Company (including this Section 7.7) and
settlement costs). The Trustee or Agent shall notify the Company in writing
promptly of any claim asserted against the Trustee or Agent for which it may
seek indemnity. However, the failure by the Trustee or Agent to so notify the
Company shall not relieve the Company of its obligations hereunder except to the
extent the Company is prejudiced thereby.
Notwithstanding the foregoing, the Company need not reimburse the
Trustee for any expense or indemnify it against any loss or liability incurred
by the Trustee through its negligence or bad faith. To secure the payment
obligations of the Company in this Section 7.7, the Trustee shall have a lien
prior to the Notes on all money or Property held or collected by the Trustee
except such money or Property held in trust to pay principal of and interest on
particular Notes. The Trustee's right to receive payment of any amounts due
under this Section 7.7 shall not be subordinate in right of payment to any other
liability or Indebtedness of the Company. The obligations of the Company under
this Section 7.7 to compensate, reimburse and indemnify the Trustee, Agents and
each predecessor Trustee and to pay or reimburse the Trustee, Agents and each
predecessor Trustee for expenses, disbursements and advances shall be joint and
several liabilities of the Company shall survive the satisfaction, discharge and
termination of this Indenture, including any termination or rejection hereof
under any bankruptcy law or the resignation or removal of the Trustee.
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When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.1(vi) hereof occurs, the expenses and the
compensation (including the reasonable fees and expenses of its agents and
counsel) for the services are intended to constitute expenses of administration
under any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
Section 7.8. Replacement of Trustee.
The Trustee may resign by so notifying the Company in writing. The
Holders of a majority in aggregate principal amount of the outstanding Notes may
remove the Trustee by notifying the Trustee and the Company in writing and may
appoint a successor Trustee with the Company's written consent which consent
shall not be unreasonably withheld. The Company may remove the Trustee at its
election if:
(i) the Trustee fails to comply with Section 7.10 hereof;
(ii) the Trustee is adjudged a bankrupt or an insolvent under any
Bankruptcy law;
(iii) a receiver or other public officer takes charge of the Trustee
or its property;
(iv) the Trustee otherwise becomes incapable of acting; or
(v) a successor corporation becomes successor Trustee pursuant to
Section 7.9 below.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify the Holders of such
event and promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Notes may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee notifies the Company of its resignation or is removed, the
retiring Trustee, the Company or the Holders of a majority in aggregate
principal amount of the outstanding Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee, after written request of a Noteholder who has been a
Noteholder for at least six months, fails to comply with Section 7.10 hereof,
any Noteholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
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A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately following
such delivery, the retiring Trustee shall, subject to its rights under Section
7.7 hereof, transfer all Property held by it as Trustee to the successor
Trustee, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Noteholder. Notwithstanding replacement of the
Trustee pursuant to this Section 7.8, the Company's obligations under Section
7.7 hereof shall continue for the benefit of the retiring Trustee.
Section 7.9. Successor Trustee by Consolidation, Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation, subject to Section 7.10 hereof, the successor corporation without
any further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Trustee may authenticate such Notes either
in the name of any predecessor hereunder or in the name of the successor to the
Trustee; and in all such cases such certificates shall have the full force which
it is anywhere in the Notes or in this Indenture provided that the certificates
of the Trustee shall have.
Section 7.10. Eligibility; Disqualification
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5) in every respect. The Trustee
shall have a combined capital and surplus of at least $50,000,000 as set forth
in its most recent published annual report of condition. The Trustee shall
comply with TIA Section 310(b); provided, however, that there shall be excluded
from the operation of TIA Section 310(b)(1) any indenture or indentures under
which other securities or certificates of interest or participation in other
securities of the Company are outstanding if the requirements for such exclusion
set forth in TIA Section 310(b)(1) are met.
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
Section 7.12. Paying Agents.
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The Company shall cause each Paying Agent other than the Trustee to
execute and deliver to it and the Trustee an instrument in which such agent
shall agree with the Trustee, subject to the provisions of this Section 7.12:
(a) that it will hold all sums held by it as agent for the payment
of principal of, or premium, if any, or interest on, the Notes (whether such
sums have been paid to it by the Company or by any obligor on the Notes) in
trust for the benefit of Holders of the Notes or the Trustee;
(b) that it will at any time during the continuance of any Event of
Default, upon written request from the Trustee, deliver to the Trustee all sums
so held in trust by it together with a full accounting thereof; and
(c) that it will give the Trustee written notice within three (3)
Business Days of any failure of the Company (or by any obligor on the Notes) in
the payment of any installment of the principal of, premium, if any, or interest
on, the Notes when the same shall be due and payable.
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ARTICLE 8.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.1. Without Consent of Holders.
Without the consent of any Holders of the Notes, the Company and the
Trustee, at any time and from time to time, may enter into one or more
indentures supplemental to this Indenture for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company in this
Indenture and in the Notes; or
(2) to add to the covenants of the Company for the benefit of the
Holders of the Notes, or to surrender any right or power herein conferred upon
the Company; or
(3) to add additional Events of Default; or
(4) to provide for uncertificated Notes in addition to or in place
of certificated Notes; or
(5) to evidence and provide for the acceptance of appointment under
this Indenture by a successor Trustee; or
(6) to secure the Notes;
(7) to cure any ambiguity, to correct or supplement any provision in
this Indenture which may be defective or inconsistent with any other provision
in this Indenture, or to make any other provisions with respect to matters or
questions arising under this Indenture; provided that such actions pursuant to
this clause shall not adversely affect the interests of the Holders of the Notes
in any material respect; or
(8) to comply with any requirements of the Commission in order to
effect and maintain the qualification of this Indenture under the TIA.
Section 8.2. With Consent of Holders.
With the consent of the Holders of not less than a majority in
aggregate principal amount of the outstanding Notes, the Company and the Trustee
may enter into an indenture or indentures supplemental to this Indenture for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of modifying, in any manner the rights of
the Holders of the Notes under this Indenture including the definitions
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herein; provided, however, that no such supplemental indenture shall, without
the consent of the Holder of each outstanding Note affected thereby:
(1) change the stated maturity of any Note or of any installment of
interest on any Note, or reduce the amount payable in respect of the principal
thereof or the rate of interest thereon or any premium payable thereon, or
reduce the amount that would be due and payable on acceleration of the maturity
thereof, or change the place of payment where, or the coin or currency in which,
any Note or any premium or interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the stated
maturity thereof;
(2) reduce the percentage in aggregate principal amount of the
outstanding Notes, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults thereunder and their consequences) provided for in this Indenture;
(3) modify in any material respect the obligations of the Company to
make Change of Control Offers upon a Change of Control or Excess Proceeds Offers
from the Available Asset Sale Proceeds; or
(4) modify or change any provision of this Indenture affecting the
contractual ranking in right of payment of the Notes in a manner adverse to the
Holders of the Notes, or
(5) make any change in Sections 6.4 or 6.7 or modify any of the
provisions of this Section 8.2, except to increase any such percentage required
for such actions or to provide that certain other provisions of this Indenture
cannot be modified or waived without the consent of the Holder of each
outstanding Note affected thereby.
The Holders of not less than a majority in aggregate principal
amount of the outstanding Notes may on behalf of all of the Notes waive any past
Default under this Indenture and its consequences, except a Default (1) in any
payment in respect of the principal of (or premium, if any) or interest on any
Notes (including any Note which is required to have been purchased pursuant to a
Change of Control Offer or an Excess Proceeds Offer which has been made by the
Company), or (2) in respect of a covenant or provision hereof which under this
Indenture cannot be modified or amended without the consent of the Holder of
each outstanding Note affected thereby.
It shall not be necessary for the consent of the Holders of Notes
under this Section 8.2 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
Section 8.3. Compliance with TIA.
Every amendment to or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect.
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Section 8.4. Revocation and Effect of Consents.
Until an amendment, supplement, waiver or other action becomes
effective, a consent to it by a Holder of a Note is a continuing consent
conclusive and binding upon such Holder and every subsequent Holder of the same
Note or portion thereof, and of any Note issued upon the transfer thereof or in
exchange therefor or in place thereof, even if notation of the consent is not
made on any such Note. Any such Holder or subsequent Holder, however, may revoke
the consent as to his Note or portion of a Note, if the Trustee receives the
written notice of revocation before the date the amendment, supplement, waiver
or other action becomes effective.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement, or waiver. If a record date is fixed, then, notwithstanding the
preceding paragraph, those Persons who were Holders at such record date (or
their duly designated proxies), and only such Persons, shall be entitled to
consent to such amendment, supplement, or waiver or to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 120 days
after such record date unless the consent of the requisite number of Holders has
been obtained.
After an amendment, supplement, waiver or other action becomes
effective, it shall bind every Noteholder, unless it makes a change described in
any of clauses (1) through (5) of Section 8.2 hereof. In that case the
amendment, supplement, waiver or other action shall bind each Holder of a Note
who has consented to it and every subsequent Holder of a Note or portion of a
Note that evidences the same debt as the consenting Holder's Note.
Section 8.5. Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a Note,
the Trustee (in accordance with the specific written direction of the Company)
shall request the Holder of the Note (in accordance with the specific written
direction of the Company) to deliver it to the Trustee. In such case, the
Trustee shall place an appropriate notation on the Note about the changed terms
and return it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms. Failure to make
the appropriate notation or issue a new Note shall not affect the validity and
effect of such amendment, supplement or waiver.
Section 8.6. Trustee To Sign Amendments, Etc.
Upon the request of the Company accompanied by a Board Resolution
authorizing the execution of any such amended or supplemental Indenture, and
upon the filing with the Trustee of evidence satisfactory to the Trustee of the
consent of the Holders of Senior Notes as aforesaid, the Trustee shall sign any
amendment, supplement or waiver authorized pursuant to this Article 8 if the
amendment, supplement or waiver does not adversely affect the
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rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing or refusing to sign such
amendment, supplement or waiver the Trustee shall be entitled to receive and,
subject to Section 7.1 hereof, shall be fully protected in relying upon an
Officers' Certificate and an Opinion of Counsel stating that such amendment,
supplement or waiver is authorized or permitted by this Indenture and is a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms (subject to customary exceptions). The
Trustee may, but shall not be obligated to, execute any such amendment,
supplement or waiver which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise. In signing any amendment,
supplement or waiver, the Trustee shall be entitled to receive an indemnity
reasonably satisfactory to it.
ARTICLE 9.
DISCHARGE OF INDENTURE, DEFEASANCE
Section 9.1. Discharge of Indenture
The Company may terminate its obligations under this Indenture, when
(1) either: (A) all Notes theretofore authenticated and delivered have been
delivered to the Trustee for cancellation, or (B) all such Notes not theretofore
delivered to the Trustee for cancellation (i) have become due and payable, or
(ii) will become due and payable within 60 days or are to be called for
redemption within 60 days (a "Discharge") under irrevocable arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company, and the Company has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire indebtedness on the Notes, not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, on and interest to the date of deposit or stated maturity or
date of redemption, whichever is later; (2) the Company has paid or caused to be
paid all other sums then due and payable hereunder by the Company; and (3) the
Company has delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent under this Indenture
relating to the satisfaction and discharge of this Indenture have been complied
with.
After such delivery the Trustee upon request of the Company shall
acknowledge in writing the discharge of the Company's obligations under the
Notes and this Indenture except for those surviving obligations specified below.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.8, 2.9,
4.2, 7.7, 9.5, 9.6, 9.7 and 9.8, the Company's optional redemption rights and
the rights, trust, powers and duties and immunities of the Trustee shall survive
until the Notes are no longer outstanding. Thereafter, only the Company's
obligations in Sections 7.7, 9.5, 9.6, 9.7 and 9.8 hereof shall survive.
The Trustee and the Paying Agent shall promptly pay to the Company
upon written request any excess money or securities held by them at any time.
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Section 9.2. Legal Defeasance.
The Company may at its option, by Board Resolution of the Board of
Directors of the Company, be discharged from its obligations with respect to the
Notes on the date the conditions set forth in Section 9.4 below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the Notes and to have satisfied all its other
obligations under such Notes and this Indenture insofar as such Notes are
concerned (and the Trustee, at the expense of the Company, shall, subject to
Section 9.6 hereof, execute instruments in form and substance reasonably
satisfactory to the Trustee and the Company acknowledging the same), except for
the following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of outstanding Notes to receive solely from
the trust funds described in Section 9.4 hereof and as more fully set forth in
such Section, payments in respect of the principal of, premium, if any, and
interest on such Notes when such payments are due, (B) the Company's obligations
with respect to such Notes under Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.8, 2.9 and
4.2 hereof, (C) the rights, powers, trusts, duties, and immunities of the
Trustee hereunder (including claims of, or payments to, the Trustee under or
pursuant to Section 7.7 hereof), (D) the Company's rights of optional redemption
and (E) this Article 9. Subject to compliance with this Article 9, the Company
may exercise its option under this Section 9.2 with respect to the Notes
notwithstanding the prior exercise of its option under Section 9.3 below with
respect to the Notes.
Section 9.3. Covenant Defeasance
At the option of the Company, pursuant to a Board Resolution of the
Board of Directors of the Company, the Company shall be released from its
obligations under Sections 4.3 through 4.20 hereof, inclusive, and clauses (ii),
(iii)(A) and (B) of Section 5.1 hereof with respect to the outstanding Notes and
any covenant added to this Indenture subsequent to the Issue Date pursuant to
Section 8.1 on and after the date the conditions set forth in Section 9.4 hereof
are satisfied (hereinafter, "Covenant Defeasance"). For this purpose, such
Covenant Defeasance means that the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such specified Section or portion thereof, whether directly or indirectly,
by reason of any reference elsewhere herein to any such specified Section or
portion thereof or by reason of any reference in any such specified Section or
portion thereof to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 6.1, but the remainder of this Indenture and the Notes shall be
unaffected thereby.
Section 9.4. Conditions to Legal Defeasance or Covenant Defeasance
The following shall be the conditions to application of Section 9.2
or Section 9.3 hereof to the outstanding Notes:
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(1) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 7.10 hereof who shall agree to comply with the provisions of this
Article 9 applicable to it) as funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of the Notes, (A) money in an amount, or (B) U.S.
Government Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will provide, not
later than the due date of any payment, money in an amount, or (C) a combination
thereof, in each case sufficient without reinvestment, in the opinion of a
nationally-recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee to pay discharge, and
which shall be applied by the Trustee (or other qualifying trustee) to pay and
discharge, the entire indebtedness in respect of the principal of, premium, if
any, and accrued interest on the outstanding Notes at the stated maturity
thereof of such principal, premium, if any, or interest on, such Notes on the
stated maturity thereof, or (if the Company has made irrevocable arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name and at the expense of the Company) the Redemption Date
thereof, as the case may be, in accordance with the terms of this Indenture and
such Notes;
(2) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel stating that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case (A) or (B) to the effect that,
and based thereon such opinion shall confirm that, the Holders of such Notes
will not recognize gain or loss for federal income tax purposes as a result of
the deposit, defeasance and discharge to be effected with respect to such Notes
and will be subject to federal income tax on the same amount, in the same manner
and at the same times as would be the case if such deposit, defeasance and
discharge were not to occur;
(3) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that the Holders of
such outstanding Notes will not recognize gain or loss for federal income tax
purposes as a result of the deposit and Covenant Defeasance to be effected with
respect to such Notes and will be subject to federal income tax on the same
amount, in the same manner and at the same times as would be the case if such
deposit and Covenant Defeasance were not to occur;
(4) no Default or Event of Default with respect to the outstanding
Notes shall have occurred and be continuing at the time of such deposit after
giving effect thereto or, in the case of Legal Defeasance, either: (A) the
Company shall have delivered to the Trustee an Opinion of Counsel to the effect
that, based upon existing precedents, if the matter were properly briefed, a
court should hold that the deposit of moneys and/or U.S. Government Obligations
as provided in clause (1) would not constitute a preference voidable under
Section 547 or 548 of the federal Bankruptcy Laws; or (B) no Default or Event of
Default relating to bankruptcy or insolvency shall have occurred and be
continuing at any time on or prior to the 91st day after the date of such
deposit (it being understood that this condition shall not be deemed satisfied
until after such 91st day);
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(5) such Legal Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the TIA (assuming
all Notes are in default within the meaning of the TIA); and
(6) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any other agreement or
instrument to which the Company is a party or by which it is bound;
(7) such Legal Defeasance or Covenant Defeasance shall not result in
the trust arising from such deposit constituting an investment company within
the meaning of the Investment Company Act of 1940, as amended, unless such trust
shall be registered under such Act or exempt from registration thereunder; and
(8) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent with respect to such Legal Defeasance or Covenant Defeasance have been
complied with.
Section 9.5. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions.
All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to Section 9.4 hereof in respect of
the outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent, to the Holders of such Notes, of
all sums due and to become due thereon in respect of principal, premium, if any,
and accrued interest, but such money need not be segregated from other funds
except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 9.4 hereof or the principal, premium, if any, and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 9 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon a Company
Request any money or U.S. Government Obligations held by it as provided in
Section 9.4 hereof which, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 9.6. Reinstatement.
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If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 9.1, 9.2 or 9.3 hereof by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture, the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article 9 until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with Section
9.1 hereof; provided, however, that if the Company has made any payment of
principal of, premium, if any, or accrued interest on any Notes because of the
reinstatement of their obligations, the Company shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the money or
U.S. Government Obligations held by the Trustee or Paying Agent.
Section 9.7. Moneys Held by Paying Agent
In connection with the satisfaction and discharge of this Indenture,
all moneys then held by any Paying Agent under the provisions of this Indenture
shall, upon written demand of the Company, be paid to the Trustee, or if
sufficient moneys have been deposited pursuant to Section 9.1 hereof, to the
Company upon a Company Request, and thereupon such Paying Agent shall be
released from all further liability with respect to such moneys.
Section 9.8. Moneys Held by Trustee.
Any moneys deposited with the Trustee or any Paying Agent or then
held by the Company in trust for the payment of the principal of, or premium, if
any, or interest on any Note that are not applied but remain unclaimed by the
Holder of such Note for two years after the date upon which the principal of, or
premium, if any, or interest on such Note shall have respectively become due and
payable shall be repaid to the Company upon a Company Request, or if such moneys
are then held by the Company in trust, such moneys shall be released from such
trust; and the Holder of such Note entitled to receive such payment shall
thereafter, as an unsecured general creditor, look only to the Company for the
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money shall thereupon cease; provided, however, that the
Trustee or any such Paying Agent, before being required to make any such
repayment, may, at the expense of the Company either mail to each Noteholder
affected, at the address shown in the register of the Notes maintained by the
Registrar pursuant to Section 2.4 hereof, or cause to be published once a week
for two successive weeks, in a newspaper published in the English language,
customarily published each Business Day and of general circulation in The City
of New York, New York, a notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such mailing or publication, any unclaimed balance of such moneys then
remaining will be repaid to the Company. After payment to the Company or the
release of any money held in trust by the Company Noteholders entitled to the
money must look only to the Company for payment as general creditors unless
applicable abandoned property law designates another person.
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ARTICLE 10.
MISCELLANEOUS
Section 10.1. Trust Indenture Act Controls.
This Indenture is subject to the provisions of the TIA that are
required to be a part of this Indenture, and shall, to the extent applicable, be
governed by such provisions. If any provision of this Indenture modifies any TIA
provision that may be so modified, such TIA provision shall be deemed to apply
to this Indenture as so modified. If any provisions of this Indenture excludes
any TIA provision that may be so excluded, such TIA provision shall be excluded
from this Indenture.
The provisions of TIA ss.ss. 310 through 317 that impose duties on
any Person (including the provisions automatically deemed included unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
Section 10.2. Notices
Except for notice or communications to Holders any notice or
communication shall be given in writing and delivered in person, sent by
facsimile, delivered by commercial courier service or mailed by first-class
mail, postage prepaid, addressed as follows:
If to the Company:
MMH Holdings, Inc.
315 West Forest Hill Avenue
Oak Creek, Wisconsin 53154
Attention: General Counsel
Fax Number: (414) 764-8596
Copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Attention: Russell W. Parks, Jr.
Fax Number: (202) 887-4288
If to the Trustee:
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Copy to:
Such notices or communications (other than those sent to Holders)
shall be effective when received and shall be sufficiently given if so given
within the time prescribed in this Indenture.
The Company or the Trustee by written notice to the others may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Noteholder shall be mailed
to him by first-class mail, postage prepaid, at his address shown on the
register kept by the Registrar and shall be given if so sent within the time
prescribed. Any notice or communication shall also be so mailed to any Person
described in TIA ss.313(c), to the extent required by the Trust Indenture Act.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication to a Noteholder is mailed in the manner provided
above, it shall be deemed duly given, whether or not the addressee receives it.
In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by this Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.
Section 10.3. Communications by Holders with Other Holders.
Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or the
Notes. The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
Section 10.4. Certificate and Opinion as to Conditions Precedent.
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Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate (which shall include the statements set
forth in Section 10.5 below) stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(ii) an Opinion of Counsel (which shall include the statements set
forth in Section 10.5 below) stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more such Persons as to other matters, and any such Person may certify or
give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, and may
state that it is so based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company stating that the information with respect to such factual matters is in
the possession of the Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate of opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 10.5. Statements Required in Certificate and Opinion.
Each certificate and opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
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(iii) a statement that, in the opinion of such Person, it or he has
made such examination or investigation as is necessary to enable it or him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(iv) a statement as to whether or not, in the opinion of such
Person, such covenant or condition has been complied with.
Section 10.6. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or meetings of
Noteholders. The Registrar and Paying Agent may make reasonable rules for their
functions.
Section 10.7. Business Days; Legal Holidays.
A "Business Day" is a day that is not a Legal Holiday. A "Legal
Holiday" is a Saturday, a Sunday, a federally-recognized holiday or a day on
which banking institutions are not required to be open in the State of New York.
If a payment date is a Legal Holiday at a place of payment, payment may be made
at that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
Section 10.8. Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.
Section 10.9. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan,
security or debt agreement of the Company or any Subsidiary thereof. No such
indenture, loan, security or debt agreement may be used to interpret this
Indenture.
Section 10.10. No Recourse Against Others.
No recourse for the payment of the principal of or premium, if any,
or interest on any of the Notes, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in this Indenture or in any supplemental indenture, or
in any of the Notes, or because of the creation of any Indebtedness represented
thereby, shall be had against any incorporator, stockholder, officer, employee
or
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director, as such, past, present or future, of the Company or of any successor
corporation or against the property or assets of any such incorporator,
stockholder, officer, employee or director, either directly or through the
Company or any successor corporation thereof, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that this Indenture and the
Notes are solely obligations of the Company, and that no such personal liability
whatever shall attach to, or is or shall be incurred by, any incorprator,
stockholder, officer, employee or director of the Company or any successor
corporation thereof, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations, covenants or agreements
contained in this Indenture or the Notes or implied therefrom, and that any and
all such personal liability of, and any and all claims against every
incorporator, stockholder, officer, employee and director, are hereby expressly
waived and released as a condition of, and as a consideration for, the execution
of this Indenture and the issuance of the Notes. It is understood that this
limitation on recourse is made expressly for the benefit of any such
incorporator, stockholder, officer, employee or director and may be enforced by
any of them.
Section 10.11. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind their respective successors. All agreements of the Trustee, any additional
trustee and any Paying Agents in this Indenture shall bind its successor.
Section 10.12. Multiple Counterparts.
The parties may sign multiple counterparts of this Indenture. Each
signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.
Section 10.13. Table of Contents, Headings, etc.
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
Section 10.14. Separability
Each provision of this Indenture shall be considered separable and
if for any reason any provision which is not essential to the effectuation of
the basic purpose of this Indenture or the Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
ARTICLE 11.
SUBORDINATION
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Section 11.1. Notes Subordinated to Senior Indebtedness.
The Company covenants and agrees, and each Holder of the Notes, by
its acceptance thereof, likewise covenants and agrees, that all Notes shall be
issued subject to the provisions of this Article 11; and each Person holding any
Note, whether upon original issue or upon transfer, assignment or exchange
thereof, accepts and agrees that the payment of all obligations on the Notes by
the Company shall, to the extent and in the manner herein set forth, be
subordinated and junior in right of payment to the prior payment in full in cash
or Cash Equivalents (or such payment shall be duly provided for to the
satisfaction of the holders of the Senior Indebtedness) of all obligations on
the Senior Indebtedness, that the subordination is for the benefit of, and shall
be enforceable directly by, the holders of Senior Indebtedness, and that each
holder of Senior Indebtedness, whether now outstanding or hereafter created,
incurred, assumed or guaranteed shall be deemed to have acquired Senior
Indebtedness, in reliance upon the covenants and provisions contained in this
Indenture.
Section 11.2. No Payment on Notes in Certain Circumstances.
(a) No payment or distribution (other than a payment or distribution
in the form of Permitted Junior Securities) of any assets or securities of the
Company of any kind or character (including, without limitation, cash, Property
and any payment or distribution which may be payable or deliverable by reason of
the payment of any other Indebtedness of the Company being subordinated to the
payment of the Notes by the Company) may be made by or on behalf of the Company,
including, without limitation, by way of set-off or otherwise, for or on account
of the Notes, or for or on account of the purchase, redemption or other
acquisition of the Notes, and neither the Trustee nor any Holder or owner of any
Notes shall take or receive from the Company, directly or indirectly in any
manner, payment in respect of all or any portion of Notes following the delivery
by the representative of the holders of Designated Senior Indebtedness (the
"Representative") to the Trustee of written notice of the occurrence of a
Payment Default, and in any such event, such prohibition shall continue until
such Payment Default is cured, waived in writing or ceases to exist. At such
time as the prohibition set forth in the preceding sentence shall no longer be
in effect, subject to the provisions of the following paragraph, the Company
shall resume making any and all required payments in respect of the Notes,
including any missed payments.
(b) Upon the occurrence of a Non-Payment Event of Default, no
payment or distribution (other than a payment or distribution in the form of
Permitted Junior Securities) of any assets of the Company of any kind may be
made by the Company, including, without limitation, by way of set-off or
otherwise, on account of the Notes, or on account of the purchase or redemption
or other acquisition of Notes, for a period (a "Payment Blockage Period")
commencing on the date of receipt by the Trustee of written notice from the
Representative of such Non-Payment Event of Default unless and until (subject to
any blockage of payments that may then be in effect under the preceding
paragraph) the earliest of (w) more than 179 days shall have elapsed since
receipt of such written notice by the Trustee, (x) such Non-Payment Event of
Default shall have been cured or waived in writing or shall have ceased to
exist, (y) such
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Designated Senior Indebtedness shall have been paid in full or (z) such Payment
Blockage Period shall have been terminated by written notice to the Company or
the Trustee from such Representative, after which, in the case of clause (w),
(x), (y) or (z), the Company shall resume making any and all required payments
in respect of the Notes, including any missed payments. Notwithstanding any
other provision of this Indenture, in no event shall a Payment Blockage Period
commenced in accordance with the provisions of this Indenture described in this
paragraph extend beyond 179 days from the date of the receipt by the Trustee of
the notice referred to above (such period, an "Initial Blockage Period"). Any
number of additional Payment Blockage Periods may be commenced during the
Initial Blockage Period; provided, that no such additional Payment Blockage
Period shall extend beyond the Initial Blockage Period. After the expiration of
the Initial Blockage Period, no Payment Blockage Period may be commenced until
at least 360 consecutive days have elapsed since the commencement date of the
Initial Blockage Period. Notwithstanding any other provision of this Indenture,
no Non-Payment Event of Default with respect to Designated Senior Indebtedness
which existed or was continuing on the date of the commencement of any Payment
Blockage Period initiated by the Representative shall be, or be made, the basis
for the commencement of a second Payment Blockage Period initiated by the
Representative, whether or not within the Initial Blockage Period, unless such
Non-Payment Event of Default shall have been waived for a period of not less
than 90 consecutive days.
Section 11.3. Payment Over of Proceeds upon Dissolution, Etc.
(a) In the event of any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, arrangement, reorganization or other similar
case or proceeding in connection therewith, relative to the Company or to its
creditors, as such, or to its assets, whether voluntary or involuntary, or any
liquidation, dissolution or other winding-up of the Company, whether voluntary
or involuntary and whether or not involving insolvency or bankruptcy, or any
general assignment for the benefit of creditors or other marshalling of assets
or liabilities of the Company (except in connection with the merger or
consolidation of the Company or its liquidation or dissolution following the
transfer of substantially all of its assets, upon the terms and conditions
permitted in Section 5.1 (all of the foregoing referred to herein individually
as a "Bankruptcy Proceeding" and collectively as "Bankruptcy Proceedings"), the
holders of Senior Indebtedness of the Company will be entitled to receive
payment and satisfaction in full in cash or Cash Equivalents of, or such payment
provided for, all amounts due on or in respect of all Senior Indebtedness of the
Company before the Holders of the Notes are entitled to receive or retain any
payment or distribution of any kind (other than a payment or distribution in the
form of Permitted Junior Securities) on account of the Notes.
(b) In the event that, notwithstanding the foregoing, the Trustee or
any Holder of Notes receives any payment or distribution of assets of the
Company of any kind, whether in cash, Property or securities, including, without
limitation, by way of set-off or otherwise, in respect of the Notes before all
Senior Indebtedness of the Company is paid and satisfied in full, then such
payment or distribution (other than a payment or distribution in the form of
Permitted Junior Securities) will be held by the recipient in trust for the
benefit of holders of Senior Indebtedness and will be immediately paid over or
delivered to the holders of Senior
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Indebtedness or their representative or representatives to the extent necessary
to make payment in full of all Senior Indebtedness remaining unpaid, after
giving effect to any concurrent payment or distribution, or provision therefor,
to or for the holders of Senior Indebtedness.
Section 11.4. Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article 11 or elsewhere in this Indenture
shall prevent (i) the Company, except under the conditions described in Sections
11.2 and 11.3, from making payments at any time for the purpose of making
payments of principal of and interest on the Notes, or from depositing with the
Trustee any monies for such payments, or (ii) in the absence of actual knowledge
by the Trustee that a given payment would be prohibited by Section 11.2 or 11.3,
the application by the Trustee of any monies deposited with it for the purpose
of making such payments of principal of, and interest on, the Notes to the
Holders entitled thereto unless at least one Business Day prior to the date upon
which such payment would otherwise become due and payable, the Trustee shall
have received the written notice provided for in Section 11.2(a) or in Section
11.7. The Company shall give prompt written notice to the Trustee of any
dissolution, winding-up, liquidation or reorganization of the Company.
Section 11.5. Subrogation.
Subject to the payment in full in cash or Cash Equivalents of all
Senior Indebtedness, the Holders shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of cash,
property or securities of the Company applicable to the Senior Indebtedness
until the Notes shall be paid in full; and, for the purposes of such
subrogation, no such payments or distributions to the holders of the Senior
Indebtedness by or on behalf of the Company or by or on behalf of the Holders by
virtue of this Article 11 which otherwise would have been made to the Holders
shall, as between the Company and the Holders, be deemed to be a payment by the
Company to or on account of the Senior Indebtedness, it being understood that
the provisions of this Article 11 are and are intended solely for the purpose of
defining the relative rights of the Holders, on the one hand, and the holders of
the Senior Indebtedness, on the other hand.
Section 11.6. Obligations of the Company Unconditional.
Nothing contained in this Article 11 or elsewhere in this Indenture
or in the Notes is intended to or shall impair, as among the Company and it
creditors other than the holders of Senior Indebtedness and the Holders, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders the principal of, premium, if any, on and any interest on the Notes as
and when the same shall become due and payable in accordance with their terms,
or is intended to or shall affect the relative rights of the Holders and
creditors of the Company other than the holders of any Senior Indebtedness, nor
shall anything herein or therein prevent the Holder or the Trustee on its behalf
from exercising all remedies otherwise permitted by applicable law upon Default
under this Indenture, subject to the rights, if any, under this Article 11 of
the holders of Senior Indebtedness in respect of cash, Property or securities of
the Company received upon the exercise of any such remedy.
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Section 11.7. Notice to Trustee.
The Company shall give prompt written notice to a Responsible
Officer of the Trustee of any fact known to the Company which would prohibit the
making of any payment to or by the Trustee in respect of the Notes pursuant to
the provisions of this Article 11. Regardless of anything to the contrary
contained in this Article 11 or elsewhere in this Indenture, the Trustee shall
not be charged with knowledge of the existence of any default or event of
default with respect to any Senior Indebtedness or of any other facts which
would prohibit the making of any payment to or by the Trustee unless and until
the Trustee shall have received notice in writing from the Company, or from a
holder of Senior Indebtedness or a Representative therefor, and, prior to the
receipt of any such written notice, the Trustee shall be entitled to assume (in
the absence of actual knowledge to the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article 11, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amounts of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article 11, and if such evidence is not furnished the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
Section 11.8. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company, the
Trustee, subject to the provisions of Article 7 hereof, and the Holders shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or
reorganization proceedings are pending, or upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, delivered to the Trustee or the Holders, for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
11.
Section 11.9. Trustee's Relation to Senior Indebtedness.
The Trustee and any agent of the Company or the Trustee shall be
entitled to all the rights set forth in this Article 11 with respect to any
Senior Indebtedness which may at any time be held by it in it individual or any
other capacity to the same extent as any other holder of Senior Indebtedness and
nothing in this Indenture shall deprive the Trustee or any such agent of any of
its rights as such holder.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in
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this Article 11, and no implied covenants or obligations with respect to the
holders of Senior Indebtedness shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness.
Whenever a distribution is to be made or a notice given to holders
or owners of Senior Indebtedness, the distribution may be made and the notice
may be given to their Representative, if any.
Section 11.10. Subordination Rights Not Impaired by Acts or Omissions of the
Company or Holders of Senior Indebtedness.
No right of any present or future holders of any Senior Indebtedness
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders and without impairing or releasing
the subordination provided in this Article 11 or the obligations hereunder of
the Holders to the holders of the Senior Indebtedness, do any one or more of the
following: (i) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, Senior Indebtedness, or otherwise amend or
supplement in any manner Senior Indebtedness, or any instrument evidencing the
same or any agreement under which Senior Indebtedness is outstanding; (ii) sell,
exchange, release or otherwise deal with any Property pledged, mortgaged
otherwise securing Senior Indebtedness; (iii) release any Person liable in any
manner for the payment or collection of Senior Indebtedness; and (iv) exercise
or refrain from exercising any rights against the Company or any other Person.
Section 11.11. Holders Authorize Trustee To Effectuate Subordination of Notes.
Each Holder by its acceptance of them authorizes and expressly
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate, as between the holders of Senior Indebtedness and the
Holders, the subordination provided in this Article 11, and appoints the Trustee
its attorney-in-fact for such purposes, including, in the event of any
dissolution, winding-up, liquidation or reorganization of the Company (whether
in bankruptcy, insolvency, receivership, or similar proceedings or upon an
assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of the Company, the filing of a claim for
the unpaid balance of its Notes and accrued interest in the form required in
those proceedings.
If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims,
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then the holders of the Senior Indebtedness or their Representative are or is
hereby authorized to have the right to file and are or is hereby authorized to
file an appropriate claim for and on behalf of the Holders of said Notes.
Nothing herein contained shall be deemed to authorize the Trustee or the holders
of Senior Indebtedness or their Representative to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder
thereof, or to authorize the Trustee or the holders of Senior Indebtedness or
their Representative to vote in respect of the claim of any Holder in any such
proceeding.
Section 11.12. This Article Eleven Not To Prevent Events of Default.
The failure to make a payment on account of principal of, premium,
if any, on or interest on the Notes by reason of any provision of this Article
11 will not be construed as preventing the occurrence of an Event of Default.
Section 11.13. Trustee's Compensation Not Prejudiced.
Nothing in this Article 11 will apply to amounts due to the Trustee
pursuant to other Sections in this Indenture.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
MMH HOLDINGS, INC.
By:
--------------------------
[TRUSTEE]
By:
--------------------------
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EXHIBIT A
MMH HOLDINGS, INC.
12% Exchange Debentures due 2009
CUSIP No.: [ ]
No. [ ] $[ ]
MMH HOLDINGS, INC., a Delaware corporation (the "Company", which
term includes any successor corporation), for value received promises to pay to
[ ] or registered assigns, the principal sum [of $[ ] [ ] Dollars]
[indicated on Schedule A hereof]*, on , 2009.
Interest Payment Dates: [ ]
Record Dates: [ ]
Reference is made to the further provisions of this 12% Exchange
Debenture due 2009 (this "Note") contained herein, which will for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authorization hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefit of this Indenture or be valid or
obligatory for any purpose.
- --------
*Include for Global Notes.
A-1
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Dated:
MMH HOLDINGS, INC.
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 12% Exchange Debentures due 2009 described in the
within-mentioned Indenture.
Dated: [ ], as Trustee
By
-------------------------------
Authorized Signatory
A-2
<PAGE>
(REVERSE OF NOTE)
MMH HOLDINGS, INC.
12% Exchange Debentures due 2009
1. Interest.
MMH HOLDINGS, Inc., a Delaware corporation (the "Company"), promises
to pay interest on the principal amount of this Note at the rate per annum shown
above. The Company will pay interest semi-annually on April 1 and October 1 of
each year (an "Interest Payment Date"), commencing the Interest Payment Date
following the date of issuance of this Note. Interest on the Notes will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from the date of issuance of this Note. Interest will be computed on
the basis of a 360-day year of twelve 30-day months. Capitalized terms used
herein and not defined shall have the meanings given them in the Indenture.
Notwithstanding anything herein to the contrary, on each Interest
Payment Date through and including April 1, 2003, the entire amount of the
interest payment on the Notes may be paid, at the option of the Company, in
additional Notes ("Secondary Notes") (valued at 100% of the principal amount
thereof). The Company may, at its option, pay cash in lieu of issuing any
Secondary Note to the extent the principal amount of such Secondary Note is not
an integral multiple of $1,000. The Company shall notify the Trustee of the
Company's election to pay interest in Secondary Notes not less than 5 days prior
to the Record Date for an Interest Payment Date. On each such Interest Payment
Date, the Trustee shall authenticate Secondary Notes for original issuance to
each holder of Notes on the preceding Record Date, as shown on the register of
the Notes, in the amount required to pay such interest. For purposes of
determining the principal amount of Secondary Notes to be issued in payment of
interest, the Company shall be entitled to aggregate as to each Holder the
principal amount of all Notes (including Secondary Notes) held of record by such
Holder.
2. Method of Payment.
The Company shall pay interest on this Note provided for in
Paragraph 1 above (except defaulted interest) to the person who is the
registered Holder of this Note at the close of business on March 15 or September
15 preceding the Interest Payment Date (whether or not such day is a business
day). A Holder must surrender this Note to a Paying Agent to collect principal
payments. The Company shall pay principal, premium, if any, and interest (to the
extent not paid in Secondary Notes) in money of the United States that at the
time of payment is legal tender for payment of public and private debts ("U.S.
Legal Tender"); provided, however, that the Company may pay principal, premium,
if any, and interest by check payable in such U.S. Legal Tender. The Company may
deliver any such interest payment (including any indirect payment made in
Secondary Notes) to the Paying Agent or to a Holder at the Holder's registered
address.
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3. Paying Agent and Registrar.
Initially, [ ] (the "Trustee") will act as Paying Agent and
Registrar. The Company may change any Paying Agent, Registrar without notice to
the Holders of the Notes. Neither the Company nor any of its subsidiaries or its
Affiliates may act as Paying Agent but may act as Registrar.
4. Indenture.
The Company issued the Notes under an Indenture, dated as of [ ]
(the "Indenture"), by and between the Company and the Trustee. The terms of this
Note include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939 (15 U.S.C. sections
77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture until such
time as the Indenture is qualified under the TIA, and thereafter as in effect on
the date on which the Indenture is qualified under the TIA. This Note is subject
to all such terms, and Holders of this Note is referred to the Indenture and the
TIA for a statement of them. The Notes are limited in aggregate principal amount
to [$ ], plus any Secondary Notes issued as provided in paragraph 1 above and
the Indenture. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein.
5. Optional Redemption.
The Notes will be redeemable, at the Company's option, in whole or
in part, at any time from time to time on or after April 1, 2003, at the
following Redemption Prices (expressed as percentages of the principal amount)
together, in each case with if redeemed during the twelve-month period
commencing on April of the years set forth below, plus, in each case, accrued
interest thereon to the date of redemption:
Year Percentage
---- ----------
2003................................................106.000%
2004................................................104.000%
2005................................................102.000%
2006 and thereafter.................................100.000%
Notwithstanding the foregoing, the Company may redeem in the
aggregate all, but not less than all, of the Notes then outstanding at any time
prior to April 1, 2001, at a redemption price equal to 112.000% of the aggregate
principal amount so redeemed, plus accrued interest to the redemption date out
of the Net Proceeds of one or more Public Equity Offerings; provided, that any
such redemption occurs within 90 days following the closing of any such Public
Equity Offering.
6. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder of Notes to be redeemed
at such Holder's registered
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address. Notes in denominations of $1,000 or less may be redeemed only in whole.
The Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Notes that have denominations larger than
$1,000.
If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the Redemption Date, interest
will cease to accrue on Notes or portions thereof called for redemption.
7. Change of Control Offer.
Upon the occurrence of a Change of Control, the Company will be
required, subject to certain limitations, to offer to purchase all of the
outstanding Notes at a purchase price equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of repurchase.
8. Limitation on Certain Asset Sales.
The Company is subject to certain conditions, obligated to make an
offer to purchase Notes at 100% of their principal amount plus accrued and
unpaid interest to the date of repurchase with certain net cash proceeds of
certain sales or other dispositions of assets in accordance with the Indenture.
9. Denominations; Transfer; Exchange.
The Notes are in registered form, without coupons, in denominations
of $1,000 and integral multiples of $1,000; provided, however, that Secondary
Notes and Notes issued in exchange for the Series A Senior Preferred Stock may
be issued in denominations of less than $1,000. A Holder shall register the
transfer of or exchange Notes in accordance with the Indenture. The Registrar
may require a Holder, among other things, to furnish appropriate endorsements
and transfer documents and to pay certain transfer taxes or similar governmental
charges payable in connection therewith as permitted by the Indenture. The
Registrar need not register the transfer of or exchange any Notes during a
period beginning 15 days before the mailing of a redemption notice for any Notes
or portions thereof selected for redemption.
[10. Persons Deemed Owners.
The registered Holder of a Note shall be treated as the owner of it
for all purposes.]
[10. The Global Note.
So long as this Global Note is registered in the name of the
Depository or its nominee, members of, or participants in, the Depositary
("Agent Members") shall have no
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rights under the Indenture with respect to this Global Note held on their behalf
by the Depository or the Trustee as its custodian, and the Depository may be
treated by the Company, the Trustee and any agent of the Company or the Trustee
as the absolute owner of this Global Note for all purposes. Notwithstanding the
foregoing, nothing herein shall (i) prevent the Company, the Trustee or any
agent of the Company or the Trustee, from giving effect to any written
certification, proxy or other authorization furnished by the Depository or (ii)
impair, as between the Depository and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of Notes.
The Holder of this Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests in this Global Note through Agent Members, to take any action which a
Holder of Notes is entitled to take under the Indenture or the Notes.
Whenever, as a result of optional redemption by the Company, a
Change of Control Offer, an Excess Proceeds Offer or an exchange for Physical
Notes, this Global Note is redeemed, repurchased or exchanged in part, this
Global Note shall be surrendered by the Holder thereof to the Trustee who shall
cause an adjustment to be made to Schedule A hereof so that the principal amount
at Maturity of this Global Note will be equal to the portion not redeemed,
repurchased or exchanged and shall thereafter return this Global Note to such
Holder; provided that this Global Note shall be in a principal amount at
Maturity of $1,000 or an integral multiple of $1,000.]*
11. Unclaimed Funds.
If funds for the payment of principal, premium or interest remain
unclaimed for two years, the Trustee and the Paying Agent will repay the funds
to the Company at its request. After that, all liability of the Trustee and such
Paying Agent with respect to such funds shall cease.
12. Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the
Indenture and the Notes except for certain provisions thereof, and may be
discharged from its obligations to comply with certain covenants contained in
the Indenture and the Notes, in each case upon satisfaction of certain
conditions specified in the Indenture.
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be
modified, amended or supplemented by the Company and the Trustee with the
consent of the Holders of at least a majority in aggregate principal amount of
the Notes then outstanding, and any existing Default or Event of Default or
compliance with any provision may be waived with the consent of the Holders of a
majority in aggregate principal amount of the Notes then outstanding. Without
notice to or consent of any Holder, the Company and the Trustee may amend or
supplement the
A-6
<PAGE>
Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes or comply with any requirements of the Commission in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Note.
14. Restrictive Covenants.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Restricted Subsidiaries to make
Restricted Payments, to incur Indebtedness, to issue Preferred Stock or other
Capital Stock of Restricted Subsidiaries, to sell assets, to permit restrictions
on dividends and other payments by Restricted Subsidiaries to the Company, to
consolidate, merge or sell all or substantially all of its assets or to engage
in transactions with Affiliates. The limitations are subject to a number of
important qualifications and exceptions.
15. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Notes then outstanding
may declare all the Notes to be due and payable immediately in the manner and
with the effect provided in the Indenture. Holders of Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. The Trustee is not
obligated to enforce the Indenture or the Notes unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Notes then outstanding to direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of Notes notice of any continuing
Default or Event of Default (except a Default in payment of principal, premium
or interest, including an accelerated payment) if it determines that withholding
notice is in their interest.
16. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Notes and may otherwise deal with
the Company, its Subsidiaries or their respective Affiliates as if it were not
the Trustee.
17. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as
such, of the Company shall have any liability for any obligation of the Company
under the Notes or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Note by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
18. Authentication.
A-7
<PAGE>
This Note shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Note.
19. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants
by the entireties), JT TEN (= joint tenants with right of survivorship and not
as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Notes as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
21. Subordination.
The Indebtedness evidenced by the Notes is to the extent and in the
manner provided in the Indenture, subordinated and subject in right of payment
to the prior payment in full of all Senior Indebtedness, and this Note is issued
subject to such provisions. Each Holder of this Note, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes and directs the
Trustee, on behalf of such Holder, to take such action as may be necessary or
appropriate to effectuate the subordination as provided in this Indenture and
(c) appoints the Trustee attorney-in-fact of such Holder for such purpose.
The Company will furnish to any Holder of a Note upon written request and
without charge a copy of the Indenture. Requests may be made to: MMH HOLDINGS,
INC., 315 West Forest Hill Avenue, Oak Creek, Wisconsin 53154, Attn:[ ].
A-8
<PAGE>
[SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount at Maturity of this Global Note shall be
[ ] [($ )]. The following decreases/increases in the principal amount at
Maturity of this Global Note have been made:
================================================================================
Total Principal
Decrease in Increase in Amount at Maturity Notation
Date of Principal Principal Following such Made by or
Decrease/ Amount at Amount at Decrease/ on Behalf of
Increase Maturity Maturity Increase Trustee
- -------- -------- -------- -------- -------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
]*
A-9
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Note to ________________________
_______________________________________________________________________________
______________________________________________________________________________.
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint____________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Dated: Signed:
--------------------------- ------------------------------
(Sign exactly as name appears on the
other side of this Note)
Signature Guarantee:
-------------------------------------
Participant in a recognized
Signature Guarantee Medallion
Program (or other signature
guarantor program reasonably
acceptable to the Trustee)
A-10
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.12 or Section 4.20 of the Indenture, check the appropriate
box:
Section 4.12 [ ] Section 4.20 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section or Section of the Indenture, state the amount:
$______________
Date: Your Signature:
---------------- ---------------------
(Sign exactly as name appears on the
other side of this Note)
Signature Guarantee:
-----------------------------------------
A-11
<PAGE>
EXHIBIT B
[FORM OF LEGEND FOR GLOBAL NOTE]
Any Global Note authenticated and delivered hereunder shall bear a
legend in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN
THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE
(OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF
THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION) ("DTC") TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IT REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
A-12
MMH HOLDINGS, INC.
12% Exchange Debentures due 2009
CUSIP No.: [ ]
No. [ ] $[ ]
MMH HOLDINGS, INC., a Delaware corporation (the "Company", which
term includes any successor corporation), for value received promises to pay to
[ ] or registered assigns, the principal sum [of $[ ] [ ] Dollars]
[indicated on Schedule A hereof]*, on , 2009.
Interest Payment Dates: [ ]
Record Dates: [ ]
Reference is made to the further provisions of this 12% Exchange
Debenture due 2009 (this "Note") contained herein, which will for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authorization hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefit of this Indenture or be valid or
obligatory for any purpose.
- --------
*Include for Global Notes.
A-1
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Dated:
MMH HOLDINGS, INC.
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 12% Exchange Debentures due 2009 described in the
within-mentioned Indenture.
Dated: [ ], as Trustee
By
-------------------------------
Authorized Signatory
A-2
<PAGE>
(REVERSE OF NOTE)
MMH HOLDINGS, INC.
12% Exchange Debentures due 2009
1. Interest.
MMH HOLDINGS, Inc., a Delaware corporation (the "Company"), promises
to pay interest on the principal amount of this Note at the rate per annum shown
above. The Company will pay interest semi-annually on April 1 and October 1 of
each year (an "Interest Payment Date"), commencing the Interest Payment Date
following the date of issuance of this Note. Interest on the Notes will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from the date of issuance of this Note. Interest will be computed on
the basis of a 360-day year of twelve 30-day months. Capitalized terms used
herein and not defined shall have the meanings given them in the Indenture.
Notwithstanding anything herein to the contrary, on each Interest
Payment Date through and including April 1, 2003, the entire amount of the
interest payment on the Notes may be paid, at the option of the Company, in
additional Notes ("Secondary Notes") (valued at 100% of the principal amount
thereof). The Company may, at its option, pay cash in lieu of issuing any
Secondary Note to the extent the principal amount of such Secondary Note is not
an integral multiple of $1,000. The Company shall notify the Trustee of the
Company's election to pay interest in Secondary Notes not less than 5 days prior
to the Record Date for an Interest Payment Date. On each such Interest Payment
Date, the Trustee shall authenticate Secondary Notes for original issuance to
each holder of Notes on the preceding Record Date, as shown on the register of
the Notes, in the amount required to pay such interest. For purposes of
determining the principal amount of Secondary Notes to be issued in payment of
interest, the Company shall be entitled to aggregate as to each Holder the
principal amount of all Notes (including Secondary Notes) held of record by such
Holder.
2. Method of Payment.
The Company shall pay interest on this Note provided for in
Paragraph 1 above (except defaulted interest) to the person who is the
registered Holder of this Note at the close of business on March 15 or September
15 preceding the Interest Payment Date (whether or not such day is a business
day). A Holder must surrender this Note to a Paying Agent to collect principal
payments. The Company shall pay principal, premium, if any, and interest (to the
extent not paid in Secondary Notes) in money of the United States that at the
time of payment is legal tender for payment of public and private debts ("U.S.
Legal Tender"); provided, however, that the Company may pay principal, premium,
if any, and interest by check payable in such U.S. Legal Tender. The Company may
deliver any such interest payment (including any indirect payment made in
Secondary Notes) to the Paying Agent or to a Holder at the Holder's registered
address.
A-3
<PAGE>
3. Paying Agent and Registrar.
Initially, [ ] (the "Trustee") will act as Paying Agent and
Registrar. The Company may change any Paying Agent, Registrar without notice to
the Holders of the Notes. Neither the Company nor any of its subsidiaries or its
Affiliates may act as Paying Agent but may act as Registrar.
4. Indenture.
The Company issued the Notes under an Indenture, dated as of [ ]
(the "Indenture"), by and between the Company and the Trustee. The terms of this
Note include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939 (15 U.S.C. sections
77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture until such
time as the Indenture is qualified under the TIA, and thereafter as in effect on
the date on which the Indenture is qualified under the TIA. This Note is subject
to all such terms, and Holders of this Note is referred to the Indenture and the
TIA for a statement of them. The Notes are limited in aggregate principal amount
to [$ ], plus any Secondary Notes issued as provided in paragraph 1 above and
the Indenture. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein.
5. Optional Redemption.
The Notes will be redeemable, at the Company's option, in whole or
in part, at any time from time to time on or after April 1, 2003, at the
following Redemption Prices (expressed as percentages of the principal amount)
together, in each case with if redeemed during the twelve-month period
commencing on April of the years set forth below, plus, in each case, accrued
interest thereon to the date of redemption:
Year Percentage
---- ----------
2003................................................106.000%
2004................................................104.000%
2005................................................102.000%
2006 and thereafter.................................100.000%
Notwithstanding the foregoing, the Company may redeem in the
aggregate all, but not less than all, of the Notes then outstanding at any time
prior to April 1, 2001, at a redemption price equal to 112.000% of the aggregate
principal amount so redeemed, plus accrued interest to the redemption date out
of the Net Proceeds of one or more Public Equity Offerings; provided, that any
such redemption occurs within 90 days following the closing of any such Public
Equity Offering.
6. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder of Notes to be redeemed
at such Holder's registered
A-4
<PAGE>
address. Notes in denominations of $1,000 or less may be redeemed only in whole.
The Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Notes that have denominations larger than
$1,000.
If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the Redemption Date, interest
will cease to accrue on Notes or portions thereof called for redemption.
7. Change of Control Offer.
Upon the occurrence of a Change of Control, the Company will be
required, subject to certain limitations, to offer to purchase all of the
outstanding Notes at a purchase price equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of repurchase.
8. Limitation on Certain Asset Sales.
The Company is subject to certain conditions, obligated to make an
offer to purchase Notes at 100% of their principal amount plus accrued and
unpaid interest to the date of repurchase with certain net cash proceeds of
certain sales or other dispositions of assets in accordance with the Indenture.
9. Denominations; Transfer; Exchange.
The Notes are in registered form, without coupons, in denominations
of $1,000 and integral multiples of $1,000; provided, however, that Secondary
Notes and Notes issued in exchange for the Series A Senior Preferred Stock may
be issued in denominations of less than $1,000. A Holder shall register the
transfer of or exchange Notes in accordance with the Indenture. The Registrar
may require a Holder, among other things, to furnish appropriate endorsements
and transfer documents and to pay certain transfer taxes or similar governmental
charges payable in connection therewith as permitted by the Indenture. The
Registrar need not register the transfer of or exchange any Notes during a
period beginning 15 days before the mailing of a redemption notice for any Notes
or portions thereof selected for redemption.
[10. Persons Deemed Owners.
The registered Holder of a Note shall be treated as the owner of it
for all purposes.]
[10. The Global Note.
So long as this Global Note is registered in the name of the
Depository or its nominee, members of, or participants in, the Depositary
("Agent Members") shall have no
A-5
<PAGE>
rights under the Indenture with respect to this Global Note held on their behalf
by the Depository or the Trustee as its custodian, and the Depository may be
treated by the Company, the Trustee and any agent of the Company or the Trustee
as the absolute owner of this Global Note for all purposes. Notwithstanding the
foregoing, nothing herein shall (i) prevent the Company, the Trustee or any
agent of the Company or the Trustee, from giving effect to any written
certification, proxy or other authorization furnished by the Depository or (ii)
impair, as between the Depository and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of Notes.
The Holder of this Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests in this Global Note through Agent Members, to take any action which a
Holder of Notes is entitled to take under the Indenture or the Notes.
Whenever, as a result of optional redemption by the Company, a
Change of Control Offer, an Excess Proceeds Offer or an exchange for Physical
Notes, this Global Note is redeemed, repurchased or exchanged in part, this
Global Note shall be surrendered by the Holder thereof to the Trustee who shall
cause an adjustment to be made to Schedule A hereof so that the principal amount
at Maturity of this Global Note will be equal to the portion not redeemed,
repurchased or exchanged and shall thereafter return this Global Note to such
Holder; provided that this Global Note shall be in a principal amount at
Maturity of $1,000 or an integral multiple of $1,000.]*
11. Unclaimed Funds.
If funds for the payment of principal, premium or interest remain
unclaimed for two years, the Trustee and the Paying Agent will repay the funds
to the Company at its request. After that, all liability of the Trustee and such
Paying Agent with respect to such funds shall cease.
12. Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the
Indenture and the Notes except for certain provisions thereof, and may be
discharged from its obligations to comply with certain covenants contained in
the Indenture and the Notes, in each case upon satisfaction of certain
conditions specified in the Indenture.
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be
modified, amended or supplemented by the Company and the Trustee with the
consent of the Holders of at least a majority in aggregate principal amount of
the Notes then outstanding, and any existing Default or Event of Default or
compliance with any provision may be waived with the consent of the Holders of a
majority in aggregate principal amount of the Notes then outstanding. Without
notice to or consent of any Holder, the Company and the Trustee may amend or
supplement the
A-6
<PAGE>
Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes or comply with any requirements of the Commission in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Note.
14. Restrictive Covenants.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Restricted Subsidiaries to make
Restricted Payments, to incur Indebtedness, to issue Preferred Stock or other
Capital Stock of Restricted Subsidiaries, to sell assets, to permit restrictions
on dividends and other payments by Restricted Subsidiaries to the Company, to
consolidate, merge or sell all or substantially all of its assets or to engage
in transactions with Affiliates. The limitations are subject to a number of
important qualifications and exceptions.
15. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Notes then outstanding
may declare all the Notes to be due and payable immediately in the manner and
with the effect provided in the Indenture. Holders of Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. The Trustee is not
obligated to enforce the Indenture or the Notes unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Notes then outstanding to direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of Notes notice of any continuing
Default or Event of Default (except a Default in payment of principal, premium
or interest, including an accelerated payment) if it determines that withholding
notice is in their interest.
16. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Notes and may otherwise deal with
the Company, its Subsidiaries or their respective Affiliates as if it were not
the Trustee.
17. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as
such, of the Company shall have any liability for any obligation of the Company
under the Notes or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Note by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
18. Authentication.
A-7
<PAGE>
This Note shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Note.
19. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants
by the entireties), JT TEN (= joint tenants with right of survivorship and not
as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Notes as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
21. Subordination.
The Indebtedness evidenced by the Notes is to the extent and in the
manner provided in the Indenture, subordinated and subject in right of payment
to the prior payment in full of all Senior Indebtedness, and this Note is issued
subject to such provisions. Each Holder of this Note, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes and directs the
Trustee, on behalf of such Holder, to take such action as may be necessary or
appropriate to effectuate the subordination as provided in this Indenture and
(c) appoints the Trustee attorney-in-fact of such Holder for such purpose.
The Company will furnish to any Holder of a Note upon written request and
without charge a copy of the Indenture. Requests may be made to: MMH HOLDINGS,
INC., 315 West Forest Hill Avenue, Oak Creek, Wisconsin 53154, Attn:[ ].
A-8
<PAGE>
[SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount at Maturity of this Global Note shall be
[ ] [($ )]. The following decreases/increases in the principal amount at
Maturity of this Global Note have been made:
================================================================================
Total Principal
Decrease in Increase in Amount at Maturity Notation
Date of Principal Principal Following such Made by or
Decrease/ Amount at Amount at Decrease/ on Behalf of
Increase Maturity Maturity Increase Trustee
- -------- -------- -------- -------- -------
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]*
A-9
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Note to ________________________
_______________________________________________________________________________
______________________________________________________________________________.
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint____________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Dated: Signed:
--------------------------- ------------------------------
(Sign exactly as name appears on the
other side of this Note)
Signature Guarantee:
-------------------------------------
Participant in a recognized
Signature Guarantee Medallion
Program (or other signature
guarantor program reasonably
acceptable to the Trustee)
A-10
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.12 or Section 4.20 of the Indenture, check the appropriate
box:
Section 4.12 [ ] Section 4.20 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section or Section of the Indenture, state the amount:
$______________
Date: Your Signature:
---------------- ---------------------
(Sign exactly as name appears on the
other side of this Note)
Signature Guarantee:
-----------------------------------------
A-11
Reliance Surety Company
A Reliance Group Holdings Company
655 Winding Brook Drive
P.O. Box 558
Glaxtonbury, CT 06033-0558
860.657.7765 Fax: 860.657.8252
Date: March 26, 1998
[LOGO] Reliance
Mr. David Smith
Morris Material Handling, Inc.
314 West Forest Hill Ave.
Oak Creek, Wisconsin 53154
Re: Morris Material Handling, Inc.
Dear Mr. Smith,
This is to confirm that Reliance Surety Company hereby commits to provide a
bonding facility to Morris Material Handling, Inc. and its subsidiaries
incorporating single projects up to $20,000,000 within an aggregate backlog
value of $60,000,000.
Extension of any credit is contingent upon; receipt of an executed Intercreditor
Agreement, an executed copy of the Reliance Continuing Agreement of Indemnity
and receipt of a mutually agreed upon level of collateral basal on job and
program size as well as continued favorable underwriting conditions.
Best Regards,
Chris McCarty
Senior Underwriter, Reliance Surety
<PAGE>
RELIANCE INSURANCE COMPANIES
RELIANCE SURETY COMPANY UNITED PACIFIC INSURANCE COMPANY
PHILADELPHIA, PENNSYLVANIA PHILADELPHIA, PENNSYLVANIA
RELIANCE INSURANCE COMPANY RELIANCE NATIONAL INDEMNITY COMPANY
PHILADELPHIA, PENNSYLVANIA PHILADELPHIA, PENNSYLVANIA
CONTINUING AGREEMENT OF INDEMNITY - CONTRACTOR'S FORM
This AGREEMENT is made by the Undersigned for the continuing benefit of RELIANCE
INSURANCE COMPANY, UNITED PACIFIC INSURANCE COMPANY, RELIANCE NATIONAL INDEMNITY
COMPANY and/or RELIANCE SURETY COMPANY (hereinafter referred to collectively as
the "Surety") for the purpose of saving each and all of them harmless and
indemnifying each and all of them from all loss and expense in connection with
any Bonds executed on behalf of any one or more of the following persons, firms
or corporations:
MMH Holdings, Inc.; Morris Material Handling, Inc.; Morris Mterial Handling,
Ltd.; Hercules S.A. de C.V.; PHMH Holding Company; SPH Crane & Hoist, Inc.;
Material Handling, LLC; MHE Canada ULC, jointly with others or on behalf of any
of its subsidiaries, affiliates or divisions or their subsidiaries, affiliates
or divisions now in existence or hereafter formed or acquired (hereinafter
referred to as "Contractor").
WITNESSETH.
WHEREAS, the Contractor, individually or jointly with others, may desire or be
required from time to time to give certain bonds, undertakings, or instruments
of guarantee (all of which will hereinafter be included within the term "Bond"
or "Bonds"), and
WHEREAS upon the express condition that this instrument be executed, the Surety
has executed or procured the execution of, and may hereafter execute or procure
the execution of such Bonds.
NOW, THEREFORE, in consideration of the execution of any such Bond or Bonds and
as an inducement to such execution, we, the Undersigned, agree and bind
ourselves, our heirs, executors, administrators, successors and assigns, jointly
and severally, as follows:
FIRST: To pay all premiums on said Bonds computed in accordance with the
Surety's regular manual of rates in effect on the date said Bonds are executed.
SECOND: To indemnify, and keep indemnified, and hold and save harmless the
Surety against all demands, claims, loss, costs, damages, expenses and
attorneys' fees whatever, and any and all liability therefor, sustained or
incurred by the Surety by reason of executing or procuring the execution of any
said Bond or Bonds, or any other Bonds, which may be already or hereafter
executed on behalf of the Contractor, or renewal or continuation thereof; or
sustained or incurred by reason of making any investigation on account thereof,
prosecuting or defending any action brought in connection therewith, obtaining a
release therefrom, recovering or attempting to recover any salvage in connection
therewith or enforcing by litigation or otherwise any of the agreements herein
contained. Payment of amounts due Surety hereunder together with legal interest
shall be payable upon demand.
THIRD: To furnish money to the Contractor or to the Surety as needed for the
prompt payment of labor, materials, and any other costs or expenses in
connection with the performance of contracts when and as requested to do so by
the Surety.
FOURTH: To assign, transfer and convey, and each of the Undersigned does by
these presents assign, transfer and convey to the Surety, as of the date of
execution of said Bond or Bonds, as collateral security for the full performance
of the covenants and agreements herein contained and the payment of any other
indebtedness or liability of the Undersigned to the Surety, whether heretofore
or hereafter incurred, the following:
(a) All right, title and interest of the Undersigned in and to all
machinery, equipment, plant, tools and materials which are, on the date of
execution of any such Bond or Bonds, or may thereafter be, about or upon
the site of the work to be performed under the contract referred to in and
guaranteed by such Bond, or elsewhere for the purpose thereof, including
as well materials purchased for or chargeable to said contract which may
be in process of construction or in storage elsewhere or in transportation
to said site;
(b) All rights, actions, causes of action, claims and demands of the
undersigned in, or arising from or out of, said contract or any
extensions, modifications, changes or alterations thereof or additions
thereto;
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<PAGE>
(c) All rights, actions, causes of action, claims and demands whatsoever
which the Undersigned or any of them may have or acquire in any
subcontract in connection with said contract, and against any
subcontractor or any person, firm or corporation furnishing or agreeing to
furnish or supply labor, materials, supplies, machinery, tools or other
equipment in connection with or on account of said contract, and against
any surety or sureties of any such materialmen, subcontractor, laborer or
other person, firm or corporation;
(d) All right, title and interest to all monies due or to become due to
the undersigned arising out of or in any way relating to said contract
including, but not limited to progress payments, deferred payments,
retained percentages, compensation for extra work and claims and the
proceeds thereof that at the time of abandonment, forfeiture or breach of
said contract or such Bond or Bonds or of the terms of this Agreement or
at the time of any advance, payment or guaranty by the Surety for the
purpose of avoiding such abandonment, forfeiture or breach, may be due or
may thereafter become due under said contract to or on behalf of the
Undersigned, together with any and all sums due or which may thereafter
become due under or on all other contracts, bonded or unbonded, in which
any or all of the Undersigned have an interest.
FIFTH: Each of the Undersigned does hereby irrevocably nominate and appoint any
officer of the Surety the true and lawful attorney-in-fact of the Undersigned,
with full right and authority, in the event the Contractor fails or is unable to
complete the work called for by the contract guaranteed by any Bond or in the
event of the breach of any provision of this Agreement to execute on behalf of,
and sign the names of each of the Undersigned to, any voucher, release,
satisfaction, check, bill of sale of all or any property by this Agreement
assigned to the Surety or any other paper or contract necessary or desired to
carry into effect the purposes of this Agreement; with full right and authority
also, in such event, to dispose of the performance of said contract by
subletting the same in the name of the Contractor or otherwise; and each of the
Undersigned does hereby ratify and confirm all that such attorney-in-fact or the
Surety may lawfully do in the premises and further authorizes and empowers the
Surety and such attorney-in-fact and each of them to enter upon and take
possession of the tools, plant equipment, materials and subcontracts and all
other collateral security mentioned in this Agreement and enforce, use, employ
and dispose thereof for the purposes set forth in this Agreement. Each of the
Undersigned specifically agrees to protect, indemnify and hold harmless the
Surety and such attorney-in-fact against any and all claims, damages, costs and
expenses that may in any way arise or grow out of the exercise of the
assignments counted in this Agreement and the powers herein granted,
specifically waiving any claim which any Undersigned has or might hereafter have
against the Surety or such attorney-in-fact on account of anything done in
enforcing the terms of this Agreement, assignments and power-of attorney.
SIXTH: That the entire contract price of any contract referred to in a Bond or
Bonds, whether in the possession of the Undersigned or another, shall be and
hereby is impressed with a trust in favor of Surety for the payment of
obligations incurred for labor, materials and services in the performance of
the contract work for which Surety would be liable under such Bond or Bonds and
for the purpose of satisfying the conditions of the Bond executed in connection
with the contract.
SEVENTH: That if Surety shall be required or shall deem it necessary to set up a
reserve in any amount to cover any claim, demand, liability, expense, suit,
order, judgment or adjudication under or on any Bond or Bonds or for any other
reason whatsoever, to immediately upon demand deposit with Surety an amount of
money sufficient to cover such reserve and any increase thereof, such funds to
be held by Surety as collateral, in addition to the indemnity afforded by this
instrument, with the right to use such funds or any part thereof, at any time,
in payment or compromise of any liability, claims, demands, judgment, damages,
fees and disbursements or other expenses; and the Undersigned, in the event of
their failure to comply with such demand, hereby authorize and empower any
attorney of any court of record of the United States or any of its territories
or possessions, to appear for them or any of them in any suit by Surety and to
confess judgment against them or any of them for any sum or sums of money up to
the amount of any or all Bond or Bonds, with costs, interest and reasonable
attorneys' fees; such judgment, however, to be satisfied upon the payment of any
and all such sums as may be found due by the Undersigned to Surety under the
terms of this Agreement. Demand shall be sufficient if sent by registered or
certified mail to the Undersigned at the address or addresses given herein or
last known to Surety, whether or not actually received. The authority to confess
judgment as set forth herein shall not be exhausted by any one exercise thereof,
but may be exercised from time to time and more than one time until all
liability of the Undersigned to Surety shall have been paid in full.
EIGHTH: All collateral security held by or assigned to the Surety may be used by
the Surety at any time in payment of any claim, loss or expense which the
Undersigned have agreed to pay hereby, whether or not such claim, loss or
expense arises out of or in connection with such Bond or contract under which
such collateral is held. The Surety may sell or realize upon any or all such
collateral security, at public or private sale, with or without notice to the
Undersigned or any of them, and with the right to be purchaser itself at any
such public sale, and shall be accountable to the Undersigned only for such
surplus or remainder of such collateral security or the proceeds thereof as may
be in the Surety's possession after it has been fully indemnified as in this
Agreement provided. The Surety shall not be liable for decrease in value or loss
or destruction of or damage to such security, however caused.
NINTH: The Surety shall have the right, at its option and in its sole
discretion:
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<PAGE>
(a) To deem this Agreement breached should the Contractor become involved
in any agreement or proceeding of liquidation, receivership, or
bankruptcy, voluntarily or involuntarily, or should the Contractor, if an
individual, die, be convicted of a felony, become a fugitive from justice,
or for any reason disappear and cannot immediately be found by the Surety
by use of usual methods.
(b) To take possession of the work under any contract and at the expense
of the Undersigned to complete or to contract for the completion of the
same, or to consent to the re-letting of the completion thereof by the
obligee in said contract Bond or Bonds, or to take such other steps as in
the discretion of the Surety may be advisable or necessary to obtain its
release or to secure itself from loss thereunder.
(c) To adjust, settle or compromise any claim, demand, suit or judgment
upon said Bond or Bonds, or any of them.
(d) To increase or decrease the penalty or penalties of any such Bond or
Bonds, to change the obligee or obligees therein, to execute any
continuations, enlargements, modifications and renewals thereof or
substitute therefore with the same or different conditions, provisions and
obligees, and with the same or larger or smaller penalties, it being
agreed that this instrument shall apply to and cover such new or changed
bonds or renewals even though the consent of the Surety may or does
substantially increase the liability of the Contractor and the Undersigned
and to take such steps as it may deem necessary or proper to obtain
release from liability under any such Bond or Bonds.
All damage, loss or expense of any nature which the Surety may incur under
Section NINTH shall be borne by the Undersigned.
TENTH: The Surety shall have the exclusive right for itself and for the
Undersigned to decide and determine whether any claim, demand, suit or judgment
upon said Bond or Bonds shall, on the basis of liability, expediency or
otherwise, be paid, settled, defended or appealed, and its determination shall
be final, conclusive and binding upon the Undersigned; and any loss, costs,
charges, expense or liability thereby sustained or incurred, as well as any and
all disbursements on account of costs, expenses and attorneys' fees, deemed
necessary or advisable by the Surety, shall be borne and paid immediately by the
Undersigned, together with legal interest. In the event of any payment,
settlement compromise or investigation, an itemized statement of the payment,
loss, costs, damages, expenses or attorneys' fees, sworn to by any officer of
the Surety or the voucher or vouchers or other evidence of such payment,
settlement or compromise, shall be prima facie evidence of the fact and extent
of the liability of the Undersigned to the Surety in any claim or suit hereunder
and in any and all matters arising between the Undersigned and the Surety.
ELEVENTH: The Surety is further authorized and empowered to advance money or to
guarantee loans to the Contractor which the Surety may see fit to advance to
said Contractor for the purpose of any contract referred to in or guaranteed by
said Bond or Bonds; and all money so loaned or advanced and all costs,
attorneys' fees and expenses incurred by the Surety in relation thereto, unless
repaid with legal interest when due, shall be conclusively presumed to be a loss
by the Surety for which each and all of the Undersigned shall be responsible,
notwithstanding said money or any part thereof so loaned or advanced to the
Contractor for the purpose of any such contract should not be so used by the
Contractor. The Undersigned hereby waive all notice of such advance or loan, or
of any default or any other act or acts giving rise to any claim under any said
Bond or Bonds, and waive notice of any and all liability of the Surety under any
said Bond or Bonds or any and all liability on the part of the Undersigned to
the effect and end that each of the Undersigned shall be and continue liable to
the Surety hereunder notwithstanding any notice of any kind to which the
Undersigned might have been or be entitled and notwithstanding any defenses
which the Undersigned might have been or be entitled to make.
TWELFTH: No assent, assignment, change in time or manner of payment or other
change or extension in the terms of any Bond or of any contract referred to in
such Bond or in the general conditions, plans or specifications incorporated in
such contract, granted or authorized by the Surety or the refusal to so grant or
authorize, shall release, discharge or in any manner whatsoever affect the
obligations assumed by the Undersigned in executing this Continuing Agreement of
Indemnity. This Agreement shall apply to any and all renewal, continuation or
substitution bonds executed by the Surety. The Surety shall not be required to
notify or obtain the approval or consent of the Undersigned prior to granting,
authorizing or executing any assent, assignment, change or extension. The Surety
shall have the absolute right to cancel any bond in accordance with any
cancellation provision contained therein and the Surety is hereby released from
any liability for expenses, costs, or damage alleged to be sustained by the
Undersigned by reason of such cancellation.
THIRTEENTH: Until the Surety shall have been furnished with competent legal
evidence of its discharge without loss from any and all Bonds, the Surety shall
have the right at all times to free access to the books, records and accounts of
each of the Undersigned for the purpose of examining the same. Each of the
Undersigned hereby authorizes and requests any and all depositories in which
funds of any of the Undersigned may be deposited to furnish to the Surety the
amount of such deposits as of any date requested and any person, firm or
corporation doing business with the Undersigned is hereby authorized to furnish
any information requested by the Surety concerning any transaction. The Surety
may furnish copies of any and all statements, agreements and financial
statements and
3 of 16
<PAGE>
any information which it now has or may hereafter obtain concerning each of the
Undersigned, to other persons or companies for the purpose of procuring
co-suretyship or reinsurance or of advising interested persons or companies.
FOURTEENTH: Each of the Undersigned does hereby waive all right to claim any
property, including homestead, as exempt from levy, execution, sale or other
legal process under the law of any state, province or other government as
against the rights of the Surety to proceed against the same for indemnity
hereunder.
FIFTEENTH: The Surety shall have every right and remedy which a personal surety
without compensation would have, including the right to secure its discharge
from the suretyship and nothing herein contained shall be considered or
construed to waive, abridge or diminish any right or remedy which the Surety
might have if this instrument were not executed. The Undersigned will, on
request of the Surety, procure the discharge of the Surety from any Bonds, and
all liability by reason thereof. Separate suits may be brought hereunder as
causes of action may accrue, and the pendency or termination of any such suit
shall not bar any subsequent action. The Surety shall be notified immediately by
the Undersigned of any claim or action which may result in a claim against the
Surety, such notice to be given by registered mail to the Surety at its Home
Office. In the event of legal proceedings against the Surety, upon or on account
of any said Bond or Bonds, the Surety may apply for a court order making any or
all of the Undersigned party defendants, and each Undersigned hereby consents to
the granting of such application and agrees to become such a party defendant and
to allow judgment, in the event of judgment against the Surety, to be rendered
also against such Undersigned in like amount and in favor of the Surety, if the
Surety so desires.
SIXTEENTH: The Surety reserves the right to decline to execute any such Bond;
and if it shall execute any proposal Bond, and if the Contractor is awarded the
contract, the Contractor shall not be obligated to obtain any Bond or Bonds
required by the contract from the Surety nor shall the Surety be obligated to
execute such Bond or Bonds.
SEVENTEENTH: This Agreement shall, in all its terms and agreements, be for the
benefit of and protect any person or company joining with the Surety in
executing said Bond or Bonds, or any of them, or executing at the request of the
Surety said Bond or Bonds, or any of them as well as any company or companies
assuming co-suretyship or reinsurance thereon.
EIGHTEENTH: The Undersigned warrant that each of them is specifically and
beneficially interested in the obtaining of each Bond. Failure to execute, or
defective execution, by any party, shall not affect the validity of this
obligation as to any other party executing the same and each such other party
shall remain fully bound and liable hereunder. Invalidity of any portion or
provision of this Agreement by reason of the laws of any state or for any other
reason shall not render the other provisions or portions hereof invalid.
Execution of any application for any Bond by the Contractor, or of any other
indemnity agreement by any Undersigned for the Contractor shall in no way
abrogate, waive or diminish any rights of Surety under this Agreement. The
Undersigned acknowledge that the execution of this Agreement and the undertaking
of indemnity was not made in reliance upon any representation concerning the
financial responsibility of any Undersigned, or concerning the competence of the
Contractor to perform.
NINETEENTH: Each of the Undersigned expressly recognizes and covenants that this
Agreement is a continuing obligation applying to and indemnifying the Surety and
that the rights of indemnification of each Surety signatory to this Agreement
shall be individual and not joint with those of the other signatory Sureties as
to any and all Bonds (whether or nor covered by any application signed by
Contractor-such application to be considered between the parties hereto as
merely supplemental to this Continuing Agreement of Indemnity) heretofore or
hereafter executed by Surety on behalf of Contractor (whether contracting alone
or as a co-venture) until this Agreement shall be canceled in the manner
hereinafter provided. Any of the Undersigned may notify the Surety at its Head
Office, of such Undersigned's withdrawl from this Agreement; such notice shall
be sent by certified or registered mail and shall state when, not less than
thirty days after receipt of such notice by the Surety, such withdrawal shall be
effective. Such Undersigned will not be liable under this Agreement as to any
Bonds executed by the Surety after the effective date of such notice; provided,
that as to any and all such Bonds executed or authorized by the Surety prior to
effective date of such notice and as to any and all renewals, continuations and
extensions thereof or substitutions therefore (and, if a proposal or Bid Bond
has been executed or authorized prior to such effective date, as to any contract
Bond executed pursuant thereto) regardless of when the same are executed, such
Undersigned shall be and remain fully liable hereunder, as if said notice had
not been served. Such withdrawal by any Undersigned shall in no way affect the
obligation of any other Undersigned who has given no such notice of
termination.
TWENTIETH: This Agreement or a carbon, photographic, xerographic or other
reproduction or copy of this Agreement shall constitute a Security Agreement to
Surety and also a Financing Statement, both in accordance with the provisions of
the Uniform Commercial Code of every jurisdiction wherein such Code is in
effect, but that the filing or recording of this Agreement shall be solely at
the option of Surety and that the failure to do so shall not release or impair
any of the obligations of the Undersigned under this Agreement or otherwise
arising, nor shall such failure be in any manner in derogation of the rights of
Surety under this Agreement or otherwise.
4 of 16
<PAGE>
Signed, sealed, and dated this 30th day of March, 1998
ATTEST MMH Holdings, Inc.
By: /s/ Martin Ditkof By: /s/ Michael Erwin (Seal)
---------------------------- ------------------------------
Name & Title: Martin Ditkof, Name & Title: Michael Erwin, President
Secretary Address:
Morris Material Handling, Inc.
By: /s/ Martin Ditkof By: /s/ Michael Erwin (Seal)
---------------------------- ------------------------------
Name & Title: Martin Ditkof, Name & Title: Michael Erwin, President
Secretary Address:
Morris Material Handling, Limited
By: /s/ Martin Ditkof By: /s/ Michael Erwin (Seal)
---------------------------- ------------------------------
Name & Title: Martin Ditkof, Name & Title: Michael Erwin, Director
Director Address:
Hercules S.A. de C.V.
By: /s/ David Smith By: /s/ Michael Erwin (Seal)
---------------------------- ------------------------------
Name & Title: David Smith, Name & Title: Michael Erwin, Director
Director Address:
PHMH Holding Company
By: /s/ Martin Ditkof By: /s/ Michael Erwin (Seal)
---------------------------- ------------------------------
Name & Title: Martin Ditkof, Name & Title: Michael Erwin, President
Secretary Address:
SPH Crane and Hoist, Inc.
By: /s/ Martin Ditkof By: /s/ Michael Erwin (Seal)
---------------------------- ------------------------------
Name & Title: Martin Ditkof, Name & Title: Michael Erwin, President
Secretary Address:
Material Handling, LLC
By: /s/ David Smith By: /s/ Martin Ditkof (Seal)
---------------------------- ------------------------------
Name & Title: David Smith, Name & Title: Martin Ditkof, Manager
Manager Address:
MHE Canada, ULC
By: /s/ David Smith By: /s/ Martin Ditkof (Seal)
---------------------------- ------------------------------
Name & Title: David Smith, Name & Title: Martin Ditkof, Director
Officer Address:
RELIANCE SURETY COMPANY
By:
------------------------------
RELIANCE INSURANCE COMPANY
UNITED PACIFIC INSURANCE COMPANY
RELIANCE NATIONAL INDEMNITIY COMPANY
By:
-------------------------------
IMPORTANT: Print or type the name and address of each signatory to this
Agreement. Each signature must be acknowledged - See REVERSE HEREOF
<PAGE>
Signed, sealed, and dated this 30th day of March, 1998
ATTEST MMH Holdings, Inc.
By: By: (Seal)
---------------------------- ------------------------------
Name & Title: Martin Ditkof, Name & Title: Michael Erwin, President
Secretary Address:
Morris Material Handling, Inc.
By: By: (Seal)
---------------------------- ------------------------------
Name & Title: Martin Ditkof, Name & Title: Michael Erwin, President
Secretary Address:
Morris Material Handling, Limited
By: By: (Seal)
---------------------------- ------------------------------
Name & Title: Martin Ditkof, Name & Title: Michael Erwin, Director
Director Address:
Hercules S.A. de C.V.
By: By: (Seal)
---------------------------- ------------------------------
Name & Title: David Smith, Name & Title: Michael Erwin, Director
Director Address:
PHMH Holding Company
By: /s/ Christine M. Weer By: /s/ Mary Alice Avery (Seal)
---------------------------- ------------------------------
Name & Title: Christine M. Weer Name & Title: Mary Alice Avery, Vice
Asst. Secretary President
Address: 3513 Concord Pike, Wilmington,
DE 19803
SPH Crane and Hoist, Inc.
By: By: (Seal)
---------------------------- ------------------------------
Name & Title: Martin Ditkof, Name & Title: Michael Erwin, President
Secretary Address:
Material Handling, LLC
By: By: (Seal)
---------------------------- ------------------------------
Name & Title: David Smith, Name & Title: Martin Ditkof, Manager
Manager Address:
MHE Canada, ULC
By: By: (Seal)
---------------------------- ------------------------------
Name & Title: David Smith, Name & Title: Martin Ditkof, Director
Officer Address:
RELIANCE SURETY COMPANY
By:
------------------------------
RELIANCE INSURANCE COMPANY
UNITED PACIFIC INSURANCE COMPANY
RELIANCE NATIONAL INDEMNITIY COMPANY
By:
-------------------------------
IMPORTANT: Print or type the name and address of each signatory to this
Agreement. Each signature must be acknowledged - See REVERSE HEREOF
<PAGE>
INDIVIDUAL & PARTNERSHIP ACKNOWLEDGEMENT
State of New York ss.
County of New York
On this _________ day of ________, 19___ before me personally appeared
________ to be known and known to me to be the individual(s) described in and
who executed the foregoing Agreement and acknowledged that_______executed the
same for the purposes, considerations and uses therein set forth as _____ free
and voluntary act and deed.
--------------------------------------
Notary Public, residing at
-----------
(Commission expires
------------------)
CORPORATE ACKNOWLEDGEMENT
State of New York ss.
County of New York
On this 30th day of March, 1998 before me personally appeared Michael Erwin to
be known, who being by me duly sworn, did depose and say; that he resides in
Milwaukee, Wisconsin; that he is the President of the MMH Holdings, Inc. the
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to the said instrument
is such corporate seal; that it was so affixed by order of the Board of
Directors of the said MMH Holdings, Inc. corporation, and that he signed his
name to the said instrument by like order.
/s/ Karen L. Doerner
--------------------------------------
Notary Public, residing at [ILLEGIBLE]
-----------
(Commission expires
------------------)
[STAMP]
KAREN L. DOERNER
Notary Public, State of New York
No. 01D0502360
Qualified in Queens County
Certificate of Official
Character Filed in
New York County
Commission Expires Feb 14, 2000
CORPORATE ACKNOWLEDGEMENT
State of New York ss.
County of New York
On this 30th day of March, 1998 before me personally appeared Michael Erwin to
be known, who being by me duly sworn, did depose and say; that he resides in
Milwaukee, Wisconsin; that he is the President of the Morris Material Handling,
Inc. the corporation described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to the said
instrument is such corporate seal; that it was so affixed by order of the Board
of Directors of the said Morris Material Handling, Inc. corporation, and that he
signed his name to the said instrument by like order.
/s/ Karen L. Doerner
--------------------------------------
Notary Public, residing at [ILLEGIBLE]
-----------
(Commission expires
------------------)
[STAMP]
KAREN L. DOERNER
Notary Public, State of New York
No. 01D0502360
Qualified in Queens County
Certificate of Official
Character Filed in
New York County
Commission Expires Feb 14, 2000
CORPORATE ACKNOWLEDGEMENT
State of New York ss.
County of New York
On this 30th day of March, 1998 before me personally appeared Michael Erwin to
be known, who being by me duly sworn, did depose and say; that he resides in
Milwaukee, Wisconsin; that he is the President of the Morris Material Handling,
Inc. the corporation described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to the said
instrument is such corporate seal; that it was so affixed by order of the Board
of Directors of the said Morris Material Handling, Inc. corporation, and that he
signed his name to the said instrument by like order.
/s/ Karen L. Doerner
--------------------------------------
Notary Public, residing at [ILLEGIBLE]
-----------
(Commission expires
------------------)
[STAMP]
KAREN L. DOERNER
Notary Public, State of New York
No. 01D0502360
Qualified in Queens County
Certificate of Official
Character Filed in
New York County
Commission Expires Feb 14, 2000
6 of 16
<PAGE>
CORPORATE ACKNOWLEDGEMENT
State of New York ss.
County of New York
On this 30th day of March, 1998 before me personally appeared Michael Erwin to
be known, who being by me duly sworn did depose and say; that he resides in
Milwaukee, Wisconsin, that he is the President of the Hercules S.A. de C.V. the
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to the said instrument
is such corporate seal, that it was so affixed by order of the Board of
Directors of the said Hercules S.A. de C.V. corporation, and that he signed his
name to the said instrument by like order.
/s/ Karen L. Doerner
--------------------------------------
Notary Public, residing at [ILLEGIBLE]
-----------
(Commission expires
------------------)
[STAMP]
KAREN L. DOERNER
Notary Public, State of New York
No. 01D0502360
Qualified in Queens County
Certificate of Official
Character Filed in
New York County
Commission Expires Feb 14, 2000
CORPORATE ACKNOWLEDGEMENT
State of New York ss.
County of New York
On this 30th day of March, 1998 before me personally appeared Michael Erwin to
be known, who being by me duly sworn did depose and say; that he resides in
Milwaukee, Wisconsin, that he is the President of the PHMH Holding Company the
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to the said instrument
is such corporate seal; that it was so affixed by order of the Board of
Directors of the said PHMH Holding Company corporation, and that he signed his
name to the said instrument by like order.
/s/ Karen L. Doerner
--------------------------------------
Notary Public, residing at [ILLEGIBLE]
-----------
(Commission expires
------------------)
[STAMP]
KAREN L. DOERNER
Notary Public, State of New York
No. 01D0502360
Qualified in Queens County
Certificate of Official
Character Filed in
New York County
Commission Expires Feb 14, 2000
CORPORATE ACKNOWLEDGEMENT
State of ss.
County of
On this day of , 19 before me personally appeared Michael Erwin to
be known, who being by me duly sworn did depose and say; that he resides in
, that he is the President of the SPH Crane and Hoist, Inc.
the corporation described in and which executed the foregoing instrument; that
he knows the seal of said corporation; that the seal affixed to the said
instrument is such corporate seal; that it was so affixed by order of the Board
of Directors of the said SPH Crane and Hoist, Inc. corporation, and that he
signed his name to the said instrument by like order.
--------------------------------------
Notary Public, residing at
-----------
(Commission expires
------------------)
7 of 16
<PAGE>
CORPORATE ACKNOWLEDGEMENT
State of New York ss.
County of New York
On this 30th day of March, 1998 before me personally appeared Michael Erwin to
be known, who being by me duly sworn did depose and say; that he resides in
that he is the Director of the Hercules S.A. de C.V. the
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to the said instrument
is such corporate seal; that it was so affixed by order of the Board of
Directors of the said Hercules S.A. de C.V. corporation, and that he signed his
name to the said instrument by like order.
--------------------------------------
Notary Public, residing at
-----------
(Commission expires
------------------)
CORPORATE ACKNOWLEDGEMENT
State of Delaware ss.
County of New Castle
On this 30th day of March, 1998 before me personally appeared Michael Erwin to
be known, who being by me duly sworn did depose and say; that he resides in
Delaware that he is the Vice President of the PHMH Holding Company the
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to the said instrument
is such corporate seal; that it was so affixed by order of the Board of
Directors of the said PHMH Holding Company corporation, and that he signed his
name to the said instrument by like order.
/s/ Sharon T. Walsh
--------------------------------------
Notary Public, residing at
Wilmington, Delaware
(Commission expires 6/11/98)
[STAMP]
SHARON T. WALSH
NOTARY PUBLIC
STATE OF DELAWARE
My commission expires
June 11, 1998.
CORPORATE ACKNOWLEDGEMENT
State of New York ss.
County of New York
On this 30th day of March, 1998 before me personally appeared Michael Erwin to
be known, who being by me duly sworn did depose and say; that he resides in
, that he is the President of the SPH Crane and Hoist, Inc. the
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to the said instrument
is such corporate seal; that it was so affixed by order of the Board of
Directors of the said SPH Crane and Hoist, Inc. corporation, and that he signed
his name to the said instrument by like order.
/s/ Karen L. Doerner
--------------------------------------
Notary Public, residing at
Forest Hills, NY
(Commission expires
------------------)
7 of 16
<PAGE>
CORPORATE ACKNOWLEDGEMENT
State of New York ss.
County of New York
On this 30th day of March, 1998 before me personally appeared Martin Ditkof to
be known, who being by me duly sworn did depose and say; that he resides in
Brookfield, Wisconsin, that he is the Manager of the Material Handling, LLC the
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to the said instrument
is such corporate seal; that it was so affixed by order of the Board of
Directors of the said Material Handling, LLC corporation, and that he signed his
name to the said instrument by like order.
/s/ Karen L. Doerner
--------------------------------------
Notary Public, residing at [ILLEGIBLE]
-----------
(Commission expires
------------------)
[STAMP]
KAREN L. DOERNER
Notary Public, State of New York
No. 01D0502360
Qualified in Queens County
Certificate of Official
Character Filed in
New York County
Commission Expires Feb 14, 2000
CORPORATE ACKNOWLEDGEMENT
State of New York ss.
County of New York
On this 30th day of March, 1998 before me personally appeared Martin Ditkof to
be known, who being by me duly sworn did depose and say; that he resides in
Brookfield, Wisconsin, that he is the Manager of the MHE Canada, ULC the
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to the said instrument
is such corporate seal; that it was so affixed by order of the Board of
Directors of the said MHE Canada, ULC corporation, and that he signed his name
to the said instrument by like order.
/s/ Karen L. Doerner
--------------------------------------
Notary Public, residing at
-----------
(Commission expires )
------------------
[STAMP]
KAREN L. DOERNER
Notary Public, State of New York
No. 01D0502360
Qualified in Queens County
Certificate of Official
Character Filed in
New York County
Commission Expires Feb 14, 2000
8 of 16
<PAGE>
COPY OF RESOLUTION OF THE BOARD OF DIRECTORS
At a meeting of the Board of Directors of MMH Holding, Inc. duly called and held
on the _______day of ________, a quorum being present, the following Preamble
and Resolution was adopted:
"WHEREAS, this Company is beneficially and materially interested in the
transactions in which Morris Material Handling, Inc.; Morris Material Handling
Limited; Hercules S.A. de C.V.; PHMH Holding Company.; SPH Crane and Hoist,
Inc.; Material Handling, LLC.; MHE Canada, ULC.
has applied, or may hereafter apply to the RELIANCE SURETY COMPANY, RELIANCE
INSURANCE COMPANY, UNITED PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL
INDEMNITY COMPANY for various bonds or undertakings, and
"WHEREAS, the RELIANCE SURETY COMPANY, RELIANCE INSURANCE COMPANY, UNITED
PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL INDEMNITY COMPANY is willing
to consider such bonds or undertakings as surety, upon being furnished with the
written indemnity of this Company, therefore be it
"RESOLVED that Michael Erwin President
----------- --------
of the Company is (are), hereby authorized to execute on behalf of the Company,
any agreement or agreements of indemnity required by the RELIANCE SURETY
COMPANY, RELIANCE INSURANCE COMPANY, UNITED PACIFIC INSURANCE COMPANY, and/or
RELIANCE NATIONAL INDEMNITY COMPANY as a prerequisite to the execution by it of
the bonds or undertakings for Morris Material Handling, Inc.; Morris Material
Handling Limited; Hercules S.A. de C.V.; PHMH Holding Company.; SPH Crane and
Hoist, Inc.; Material Handling, LLC.; MHE Canada, ULC.
in connection with the matters or transactions described in the agreement of
indemnity required by said RELIANCE SURETY COMPANY, RELIANCE INSURANCE COMPANY,
UNITED PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL INDEMNITY COMPANY,
and the aforementioned representative(s) of the Company is (are) hereby
authorized to affix the corporate seal to such agreement of indemnity and
subscribe his (their) name(s) thereto, in behalf of the Company.
"BE IT FURTHER RESOLVED, that any prior acts of said officers or any
officers or representatives of this Company in executing said indemnity
agreement or agreements on behalf of the Company are hereby ratified."
I, Martin Ditkof, Secretary of MMH Holding, Inc. have compared the
foregoing Preamble and Resolution with the original thereof, as they appear on
the records of the meetings of the Board of Directors of said Company, and do
certify that the same is a correct and true transcript therefrom, and of the
whole of said original Preamble and Resolution.
Given under my hand and seal of the Company this 30th day of March, 1998.
/s/ Martin Ditkof
-------------------------
Martin Ditkof, Secretary
9 of 16
<PAGE>
COPY OF RESOLUTION OF THE BOARD OF DIRECTORS
At a meeting of the Board of Directors of Morris Material Handling, Inc. duly
called and held on the _______day of ________, a quorum being present, the
following Preamble and Resolution was adopted:
"WHEREAS, this Company is beneficially and materially interested in the
transactions in which MMH Holdings.; Morris Material Handling Limited; Hercules
S.A. de C.V.; PHMH Holding Company.; SPH Crane and Hoist, Inc.; Material
Handling, LLC.; MHE Canada, ULC.
has applied, or may hereafter apply to the RELIANCE SURETY COMPANY, RELIANCE
INSURANCE COMPANY, UNITED PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL
INDEMNITY COMPANY for various bonds or undertakings, and
"WHEREAS, the RELIANCE SURETY COMPANY, RELIANCE INSURANCE COMPANY, UNITED
PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL INDEMNITY COMPANY is willing
to consider such bonds or undertakings as surety, upon being furnished with the
written indemnity of this Company, therefore be it
"RESOLVED that Michael Erwin President
----------- --------
of the Company is (are), hereby authorized to execute on behalf of the Company,
any agreement or agreements of indemnity required by the RELIANCE SURETY
COMPANY, RELIANCE INSURANCE COMPANY, UNITED PACIFIC INSURANCE COMPANY, and/or
RELIANCE NATIONAL INDEMNITY COMPANY as a prerequisite to the execution by it of
the bonds or undertakings for MMH Holdings.; Morris Material Handling Limited;
Hercules S.A. de C.V.; PHMH Holding Company.; SPH Crane and Hoist, Inc.;
Material Handling, LLC.; MHE Canada, ULC.
in connection with the matters or transactions described in the agreement of
indemnity required by said RELIANCE SURETY COMPANY, RELIANCE INSURANCE COMPANY,
UNITED PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL INDEMNITY COMPANY,
and the aforementioned representative(s) of the Company is (are) hereby
authorized to affix the corporate seal to such agreement of indemnity and
subscribe his (their) name(s) thereto, in behalf of the Company.
"BE IT FURTHER RESOLVED, that any prior acts of said officers or any
officers or representatives of this Company in executing said indemnity
agreement or agreements on behalf of the Company are hereby ratified."
I, Martin Ditkof, Secretary of Morris Material Handling, Inc. have
compared the foregoing Preamble and Resolution with the original thereof, as
they appear on the records of the meetings of the Board of Directors of said
Company, and do certify that the same is a correct and true transcript
therefrom, and of the whole of said original Preamble and Resolution.
Given under my hand and seal of the Company this 30th day of March, 1998.
/s/ Martin Ditkof
-------------------------
Martin Ditkof, Secretary
10 of 16
<PAGE>
COPY OF RESOLUTION OF THE BOARD OF DIRECTORS
At a meeting of the Board of Directors of Morris Material Handling Limited, duly
called and held on the _______day of ________, a quorum being present, the
following Preamble and Resolution was adopted:
"WHEREAS, this Company is beneficially and materially interested in the
transactions in which MMH Holdings, Inc.; Morris Material Handling, Inc.;
Hercules S.A. de C.V.; PHMH Holding Company.; SPH Crane and Hoist, Inc.;
Material Handling, LLC.; MHE Canada, ULC.
has applied, or may hereafter apply to the RELIANCE SURETY COMPANY, RELIANCE
INSURANCE COMPANY, UNITED PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL
INDEMNITY COMPANY for various bonds or undertakings, and
"WHEREAS, the RELIANCE SURETY COMPANY, RELIANCE INSURANCE COMPANY, UNITED
PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL INDEMNITY COMPANY is willing
to consider such bonds or undertakings as surety, upon being furnished with the
written indemnity of this Company, therefore be it
"RESOLVED that Michael Erwin Director
----------- --------
of the Company is (are), hereby authorized to execute on behalf of the Company,
any agreement or agreements of indemnity required by the RELIANCE SURETY
COMPANY, RELIANCE INSURANCE COMPANY, UNITED PACIFIC INSURANCE COMPANY, and/or
RELIANCE NATIONAL INDEMNITY COMPANY as a prerequisite to the execution by it of
the bonds or undertakings for MMH Holdings, Inc.; Morris Material Handling,
Inc.; Hercules S.A. de C.V.; PHMH Holding Company.; SPH Crane and Hoist, Inc.;
Material Handling, LLC.; MHE Canada, ULC.
in connection with the matters or transactions described in the agreement of
indemnity required by said RELIANCE SURETY COMPANY, RELIANCE INSURANCE COMPANY,
UNITED PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL INDEMNITY COMPANY,
and the aforementioned representative(s) of the Company is (are) hereby
authorized to affix the corporate seal to such agreement of indemnity and
subscribe his (their) name(s) thereto, in behalf of the Company.
"BE IT FURTHER RESOLVED, that any prior acts of said officers or any
officers or representatives of this Company in executing said indemnity
agreement or agreements on behalf of the Company are hereby ratified."
I, Martin Ditkof, of Morris Material Handling Limited, have compared the
foregoing Preamble and Resolution with the original thereof, as they appear on
the records of the meetings of the Board of Directors of said Company, and do
certify that the same is a correct and true transcript therefrom, and of the
whole of said original Preamble and Resolution.
Given under my hand and seal of the Company this 30th day of March, 1998.
/s/ Martin Ditkof
-------------------------
Martin Ditkof, Director
11 of 16
<PAGE>
COPY OF RESOLUTION OF THE BOARD OF DIRECTORS
At a meeting of the Board of Directors of Hercules S.A. de C.V., duly called and
held on the _______day of ________, a quorum being present, the following
Preamble and Resolution was adopted:
"WHEREAS, this Company is beneficially and materially interested in the
transactions in which MMH Holdings, Inc., Morris Material Handling, Inc.; Morris
Material Handling Limited; PHMH Holding Company.; SPH Crane and Hoist, Inc.;
Material Handling, LLC.; MHE Canada, ULC.
has applied, or may hereafter apply to the RELIANCE SURETY COMPANY, RELIANCE
INSURANCE COMPANY, UNITED PACIFIC INSURANCE COMPANY, and/or RELIANCE
NATIONAL INDEMNITY COMPANY for various bonds or undertakings, and
"WHEREAS, the RELIANCE SURETY COMPANY, RELIANCE INSURANCE COMPANY, UNITED
PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL INDEMNITY COMPANY is willing
to consider such bonds or undertakings as surety, upon being furnished with the
written indemnity of this Company, therefore be it
"RESOLVED that Michael Erwin Director
----------- --------
of the Company is (are), hereby authorized to execute on behalf of the Company,
any agreement or agreements of indemnity required by the RELIANCE SURETY
COMPANY, RELIANCE INSURANCE COMPANY, UNITED PACIFIC INSURANCE COMPANY, and/or
RELIANCE NATIONAL INDEMNITY COMPANY as a prerequisite to the execution by it of
the bonds or undertakings for MMH Holdings, Morris Material Handling, Inc.;
Morris Material Handling Limited; PHMH Holding Company.; SPH Crane and Hoist,
Inc.; Material Handling, LLC.; MHE Canada, ULC.
in connection with the matters or transactions described in the agreement of
indemnity required by said RELIANCE SURETY COMPANY, RELIANCE INSURANCE COMPANY,
UNITED PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL INDEMNITY COMPANY,
and the aforementioned representative(s) of the Company is (are) hereby
authorized to affix the corporate seal to such agreement of indemnity and
subscribe his (their) name(s) thereto, in behalf of the Company.
"BE IT FURTHER RESOLVED, that any prior acts of said officers or any
officers or representatives of this Company in executing said indemnity
agreement or agreements on behalf of the Company are hereby ratified."
I, David Smith, of Hercules S.A. de C.V., have compared the foregoing
Preamble and Resolution with the original thereof, as they appear on the records
of the meetings of the Board of Directors of said Company, and do certify that
the same is a correct and true transcript therefrom, and of the whole of said
original Preamble and Resolution.
Given under my hand and seal of the Company this 30th day of March 1998.
/s/ David Smith
-------------------------
David Smith, Director
12 of 16
<PAGE>
COPY OF RESOLUTION OF THE BOARD OF DIRECTORS
At a meeting of the Board of Directors of PHMH Holding Company, duly called and
held on the _______day of ________, a quorum being present, the following
Preamble and Resolution was adopted:
"WHEREAS, this Company is beneficially and materially interested in the
transactions in which MMH Holdings, Inc.; Morris Material Handling, Inc.; Morris
Material Handling Limited; Hercules S.A. de C.V.; SPH Crane and Hoist, Inc.;
Material Handling, LLC.; MHE Canada, ULC.
has applied, or may hereafter apply to the RELIANCE SURETY COMPANY, RELIANCE
INSURANCE COMPANY, UNITED PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL
INDEMNITY COMPANY for various bonds or undertakings, and
"WHEREAS, the RELIANCE SURETY COMPANY, RELIANCE INSURANCE COMPANY, UNITED
PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL INDEMNITY COMPANY is willing
to consider such bonds or undertakings as surety, upon being furnished with the
written indemnity of this Company, therefore be it
"RESOLVED that Michael Erwin President
----------- --------
of the Company is (are), hereby authorized to execute on behalf of the Company,
any agreement or agreements of indemnity required by the RELIANCE SURETY
COMPANY, RELIANCE INSURANCE COMPANY, UNITED PACIFIC INSURANCE COMPANY, and/or
RELIANCE NATIONAL INDEMNITY COMPANY as a prerequisite to the execution by it of
the bonds or undertakings for MMH Holdings, Inc.; Morris Material Handling,
Inc.; Morris Material Handling Limited; Hercules S.A. de C.V.; SPH Crane and
Hoist, Inc.; Material Handling, LLC.; MHE Canada, ULC.
in connection with the matters or transactions described in the agreement of
indemnity required by said RELIANCE SURETY COMPANY, RELIANCE INSURANCE COMPANY,
UNITED PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL INDEMNITY COMPANY,
and the aforementioned representative(s) of the Company is (are) hereby
authorized to affix the corporate seal to such agreement of indemnity and
subscribe his (their) name(s) thereto, in behalf of the Company.
"BE IT FURTHER RESOLVED, that any prior acts of said officers or any
officers or representatives of this Company in executing said indemnity
agreement or agreements on behalf of the Company are hereby ratified."
I, Mary Alice Avery, Vice President of PHMH Holding Company, have compared
the foregoing Preamble and Resolution with the original thereof, as they appear
on the records of the meetings of the Board of Directors of said Company, and do
certify that the same is a correct and true transcript therefrom, and of the
whole of said original Preamble and Resolution.
Given under my hand and seal of the Company this 30th day of March 1998.
/s/ Mary Alice Avery
-------------------------
Mary Alice Avery, Vice President
13 of 16
<PAGE>
COPY OF RESOLUTION OF THE BOARD OF DIRECTORS
At a meeting of the Board of Directors of SPH Crane and Hoist, Inc. duly called
and held on the _______day of ________, a quorum being present, the following
Preamble and Resolution was adopted:
"WHEREAS, this Company is beneficially and materially interested in the
transactions in which MMH Holdings, Inc., Morris Material Handling, Inc.; Morris
Material Handling Limited; Hercules S.A. de C.V.; PHMH Holding Company.; SPH
Crane and Hoist, Inc.; Material Handling, LLC.; MHE Canada, ULC.
has applied, or may hereafter apply to the RELIANCE SURETY COMPANY, RELIANCE
INSURANCE COMPANY, UNITED PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL
INDEMNITY COMPANY for various bonds or undertakings, and
"WHEREAS, the RELIANCE SURETY COMPANY, RELIANCE INSURANCE COMPANY, UNITED
PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL INDEMNITY COMPANY is willing
to consider such bonds or undertakings as surety, upon being furnished with the
written indemnity of this Company, therefore be it
"RESOLVED that Michael Erwin President
----------- --------
of the Company is (are), hereby authorized to execute on behalf of the Company,
any agreement or agreements of indemnity required by the RELIANCE SURETY
COMPANY, RELIANCE INSURANCE COMPANY, UNITED PACIFIC INSURANCE COMPANY, and/or
RELIANCE NATIONAL INDEMNITY COMPANY as a prerequisite to the execution by it of
the bonds or undertakings for MMH Holdings, Inc., Morris Material Handling,
Inc.; Morris Material Handling Limited; Hercules S.A. de C.V.; PHMH Holding
Company.; Material Handling, LLC.; MHE Canada, ULC.
in connection with the matters or transactions described in the agreement of
indemnity required by said RELIANCE SURETY COMPANY, RELIANCE INSURANCE COMPANY,
UNITED PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL INDEMNITY COMPANY,
and the aforementioned representative(s) of the Company is (are) hereby
authorized to affix the corporate seal to such agreement of indemnity and
subscribe his (their) name(s) thereto, in behalf of the Company.
"BE IT FURTHER RESOLVED, that any prior acts of said officers or any
officers or representatives of this Company in executing said indemnity
agreement or agreements on behalf of the Company are hereby ratified."
I, Martin Ditkof, Secretary of SPH Crane and Hoist, Inc. have compared the
foregoing Preamble and Resolution with the original thereof, as they appear on
the records of the meetings of the Board of Directors of said Company, and do
certify that the same is a correct and true transcript therefrom, and of the
whole of said original Preamble and Resolution.
Given under my hand and seal of the Company this 30th day of March, 1998.
/s/ Martin Ditkof
-------------------------
Martin Ditkof, Secretary
14 of 16
<PAGE>
COPY OF RESOLUTION OF THE BOARD OF DIRECTORS
At a meeting of the Board of Directors of Material Handling, LLC, duly called
and held on the _______day of ________, a quorum being present, the following
Preamble and Resolution was adopted:
"WHEREAS, this Company is beneficially and materially interested in the
transactions in which MMH Holdings, Inc.; Morris Material Handling, Inc.; Morris
Material Handling Limited; Hercules S.A. de C.V.; PHMH Holding Company.; SPH
Crane and Hoist, Inc.; MHE Canada, ULC.
has applied, or may hereafter apply to the RELIANCE SURETY COMPANY, RELIANCE
INSURANCE COMPANY, UNITED PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL
INDEMNITY COMPANY for various bonds or undertakings, and
"WHEREAS, the RELIANCE SURETY COMPANY, RELIANCE INSURANCE COMPANY, UNITED
PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL INDEMNITY COMPANY is willing
to consider such bonds or undertakings as surety, upon being furnished with the
written indemnity of this Company, therefore be it
"RESOLVED that Martin Ditkof Manager
----------- --------
of the Company is (are), hereby authorized to execute on behalf of the Company,
any agreement or agreements of indemnity required by the RELIANCE SURETY
COMPANY, RELIANCE INSURANCE COMPANY, UNITED PACIFIC INSURANCE COMPANY, and/or
RELIANCE NATIONAL INDEMNITY COMPANY as a prerequisite to the execution by it of
the bonds or undertakings for MMH Holdings, Inc.; Morris Material Handling,
Inc.; Morris Material Handling Limited; Hercules S.A. de C.V.; PHMH Holding
Company.; SPH Crane and Hoist, Inc.; MHE Canada, ULC.
in connection with the matters or transactions described in the agreement of
indemnity required by said RELIANCE SURETY COMPANY, RELIANCE INSURANCE COMPANY,
UNITED PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL INDEMNITY COMPANY,
and the aforementioned representative(s) of the Company is (are) hereby
authorized to affix the corporate seal to such agreement of indemnity and
subscribe his (their) name(s) thereto, in behalf of the Company.
"BE IT FURTHER RESOLVED, that any prior acts of said officers or any
officers or representatives of this Company in executing said indemnity
agreement or agreements on behalf of the Company are hereby ratified."
I, David Smith, of Material Handling, LLC. have compared the foregoing
Preamble and Resolution with the original thereof, as they appear on the records
of the meetings of the Board of Directors of said Company, and do certify that
the same is a correct and true transcript therefrom, and of the whole of said
original Preamble and Resolution.
Given under my hand and seal of the Company this 30th day of March, 1998.
/s/ David Smith
-------------------------
David Smith, Manager
15 of 16
<PAGE>
COPY OF RESOLUTION OF THE BOARD OF DIRECTORS
At a meeting of the Board of Directors of MHE Canada, ULC duly called and held
on the _______day of ________, a quorum being present, the following Preamble
and Resolution was adopted:
"WHEREAS, this Company is beneficially and materially interested in the
transactions in which MMH Holdings, Inc.; Morris Material Handling, Inc.; Morris
Material Handling Limited; Hercules S.A. de C.V.; PHMH Holding Company.; SPH
Crane and Hoist, Inc.; Material Handling, LLC.
has applied, or may hereafter apply to the RELIANCE SURETY COMPANY, RELIANCE
INSURANCE COMPANY, UNITED PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL
INDEMNITY COMPANY for various bonds or undertakings, and
"WHEREAS, the RELIANCE SURETY COMPANY, RELIANCE INSURANCE COMPANY, UNITED
PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL INDEMNITY COMPANY is willing
to consider such bonds or undertakings as surety, upon being furnished with the
written indemnity of this Company, therefore be it
"RESOLVED that Martin Ditkof Director
----------- --------
of the Company is (are), hereby authorized to execute on behalf of the Company,
any agreement or agreements of indemnity required by the RELIANCE SURETY
COMPANY, RELIANCE INSURANCE COMPANY, UNITED PACIFIC INSURANCE COMPANY, and/or
RELIANCE NATIONAL INDEMNITY COMPANY as a prerequisite to the execution by it of
the bonds or undertakings for MMH Holdings, Inc.; Morris Material Handling,
Inc.; Morris Material Handling Limited; Hercules S.A. de C.V.; PHMH Holding
Company.; SPH Crane and Hoist, Inc.; Material Handling, LLC.
in connection with the matters or transactions described in the agreement of
indemnity required by said RELIANCE SURETY COMPANY, RELIANCE INSURANCE COMPANY,
UNITED PACIFIC INSURANCE COMPANY, and/or RELIANCE NATIONAL INDEMNITY COMPANY,
and the aforementioned representative(s) of the Company is (are) hereby
authorized to affix the corporate seal to such agreement of indemnity and
subscribe his (their) name(s) thereto, in behalf of the Company.
"BE IT FURTHER RESOLVED, that any prior acts of said officers or any
officers or representatives of this Company in executing said indemnity
agreement or agreements on behalf of the Company are hereby ratified."
I, David Smith, of MHE Canada, ULC have compared the foregoing Preamble
and Resolution with the original thereof, as they appear on the records of the
meetings of the Board of Directors of said Company, and do certify that the same
is a correct and true transcript therefrom, and of the whole of said original
Preamble and Resolution.
Given under my hand and seal of the Company this 30th day of March 1998.
/s/ David Smith
-------------------------
David Smith, Officer
16 of 16
CREDIT INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made as of the 30th day of March, 1998, between
Harnischfeger Industries, Inc., a Delaware corporation ("HII"), and Morris
Material Handling, Inc., a Delaware corporation ("Morris"). Capitalized terms
used but not defined herein shall have the respective meanings set forth in the
Recapitalization Agreement entered into as of January 28, 1998, as amended, by
and among MHE Investments, Inc., a Delaware corporation, Harnischfeger
Corporation, a Delaware corporation ("HarnCo"), and certain other parties named
therein (the "Recapitalization Agreement").
WHEREAS, pursuant to the Recapitalization Agreement, HarnCo and
Investor will participate in a recapitalization of MMH Holdings, Inc., a
Delaware corporation ("MMH"), which is the parent company of Morris;
WHEREAS, MMH and its Subsidiaries owe financial and performance
obligations to third persons, the payment and performance of which are
guaranteed by HII and its Affiliates or for which HII and its Affiliates stand
as surety or are otherwise liable or contingently liable, or are secured by
letters of credit, surety bonds, indemnities or other arrangements with third
parties whereby HII and its Affiliates are obligated to repay amounts paid on
such arrangements by third parties; and
WHEREAS, HII and its Affiliates will agree to continue such third
party letters of credit, surety bonds and other arrangements existing on the
Closing Date, but subject to the obligation of Morris and its Subsidiaries to
repay any amounts paid by HII and its Affiliates under such arrangements.
NOW THEREFORE, for the purpose of evidencing the obligations of
Morris and its Subsidiaries in respect of the foregoing, and for establishing
the rights of the parties in respect thereof, the parties do hereby enter into
this Agreement.
Section 1. Definitions. As used in this Agreement:
"Annual Fees" shall have the meaning set forth in Section 4(a)
below.
"Credit" shall mean each letter of credit, performance bond, payment
bond, surety bond or other bond or instrument by, on behalf of or for the
benefit of the MHE Business, whereby HII or an Affiliate thereof is obligated to
pay, reimburse, or indemnify any non-Affiliated Person, including those
arrangements set forth on Schedule 4(p) of the Disclosure Schedule, and any
renewal, replacement, substitution or extension thereof; provided that Credits
shall not include any of the foregoing if and to the extent they cover (i)
Excluded Liabilities or (ii) businesses or operations other than the MHE
Business.
<PAGE>
"Credit Provider" means every obligor on a Credit (which may include
HII or Affiliates thereof) and every successor and assign thereof.
"Credit Provider Agreement" means any agreement, contract,
promissory note or other instrument, arrangement or understanding whereby HII or
one of its Affiliates is obligated to pay, reimburse, or indemnify any Credit
Provider for any payments made on any Credit.
"Demand" shall mean any draft, authenticated electronic or
telegraphic transmission or written demand drawn or made.
"Event of Default" shall have the meaning set forth in Section 10
below.
"Face Amount of Credits" shall mean the sum of the original face
amount of the Credits (and any extensions or renewals thereof). For the purposes
of this Agreement, the face amount of all bonds opened with respect to a single
contract, including performance bonds, payment bonds and all other bonds
relating thereto, shall be deemed to be the sum of such bonds.
"HII" shall have the meaning set forth in the preface above.
"HII Credit Payment" shall mean any payment whatsoever made by HII
or an Affiliate thereof on or after the date of this Agreement under or in
connection with a Credit Provider Agreement.
"MMH" shall have the meaning set forth in the preface above.
"Morris" shall have the meaning set forth in the preface above.
"Obligation" shall mean (i) each Credit and (ii) each guaranty,
indemnity, direct obligation, contingent obligation or other arrangement
(including, without limitation, foreign exchange contracts), maintained by, on
behalf of or for the benefit of the MHE Business, whereby HII or an Affiliate
thereof is obligated to pay, reimburse, or indemnify any non-Affiliated Person,
and any renewal, replacement, substitution or extension thereof; provided that
Obligations shall not include any of the foregoing if and to the extent they
cover (x) Excluded Liabilities or (y) businesses or operations other than the
MHE Business.
"Outstanding Amount of Credits" shall mean: (a) the Face Amount of
Credits; minus (b) the sum of (i) the Face Amount of Credits with respect to
which all liability, potential or actual, has been released or otherwise
terminated by the Credit Provider and the obligee of such Credits; and (ii) that
portion of the Face Amount of Credits with respect to which all liability,
potential or actual, has been released or otherwise terminated by the Credit
Provider and the obligee of such Credits; and (iii) any amount by which the Face
Amount of any Credits has been automatically reduced in accordance with the
terms of such Credits; and (iv) any portion of the Face Amount of Credits which
Morris (or MMH) and HII have mutually agreed upon, which agreement is evidenced
by a writing executed by HII and Morris (or MMH) and which makes
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reference to this Section.
"Recapitalization Agreement" shall have the meaning set forth in the
preface above.
"Reduction Amount" shall have the meaning set forth in Section 4(b)
below.
"Reduction Dates" shall have the meaning set forth in Section 4(b)
below.
Section 2. Continuance of Obligations. On the terms and subject to
the provisions of this Agreement, HII and its Affiliates shall maintain in place
the Obligations in existence on the date hereof. HII and its Affiliates shall
have no obligation to extend, renew or increase any Obligation or create or
enter into any new or additional Obligation; provided that HII and its
Affiliates shall be required to renew Credits as and to the extent required by
customer contracts in effect on the date hereof (but in no event shall HII or
its Affiliates be required to increase the amount of any such Credit). Morris
and its Affiliates shall join HII and its Affiliates in taking all commercially
reasonable efforts to effect the release of all liability of HII and its
Affiliates in respect of the Obligations; provided that Morris shall not be
required to post or arrange substitute or back-up Credits, furnish collateral or
other credit support or make any payments (other than payments owed to third
parties in respect of such Obligations and payments owed to HII and its
Affiliates under this Agreement) in order to obtain such release.
Section 3. Reimbursement for HII Payments.
(a) Morris agrees that HII and its Affiliates may make any HII
Credit Payment demanded of it, as long as HII or an Affiliate thereof, as
applicable, believes that such demand complies with the terms of a Credit
Provider Agreement. HII or an Affiliate thereof, as applicable, shall give
Morris or MMH prompt written notice after any such HII Credit Payment.
Notwithstanding the foregoing, with respect to HII Credit Payments that are not
due on demand, HII or an Affiliate thereof (i) shall give notice to Morris or
MMH of such demand, (ii) shall give MMH or a Subsidiary thereof a reasonable
opportunity defend or contest such demand, and (iii) shall not make such HII
Credit Payment until it receives written notice from MMH or a Subsidiary thereof
authorizing it to do so; provided, however, that if such delay in making an HII
Credit Payment would cause a default under a Credit Provider Agreement, HII or
an Affiliate thereof may make such HII Credit Payment prior to such failure
becoming a default. Morris and its Subsidiaries shall reimburse HII on Demand
for the full amount of HII Credit Payments. Such reimbursement shall be made by
Morris or a Subsidiary thereof in immediately available funds on Demand in the
full amount of any such HII Credit Payment, plus interest accrued thereon from
the date of such HII Credit Payment to the date of reimbursement. Such
reimbursement shall be made within 10 days after Demand by HII or an Affiliate
thereof.
(b) In the event that HII or an Affiliate receives a demand
for payment on any Obligation (other than HII Credit Payments), HII or such
Affiliate (i) shall give notice to
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Morris or MMH of such demand, (ii) shall give MMH or an Affiliate a reasonable
opportunity to defend or contest such demand, and (iii) shall not make such
payment until either (x) it receives written notice from MMH or an Affiliate
thereof authorizing it to do so, or (y) MMH or an Affiliate fails to defend HII
against such demand (or fails to conduct such defense in good faith), or (z) a
judgment in entered against HII or an Affiliate in respect of such demand (and
MMH or an Affiliate thereof does not promptly obtain a stay of such judgment
pending appeal). Morris and its Subsidiaries shall reimburse HII on demand for
the full amount of any payment made by HII or an Affiliate in accordance with
this Section 3(b). Such reimbursement shall be made by Morris or a Subsidiary
thereof in immediately available funds in the full amount of any such HII
payment, plus interest accrued thereon from the date of such HII payment to the
date of reimbursement. Such reimbursement shall be made within 10 days after
Demand by HII or an Affiliate thereof.
Section 4. Continuation Fees and Expenses.
(a) On the Closing Date, Morris and its Subsidiaries shall pay
to HII an annual fee equal to 1% of the Outstanding Amount of Credits on the
Closing Date (pro rated for the period from the Closing Date through the end of
the 1998 calendar year). On or before January 15 of each calendar year
thereafter, Morris and its Subsidiaries shall pay to HII an annual fee equal to
1% of the Outstanding Amount of Credits on January 1 of such calendar year. The
annual fees payable pursuant to this Section 4(a) are referred to herein as
"Annual Fees".
(b) Promptly following the end of each quarter during each
calendar year, Morris (or MMH) and HII shall identify and mutually agree on the
amount of any reductions of the Outstanding Amount of Credits which occurred
during such quarter (the "Reduction Amount") and the dates on which such
reductions occurred (the "Reduction Dates"). Promptly following such
identification and agreement, HII shall refund to Morris a pro-rata portion of
the Annual Fee for each Reduction Amount (based on the period from the
applicable Reduction Date through the end of the year).
(c) In addition to the amounts payable under Sections 4(a) and
(b), Morris and its Subsidiaries shall pay to HII, from time to time, the full
amount paid by HII and its Affiliates to non-Affiliated Persons in respect of
fees, commissions, costs, premiums and expenses (including reasonable attorney's
fees) incurred by HII and its Affiliates after the Closing Date in connection
with maintaining the Obligations.
Section 5. Undertakings of Affiliates. Morris shall cause each
Subsidiary of Morris to perform the obligations of such Subsidiary pursuant to,
and to comply with all covenants and agreements contained in, this Agreement.
HII shall cause each Affiliate of HII to perform the obligations of such
Affiliate pursuant to, and to comply with all covenants and agreements contained
in, this Agreement.
Section 6. Unconditional Obligations of Morris and its Subsidiaries.
Morris and its Subsidiaries' obligations under this Agreement shall be absolute,
unconditional, and
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irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement under all circumstances whatsoever, notwithstanding (a) any lack
of validity or enforceability of any Obligation or any agreement or document
relating to any Obligation, (b) any amendment or waiver of, or any consent to or
departure from, all or any of the documents and agreements in connection with
any Obligation, (c) the existence of any claim, set-off, defense or other right
to which MMH or a Subsidiary thereof may have at any time against the
beneficiary or transferee of any Obligation, (d) any breach of contract or other
dispute between MMH or a Subsidiary thereof, HII or an Affiliate thereof, any
Credit Provider, the beneficiary or transferee of any Obligation or any other
person or entity, whether or not related to this Agreement or any Obligation, or
(e) any delay, extension of time, renewal, compromise or other indulgence
granted or agreed to by HII or an Affiliate thereof with or without notice to or
approval by MMH or a Subsidiary thereof with respect to the obligations of MMH
or a Subsidiary thereof to HII or an Affiliate thereof under this Agreement.
Section 7. No Liability for Certain Acts. Neither HII nor any of its
Affiliates assume liability or responsibility for any of the following: (a) any
acts or omissions of any beneficiary or transferee of any Obligation or of any
Credit Provider, or any person purporting to act on behalf of the foregoing, (b)
the form, validity, sufficiency, correctness, genuineness or legal effect of any
demand, instrument, draft, document, certificate or other writing given to HII
or an Affiliate thereof in connection with any Obligation or Credit Provider
Agreement, or of any signatures or endorsements thereon, (c) any payment by HII
or its Affiliates that does not comply with any Obligation or any Credit
Provider Agreement, except where such HII Payment arises solely from the gross
negligence, wilful misconduct or breach of this Agreement by HII or an Affiliate
thereof, (d) the failure of any Credit Provider or of any beneficiary or
transferee of any Obligation to meet any obligations owed to MMH or its
Subsidiaries, (e) any act, omission, error, breach, negligence, gross negligence
or misconduct of any Credit Provider or any beneficiary or transferee of any
Obligation, (f) any errors, inaccuracies, omissions, interruptions or delays in
transmission or delivery of any messages, directions or correspondence by mail,
cable, telegraph, wireless or otherwise, whether or not in cipher. The
occurrence of one or more of the contingencies referred to in this Section shall
not affect, impair or prevent the vesting of any of HII or any of its
Affiliates' rights or powers under this Agreement or the obligations of Morris
and its Subsidiaries to reimburse HII Payments under this Agreement, except to
the extent such occurrence is due to HII or an Affiliate's failure to comply
with Section 3 hereof.
Section 8. Reimbursement for Certain Expenses. Except in the case of
HII or any of its Affiliates' gross negligence, wilful misconduct or breach of
this Agreement, Morris and its Subsidiaries shall reimburse and indemnify HII
and its Affiliates on Demand for any damages, losses, liabilities, claims,
penalties, judgments, costs and expenses paid, suffered or incurred by HII or
any of its Affiliates on or after the date of this Agreement, however caused,
including but not limited to, attorneys' fees and legal expenses, arising out of
or in connection with (a) the Obligations, or any demands made by beneficiaries
or any transferees of a Obligation or any Credit Provider, (b) the collection of
any amounts owed to HII or its Affiliates by Morris or a Subsidiary thereof
under this Agreement, any Credit Provider Agreement or any Obligation, (c) the
protection, exercise or enforcement of any of HII or any of its Affiliates'
rights and
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remedies under this Agreement, any Credit Provider Agreement or any Obligation,
or (d) any court orders, injunctions, decrees or other procedures restraining or
seeking to restrain HII or an Affiliate thereof from paying any amount under a
Obligation or a Credit Provider Agreement.
Section 9. Limitation of Liability. Notwithstanding any other
provision of this Agreement, in no event shall HII or any of its Affiliates be
liable, regardless of whether any claim is based on contract or tort, for any
special, consequential, indirect or incidental damages, including, but not
limited to, lost profits, arising out of or in connection with any action taken
by HII or any of its Affiliates in connection with this Agreement, any Credit
Provider Agreement or any Obligation.
Section 10. Event of Default. Morris agrees that each of the
following shall constitute an "Event of Default" under this Agreement: (a) any
acceleration of amounts owing under any promissory note, credit agreement, or
other evidence of indebtedness owed by MMH or a Subsidiary thereof to any other
Person (excluding HII or its Affiliates) having a principal amount in excess of
$10,000,000; (b) MMH or a Subsidiary thereof suspends the transaction of its
usual business, or dissolves or liquidates, or is generally not paying its debts
as they become due or becomes insolvent or makes a general assignment for the
benefit of creditor; or (c) a petition is filed by or against MMH or any
Subsidiary thereof seeking the liquidation or reorganization of MMH or such
Subsidiary under the United States Bankruptcy Code or any similar provision of
state, federal or foreign law or a custodian or receiver is appointed for any of
the properties or assets of MMH or any Subsidiary thereof, or any governmental
authority or any court takes possession of any substantial part of the property
of MMH or any material Subsidiary thereof or assumes control over the affairs of
MMH or any material Subsidiary thereof. Upon the occurrence of any Event of
Default, Morris or a Subsidiary thereof shall, within thirty (30) days following
written notice from HII, post a bank letter of credit in favor of HII and its
Affiliates in an amount equal to the Outstanding Amount of Credits at such time.
Such letter of credit shall give HII the unconditional right to draw in order to
fulfill the reimbursement obligations of Morris and its Subsidiaries hereunder
(but only at the time and to the extent HII or its Affiliates make payment on
any Obligation). The posting of such letter of credit shall not relieve Morris
and its Subsidiaries of their obligations hereunder.
Section 11. Remedies. HII and its Affiliates shall be entitled to
pursue any and all remedies available at law or in equity in connection with any
failure by Morris or its Subsidiaries to make any payment when due under this
Agreement or any other breach of the terms of this Agreement (regardless of
whether or not the matter in question constitutes an Event of Default).
Section 12. Set-Off. In addition to any rights now or hereafter
granted under applicable law, and not by way of limitation of any such rights,
upon the occurrence of any Event of Default, HII and its Affiliates are hereby
authorized by Morris at any time or from time to time, without notice thereto,
or to any other person, any such notice being hereby waived by Morris, to
set-off and to appropriate and to apply any and all amounts at any time held or
owing by HII or its Affiliates to or for the credit of MMH or any Subsidiary
thereof against and on account of the
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obligations and liabilities of Morris and its Subsidiaries under this Agreement.
Section 13. Waiver. No delay, extension of time, renewal,
compromise, or other indulgence which may occur or be granted by HII or any of
its Affiliates under this Agreement from time to time shall impair HII or any of
its Affiliates' rights or powers under this Agreement. Neither HII nor any of
its Affiliates shall be deemed to have waived any of its rights under this
Agreement, unless HII shall have signed such a waiver in writing. No such
written waiver shall be effective as to any transactions or events of default
occurring subsequent to the date of such waiver, unless expressly so provided
therein.
Section 14. Modification of Credits and Credit Provider Agreements.
Neither MMH nor any Subsidiary thereof shall increase the amount of any Credit,
extend any expiration date of any Credit, extend the period of time for
presentation of documents or demands under any Credit, agree to any substitution
of any Credit, or agree to any creation, amendment, supplement, waiver or other
modification of any Credit Provider Agreement or any creation, amendment,
supplement, waiver or other modification of any Credit, without the prior
written agreement of HII.
Section 15. Information Requirements. MMH and each of its
Subsidiaries shall deliver to HII reasonably promptly after receipt, a copy of
each demand, or other communication of any nature from a Credit Provider or the
beneficiary or transferee of any Credit with respect to the Credit, or any
person acting or purporting to act on behalf of any such person.
Section 16. Severability. Any provision of this Agreement or any
Obligation which is prohibited or unenforceable in any jurisdiction, shall be,
only as to such jurisdiction, ineffective to the extent of such prohibition or
unenforceability, but all the remaining provisions of this Agreement or any
Obligation shall remain valid.
Section 17. Succession and Assignment. The obligations of Morris and
its Subsidiaries hereunder shall bind the successors and assigns of Morris and
its Subsidiaries, and all rights, benefits, and privileges conferred on HII and
its Affiliates by this Agreement shall be and hereby are extended to, conferred
upon, and may be enforced by, the successors and assigns of HII and its
Affiliates.
Section 18. Submission to Jurisdiction. Each of the parties consents to
the exclusive jurisdiction of the federal courts of the Eastern District of
Wisconsin for any legal action, suit, or proceeding arising out of or in
connection with this Agreement, and agree that any such action, suit, or
proceeding may be brought only in such courts. If such forum is not available,
each of the parties consents to the exclusive jurisdiction of the Milwaukee
County Circuit Court for any such action, suit or proceeding. Each of the
parties further waives any objection to the laying of venue for any such suit,
action, or proceeding in such courts. Each party agrees to accept and
acknowledge service of any and all process that may be served in any suit,
action, or proceeding. Each party agrees that any service of process upon it
mailed by registered or certified mail, return receipt requested to such party
at the address provided in Section 22 below shall be deemed in
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every respect effective service of process upon such party in any such suit,
action, or proceeding. Each party agrees to waive any right it might have to a
trial by jury in any such suit, action or proceeding.
Section 19. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.
Section 20. Construction. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party. The word "including" shall mean including without limitation.
Section 21. Joint and Several Obligations. Morris agrees that this
Agreement constitutes the joint and several agreement and obligation of Morris
and its Subsidiaries, and that HII would not be willing to enter into this
Agreement absent such joint and several liability. Morris shall cause its
Affiliates to honor and comply with the terms and conditions of this Agreement.
Section 22. Notice. Any notice required or permitted hereunder shall
be given in writing and shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to HII: with a copy to:
Harnischfeger Industries, Inc. Kirkland & Ellis
3600 South Lake Drive 200 East Randolph Drive
St. Francis, WI 53235-3716 Chicago, IL 60601
Attention: James A. Chokey and Attention: Keith S. Crow
John Spies Telephone No.: (312) 861-2000
Telephone No.: (414) 486-6400 Facsimile No.: (312) 861-2200
Facsimile No.: (414) 486-6717
If to Morris: and with a copy to:
Morris Material Handling, Inc. Akin, Gump Strauss, Hauer & Feld, L.L.P.
315 West Forest Hill Avenue Suite 400
Oak Creek, WI 53154 1333 New Hampshire Avenue, N.W.
Attention: Martin L. Ditkof Washington, D.C. 20036
Telephone No.: (414) 764-8593 Attention: Russell W. Parks, Jr.
Facsimile No.: (414) 764-8594 Telephone No.: (202) 887-4000
Facsimile No.: (202) 887-4288
or at such other address as such party may designate by ten days advance written
notice to the
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other party.
Section 23. Entire Agreement. This Agreement, the Recapitalization
Agreement and the other Transaction Agreements constitute the entire agreement
of HII and its Subsidiaries, on the one hand, and Morris, MMH and their
Subsidiaries, on the other hand, with respect to the Obligations, and no oral
statements or prior written statements not contained in this Agreement shall
have any force and effect.
Section 24. No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the parties, Affiliates
of HII, Subsidiaries of Morris and their respective successors and permitted
assigns.
Section 25. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
Section 26. Headings. The Section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 27. Interest. Interest shall accrue and be payable on
overdue amounts under this Agreement at a rate per annum equal to the lesser of
20% per annum or the highest rate allowed by law.
Section 28. Termination. The obligations of Morris and its
Subsidiaries under this Agreement will terminate when HII and its Affiliates no
longer have any obligations or liability, contingent or otherwise, under any
Obligation.
* * * *
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IN WITNESS WHEREOF, the undersigned have executed and delivered this
agreement as of the date first above written.
HARNISCHFEGER INDUSTRIES, INC.
By: /s/ Eric Fonstad
----------------------------
Its: Assistant Secretary
----------------------------
MORRIS MATERIAL HANDLING, INC.
By: /s/ David D. Smith
----------------------------
Its: Vice President
----------------------------
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TAX SHARING AGREEMENT
This Tax Sharing Agreement (the "Agreement") dated March 30, 1998 by and
among MHE Investments, Inc. ("Parent") and Parent's subsidiaries MMH Holdings,
Inc. f/k/a/ Material Handling Equipment, Inc., Morris Material Handling, Inc.,
PHME Holding Company, SPH Crane & Hoist, Inc., Birmingham Crane & Hoist, Inc.,
PHME Services, Inc., Material Handling Equipment Nevada Corporation, MHE
Technologies, Inc., MPH Crane, Inc., Morris Mechanical Handling, Inc., NPH
Material Handling, Inc., (collectively referred to herein as "Subsidiaries" or
individually as "Subsidiary") and Material Handling LLC, MHE Canada ULC, Morris
Material Handling, LLC, 3014794 Nova Scotia ULC, Mondel ULC, Kaverit ULC,
Hydramach ULC, Morris Blooma Pte Ltd., P&H Middle East, Ltd., Harnishfeger
Distribution and Service LLC, HPH Material Handling, LLC, EPH Material Handling,
LLC, CMH Material Handling, LLC, Morris Material Handling Ltd., Red Crown ULC,
Lowfile Limited, Invercoe Engineering Limited, Butters Engineering Limited, MMH
(Holdings) Limited, Morris Mechanical Handling Limited, Linear Motors Limited,
UK Crane Services Limited, Vaughan Crane Company Limited, Royce Limited, MMH
International Limited, Morris Mechanical (Pty) Limited, Hercules S.A. de CV
(collectively referred to as the "Other Subsidiaries" and each, an "Other
Subsidiary") is effective for the taxable years of Parent and each Subsidiary
ending after March 30, 1998.
WHEREAS, Parent and the Subsidiaries are all members of an affiliated
group as that term is defined in Section 1504 of the Internal Revenue Code of
1986, as amended (the "Code"), since March 30, 1998. Parent and the Subsidiaries
are collectively referred to herein as the "Affiliated Group."
WHEREAS, the Affiliated Group intends to exercise the privilege granted to
it by Section 1501 of the Code and the Treasury Regulations promulgated
thereunder (the "Treasury Regulations") to file consolidated Federal income tax
returns for taxable years ending after March 30, 1998.
WHEREAS, the Other Subsidiaries are foreign entities and entities that are
either disregarded or treated as partnerships for Federal income tax purposes;
WHEREAS, the parties hereto wish to allocate and settle among themselves,
in an equitable manner, their sharing of the consolidated Federal income tax
liability (and any unitary or combined tax liability under state or local law)
of the Affiliated Group for the taxable years ending after March 30, 1998;
<PAGE>
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants contained herein, Parent, each Subsidiary and each
Other Subsidiary do hereby enter into this Agreement and do hereby agree as
follows:
1. Preparation of Consolidated Federal Income Tax Return (and Applicable
Unitary or Combined Tax Returns under State or Local Law)/Payment of Tax
Liability.
a. Each Subsidiary which is member of the Affiliated Group hereby
appoints Parent as its agent, so long as each such Subsidiary is a member of the
Affiliated Group, for purposes of filing consolidated Federal income tax returns
(and any applicable unitary or combined tax returns under state or local law)
and making any election or application or taking any action in connection
therewith on behalf of each such Subsidiary. Parent agrees to prepare or cause
to be prepared and to timely file annually on behalf of the Affiliated Group a
consolidated Federal income tax return (and any applicable unitary or combined
tax returns under state or local law) for all taxable years of the Affiliated
Group ending after March 30, 1998, until such time as it may be determined by
Parent that the best interests of the Affiliated Group are no longer served
thereby, subject to receiving the required consent of the Commissioner of
Internal Revenue to discontinue filing such a consolidated Federal income tax
return (and any applicable unitary or combined tax returns under state or local
law). Parent shall also timely pay or discharge, or cause to be timely paid or
discharged, the consolidated Federal income tax liability (and any applicable
unitary or combined tax liability under state or local law) of the Affiliated
Group for such taxable year.
b. Each Subsidiary which is a member of the Affiliated Group, and
each Other Subsidiary, shall cooperate with Parent in the filing, to the extent
permitted by law, of the Affiliated Group's consolidated Federal income tax
returns (and any applicable unitary or combined tax returns under state or local
law) by maintaining such books and records and providing such information as may
be necessary or useful in the filing of such returns and executing any documents
and taking any actions which Parent may reasonably request in connection
therewith.
2. Allocation of Consolidated Tax Liability for the Taxable Years Ending
After March 30, 1998.
a. Each Subsidiary shall compute its respective separate Federal
income tax liability (and any applicable state or local tax liability) (before
tax credits) as if it were filing its own Federal income tax return (or its own
state or local tax return) on a stand alone basis. The Federal income tax
liability (or state or local tax liability) referred to in the immediately
preceding sentence (i) shall include the alternative minimum tax (if
appropriate) and (ii) shall be determined without regard to the provisions set
forth in Section 1561 Code. The consolidated Federal income tax liability (and
any unitary or combined tax liability under state or local law) shall be
allocated among the Parent and the Subsidiaries in method similar to the
provisions of Sections 1552(b) and 1552(a)(1) of the Code. In general terms,
allowing for various adjustments pursuant to
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such sections, the method set forth in this paragraph 2 provides that the tax
liability for the Affiliated Group will be allocated among the Parent and the
Subsidiaries hereto in the ratio that each party's separate taxable income bears
to the sum of the separate taxable incomes of all parties having taxable income
for the taxable year. Each Subsidiary shall pay such tax liability to Parent in
the manner set forth in Section 4 below.
(b) Each Other Subsidiary shall compute its respective separate
Federal income tax liability (and any applicable state or local tax liability)
(before tax credits) as if it were filing its own Federal income tax return (or
its own state or local tax return) on a stand alone basis. The Federal income
tax liability (or state or local tax liability) referred to in the immediately
preceding sentence (i) shall include the alternative minimum tax (if applicable)
and (ii) shall be determined without regard to the provisions set forth in
Section 1561 Code. The consolidated Federal income tax liability of a particular
Subsidiary (and any applicable state or local tax liability of a Subsidiary)
shall be allocated among such Subsidiary and each Other Subsidiary whose income
and losses are required to be included in such Subsidiary's stand alone return,
in the manner set forth in Section 2(a) above. Each Other Subsidiary shall pay
its allocable portion of such tax liability, if any, to the Subsidiary required
to include such Other Subsidiary's income and losses in its stand alone return
as provided in Section 2(a) above.
3. Compensation for Tax Benefit Liability for Taxable Years Ending After
March 30, 1998.
a. In general terms, the method set forth herein provides that the
tax liability for the entire Affiliated Group be allocated among the Parent and
Subsidiaries hereto in proportion to the tax liability which each party would
have had if calculated separately from the group. If any such party's resulting
tax liability is reduced (the "Non-Generating Party") by using another party's
tax losses or other tax attributes (the "Generating Party"), the Non-Generating
Party shall pay its proportionate share of the tax savings to the Generating
Party as compensation for the use of its tax losses or other tax attributes at
such time as the Generating Party could have used such loss or other tax
attributes (e.g., in the year when the Generating Party has a positive tax
liability that could have been reduced if the benefit was still available). If a
determination is made that some other method of allocation of tax liability is
required by law, then such required allocation method shall be used in lieu of
the method described herein.
b. A Non-Generating Party agrees to reimburse a Generating Party as
required in this paragraph 3 within thirty (30) days after filing of the
consolidated Federal income tax return (or any unitary or combined return under
state or local law).
4. Time of Payment.
a. Estimated Tax Payments. On or about April 15, June 15, September
15, and December 15 of each taxable year, each Subsidiary shall pay to Parent
its portion of the consolidated Federal estimated tax (or any unitary or
combined
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estimated tax under state or local law) of the Affiliated Group. On or about
April 15, June 15, September 15 and December 15 of end taxable year each Other
Subsidiary shall pay to the Subsidiary required to include such Other
Subsidiary's income and loss on its stand alone return as provided in Section
2(b), its portion of the consolidated Federal income tax (or unitary or combined
tax under state or local law) of the Affiliated Group.
b. Year-end True-up. For each taxable year referred to in Section
4(a), each Subsidiary shall pay to Parent and each Other Subsidiary shall pay to
the Subsidiary required to include such Other Subsidiary's income and loss on
its stand alone return, an amount equal to the excess, if any, of such
Subsidiary's, or Other Subsidiary's, if applicable, separate Federal income tax
liability (or unitary or combined tax liability under state or local law), as
determined under paragraphs 2 or 3 herein, as the case may be, over the
aggregate amount of estimated tax paid by such Subsidiary or Other Subsidiary
pursuant to paragraph 4(a) herein. If the aggregate amount of payments actually
made by any Subsidiary or Other Subsidiary's pursuant to paragraph 4(a) exceeds
such Subsidiary's or Other Subsidiary's separate tax liability as determined
under paragraphs 2 or 3 herein, as the case may be, Parent shall pay to such
Subsidiary, or a Subsidiary shall pay to Other Subsidiary, an amount equal to
such excess. Payments to be made under this paragraph 4(b) shall be made no
later than the due date of the Affiliated Group's Federal income tax return (or
applicable unitary or combined tax return under state or local law) for the
relevant taxable year. If the due date for filing such return is extended, any
payments to be made at the time of filing a request for extension of time to
file shall be made on an estimated basis. No later than one (1) day prior to the
extended due date for such return, each Subsidiary's or Other Subsidiary's
payment shall be recalculated and any difference between the Federal tax
liability (or applicable state or local tax liability) of such Subsidiary or
Other Subsidiary and all of such Subsidiary's or Other Subsidiary prior payments
with respect to such taxable year shall be paid by the appropriate party to the
party entitled thereto by such day.
5. Redetermination of Tax Liability.
a. In the event of any redetermination of the consolidated Federal
income tax liability (or any unitary or combined tax liability under state or
local law) of the Affiliated Group for any taxable year covered by this
Agreement, including as a result of audit by the Internal Revenue Service (or
other appropriate authority), a claim for refund or otherwise, the Affiliated
Group's consolidated Federal tax liability (or any unitary or combined tax
liability under state or local law) shall be recomputed in the same manner as
set forth in paragraphs 2 or 3 herein, as the case may be, for such taxable year
and any subsequent taxable years to take into account such redetermination and
the payments pursuant to paragraph 4 herein shall be appropriately adjusted. Any
payment between Parent and any Subsidiary, or between any Subsidiary and any
Other Subsidiary, required by such adjustment shall be paid no later than thirty
(30) days after the date of a Final Determination (as defined below) with
respect to such redetermination, or as soon as such adjustment could practically
be calculated, if later. A Final Determination shall mean a closing agreement,
or other agreement finally settling a tax liability with the
4
<PAGE>
Internal Revenue Service, a claim for refund which has been allowed, a
deficiency notice with respect to which the period for filling a petition with
the Tax Court has expired, or a decision of any court of competent jurisdiction
that is not subject to appeal or as to which the time for appeal has expired.
b. In any suit, conference, or other preceding with the Internal
Revenue Service or in any judicial proceeding concerning the determination of
Federal income tax liabilities of the Affiliated Group, the relevant taxpayer(s)
shall be represented by persons selected by Parent. The settlement and terms of
settlement of any issues relating to such preceding shall be in the sole
discretion of Parent and each party hereto appoints Parent as its agent for the
purposes of proposing and concluding any such settlement.
c. Payments pursuant to paragraph 4 shall also be appropriately
adjusted as soon as practicable to take into account any changes to the
consolidated Federal income tax liability (or any unitary or combined tax
liability under state or local law) resulting from the filing of an amended
consolidated Federal income tax return (or amended unitary or combined tax
return under state or local law) for the Affiliated Group for any taxable year.
6. Interpretation. This Agreement is intended to allocate certain Federal
income tax liabilities (an any applicable state or local or foreign tax
liabilities) of the Affiliated Group, and any situation or circumstance
concerning such allocation that is not specifically contemplated hereby or
provided for herein shall be dealt with in a manner consistent with the
underlying principles of allocation in this Agreement.
7. Legal and Accounting Fees. Any fees or expenses for legal, accounting
or other professional services rendered in connection with (i) the preparation
of a consolidated Federal income tax return (or any applicable unitary or
combined income tax return under state or local law) for the Affiliated Group,
(ii) the application of the provisions of this Agreement or (iii) the conduct of
any audit, conference or preceding of the Internal Revenue Service or judicial
proceeding relevant to any determination required to be made hereunder shall be
allocated among the Parent and its Subsidiaries (and Other Subsidiaries) in a
manner resulting in each such Party bearing a reasonable approximation of the
actual amount of such fees or expenses hereunder reasonably related to, and for
the benefit of, such member, rather than to or for the benefit of other Parties.
8. Effect of the Agreement. This Agreement shall determine the liability
of Parent, the Subsidiaries and the Other Subsidiaries among themselves as to
matters provided for herein, whether or not such determination is effective for
purposes of the Code, financial reporting purposes or other purposes.
9. Entire Agreement. This Agreement embodies the entire understanding
among the parties relating to its subject matter and supersedes and terminates
all prior agreements and understandings among the parties with respect to such
subject matter; any
5
<PAGE>
and all prior correspondence, conversations and memoranda are merged herein and
shall be without effect hereon. This Agreement shall not be modified except by a
writing duly signed by each of the parties hereto, and no waiver of any
provisions of this Agreement shall be effective unless in writing duly signed by
the party sought to be bound.
10. Code References. Any references to the Code or Treasury Regulations
shall be deemed to refer to the relevant provisions of any successor statute or
regulation and shall refer to such provisions as in effect from time to time.
11. Term. As set forth above, this Agreement is effective for taxable
years ending after March 30, 1998, and shall continue in effect until
termination or canceled as hereinafter provided. If terminated or canceled, the
obligations and liabilities of the parties arising under this Agreement shall
nevertheless continue to apply in full force and effect to all taxable years
(and that part of any taxable year ending as of the date of cancellation or
termination) during which such party is or was a member of the group.
(a) This Agreement shall be terminated if -
(i) the parties agree in writing to a termination effective as of
the first day of any month by giving 30 days prior written notice of such
cancellation;
(ii) as to any member, membership in the group ceases or is
terminated for any reason whatsoever; or
(iii) Parent fails to file, on behalf of the Affiliated Group, a
consolidated Federal income tax return (or any applicable unitary or
combined return under state or local law) for any taxable year.
(b) Upon termination or cancellation of this Agreement, the parties will
make appropriate arrangements to compensate either Parent, any Subsidiary or any
Other Subsidiary, as the case may be, for tax incidents generated by such entity
and utilized by the Affiliated Group in the consolidated Federal income tax
return (or any applicable unitary or combined tax return under state or local
law) if under this Agreement the entity generating the tax incidents had not
previously been compensated for such tax benefit.
12. Assignment or Transfer. This agreement shall not be assignable or
transferable by any party hereto without the prior written consent of the other
parties.
13. Binding Effect; Governing Law; Successors. This Agreement shall be
binding upon the parties that are signatories hereto and those subsidiaries that
become parties hereto pursuant to paragraph 12. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware. This
Agreement shall inure to the benefit of and be binding upon any successors or
permitted assigns of parties hereto.
6
<PAGE>
PARENT
By: /s/ Michael S. Shein
--------------------------------
MHE Investments, Inc.
SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
MMH Holdings, Inc. f/k/a Material
Handling Equipment, Inc.
SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Morris Material Handling, Inc.
SUBSIDIARY
By: /s/ John P. Garniewski
--------------------------------
PHMH Holding Company
SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
SPH Crane and Hoist, Inc.
SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Birmingham Crane & Hoist, Inc.
SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
PHME Service, Inc.
SUBSIDIARY
By: /s/ Patrick Dorn
--------------------------------
Material Handling Equipment Nevada
Corporation
SUBSIDIARY
By: /s/ John P. Garniewski
--------------------------------
MHE Technologies, Inc.
7
<PAGE>
SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
MPH Crane, Inc.
SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Morris Mechanical Handling, Inc.
SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
NPH Material Handling, Inc.
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Material Handling, LLC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
MHE Canada ULC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Morris Material Handling, LLC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
3016117 Nova Scotia ULC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Mondel ULC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Kaverit Steel and Crane ULC
8
<PAGE>
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Hydramach ULC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Morris Blooma Pte Ltd.
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
P&H Middle East, Ltd.
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Harnishfeger Distribution and
Service, LLC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
HPH Material Handling, LLC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
EPH Material Handling, LLC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
CMH Material Handling, LLC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Morris Material Handling Limited
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Red Crown, ULC
9
<PAGE>
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Lowfile Limited
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Invercoe Engineering Limited
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Butters Engineering Limited
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
MMH (Holdings) Limited
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Morris Mechanical Handling Limited
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Linear Motors Limited
OTHER SUBSIDIARY
By: /s/ Steve Davis
--------------------------------
UK Crane Services Limited
OTHER SUBSIDIARY
By: /s/ Steve Davis
--------------------------------
Vaughan Crane Company Limited
OTHER SUBSIDIARY
By: /s/ Steve Davis
--------------------------------
Royce Limited
10
<PAGE>
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
MMH International Limited
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Morris Mechanical (Pty) Limited
OTHER SUBSIDIARY
By: /s/ Michael S. Erwin
--------------------------------
Hercules S.A. de C.V.
11
COMPONENT AND MANUFACTURED PRODUCTS SUPPLY AGREEMENT
This COMPONENT AND MANUFACTURED PRODUCTS SUPPLY AGREEMENT (this
"Agreement") is dated as of March 30, 1998, by and between Harnischfeger
Corporation, a Delaware corporation ("Harnco"), and Morris Material Handling,
Inc., a Delaware corporation ("MMH") (collectively, the "Parties").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Recapitalization Agreement dated
as of January 28, 1998, as amended to date, by and between, among other parties,
MHE Investments, Inc. and Harnco (the "Recapitalization Agreement"), Harnco and
certain Affiliates of Harnco have agreed to sell, and MHE Investments, Inc. has
agreed to purchase a controlling interest in the MHE Business;
WHEREAS, in connection therewith, MMH and Harnco desire that Harnco
provide those Companies engaged in the MHE Business in the U.S. (the "U.S.
Companies") with certain manufacturing and other services as set forth herein;
and
WHEREAS, capitalized terms used herein and not otherwise defined
herein have the meanings given to such terms in the Recapitalization Agreement;
NOW, THEREFORE, in consideration of the premises and covenants set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Harnco and MMH agree as follows:
1. Harnco's Obligations. During the term of this Agreement as set
forth in Section 3 below (the "Supply Period"), subject to the terms and
conditions set forth herein:
(a) Harnco shall sell or shall cause its Affiliates to sell to MMH
and MMH may purchase from Harnco Manufactured Products in such quantities as
requested in written purchase orders submitted by the U.S. Companies to Harnco,
provided, however, that Harnco (A) shall not be required to supply Manufactured
Products in excess of its actual manufacturing capacity, and (B) shall not be
required to purchase additional machinery or equipment or hire any additional
temporary or permanent employees. For purposes of this agreement "Manufactured
Products" shall mean the products described in Annex "A" hereto.
(b) The price and payment terms for Manufactured Products purchased
by the U.S. Companies hereunder shall be in accordance with the provisions of
Annex "A" hereto. In addition to the terms set forth herein, the terms and
conditions of the sale of Manufactured
<PAGE>
Products hereunder shall be in accordance with the provisions of Annex "B"
hereto:
2. Sales Documents. Any invoice, purchase order acknowledgment,
purchase order or other document issued by any Party or the U.S. Companies upon
the execution of this Agreement or subsequent hereto shall be deemed to (i) be
for the record keeping convenience of the Parties and (ii) confirm this
Agreement and not add to, delete from or change the provisions of this
Agreement, unless specifically agreed upon by the Parties in writing on a
case-by-case basis.
3. Term of Agreement. Subject to Section 4, the term of this
Agreement shall commence on the Closing Date and shall continue for a period of
two (2) years thereafter, at which time the Agreement shall terminate.
4. Termination.
(a) This Agreement may be terminated in its entirety at any
time as follows:
(i) by the mutual written agreement of the parties
hereto;
(ii) at the election of Harnco (such election to be made
in writing), in the event of a material default by MMH of its
obligations hereunder, which shall not have been cured within
sixty (60) days after written notice given by Harnco to MMH
or, in the event of a breach of a payment obligation, thirty
(30) days after written notice given by Harnco to MMH; or
(iii) at the election of MMH (such election to be made
in writing), in the event of a material default by Harnco of
its obligations hereunder, which shall not have been cured
within sixty (60) days after written notice given by MMH to
Harnco.
(b) No termination or expiration of this Agreement, in whole
or in part, shall discharge, affect or otherwise modify in any manner the rights
and obligations of the parties hereto which have accrued or have been incurred
prior to such termination, including, the obligation of MMH to pay to Harnco any
and all amounts payable hereunder in respect of goods or services theretofore
provided, or of Harnco to resolve pursuant to the terms hereof any claims
identified by MMH.
5. Assignment. This Agreement may not be assigned by either party
and shall not inure to the benefit of any third party without the prior written
consent of the other party, and any attempted assignment shall be null and void,
except that either party may assign this Agreement to any Affiliate.
The foregoing notwithstanding, MMH (and any permitted successor or
assign)
<PAGE>
may assign or transfer its rights hereunder as part of a merger or consolidation
with, or the sale, exchange or other transfer of all or substantially all of its
assets to, any Person other than an HII Competitor (as defined below). As used
in this Agreement, "HII Competitor" means any Person which engages in a business
or enterprise which competes with (i) any business or enterprise conducted by
HII or its Subsidiaries immediately after the Closing or (ii) any other business
or enterprise conducted by HII or its Subsidiaries in the future (other than as
a result of the acquisition of HII by a third party). Harnco shall have the
right to terminate this Agreement on 90 days prior written notice at any time
after an HII Competitor (x) acquires more than 50% of MMH's (or its direct or
indirect parent's) voting stock (or more than 50% of the voting stock of a
permitted successor or assign) or (y) acquires, directly or indirectly, the
power to direct or cause the direction of MMH's (or a permitted successor's or
assign's) management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
6. Confidentiality. Each party shall cause each of its Affiliates
and each of their officers, directors and employees to hold all information
relating to the business of the other party disclosed to it by reason of this
Agreement confidential and will not disclose any of such information to any
party unless legally compelled to disclose such information; provided, however,
that to the extent that any of them may become so legally compelled they may
only disclose such information if they shall first have used reasonable efforts
to, and, if practicable, shall have afforded the other party the opportunity to
obtain, an appropriate protective order or other satisfactory assurance of
confidential treatment for the information required to be so disclosed.
7. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Wisconsin, without regard
to its conflicts of law principles.
8. Limitation of Liability, Indemnity.
(a) HARNCO SHALL HAVE NO LIABILITY TO MMH WITH RESPECT TO THE SALE
OF PRODUCTS HEREUNDER FOR LOST REVENUES OR PROFITS OR FOR SPECIAL,
CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES OF ANY KIND WHETHER ARISING IN
CONTRACT, TORT, PRODUCT LIABILITY OR OTHERWISE, EVEN IF ADVISED OF THE
POSSIBILITY OF SUCH LOST PROFITS OR DAMAGES. IN NO EVENT SHALL HARNCO BE LIABLE
TO MMH FOR ANY DAMAGES WHATSOEVER IN EXCESS OF THE PRICE OF PRODUCTS SOLD
HEREUNDER, OTHER THAN THE COST OF HARNCO'S WARRANTY OBLIGATIONS PURSUANT TO
"ANNEX B".
IN THE EVENT THAT ANY WARRANTY OF HARNCO FAILS OF ITS ESSENTIAL PURPOSE,
OR IS HELD TO BE INVALID OR UNENFORCEABLE FOR ANY REASON, IN CONSIDERATION OF
THE OTHER PROVISIONS OF THIS AGREEMENT, THE PARTIES UNDERSTAND AND AGREE THAT
ALL LIMITATIONS OF LIABILITY FOR SPECIAL,
3
<PAGE>
INCIDENTAL, AND CONSEQUENTIAL DAMAGES WILL NEVERTHELESS REMAIN IN EFFECT.
(b) MMH shall defend, indemnify and hold harmless Harnco and its
Affiliates, their shareholders, and their respective officers, directors,
employees, and agents from any Loss (for the purposes of this Agreement, "Loss"
shall mean any and all costs and expenses, damages, and losses actually
incurred) which results from or relates to the provision of the Manufactured
Products pursuant to this Supply Agreement, other than the cost of Harnco's
warranty obligations pursuant to "Annex B", unless such Loss is caused by the
willful misconduct or gross negligence of the indemnitee.
9. Dispute Resolution; Submission to Jurisdiction.
(a) In the event of any dispute or disagreement between Harnco and
MMH as to the interpretation of any provision of this Agreement (or the
performance of obligations hereunder), the matter, upon written request of
either party, shall be referred to representatives of the parties for decision,
each party being represented by a senior executive officer who has no direct
operational responsibility for the matters contemplated by this Agreement (the
"Representatives"). The Representatives shall promptly meet in a good faith
effort to resolve the dispute. If the Representatives do not agree upon a
decision within 30 calendar days after reference of the matter to them, each of
Harnco and MMH shall be free to exercise the remedies available to it under
applicable law, subject to clause (b) below.
(b) Each of Harnco and MMH consents to the exclusive jurisdiction of
the federal courts of the Eastern District of Wisconsin for any legal action,
suit or proceeding arising out of or in connection with this Agreement, and
agrees that any such action, suit, or proceeding may be brought only in such
courts. If such forum is not available, each of the Parties consents to the
exclusive jurisdiction of the Milwaukee County Circuit Court for any such
action, suit or proceeding. Each of Harnco and MMH further waives any objection
to the laying of venue for any suit, action or proceeding in such courts. Each
party agrees to accept and acknowledge service of any and all process that may
be served in any suit, action or proceeding. Each party agrees that any service
of process upon it mailed by registered or certified mail, return receipt
requested to such party at the address provided in Section 11 below shall be
deemed in every respect effective service of process upon such party in any such
suit, action or proceeding. Each party agrees to waive any right it might have
to a trial by jury in any such suit, action or proceeding.
10. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
11. Notices. Unless otherwise indicated herein, all notices,
requests, demands or other communications to the respective parties hereto shall
be deemed to have been given or
4
<PAGE>
made when deposited in the mails, registered or certified mail, return receipt
requested, postage prepaid, or by means of overnight delivery service when
delivered to such service addressed or by facsimile to the respective party at
the following address:
To Harnco: Harnischfeger Corporation
4400 W. National Avenue
Milwaukee, WI 53124-3684
Attn: Michael Salsieder
Vice President, General Counsel and Secretary
To MMH: Morris Material Handling, Inc.
315 W. Forest Hill Avenue
Oak Creek, WI 53154-2999
Attn: General Counsel
with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Attn: Russell W. Parks, Jr.
12. Modification, Nonwaiver, Severability. No alleged waiver,
modification or amendment to this Agreement or to Annex A or Annex B attached
hereto shall be effective against either party hereto, unless in writing, signed
by the party against which such waiver, modification or amendment is asserted,
and referring specifically to the provision hereof alleged to be waived,
modified or amended. The failure or delay of either party to insist upon the
other party's strict performance of the provisions in this Agreement or to
exercise in any respect any right, power, privilege, or remedy provided for
under this Agreement shall not operate as a waiver or relinquishment thereof,
nor shall any single or partial exercise of any right, power, privilege, or
remedy preclude other or further exercise thereof, or the exercise of any other
right, power, privilege, or remedy; provided, however, that the obligations and
duties of either party with respect to the performance of any term or condition
in this Agreement shall continue in full force and effect.
13. Interpretation. The headings and captions contained in this
Agreement and in Annex A and Annex B attached hereto are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. The use of the word "including" herein shall mean "including without
limitation."
14. No Strict Construction. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
person.
5
<PAGE>
15. Entire Agreement. This Agreement, the Motor Rewind Agreements
with Harnco Affiliates and the Recapitalization Agreement contain the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings,
whether written or oral, relating to such subject matter.
16. Relationship of Parties. Harnco shall perform all of the
services hereunder as an independent contractor and none of the parties shall
act or represent or hold itself out as having authority to act as an agent or
partner of the other parties, or in any way bind or commit the other party to
any obligations. Nothing contained in this Agreement shall be construed as
creating a partnership, joint venture, agency, trust or other association of any
kind, each party being individually responsible only for its obligations as set
forth in this Agreement.
17. Force Majeure. If Harnco is prevented from complying, either
totally or in part, with any of the terms or provisions of this Agreement by
reason of fire, flood, storm, strike, lockout or other labor trouble, any law,
order, proclamation, regulation, ordinance, demand or requirement of any
governmental authority, riot, war, rebellion or other causes beyond the
reasonable control of Harnco or other acts of God, then upon written notice to
MMH, the affected provisions and/or other requirements of this Agreement shall
be suspended during the period of such disability and Harnco shall have no
liability to MMH or any other party in connection therewith, other than using
commercially reasonable efforts to provide an alternative, if possible, and at
the end of such suspended period to continue to provide any affected
Manufactured Products for the balance of the term hereof and at the price
therefor as set forth in "Annex A".
18. Effectiveness. The parties' obligations under this Agreement are
conditional upon the closing of the Recapitalization Agreement (the "Closing"),
the occurrence of which is subject to various conditions set forth in the
Recapitalization Agreement. This Agreement shall become operative if and when
the Closing occurs and shall be null and void if the Closing does not occur for
any reason. Nothing in this Agreement shall constitute a representation or
promise that any party hereto shall proceed with the Closing or obligate any
party to do so.
* * * * *
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date and year first
set forth above.
HARNISCHFEGER CORPORATION
By: /s/ Eric Fonstad
-------------------------
Title: Assistant Secretary
----------------------
6
<PAGE>
MORRIS MATERIAL HANDLING, INC.
By: /s/ Michael S. Erwin
-------------------------
Title: President
----------------------
7
<PAGE>
ANNEX A
Manufactured Products
For purposes of this Agreement, "Manufactured Products" shall mean products,
repair parts and rebuilds as have been manufactured by Harnco at its National
Avenue and Orchard Street facilities for the MHE Business from and after
November 1, 1995.
Price
The price of the Manufactured Products shall be fully absorbed standard cost for
normal production products and repair parts as of the date of shipment.
Calculation of standard cost is to be consistent with practices in effect for
all other Harnco products as of the Closing Date.
The price for rebuilds and repairs, which have no standard cost, will be fully
absorbed job cost as of the date of shipment.
Prices quoted are exclusive of all Taxes (except taxes levied on Seller's
income) and MMH shall pay all taxes in full or shall reimburse Seller for any
such taxes paid by Seller.
Payment Terms
All invoices shall be paid not later than thirty (30) days following receipt by
MMH of Seller's bill or invoice. Payments made after thirty (30) days from
receipt of bills or invoices shall bear interest at the rate of 12% per annum.
<PAGE>
ANNEX B
SHIPMENT: Unless expressly stated otherwise in this Agreement, all shipments are
F.C.A. Harnco's plant or warehouse and title and all risk of loss with respect
to any goods shipped shall pass to MMH when such goods are delivered to the
carrier at such plant or warehouse. All delivery dates are estimates of
approximate dates of delivery and do not constitute a guaranty of delivery on
such dates.
WARRANTIES: Harnco warrants Manufactured Products against failure due to defects
in materials and workmanship for 1 (one) year after first use of 3,000 operating
hours, whichever first occurs, but in no event longer than eighteen (18) months
from the shipment date (the "Warranty Period"). Components and accessories not
manufactured by Harnco which are warranted separately by their respective
manufacturers are not warranted by Harnco and Harnco shall assign to MMH
whatever rights Harnco obtains under any such warranties. Harnco warrants
Services to conform in all material respects to the description of Services
included in this agreement at the time of performance of such Services. All
warranties and any obligations of Harnco therewith shall automatically terminate
with respect to any products which are operated in excess of rated capacities or
are otherwise misused, are altered or repaired in any manner not authorized by
Harnco, are damaged or are not maintained in accordance with recommended
practices and instructions.
THE FOREGOING WARRANTIES ARE IN LIEU OF, AND HARNCO EXPRESSLY DISCLAIMS, ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
WARRANTY REMEDIES: MMH's sole and exclusive remedy for nonconformance of any
Products with the Product description or for failure due to defects in materials
or workmanship in Products during the Warranty Period shall be, at Harnco's
election, either Harnco's repair or correction of such nonconformance or defect
or Harnco's furnishing without charge, F.C.A. Harnco's factory or warehouse, a
replacement for any such nonconforming or defective part provided that Harnco is
given immediate notice of any claimed nonconformance or defect and the part is
available for inspection or, at the request of Harnco and at MMH's expense,
delivered to Harnco. Harnco shall not be liable for the cost, including labor
costs, of dismantling and installing replacement parts or for any other expense
connected therewith or for any special, exemplary, incidental or consequential
damages. MMH's sole and exclusive remedy for nonconformance of any Services with
the foregoing warranty shall be Harnco's correction or reperformance of any such
nonconforming Services provided that Harnco is given notice of any claimed
nonconformance within 30 days of the performance of such Services. Except for
the Harnco's direct costs incurred in correcting or reperforming nonconforming
Services, Harnco shall not be liable for any other expense connected with the
correction or reperformance of any Services or for any special, exemplary,
incidental or consequential
<PAGE>
damages.
THE FOREGOING REMEDIES SHALL CONSTITUTE MMH'S SOLE AND EXCLUSIVE REMEDIES FOR
BREACH OF WARRANTY AND ALL OTHER REMEDIES ARE HEREBY EXPRESSLY EXCLUDED.
TRANSITION SERVICES AGREEMENT
This TRANSITION SERVICES AGREEMENT (this "Agreement") is dated as of
March 30, 1998, by and between Harnischfeger Corporation, a Delaware corporation
("Harnco"), and Morris Material Handling, Inc., a Delaware corporation ("MMH").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Recapitalization Agreement dated
as of January 28, 1998, as amended to date, by and between MHE Investments,
Inc., Harnco and additional sellers named therein (the "Recapitalization
Agreement"), MHE Investments, Inc. will acquire a controlling interest in the
Companies;
WHEREAS, in connection therewith, MMH and Harnco desire that Harnco
provide the Companies located in the United States with certain transition
services as set forth herein; and
WHEREAS, capitalized terms used herein and not otherwise defined
herein have the meanings given to such terms in the Recapitalization Agreement;
NOW, THEREFORE, in consideration of the premises and covenants set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Harnco and MMH agree as follows:
1. Transition Services. During the term of this Agreement as set
forth in Section 4 below (the "Transition Period"), Harnco shall provide, or
cause its Affiliates to provide, to the Companies and their Subsidiaries located
in the United States the services set forth on Annex A hereto for the periods of
time set forth on Annex A hereto, in each case in the manner and at a relative
level of service consistent in all material respects with that provided by
Harnco or its Affiliates to the Companies and their Subsidiaries immediately
prior to the date hereof. Such services shall be provided at the price set forth
on Annex A hereto. MMH shall not be responsible for any allocated software
amortization charges. Harnco and MMH shall each pay fifty percent (50%) of (i)
any amounts that are required to be paid to any licensors of software that is
used in connection with the provision of any services hereunder; and (ii) any
amounts that are required to be paid to any such licensors to obtain the consent
of such licensors to provide any of the services hereunder. Subject to the
immediately preceding sentence, Harnco shall use reasonable efforts to obtain
any consents that may be required from such licensors in order to provide any of
the services hereunder.
2. Billing and Payment. MMH shall promptly pay any bills and
invoices that it
<PAGE>
receives from Harnco or its Affiliates for services provided pursuant to this
Agreement, subject to receiving appropriate support documentation for such bills
and invoices. Such charges will be billed at the end of each fiscal month during
the Transition Period. All invoices shall be paid not later than thirty (30)
days following receipt by MMH of Harnco's bill or invoice. Payments made after
thirty (30) days from receipt of bills or invoices shall bear interest at the
rate of 12% per annum.
3. General Intent. Harnco shall provide the transition services
which are set forth on Annex A hereto and such other transition assistance as
the parties may otherwise agree during the Transition Period. Nothing hereunder
shall be construed as a representation or warranty by Harnco that such services
shall be suitable or adequate for the conduct of the business of the Companies
by the MMH. Subject to Section 4 below, MMH shall cause the Companies and its
Subsidiaries to use reasonable commercial efforts to discontinue the use of such
assistance as soon as reasonably possible and (unless the parties otherwise
agree) in all events to discontinue such use with respect to each service
specified in Annex A hereto not later than the end of the period specified in
Annex A hereto (and any extensions thereto pursuant to Section 4) for the
provision of each such service.
4. Term of Agreement. Subject to Section 5, the term of this
Agreement shall commence on the Closing Date and shall continue with respect to
each service described on Annex A hereto for the term of the service period with
respect to such service set forth on Annex A hereto, provided that MMH may
extend any such service from month-to-month for a period not to exceed twelve
(12) months after the expiration of the "Service Period" for such Service as is
set forth in "Annex A", at a price to which Harnco and MMH have agreed
(following their reasonable good faith efforts to reach agreement). Failing such
agreement, no service term shall be extended. Notwithstanding the provisions of
the Separation Agreement, MMH shall be responsible for and shall reimburse
Harnco for the costs of setting up software interfaces and migrating data upon
the expiration or termination of the term of any service period hereunder.
5. Termination.
(a) Any service provided by Harnco or its Affiliates hereunder
may be terminated by MMH prior to the end of the period specified in Annex A
hereto upon twenty (20) days' prior written notice to Harnco. As soon as
reasonably practicable following receipt of any such notice, Harnco shall advise
MMH as to whether termination of such service will require the termination or
partial termination of, or otherwise affect the provision of, certain other
services specified in Annex A attached hereto because such other services cannot
be provided at the same cost or expense to Harnco following termination of such
service. If such is the case, MMH may withdraw its termination notice.
Otherwise, such termination shall be final.
(b) In addition, this Agreement may be terminated in its
entirety at any time as follows:
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(i) by the mutual written agreement of the parties
hereto;
(ii) at the election of Harnco (such election to be made
in writing), in the event of a material default by MMH of its
obligations hereunder, which shall not have been cured within
sixty (60) days after written notice given by Harnco to MMH
or, in the event of a breach of a payment obligation, thirty
(30) days after written notice given by Harnco to MMH; or
(iii) at the election of MMH (such election to be made
in writing), in the event of a material default by Harnco of
its obligations hereunder, which shall not have been cured
within sixty (60) days after written notice given by MMH to
Harnco.
(c) No termination of this Agreement, in whole or in part,
shall discharge, affect or otherwise modify in any manner the rights and
obligations of the parties hereto which have accrued or have been incurred prior
to such termination, including, the obligation of MMH to pay to Harnco any and
all amounts payable hereunder in respect of Services theretofore provided, or of
Harnco to resolve pursuant to the terms hereof any claims identified by MMH.
6. Assignment. This Agreement may not be assigned by either party
and shall not inure to the benefit of any third party without the prior written
consent of the other party, and any attempted assignment shall be null and void,
except that Harnco may assign this Agreement to any entity into which it merges
or reorganizes or to any current or future Harnco affiliate.
The foregoing notwithstanding, MMH (and any permitted successor or
assign) may assign or transfer its rights hereunder (except for any rights to
the services described at Annex A, Sections (B)(1) and (B)(3) or any other
services which would permit access to any proprietary information of Harnco or
its Affiliates, which shall terminate upon any assignment or transfer) as part
of a merger or consolidation with, or the sale, exchange or other transfer of
all or substantially all of its assets to, any Person other than an HII
Competitor (as defined below). As used in this Agreement, "HII Competitor" means
any Person which engages in a business or enterprise which competes with (i) any
business or enterprise conducted by HII or its Subsidiaries immediately after
the Closing or (ii) any other business or enterprise conducted by HII or its
Subsidiaries in the future (other than as a result of the acquisition of HII by
a third party). Harnco shall have the right to terminate this Agreement on 90
days prior written notice at any time after an HII Competitor (x) acquires more
than 50% of MMH's (or its direct or indirect parent's) voting stock (or more
than 50% of the voting stock of a permitted successor or assign) or (y)
acquires, directly or indirectly, the power to direct or cause the direction of
MMH's (or a permitted successor's or assign's) management or policies (whether
through ownership of
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<PAGE>
securities or partnership or other ownership interests, by contract or
otherwise).
7. Confidentiality. Each party shall cause each of its Affiliates
and each of their officers, directors and employees to hold all information
relating to the business of the other party disclosed to it by reason of this
Agreement confidential and will not disclose any of such information to any
party unless legally compelled to disclose such information; provided, however,
that to the extent that any of them may become so legally compelled they may
only disclose such information if they shall first have used reasonable efforts
to, and, if practicable, shall have afforded the other party the opportunity to
obtain, an appropriate protective order or other satisfactory assurance of
confidential treatment for the information required to be so disclosed.
8. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Wisconsin, without regard
to its conflicts of law principles.
9. LIMITATION OF LIABILITY. HARNCO SHALL HAVE NO LIABILITY TO MMH
WITH RESPECT TO THE PROVISION OF SERVICES HEREUNDER FOR LOST PROFITS OR FOR
SPECIAL, CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES OF ANY KIND WHETHER
ARISING IN CONTRACT, TORT, PRODUCT LIABILITY OR OTHERWISE, EVEN IF ADVISED OF
THE POSSIBILITY OF SUCH LOST PROFITS OR DAMAGES. IN NO EVENT SHALL HARNCO BE
LIABLE TO MMH FOR ANY DAMAGES WHATSOEVER IN EXCESS OF THE PRICE OF SERVICES AT
ISSUE PROVIDED HEREUNDER, OTHER THAN DAMAGES CAUSED BY HARNCO'S GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT.
In the event that any warranty of Harnco fails of its essential purpose,
or is held to be invalid or unenforceable for any reason, in consideration of
the other provisions of this Agreement, the parties understand and agree that
all limitations of liability for special, incidental, and consequential damages
will nevertheless remain in effect.
10. Dispute Resolution; Submission to Jurisdiction.
(a) In the event of any dispute or disagreement between Harnco and
MMH as to the interpretation of any provision of this Agreement (or the
performance of obligations hereunder), the matter, upon written request of
either party, shall be referred to representatives of the parties for decision,
each party being represented by a senior executive officer who has no direct
operational responsibility for the matters contemplated by this Agreement (the
"Representatives"). The Representatives shall promptly meet in a good faith
effort to resolve the dispute. If the Representatives do not agree upon a
decision within 30 calendar days after reference of the matter to them, each of
Harnco and MMH shall be free to exercise the remedies available to it under
applicable law, subject to clause (b) below.
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(b) Each of Harnco and MMH consents to the exclusive jurisdiction of
the federal courts of the Eastern District of Wisconsin for any legal action,
suit or proceeding arising out of or in connection with this Agreement, and
agrees that any such action, suit, or proceeding may be brought only in such
courts. If such forum is not available, MMH and Harnco consent to the exclusive
jurisdiction of the Milwaukee County Circuit Court for any such action, suit or
proceeding. Each of Harnco and MMH further waives any objection to the laying of
venue for any suit, action or proceeding in such courts. Each party agrees to
accept and acknowledge service of any and all process that may be served in any
suit, action or proceeding. Each party agrees that any service of process upon
it mailed by registered or certified mail, return receipt requested to such
party at the address provided in Section 12 below shall be deemed in every
respect effective service of process upon such party in any such suit, action or
proceeding. Each party agrees to waive any right it might have to a trial by
jury in any such suit, action or proceeding.
11. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
12. Notices. Unless otherwise indicated herein, all notices,
requests, demands or other communications to the respective parties hereto shall
be deemed to have been given or made when deposited in the mails, registered or
certified mail, return receipt requested, postage prepaid, or by means of
overnight delivery service when delivered to such service addressed or by
facsimile to the respective party at the following address:
To Harnco: Harnischfeger Corporation
4400 W. National Avenue
Milwaukee, WI 53214-3684
Attn: Michael Salsieder
Vice President, General Counsel and Secretary
To MMH: Morris Material Handling, Inc.
315 W. Forest Hill Avenue
Oak Creek, WI 53154-2999
Attn: General Counsel
with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Attn: Russell W. Parks, Jr.
5
<PAGE>
13. Modification, Nonwaiver, Severability. No alleged waiver,
modification or amendment to this Agreement or to Annex A attached hereto shall
be effective against either party hereto, unless in writing, signed by the party
against which such waiver, modification or amendment is asserted, and referring
specifically to the provision hereof alleged to be waived, modified or amended.
The failure or delay of either party to insist upon the other party's strict
performance of the provisions in this Agreement or to exercise in any respect
any right, power, privilege, or remedy provided for under this Agreement shall
not operate as a waiver or relinquishment thereof, nor shall any single or
partial exercise of any right, power, privilege, or remedy preclude other or
further exercise thereof, or the exercise of any other right, power, privilege,
or remedy; provided, however, that the obligations and duties of either party
with respect to the performance of any term or condition in this Agreement shall
continue in full force and effect.
14. Interpretation. The headings and captions contained in this
Agreement and in Annex A attached hereto are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement. The
use of the word "including" herein shall mean "including without limitation."
15. No Strict Construction. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
person.
16. Entire Agreement. This Agreement and the Recapitalization
Agreement contain the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, whether written or oral, relating to such subject
matter.
17. Relationship of Parties. Harnco shall perform all of the
services hereunder as an independent contractor and none of the parties shall
act or represent or hold itself out as having authority to act as an agent or
partner of the other parties, or in any way bind or commit the other party to
any obligations. Nothing contained in this Agreement shall be construed as
creating a partnership, joint venture, agency, trust or other association of any
kind, each party being individually responsible only for its obligations as set
forth in this Agreement.
18. Force Majeure. If Harnco is prevented from complying, either
totally or in part, with any of the terms or provisions of this Agreement by
reason of fire, flood, storm, strike, lockout or other labor trouble, any law,
order, proclamation, regulation, ordinance, demand or requirement of any
governmental authority, riot, war, rebellion or other causes beyond the
reasonable control of Harnco or other acts of God, then upon written notice to
MMH, the affected provisions and/or other requirements of this Agreement shall
be suspended during the period of such disability and Harnco shall have no
liability to MMH or any other party in
6
<PAGE>
connection therewith, other than using commercially reasonable efforts to
provide an alternative, if possible, and at the end of such suspended period to
continue to provide any affected services for the balance of the term and at the
price therefor as set forth in "Annex A".
19. Effectiveness. The parties' obligations under this Agreement are
conditional upon the closing of the Recapitalization Agreement (the "Closing"),
the occurrence of which is subject to various conditions set forth in the
Recapitalization Agreement. This Agreement shall become operative if and when
the Closing occurs and shall be null and void if the Closing does not occur for
any reason. Nothing in this Agreement shall constitute a representation or
promise that any party hereto shall proceed with the Closing or obligate any
party to do so.
* * * * *
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date and year first
set forth above.
HARNISCHFEGER CORPORATION
By: /s/ Eric Fonstad
-------------------------
Title: Assistant Secretary
----------------------
MORRIS MATERIAL HANDLING, INC.
By: /s/ David D. Smith
-------------------------
Title: Vice President
----------------------
TRADEMARK LICENSE AGREEMENT
THIS TRADEMARK LICENSE AGREEMENT (this "Agreement") is made and entered
into as of March 30, 1998 (the "Effective Date"), by and between Harnischfeger
Technologies, Inc., a Delaware corporation ("Licensor"), and Morris Material
Handling, Inc., a Delaware corporation ("Licensee").
WHEREAS, Affiliates of Licensor and Licensee are parties to that certain
Recapitalization Agreement made and entered into as of January 28, 1998, as
amended (the "Recapitalization Agreement"), pursuant to which this Agreement is
made and attached as Exhibit A.
WHEREAS, Licensee acknowledges and agrees that Licensor owns all right,
title and interest in and to the Licensed Trademarks (as hereinafter defined);
and
WHEREAS, Licensee desires to acquire from Licensor, and Licensor desires
to grant to Licensee, a sole and exclusive license to use the Licensed
Trademarks for the limited purposes set forth herein.
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter set forth and for other good and valuable consideration, the parties
hereto agree as follows:
1 DEFINITIONS
1.1 General. Any term used herein with initial capital letters and not
otherwise defined herein shall have the meaning ascribed to such term in the
Recapitalization Agreement.
1.2 EBITDA. The term "EBITDA" shall mean, with respect to any particular
fiscal period, net income before interest, taxes, depreciation and amortization
for such period, calculated in accordance with Generally Accepted Accounting
Principles used in the preparation of Audited Financial Statements. The
calculation of EBITDA in respect of any particular fiscal period shall be
discrete and without regard to such results of operations in any other preceding
or subsequent fiscal period.
1.3 Licensed Equipment. The term "Licensed Equipment" shall mean Licensed
Original Equipment and Licensed Post-Original Equipment and Services,
collectively.
1.4 Licensed Original Equipment. The term "Licensed Original Equipment"
shall mean original industrial cranes, hoists, winches, and other related types
of industrial "through-the-air" material handling equipment; provided, however,
that "Licensed Original Equipment" shall not include mining-related material
handling equipment or any other material handling equipment intended to be moved
from work-site to work-site on a regular basis.
1.5 Licensed Post-Original Equipment and Services. The term "Licensed
Post-Original Equipment and Services" shall mean aftermarket products
(including repair parts, spare
<PAGE>
parts and modernizations) and services (including inspection, repair and
maintenance) related to Licensed Original Equipment.
1.6 Licensed Trademarks. The term "Licensed Trademarks" shall mean the
trade names, trademarks and service marks "P&H" and "MAGNETORQUE," in any form
or design used in the MHE Business as of the Closing Date and any other form or
design, in each case consistent with the requirements of Section 5 of this
Agreement, whether or not registered, and all registrations and applications to
register in any country such trade name, trademark or service mark owned by
Licensor, including but not limited to those set forth on Exhibit 1 hereto.
1.7 Net Sales Price. The term "Net Sales Price" shall mean Licensee's or
its Affiliates' net selling price to any unaffiliated third party after the
deduction of normal trade and cash discounts, returns accepted for credit and,
if separately itemized, applicable sales taxes, customs, duties and freight
charges.
2 LICENSE
2.1 Grant.
2.1.1 Licensed Original Equipment. Subject to the terms and
conditions set forth in this Agreement, Licensor hereby grants to Licensee, and
Licensee hereby accepts, a sole and exclusive, worldwide license to use the
Licensed Trademarks on or in connection with the manufacture, distribution,
marketing, advertising, promotion and sale of Licensed Original Equipment.
2.1.2 Licensed Post-Original Equipment and Services. Subject to the
terms and conditions set forth in this Agreement, Licensor hereby grants to
Licensee, and Licensee hereby accepts, a sole and exclusive, worldwide license
to use the Licensed Trademarks on or in connection with the manufacture,
distribution, provision, marketing, advertising, promotion and sale of Licensed
Post-Original Equipment and Services.
2.2 Sublicenses. Licensee shall have the right to sublicense any of its
rights under this Agreement to any of its Affiliates and distributors according
to terms and conditions approved in writing by Licensor, which approval shall
not be unreasonably withheld. Excluding services from this limitation, any
sublicenses granted to Licensee's distributors shall be limited to use of the
Licensed Trademarks only in connection with Licensed Equipment manufactured by
and sold to such distributors by Licensee or its Affiliates at their respective
then-current normal prices. Licensee shall have no right to sublicense any of
its rights under this Agreement to any Person other than its Affiliates and
distributors, except with the prior written consent of Licensor and according to
terms and conditions approved in writing by Licensor. All sublicenses granted
under this Section 2.2 shall immediately terminate upon expiration or
termination of this Agreement for any reason whatsoever. To the extent that any
of Licensee's Affiliates or distributors are licensed, as of the Closing Date,
to use the Licensed Trademarks in connection with Licensed Equipment, Licensee
shall have the right to grant sublicenses to such Affiliates and distributors
under the same terms and conditions under which such Affiliates and distributors
are licensed as of the Closing
<PAGE>
Date, provided that: (i) such licenses are in writing or reduced to writing
within ninety (90) days following the Closing Date; (ii) Licensee uses its best
efforts to modify such sublicenses to the extent necessary to make them
consistent with this Agreement; and (iii) Licensee terminates any such
sublicenses that are inconsistent with this Agreement as soon as permitted by
the terms and conditions of such sublicenses.
2.3 Limitations. No rights or licenses, express or implied, other than
those granted in Sections 2.1 and 2.2 of this Agreement, are granted by this
Agreement. The rights granted in Sections 2.1 and 2.2 of this Agreement extend
only to the Licensed Equipment and the Licensed Trademarks. Except as licensed
hereunder, Licensee shall not use any term, phrase or design that is confusingly
similar to, or a colorable imitation or translation of the Licensed Trademarks,
or any portion of the Licensed Trademarks, in any manner whatsoever, other than
as used in the MHE Business on actual Licensed Equipment in existence as of the
Closing Date, but only with respect to such actual Licensed Equipment in
existence as of the Closing Date.
2.4 Reservation of Rights. Licensor expressly reserves the right to use
and license the Licensed Trademarks anywhere in the world for any purpose other
than on or in connection with the manufacture, distribution, provision,
marketing, advertising, promotion or sale of Licensed Equipment.
3 OWNERSHIP
3.1 Licensor's Ownership. Licensee acknowledges and agrees that Licensor
is the owner of all right, title and interest in and to the Licensed Trademarks
(in any form or embodiment), and in and to any applications for registrations
and registrations thereof, and is also the owner of the goodwill associated with
or which shall become associated with the Licensed Trademarks in connection with
the business and goods in relation of which the Licensed Trademarks has been, is
or shall be used. Licensee acknowledges and agrees that the Licensed Trademarks
is famous, well-known and internationally recognized. Licensee shall at any
time, whether during or after the term of this Agreement, execute any documents
reasonably required by Licensor to confirm Licensor's ownership rights. Licensor
represents for the benefit of Licensee that it has not granted any licenses to
any third parties with respect to the Licensed Trademarks with respect to the
Licensed Equipment. Licensee acknowledges and agrees that it has received copies
of all of the licenses and amendments thereto set forth on Exhibit 2 hereto and
that those licenses are consistent with the foregoing representation made by
Licensor.
3.2 Licensee's Use. Licensee acknowledges and agrees that all use of the
Licensed Trademarks by Licensee shall inure to the benefit of Licensor and
hereby assigns any and all right, title or interest in or to the Licensed
Trademarks and all the goodwill associated therewith that may accrue to the
benefit of, or be acquired by, Licensee as a result of its exercise of the
rights and licenses granted pursuant to this Agreement or otherwise. Sales by
Licensee of Licensed Equipment in connection with the Licensed Trademarks shall
be deemed to have been made by Licensor for purposes of trademark registrations
of the Licensed Trademarks and all uses of the Licensed Trademarks by Licensee
shall inure to the benefit of Licensor for such purposes.
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<PAGE>
3.3 Licensor Representation as to Ownership. Licensor represents that it
is the owner of the Licensed Trademarks and that, to the Knowledge of the
Specified Employees, there are no third party rights that are inconsistent with
the license being granted herein to Licensee.
3.4 Goodwill. Any reference to goodwill hereunder shall only mean the
consumer recognition or drawing power of a trade name, trademark or service
mark; provided that nothing in this Agreement shall entitle Licensor (or any of
its Affiliates) to any of Licensee's customer lists or to represent to customers
of Licensee that the business of Licensee is or was that of Licensor.
4 QUALITY CONTROL
4.1 Quality of Licensed Equipment. Licensee recognizes the importance of
uniformity of the goods and services in connection with the Licensed Trademarks
and maintenance of the high quality of workmanship, service and materials and of
consistency in the merchandising, promotion and sale of such goods and services.
Licensee represents, warrants and covenants that all Licensed Equipment
manufactured, distributed, provided, marketed, advertised, promoted or sold by
Licensee in connection with the Licensed Trademarks or bearing the Licensed
Trademarks shall strictly conform to quality standards that are substantially
equivalent to those standards used in the MHE Business as of the Closing Date.
Licensor shall have the right, at any time and for good cause, to modify or
supplement the quality standards to be maintained by Licensee in a manner
consistent with the then-existing standards by providing reasonable advance
written notice thereof to Licensee, provided that complying with such
modifications or supplementations will not impose undue hardship on Licensee.
4.2 Inspections. Licensor and its duly authorized representatives shall
have the right to inspect, upon reasonable written notice and during normal
business hours (unless requested by Licensee to be at other than normal business
hours), each of Licensee's premises one time during each of Licensee's fiscal
quarters during the term of this Agreement for the purpose of ensuring that
Licensee complies with Section 4.1 of this Agreement. Upon Licensor's request,
Licensee shall supply Licensor with all other information necessary to confirm
that Licensee is complying with Section 4.1 of this Agreement.
5 USE OF TRADEMARKS
5.1 Prior Approval Required. Licensee shall not, without Licensor's prior
written consent, which consent shall not be unreasonably withheld, use the
Licensed Trademarks, or any reproduction or variation thereof, in any manner
whatsoever (including advertising and promotion), except as used in the MHE
Business as of the Closing Date in a manner consistent with the requirements of
Section 5 of this Agreement. Licensee shall, at its own expense, submit to
Licensor for Licensor's prior written approval, examples of any proposed
modification or change to the uses of the Licensed Trademarks previously
approved by Licensor.
5.2 Standards. Licensee shall comply with Licensor's written requirements
and
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<PAGE>
guidelines for using the Licensed Trademarks, which requirements and guidelines
have been provided by Licensor to Licensee. Such requirements and guidelines
shall include examples of the styles, scripts, colors and devices prescribed by
Licensor. Licensor shall have the right, at any time and for good cause, to
modify or supplement such requirements and guidelines in a manner consistent
with the then-existing requirements or guidelines by providing reasonable
advance written notice thereof to Licensee, provided that complying with such
modifications or supplementations will not impose undue hardship on Licensee.
5.3 Proper Usage. Licensee shall use the Licensed Trademarks in accordance
with generally acceptable proper trademark usage standards. Licensee shall place
all proper trademark notices after the Licensed Trademarks. Licensee shall
strictly comply with all laws and regulations pertaining to the Licensed
Trademarks in force at any time worldwide. Licensee shall not use the Licensed
Trademarks in any manner to disparage Licensor or the reputation of Licensor nor
take any action that will harm or jeopardize the Licensed Trademarks, or
Licensor's ownership thereof, in any way. Licensee shall not use the Licensed
Trademarks as part of a trademark, service mark or corporate name of any
corporation or business organization, except with Licensor's prior written
consent, which consent may be withheld in Licensor's sole discretion. Licensee
shall not use the Licensed Trademarks in connection with any other trademark,
service mark or trade name, except in the manner as presently used in the MHE
Business or except with Licensor's prior written consent, which consent may be
withheld in Licensor's sole discretion.
5.4 Samples. At Licensor's reasonable request and at Licensee's expense,
Licensee shall provide Licensor with copies, photographs or representative
samples of advertising copy, promotional materials or other materials bearing
the Licensed Trademarks.
5.5 Registered User. To the extent required by the laws of any
jurisdiction in which Licensee uses the Licensed Trademarks, Licensee agrees to
execute registered user applications or agreements in a form specified by
Licensor for the purposes of registration of Licensee as a registered user of
the Licensed Trademarks. For this purpose, Licensor shall execute and deliver
any and all documents and instruments as may be required for the purposes of
registration of Licensee as a registered user of the Licensed Trademarks.
6 PROTECTION OF TRADEMARKS
6.1 Validity and Enforceability. Licensee shall not, during the term of
this Agreement or any time thereafter, contest or assist any other party in
contesting the validity or enforceability of or Licensor's ownership of all
right, title and interest in and to the Licensed Trademarks.
6.2 Notice of Infringement. Licensee shall promptly notify Licensor of any
apparent infringement or dilution of the Licensed Trademarks of which Licensee
is aware.
6.3 Enforcement. Licensor, at its sole cost and expense and in its own
name, may
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prosecute and defend any action or proceeding that Licensor deems necessary or
desirable to protect the Licensed Trademarks, including but not limited to
actions or proceedings involving infringement or dilution of the Licensed
Trademarks. Licensee, upon written request by Licensor, shall join Licensor in
any such action or proceeding at Licensor's sole cost and expense. Licensee
shall not commence any action or proceeding alleging infringement or dilution of
the Licensed Trademarks and shall not defend any such action unless it first
makes written demand upon Licensor to do so. Any and all damages recovered in
any action or proceeding commenced by Licensor based on the Licensed Trademarks
shall belong solely and exclusively to Licensor, except to the extent such
damages are based upon infringement of the Licensed Trademarks in connection
with the Licensed Equipment, in which case, Licensee shall be entitled to (a)
the amount of such damages that exceed the total cost to Licensor of bringing
such action or proceeding minus (b) a royalty equal to three-fourths of one
percent (3/4%) of such damages that relate to a period of time during which
royalties were due. With respect to any and all damages recovered in any action
or proceeding commenced by Licensee based on the Licensed Trademarks, Licensor
shall be entitled to (a) the amount of such damages that exceed the total cost
to Licensee of bringing such action or proceeding multiplied by (b) a royalty
rate equal to three-fourths of one percent (3/4%) with respect to such damages
that relate to a period of time during which royalties were due, and if
otherwise, zero.
6.4 Cooperation. Licensee shall cooperate with Licensor in the execution,
filing and prosecution of any trademark applications or renewal documents that
Licensor files for the Licensed Trademarks and, for that purpose, Licensee shall
supply to Licensor from time to time such samples, containers, labels and
similar material as may reasonably be required. Licensee shall reasonably
cooperate with Licensor to do all acts necessary or desirable for maintaining,
renewing, protecting, strengthening, and enforcing the Licensed Trademarks.
Licensor shall, at Licensee's reasonable request and sole expense, in Licensor's
name, apply for new registrations of and renew existing registrations of the
Licensed Trademarks in connection with Licensed Equipment. The foregoing
sentence shall not limit or restrict Licensor's ability to apply for new
registrations or renew existing registrations of the Licensed Trademarks in
connection with Licensed Equipment at its own option and expense.
7 ROYALTIES AND PAYMENT
7.1 Royalties. As compensation to Licensor for all rights granted to
Licensee hereunder, beginning twelve (12) months after the Effective Date and
continuing for a period of ten (10) years thereafter, Licensee shall pay
Licensor a royalty equal to three-fourths of one percent (3/4%) of the total Net
Sales Price of all Licensed Equipment (including newly developed or acquired
goods and services constituting Licensed Equipment) distributed, provided or
sold by Licensee and its Affiliates during such time period, regardless of
whether such Licensed Equipment bears the Licensed Trademarks (including but not
limited to Licensed Equipment distributed, provided or sold under trademarks
other than the Licensed Trademarks). In computing such Net Sales Price, no
deduction shall be made for uncollectible accounts or for any costs associated
with the manufacture, distribution, provision, marketing, advertising, promotion
or sale of Licensed Equipment. Such royalty shall be payable on all such
Licensed Equipment
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manufactured, distributed, provided, marketed, advertised, promoted or sold by
Licensee and its Affiliates even if such manufacture, distribution, provision,
marketing, advertising, promotion or sale is in violation of this Agreement. Any
payment of such royalty shall be without prejudice to Licensor's right to
terminate this Agreement on account of such violation. Only one royalty payment
shall be made as to any given item of Licensed Equipment, provided that such
royalty payment shall be based upon the highest Net Sales Price for such
Licensed Equipment.
7.2 Payment Terms. No more than ninety (90) days following the end of each
of Licensee's fiscal years during which royalty payments are due (the first such
payment to be due January 30, 2000), Licensee shall pay to Licensor all
royalties due and payable for such fiscal year (including partial fiscal years
on a pro rata basis) pursuant to Section 7.1 of this Agreement. All such
payments shall be made in U.S. dollars to the address set forth below or at such
other address or addresses as Licensor may designate in writing from time to
time:
Harnischfeger Technologies, Inc.
3513 Concord Pike, Suite 3001
Wilmington, DE 19803
Attn: Accounts Receivable
7.3 Royalty Deferral. In the event that the EBITDA of Licensee's parent,
MMH Holdings, Inc., a Delaware corporation, for a particular fiscal year, after
deducting the royalty owed for such year, would be less than forty-five million
nine hundred thousand dollars ($45,900,000), Licensee may defer payment of such
royalty for up to two (2) fiscal years from the end of the royalty period to
which such payment relates. Licensee may exercise the right in the preceding
sentence twice during the term of this Agreement; provided, each right shall be
limited exclusively to the royalty payment relating to the current period for
which such right is exercised. Within thirty days of the end of a deferral
period, Licensee shall pay Licensor the deferred royalties plus simple interest
at the rate of twelve (12%) per annum. Notwithstanding anything to the contrary,
no royalty payment shall be deferred for a period of greater than two (2) fiscal
years.
8 ACCOUNTING; BOOKS AND RECORDS
8.1 Accounting. Licensee shall provide to Licensor, within ninety (90)
days after the end of each of its fiscal years during which royalty payments are
due, complete and accurate statements, certified by the chief financial officer
of Licensee as accurate, showing all information necessary to calculate the
total Net Sales Price of all Licensed Equipment distributed, provided or sold by
Licensee and its Affiliates during such fiscal year. For this purpose, Licensee
shall use the form of statement provided by Licensor, or, if no such form is
provided by Licensor, such form or statement as may be reasonably acceptable to
Licensor.
8.2 Books and Records. Licensee shall keep, during each of its fiscal
years during which royalty payments are due and for a period of six (6) months
following the end of the last such fiscal year, accurate books of account and
records covering all transactions relating to this Agreement and all other
records and information necessary to calculate the total Net Sales Price
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of all Licensed Equipment distributed, provided or sold by Licensee and its
Affiliates during each of its fiscal years during which royalty payments are
due. Licensor and its duly authorized representatives, at Licensor's sole cost
and expense, upon reasonable notice, shall have the right, at least twice during
each of Licensee's fiscal years during which royalty payments are due and once
during the six (6) month period following the end of the last such fiscal year,
during normal business hours, to examine such books of account, records and
other information and all other accounts, records, information, materials and
inventory in the possession or under the control of Licensee with respect to the
subject matter of this Agreement. Licensor shall have full and free access
thereto and shall have the right to make copies and extracts therefrom.
8.3 Audit. Once during each of Licensee's fiscal years during which
royalty payments are due and once during the six (6) month period following the
end of the last such fiscal year, upon demand of Licensor with reasonable
notice, Licensee shall, at Licensor's expense, furnish to Licensor a detailed
statement by an independent certified public accountant selected by Licensor
showing all information necessary to calculate the total Net Sales Price of all
Licensed Equipment distributed, provided or sold by Licensee and its Affiliates
during each of Licensee's fiscal years during which royalty payments are due.
8.4 Errors. If as a result of an audit conducted pursuant to Section 8.3
of this Agreement Licensee is required to make additional payments to Licensor
in excess of ten percent (10%) of the total previously paid by Licensee during
Licensee's fiscal year that immediately precedes such audit, Licensee shall
reimburse Licensor for all expenses incurred in connection with such examination
or audit, and interest will accrue from the date such payment was originally due
at one percent (1%) per month or the highest lawful rate, whichever is lower.
9 TERM AND TERMINATION
9.1 Term.
9.1.1 Licensed Original Equipment. The term of the license granted
under Section 2.1.1 of this Agreement shall begin on the Closing Date and,
unless this Agreement is earlier terminated pursuant to Section 9.2 or Section
13.15 of this Agreement, continue until fifteen (15) years after the date of the
earlier to occur of the following: (i) the consummation of a public offering of
Licensee's or its direct or indirect parent's or successors' common stock
(excluding, for purposes hereof, transactions in connection with the Closing);
(ii) the sale of Licensee or its direct parent or successor to any unaffiliated
third party (whether by sale of a majority of stock, sale of a majority of
assets, merger, consolidation or otherwise); or (iii) a Change of Control (as
such term is defined in the Indenture dated March 30, 1998 relating to the
Licensee's 9 1/2% Senior Notes due 2008 (as in effect on the date hereof)).
9.1.2 Licensed Post-Original Equipment and Services. The term of the
license granted under Section 2.1.2 of this Agreement shall begin on the Closing
Date and, unless this Agreement is earlier terminated pursuant to Section 9.2 or
Section 13.15 of this Agreement, continue until twenty two (22) years after the
date of the earlier to occur of the following: (i) the
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consummation of a public offering of Licensee's or its direct or indirect
parent's or successors' common stock (excluding, for purposes hereof,
transactions in connection with the Closing); (ii) the sale of Licensee or its
direct parent to any unaffiliated third party (whether by sale of a majority of
stock, sale of a majority of assets, merger, consolidation or otherwise); or
(iii) a Change of Control (as such term is defined in the Indenture dated March
30, 1998 relating to the Licensee's 9 1/2% Senior Notes due 2008 (as in effect
on the date hereof)).
9.2 Termination for Default. Either party may terminate this Agreement by
written notice at any time following the occurrence of any one or more of the
following events: (i) the other party ceases to do business; (ii) the other
party makes an assignment for the benefit of creditors; or (iii) the other party
materially breaches this Agreement and does not cure such breach within ninety
(90) days after receiving written notice of such breach.
9.3 Effect of Termination. Upon expiration or termination of this
Agreement for any reason whatsoever, Licensee shall, and shall cause all of its
sublicensees to, discontinue immediately all use of the Licensed Trademarks and,
with respect to all materials bearing the Licensed Trademarks, either: (i)
destroy immediately such materials; or (ii) remove the Licensed Trademarks from
such materials or overlabel the Licensed Trademarks appearing on such materials.
Notwithstanding the foregoing, upon termination of this Agreement for any reason
other than Licensee's breach of its obligations set forth in Section 4 of this
Agreement or pursuant to Section 13.15 of this Agreement, Licensee shall have
the right, during the period of nine (9) months following such termination, to
dispose of its inventory of materials, equipment or parts bearing the Licensed
Trademarks existing as of the date of such termination, so long as Licensee
complies with all of the terms and conditions of this Agreement during such nine
(9) month period. Licensee shall also have the right to use the Licensed
Trademarks (in the manner prescribed by this Agreement) to the extent necessary
to comply with the terms and conditions of any definite purchase orders accepted
by Licensee and in existence as of the date of such termination. Licensee shall
have no obligation to retrieve or recall any equipment, parts or material
distributed prior to such expiration or termination. Nothing herein shall
prohibit Licensee or any of its sublicensees from making reference to the fact
that the parts it or they sell or distribute are for P&H equipment, or a
statement to that effect; provided that any such reference or statement does not
infringe Licensor's rights in and to the Licensed Trademarks. An officer of
Licensee shall certify in writing to Licensor that Licensee has complied with
the requirements of this Section 9.3. Licensee shall execute any and all
documents necessary to terminate of record any of Licensee's rights hereunder,
which documents shall be prepared by Licensor at Licensor's expense.
Notwithstanding Licensee's discontinuance of use of the Licensed Trademarks, for
as long as Licensee or its successors are doing business in connection with
Licensed Equipment, Licensor and its Affiliates shall never use, or license
third parties to use, the Licensed Trademarks (or any mark confusingly similar
thereto) in connection with Licensed Equipment after termination or expiration
of this Agreement. Except as set forth above, or as otherwise permitted by law,
upon expiration or termination of this Agreement, Licensee and its Affiliates
shall never use the Licensed Trademarks (or any mark confusingly similar
thereto) in connection with Licensed Equipment at any time after such expiration
or termination.
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10 DISCLAIMER OF WARRANTY
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, LICENSOR DISCLAIMS ALL
WARRANTIES, EXPRESS OR IMPLIED, WITH REGARD TO THE LICENSED
TRADEMARKS AND THIS AGREEMENT.
11 INDEMNIFICATION AND INSURANCE
11.1 Indemnification by Licensee. Licensee shall indemnify, defend,
protect and forever hold harmless Licensor and each of its Affiliates, and the
shareholders, officers, directors, representatives, partners, members,
employees, agents, successors and assigns of Licensor and each of its Affiliates
from and against all actual damages, losses, liabilities (including, but not
limited to, judgments and settlements entered into in good faith), taxes,
penalties, fines, claims, suits, injunctions, proceedings, liens, demands,
charges, costs and expenses paid or payable to third parties of any kind or
nature (including attorneys' fees and expenses of counsel selected by Licensor)
incurred by Licensor ("Indemnifiable Damages") for which they or any of them
become liable or may incur or be compelled to pay in any action or claim against
them or any of them, for or by reason of any breach of warranty, covenant or
agreement by Licensee contained herein or any acts, whether of omission or
commission, that may be committed or suffered by Licensee or any of its agents,
servants, officers, directors and employees in connection with Licensee's
performance or enjoyment of this Agreement, including without limitation: (i)
the manufacturing, distribution, provision, marketing, advertising, promotion,
sale or use of any Licensed Equipment bearing the Licensed Trademarks or with
which the Licensed Trademarks is associated; or (ii) any use by Licensee of the
Licensed Trademarks, except as set forth in Section 11.2 of this Agreement. The
limitations set forth in Section 12 of this Agreement shall not apply to this
Section 11.1.
11.2 Indemnification by Licensor. Licensor shall indemnify and hold
harmless Licensee, its officers, directors, employees and Affiliates from any
and all liability arising out of any third party suit, action, legal proceeding,
claim or demand, of whatever kind or character, including claims of trademark or
service mark infringement or unfair competition, that the use by Licensee of the
Licensed Trademarks, as authorized and approved by Licensor pursuant to this
Agreement, violates the rights of such third party. Licensor's obligations under
this Section 11.2 shall apply only to those acts that occur during the period
during which royalties are due, and only if: (i) Licensee promptly notifies
Licensor of any claim giving rise to such liability and fully discloses to
Licensor all information relating to such claim; (ii) Licensee provides
reasonable cooperation to Licensor in the defense of all such claims, which
defense costs and expenses, and to the extent that Licensee incurs any legal
expenses that have been approved in writing by Licensor for providing assistance
in the defense of any such claims, shall be Licensor's responsibility; (iii)
Licensee neither acts nor fails to act in such manner as may jeopardize or
compromise such defense or hinder Licensor in providing such defense; and (iv)
the claim is by either (a) a third party licensed by Licensor to use the
Licensed Trademarks other than under any of the licenses set forth on Schedule
4(l)(i) of the Recapitalization Agreement or Exhibit 2 hereto, or (b) any other
third party whose rights the Specified Employees had Knowledge of as of the
Effective Date. The limitations set forth in Section 12 of this Agreement shall
not apply to this
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Section 11.2.
11.3 Insurance. In furtherance of Licensee's covenants contained in
Section 11.1 of this Agreement, Licensee shall maintain in full force and effect
during the term of this Agreement and for a period of five (5) years thereafter
policies of insurance against product liability and other liabilities with
financially sound and reputable insurance companies in at least such amounts,
against at least such risks and with such levels of self-retention as are
usually insured against in the same general area by companies engaged in the
same or similar business and, upon request by Licensor, to provide Licensor with
evidence of such policies.
12 LIMITATION OF LIABILITY
EXCEPT TO THE MINIMUM EXTENT REQUIRED BY APPLICABLE LAW, LICENSOR SHALL NOT BE
LIABLE TO LICENSEE OR ANY THIRD PARTY FOR ANY DIRECT DAMAGES OR FOR ANY SPECIAL,
CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES (INCLUDING BUT NOT LIMITED TO
LOST OR ANTICIPATED REVENUES OR PROFITS) ARISING FROM ANY CLAIM ARISING UNDER OR
RELATING TO THIS AGREEMENT OR THE LICENSED TRADEMARKS, WHETHER SUCH CLAIM IS
BASED ON WARRANTY, CONTRACT, TORT (INCLUDING BUT NOT LIMITED TO NEGLIGENCE AND
STRICT LIABILITY) OR OTHERWISE, EVEN IF AN AUTHORIZED REPRESENTATIVE OF THE
PARTY IS ADVISED OF THE POSSIBILITY OR LIKELIHOOD OF SAME. LICENSEE ACKNOWLEDGES
AND AGREES THAT THE FOREGOING LIMITATION SHALL NOT BE DEEMED OR ALLEGED BY
LICENSEE TO HAVE FAILED OF ITS ESSENTIAL PURPOSE.
13 MISCELLANEOUS
13.1 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by a
duly authorized representative of the party against whom it is being enforced.
No waiver by any party of any default, misrepre sentation, or breach of warranty
or covenant hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
13.2 Approvals. Licensee understands that this License may not constitute
all the consents or licenses required in order to manufacture, distribute,
provide, market, advertise, promote or sell the Licensed Equipment.
13.3 Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law
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shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation.
13.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
13.5 Dispute Resolution. In the event of a dispute between the parties
arising under or relating to this Agreement, such dispute shall promptly be
resolved in accordance with the provisions for dispute resolution set forth in
the Recapitalization Agreement.
13.6 Entire Agreement. This Agreement together with the Recapitalization
Agreement (including the documents incorporated herein) constitutes the entire
agreement between the parties and supersedes any prior understandings,
agreements or representations by or between the parties, written or oral, that
may have related in any way to the subject matter hereof.
13.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of New York without giving effect
to any choice or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of New York.
13.8 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.9 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
13.10 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
13.11 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Licensor: Copy to:
--------------- --------
Harnischfeger Technologies, Inc. Kirkland & Ellis
3513 Concord Pike, Suite 3001 200 East Randolph Drive
Wilmington, DE 19803 Chicago, IL 60601
Attn: President Attn: Keith S. Crow
Telephone No.: (302) 477-0644 Telephone No.:(312) 861-2000
Facsimile No.: (302) 477-0578 Facsimile No.:(312) 861-2200
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If to Licensee: Copy to:
--------------- --------
Morris Material Handling, Inc. Akin, Gump, Strauss, Hauer & Feld,
315 West Forest Hill Avenue L.L.P. Suite 400
Oak Creek, WI 53154 1333 New Hampshire Avenue, N.W.
Attn: General Counsel Washington, D.C. 20036
Telephone No.:(414) 764-8593 Attn: Russell W. Parks, Jr.
Facsimile No.:(414) 764-8594 Telephone No.:(202) 887-4000
Facsimile No.:(202) 887-4288
Any party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other party
notice in the manner herein set forth.
13.12 Relationship of the Parties. This Agreement does not constitute
Licensee as the agent or legal representative of Licensor or Licensor as the
agent or legal representative of Licensee for any purpose whatsoever. Licensee
is not granted any right or authority to assume or to create any obligation or
responsibility, express or implied, on behalf of or in the name of Licensor or
to bind Licensor in any manner or thing whatsoever; nor is Licensor granted any
right or authority to assume or create any obligation or responsibility, express
or implied, on behalf of or in the name of Licensee or to bind Licensee in any
manner or thing whatsoever. No joint venture or partnership between Licensee and
Licensor is intended or shall be inferred.
13.13 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective under applicable law, but
if any provision of this Agreement is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
13.14 Submission to Jurisdiction. Each of the parties consents to the
exclusive jurisdiction of the federal courts of the Eastern District of
Wisconsin for any legal action, suit, or proceeding arising out of or in
connection with this Agreement, and agree that any such action, suit, or
proceeding may be brought only in such courts. If such forum is not available,
each of the parties consents to the exclusive jurisdiction of the Milwaukee
County Circuit Court for any such action, suit or proceeding. Each of the
parties further waives any objection to the laying of venue for any such suit,
action, or proceeding in such courts. Each party agrees to accept and
acknowledge service of any and all process that may be served in any suit,
action, or proceeding. Each party agrees that any service of process upon it
mailed by registered or certified mail, return receipt requested to such party
at the address provided in Section 13.11 of this Agreement shall be deemed in
every respect effective service of process upon such party in any such suit,
action,
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or proceeding. Each party agrees to waive any right it might have to a trial by
jury in any such suit, action or proceeding.
13.15 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties named herein, their respective Affiliates
and their permitted successors and assigns. Licensee (and any permitted
successor or assign) may assign or transfer its rights hereunder only as part of
a merger or consolidation with, or the sale, exchange or other transfer of all
or substantially all of its assets to, any Person other than a Licensor
Competitor (as defined below). Any attempted assignment made in violation of
this Agreement shall be null and void. As used in this Agreement, the term
"Licensor Competitor" shall mean any Person that engages in a business or
enterprise that competes on a significant level with (i) any business or
enterprise conducted by HII or its Subsidiaries immediately after the Closing
Date or (ii) any other business or enterprise conducted by HII or its
Subsidiaries in the future (other than as a result of the acquisition of HII by
a third party) that accounts for at least twenty percent (20%) of HII's gross
revenue on a consolidated basis. If a Licensor Competitor (x) acquires more than
fifty percent (50%) of Licensee's or its direct or indirect parent's voting
stock (or more than fifty percent (50%) of the voting stock of a permitted
successor or assign) or (y) acquires, directly or indirectly, the power to
direct or cause the direction of Licensee's (or a permitted successor's or
assign's) management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise), Licensee
shall immediately notify Licensor in writing of such acquisition or this
Agreement shall automatically terminate and be of no further force and effect.
Licensor shall have the right to terminate this Agreement, at its sole
discretion, within thirty (30) days after receiving such notice.
13.16 Survival. To the extent the terms of this Agreement provide for
rights, interests, duties, claims, undertakings or obligations subsequent to the
termination or expiration of this Agreement, the terms of this Agreement shall
survive such termination or expiration, including but not limited to the terms
contained in Articles 8, 9, 10, 11 and 12 of this Agreement.
13.17 Confidentiality and Use Restriction. Any confidential information,
drawings, specifications and technical data furnished to Licensor under this
Agreement (including non-public information learned by Licensor as a result of
Licensor's inspection right under this Agreement) shall remain the property of
Licensee, shall be used by Licensor only for the purpose of exercising its
rights under this Agreement, and shall be retained in confidence by Licensor.
Licensor shall use the same degree of care as it uses to protect its own
confidential information of a similar nature, but no less than a reasonable
degree of care, to prevent the unauthorized use, dissemination or publication of
such confidential information, drawings, specifications and technical data. No
such confidential information, drawings, specifications or technical data shall
be copied or, except as set forth above, otherwise used without the prior
written consent of Licensee.
* * * * *
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
MORRIS MATERIAL HARNISCHFEGER TECHNOLOGIES, INC.
HANDLING, INC.
By: /s/ David D. Smith By: /s/ John P. Garniewski, Jr.
---------------------------- ---------------------------
Name: David D. Smith Name: John P. Garniewski, Jr.
--------------------------- --------------------------
Title: Vice President Title: President
-------------------------- -------------------------
MANAGEMENT CONSULTING AGREEMENT
THIS MANAGEMENT CONSULTING AGREEMENT (the "Agreement"), dated as of March
30, 1998, by and between Morris Material Handling, Inc., a Delaware corporation
(the "Company"), and Chartwell Investments Inc., a Delaware corporation (the
"Consultant").
WHEREAS, the Company desires to avail itself of the expertise possessed by
the Consultant and consequently has requested that the Consultant provide it,
from time to time, with certain management consultant and advisory services
related to the business, strategy, administration and affairs of the Company and
the review and analysis of certain financial and other transactions; and
WHEREAS, the Consultant and the Company agree that it is in their
respective interests to enter into a management consulting agreement whereby,
for the consideration specified herein, the Consultant shall provide such
services as an independent consultant to the Company.
NOW THEREFORE, in consideration of the mutual premises and covenants
contained herein, the Company and the Consultant agree as follows:
1. Retention of Consultant. The Company hereby retains the Consultant, and
the Consultant hereby accepts such retention, upon the terms and conditions set
forth in this Agreement.
2. Effective Date/Term. This Agreement shall commence as of the Closing
Date (as such term is defined in the Recapitalization Agreement (the
"Recapitalization Agreement") dated as of January 28, 1998, as amended, by and
among Harnischfeger Corporation, a Delaware corporation, the Sellers named
therein and MHE Investments, Inc., a Delaware corporation) and shall continue
through the period ending on the tenth anniversary of such date, subject to
renewal pursuant to paragraph 5 below (such period, including any renewal
hereinafter referred to as the "Term").
3. Management Consulting Services.
(a) The Consultant shall advise the Company concerning such
management matters relating to the Company's personnel, business and acquisition
strategy, administration and proposed financial transactions, and other senior
management matters relating to the Company as the Company shall reasonably and
specifically request. The Consultant shall not be required to devote any
specified amount of time to any such request, and
<PAGE>
shall be required to devote only so much time to any such request as the
Consultant shall, in its reasonable discretion, deem necessary to complete such
services. Such consulting services shall, in the Consultant's reasonable
discretion, be rendered in person or by telephone or other communication. The
Consultant shall (i) use its reasonable efforts to deal effectively with all
subjects submitted to it hereunder and (ii) endeavor to further, by performance
of its services hereunder, the policies and objectives of the Company.
(b) The Consultant shall perform all such services as an independent
contractor to the Company. The Consultant is not an agent or representative of
the Company and has no authority to act for or to bind the Company without its
prior written consent.
(c) This Agreement shall in no way prohibit the Consultant from
engaging in other activities, whether or not competitive with any business of
the Company. The parties hereto agree that, in the event additional services not
contemplated hereby are requested of the Consultant, the parties hereto shall
negotiate the scope of, and appropriate compensation for, such additional
services.
4. Compensation.
(a) As compensation for the services provided by the Consultant
hereunder, the Company shall pay to the Consultant, as provided herein, an
annual fee (the "Management Fee") of $1,000,000 for each fiscal year of the
Company during the Term hereof. The Management Fee shall be payable
semi-annually, in advance on the first day of the first and third quarters of
each fiscal year of the Company during the Term (except that the first payment
will be made on the date hereof), or, if such date is not a business day, on the
next succeeding business day.
(b) In addition to the payment of the Management Fee, the Company
shall reimburse the Consultant for all out-of-pocket costs and expenses
reasonably incurred by the Consultant in connection with the provision of
services hereunder, including legal, accounting, temporary and overtime
secretarial, travel and entertainment fees and expenses, promptly upon receipt
of a statement of such expense from the Consultant.
(c) If the Agreement is terminated at the Company's option upon 30
days prior notice to the Consultant (the "Company's Termination Option"), the
Consultant shall, within five business days of termination, receive a payment
equal to the amount of compensation the Consultant would have received
thereunder, absent the exercise of the Company's Termination Option, if the
Agreement had not been terminated until the date on which the Agreement would
next have expired if not renewed.
5. Renewal. This Agreement shall automatically be renewed by the Board of
Directors of the Company (the "Board") for
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<PAGE>
additional 1-year periods unless the Board determines not to renew the Agreement
and gives written notice to the Consultant of non-renewal at least 60 business
days prior to the date in which the Agreement would otherwise have been renewed.
6. Indemnification. The Company agrees to indemnify and hold the
Consultant, its officers, employees and agents (each an "Indemnified Party")
harmless against any liability, claim, loss or expenses (the "Damages") to which
an Indemnified Party may become subject as a result of the performance of the
Consultant's services hereunder, such claims, losses or expenses shall be paid
when and as incurred; provided that the Company shall not be liable to an
Indemnified Party for Damages resulting primarily and directly from the
Indemnified Party's bad faith, gross negligence or willful misconduct, and
Consultant shall so indemnify the Company, its officers, employees and agents
for Damages arising from its bad faith, gross negligence or willful misconduct.
7. Notices. Any notice, request, demand or other communications required
or permitted to be given under this Agreement shall be in writing and shall be
effective and deemed to have been duly given when delivered personally or on the
earlier to occur of (a) the date of delivery as shown by the return receipt; (b)
two (2) days after the mailing thereof by registered or certified mail, return
receipt requested, with first class postage prepaid; (c) confirmation of receipt
of telecopy; or (d) the day after shipment by a nationally recognized overnight
delivery service. All notices shall be addressed to the person at the addresses
set forth on the signature page hereto. Any party hereto may at any time and
from time to time change its address for purpose of receiving notices by giving
notice thereof to the other party as provided in this Section 7. Any notice
which is required to be made within a stated period of time shall be deemed
timely if made before midnight of the last day of such period.
8. Binding Agreement; Benefit. This Agreement shall bind and inure to the
benefit of any heirs or legal representatives of the Consultant and the Company.
9. Governing Law. This Agreement shall be subject to and governed by the
laws of the State of Delaware regardless of applicable conflict of laws rules or
principles or the fact that either or both of the parties now is or may become a
resident of a different state or country.
10. Headings. Section headings are used for convenience only and shall in
no way affect the construction of this Agreement.
11. Entire Agreement; Additional Agreements; Amendments. This Agreement
contains the entire understanding of the parties with respect to its subject
matter; provided, however, that
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<PAGE>
nothing contained herein shall be construed to prevent the Company from
contracting with the Consultant for additional services pursuant to other,
separately documented agreements. Neither this Agreement nor any part hereof may
in any way be altered, amended, extended, waived, discharged or terminated
except by a written agreement signed by each of the parties.
12. Successors and Assigns. The benefits of this Agreement shall inure to
the respective successors and assigns of the parties hereto and of the
Indemnified Parties hereunder and their successors and assigns and
representatives, and the obligations and liabilities assumed hereunder by the
parties hereto shall be binding upon their respective successors and assigns.
Consultant may not assign its rights and obligations hereunder except to an
entity controlled by or under common control with Consultant.
13. Counterparts. This Agreement may be executed in any number of
counterparts and by each of the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
together shall constitute one and the same agreement.
14. Confidentiality. The Consultant shall maintain the confidentiality of
all proprietary information received by it in the course of its engagement
hereunder relating to the Company, and shall not use the same for any purpose
other than as contemplated herein.
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Consulting
Agreement as of the date first above written.
MORRIS MATERIAL HANDLING, INC.
By: /s/ Michael S. Erwin
------------------------------
Name: Michael S. Erwin
-----------------------------
Title: President
----------------------------
Address: 315 W. Forest Hill Avenue
--------------------------
Oak Creek, WI 53157
--------------------------
CHARTWELL INVESTMENTS INC.
By: Todd R. Berman
---------------------------------
Name: Todd R. Berman
--------------------------------
Title: President
-------------------------------
Address: 717 Fifth Avenue, 23rd Floor
-----------------------------
New York, NY 10022
-----------------------------
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CHARTWELL INVESTMENTS INC.
717 Fifth Avenue
23rd Floor
New York, New York 10022
March 30, 1998
Morris Material Handling, Inc.
315 West Forest Hill Avenue
Oak Creek, Wisconsin 53154
Attention: President
Dear Sirs:
This letter is to confirm our agreement that in connection with the
transactions (the "Transactions") contemplated in the Recapitalization Agreement
dated as of January 28, 1998, as amended, by and among Harnischfeger
Corporation, a Delaware corporation, the Sellers named therein and MHE
Investments, Inc., a Delaware corporation, you have agreed to reimburse us at
the closing of the Transactions (the "Closing") for the reasonable out-of-pocket
costs and expenses which we have incurred in connection with the Transactions.
You have also agreed to pay us a fee for advisory services we have rendered to
you in connection with the financing of the Transactions (the "Financing") at
the Closing equal to: one percent (1%) of total capitalization of Morris
Material Handling, Inc. and MMH Holdings, Inc. (collectively hereinafter
referred to as "Morris") including, without limitation but without duplication,
all debt and facilities, and preferred and common equity interests (the
"Advisory Fee").
These services are attributable to acting as exclusive financial advisor
with respect to the Transactions and the Financing and negotiating and assisting
with the documentation related to the Financing (collectively, the "Advisory
Services").
Each of the parties hereto acknowledges that the Advisory Services for
which the Advisory Fee is to be paid hereunder have been heretofore rendered by
Chartwell Investments Inc. at your request in connection with the Financing as
described above.
Morris agrees to indemnify and hold Chartwell Investments Inc., its
officers, employees and agents (each an "Indemnified Party") harmless against
any liability, claim, loss or expenses, as and when incurred ("Damages"), to
which an Indemnified Party may become subject as a result of the performance of
the services described herein; provided, however, that Morris shall not be
<PAGE>
liable to an Indemnified Party for Damages resulting primarily and directly from
the Indemnified Party's bad faith, gross negligence or willful misconduct, and
Chartwell Investments Inc. shall so indemnify Morris for damages arising from
its bad faith, gross negligence or willful misconduct.
The benefits of this Agreement shall inure to the respective successors
and assigns of the parties hereto and of the indemnified parties hereunder and
their successors and assigns and representatives, and the obligations and
liabilities assumed hereunder by the parties hereto shall be binding upon their
respective successors and assigns.
This Agreement shall not be assignable by the parties hereto without
mutual written consent.
This Agreement shall be subject to and governed by the laws of the State
of Delaware without regard to its conflict of laws principles and rules.
If the foregoing comports with your understanding of our agreement, please
sign below, whereupon this letter shall be a valid and binding agreement.
Very truly yours,
CHARTWELL INVESTMENTS INC.
By: /s/ Todd R. Berman
--------------------------
Name: Todd R. Berman
-------------------------
Title: President
------------------------
ACCEPTED AND AGREED AS OF THIS
30th DAY OF MARCH, 1998
MORRIS MATERIAL HANDLING, INC.
By: /s/ Michael S. Erwin
--------------------------
Name: Michael S. Erwin
-------------------------
Title: President
------------------------
MMH HOLDINGS, INC.
By: /s/ Michael S. Erwin
--------------------------
Name: Michael S. Erwin
-------------------------
Title: President
------------------------
[Execution Copy]
SEPARATION AGREEMENT
by and between
HARNISCHFEGER CORPORATION
and
MATERIAL HANDLING, LLC
October 26, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions............................................................1
2. Exchange of Consideration..............................................6
2.1 Consideration by HarnCo..........................................6
2.2 Consideration by MHE LLC.........................................6
3. Transferred Assets, Leased Personal Property, Retained Assets and
Shared Facilities......................................................6
3.1 Transferred Assets...............................................6
3.2 Leased Personal Property.........................................8
3.3 Retained Assets..................................................8
3.4 Consents and Approvals...........................................9
3.5 Deferred Real Estate Conveyance.................................10
3.6 Shared Facilities...............................................10
4. Assumption of Liabilities.............................................10
4.1 Assumed Liabilities.............................................10
4.2 Absolute Assumption.............................................12
4.3 Retained Liabilities............................................12
4.4 Payments Due to Withheld Consents...............................12
5. No Representations and Warranties.....................................12
6. Authorizations........................................................13
7. Employees and Employment..............................................13
7.1 Employment......................................................13
7.2 Collective Bargaining Agreements and Employment Contracts.......13
8. Use of HarnCo's Trademarks............................................14
9. Other Effective Date and Post-Effective Date Covenants................14
9.1 Intercompany Cash Management....................................14
9.2 Letters of Credit...............................................14
10. Indemnification Matters...............................................14
10.1 Indemnification.................................................14
10.2 Notice of Circumstance..........................................16
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<PAGE>
10.3 Scope of Indemnification........................................17
10.4 Indemnity for Certain Environmental Liabilities.................17
11. Limitation on Consequential Damages...................................17
12. Further Assurances....................................................17
13. Transfer Tax Matters..................................................17
13.1 Transaction Taxes...............................................17
13.2 Property Taxes..................................................17
13.3 Unemployment Tax Experience.....................................18
13.4 Preparation of W-2's, Etc.......................................18
14. Post-Effective Date Tax Matters.......................................18
14.1 Filing of Tax Returns...........................................18
14.2 Payment of Taxes................................................18
14.3 Cooperation and Records Retention...............................19
14.4 Liability for Assessments or Refunds............................19
15. Bulk Sales or Transfer Laws...........................................20
16. Miscellaneous.........................................................20
16.1 Entire Agreement................................................20
16.2 Waivers.........................................................20
16.3 Succession and Assignment.......................................20
16.4 Headings........................................................20
16.5 Notices. .......................................................20
16.6 Counterparts....................................................21
16.7 Expenses........................................................21
16.8 Severability....................................................21
16.9 Governing Law...................................................21
16.10 Submission to Jurisdiction......................................21
16.11 Construction....................................................22
16.12 Incorporation of Exhibits and Schedules.........................22
16.13 No Third Party Beneficiaries....................................22
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<PAGE>
LIST OF SCHEDULES
AND EXHIBITS
Schedule 1.24 Leased Personal Property
Schedule 1.37 Other MHE Subsidiaries
Schedule 3.1.4 Excluded Tooling
Schedule 3.1.11.1 Owned Real Estate
Schedule 3.1.11.2 Leased Real Estate
Schedule 3.6 Shared Facilities
Schedule 4.1.6.2 Stock and Asset Purchase Agreements
Schedule 4.1.8 Assumed Litigation
EXHIBIT A MHE License Agreement
EXHIBIT B P&H License Agreement
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<PAGE>
SEPARATION AGREEMENT
This SEPARATION AGREEMENT (the "Agreement"), dated as of October 26, 1997,
is between Harnischfeger Corporation, a Delaware corporation ("HarnCo"), and
Material Handling, LLC, a Delaware limited liability company ("MHE LLC").
RECITALS
WHEREAS, HarnCo desires to convey, assign and lease certain assets of the
MHE Division to MHE LLC in exchange for MHE LLC's assumption of the Assumed
Liabilities and MHE LLC's issuance to HarnCo of the MHE LLC Interests; and
WHEREAS, MHE LLC desires to accept the conveyance, assignment and lease
from HarnCo of such assets, to assume the Assumed Liabilities, and to issue the
MHE LLC Interests to HarnCo.
THEREFORE, the parties hereby agree as follows:
1. Definitions. The following terms shall, for the purposes of this Agreement,
have the following meanings:
1.1 "Active Employees" means all employees of the MHE Division who are
either actively employed or are on layoff, leave of absence or short-term
disability on the Effective Date.
1.2 "Agreement" has the meaning set forth in the preface above.
1.3 "Action" means any actual or threatened action, suit, arbitration,
inquiry, proceeding, or investigation by or before any court, agency, tribunal,
arbitrator, mediator, or Governmental Body.
1.4 "Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned Person.
1.5 "Assets" means the Transferred Assets and Leased Personal Property.
1.6 "Assumed Liabilities" shall have the meaning specified in Section 4.1.
1.7 "Business" means (i) the original equipment business for industrial
cranes, hoists, winches, and other related types of industrial "through-the-air"
material handling equipment, and (ii) aftermarket products and services for the
products described in clause (i), including inspection, repair, and maintenance,
in each case as performed immediately prior to the Effective Date by HarnCo and
the Other MHE Subsidiaries.
<PAGE>
1.8 "Cash" means cash and cash equivalents (including marketable
securities and short term investments).
1.9 "Code" means the Internal Revenue Code of 1986, as amended.
1.10 "Contracts" means (i) contracts, agreements, undertakings,
commitments, licenses, permits, authorizations, instruments, representations and
warranties, certificates, instruments granting a Security Interest, guaranties,
arrangements, license and technology agreements (including software licenses),
asset and stock purchase and sale agreements, releases, settlements,
indemnities, leases and confidentiality or nondisclosure agreements, in each
case which were undertaken for or made on behalf of or for the MHE Division by
HarnCo; (ii) the right to receive payment for Products sold or services rendered
pursuant to, and to receive goods and services pursuant to, such contracts; and
(iii) the rights under any of the foregoing, including the right to assert
claims and take other rightful actions in respect of breaches, defaults and
other violations of such contracts.
1.11 "Effective Date" shall mean October 26, 1997.
1.12 "Effective Time" shall mean 12:01 a.m. on the Effective Date.
1.13 "Employee Benefit Plan" means the employee welfare benefit plans as
defined in Section 3(1) of ERISA, and the employee pension benefit plans as
defined in Section 3(2) of ERISA currently or previously maintained by any
HarnCo Company for the benefit of employees of the MHE Division.
1.14 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.15 "Environmental and Safety Requirements" means all federal, state,
local and foreign statutes, regulations, ordinances and similar provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, as such of the foregoing are enacted or in effect prior to, on, or
after the Effective Date.
1.16 "Environmental Liability" means any Liability or investigatory,
remedial or corrective obligation whatsoever arising under any Environmental and
Safety Requirements, including without limitation any liability pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), as amended, or otherwise relating to handling, treatment, storage,
onsite or offsite disposal, release or threatened release of hazardous
materials, substances or wastes, personal injury, property damage or natural
resources damage.
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<PAGE>
1.17 "Governmental Body" means any country, any national body, any state,
province, municipality, subdivision of any of the foregoing, any agency,
governmental department, court, entity, commission, board, ministry, bureau,
locality or authority of any of the foregoing, or any quasi-governmental or
private body exercising any regulatory, taxing, importing, exporting, or other
governmental or quasi-governmental function.
1.18 "HarnCo" has the meaning set forth in the preface above.
1.19 "HarnCo Companies" means (i) HarnCo, (ii) HarnCo's Affiliates (but
excluding MHE LLC and the Other MHE Subsidiaries) and (iii) any direct or
indirect Predecessors of the Persons covered by clauses (i) and (ii).
1.20 "HarnCo Indemnified Parties" means the HarnCo Companies and their
respective officers, directors, employees, agents, representatives,
shareholders, successors and assigns.
1.21 "HCHC" means HCHC, Inc., a Delaware corporation and wholly-owned
subsidiary of HarnCo.
1.22 "Income Taxes" means all U.S. federal, state and local taxes on,
based on, measured by or with respect to income, net worth or capital (including
interest and penalties thereon).
1.23 "Intellectual Property" means all (i) patents and pending patent
applications; (ii) trademark, service mark and trade name registrations and
applications therefor; (iii) copyright registrations and applications therefor;
and (iv) licenses (other than licenses for the use of commercially available
computer software and related documentation) and similar agreements for the use
of any intellectual property (including patents, unpatented inventions and
technology, trademarks, service marks and trade names, copyrights and
copyrightable works, know-how and trade secrets).
1.24 "Leased Personal Property" means all leased machines, equipment,
software and other items of personal property, including those listed in
Schedule 1.24.
1.25 "Liability" means any commitment, contract, agreement, obligation,
liability, debt, Tax, payment, expense, cost, fee, loss, damage, demand, claim,
breach, default, Action, fine, penalty, judgment, settlement, release,
indemnity, warranty, representation or misrepresentation, certification, injury,
death, accident, tort, or product liability, whether resulting from, arising out
of or relating to facts, actions, events or conditions that occurred or existed
in whole or in part before, on or after the Effective Date, whether accrued or
unaccrued, whether absolute, contingent or otherwise, whether liquidated or
unliquidated, whether due, to become due, or otherwise, whether known or
unknown, whether written, oral or otherwise, whether direct, indirect, special,
incidental, consequential, punitive or otherwise, and whether asserted or
unasserted, including those arising under any law (including any statute, the
common law or any rule, order, instruction, directive, regulation, by-law,
ordinance, or requirement of any
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<PAGE>
Governmental Body or imposed by any court or any arbitrator in a binding
arbitration), and without regard to (i) whether based on theories of negligence,
breach of warranty, strict liability, breach of contract, violation of any
consumer protection legislation passed by any Governmental Body, absolute
liability or arising as an obligation of contribution, or the violation of any
other applicable legal duty or standard, (ii) the cause thereof or the
negligence of any Person, whether such negligence be sole, joint or concurrent,
active or passive, or (iii) whether arising before, on or after the Effective
Date. Unless otherwise qualified, all references to Liabilities herein shall
include Environmental Liabilities.
1.26 "MHE Benefits" shall have the meaning set forth in Section 7.1.
1.27 "MHE Division" means the P&H Material Handling Division of HarnCo,
through which HarnCo (along with the Other MHE Subsidiaries) conducted the
Business prior to the Effective Date; provided, the MHE Division shall not be
construed to include any of the Other MHE Subsidiaries.
1.28 "MHE LLC" has the meaning set forth in the preface above.
1.29 "MHE License Agreement" means the Patent, Invention, Know-How and
Trademark License Agreement between MHE LLC and MHE Technologies, Inc., attached
hereto as Exhibit A.
1.30 "MHE LLC Interests" means the limited liability company membership
interests of MHE LLC.
1.31 "Mining Division" means the P&H Mining Division of HarnCo.
1.32 "National Avenue Facility" means the HarnCo facility located at 4400
W. National Avenue, Milwaukee, WI 53214-3684.
1.33 "Oak Creek Facility" means the HarnCo facility located at 315 W.
Forest Hill Avenue, Oak Creek, Wisconsin 53154-2199.
1.34 "Orchard Street Facility" means that HarnCo Facility located at 4107
W. Orchard Street, Milwaukee, WI 53215-1707.
1.35 "Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
1.36 "Other Agreements" means (i) the MHE License Agreement and (ii) the
P&H License Agreement.
1.37 "Other MHE Subsidiaries" means those Subsidiaries and Affiliates of
HarnCo which are listed on Schedule 1.37, each of which is principally engaged
in the Business.
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<PAGE>
1.38 "P&H License Agreement" means the Corporate Name and Trademark
License Agreement between MHE LLC and Harnischfeger Technologies, Inc., attached
hereto as Exhibit B.
1.39 "Parties" means HarnCo and MHE LLC, each of which is individually
referred to as a "Party."
1.40 "Permit" means governmental licenses, permits, approvals,
authorizations, license applications, and license amendment applications and all
governmental or third party product registrations or approvals.
1.41 "Person" means an individual, a partnership, a limited liability
company, a corporation, a division of a corporation (if applicable), an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
1.42 "Predecessor" means a Person who has previously held an interest in
another Person, including a Person who conveyed, transferred or assigned all or
substantially all of its assets to the succeeding Person or a Person who was
merged or amalgamated into or consolidated with the succeeding Person.
1.43 "Products" means those industrial "through-the-air" material handling
equipment products (i) researched, developed, engineered, manufactured,
distributed, sold or marketed, or (ii) serviced, inspected, maintained, or
repaired by the MHE Division or its Predecessors, in each case prior to the
Effective Date, including original equipment cranes, hoists, and winches, other
related types of industrial "through-the-air" material handling equipment, and
aftermarket products; provided, however, that Products shall not include any
mobile construction material handling equipment or related products of the type
produced by the former Construction Equipment Division of HarnCo.
1.44 "Retained Assets" shall have the meaning described in Section 3.3.
1.45 "Retained Liabilities" shall have the meaning described in Section
4.3.
1.46 "Retired and Inactive Employees" means all former employees of the
MHE Division who were not employed by the MHE Division or any HarnCo Company on
the Effective Date, or (to the extent applicable) beneficiaries of such former
employees.
1.47 "Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Income Taxes, including any schedule
or attachment thereto.
1.48 "Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable or for taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under
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<PAGE>
capital lease arrangements, and (d) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of money.
1.49 "Shared Facilities" has the meaning set forth in Section 3.6.
1.50 "Taxes" means all federal, state, provincial, local and foreign
income, profits, franchise, unincorporated business, withholding, capital,
general corporate, customs duties, environmental (including taxes under Code
Section 59A), disability, registration, alternative, add-on, minimum, estimated,
sales, goods and services, use, occupation, property, severance, production,
excise, recording, ad valorem, gains, transfer, value-added, unemployment
compensation, social security premium, privilege and any and all other taxes
(including interest, additions to tax and penalties thereon, and interest on
such additions to tax and penalties).
1.51 "Termination Date" means the close of business on the date that the
MHE LLC Interests are transferred to a Person that is not an Affiliate of
HarnCo.
1.52 "Transferred Assets" shall have the meaning described in Section 3.1.
1.53 "Warranty Obligations" shall mean any obligation to repair or replace
defective products for a period of time of one (1) year after the date of
delivery by HarnCo to an end user.
1.54 "Xtek Dispute" means the lawsuit entitled Harnischfeger Corporation
v. Xtek, currently pending in Cincinnati, Ohio.
2. Exchange of Consideration.
2.1 Consideration by HarnCo. On the terms and subject to the conditions
set forth in this Agreement, HarnCo hereby (i) conveys and assigns to MHE LLC
all of HarnCo's right, title and interest in and to the Transferred Assets, (ii)
subleases to MHE LLC all of HarnCo's rights and interests in the Leased Personal
Property and (iii) leases or subleases the specified areas of the Shared
Facilities to MHE LLC. Such conveyances, assignments, leases and sub-leases
shall occur and be effective as of the Effective Time. In addition, HarnCo has
caused MHE Technologies, Inc. to execute and deliver the MHE License Agreement
and Harnischfeger Technologies, Inc. to execute and deliver the P&H License
Agreement.
2.2 Consideration by MHE LLC. MHE LLC hereby assumes and agrees to pay,
honor, discharge and be fully liable for all of the Assumed Liabilities. Such
assumption shall occur and be effective as of the Effective Time. MHE LLC has
also executed and delivered both the MHE License Agreement and the P&H License
Agreement, and has issued to HarnCo the MHE LLC Interests.
3. Transferred Assets, Leased Personal Property, Retained Assets and Shared
Facilities.
3.1 Transferred Assets. The term "Transferred Assets" shall mean those
assets of the
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<PAGE>
MHE Division specified in Sections 3.1.1 through 3.1.14 which, immediately prior
to the Effective Time, are held by HarnCo and used exclusively by the MHE
Division. The Transferred Assets shall not include any Retained Assets.
3.1.1 Receivables. Billed and unbilled accounts and notes receivable
(including intercompany and intracompany accounts and notes receivable held by
the MHE Division), net of reserves for bad debt.
3.1.2 Inventories. Inventories and related reserves of or with
respect to Products manufactured by the MHE Division, its subsidiaries or
Predecessors, including finished goods, finished components, consigned
inventory, work-in-process, raw materials, scrap, purchased parts, packaging and
supplies, and perishable tools.
3.1.3 Current Assets. Prepaid expenses and deposits.
3.1.4 Fixed Assets. Machinery, equipment, furniture, furnishings,
personal computers and servers (and related peripheral hardware), office
equipment, printing machines, reproduction equipment tools, jigs, dies, molds
and parts and similar property (including any of the foregoing purchased subject
to any conditional sales or title retention agreement in favor of any other
Person, but excluding any of the foregoing which is Leased Personal Property),
and all fixed assets of the foregoing nature located at the Oak Creek Facility
and all tooling set forth on Schedule 3.1.4.
3.1.5 Claims. Claims, deposits, prepayments, refunds, causes of
action, choses in action, rights of recovery, rights of set off, and rights of
recoupment (collectively a "claim" for the purposes of this Section 3.1.5). With
respect to the Xtek Dispute, such claim shall be for the full amount of the
final resolution of such claim (whether by adjudication or otherwise), despite
any shared nature or non-exclusive aspect of such claim.
3.1.6 Contracts. All Contracts.
3.1.7 Vehicles. Automobiles, trucks, and other vehicles listed on
Schedule 1.24.
3.1.8 Office Supplies. Subject to Article 8, office supplies,
stationery and forms.
3.1.9 Bonds and Letters of Credit. Bonds, letters of credit and
other evidences of indebtedness furnished by any other Person to the MHE
Division and the right to receive payments from any other Person under or in
respect of any such instrument.
3.1.10 Books and Records. Books, records, manuals and other
materials, including advertising matter, catalogs, price lists, credit
information, cost information, correspondence, mailing lists, lists of
customers, distribution lists, photographs, production data, sales and
promotional materials and records, purchasing materials and records, personnel
records,
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manufacturing and quality control records and procedures, blueprints, research
and development files, records, data and laboratory books, patent disclosures,
media materials and plates, accounting records and sales order files.
3.1.11 Real Estate.
3.1.11.1 The owned real estate listed in Schedule 3.1.11.1
(together with the buildings, improvements, and fixtures thereon) and easements,
rights-of-way, and other appurtenants thereto, which shall be conveyed by
quitclaim deed.
3.1.11.2 Subject to each applicable lease (whether oral or
written), the leasehold interest in the leased real estate listed in Schedule
3.1.11.2. Where such conveyance or assignment involves a sublease of such real
property between HarnCo and MHE LLC, HarnCo shall enjoy the rights (but not the
obligations) under the applicable terms and conditions as if HarnCo were the
primary lessor under such lease.
3.1.12 Permits. All Permits.
3.1.13 Data Assets. All electronic data residing in the various
shared or HarnCo managed systems that is related to the MHE Division, including
information for processes, products, bills of material, routings, customers,
employees, financial information, vendors, drawings, inventory, and storerooms,
and any data stored off-line necessary for conducting the MHE Division's
business activities.
3.1.14 Control Test Facility Equipment. The control test facility
equipment located at the Orchard Street Facility utilized solely for services to
the MHE Division.
3.2 Leased Personal Property. Subject to Section 3.4, the Leased Personal
Property shall be subleased to MHE LLC, with MHE LLC being bound by and subject
to all such terms and conditions and entitled to all rights as if it were the
lessee thereunder. As between HarnCo and MHE LLC, HarnCo shall enjoy the rights
(but not the obligations) under the applicable terms and conditions as if HarnCo
were the primary lessor under each such lease.
3.3 Retained Assets. Notwithstanding anything herein to the contrary,
HarnCo shall retain and not convey, assign or lease, and MHE LLC shall not
purchase, acquire or lease, the following assets (collectively, the "Retained
Assets"):
3.3.1 Any and all stock and other ownership interests in the Other
MHE Subsidiaries, as well as any ownership interests in and notes receivable
from Century II, Inc. (formerly known as the Construction Equipment Division of
HarnCo and now known as PPM Cranes, Inc.)
3.3.2 Any and all of the rights of HarnCo under this Agreement or
the Other Agreements.
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3.3.3 Any and all refunds that relate to Taxes paid by HarnCo prior
to the Effective Time.
3.3.4 Any and all Employee Benefit Plans, including the plan assets
of the Harnischfeger Industries Salaried Employee's Retirement Plan and the
Harnischfeger Industries Hourly Employee's Retirement Pension Plan.
3.3.5 All Intellectual Property, including jointly used or shared
Intellectual Property.
3.3.6 Any and all Cash; provided that MHE LLC shall be able to draw
Cash from HarnCo pursuant to Section 9.1.
3.3.7 Any real estate owned, operated, used or leased by HarnCo
other than that listed in Schedules 3.1.11.1 and 3.1.11.2.
3.3.8 Any and all assets which, immediately prior to the Effective
Time, are not used exclusively by the MHE Division in conducting the Business,
whether or not such assets are otherwise listed in this Section 3.3.
3.3.9 The Workers' Compensation reserve as set forth on the balance
sheet of the MHE Division as of the Effective Date.
3.3.10 Telecommunications equipment and computer equipment on which
the Data Assets are stored.
3.3.11 Any and all actions, claims, causes of action, rights of
recovery, choses in action and rights of set off of any kind arising before, on
or after the Effective Date relating to the Retained Assets set forth above.
3.4 Consents and Approvals. This Agreement and the Other Agreements shall
not constitute an assignment, transfer or lease of any interest in any Asset (or
in any Shared Facility) if an assignment, transfer, lease or an attempt to make
such an assignment, transfer or lease (a) without the consent of or notice to a
third party would constitute a breach or violation or affect adversely the
rights of MHE LLC, HarnCo or any Affiliate of HarnCo thereunder or (b) is
restricted or prohibited by law, including all Environmental and Safety
Requirements. Any transfer, assignment or lease to MHE LLC by HarnCo of any
interest in any Asset (or in any Shared Facility) that requires filing with,
notice to, or the consent of a third party shall be made subject to such filing,
notice being given, or consent or approval being obtained. In the event such
consent or approval is not obtained on or prior to the Effective Date, HarnCo
shall continue to use commercially reasonable efforts to obtain any such
approval or consent until the earliest of (i) 180 days after the Effective Date,
(ii) such time as such consent or approval has been obtained or (iii) the date
HarnCo determines that the third party will not provide its consent or approval.
In the event HarnCo determines that the third party will not provide its consent
or approval (which determination shall be deemed to have been made if such
consent or approval has not been
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obtained 180 days after the Effective Date), HarnCo will cooperate with MHE LLC
in any lawful and feasible arrangement to provide MHE LLC with the benefits of
any such Asset (or Shared Facility), including performance by HarnCo as agent,
if commercially feasible; provided, however, that MHE LLC shall undertake to pay
or satisfy the corresponding Liabilities for the enjoyment of such benefits to
the extent MHE LLC would have been responsible therefor if such consent or
approval had been obtained. Notwithstanding the foregoing, the HarnCo Companies
shall have the right to terminate or cancel any Permit or Contract that is not
assigned within 180 days of the Effective Date. MHE LLC shall pay and discharge
any and all Liabilities incurred by any HarnCo Company after the Effective Date
in seeking to obtain or obtaining any consent or approval. MHE LLC acknowledges
that the benefits under certain Contracts are available to MHE LLC only until
the Termination Date. MHE LLC shall be responsible for negotiating with other
Persons that are parties to such Contracts to obtain future commitments, if any,
for such products or services after the Termination Date.
3.5 Deferred Real Estate Conveyance. Subject to Section 3.4, any real
estate that HarnCo is unable to convey or lease as required hereunder as of the
Effective Date will be conveyed or leased as soon as reasonably practicable
thereafter.
3.6 Shared Facilities. From and after the Effective Date and until the
Termination Date, MHE LLC may continue to occupy the shared facilities which are
identified in Schedule 3.6 (collectively the "Shared Facilities") in the manner
and in the areas and otherwise to the extent such occupancy has been conducted
immediately prior to the Effective Date.
4. Assumption of Liabilities.
4.1 Assumed Liabilities. The term "Assumed Liabilities" shall mean any and
all Liabilities of any HarnCo Company that result from, arise out of or relate
to (i) the MHE Division, (ii) the Business, (iii) the Transferred Assets, or
(iv) real property formerly owned or leased by any HarnCo Company and
exclusively or primarily operated or used for purposes of the MHE Division or
the Business, including any and all Liabilities associated with or of the nature
of those listed in Sections 4.1.1 through 4.1.12. The Assumed Liabilities shall
not include any Retained Liabilities.
4.1.1 Any and all billed or unbilled accounts and notes payable and
accrued liabilities (including intercompany and intracompany accounts and notes
payable and accrued liabilities of the MHE Division).
4.1.2 Active Employees and Retired and Inactive Employees, including
(i) liability for any salaries, wages, bonuses, incentive compensation, profit
sharing, tax equalization payments, vacation pay, sick leave, personal leave,
severance pay, wrongful dismissal and discrimination claims; (ii) except as set
forth in Section 4.3, liability for or under MHE Benefits and (iii) liability
arising from claims or litigation and liability arising from any injury, death,
loss, disability, occupational disease or claims under any workers' compensation
laws.
4.1.3 Claims by any Active Employee or Retired and Inactive Employee
under
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any law in respect of termination of employment or dismissal.
4.1.4 The owned and leased real estate listed on Schedules 3.1.11.1
and 3.1.11.2, respectively, the areas of the Shared Facilities occupied by MHE
LLC pursuant to Section 3.6, or any current or previous facility or office space
used in whole or primarily by the MHE Division, the operations of any of the
foregoing, and any on-site or off-site Environmental Liabilities related to any
of the foregoing.
4.1.5 Real and personal property taxes arising out of or related to
the MHE Division, whether for taxable periods before, on or after the Effective
Date.
4.1.6 All Contracts, including:
4.1.6.1 Any consulting, severance or employment agreements or
indemnities to officers or employees of the MHE Division.
4.1.6.2 Any stock purchase or asset purchase agreement, other
transfer agreement or merger document or any other agreement concerning the
acquisition or divestiture of any assets of the MHE Division or of the Business,
or any other agreement in any way concerning the MHE Division, the Assets or the
Business, or any portion thereof, including those listed on Schedule 4.1.6.2.
4.1.6.3 All Liabilities arising from, relating to or
associated with any breach or failure to perform with respect to such Contracts,
including liabilities arising from termination of distributors of the MHE
Division, except for Warranty Obligations for components manufactured by the
Mining Division delivered to end users prior to the Effective Date.
4.1.7 All Environmental Liabilities.
4.1.8 All Actions pending or threatened against, or otherwise
affecting, the MHE Division or the Business, including those listed on Schedule
4.1.8.
4.1.9 Warranty claims and product liability claims, including claims
for personal injury and exposure to asbestos, with respect to Products and
Services manufactured, sold or provided by any HarnCo Company or the Other MHE
Subsidiaries on or prior to the Effective Date.
4.1.10 All Leased Personal Property.
4.1.11 All Liabilities for violations of law relating to or arising
out of operations of the MHE Division or the Business prior to and on the
Effective Date, including Liabilities for actions taken or omissions made by
directors, officers, employees, agents or other representatives of HarnCo or any
Affiliate of HarnCo which relate to the MHE Division or the Business (regardless
of whether or not such actions were taken or omissions were made in the Ordinary
Course of Business), including any legal or regulatory consequences of such
actions or omissions.
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4.1.12 Any other agreements, commitments or obligations in any way
relating to the MHE Division or the Business by any HarnCo Company or the Other
MHE Subsidiaries under which any HarnCo Company has or may have any liability or
obligation after the Effective Time (whether primary or contingent).
4.2 Absolute Assumption. It is the intent of the parties that MHE LLC's
assumption of the Assumed Liabilities (including Environmental Liabilities)
under Section 2.2 shall be absolute. Upon, from and after the Effective Date,
MHE LLC shall, without any further responsibility or liability of or recourse to
any of the HarnCo Companies, absolutely and irrevocably assume and be solely
liable and responsible for the Assumed Liabilities. Neither HarnCo nor any of
the HarnCo Companies shall be liable to MHE LLC (or any of its Affiliates,
officers, directors, employees, agents or assigns) for any reason whatsoever (i)
on account of the Assumed Liabilities or (ii) on account of any obligations,
liabilities or expenses arising out of or associated with (or any litigation and
claims alleged to arise out of or be associated with) (A) the assets, business
and operations of MHE LLC following the Effective Date, (B) this Agreement or
any of the other agreements or instruments executed pursuant hereto or (C) any
other activities of the MHE Division (whether or not in the Ordinary Course of
Business and whether occurring before, on or after the Effective Date). MHE LLC
hereby waives and releases for itself and on behalf of the Other MHE
Subsidiaries (and their Affiliates) any claims, defenses, or claims for
contribution that they may have against HarnCo or any other HarnCo Company with
respect to the Assumed Liabilities.
4.3 Retained Liabilities. The term "Retained Liabilities" shall mean (i)
any and all Liabilities of MHE LLC for transaction taxes that HarnCo has agreed
to pay pursuant to Section 13.1, (ii) subject to Article 14, any and all
liabilities of MHE LLC for Taxes accrued on or before the Effective Date not
described in Section 4.1.5, (iii) any deferred compensation liability previously
deducted for book purposes but not yet deducted for tax purposes, (iv) any and
all liabilities with respect to medical, pension and savings plans of Retired
and Inactive Employees, including all liabilities relating to the Harnischfeger
Industries Salaried Employee's Retirement Plan and the Harnischfeger Industries
Hourly Employee's Retirement Pension Plan, (v) any and all Environmental
Liabilities of the HarnCo Companies relating to the ownership, operation or use
of the Shared Facilities or the Orchard Street Facility, and (vi) any and all
non-trade intercompany accounts payable to HCHC.
4.4 Payments Due to Withheld Consents. In connection with MHE LLC's
assumption of the Assumed Liabilities, HarnCo shall use commercially reasonable
efforts to obtain any necessary consents; provided, however, that HarnCo shall
not be obligated to incur any Liability with respect to or remain liable for any
Assumed Liability. With respect to any Contracts for which all necessary
consents have not been obtained within 180 days following the Effective Date,
HarnCo may, in its sole discretion, (i) require MHE LLC to pay to the applicable
payee(s) the amount necessary to settle the entire outstanding obligations in
accordance with the applicable Contracts, or any payoff associated with
termination or cancellation of such Contracts (pursuant to Section 3.4), (ii)
require MHE LLC to make the payments to the applicable payee as they
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become due in accordance with the applicable Contracts, or (iii) pay to the
applicable payee(s) the amount necessary to settle the entire outstanding
obligation in accordance with the applicable Contracts on behalf of MHE LLC,
with such payments being subject to reimbursement pursuant to Article 10. MHE
LLC agrees to make any such payments in accordance with instructions provided by
HarnCo.
5. No Representations and Warranties. Notwithstanding any contrary provisions
herein or in the Other Agreements, it is the explicit understanding of MHE LLC,
and MHE LLC hereby agrees, that neither HarnCo nor any other HarnCo Company, nor
any officer, director, employee or agent of any of the foregoing, is making any
representation or warranty whatsoever, express or implied. HARNCO, FOR ITSELF
AND ON BEHALF OF SUCH PERSONS, EXPRESSLY DISCLAIMS AND NEGATES ANY EXPRESS OR
IMPLIED WARRANTIES, INCLUDING THE WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE
OR OF MERCHANTABILITY, THE CONDITION OR VALUE OF THE ASSETS, THE COLLECTIBILITY
OF RECEIVABLES, OR VALIDITY OF LEASES. HarnCo does not warrant any forecast or
financial performance information relating to the MHE Division or the Business.
HarnCo does not warrant the valuation of inventory, assets or the adequacy of
reserves on the books of the MHE Division or the Business. MHE LLC accepts the
Assets in their "AS IS, WHERE IS" CONDITION, WITH ALL FAULTS. Without in any way
limiting the disclaimer above, HarnCo further disclaims any and all warranties
or representations, whether express or implied, with respect to environmental,
health or safety matters, including any matters arising under Environmental and
Safety Requirements. MHE LLC hereby acknowledges the foregoing disclaimer and
limitation of warranty.
6. Authorizations. Each of HarnCo and MHE LLC covenants to, as promptly as
practicable after the Effective Date, (a) make, or cause to be made, all such
filings and submissions under laws, rules and, regulations as may be required to
consummate (i) the transfer of the Transferred Assets, the lease of the Leased
Personal Property and the occupancy arrangements for the Shared Facilities, (ii)
the assumption of the Assumed Liabilities and (iii) the other transactions
contemplated hereby in accordance with the terms of this Agreement, and (b) use
commercially reasonable efforts to take, or cause to be taken, all other actions
necessary, proper or advisable in order to fulfill the obligations hereunder. In
furtherance thereof, HarnCo and MHE LLC each agree to coordinate and cooperate
with one another in exchanging such information and supplying such assistance as
may be reasonably required by each in connection with the foregoing.
7. Employees and Employment.
7.1 Employment. As of the Effective Date, MHE LLC shall offer to employ
all Active Employees. All Active Employees shall become employees of MHE LLC on
the Effective Date. MHE LLC shall promptly notify HarnCo of any Active Employee
that does not accept employment. MHE LLC shall, until the Termination Date and
at its own expense, provide all Active Employees with the same pension benefit
plans and welfare benefit plans that are provided under the Employee Benefit
Plans and other benefit programs, policies and arrangements (the "MHE Benefits")
for such Active Employees immediately prior to the Effective Date. In general,
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under such MHE Benefits adopted by MHE LLC, all periods of service with any
HarnCo Company shall be counted for all purposes.
7.2 Collective Bargaining Agreements and Employment Contracts. As soon as
practicable after the Effective Date, MHE LLC shall enter into a new collective
bargaining agreement with United Steelworkers of America, Local No. 1114
covering Active Employees and Retired and Inactive Employees. On the Effective
Date, MHE LLC shall assume all liability for all individual or group employment
contracts that are in effect between HarnCo and any Active Employee or Retired
and Inactive Employee or group of Active Employees or Retired and Inactive
Employees.
8. Use of HarnCo's Trademarks. Except with respect to Intellectual Property set
forth in the License Agreement and the P&H License Agreement (the use of which
shall be governed by each such agreement), MHE LLC shall be entitled on a
non-exclusive, non-transferable, royalty free basis to distribute their sales
aids, sales literature, advertising materials, catalogues, inventory and
packaging materials, invoicing or purchasing forms existing on the Effective
Date that bear any trademark, logo, or corporate name of Harnischfeger
Corporation, Harnischfeger Industries, Inc. or any other HarnCo Company
(collectively, the "Harnischfeger Marks"), but only until the existing inventory
is depleted or for a period of nine months after the Effective Date, whichever
first occurs. MHE LLC shall have no other rights to use the Harnischfeger Marks
as all or part of any trademark, logo, trade name or corporate name, except as
provided in the License Agreement. Within 30 days following the Termination
Date, MHE LLC agrees to mark all inventory, packaging materials, sales aids,
sales literature, advertising materials or catalogues that contain any of the
Harnischfeger Marks to indicate that MHE LLC is the seller of such Products.
9. Other Effective Date and Post-Effective Date Covenants.
9.1 Intercompany Cash Management. From the Effective Date until the end of
business on the day preceding the Termination Date, HarnCo shall provide Cash
to, and collect Cash from, MHE LLC in accordance with practices consistent with
the practices with respect to the MHE Division in effect as of the Effective
Date. Therefore, Cash equal to the excess of the aggregate daily deposits in MHE
LLC's collection accounts over the aggregate daily disbursement from MHE LLC's
disbursement accounts shall be provided by MHE LLC to HarnCo and, conversely,
Cash equal to the excess of the aggregate daily disbursement from MHE LLC's
disbursement accounts over the aggregate daily deposits in MHE LLC's collection
accounts shall be provided by HarnCo to MHE LLC.
9.2 Letters of Credit. From the Effective Date through the Termination
Date, HarnCo shall assist MHE LLC in and procuring letters of credit for the
benefit of MHE LLC which MHE LLC alone can not issue or procure. HarnCo shall
use reasonable efforts to assist MHE LLC in drawing under letters of credit
issued prior to the Effective Date in the name of any HarnCo Company for the
benefit of the MHE Division or MHE LLC.
10. Indemnification Matters.
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10.1 Indemnification. Subject to Sections 10.3 and 10.4, MHE LLC shall
indemnify, defend, save and hold harmless the HarnCo Indemnified Parties from
and against all claims, liabilities, obligations, losses, costs, costs of
defense (as and when incurred, and including all outside attorneys' and
consultants' fees) expenses, fines, taxes, levies, imposts, duties,
deficiencies, assessments, charges, penalties, allegations, demands, damages
(including but not limited to actual, punitive or consequential, foreseen or
unforeseen, known or unknown), settlements, awards, or judgments of any kind or
nature whatsoever, arising out of or associated with the Assumed Liabilities
(including the Environmental Liabilities) or that otherwise are or are alleged
to be related to, arising from, or associated with the ownership, use,
possession, operation or conduct of (i) the MHE Division, (ii) the Business, or
(iii) the Transferred Assets, in each case before, on or after the Effective
Date. The indemnities provided by MHE LLC hereunder shall extend to any and all
Assumed Liabilities with respect to environment, health, safety, personal
injury, property damage, employment, benefits, compensation, claims arising out
of contracts, product liability, warranty, merchantability or fitness for any
particular purpose of goods, conformity of goods to contractual requirements,
deceptive trade practice, misrepresentation, fraud or any other alleged or
actual breach or violation of any obligation or requirement arising out of, or
in connection with (i) the MHE Division, (ii) the Business, or (iii) the
Transferred Assets. MHE LLC's indemnification includes any Liability (including
reasonable fees and expenses of attorneys, accountants, consultants, and
experts) that the HarnCo Indemnified Parties incur, are subject to a claim for,
or are subject to, that are based upon, arising out of, relating to or otherwise
in respect of:
10.1.1 Any breach of any covenant or agreement of MHE LLC contained
in this Agreement or the Other Agreements.
10.1.2 The acts or omissions of any of the HarnCo Companies on
behalf of the MHE Division before or on the Effective Date and the acts or
omissions of MHE LLC after the Effective Date;
10.1.3 The conduct of the Business before, on or after the Effective
Date.
10.1.4 The conduct of the Business by any HarnCo Company or any of
the Other MHE Subsidiaries after the Effective Date;
10.1.5 The Assumed Liabilities (regardless of whether any such
Assumed Liability is assigned by any HarnCo Company or assumed by MHE LLC);
10.1.6 The Assets, regardless of MHE LLC's prior or continued use of
any such asset;
10.1.7 The conveyance, assignment, sale, lease or making available
of the Assets, or the license of the Intellectual Property pursuant to the
License Agreement;
10.1.8 Any and all amounts for which HarnCo may be liable on account
of any claims, administrative charges, self-insured retentions, deductibles,
retrospective premiums or
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fronting provisions in insurance policies, including as the result of any
uninsured period, insolvent insurance carriers or exhausted policies, arising
from or out of claims by or against MHE LLC, or the employees of any of the
foregoing, or claims by insurance carriers of any HarnCo Company for indemnity
arising from or out of claims by or against MHE LLC, acts or omissions of MHE
LLC, or related to the Business or any Product;
10.1.9 Any settlement or judgments in any litigation commenced by
one or more insurance carriers against any HarnCo Company on account of claims
by or against MHE LLC or the employees of the MHE Division or MHE LLC;
10.1.10 Any and all Liabilities incurred by any HarnCo Company
pursuant to its obligations hereunder or under any of the Other Agreements after
the Effective Date in seeking to obtain or obtaining any consent or approval to
assign, transfer or lease any interest in any asset or instrument, contract,
lease (whether oral or written), permit or benefit arising thereunder or
resulting therefrom;
10.1.11 Any Liability incurred by any HarnCo Company as a result of
the drawing against any letter of credit or performance bond issued by any
HarnCo Company on behalf of MHE LLC or the MHE Division;
10.1.12 Any Liability relating to the failure to comply with any
bulk sales or transfers laws in connection herewith or with any of the Other
Agreements; and
10.1.13 Any Liability relating to an Active Employee or Retired and
Inactive Employee (other than Retained Liabilities).
This indemnity obligation shall apply without regard to (i) whether the
Liability (including any Environmental Liability) is based on theories of
negligence, breach of warranty, strict liability, breach of contract, violation
of any consumer protection legislation passed by any Governmental Body, absolute
liability or arising as an obligation of contribution, or the violation of any
other applicable legal duty or standard, (ii) whether the Liability (including
any Environmental Liability) was caused by the negligence of any of the HarnCo
Indemnified Parties (whether such negligence be sole, joint or concurrent,
active or passive), or (iii) whether the Liability (including any Environmental
Liability) arose before, on or after the Effective Date.
10.2 Notice of Circumstance. After receipt by HarnCo of notice, or
HarnCo's actual discovery, of any action, proceeding, claim, demand, or
potential claims, which could give rise to a right of indemnification pursuant
to any provision of this Agreement (any of which is individually referred to as
a "Circumstance"), HarnCo shall give MHE LLC written notice describing the
Circumstance in reasonable detail; provided, however, that no delay by HarnCo in
notifying MHE LLC shall relieve MHE LLC from any Liability hereunder unless (and
then solely to the extent) MHE LLC's position is actually prejudiced by such
delay. In the event MHE LLC notifies HarnCo within 30 days after such notice
that MHE LLC is assuming the defense thereof, (i) MHE LLC will defend the HarnCo
Indemnified Parties against the Circumstance with counsel of its choice,
provided such counsel is reasonably satisfactory to HarnCo, (ii) the HarnCo
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Indemnified Parties may retain separate co-counsel at its or their sole cost and
expense (except that MHE LLC will be responsible for the fees and expenses for
the separate co-counsel to the extent HarnCo concludes reasonably that the
counsel selected by MHE LLC has a conflict of interest), (iii) the HarnCo
Indemnified Parties will not consent to the entry of any judgment or enter into
any settlement with respect to the Circumstance without the written consent of
MHE LLC and (iv) MHE LLC will not consent to the entry of any judgment with
respect to the Circumstance, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the HarnCo
Indemnified Parties from all Liability with respect thereto, without the written
consent of HarnCo. In the event MHE LLC does not notify HarnCo within 30 days
after HarnCo has given notice of the Circumstance that MHE LLC is assuming the
defense thereof, the HarnCo Indemnified Parties may defend against, or enter
into any settlement with respect to, the Circumstance in any manner the HarnCo
Indemnified Parties reasonably deem appropriate, at MHE LLC's cost.
10.3 Scope of Indemnification. Indemnification under this Article 10 shall
be in addition to any remedies the HarnCo Companies may have at law or equity.
There shall be no time limit as to MHE LLC's indemnification obligations
hereunder.
10.4 Indemnity for Certain Environmental Liabilities. MHE LLC understands
and agrees that its right to indemnification for matters described in Section
4.3(v) hereof shall constitute its sole recourse against the HarnCo Companies
with respect to environmental, health or safety matters and that it shall have
no other right of indemnification or any other right or remedy against the
HarnCo Companies with respect to any environmental, health or safety matters
(including without limitation all matters arising under CERCLA or any other
Environmental and Safety Requirements) arising from this Agreement or the
transactions contemplated thereby (collectively "Environmental, Health and
Safety Matters") and hereby waives, and releases the HarnCo Companies and their
respective officers, directors, employees and agents from, any and all claims,
demands, or causes of action with respect to Environmental, Health and Safety
Matters.
11. Limitation on Consequential Damages. NOTWITHSTANDING ANYTHING HEREIN TO THE
CONTRARY, NO HARNCO COMPANY SHALL BE LIABLE TO MHE LLC, ANY OTHER MHE SUBSIDIARY
OR ANY OF THEIR AFFILIATES FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL
OR PUNITIVE DAMAGES, LOST PROFITS, LOSS OF SALE OR USE, OR OPPORTUNITY COSTS,
REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT OR OTHERWISE.
12. Further Assurances. After the Effective Date and upon HarnCo's request, and
for no further consideration, MHE LLC shall use its best efforts to obtain full
releases of any and all HarnCo Companies' Liability with respect to the Assumed
Liabilities; provided, however, that until MHE LLC obtains such releases, MHE
LLC shall not take any action that has the effect of amending or otherwise
modifying any provisions of any of the Assumed Liabilities for which any HarnCo
Company may have continuing liability, either primary or contingent, except for
amendments or modifications which do not (i) increase in any respect any
Liability of any HarnCo Company thereunder, or (ii) extend the period of time
during which any HarnCo Company will be
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obligated or liable thereunder.
13. Transfer Tax Matters.
13.1 Transaction Taxes. HarnCo shall be liable for any and all sales, use,
transfer, stamp, stamp duty, stamp duty reserve tax, conveyance, documentary, or
similar taxes, duties, excises or governmental charges imposed by any taxing
jurisdiction, including recording fees, notarial fees and other similar costs
incurred in connection with the conveyance of the Assets to MHE LLC pursuant to
this Agreement. MHE LLC shall, on the Effective Date, execute and deliver to
HarnCo a sales tax resale exemption certificate for each state in which
inventory is transferred to MHE LLC pursuant to this Agreement.
13.2 Property Taxes. MHE LLC shall be liable for, shall pay and shall
indemnify and hold HarnCo harmless against any and all real and personal
property taxes and assessments relating to the Assets, regardless of the taxable
periods to which such taxes relate. If HarnCo is contesting any such taxes
before a taxing authority, administrative tribunal or in a judicial proceeding,
as of the Effective Date MHE LLC shall assume responsibility for and control any
such proceeding at its own expense and with its own counsel. HarnCo shall
execute all contracts, authorizations or other documents necessary to enable MHE
LLC to have proper standing to conduct any such proceedings.
13.3 Unemployment Tax Experience. The state unemployment tax experience
(the "Experience") of HarnCo may be transferred to MHE LLC for such states, if
any, as HarnCo may select in its sole discretion. The decision to transfer such
Experience may be made separately for each state in which the business of MHE
LLC is conducted. If HarnCo elects to transfer the Experience in a particular
state, MHE LLC shall timely execute any and all necessary governmental filings
to accomplish this transfer.
13.4 Preparation of W-2's, Etc. HarnCo and MHE LLC agree that MHE LLC has
received substantially all of the property used in a trade or business
previously operated by HarnCo, and in connection therewith MHE LLC shall employ
individuals who immediately before the Effective Date were employed in such
trade or business by HarnCo. Accordingly, if the Effective Date is such that the
alternative procedure set forth in Revenue Procedure 84-77, 1984-2 C.B. 753 for
reporting by predecessors-successors is applicable and provided that HarnCo
provides MHE LLC with all necessary (as determined in HarnCo's sole discretion)
payroll records for the calendar year which includes the Effective Date, then
MHE LLC shall furnish or cause to be furnished a Form W-2 to each employee
employed by MHE LLC who had been employed by HarnCo disclosing all wages and
other compensation paid for such calendar year, and taxes withheld therefrom,
and HarnCo shall be relieved of the responsibility to do so.
14. Post-Effective Date Tax Matters.
14.1 Filing of Tax Returns. HarnCo agrees to prepare and file or cause to
be prepared and filed on a timely basis all appropriate Returns in respect of
the MHE Division that (i) are required to be filed before the Effective Date; or
(ii) are required to be filed on or after the
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<PAGE>
Effective Date that (a) are required to include, on a consolidated or combined
basis, the operations of the MHE Division for any tax period ending before the
Effective Date; or (b) are required to be filed by the MHE Division on a
separate return basis for any tax period ending before the Effective Date. To
the extent requested by HarnCo, MHE LLC shall participate in the filing of and
shall file any required Returns with respect to any period that ends before the
Effective Date. MHE LLC shall prepare the schedules in respect of MHE LLC and
the MHE Division containing the information necessary for HarnCo to prepare any
consolidated or combined returns. MHE LLC shall also prepare or cause to be
prepared and shall file or cause to be filed all other Returns required of MHE
LLC and the MHE Division, or in respect of its activities, for any taxable
period ending on or after the Effective Date that includes the operations of MHE
LLC or the MHE Division prior to the Effective Date.
14.2 Payment of Taxes.
14.2.1 HarnCo agrees to pay timely all Income Taxes in respect of
MHE LLC or the MHE Division that are (i) due with respect to Returns that HarnCo
is required to prepare and file pursuant to Section 14.1 hereof, or (ii) due
before the Effective Date for which no Return is required to be filed. In
addition, HarnCo agrees to pay all other Income Taxes that may be due after the
Effective Date that are attributable to the period prior to the Effective Date.
The parties hereto will, to the extent permitted by applicable law, elect with
the relevant Tax authority to treat for all purposes the day prior to the
Effective Date as the last day of a taxable period of the MHE Division, and such
period shall be treated as a "Short Period" for purposes of this Agreement.
14.2.2 In any case where applicable law does not permit MHE LLC to
treat the day prior to the Effective Date as the last day of a Short Period,
then for purposes of this Agreement the portion of such Income Taxes that is
attributable to the operations of the MHE Division for such Interim Period (as
defined below) shall be (i) in the case of Income Taxes that are not based in
whole or in part on income or gross receipts, the total amount of such Income
Taxes for the period in question multiplied by a fraction, the numerator of
which is the number of days in the Interim Period, and the denominator of which
is the total number of days in the entire period in question, and (ii) in the
case of Income Taxes that are based in whole or in part on income or gross
receipts, the Income Taxes that would be due with respect to the Interim Period,
if such Interim Period were a Short Period. "Interim Period" means with respect
to any Income Taxes imposed on MHE LLC on a periodic basis for which the day
prior to the Effective Date is not the last day of a Short Period, the period of
time beginning on the first day of the actual taxable period that includes (but
does not end on) the day prior to the Effective Date and ending on the day prior
to the Effective Date. Any franchise Tax shall be allocated to the taxable
period during which the right to do business obtained by the payment of such
franchise Tax relates, regardless of whether such franchise tax is measured by
income, operations, assets or capital relating to another taxable period.
14.3 Cooperation and Records Retention. HarnCo and MHE LLC shall (i) each
provide the other with such assistance as may reasonably be requested by either
of them in connection with the preparation of any Tax return, audit or other
examination by any taxing authority or judicial or administrative proceedings
relating to liability for Taxes, (ii) each retain
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and provide the other with any records or other information which may be
relevant to such Return, audit or examination or proceeding, and (iii) each
provide the other with any final determination of any such audit or examination
or proceeding that affects any amount required to be shown on any Tax return of
the other for any period. Without limiting the generality of the foregoing,
HarnCo and MHE LLC shall retain, until the applicable statutes of limitations
(including any extensions) have expired, copies of all Tax returns, supporting
work schedules and other records or information which are relevant to such
returns for all taxable periods or portions thereof ending before or including
the Effective Date and shall not thereafter destroy or otherwise dispose of any
such records without first providing the other party with a reasonable
opportunity to review and copy the same.
14.4 Liability for Assessments or Refunds. HarnCo shall pay any
assessments for additional Income Taxes and be entitled to receive all refunds
of Income Taxes (i) with respect to all periods ending prior to the Effective
Date; and (ii) with respect to any period beginning before the Effective Date
and ending after the Effective Date, but only with respect to the portion of
such period up to and including the day prior to the Effective Date allocated in
accordance with Section 14.2.2 above. HarnCo shall have sole and exclusive
discretion to contest or not to contest, negotiate and settle proposed
adjustments relating to the inclusion in any Return of the income, deductions,
credits, allowances or other tax items of MHE LLC for any period ending before
the Effective Date. Any proceeding with respect to Income Taxes for a period
which includes but does not end on the day prior to the Effective Date shall be
controlled jointly by HarnCo and MHE LLC.
15. Bulk Sales or Transfer Laws. MHE LLC acknowledges that HarnCo will not
comply with the provision of any bulk sales or transfer laws of any jurisdiction
in connection with the transaction contemplated by this Agreement. MHE LLC
hereby waives compliance by HarnCo with the provisions of the bulk sales or
transfer law of any jurisdiction.
16. Miscellaneous.
16.1 Entire Agreement. This Agreement and the Other Agreements constitute
the entire agreement of the parties with respect to the subject matter hereof
and thereof, supersede all prior agreements, understandings and representations
between them with respect to such subject matter, written or oral, and shall not
be modified, amended or terminated except by a written agreement specifically
referring to the applicable agreement signed by all of the parties thereto.
16.2 Waivers. No waiver by any Party of any breach or default hereunder
shall be considered valid unless in writing and signed by the party giving such
waiver, and no such waiver shall be deemed a waiver of any subsequent breach or
default of the same or similar nature.
16.3 Succession and Assignment. This Agreement shall inure to the benefit
of, and be binding upon, HarnCo and MHE LLC and their successors and permitted
assigns, and may be assigned in whole or in part by them to any of their
respective Affiliates (with the assignor remaining primarily liable thereon),
but otherwise this Agreement is not assignable by any party hereto, either in
whole or in part, without the prior written consent of the other party, and any
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<PAGE>
such attempted assignment without such consent shall be null and void. In the
event that such an assignment is made to any such Affiliate such assignment
shall include an obligation on such Affiliate to transfer all rights and
interests assigned thereto back to such assigning party (or to some other
Affiliate thereof) promptly upon such assignee ceasing to be an Affiliate of the
assignor.
16.4 Headings. The paragraph headings contained herein or in the Other
Agreements are for the purposes of convenience only and are not intended to
define or limit the contents of such paragraphs and shall be given no effect in
the construction or interpretation of this Agreement or the Other Agreements.
16.5 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to HarnCo: Copy to:
Harnischfeger Corporation Kirkland & Ellis
3600 South Lake Drive 200 East Randolph Drive
St. Francis, WI 53235-3716 Chicago, IL 60601
Attn: James A. Chokey Attn: Keith S. Crow
If to MHE: Copy to:
Material Handling, LLC Material Handling, LLC
315 W. Forest Hill Avenue 315 W. Forest Hill Avenue
Oak Creek, WI 53154 Oak Creek, WI 53154
Attn: President Attn: General Counsel
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
16.6 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall be deemed one original.
16.7 Expenses. Except as otherwise provided in Articles 4 and 10 and
Section 3.4, MHE LLC shall bear the expenses, costs and fees (including those of
attorneys, accountants, consultants, or experts) incurred by MHE LLC and the MHE
Division, and HarnCo shall bear the
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<PAGE>
expenses, costs and fees (including those of attorneys, accountants,
consultants, or experts) incurred by HarnCo, in connection with the transactions
contemplated hereby, including the preparation and execution of this Agreement
and the Other Agreements and compliance herewith and therewith.
16.8 Severability. Any provision of this Agreement or any of the Other
Agreements that is invalid or unenforceable in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
16.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of New York without giving effect
to any choice or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of New York.
16.10 Submission to Jurisdiction. Each of the Parties consents to the
exclusive jurisdiction of the federal courts of the Eastern District of
Wisconsin for any legal action, suit, or proceeding arising out of or in
connection with this Agreement or the Other Agreements, and agree that any such
action, suit, or proceeding may be brought only in such courts. If such forum is
not available, each of the Parties consents to the exclusive jurisdiction of the
Milwaukee County Circuit Court for any such action, suit or proceeding. Each of
the Parties further waives any objection to the laying of venue for any such
suit, action, or proceeding in such courts. Each Party agrees to accept and
acknowledge service of any and all process that may be served in any suit,
action, or proceeding. Each Party agrees that any service of process upon it
mailed by registered or certified mail, return receipt requested to such Party
at the address provided in Section 16.5 above shall be deemed in every respect
effective service of process upon such Party in any such suit, action, or
proceeding. Each Party agrees to waive any right it might have to a trial by
jury in any such suit, action or proceeding.
16.11 Construction. Each of the Parties agree that (a) the rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation or construction of
this Agreement or the Other Agreements and (b) except as specifically provided
in an agreement, no usage of trade, course of dealing, course of performance or
enforcement or surrounding circumstances shall be used in interpreting or
construing this Agreement or the Other Agreements. The terms "including" or
"include" shall mean "including, without limitation," and the subsequent listing
of any matter or matters shall in no event be construed to limit or narrow the
breadth of the preceding clause of matter.
16.12 Incorporation of Exhibits and Schedules. The schedules and exhibits
to this Agreement shall be construed with and as integral parts of this
Agreement to the same extent as if they were set forth verbatim herein;
provided, however, that in the event of any conflict between any such schedule
or exhibit (including the Other Agreements) and this Agreement, this Agreement
shall control.
16.13 No Third Party Beneficiaries. Nothing in this Agreement, whether
express or
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implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any Persons other than the parties hereto and their Affiliates and
respective permitted successors and assigns.
******
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
HARNISCHFEGER CORPORATION
By: /s/ Kenneth J. Stark
-----------------------------
Its: Assistant Teasurer
-----------------------------
MATERIAL HANDLING, LLC
By: /s/ Eric Fonstad
-----------------------------
Its: Manager
-----------------------------
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SHARE AND ASSET PURCHASE AGREEMENT
BETWEEN
PHMH HOLDING COMPANY
AND
JAMES GANN, SR., JAMES GANN, JR., AND GAIL GANN
FOR THE
STOCK OF MPH CRANE, INC.
AND THE
REAL ESTATE LOCATED AT 213 INDUSTRIAL DRIVE, FRANKLIN, OHIO
FEBRUARY 14, 1997
<PAGE>
PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") is made and entered into effective
February 14, 1997 by the following:
1. PHMH Holding Company is a Delaware holding company with its principal
place of business located in Wilmington, Delaware ("Buyer");
2. James Gann, Sr. and James Gann, Jr. (collectively referred to as the
"Sellers"), and Gail Gann (together with the Sellers referred to as the
"Shareholders");
3. MPH Crane, Inc., an Ohio Corporation with its principal place of business
located in Franklin, Ohio ("Purchased Company").
The Buyer, Shareholders, and the Purchased Company are referred to collectively
as the "Parties".
In consideration of the representations, warranties, and covenants
discussed below, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
"Acquired Shares" means all right, title, and interest in all classes of
the issued and outstanding shares of MPH Crane, Inc.
"Acquired Real Estate" shall mean the real estate located at 213
Industrial Drive, Franklin, Ohio.
"Affiliate" of a Party means a Person or company that directly, or
indirectly through one or more intermediaries, owns or controls, or is
controlled or owned by, or is under common control or ownership with, that
Party.
"Business" means all business operations and activities in which the
Purchased Company is now engaged or has been engaged in the past, other than 1)
selling and servicing Landoll roll back trailers, 2) owning farmland, 3) owning
lakefront property, and 4) the assets listed on Exhibit 1.01(a).
"Closing Date Balance Sheet" means the statement of assets, liabilities,
and shareholders equity of the Purchased Company on the date of the Closing.
<PAGE>
"Contracts" means all arrangements, agreements or contracts of any type or
nature whatsoever, including government contracts.
"Indemnified Liabilities" means:
(a) any Environmental Liabilities of the Purchased Company as set forth in
Article (V) of this Agreement;
(b) any Liability of the Shareholders or the Purchased Company for Taxes
(i) arising in connection with this Transaction (including any Taxes arising
because the Shareholders are transferring the Acquired Shares and/or the Sellers
are transferring the Acquired Real Estate) or (ii) which arose, were incurred,
or accrued for periods on or prior to the Closing Date which are not reflected
in the Closing Date Balance Sheet (whether or not the liability for such Taxes
exists as of such date);
(c) any Liability of the Shareholders or the Purchased Company for costs
and expenses incurred in connection with this Transaction;
(d) any Liability of the Purchased Company which arises out of activities
other than its Business (specifically included as Indemnified Liabilities under
this sub-section include, without limitation, any claims or Liabilities which
arise out of the Landoll roll back trailer sales and service, the boat, the
farmland located in Prebble County, Ohio, the lakefront property located in
Prebble County, Ohio and other real estate previously owned not used in the
Business);
(e) any Liability arising from the Shareholders' or the Purchased
Company's violation before the Closing Date of any laws, ordinances or
regulations;
(f) any Liability, arising from the Purchased Company breaching a contract
prior to the Closing Date, other than as reflected on its financial statements;
(g) any Liability arising out of a contract or agreement which
Shareholders have not disclosed on the Disclosure Schedule, and which may be
considered breached or terminated because of this Transaction;
(h) subject to the provisions of Section 10.16, any Liability of the
Purchased Company arising from products or services delivered or performed in
the field prior to the Closing Date, for all claims of loss of profits, loss of
capital, or loss of use by the Purchased Company's customer or the product end
user, but only to the extent that such claims are made within three (3) years of
the Closing Date; and
(i) 50% of any Liability arising out of negligence and/or product
liability claims made by third parties against the Purchased Company for
accidents and/or incidents occurring within two (2) years after the Closing
Date, including the cost of
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<PAGE>
defense of such claims, which involve products and/or services sold or provided
by the Purchased Company prior to the Closing Date, with a maximum aggregate cap
of $50,000 to be paid under this provision.
"Intellectual Property" means all of the following owned by Purchased
Company or Shareholders, and pertaining to the Business: (a) all patents, patent
applications, patent disclosures, and their improvements, (b) all trademarks,
service marks, trade dress, logos, trade names, corporate names and
registrations, and their applications for registration, together with all of the
associated goodwill, including, but not limited to, "MPH Crane", (c) all
copyrights, registrations, and applications for their registration, to the
extent assignable, (d) all mask works, registrations, and applications for their
registration, (e) all computer software, data, and documentation, (f) all trade
secrets and confidential business information (including ideas, formulas,
compositions, inventions [whether patentable or unpatentable and whether or not
reduced to practice], know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, service manuals,
parts lists, financial, marketing, and business data, pricing and cost
information, business and marketing plans, and customer and supplier lists and
information), (g) all other proprietary rights, and (h) all copies and tangible
embodiments (in whatever form or medium) of any of the above.
"Knowledge" means all information actually known by the Shareholders,
after due and appropriate review of documents in the possession of or located at
the Purchased Company, and interviews with Larry Ramsey, Doug Stump, Joe Cox,
Vic Stempler, and Talmedge Buckle, after Sellers have requested such individuals
to undertake a due and appropriate review of documents and collection of
information.
"Liability" or "Liabilities" means any responsibility or obligation
whether known or unknown, whether absolute or contingent, whether liquidated or
unliquidated, whether due or to become due, whether disputed or undisputed, and
whether legal or equitable.
"Material" means of a magnitude such that it had, has, or may in the
future have an economic effect, gain or loss with respect to the Buyer or the
Purchased Company, in excess of twenty-five thousand dollars ($25,000).
"Net Book Value" means the excess of assets over liabilities as shown on a
balance sheet prepared in accordance with U.S. generally accepted accounting
practices, and based in principle on the agreed to July 1996 financial
statements as adjusted to exclude those assets to be divested prior to Closing,
a copy of which is attached as Exhibit 1.01(b).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice and shall include matters such as
quantity and frequency.
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<PAGE>
"Person" means any individual, partnership, joint venture, corporation or
any other type of entity.
"Security Interest" means any mortgage, pledge, security interest, claim,
encumbrance, charge, or other lien.
"Tax" means any income, gross receipts, capital stock, employment,
franchise, profits, withholding, social security, unemployment, disability, real
property, personal property, stamp, excise, occupation, import or custom duties,
goods and services, sales, use, transfer, value added, alternative minimum,
estimated, or other tax, including any interest, penalty, or addition thereto,
whether disputed or not, and regardless of the country, state, or jurisdiction
in which it arises.
"Transaction" means all activities involving the Buyer purchasing from
Shareholders the Acquired Shares and the Acquired Real Estate, including (l)
drafting, executing and delivering this Agreement and other related documents,
(2) the conduct of due diligence, (3) the Closing, (4) the transfer of the
Acquired Shares and Acquired Real Estate, and (5) all post closing rights and
obligations.
ARTICLE II
BASIC TRANSACTION
2.01. Purchase and Sale of Shares. Subject to all terms and conditions
contained in this Agreement, (1) the Buyer agrees to purchase from the
Shareholders, and the Shareholders agree to sell and deliver to the Buyer, good,
marketable and indefeasible title to all of the Acquired Shares at the Closing
and (2) Buyer, or its designee, agrees to purchase from Sellers, and Sellers
agree to sell and deliver to the Buyer, or its assignee, good, marketable and
indefeasible title to the Acquired Real Estate at the Closing. The Acquired
Shares shall be free and clear of all Security Interests, Liabilities and other
restrictions.
2.02 Purchase Price. The amount to be paid by Buyer to Shareholders for
the Acquired Shares shall be $7,400,000.00, minus the outstanding principal
balance, together with any and all accrued and unpaid interest, costs and fees,
of all long term debt and lines of credit (hereafter the "Share Purchase
Price"), based on the Purchased Company having $1,627,030.00 in Net Book Value
on the Closing Date. The amount to be paid by Buyer to Sellers for the Acquired
Real Estate shall be $4,000,000.00 (hereafter the "Real Estate Purchase Price").
The Share Purchase Price shall be adjusted downward dollar for dollar to the
extent the Net Book Value of the Purchased Company is less than $1,627,030.00 on
the Closing Date. The Share Purchase Price shall be adjusted upward dollar for
dollar to the extent that the Net Book Value of the Purchased Company exceeds
$1,627,030.00 on the Closing Date. At the Closing, Buyer shall l) pay to Sellers
the entire amount of the Real Estate Purchase Price, and 2) pay the entire
amount of the Share Purchase Price in cash or immediately available funds, other
than $700,000, which
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<PAGE>
(subject to the $400,000 offset balance under Section 9.05) shall not be payable
until 30 days after the Purchased Company has received the funds for selling the
Dayton, Ohio facility. The sale of the Dayton facility shall be conducted in
accordance with the procedures outlined in Section 8.06.
2.03 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Coolidge, Wall,
Wamsley & Lombard commencing at 10:00 a.m. Dayton, Ohio time, on February 14,
1997 or such other date as the Parties may mutually determine (the "Closing
Date").
2.04 Deliveries at the Closing. At the Closing: (a) the Shareholders will
deliver to the Buyer the various certificates, instruments, and documents
referred to in ss.6.01 herein, (b) the Buyer will deliver to the Shareholders
the various certificates, instruments, and documents referred to in ss.6.02
herein, (c) the Shareholders and the Purchased Company will execute, acknowledge
(if appropriate), and deliver to the Buyer such other documents as the Buyer and
its counsel reasonably may request, (d) the Buyer will execute, acknowledge (if
appropriate), and deliver to the Shareholders such other documents as the
Shareholders and their counsel reasonably may request, and (e) the Buyer will
deliver to the Shareholders and Sellers for their respective accounts the
consideration specified in ss.2.02 above.
2.05 Preparation of Closing Date Balance Sheet.
(a) Within 60 days after the Closing Date, the Shareholders will prepare
and deliver to the Buyer a draft Closing Date Balance Sheet. The Shareholders
will prepare the draft Closing Date Balance Sheet on a basis consistent with the
preparation of their July 1996 financial statements, attached as Exhibit 1.01(b)
(a), along with the adjustments agreed to by all Parties prior to the Closing.
Buyer shall give Shareholders and their accountants, employees and other agents
reasonable access to the books, records and assets of the Purchased Company for
purposes of preparing the draft Closing Date Balance Sheet;
(b) If the draft Closing Date Balance Sheet is not acceptable to Buyer,
the Buyer will deliver to the Shareholders within 30 days after receiving the
draft Closing Date Balance Sheet a detailed statement describing its objections.
The Buyer and the Shareholders will use reasonable efforts to resolve any such
objections, but if they do not obtain a final resolution within 30 days after
Shareholders have received the statement of objections, the Buyer and
Shareholders will select an accounting firm mutually acceptable to them to
resolve any remaining objections. If the Buyer and Shareholders are unable to
agree on the choice of an accounting firm, they will select the accounting firm
of Ernst & Young;
(c) The Parties will share the fees and expenses of this accounting firm
in proportion to the degree to which the accounting firm has accepted the
position of the other Party;
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<PAGE>
(d) The determination of any accounting firm so selected will be
conclusive and binding upon the Parties as to the final Closing Date Balance
Sheet;
(e) Within 15 days following the determination of the final Closing Date
Balance Sheet, the amount of any increase in the Share Purchase Price, if any,
shall be paid by the Buyer in cash or by immediately available funds; and
(f) any reduction in the Share Purchase Price following the determination
of the Closing Date Balance Sheet shall be subject to the same set off
procedures and limitations as set forth in Article 9.05.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
The Sellers, the Purchased Company, and the Shareholders where
specifically noted represent and warrant to the Buyer that the statements
contained in this Article III are correct and complete as of the date of this
Agreement. The Disclosure Schedule will be arranged in paragraphs corresponding
to the numbered and lettered paragraphs contained in this Article III. Terms
used in the Disclosure Schedule and not specifically otherwise defined shall
have the same meanings as in this Agreement.
3.01 Corporate Organization. MPH Crane, Inc is a corporation duly
organized, valid and subsisting, and in good standing under the laws of Ohio.
Its authorized capital consists of 50 Class A voting shares, and 450 Class B
non-voting shares. All shares have been issued and are outstanding as fully paid
and non-assessable. The Shareholders have delivered to the Buyer true, correct,
complete and up to date copies of the articles of incorporation and code of
regulations of MPH Crane, Inc. (as amended to date). The minute books containing
the records of meetings of the shareholders and the board of directors are
correct and complete in all Material respects. MPH Crane, Inc. is not in default
under, or in violation of, any provision of its articles or code of regulations.
In addition:
(a) Except with respect to the rights granted to Buyer pursuant to this
Agreement, there are no outstanding options, warrants, contracts, subscriptions,
commitments or other rights of any character which may entitle any Person to
acquire any of the issued or unissued capital stock of the Purchased Company
prior or subsequent to the Closing; and
(b) Shareholders have good, lawful and marketable title to, and record and
beneficial ownership of all of the issued and outstanding shares of the capital
stock of the Purchased Company. All such outstanding shares of the Purchased
Company have been duly authorized and issued, and are fully paid and are
nonassessable. Shareholders own all such shares free and clear of all liens,
security agreements, shareholders' agreements,
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<PAGE>
voting trust agreements and other claims and encumbrances. At the Closing, upon
Shareholders' delivery of the shares to Buyer, Buyer will own all of the issued
and outstanding capital stock of the Purchased Company, free and clear of all
liens, security agreements, shareholders' agreements, voting trust agreements
and other claims and encumbrances, except those that are the result of Buyer's
actions.
3.02 Authorization of Transaction. Shareholders and the Purchased Company
have full individual and corporate power and authority to execute and deliver
this Agreement and to perform their obligations to consummate the Transaction.
This Agreement has been duly and validly executed and delivered by the
Shareholders and constitutes a valid and legally binding obligation on their
behalf, and upon the Purchased Company, enforceable and effective in accordance
with its terms. Further, Sellers and Shareholders own respectively, with good
and marketable title, unencumbered by any Liability, option, right of first
refusal, or Security Interest, all of Acquired Real Estate and the Acquired
Shares, respectively, subject only to those items listed on the Disclosure
Schedule.
3.03 Noncontravention. Except as set forth in the Disclosure Schedule, the
execution and the delivery of this Agreement and the consummation of this
Transaction will not (1) violate any statute, regulation, rule, judgment, order,
decree, stipulation, injunction, charge, or other restriction of any government,
government agency or court, (2) violate any provision of the charter or code of
regulations of the Purchased Company, (3) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any contract, lease, sublease, license, assignment, sublicense, franchise,
permit, indenture, agreement, mortgage, promissory note or other evidence of
indebtedness, Security Interest, or any other agreement to which the
Shareholders or the Purchased Company is a party or bound, or to which the
Business is subject, or (4) result in the imposition of any Security Interest
upon any of the Purchased Company's assets or the Acquired Real Estate.
3.04 Financial Statements. All financial statements of the Purchased
Company provided to Buyer for the fiscal year ended October 31, 1995 and the
July 1996 financial statements, attached as Exhibit 1.01(b) (as agreed to after
adjustments) have been prepared in accordance with U.S. generally accepted
accounting principals applied consistently, and are attached as Exhibit 3. 04.
3.05 Events Subsequent to Most Recent Fiscal Year End. Other than as
listed on the Disclosure Schedule, since the most recent fiscal year end for the
Purchased Company (and other than as reflected on the July 1996 financial
statements), there has not been any Material adverse change in the assets,
Liabilities, Business, financial condition, operations (including any
substantial reduction in backlog or new orders, technical problems or delays in
availability of materials), or results of operations. Without limiting the
generality of the foregoing, since that date:
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(a) The Purchased Company has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for fair and adequate
consideration in the Ordinary Course of Business (and other than as required by
this Transaction);
(b) The Purchased Company has not entered into any contract, lease,
sublease, license, or sublicense either (l) involving more than $10,000 other
than to a product customer or vendor in the Ordinary Course of Business (other
than for the vehicle acquisitions which are listed on the Disclosure Schedule),
or (2) outside the Ordinary Course of Business;
(c) No Person has accelerated, terminated, modified, or canceled (other
than termination at the end of a scheduled term) any contract, lease, sublease,
license, or sublicense with the Purchased Company, involving more than $10,000;
(d) The Purchased Company has not granted, or become aware of the
existence of, any Security Interest upon any of its assets, tangible or
intangible;
(e) The Purchased Company has not made any capital expenditure (or series
of related capital expenditures) involving more than $50,000 in the aggregate;
(f) The Purchased Company has not created, incurred, assumed, or
guaranteed any indebtedness other than its trade payables, in excess of $10,000;
(g) The Purchased Company has not delayed or postponed beyond its normal
practice the payment of accounts payable and other Liabilities;
(h) The Purchased Company has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims) involving
more than $10,000 in the aggregate;
(i) The Purchased Company has not granted any license or sublicense of any
rights under, or with respect to, any Intellectual Property;
(j) The Purchased Company has not declared, set aside, or paid any
dividend or distribution with respect to its capital stock or redeemed,
purchased, or otherwise acquired any of its capital stock;
(k) The Purchased Company has not experienced any damage, destruction, or
loss in excess of $10,000 in the aggregate (whether or not covered by insurance)
to its property and assets;
(l) The Purchased Company has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees giving
rise to any claim or right on its part against any such person, or on the part
of any such person
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against it, which exceeds $10,000, other than reflected on the financial
statements of the Purchased Company or as set forth on the Disclosure Schedule;
(m) The Purchased Company has not entered into any new employment contract
or collective bargaining agreement, written or oral, or substantially modified
the terms of any existing such contract or agreement;
(n) The Purchased Company has not granted any increase outside the
Ordinary Course of Business in the base compensation of any of its directors,
officers, and employees (other than normal raises made consistent with past
practices and the salary doubling to Shareholders James Gann, Sr. and James
Gann, Jr.);
(o) The Purchased Company has not adopted any new (1) bonus, (2)
profit-sharing, (3) incentive compensation, (4) pension, (5) retirement, (6)
medical, hospitalization, life, or other insurance, (7) severance, or (8) other
plan, contract, or commitment for any of its directors, officers, and employees,
or substantially modified or terminated any existing such plan, contract, or
commitment;
(p) The Purchased Company has not made any other change in employment
terms for any of its directors, officers, or employees, either (l) outside the
Ordinary Course of Business, or (2) inconsistent with or substantially different
from, its prior practices.
(q) The Purchased Company has not made or pledged to make any charitable
or political contribution in excess of $5,000 in the aggregate;
(r) The Purchased Company has not entered into any merger, acquisition, or
consolidation agreement;
(s) The Purchased Company has not entered into an agreement, contract,
understanding or other transaction with, or made a payment to, any Affiliate of
the Purchased Company, or entered into or agreed to an amendment or modification
to an existing agreement, contract, understanding or other transaction with any
Affiliate, whether or not in the Ordinary Course of Business other than as set
forth on the Disclosure Schedule; and
(t) There has not been any other occurrence, event, incident, action,
failure to act, or transaction involving the Purchased Company (l) in excess of
$100,000 in the Ordinary Course of Business, or (2) in excess of $10,000 outside
the Ordinary Course of Business.
3.06 Undisclosed Liabilities. Other than as set forth on the Disclosure
Schedule, the Shareholders and the Purchased Company have no Knowledge of any
Material Liabilities except for (a) Liabilities set forth on the face of the
most recent
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balance sheet and (b) Liabilities which have arisen after the most recent
balance sheet in the Ordinary Course of Business.
3.07 Tax Matters.
(a) The Purchased Company has filed all Tax reports and returns that it
was required to file. All such reports and returns were correct and complete in
all Material respects. All Taxes owed by the Purchased Company have been paid or
adequate reserves for Taxes have been established on the books of the Purchased
Company. Other than as set forth on the Disclosure Schedule, the Purchased
Company is not currently the beneficiary of any extension of time within which
to file any report or return. No claim has been made within the last five years
by an authority in a jurisdiction where the Purchased Company does not file
returns that it is, or may be, subject to taxation by that jurisdiction. There
are no Security Interests in any of the assets of the Purchased Company that
arose in connection with any alleged failure to pay any Tax;
(b) The Purchased Company has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party; and
(c) To the Knowledge of the Shareholders and the Purchased Company, there
is no, nor has there ever been a dispute, threat, claim, notice of examination,
or an examination concerning any Tax Liability of the Purchased Company by any
governmental authority, other than for the resolved dispute with the IRS for tax
years 1990 through 1992, and except as set forth in the Disclosure Schedule.
3.08 Tangible Assets. The Purchased Company owns or leases all tangible
assets used in the conduct of the Business. Section 3.08 of the Disclosure
Schedule lists all of the leased property. To the Knowledge of Shareholders and
the Purchased Company, each tangible asset is free from substantial defects, has
been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear), and is
functioning properly for the purposes for which it presently is used.
3.09 Owned and Leased Real Property. The Purchased Company owns or leases
the real estate set forth on ss.3.09 of the Disclosure Schedule. The Purchased
Company does not now own or lease real estate other than that set forth on the
Disclosure Schedule, other than for an office in an office park in Centerville,
Ohio during the mid-1980's. To Sellers' Knowledge with respect to the Acquired
Real Estate and the Dayton facility, there are no (1) pending or threatened
expropriation proceedings or planned special assessments relating to the
property, (2) pending or threatened litigation or administrative actions
relating to the property, (3) orders or rulings by any court or governmental
agency requiring repairs, alterations or corrections of any existing conditions
of the property, or (4) other matters Materially affecting adversely the current
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business use, occupancy, or value thereof. In regard to the Acquired Real Estate
and the Dayton facility, the Sellers and the Purchase Company represent that:
(a) To the Knowledge of Sellers and the Purchased Company, (1) the legal
descriptions for the parcels contained in the respective deeds describes such
parcels fully and adequately, (2) the buildings and improvements are located
within the boundary lines of the described parcels of land, are not in violation
of applicable setback requirements, zoning laws, and ordinances (and none of the
properties or buildings or improvements thereon are subject to "permitted
non-conforming use" or "permitted nonconforming structure" classifications), and
do not encroach on any easement which may burden the land, (3) the properties
are not located within any flood plain or subject to any similar type
restriction for which any permits or licenses necessary to the use have not been
obtained, and (4) access to the properties is provided by paved public
right-of-way with adequate curb cuts available;
(b) All facilities have received all approvals of governmental authorities
(including licenses and permits) required in connection with their ownership and
operation, and have been operated and maintained in all Material respects for
current business purposes in accordance with applicable laws, rules, and
regulations;
(c) There are no outstanding options or rights of first refusal to third
parties to purchase any interest in any portion of the real property which is
owned by the Purchased Company;
(d) There are no parties in possession of the parcels of real properties
other than the Purchased Company;
3.10 Intellectual Property.
(a) To the Knowledge of Sellers and the Purchased Company, the Purchased
Company owns, or has the right to use pursuant to a license, sublicense,
agreement, or permission, all Intellectual Property used in the operation of the
Business. No claim or notice has been made by a third party that the Purchased
Company has inappropriately used Intellectual Property, or that a third party
intends to cancel a license, sublicense or agreement which currently allows the
Purchased Company to use certain Intellectual Property;
(b) To the Knowledge of Sellers and the Purchased Company, ss.3.10 (b) of
the Disclosure Schedule identifies each patent or registration which has been
issued to the Purchased Company with respect to any of its Intellectual
Property, identifies each trademark and registered copyright, identifies each
pending patent application or application for registration which the Purchased
Company has made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which the Purchase
Company has granted to any third party with respect to any of its Intellectual
Property;
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(c) To the Knowledge of Sellers and the Purchased Company, ss.3.10 (c) of
the Disclosure Schedule identifies each item of Intellectual Property that any
third party owns and that the Purchased Company uses pursuant to license,
sublicense, agreement, or permission (other than non-proprietary computer
software and similar licenses); and
(d) All licenses are in good standing, with all fees having been paid on a
timely basis.
3.11 Inventory. The inventory owned by the Purchased Company consists of
raw materials, supplies, manufactured and purchased parts, work in process and
finished goods, all of which is of a quality and quantity useable and saleable
at greater than or equal to the value on the financial statements in the
Ordinary Course of Business. The inventory is free and clear of any Security
Interest, except as set forth on the Disclosure Schedule. All reserves for
excess and obsolete inventory are adequate.
3.12 Contracts. ss.3.12 of the Disclosure Schedule lists (by Subparagraph)
the following contracts, agreements, and other written arrangements to which the
Purchased Company is a party to:
(a) Any written agreement or arrangement concerning a partnership or joint
venture;
(b) Any written agreement (or group of related written arrangements) under
which it has created, incurred, assumed, or guaranteed (or may create, incur,
assume, or guarantee) non-trade indebtedness involving more than $5,000, or
under which it has granted or permitted (or may grant or permit) a Security
Interest on any of its assets, tangible or intangible;
(c) Any written agreement concerning confidentiality or noncompetition;
(d) Any written agreement between or involving the Purchased Company and
any of its Affiliates;
(e) Any written agreement with any of the directors, officers, and
employees of the Purchased Company in the nature of a collective bargaining
agreement, employment agreement, or severance agreement;
(f) Any written agreement to which a government department is a party;
(g) Any written agreement providing for indemnification for or against any
Liabilities of any third party;
(h) Any written agreement in which the Purchased Company anticipates
taking a Material loss;
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(i) Any written agreement under which the consequences of a default or
termination could have a Material adverse effect on the assets, Liabilities,
Business, financial condition, operations, results of operations, or future
prospects of the Purchased Company taken as a whole; and
(j) Any other written agreement not entered into in the Ordinary Course of
Business.
The Shareholders have delivered to the Buyer, or showed to Buyer with an offer
to provide to Buyer, a correct and complete copy of each written agreement
listed above, or has set forth a description of the written agreement in the
Disclosure Schedule. To the Knowledge of the Shareholders and the Purchased
Company, with respect to each written agreement so listed: (1) the written
agreement is legal, valid, binding, enforceable, and in full force and effect in
accordance with its terms and conditions, (2) other than as set forth on the
Disclosure Schedule, the written agreement will continue to be legal, valid,
binding, and enforceable and in full force and effect on identical terms
following the Closing, (3) no party is in breach or default, and no event has
occurred which would constitute a breach or default or permit termination,
modification, or acceleration, under the written agreement, and (4) no party has
repudiated any provision of the written arrangement.
To the Knowledge of the Shareholders and the Purchased Company, the Purchased
Company is not a party to any verbal contract, agreement, or other arrangement
which, if reduced to written form, would be required to be listed in ss.3.12 of
the Disclosure Schedule. To the Knowledge of Shareholders and the Purchased
Company, there is no contract bid currently outstanding which, if accepted,
would result in any loss. All purchase orders and commitments of the Purchased
Company were entered into in the Ordinary Course of Business. To the Knowledge
of Shareholders and the Purchased Company, no supplier has indicated within the
past year that it will stop, or decrease the rate of, supplying materials,
products, or services and no customer has indicated within the past year that it
will stop, or decrease the rate of, buying materials, products, or services from
the Purchased Company.
3.13 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Purchased Company other than as disclosed in the
Disclosure Schedule.
3.14 Insurance. ss.3.14 of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, cargo liability, workers' compensation coverage,
and bond and surety arrangements) to which the Purchased Company is currently a
party, a named insured, or otherwise the beneficiary of coverage, including:
(a) the name, address, and telephone number of the agent;
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(b) as an exhibit to the Disclosure Schedule, a list of each such policy
(or binders for current policies) and;
(c) a list of any retroactive premium adjustments or other loss-sharing
arrangements.
Sellers and the Purchased Company warrant that there are no retroactive premium
adjustments, self insured retentions, or other loss-sharing arrangements.
To the Knowledge of Sellers and the Purchased Company, and other than as
set forth on the Disclosure Schedule, for each insurance policy currently in
effect (1) the policy is legal, valid, binding, enforceable, and in full force
and effect, (2) the policy will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms up to and on the
Closing Date, (3) neither the Purchased Company nor any other insured party is
in breach, (4) no event has occurred which is a breach or default or which would
permit termination, modification, or acceleration under the policy, and (5) no
party to the policy has repudiated any of its provisions.
3.15 Litigation. ss.3.15 of the Disclosure Schedule sets forth each
instance in which the Purchased Company (1) is subject to any unsatisfied
judgment, order, decree, stipulation, injunction, or charge or (2) is a party to
or, to the Knowledge of the Shareholders or the Purchased Company, is threatened
to be made a party to, any charge, complaint, action, claim, suit, proceeding,
hearing, or investigation in any court, government department, agency,
commission, board, authority, other administrative agency, or before any
arbitrator to the extent that such instance would have a Material adverse effect
on the Business.
3.16 Product Warranty. Each product manufactured, sold, leased, or
delivered by the Purchased Company in the Ordinary Course of Business has been
in conformity in all Material respects with all applicable commitments and all
express and implied warranties. Other than as set forth on the Disclosure
Schedule, no product manufactured, sold, leased, or delivered by the Purchased
Company is subject to any guaranty, warranty, or other indemnity which exposes
the Purchased Company to Material Liability beyond the standard terms and
conditions of sale or lease generally used by the Purchased Company.
3.17 Product Liability. Other than as set forth on the Disclosure
Schedule, the Shareholders and the Purchased Company have no Knowledge of any
facts which are likely to give rise to any Liability arising out of any death or
injury to persons or damage to property as a result of the ownership,
possession, maintenance, or use of any product designed, manufactured, sold,
leased, or delivered by the Purchased Company.
3.18 Employees. To the Knowledge of Sellers and the Purchased Company (1)
no key employee or group of employees has any plans to terminate employment with
the
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Purchased Company, (2) the Purchased Company is in compliance with all federal
and state laws respecting employment, wages, and hours, and (3) the Purchased
Company has not engaged in any discriminatory hiring or employment practices, or
any unfair labor practices, nor have any employment discrimination or unfair
labor practice complaints against the Purchased Company been filed, or
threatened to be filed, with any federal or state agency having jurisdiction
over labor matters, except as set forth on the Disclosure Schedule. To the
Knowledge of the Sellers and the Purchased Company, no employee has asserted or
threatened to assert that the Purchased Company is liable for any arrears of
wages, benefits, damages or any taxes or penalties for failure to comply with
any of the foregoing.
3.19 Employee Benefits. ss.3.19 of the Disclosure Schedule lists all
employee benefit plans that the Purchased Company maintains or to which it
contributes for the benefit of any current or former employee. In addition:
(a) To the Knowledge of the Sellers and the Purchased Company, there have
been no inappropriate transactions with respect to any employee benefit plan
which could result in a Material Liability to the Purchased Company. No charge,
complaint, action, suit, proceeding, hearing, investigation, claim, or demand
with respect to the administration or the investment of the assets of any
employee benefit plan (other than routine claims for benefits) is pending or, to
the knowledge of the Shareholders or the Purchased Company, threatened. The
Shareholders and the Purchased Company have no knowledge of any basis for any
such charge, complaint, action, suit, proceeding, hearing, investigation, claim
or demand;
(b) all employee benefit plans are fully funded, and no plan is under
funded;
(c) the Shareholders and the Purchased Company do not contribute to, nor
have they ever been required to contribute to, any multi employer plan which
exposes the Purchased Company to Liability; and
(d) the Purchased Company has no post-retirement medical obligations or
plans.
3.20 Guaranties. The Purchased Company is not a guarantor or indemnitor,
and is not otherwise liable, for any Liability (including indebtedness) of an
Affiliate or any other Person, other than for the items set forth on the
Disclosure Schedule.
3.21 Health and Safety.
(a) To the Knowledge of the Shareholders and the Purchased Company, the
Purchased Company has obtained all permits, licenses and other authorizations
which are legally required concerning public health and safety, and worker
health and safety;
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(b) To the Knowledge of the Shareholders and the Purchased Company, the
Purchased Company is in compliance with all terms and conditions of all health
and safety permits, licenses, and required authorizations; and
(c) To the Knowledge of the Shareholders and the Purchased Company, the
Purchased Company is in compliance with all health and safety laws. Further, to
the Knowledge of the Shareholders and the Purchased Company, no facts, events or
conditions with respect to any past or present operations or facilities of the
Purchased Company, interfere with, or prevent continued compliance with, health
and safety laws, nor are there any investigations, inquiries, notices or
proceedings pending or threatened with regard to violation of any health or
safety law.
3.22 Legal Compliance.
(a) To the Knowledge of the Shareholders and the Purchased Company, other
than as set forth on the Disclosure Schedule, the Purchased Company is in
compliance with all laws (including rules, regulations, and orders hereunder) .
Further, the Purchased Company has not received any notice of non-compliance
with any law (including rules, regulations, and orders hereunder) with an
exposure in excess of $50,000. No charge, complaint, action, suit, proceeding,
hearing, investigation, claim, demand, or notice has been filed or commenced
against the Purchased Company alleging any failure to comply with a law.
(b) To the Knowledge of Shareholders and the Purchased Company, the
Purchased Company has not:
(1) made or agreed to make any contribution, payment, or gift of
funds or property to any governmental official, employee, or agent where
the contribution, payment, or gift or its purpose, was illegal;
(2) established or maintained any unrecorded fund or asset for any
purpose, or made any false entries on any books or records for any reason;
and
(3) made or agreed to make any contribution, or reimbursed any
political gift or contribution made by any other person, to any candidate
for federal, state, provincial, municipal, local, or other public office.
(c) To the Knowledge of Shareholders and the Purchased Company, the
Purchased Company has possession of all records and documents it was required to
retain under all laws and regulations.
(d) To the Knowledge of the Shareholders and the Purchased Company, the
Purchased Company possesses all licenses, permits, authorizations, franchises
and other approvals adequate in all Material respects for the current conduct of
the Business, and none of these will be canceled or terminated by virtue of this
Transaction.
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3.23 Brokers' Fees. The Shareholders and the Purchased Company have no
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to this Transaction, other than fees to its lawyers and
accountants which shall be fully satisfied prior to Closing or reserved on the
Closing Date Balance Sheet.
3.24 Disclosure. To the Knowledge of Shareholders and the Purchased
Company, neither this Agreement, nor any of the related schedules, exhibits, and
attachments contain any untrue statement of a Material fact or omit a Material
fact necessary to make each statement accurate. To the Knowledge of Shareholders
and the Purchased Company, there is no fact not disclosed to the Buyer in
writing and which has had, or would be anticipated to have, a Material adverse
effect upon the Purchased Company or upon the existing or expected financial
condition, operating results, assets, customer or supplier relations, employee
relations or business prospects of the Business.
3.25 Energy. To the Knowledge of the Shareholders and the Purchased
Company, except as set forth on the Disclosure Schedules, no source of energy or
utility service has, within two (2) years prior to this Agreement, reduced or
terminated services to the Purchased Company, nor has the Purchased Company
received any notice threatening to reduce, terminate, ration or subject to
allotment any supply of energy or utility services in the future.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Shareholders that the statements
contained in this Article IV are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date.
4.01 Organization of the Buyer. The Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of Delaware.
4.02 Authorization of Transaction. The Buyer has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations. This Agreement constitutes the valid
and legally binding obligation of the Buyer, enforceable and effective in
accordance with its terms and conditions.
4.03 Noncontravention. The execution and the delivery of this Agreement
and the consummation of this Transaction will not (l) violate any statute,
regulation, rule, judgment, order, decree, stipulation, injunction, charge, or
other restriction of any government, government agency or court, (2) violate any
provision of the articles of incorporation or bylaws of the Buyer, (3) or
conflict with, result in a breach of, constitute a default under, any
contractual obligation of the Buyer.
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4.04 Brokers' Fees. The Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to this
Transaction.
ARTICLE V
ENVIRONMENTAL MATTERS
5.01 Definitions. As used in this Agreement:
(a) "Environment" shall mean ambient air, land surface, subsurface
soil, surface and subsurface water, groundwater, and/or natural resources,
wherever located.
(b) "Environmental Claim" shall mean any claim, demand, suit,
action, notice order, direction, notice of noncompliance, notice of violation,
lien, investigation, administrative proceeding, judicial proceeding or civil
action by or from any person, including any Governmental Authority, alleging
liability, responsibility, obligation or commitment under any Environmental Law.
(c) "Environmental Condition" shall mean (i) any Environmental
Release which occurred or existed prior to the Closing Date on, at, in, under or
from any property ever owned or used by the Purchased Company ("Real Property");
(ii) any Environmental Release which occurred or existed prior to the Closing
Date on, at, in, under or from any location in the world other than the Real
Property, to the extent such Hazardous Material is related to or from the
Business; (iii) any violation or non-compliance of any Environmental Law which
occurred or existed prior to the Closing Date in any way involving or related to
the Real Property or Business; (iv) any injury (including but not limited to
bodily injury, personal injury or Death) to any natural person where such injury
arises out of or arises from any exposure to, contact with, absorption of, or
infestation of any Hazardous Material which is or was the subject of an
Environmental Release; (v) any damage or injury (including but not limited to
diminution in value, loss of use, or economic loss) to real or tangible property
of any person or entity which occurs prior to the Closing Date, where such
injury arises out of or arises from any Hazardous Material which is or was the
subject of an Environmental Release.
(d) "Environmental Law" shall mean any Legal Requirement in any way
pertaining to the Environment and/or the regulation of pollution, human health
or welfare as affected by the Environment (including, without limitation, any
Legal Requirement relating to any Environmental Release or Remedial Action, or
relating to the presence, use, possession, control, manufacture, processing,
distribution, production, generation, handling, labeling, storage,
transportation or treatment of any Hazardous Material), including without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C. Sec. 9601 et seq. and 40 C.F.R. Sec. 302.1 et seq.), the
Resource Conservation and Recovery Act of 1976 (42 U.S.C. Sec.
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6901 et seq.), the Federal Water Pollution Control Act as amended by the Clean
Water Act of 1977 (33 U.S.C. Sec. 1251 et seq.), the Clean Air Act (42 U.S.C.
Sec. 7401 et seq.), the Emergency Planning and Community Right-To-Know Act (42
U.S.C. Sec. 11000 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. Sec. 1801 et seq.), the Toxic Substances Control Act (15 U.S.C. Sec. 2601
et seq.), and any similar state or local laws.
(e) "Environmental Liabilities of the Purchased Company" shall mean
all obligations, responsibilities, commitments and liabilities under any
Environmental Law in any way arising from, arising out of, or related to any
Environmental Condition for which Buyer provides written notice to Shareholders
within four (4) years after the Closing Date, and provided such Environmental
Condition was caused by the Purchased Company prior to the Closing Date.
(f) "Environmental Permits" shall mean any permit, license,
certificate, consent, approval or authorization under any Environmental Law.
(g) "Environmental Release" shall mean any deposit, disposal,
discharge, dispersal, emission, leaching, leaking, injection, migration,
presence, release, or spill of Hazardous Material into the Environment or
property.
(h) "Governmental Authority" means the government of the United
States of America, any state in the United States of America, and any municipal
entity or body politic in any state, or any agency, authority, board, bureau,
district, department, commission or instrumentality (including any court or
other tribunal) of any of the foregoing.
(i) "Hazardous Material" means: (i) any material, substance,
chemical, waste, contaminant or pollutant which is regulated, listed or defined
as hazardous, extremely hazardous, toxic, dangerous, infectious, ignitable,
corrosive, flammable irritant, explosive, radioactive, nuclear, restricted, or a
nuisance, or words of similar import, under any Environmental Law; (ii) any
petroleum substance, petroleum product, underground storage tank, underground
receptacle, above ground storage tank, asbestos containing material, urea
formaldehyde foam insulation, or any transformer or other equipment containing
PCBs; or (iii) any other material substance, chemical, waste, contaminant or
pollutant, the exposure to, Environmental Release of or presence in the
Environmental Law or which has been determined to be harmful to human health,
welfare or the Environment.
(j) "Legal Requirement" means any statute, law, code, ordinance,
regulation, rule, directive, requirement (including those contained in
Environmental Permits), order, judgment, writ, injunction, ruling, decree,
bylaw, case law, or common law, whether presently in effect or hereinafter
enacted, adopted, promulgated or issued, of any Governmental Authority.
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(k) "Remedial Action" means any action to investigate, evaluate,
assess, test, monitor, remove, respond to, treat, neutralize, contain, isolate,
prevent, restore, rehabilitate, abate, repair, replace, remedy, correct,
clean-up or otherwise remediate the Environmental Release or presence of any
Hazardous Material in the Environment.
5.02. Representations and Warranties.
(a) Environmental Compliance.
(1) The Real Property, when owned or used by the Purchased Company,
was, and is, not in direct or indirect violation of any Environmental Law; and
(2) The Purchased Company (i) is in compliance with all applicable
Environmental Laws (other than Environmental Laws and Liabilities imposed solely
under statutes enacted after the Closing Date which impose a new scope of
liability not existing under previous law) and Environmental Permits; (ii) has
never received any Environmental Claim; (iii) knows of no basis for an
Environmental Claim; (iv) has never received any written communication from any
person, including any Governmental Authority, alleging that it is in
noncompliance with or in violation of any Environmental Law; (v) to the
Knowledge of the Shareholders and the Purchased Company is not under
investigation by any Governmental Authority for the failure to comply with any
Environmental Law; (vi) has never been required to take any Remedial Action with
respect to any property; (vii) has never paid any fine, forfeiture, penalty or
assessment to any Governmental Authority under any Environmental Law, and (viii)
has never made any untrue or misleading statement, certification, warranty or
representation in any document submitted to any Governmental Authority in
connection with any Environmental Law.
(b) Environmental Permits.
(1) The Purchased Company has obtained all Environmental Permits as
are necessary or required under Environmental Laws (other than Environmental
Laws and Liabilities imposed solely under statutes enacted after the Closing
Date which impose a new scope of liability not existing under previous law) in
connection with the operation of the Business. All such Environmental Permits
are in good standing; and
(2) The Purchased Company is in compliance with all terms and
conditions of all Environmental Permits, and it has never violated any term or
condition of any Environmental Permit.
(c) Pending Claim.
(1) The Real Property is not subject to any private or governmental
lien or judicial or administrative notice or action relating to any Hazardous
Material; and
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(2) There is no Environmental Claim pending or to the Knowledge of
the Shareholders and the Purchased Company threatened (i) against the Purchased
Company in connection with the Real Property or the operation of the Business,
(ii) against any person whose liability the Purchased Company has retained or
assumed either contractually or by operation of law, or (iii) against any real
property, personal property or operation which was formerly owned, used, leased
or operated by the Purchased Company.
(d) Disposal of Hazardous Materials. The Purchased Company nor any person
acting on behalf of it have ever transported for the disposal, treatment, or
recycling, or made arrangements for transportation, disposal, treatment or
recycling, of any Hazardous Material from any real property at anytime owned,
operated, used or leased by the Purchased Company to any other location, other
than in compliance with Environmental Law.
(e) Environmental Condition of Property. To the Knowledge of the
Shareholders and the Purchased Company, the Real Property, including any
improvements thereon and any soil, subsurface water, surface water and
groundwater at or under such Property:
(l) is not contaminated by any Hazardous Material;
(2) does not contain any Hazardous Material;
(3) specifically does not contain any petroleum product, asbestos
containing material, or urea formaldehyde foam;
(4) does not contain any fill material which contains a Hazardous
Material;
(5) never contained any above ground storage tank, underground
storage tank or other underground storage receptacle;
(6) has never been used for the treatment, disposal, deposit,
recycling, land filling, or dumping of any Hazardous Material;
(7) has never been affected by an Environmental Release;
(8) does not contain a condition that is a threat to the Environment
in such a way as to give rise to an Environmental Claim;
(9) to the Knowledge of Shareholders and the Purchased Company, does
not face any risk of contamination of any Hazardous Material from any nearby
property;
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(10) has never been the subject of any Remedial Action, or have any
action taken to abate, restore, repair or remedy any nuisance or other condition
adversely affecting the Environment; and
(11) does not contain any wetlands.
5.03. Environmental Indemnity. Subject to the limitations set forth in
Section 9.05:
(a) Shareholders shall defend, indemnify and hold Buyer and the Purchased
Company harmless from and against any and all losses, damages, costs, expenses,
liabilities and obligations, including, without limitation, settlement costs,
judgments, interest, penalties and reasonable attorneys' fees and other
reasonable legal costs and expenses for investigating or defending any actions,
claims or proceedings which Buyer or the Purchased Company may incur, or become
subject to, based upon, arising out of, relating to, or resulting from any
Environmental Liabilities of the Purchased Company.
(b) Regarding Remedial Action. Shareholders shall undertake any Remedial
Action, or provide indemnification for any Remedial Action, where (1) Remedial
Action is required by any Governmental Authority, or (2) a Hazardous Material is
present at any location subject to a Remedial Action at a level which exceeds
any applicable standard or limit under any Environmental Law.
ARTICLE VI
CONDITIONS TO OBLIGATION TO CLOSE
6.01 Conditions to Obligation of the Buyer. The obligation of the Buyer to
close this Transaction is subject to the following conditions:
(a) The Shareholders and the Purchased Company will have taken all
necessary individual and corporate actions to approve and authorize this
Agreement and this Transaction, including all necessary shareholder and Board of
Director actions;
(b) The representations and warranties set forth in Article III above
shall be true and correct in all Material respects as of the Closing Date;
(c) The Shareholders and the Purchased Company shall have performed and
been in substantial compliance with all of their covenants, agreements and
conditions required by this Agreement at that time;
(d) No action, suit, or proceeding shall be finalized, pending or
threatened in which an unfavorable judgment, order, decree, finding,
stipulation, determination, ruling, injunction, or charge does, or would (1)
prevent consummation of any of this Transaction, (2) declare unlawful any
portion of this
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Transaction, (3) cause any portion of this Transaction to be rescinded following
consummation, or (4) Materially affect adversely the right of the Buyer to own,
operate, or control the Purchased Company;
(e) The Shareholders Jim Gann, Sr. and Jim Gann, Jr. shall have entered
into a Consulting Agreement and an Employment Agreement, respectively, with the
Purchased Company and Harnischfeger Corporation substantially in the forms
attached hereto as Exhibits 6.01 (e) (1) and 6.01 (e) (2), and 2) the Purchased
Company shall have entered into employment contract with certain employees of
the Purchased Company substantially on the form attached hereto as Exhibit 6.01
(e) (3);
(f) The Buyer shall have received from counsel to the Shareholders and the
Purchased Company an opinion with respect to the matters set forth in Article
6.01 in an acceptable form, addressed to the Buyer and dated as of the Closing
date;
(g) The Shareholders and the Purchased Company will have delivered to the
Buyer all of the following documents:
(1) a certificate (without qualification as to knowledge,
materiality or otherwise) to the effect that each of the conditions specified
above in ss.6.01(a) through ss.6.01(d), inclusive, is satisfied in all respects;
and
(2) certified copies of the resolutions duly adopted by the
Purchased Company's board of directors authorizing the execution, delivery and
performance of this Agreement and this Transaction;
(h) All actions to be taken by the Shareholders and the Purchased Company
in connection with consummation of this Transaction will be adequate in form and
substance, in the opinion of Buyer, to close this Transaction;
(i) Shareholders shall tender all share certificates of the Acquired
Shares to Buyer, and execute all documents necessary to transfer ownership;
(j) Sellers shall deliver to Buyer (1) a general warranty deed for the
Acquired Real Estate, in form and substance acceptable to Buyer, conveying fee
simple title to the Acquired Real Estate free and clear of all liens,
restrictions and encumbrances except for permitted exceptions, (2) evidence of
fee simple ownership of the Dayton facility, satisfactory to Buyer, and (3) the
most recent title insurance policy on the Dayton facility;
(k) Sellers shall tender all documents to Buyer necessary to effectuate
the transfer of the Acquired Real Estate, and the Buyer shall reimburse 50% of
the cost to Sellers, for the following:
(l) The Buyer shall have received from a nationally recognized title
insurance company (the "Title Company") satisfactory to the Buyer a fee owner's
title insurance policy issued to the Buyer with respect to the Acquired Real
Estate, in form and substance satisfactory to the Buyer, together with
endorsements reasonably requested by
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the Buyer, in an amount determined by the Buyer, insuring the Buyer and issued
as of the Closing Date by the Title Company, showing the Buyer or one of Buyer's
subsidiaries to have a fee simple title to the Acquired Real Estate, and a valid
leasehold estate in the Acquired Real Estate, in each case subject only to
permitted encumbrances. Shareholders shall have delivered to the Title Company
any affidavits or indemnities required by the Title Company in connection with
the delivery of the owner's title policies and leasehold title policies;
(2) The Buyer shall have received a survey of the Acquired Real
Estate, dated within 30 days of the Closing Date, prepared by a certified or
registered surveyor reasonably acceptable to the Buyer and the Title Company and
certified to the Buyer and the Title Company in form and substance satisfactory
to the Buyer and the Title Company, complying with the current Minimum Standard
Detail Requirements for ALTA/ACSM Land Title Surveys and (i) setting forth an
accurate description of the real estate, (ii) locating all improvements,
encumbrances (setting forth the recording information of any recorded
instruments), setback lines alleys, streets and roads, (iii) showing any
encroachments upon or by any improvements on such parcels, and (iv) showing all
dedicated public streets providing access to such parcels; and
(3) The Buyer shall have received fully executed originals of all
documents required to effectuate the transfer of title in the Acquired Real
Estate.
(l) Buyer shall have approved all forms to accomplish the divestiture by
the Purchased Company of the Landol roll back trailer business, the boat, and
any other asset agreed to by the Parties;
(m) The Purchased Company's accounts payable are current in accordance to
the terms of sale and/or purchase with Harnischfeger Corporation and its
subsidiaries.
(n) [intentionally left blank]
(o) An insurance certificate is delivered by Shareholders which list the
Purchased Company as being insured for 2 years after the Closing Date for
selling and/or servicing Landoll Trailers;
(p) Shareholders Jim Gann, Sr. and Jim Gann, Jr. shall have entered into
non-compete agreements which are acceptable to all Parties;
(q) Buyer shall have received all documentation necessary to ensure that
the property tax abatement for the Franklin facility shall not be adversely
affected by this Transaction;
(r) Shareholders and Buyer shall have entered into a separate contract for
handling the dispute with Fujitec;
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(s) The Purchased Company has negotiated a satisfactory resolution with
its lenders so as not to be in a default arising out of this Transaction; and
(t) During the Closing, the Purchased Company will hold a Shareholders
Meeting at which the resignation of board members appointed by Shareholders will
take place and, simultaneously, the Buyer will appoint its own members to the
Board of Directors of the Purchased Company. At the same Shareholders Meetings,
any and all powers of attorneys granted by the Purchased Company as of the
Closing Date will be canceled and revoked and new powers of attorney granted.
The Buyer may waive any condition specified in this ss.6.01 if it executes a
writing so stating at or prior to the Closing.
6.02 Conditions to Obligation of the Shareholders. The obligation of the
Shareholders to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(a) The Buyer will have taken all necessary corporate actions to approve
and authorize this Agreement and this Transaction on terms and conditions
satisfactory to the Shareholders, including all necessary Board of Director
actions;
(b) The representations and warranties set forth in Article IV above shall
be true and correct in all Material respects as of the Closing Date;
(c) The Buyer shall have performed and been in substantial compliance with
all covenants, agreements and conditions;
(d) No action, suit, or proceeding shall be finalized, pending or
threatened in which an unfavorable judgment, order, decree, finding,
stipulation, determination, ruling, injunction, or charge does, or would (1)
prevent consummation of any of this Transaction, (2) declare unlawful any
portion of this Transaction, or (3) cause any portion of this Transaction to be
rescinded following consummation;
(e) The Shareholders shall have received from counsel to the Buyer an
opinion with respect to the matters set forth in Article 6.02 in a form
acceptable to Shareholders, addressed to the Shareholders and dated as of the
Closing Date;
(f) Shareholders Jim Gann, Sr. and Jim Gann, Jr. shall have entered into a
Consulting Agreement and an Employment Agreement, respectively, with the
Purchased Company and Harnischfeger Corporation which are substantially in the
forms attached as Exhibits 6.01 (e) (1) and 6.01 (e) (2);
(g) At or immediately after Closing, the Buyer shall pay off the bank
loans on the Acquired Real Estate and of the Purchased Company, and shall use
its reasonable efforts, which does not include payment of moneys or providing
other consideration, to
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obtain the release of Shareholders from all personal guarantees given by them in
respect of any obligations of the Purchased Company; and
(h) Buyer shall have tendered the consideration required under the terms
of Section 2.02.
The Shareholders may waive any condition specified in this ss.6.02 if it
executes a writing so stating at or prior to the Closing.
ARTICLE VII
TERMINATION
7.01 Termination of Agreement. The Parties may terminate this Agreement as
provided in ss.6.01, ss.6.02, and as provided below.
(a) the Buyer and the Shareholders may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written notice to the
Shareholders at any time prior to the Closing in the event the Shareholders or
the Purchased Company are in breach in any Material respect, and the
Shareholders and the Purchased Company may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing in the event the
Buyer is in breach in any Material respect; provided, however, that should the
breach be curable, then the notice must provide a reasonable time and method for
the breaching Party to cure; and
(c) any Party may terminate this Agreement by giving written notice to the
other Parties should Closing not occur by February 14, 1997.
7.02 Effect of Termination. If any Party terminates this Agreement
pursuant to ss.7.01 above, all obligations of the Parties for this Transaction
shall terminate without any Liability, except for any Liability of any Party
then in breach; provided, however, that the provisions of ss.10.02 and ss.10.12
of this Agreement shall survive any such termination.
ARTICLE VIII
ADDITIONAL COVENANTS
The Parties agree as follows with respect to the period following the
Closing:
8.01 General. Should any further action be necessary or desirable after
the Closing to carry out the purposes of this Agreement or this Transaction,
each of the Parties will take such further action and execute such further
documents as the other Party
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reasonably requests, at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification for the action under
Article IX below).
8.02 Litigation Support. All Parties will, subject to any limitations that
are reasonably required to preserve applicable attorney-client and other
privileges, cooperate with the other Parties and their counsel in any lawsuit or
dispute resolution with third parties, make available its personnel, and provide
such reasonable testimony and access to its books and records as may be
necessary, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification for the action under Article IX
below).
8.03 Transition. The Shareholders will not take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of the Purchased Company from
maintaining the same business relationships with the Purchased Company as
maintained prior to the Closing. The Shareholders will refer (or handle as an
employee of the Purchased Company) all customer inquiries relating to the
Business of the Purchased Company to the Purchased Company after the Closing.
8.04 Tax Matters. The Shareholders will be responsible for and will pay
all Taxes and fees incurred by the Shareholders or the Purchased Company (other
than as reflected on the Closing Date Balance Sheet), and Buyer will pay all
Taxes and fees incurred by Buyer, arising out of or in connection with this
Transaction. The Shareholders shall prepare and file the relevant Tax returns
and pay the taxes (other than as reflected on the Closing Date Balance Sheet)
shown to be due on such Tax returns.
8.05 Access to Books and Records After Closing. The Parties agree that,
for the purposes of this section, the "Access Period" is defined as the longer
of (a) a period of five years following the Closing Date or (b) the period of
time beginning on the Closing Date and ending on the date on which Taxes may no
longer be assessed under the applicable statutes of limitations, including
period of waivers or extensions. The Shareholders covenant and agree to maintain
in a reasonably accessible place during the Access Period, the books and records
not delivered to Buyer relating to the Business, to provide Buyer and its
representatives reasonable access to such books and records during normal
business hours, and to provide copies of such books and records to Buyer or its
representative at Buyer's expense. Shareholders agree to notify Buyer prior to
disposing of any such books and records and, upon request made within 60 days
after receipt of such notice, to deliver such books and records to Buyer at
Buyer's expense. With respect to the books and records delivered to Buyer in
this Transaction, Buyer covenants and agrees to give the Shareholders the same
access for the same time period and agrees to give the Shareholders the same
notice and rights in the event of any proposed disposition of such books and
records.
8.06 Dayton Facility Sale. The Purchased Company shall continue after the
Closing to attempt in good faith to sell the Dayton facility. The Sellers agree
to cooperate
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with the Purchased Company in marketing and selling the facility. The Parties
agree that the Purchased Company shall be under no obligation to accept any
offer to sell the Dayton facility within the first twenty-four (24) months after
the Closing Date for any amount less than $1.3 million, other than at a purchase
price which the Buyer, in its sole discretion, deems reasonable. If the
Purchased Company receives an offer during the 24 months equal to or greater
than $1.3 million, the Purchased Company must accept such offer to sell the
Dayton facility, net of any fees, commissions or other expenses related to the
sale, and which is not subject to any indemnification, tail liabilities, or
contingencies. After that time, the Purchased Company must accept any offer to
sell the Dayton facility which is in excess of $700,000.00, net of any fees,
commissions or other expenses related to the sale, and which is not subject to
any indemnification, tail liabilities, or contingencies.
ARTICLE IX
SURVIVAL; INDEMNIFICATION
9.01 Survival. All of the representations, warranties, covenants and
agreements of the Buyer, the Purchased Company, and the Shareholders contained
in this Agreement, the Disclosure Schedule, and any certificate or document
described pursuant to this Agreement, shall survive the Closing and continue in
full force and effect indefinitely, other than the non-Tax representations and
warranties which shall continue in full force and effect for only four (4)
years, at which time they shall expire. In the case of any conflict between this
Section and Section 9.05, Section 9.05 shall govern.
9.02 Indemnification Provisions for Benefit of the Buyer and the Purchased
Company. Subject to Section 9.01, the Sellers agree to indemnify and save
harmless the Buyer and the Purchased Company, and each director, officer,
employee, agent or Affiliate of the Buyer (collectively the "Indemnities"), from
and against any Liability the Buyer, the Purchased Company, or the Indemnities
may incur (including reasonable attorney fees) which is caused by:
(a) any breach of, or inaccuracy in, any of the Shareholders', Sellers',
or the Purchased Company's representations, warranties, covenants and agreements
contained in this Agreement;
(b) any Indemnified Liability;
(c) any failure by the Shareholders or Sellers to carry out, perform,
satisfy, or discharge any of their covenants, agreements, undertakings,
liabilities or obligations under this Agreement or under any of the documents
and materials required to be executed and delivered by the Shareholders prior to
or at Closing pursuant to this Agreement; and
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(d) any suit, action or other proceeding brought by any Person (including
the Buyer of the Purchased Company) arising out of, or in any way related to,
any of the matters referred to in the above subsections (a)-(c).
9.03 Indemnification Provisions for Benefit of the Shareholders. Subject
to Section 9.01, the Buyer agrees to indemnify and save harmless the
Shareholders from and against any Liability the Shareholders may incur
(including reasonable attorney fees) which is caused by:
(a) the breach of any of the Buyer's representations, warranties,
covenants and agreements contained in this Agreement;
(b) any failure by the Buyer to carry out, perform satisfy and discharge
any of its covenants, agreements, undertakings, liabilities or obligations under
this Agreement or under any of the documents and materials required to be
delivered by the Buyer prior to or at Closing pursuant to this Agreement; and
(c) any suit, action or other proceeding brought by any Person (including
the Shareholders) arising out of, or in any way related to, any of the matters
referred to in the above subsections (a) - (b).
9.04 Matters Involving Third Parties. If any Party (the "Indemnified
Party") shall learn of any matter which may give rise to a claim for
indemnification against another Party (the "Indemnifying Party") under this
Article IX, then the Indemnified Party shall promptly notify the Indemnifying
Party promptly of the claim details; provided, however that no delay on the part
of the Indemnified Party in notifying the Indemnifying Party shall relieve the
Indemnifying Party from any liability or obligation except to the extent the
Indemnifying Party is damaged by the late notice. In the event the Indemnifying
Party notifies the Indemnified Party within 30 days after the Indemnified Party
has given notice of the matter that the Indemnifying Party is assuming its
defense, the Indemnifying Party will defend the Indemnified Party against the
matter with counsel of its choice reasonably satisfactory to the Indemnified
Party.
9.05 Indemnification Provision Limitations. The above indemnification
provisions are exclusive. In addition, the Sellers' Liability under Section 9.02
are subject to the following conditions:
(a) Sellers' Liabilities 1) not arising out of the Business, not relating
to the Business or not based on the Business, or those portions of Liabilities
which do not arise out of the Business, not relate to the Business or are not
based on the Business and 2) under Indemnified Liability (i), shall be without
limit. Buyer and the Purchased Company may, at their option, require Sellers to
satisfy these liabilities and/or may set off amounts owed to Sellers under the
Non-Compete Agreements. Buyer and the Purchased Company may exercise their
rights of set off, or suspend payments, for both l) Liabilities
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actually incurred and 2) Liabilities which they reasonably believe may be
incurred, and for which Buyer or the Purchased Company has given Shareholders
notice; and
(b) Other than for Indemnified Liability (i), Sellers' Liabilities arising
out of the Business, relating to the Business or based on the Business, or those
portions of Liabilities which arise out of the Business, related to the Business
or are based on the Business, are limited to an offset against the $700,000
balance owed to Shareholders for the Dayton real estate under Section 2.02, such
amount of Liability not to exceed a $400,000 maximum aggregate, and such amount
to be reduced by $100,000 each 12 months after the Closing Date, so long as the
Buyer and/or the Purchased Company has not made a claim for indemnification
against Shareholders for such an amount. It is expressly understood that the
reduction set forth in the prior sentence shall be decreased on a
dollar-for-dollar basis for any claims of indemnification. This $400,000 amount
shall not be deemed to be reduced by any insurance coverage procured by Sellers
for the Purchased Company under the terms of this Agreement; however, the
Purchased Company and the Buyer will take reasonable steps to recover under such
insurance after asserting any right of set off under this paragraph. Buyer and
the Purchased Company may exercise their rights of set off, or suspend payments,
for both 1) Liabilities actually incurred and 2) Liabilities which they
reasonably believe may be incurred, and for which Buyer or the Purchased Company
has given Shareholders notice. Should, after a claim for indemnification has
been made and monies have been suspended or set off, the Purchased Company
receive insurance monies that satisfy or resolve the claim, then the Purchased
Company shall reimburse the Sellers, but only to the extent that the Purchased
Company or Buyer has been made whole in relation to the claim for which
indemnity has been asserted or set off effected.
ARTICLE X
MISCELLANEOUS
10.01 Press Releases and Announcements. No Party shall issue any press
release or announcement relating to this Agreement without the prior written
approval of the other Parties; provided, however, that any Party may make any
public disclosure it believes in good faith to be required by law or regulation
(in which case the disclosing Party will if legally permitted, advise the other
Party not less than three business days prior to making the disclosure).
10.02 Confidentiality. If this Transaction is not consummated, the Buyer
will keep confidential and on the request of the Shareholders return to the
Shareholders, all written information and materials regarding the Shareholders
and the Business which were provided by Shareholders to Buyer and copies of such
information that were made by or on behalf of Buyer. This restriction does not
apply, however, to information (l) which is or was generally available to the
public from sources other than the Purchaser or its representatives, (2) is or
becomes available to Purchaser from a third party who did not obtain such
information directly or indirectly from the Shareholders or the Purchased
Company, (3) is already in the possession of Purchaser or developed by Purchaser
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without reference to any of the Purchased Company's confidential information, or
(4) which Purchaser becomes obligated to disclose by any law, regulation or
judicial process. Further, Buyer shall keep one copy of any notes, which shall
be placed in storage and shall not be used by Buyer or its affiliates without
Sellers' prior written consent.
10.03 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors.
10.04 Entire Agreement. This Agreement and the referenced documents
constitute the entire agreement between the Parties and supersede any prior
understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to this Transaction.
10.05 Succession and Assignment. No Party may transfer or assign either
this Agreement or any of its rights, interests, or obligations without the prior
written approval of the other Parties; provided, however, that the Buyer may (a)
assign any or all of its rights and interests to one or more of its Affiliates
and (b) designate one or more of its Affiliates to perform its obligations.
10.06 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
10.07 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.08 Notices. All notices, requests, demands, claims, and other
communications will be in writing. Any notice, request, demand, claim, or other
communication requirement under this Agreement shall be deemed satisfied if it
is faxed or sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set forth below:
If to the Shareholders: James Gann, Sr.
818 Lars Cove
Eaton, Ohio 45320
If to the Shareholders: James Gann, Jr.
9831 Taragon Road
Centerville, Ohio 45458
If to the Shareholders: Gail Gann
818 Lars Cove
Eaton, Ohio 45320
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With a Copy to: Coolidge, Wall, Womsley & Lombard
33 W. First Street
Dayton, Ohio 45402
Attn: Barb Sager
If to the Buyer: PHMH HOLDING COMPANY
c/o Harnischfeger Corporation
315 W. Forest Hill Avenue
Oak Creek, Wisconsin 53154-2999
Attention: President
P&H Material Handling Division
With a Copy to: Harnischfeger Corporation
315 W. Forest Hill Avenue
Oak Creek, Wisconsin 53154-2999
Attention: General Counsel,
P&H Material Handling Division
10.09 Governing Law. This Agreement shall be governed by and construed in
accordance with Ohio, U.S.A. law.
10.10 Amendments and Waivers. No amendment or waiver provision of this
Agreement shall be valid unless in writing and signed by all Parties. No waiver
by any Party of any default, misrepresentation, promise, breach of warranty or
breach of covenant, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, breach of warranty or breach of
covenant, or affect in any way any rights arising by virtue of any prior or
subsequent similar occurrence.
10.11 Severability. Any term or provision of this Agreement that is
invalid or unenforceable shall not affect the validity or enforceability of the
remaining terms and provisions. If the final judgment of an arbitrator or a
court of competent jurisdiction declares that any term or provision contained in
this Agreement is invalid or unenforceable, the Parties agree that the court or
arbitrator making the determination of invalidity or unenforceability shall have
the power to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, and to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable, and
that comes closest to expressing intention of the invalid or unenforceable term
or provision. The Parties agree that this Agreement shall be enforceable as so
modified after the expiration of the time within which the judgment may be
appealed.
10.12 Expenses. Except as otherwise specifically provided in this
Agreement, each Party will bear its respective own costs and expenses (including
fees and expenses of legal counsel, investment bankers, brokers and other
representatives and consultants) incurred in connection with this Agreement and
Transaction.
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<PAGE>
10.13 Construction. The language used in this Agreement will be deemed to
be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference in
this Agreement to any law shall be deemed also to refer to all rules and
regulations promulgated under the law, unless the context requires otherwise.
Whenever the term "including" is used in this Agreement in connection with a
listing of items, such listing shall be interpreted to be illustrative only, and
shall not be interpreted as a limitation on or an exclusive listing of the items
included within the prior reference.
10.14 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated by reference.
10.15 Binding Arbitration and Good Faith Discussions The Parties agree
that in the event a dispute arises out of or relating to this Agreement, the
Parties must attempt in good faith to resolve the dispute through discussion and
alternate dispute resolution according to the following procedure.
(a) Good Faith Discussion - The complaining Party shall notify the other
Parties of the dispute. All involved Parties shall attempt to discuss the
dispute in good faith;
(b) Mediation - Should the dispute remain unresolved after 30 days after
the initial notice under subsection (a), then either party may request Mediation
by a mutually acceptable neutral person not affiliated with any of the Parties.
If the Parties are unable to agree on a Mediator and the location of the
mediation, then the Mediation shall take place in Cleveland, Ohio, and the
Mediator shall be mutually agreed to by the Parties or, if no agreement is
reached, then by J.A.M.S./Endispute. The cost of the Mediation shall be split
equally;
(c) Arbitration - Should the dispute remain unresolved after Mediation,
the Parties agree to arbitrate under the rules of conciliation and arbitration
of the American Arbitration Association. The arbitration award shall be
considered the final and binding resolution of any dispute arising under this
Agreement. There shall be three arbitrators, one being selected by the Buyer and
one being selected by the Shareholders, and the third being selected by the two
arbitrators so selected. If a Party fails to nominate an arbitrator within 15
days from the date of the notification made to it of the other Party's request
for arbitration, or if the two arbitrators fail within 15 days from the date of
their appointment to reach agreement on the third arbitrator, then the third
arbitrator shall be appointed in accordance with the AAA rules. The place of
Arbitration shall be Cleveland, Ohio. The Arbitration expenses shall be paid by
the losing party. If the arbitrators do not find for one party's position in its
entirety, then the Parties shall share the arbitration expenses equally. The
Parties shall also be responsible for their own expenses, including attorney
fees;
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<PAGE>
(d) Enforceability - This Agreement, including the Arbitration provision
and any award, shall be enforceable in any federal or state court in the United
States; and
(e) Miscellaneous - The Parties waive the defense of inconvenient forum
and lack of personal jurisdiction in any proceeding brought in federal or state
court in Cleveland to enforce this Arbitration provision. Further, the Parties
agree that notice under this Agreement shall constitute acceptable and valid
service of process for all proceeding to enforce this Arbitration Clause.
10.16 P&H Products. Notwithstanding any other provision of this Agreement
to the contrary, the Shareholders and the Purchased Company make no
representations, warranties, or covenants with respect to any products, goods or
services supplied at any time by Buyer or any of its affiliates to Purchased
Company (or the Purchased Company's customers), to that extent such goods were
merely re-sold by the Purchased Company merely incorporated by the Purchased
Company into cranes within designs consistent with industry practices and
standards.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the above
date.
PHMH HOLDING COMPANY MPH CRANE, INC.
By /s/ Martin L. Ditkof By /s/ James F. Gann, Sr.
---------------------------------- -------------------------------
Title Attorney Title CEO
------------------------------- ---------------------------
JAMES GANN, SR.
/s/ James Gann, Sr.
---------------------------------
GAIL GANN
/s/ Gail Gann
---------------------------------
JAMES GANN, JR.
/s/ James Gann, Jr.
---------------------------------
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") by and between Morris Material
Handling, Inc., a Delaware corporation (the "Company"), and Michael S. Erwin
("Executive").
W I T N E S S E T H:
WHEREAS, the Executive is a valued and important employee of the Company,
and possesses significant information about its strategic plans and other trade
secrets; and
WHEREAS, the Executive has been offered the opportunity to purchase units
of Niles, LLC, in connection with the recapitalization contemplated by that
certain Recapitalization Agreement, among Harnischfeger Corporation, the Sellers
named therein and MHE Investments, Inc., dated January 28, 1998 (the
"Recapitalization Agreement"), and to acquire options to purchase additional
units of MMH Holdings, Inc., ("MMH") the owner of all of the stock of the
Company; and
WHEREAS, the Executive desires to purchase such units and to acquire such
options, and understands that the offer to purchase units and acquire options is
contingent upon the execution of this Agreement; and
WHEREAS, the Company wishes to secure the services of Executive after the
Recapitalization, and Executive wishes to furnish such services to the Company,
pursuant to the terms and provisions of this Agreement;
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and obligations contained herein, the Company and Executive agree as follows:
ARTICLE I: EMPLOYMENT, TERM AND DUTIES
Section 1.1. Condition Precedent. This Agreement shall take effect
immediately upon Harnischfeger Corporation or one of its Affiliates (as that
term is defined in the Recapitalization Agreement) selling 50 percent or more of
the outstanding shares of MMH to any party which is an affiliate of Chartwell
Investments Inc., (the "Effective Date"). Should Harnischfeger Corporation or
one of its Affiliates not sell 50 percent or more of the outstanding shares of
the Company to a party which is an affiliate of Chartwell Investments Inc. prior
to July 31, 1998, then this Agreement becomes void ab initio.
Section 1.2. Term. Unless terminated sooner pursuant to the occurrence of
an "Employment Related Event" or a "Termination Event" (both terms as defined in
Article III) and subject to the other terms and provisions of this Agreement,
the Company agrees to employ Executive and Executive agrees to be employed by
the Company, for the period beginning as of the Effective Date and continuing
until the third anniversary of the Effective Date. The Agreement will be
extended for one year on the third anniversary of the Effective Date and on each
anniversary thereafter unless either party gives 60 days' written notice of
failure to renew or termination prior to any such anniversary date; provided,
however, that any such non-renewal by the Company shall void the Executive's
postemployment obligations contained in the Non-Competition Agreement referred
to in Article V of this Agreement. The Executive may voluntarily resign
employment at any time upon providing 60 days' written notice to the Company's
Board of Directors; provided, however, that the obligations of the Executive
under Article IV (Confidential Information) hereof, and the post-employment
obligations of Executive
<PAGE>
contained in the separate Non-Competition Agreement referred to in Article V
hereof shall survive such resignation. The Executive's entitlement to any
severance benefits or payments following termination of employment shall be
governed solely by Article III of this Agreement, and the Executive shall have
no entitlement to any such benefits or payments other than as set forth in
Article III of this Agreement, or as required to be provided to the Executive by
operation of law.
Section 1.3 Title. From and after the Effective Date, the Company shall
employ Executive in the position of President and Chief Executive Officer, or
such other title as mutually agreed upon by the Company and the Executive.
Section 1.4 Duties. Executive agrees to serve in the position referred to
in Section 1.3 and to perform diligently and to the best of his abilities the
duties and services pertaining to such office, as well as such additional duties
and services appropriate to such office as the Board of Directors of the Company
("Board of Directors") may reasonably assign to Executive from time to time.
Section 1.5 Business Time and Efforts. Executive agrees, during the period
of employment by the Company, to devote all of his business time, energy and
best efforts to the business and affairs of the Company and its affiliates and
not to engage, directly or indirectly, in any other business or businesses,
whether or not similar to that of the Company, except with the prior written
consent of the Board of Directors.
Section 1.6 Board Seat. By its execution of this Agreement, MHE
Investments, Inc. agrees to take all necessary actions to cause Michael Erwin to
be elected and maintained as a member of the Board of Directors of the Company
and the board of directors of MMH for so long as the Executive is employed
pursuant to this Agreement. In addition, it is agreed that Michael Erwin shall
be entitled from time to time to recommend one other member of management to
serve as a director of the Company and as a director of MMH, subject to the
approval of their respective boards.
ARTICLE II: COMPENSATION AND BENEFITS
Section 2.1 Base Salary. During the term of this Agreement, Executive
shall receive an annual base salary of $180,000, subject to annual review by the
Board of Directors.
Section 2.2 Bonus. The Company and Executive shall annually establish an
objective, performance-based bonus plan for Executive. The percentages, targets,
and other terms of the plan will be as mutually agreed upon between the
Compensation Committee of the Board of Directors of the Company and the Chief
Executive Officer of the Company. It is anticipated that, for fiscal year 1998,
the bonus plan will be based on Economic Value Added, while for fiscal 1999 and
after the plan will be based on EBITDA. Bonuses will be earned over the
Company's fiscal year ending October 31, and shall be paid by the Company to the
Executive as soon as practicable in accordance with the Company's bonus payment
procedures.
Section 2.3 Equity.
(a) Equity Purchase. Executive shall be eligible to purchase
an initial amount of Equity in Niles LLC for payment as agreed upon
between Niles LLC and the Executive.
(b) Equity Options. Executive shall be eligible to receive an
initial option
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<PAGE>
grant of 620 A Options, 620 B Options and 750 C Options pursuant to the
terms of Schedule A, attached hereto.
Section 2.4 Other Perquisites. During his employment hereunder, Executive
shall be afforded the following incidental benefits:
(a) Expenses. Executive shall be entitled to be reimbursed for
all customary and reasonable expenses incurred by Executive in the
performance of his duties and responsibilities, subject to such reasonable
substantiation and documentation as may be required by the Company in
accordance with its normal policies.
(b) Other Company Benefits. Subject to the terms of each plan,
program or arrangement as the case may be, Executive and, to the extent
applicable, Executive's family, dependents and beneficiaries, shall be
allowed to participate in all benefits, plans and programs, including
improvements or modifications of the same, which are now, or may hereafter
be, available to similarly situated employees of the Company generally.
The Company shall not, however, by reason of this paragraph be obligated
to institute, maintain, or refrain from changing, amending or
discontinuing, any such benefit plan or program, so long as such changes
are similarly applicable to employees of the Company generally.
Section 2.5 Withholding of Taxes. The Company may withhold from any
benefits or compensation payable under this Agreement all federal, state, city
or other taxes as may be required pursuant to any law or governmental regulation
or ruling.
ARTICLE III: TERMINATION OF EMPLOYMENT
Section 3.1 Employment-Related Event. An "Employment-Related Event" means
any of the following: (a) Executive's resignation for Good Reason (as defined
below), (b) Executive's termination by the Company without Cause (as defined
below) or (c) Executive's death or permanent disability (as defined below).
Should an Employment Related Event occur, the Executive shall only be entitled
to the benefits and payments set forth below, and Executive specifically agrees
to sign a Release as drafted by the Company under which the Executive shall
agree to waive and release all other rights and entitlement, whether legal,
contractual or equitable (including waiving and releasing any claims alleging
discrimination and/or harassment to the maximum extent allowed by law) in order
to be entitled to such benefits and payments.
(a) Good Reason. The Executive may terminate his employment
under this Agreement for Good Reason, after having given the Company
written notice specifying the reason the Executive is terminating his
employment and having given the Company thirty days after such notice
within which to cure the condition specified. "Good Reason" means any of
the following: (i) a material reduction of the Executive's duties or
authority as provided in the Agreement or as later increased by the Board
of Directors; (ii) a substantial change in work conditions; (iii) a
material decrease in compensation or benefits; (iv) relocation of his
principal workplace over 50 miles from his initial workplace without
Executive's consent; (v) the breach of this Agreement by the Company or an
affiliate of the Company; (vi) a change in control of the Company (as
defined in Schedule D hereto); or (vii) the failure by the Company to
obtain the assumption of this Agreement by any successor to or assignee of
the Company or any purported termination of this Agreement which does not
satisfy the requirements of this Agreement. If at the end of such notice
period, the Company has not cured such condition, the written notice shall
take effect, and the Executive will be entitled to the
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<PAGE>
following: (A) continuation of his then current Base Salary (prior to any
reduction that constitutes Good Reason) for twelve months from the date of
termination payable in accordance with Company payroll practice; (B)
continuation of health and life insurance benefits for twenty-four months
at the Company's expense subject to applicable cost-sharing arrangements,
co-payments, and deductibles in place immediately prior the Executive's
termination (provided, however, that such health benefits shall not be
counted toward the Executive's entitlement for COBRA, and that such health
and life insurance benefits shall terminate immediately upon Executive
obtaining employment with a third party which provides health and life
insurance benefits); (C) a "pro-rated bonus" for the fiscal year in which
the termination occurs which shall be payable at the time the Company
customarily pays bonuses; (D) the continuation of all other perquisites
for six months; (E) reasonable outplacement assistance for six months
(including out of pocket expenses of the Executive to search for a job not
to exceed $5000); and (F) payment, if requested by the Executive, for all
equity in MMH or the Company owned by the Executive or his family
(including but not limited to Equity Units), payable in equal quarterly
installments over the thirty-six month period following termination,
provided, however, that if this option is requested, the equity shall be
valued as of the date of termination at its fair market value by the
Compensation Committee of the Board of Directors and shall be repurchased
so long as permitted under the terms of any financing documents, including
but not limited to indentures or loan agreements applicable to the Company
or any direct or indirect parent entity of the Company at such time. For
purposes of this Agreement, a "pro-rated bonus" means the portion of the
bonus that is arrived at by using the number of days the Executive was
employed by the Company in the year of termination as the numerator of a
fraction of which 365 is the denominator and then multiplying the bonus
the Executive was otherwise eligible to receive by such fraction.
4
<PAGE>
(b) Termination by the Company without Cause. If the Company
terminates the Executive's employment under this Agreement without Cause,
the Executive shall be entitled to the following: (i) a lump sum payment
equal to his then current annual Base Salary plus a lump sum payment equal
to the Base Salary which would have otherwise been payable for the balance
of the fiscal year in which termination occurs, and (ii) the same benefits
and compensation and payable at the same time as provided in clauses (B)
through (F) of Section 3.1(a). "Cause" means any of the following acts by
the Executive which, if curable, have not been cured by Executive within
30 days' written notice thereof: (i) willful failure to substantially and
materially perform his duties as assigned to him by Board of Directors
(other than any such failure resulting from the Executive's reasonable
business judgment or incapacity due to physical or mental illness); (ii)
commission of a fraud on the Company; (iii) breach of fiduciary duty
involving material personal gain; or (iv) willful misconduct materially
and demonstrably injurious or detrimental to the Company or its
affiliates.
(c) Death or Permanent Disability. This Agreement shall
terminate immediately upon the Executive's Death or Permanent Disability.
Permanent Disability shall have the same meaning as set forth in the
Company's long term disability policy. Upon termination for Death or
Permanent Disability, the Executive, or his estate, shall receive the
following: (i) all accrued Base Salary and other accrued entitlements
earned through the date of termination, (ii) the continuation of Base
Salary for 90 days after such termination, and (iii) the compensation and
benefits set forth in clauses (B), (C), (D) and (F) of Section 3.1(a).
Section 3.2 Termination Event. "Termination Event" means the Executive's
resignation without Good Reason or termination by the Company for Cause. In the
event of a termination due to a Termination Event, the Executive shall receive
his accrued Base Salary and accrued entitlements through the date of
termination. In the event the Executive resigns from the Company without Good
Reason, such resignation only becomes effective upon 60 days' written notice to
the Company.
Section 3.3 Resignation from the Board of Directors and Offices. In the
event of Executive's termination of employment for any reason (including the
failure of the Company to renew the Agreement), such termination or non-renewal
shall also be considered a resignation as a member of the Board of Directors, a
resignation from the board of directors of any affiliates or subsidiaries of the
Company and a resignation from any offices held by the Executive with the
Company or with any of its affiliates or subsidiaries.
ARTICLE IV: MISCONDUCT AND CONFIDENTIAL INFORMATION
Executive agrees to be bound by the provisions of the World Wide Business
Conduct Policy and the Employee Proprietary Rights and Confidentiality Agreement
attached hereto as Schedule B. The provisions of such documents are incorporated
into this Agreement.
5
<PAGE>
ARTICLE V: NON-COMPETITION; NON-SOLICITATION; INJUNCTIVE RELIEF
Simultaneously with the execution of this Agreement, Executive shall
execute and deliver to the Company a non-competition agreement in the form
attached hereto as Schedule C (the "Non-Competition Agreement"), which shall
become effective if and when this Agreement becomes effective as provided in
Section 1.1 hereof.
ARTICLE VI: INDEMNIFICATION
The Company shall, to the fullest extent permitted by applicable law
indemnify and hold harmless Executive from all claims or expenses that may be
asserted against the Company and affiliates thereof due to his employment, or
that may otherwise derive from Executive's employment as contemplated under this
Agreement, in accordance with the Company's charter and bylaws. The Company
shall purchase and maintain for the benefit of Executive a director's and
officer's liability policy.
ARTICLE VII: MISCELLANEOUS
Section 7.1 Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered, sent by facsimile or when mailed
by United States registered or certified mail, return receipt requested, postage
prepaid, addressed to such address or sent to such facsimile number as each
party may furnish to the other in writing from time to time. Unless notified
otherwise by Executive, copies of notices or other communications sent to
Executive shall be sent to the address noted on the signature page attached
hereto.
Section 7.2 Applicable Law, Jurisdiction and Venue. This Agreement is
entered into under, and shall be governed for all purposes by, the laws of the
State of Wisconsin. In any such litigation, each party hereto waives personal
service of any summons, complaint or other process and agrees that the service
thereof may be made by certified mail directed to such party at his or its
address for purposes of notice under Section 7.1 hereof.
Section 7.3 No Waiver. No failure by either party hereto at any time to
give notice of any breach by the other party of, or to require compliance with,
any condition or provision of this Agreement shall (i) be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time or (ii) preclude insistence upon strict compliance in the
future.
Section 7.4 Severability. If a court of competent jurisdiction determines
that any provision of this Agreement is invalid or unenforceable, then the
invalidity or unenforceability of that provision all not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
Section 7.5 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 Agreement.
Section 7.6 Headings. The paragraph headings have been inserted for
purposes of convenience and shall not be used for interpretive purposes.
Section 7.7 Gender and Plurals. Wherever the context so requires, the
masculine gender includes the feminine or neuter, and the singular number
includes the plural and
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conversely.
Section 7.8 Affiliate. As used in this Agreement, unless otherwise
indicated, "affiliate" shall have the same definition as set forth in the
Recapitalization Agreement.
Section 7.9 Assignment. This Agreement, and the rights and obligations of
the parties hereunder, are personal and neither this Agreement, nor any right,
benefit or obligation of either party hereto, shall be subject to voluntary or
involuntary assignment, alienation or transfer, whether by operation of law or
otherwise, without the prior written consent of the other party except that
vested rights to payment shall be subject to devise, and shall descend in
accordance with applicable laws of inheritance.
Section 7.10 Effects of Termination of Employment. Except as otherwise
provided herein or under any benefit plan or other agreement between the Company
and the Executive, termination of Executive's employment under this Agreement
shall not affect any right or obligation of either party hereto which is accrued
or vested prior to or upon such termination or the rights and obligations set
forth herein.
Section 7.11 Entire Agreement. This Agreement constitutes the entire
agreement of the parties with regard to the subject matter hereof, contains all
the covenants, promises, representations, warranties and agreements between the
parties with respect to employment of Executive by the Company, and supersedes
all prior employment agreements between the Executive and the Company or any of
its predecessors. Each party to this Agreement acknowledges that no
representation, inducement, promise or agreement, oral or written, has been made
by either party, or by anyone acting on behalf of either party, which is not
embodied herein, and that no agreement, statement, or promise relating to the
employment of Executive by the Company, which is not contained in this
Agreement, shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing and signed by the party to be charged.
Section 7.12 Attorney's Fees. Pursuant to the terms of a side letter (the
"Side Letter"), Executive shall be entitled to be reimbursed for reasonable
attorney's fees incurred in the negotiation of this Agreement to the limit
established in the Side Letter. In addition, Executive shall be entitled to
reimbursement of attorney's fees in any litigation between the Company and
Executive with respect to Executive's enforcement of this Agreement to the
extent Executive prevails in such litigation.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
MORRIS MATERIAL HANDLING, INC.
By: /s/ Martin L. Ditkof
---------------------------------------
Name: Martin L. Ditkof
Title: Secretary
/s/ Michael S. Erwin
-----------------------------------------
Executive
Acknowledged by
MHE INVESTMENTS, INC.
By: /s/ Michael S. Shein
---------------------------------------
Name: Michael S. Shein
Title: Vice President
/s/ Michael S. Erwin
-----------------------------------------
Executive
8
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") by and between Morris Material
Handling, Inc., a Delaware corporation (the "Company"), and David D. Smith
("Executive").
W I T N E S S E T H:
WHEREAS, the Executive is a valued and important employee of the Company,
and possesses significant information about its strategic plans and other trade
secrets; and
WHEREAS, the Executive has been offered the opportunity to purchase units
of Niles, LLC, in connection with the recapitalization contemplated by that
certain Recapitalization Agreement, among Harnischfeger Corporation, the Sellers
named therein and MHE Investments, Inc., dated January 28, 1998 (the
"Recapitalization Agreement"), and to acquire options to purchase additional
units of MMH Holdings, Inc., ("MMH") the owner of all of the stock of the
Company; and
WHEREAS, the Executive desires to purchase such units and to acquire such
options, and understands that the offer to purchase units and acquire options is
contingent upon the execution of this Agreement; and
WHEREAS, the Company wishes to secure the services of Executive after the
Recapitalization, and Executive wishes to furnish such services to the Company,
pursuant to the terms and provisions of this Agreement;
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and obligations contained herein, the Company and Executive agree as follows:
ARTICLE I: EMPLOYMENT, TERM AND DUTIES
Section 1.1. Condition Precedent. This Agreement shall take effect
immediately upon Harnischfeger Corporation or one of its Affiliates (as that
term is defined in the Recapitalization Agreement) selling 50 percent or more of
the outstanding shares of MMH to any party which is an affiliate of Chartwell
Investments Inc., (the "Effective Date"). Should Harnischfeger Corporation or
one of its Affiliates not sell 50 percent or more of the outstanding shares of
the Company to a party which is an affiliate of Chartwell Investments Inc. prior
to July 31, 1998, then this Agreement becomes void ab initio.
Section 1.2. Term. Unless terminated sooner pursuant to the occurrence of
an "Employment Related Event" or a "Termination Event" (both terms as defined in
Article III) and subject to the other terms and provisions of this Agreement,
the Company agrees to employ Executive and Executive agrees to be employed by
the Company, for the period beginning as of the Effective Date and continuing
until the third anniversary of the Effective Date. The Agreement will be
extended for one year on the third anniversary of the Effective Date and on each
anniversary thereafter unless either party gives 60 days' written notice of
failure to renew or termination prior to any such anniversary date; provided,
however, that any such non-renewal by the Company shall void the Executive's
postemployment obligations contained in the Non-Competition Agreement referred
to in Article V of this Agreement. The Executive may voluntarily resign
employment at any time upon providing 60 days' written notice to the Company's
Board of Directors; provided, however, that the obligations of the Executive
under Article IV (Confidential Information) hereof, and the post-employment
obligations of Executive
<PAGE>
contained in the separate Non-Competition Agreement referred to in Article V
hereof shall survive such resignation. The Executive's entitlement to any
severance benefits or payments following termination of employment shall be
governed solely by Article III of this Agreement, and the Executive shall have
no entitlement to any such benefits or payments other than as set forth in
Article III of this Agreement, or as required to be provided to the Executive by
operation of law.
Section 1.3 Title. From and after the Effective Date, the Company shall
employ Executive in the position of Vice President, or such other title as
mutually agreed upon by the Company and the Executive.
Section 1.4 Duties. Executive agrees to serve in the position referred to
in Section 1.3 and to perform diligently and to the best of his abilities the
duties and services pertaining to such office, as well as such additional duties
and services appropriate to such office as the Board of Directors of the Company
("Board of Directors") may reasonably assign to Executive from time to time.
Section 1.5 Business Time and Efforts. Executive agrees, during the period
of employment by the Company, to devote all of his business time, energy and
best efforts to the business and affairs of the Company and its affiliates and
not to engage, directly or indirectly, in any other business or businesses,
whether or not similar to that of the Company, except with the prior written
consent of the Board of Directors.
ARTICLE II: COMPENSATION AND BENEFITS
Section 2.1 Base Salary. During the term of this Agreement, Executive
shall receive an annual base salary of $111,300, subject to annual review by the
Board of Directors.
Section 2.2 Bonus. The Company and Executive shall annually establish an
objective, performance-based bonus plan for Executive. The percentages, targets,
and other terms of the plan will be as mutually agreed upon between the
Compensation Committee of the Board of Directors of the Company and the Chief
Executive Officer of the Company. It is anticipated that, for fiscal year 1998,
the bonus plan will be based on Economic Value Added, while for fiscal 1999 and
after the plan will be based on EBITDA. Bonuses will be earned over the
Company's fiscal year ending October 31, and shall be paid by the Company to the
Executive as soon as practicable in accordance with the Company's bonus payment
procedures.
Section 2.3 Equity.
(a) Equity Purchase. Executive shall be eligible to purchase
an initial amount of Equity in Niles LLC for payment as agreed upon
between Niles LLC and the Executive.
(b) Equity Options. Executive shall be eligible to receive an
initial option grant of 248 A Options, 248 B Options and 320 C Options
pursuant to the terms of Schedule A, attached hereto.
Section 2.4 Other Perquisites. During his employment hereunder, Executive
shall be afforded the following incidental benefits:
(a) Expenses. Executive shall be entitled to be reimbursed for
all customary and reasonable expenses incurred by Executive in the
performance of his
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duties and responsibilities, subject to such reasonable substantiation and
documentation as may be required by the Company in accordance with its
normal policies.
(b) Other Company Benefits. Subject to the terms of each plan,
program or arrangement as the case may be, Executive and, to the extent
applicable, Executive's family, dependents and beneficiaries, shall be
allowed to participate in all benefits, plans and programs, including
improvements or modifications of the same, which are now, or may hereafter
be, available to similarly situated employees of the Company generally.
The Company shall not, however, by reason of this paragraph be obligated
to institute, maintain, or refrain from changing, amending or
discontinuing, any such benefit plan or program, so long as such changes
are similarly applicable to employees of the Company generally.
Section 2.5 Withholding of Taxes. The Company may withhold from any
benefits or compensation payable under this Agreement all federal, state, city
or other taxes as may be required pursuant to any law or governmental regulation
or ruling.
ARTICLE III: TERMINATION OF EMPLOYMENT
Section 3.1 Employment-Related Event. An "Employment-Related Event" means
any of the following: (a) Executive's resignation for Good Reason (as defined
below), (b) Executive's termination by the Company without Cause (as defined
below) or (c) Executive's death or permanent disability (as defined below).
Should an Employment Related Event occur, the Executive shall only be entitled
to the benefits and payments set forth below, and Executive specifically agrees
to sign a Release as drafted by the Company under which the Executive shall
agree to waive and release all other rights and entitlement, whether legal,
contractual or equitable (including waiving and releasing any claims alleging
discrimination and/or harassment to the maximum extent allowed by law) in order
to be entitled to such benefits and payments.
(a) Good Reason. The Executive may terminate his employment
under this Agreement for Good Reason, after having given the Company
written notice specifying the reason the Executive is terminating his
employment and having given the Company thirty days after such notice
within which to cure the condition specified. "Good Reason" means any of
the following: (i) a material reduction of the Executive's duties or
authority as provided in the Agreement or as later increased by the Board
of Directors; (ii) a substantial change in work conditions; (iii) a
material decrease in compensation or benefits; (iv) relocation of his
principal workplace over 50 miles from his initial workplace without
Executive's consent; (v) the breach of this Agreement by the Company or an
affiliate of the Company; (vi) a change in control of the Company (as
defined in Schedule D hereto); or (vii) the failure by the Company to
obtain the assumption of this Agreement by any successor to or assignee of
the Company or any purported termination of this Agreement which does not
satisfy the requirements of this Agreement. If at the end of such notice
period, the Company has not cured such condition, the written notice shall
take effect, and the Executive will be entitled to the following: (A)
continuation of his then current Base Salary (prior to any reduction that
constitutes Good Reason) for twelve months from the date of termination
payable in accordance with Company payroll practice; (B) continuation of
health and life insurance benefits for twenty-four months at the Company's
expense subject to applicable cost-sharing arrangements, co-payments, and
deductibles in place immediately prior the Executive's termination
(provided, however, that such health benefits shall not be counted toward
the Executive's entitlement for COBRA, and that such health and life
insurance benefits shall terminate immediately upon Executive obtaining
employment with a third
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party which provides health and life insurance benefits); (C) a "pro-rated
bonus" for the fiscal year in which the termination occurs which shall be
payable at the time the Company customarily pays bonuses; (D) the
continuation of all other perquisites for six months; (E) reasonable
outplacement assistance for six months (including out of pocket expenses
of the Executive to search for a job not to exceed $5000); and (F)
payment, if requested by the Executive, for all equity in MMH or the
Company owned by the Executive or his family (including but not limited to
Equity Units), payable in equal quarterly installments over the
twenty-four month period following termination, provided, however, that if
this option is requested, the equity shall be valued as of the date of
termination at its fair market value by the Compensation Committee of the
Board of Directors and shall be repurchased so long as permitted under the
terms of any financing documents, including but not limited to indentures
or loan agreements applicable to the Company or any direct or indirect
parent entity of the Company at such time. For purposes of this Agreement,
a "pro-rated bonus" means the portion of the bonus that is arrived at by
using the number of days the Executive was employed by the Company in the
year of termination as the numerator of a fraction of which 365 is the
denominator and then multiplying the bonus the Executive was otherwise
eligible to receive by such fraction.
(b) Termination by the Company without Cause. If the Company
terminates the Executive's employment under this Agreement without Cause,
the Executive shall be entitled to the following: (i) a lump sum payment
equal to his then current annual Base Salary plus a lump sum payment equal
to the Base Salary which would have otherwise been payable for the balance
of the fiscal year in which termination occurs, and (ii) the same benefits
and compensation and payable at the same time as provided in clauses (B)
through (F) of Section 3.1(a). "Cause" means any of the following acts by
the Executive which, if curable, have not been cured by Executive within
30 days' written notice thereof: (i) willful failure to substantially and
materially perform his duties as assigned to him by Board of Directors
(other than any such failure resulting from the Executive's reasonable
business judgment or incapacity due to physical or mental illness); (ii)
commission of a fraud on the Company; (iii) breach of fiduciary duty
involving material personal gain; or (iv) willful misconduct materially
and demonstrably injurious or detrimental to the Company or its
affiliates.
(c) Death or Permanent Disability. This Agreement shall
terminate immediately upon the Executive's Death or Permanent Disability.
Permanent Disability shall have the same meaning as set forth in the
Company's long term disability policy. Upon termination for Death or
Permanent Disability, the Executive, or his estate, shall receive the
following: (i) all accrued Base Salary and other accrued entitlements
earned through the date of termination, (ii) the continuation of Base
Salary for 90 days after such termination, and (iii) the compensation and
benefits set forth in clauses (B), (C), (D) and (F) of Section 3.1(a).
Section 3.2 Termination Event. "Termination Event" means the Executive's
resignation without Good Reason or termination by the Company for Cause. In the
event of a termination due to a Termination Event, the Executive shall receive
his accrued Base Salary and accrued entitlements through the date of
termination. In the event the Executive resigns from the Company without Good
Reason, such resignation only becomes effective upon 60 days' written notice to
the Company.
Section 3.3 Resignation from the Board of Directors and Offices. In the
event of Executive's termination of employment for any reason (including the
failure of the Company to renew the Agreement), such termination or non-renewal
shall also be considered a resignation as
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a member of the Board of Directors, a resignation from the board of directors of
any affiliates or subsidiaries of the Company and a resignation from any offices
held by the Executive with the Company or with any of its affiliates or
subsidiaries.
ARTICLE IV: MISCONDUCT AND CONFIDENTIAL INFORMATION
Executive agrees to be bound by the provisions of the World Wide Business
Conduct Policy and the Employee Proprietary Rights and Confidentiality Agreement
attached hereto as Schedule B. The provisions of such documents are incorporated
into this Agreement.
ARTICLE V: NON-COMPETITION; NON-SOLICITATION; INJUNCTIVE RELIEF
Simultaneously with the execution of this Agreement, Executive shall
execute and deliver to the Company a non-competition agreement in the form
attached hereto as Schedule C (the "Non-Competition Agreement"), which shall
become effective if and when this Agreement becomes effective as provided in
Section 1.1 hereof.
ARTICLE VI: INDEMNIFICATION
The Company shall, to the fullest extent permitted by applicable law
indemnify and hold harmless Executive from all claims or expenses that may be
asserted against the Company and affiliates thereof due to his employment, or
that may otherwise derive from Executive's employment as contemplated under this
Agreement, in accordance with the Company's charter and bylaws. The Company
shall purchase and maintain for the benefit of Executive a director's and
officer's liability policy.
ARTICLE VII: MISCELLANEOUS
Section 7.1 Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered, sent by facsimile or when mailed
by United States registered or certified mail, return receipt requested, postage
prepaid, addressed to such address or sent to such facsimile number as each
party may furnish to the other in writing from time to time. Unless notified
otherwise by Executive, copies of notices or other communications sent to
Executive shall be sent to the address noted on the signature page attached
hereto.
Section 7.2 Applicable Law, Jurisdiction and Venue. This Agreement is
entered into under, and shall be governed for all purposes by, the laws of the
State of Wisconsin. In any such litigation, each party hereto waives personal
service of any summons, complaint or other process and agrees that the service
thereof may be made by certified mail directed to such party at his or its
address for purposes of notice under Section 7.1 hereof.
Section 7.3 No Waiver. No failure by either party hereto at any time to
give notice of any breach by the other party of, or to require compliance with,
any condition or provision of this Agreement shall (i) be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time or (ii) preclude insistence upon strict compliance in the
future.
Section 7.4 Severability. If a court of competent jurisdiction determines
that any provision of this Agreement is invalid or unenforceable, then the
invalidity or unenforceability of that provision all not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
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Section 7.5 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 Agreement.
Section 7.6 Headings. The paragraph headings have been inserted for
purposes of convenience and shall not be used for interpretive purposes.
Section 7.7 Gender and Plurals. Wherever the context so requires, the
masculine gender includes the feminine or neuter, and the singular number
includes the plural and conversely.
Section 7.8 Affiliate. As used in this Agreement, unless otherwise
indicated, "affiliate" shall have the same definition as set forth in the
Recapitalization Agreement.
Section 7.9 Assignment. This Agreement, and the rights and obligations of
the parties hereunder, are personal and neither this Agreement, nor any right,
benefit or obligation of either party hereto, shall be subject to voluntary or
involuntary assignment, alienation or transfer, whether by operation of law or
otherwise, without the prior written consent of the other party except that
vested rights to payment shall be subject to devise, and shall descend in
accordance with applicable laws of inheritance.
Section 7.10 Effects of Termination of Employment. Except as otherwise
provided herein or under any benefit plan or other agreement between the Company
and the Executive, termination of Executive's employment under this Agreement
shall not affect any right or obligation of either party hereto which is accrued
or vested prior to or upon such termination or the rights and obligations set
forth herein.
Section 7.11 Entire Agreement. This Agreement constitutes the entire
agreement of the parties with regard to the subject matter hereof, contains all
the covenants, promises, representations, warranties and agreements between the
parties with respect to employment of Executive by the Company, and supersedes
all prior employment agreements between the Executive and the Company or any of
its predecessors. Each party to this Agreement acknowledges that no
representation, inducement, promise or agreement, oral or written, has been made
by either party, or by anyone acting on behalf of either party, which is not
embodied herein, and that no agreement, statement, or promise relating to the
employment of Executive by the Company, which is not contained in this
Agreement, shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing and signed by the party to be charged.
Section 7.12 Attorney's Fees. Pursuant to the terms of a side letter (the
"Side Letter"), Executive shall be entitled to be reimbursed for reasonable
attorney's fees incurred in the negotiation of this Agreement to the limit
established in the Side Letter. In addition, Executive shall be entitled to
reimbursement of attorney's fees in any litigation between the Company and
Executive with respect to Executive's enforcement of this Agreement to the
extent Executive prevails in such litigation.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
MORRIS MATERIAL HANDLING, INC.
By: /s/ Michael S. Erwin
---------------------------------------
Name: Michael S. Erwin
Title: President
/s/ David D. Smith
-----------------------------------------
Executive
Acknowledged by
MHE INVESTMENTS, INC.
By: /s/ Michael S. Shein
---------------------------------------
Name: Michael S. Shein
Title: Vice President
/s/ David D. Smith
-----------------------------------------
Executive
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") by and between Morris Material
Handling, Inc., a Delaware corporation (the "Company"), and Martin L. Ditkof
("Executive").
W I T N E S S E T H:
WHEREAS, the Executive is a valued and important employee of the Company,
and possesses significant information about its strategic plans and other trade
secrets; and
WHEREAS, the Executive has been offered the opportunity to purchase units
of Niles, LLC, in connection with the recapitalization contemplated by that
certain Recapitalization Agreement, among Harnischfeger Corporation, the Sellers
named therein and MHE Investments, Inc., dated January 28, 1998 (the
"Recapitalization Agreement"), and to acquire options to purchase additional
units of MMH Holdings, Inc., ("MMH") the owner of all of the stock of the
Company; and
WHEREAS, the Executive desires to purchase such units and to acquire such
options, and understands that the offer to purchase units and acquire options is
contingent upon the execution of this Agreement; and
WHEREAS, the Company wishes to secure the services of Executive after the
Recapitalization, and Executive wishes to furnish such services to the Company,
pursuant to the terms and provisions of this Agreement;
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and obligations contained herein, the Company and Executive agree as follows:
ARTICLE I: EMPLOYMENT, TERM AND DUTIES
Section 1.1. Condition Precedent. This Agreement shall take effect
immediately upon Harnischfeger Corporation or one of its Affiliates (as that
term is defined in the Recapitalization Agreement) selling 50 percent or more of
the outstanding shares of MMH to any party which is an affiliate of Chartwell
Investments Inc., (the "Effective Date"). Should Harnischfeger Corporation or
one of its Affiliates not sell 50 percent or more of the outstanding shares of
the Company to a party which is an affiliate of Chartwell Investments Inc. prior
to July 31, 1998, then this Agreement becomes void ab initio.
Section 1.2. Term. Unless terminated sooner pursuant to the occurrence of
an "Employment Related Event" or a "Termination Event" (both terms as defined in
Article III) and subject to the other terms and provisions of this Agreement,
the Company agrees to employ Executive and Executive agrees to be employed by
the Company, for the period beginning as of the Effective Date and continuing
until the third anniversary of the Effective Date. The Agreement will be
extended for one year on the third anniversary of the Effective Date and on each
anniversary thereafter unless either party gives 60 days' written notice of
failure to renew or termination prior to any such anniversary date; provided,
however, that any such non-renewal by the Company shall void the Executive's
postemployment obligations contained in the Non-Competition Agreement referred
to in Article V of this Agreement. The Executive may voluntarily resign
employment at any time upon providing 60 days' written notice to the Company's
Board of Directors; provided, however, that the obligations of the Executive
under Article IV (Confidential Information) hereof, and the post-employment
obligations of Executive
<PAGE>
contained in the separate Non-Competition Agreement referred to in Article V
hereof shall survive such resignation. The Executive's entitlement to any
severance benefits or payments following termination of employment shall be
governed solely by Article III of this Agreement, and the Executive shall have
no entitlement to any such benefits or payments other than as set forth in
Article III of this Agreement, or as required to be provided to the Executive by
operation of law.
Section 1.3 Title. From and after the Effective Date, the Company shall
employ Executive in the position of General Counsel and Secretary, or such other
title as mutually agreed upon by the Company and the Executive.
Section 1.4 Duties. Executive agrees to serve in the position referred to
in Section 1.3 and to perform diligently and to the best of his abilities the
duties and services pertaining to such office, as well as such additional duties
and services appropriate to such office as the Board of Directors of the Company
("Board of Directors") may reasonably assign to Executive from time to time.
Section 1.5 Business Time and Efforts. Executive agrees, during the period
of employment by the Company, to devote all of his business time, energy and
best efforts to the business and affairs of the Company and its affiliates and
not to engage, directly or indirectly, in any other business or businesses,
whether or not similar to that of the Company, except with the prior written
consent of the Board of Directors.
ARTICLE II: COMPENSATION AND BENEFITS
Section 2.1 Base Salary. During the term of this Agreement, Executive
shall receive an annual base salary of $96,600, subject to annual review by the
Board of Directors.
Section 2.2 Bonus. The Company and Executive shall annually establish an
objective, performance-based bonus plan for Executive. The percentages, targets,
and other terms of the plan will be as mutually agreed upon between the
Compensation Committee of the Board of Directors of the Company and the Chief
Executive Officer of the Company. It is anticipated that, for fiscal year 1998,
the bonus plan will be based on Economic Value Added, while for fiscal 1999 and
after the plan will be based on EBITDA. Bonuses will be earned over the
Company's fiscal year ending October 31, and shall be paid by the Company to the
Executive as soon as practicable in accordance with the Company's bonus payment
procedures.
Section 2.3 Equity.
(a) Equity Purchase. Executive shall be eligible to purchase
an initial amount of Equity in Niles LLC for payment as agreed upon
between Niles LLC and the Executive.
(b) Equity Options. Executive shall be eligible to receive an
initial option grant of 88 A Options, 88 B Options and 100 C Options
pursuant to the terms of Schedule A, attached hereto.
Section 2.4 Other Perquisites. During his employment hereunder, Executive
shall be afforded the following incidental benefits:
(a) Expenses. Executive shall be entitled to be reimbursed for
all customary and reasonable expenses incurred by Executive in the
performance of his
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duties and responsibilities, subject to such reasonable substantiation and
documentation as may be required by the Company in accordance with its
normal policies.
(b) Other Company Benefits. Subject to the terms of each plan,
program or arrangement as the case may be, Executive and, to the extent
applicable, Executive's family, dependents and beneficiaries, shall be
allowed to participate in all benefits, plans and programs, including
improvements or modifications of the same, which are now, or may hereafter
be, available to similarly situated employees of the Company generally.
The Company shall not, however, by reason of this paragraph be obligated
to institute, maintain, or refrain from changing, amending or
discontinuing, any such benefit plan or program, so long as such changes
are similarly applicable to employees of the Company generally.
Section 2.5 Withholding of Taxes. The Company may withhold from any
benefits or compensation payable under this Agreement all federal, state, city
or other taxes as may be required pursuant to any law or governmental regulation
or ruling.
ARTICLE III: TERMINATION OF EMPLOYMENT
Section 3.1 Employment-Related Event. An "Employment-Related Event" means
any of the following: (a) Executive's resignation for Good Reason (as defined
below), (b) Executive's termination by the Company without Cause (as defined
below) or (c) Executive's death or permanent disability (as defined below).
Should an Employment Related Event occur, the Executive shall only be entitled
to the benefits and payments set forth below, and Executive specifically agrees
to sign a Release as drafted by the Company under which the Executive shall
agree to waive and release all other rights and entitlement, whether legal,
contractual or equitable (including waiving and releasing any claims alleging
discrimination and/or harassment to the maximum extent allowed by law) in order
to be entitled to such benefits and payments.
(a) Good Reason. The Executive may terminate his employment
under this Agreement for Good Reason, after having given the Company
written notice specifying the reason the Executive is terminating his
employment and having given the Company thirty days after such notice
within which to cure the condition specified. "Good Reason" means any of
the following: (i) a material reduction of the Executive's duties or
authority as provided in the Agreement or as later increased by the Board
of Directors; (ii) a substantial change in work conditions; (iii) a
material decrease in compensation or benefits; (iv) relocation of his
principal workplace over 50 miles from his initial workplace without
Executive's consent; (v) the breach of this Agreement by the Company or an
affiliate of the Company; (vi) a change in control of the Company (as
defined in Schedule D hereto); or (vii) the failure by the Company to
obtain the assumption of this Agreement by any successor to or assignee of
the Company or any purported termination of this Agreement which does not
satisfy the requirements of this Agreement. If at the end of such notice
period, the Company has not cured such condition, the written notice shall
take effect, and the Executive will be entitled to the following: (A)
continuation of his then current Base Salary (prior to any reduction that
constitutes Good Reason) for twelve months from the date of termination
payable in accordance with Company payroll practice; (B) continuation of
health and life insurance benefits for twenty-four months at the Company's
expense subject to applicable cost-sharing arrangements, co-payments, and
deductibles in place immediately prior the Executive's termination
(provided, however, that such health benefits shall not be counted toward
the Executive's entitlement for COBRA, and that such health and life
insurance benefits shall terminate immediately upon Executive obtaining
employment with a third
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<PAGE>
party which provides health and life insurance benefits); (C) a "pro-rated
bonus" for the fiscal year in which the termination occurs which shall be
payable at the time the Company customarily pays bonuses; (D) the
continuation of all other perquisites for six months; (E) reasonable
outplacement assistance for six months (including out of pocket expenses
of the Executive to search for a job not to exceed $5000); and (F)
payment, if requested by the Executive, for all equity in MMH or the
Company owned by the Executive or his family (including but not limited to
Equity Units), payable in equal quarterly installments over the
twenty-four month period following termination, provided, however, that if
this option is requested, the equity shall be valued as of the date of
termination at its fair market value by the Compensation Committee of the
Board of Directors and shall be repurchased so long as permitted under the
terms of any financing documents, including but not limited to indentures
or loan agreements applicable to the Company or any direct or indirect
parent entity of the Company at such time. For purposes of this Agreement,
a "pro-rated bonus" means the portion of the bonus that is arrived at by
using the number of days the Executive was employed by the Company in the
year of termination as the numerator of a fraction of which 365 is the
denominator and then multiplying the bonus the Executive was otherwise
eligible to receive by such fraction.
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(b) Termination by the Company without Cause. If the Company
terminates the Executive's employment under this Agreement without Cause,
the Executive shall be entitled to the following: (i) a lump sum payment
equal to his then current annual Base Salary plus a lump sum payment equal
to the Base Salary which would have otherwise been payable for the balance
of the fiscal year in which termination occurs, and (ii) the same benefits
and compensation and payable at the same time as provided in clauses (B)
through (F) of Section 3.1(a). "Cause" means any of the following acts by
the Executive which, if curable, have not been cured by Executive within
30 days' written notice thereof: (i) willful failure to substantially and
materially perform his duties as assigned to him by Board of Directors
(other than any such failure resulting from the Executive's reasonable
business judgment or incapacity due to physical or mental illness); (ii)
commission of a fraud on the Company; (iii) breach of fiduciary duty
involving material personal gain; or (iv) willful misconduct materially
and demonstrably injurious or detrimental to the Company or its
affiliates.
(c) Death or Permanent Disability. This Agreement shall
terminate immediately upon the Executive's Death or Permanent Disability.
Permanent Disability shall have the same meaning as set forth in the
Company's long term disability policy. Upon termination for Death or
Permanent Disability, the Executive, or his estate, shall receive the
following: (i) all accrued Base Salary and other accrued entitlements
earned through the date of termination, (ii) the continuation of Base
Salary for 90 days after such termination, and (iii) the compensation and
benefits set forth in clauses (B), (C), (D) and (F) of Section 3.1(a).
Section 3.2 Termination Event. "Termination Event" means the Executive's
resignation without Good Reason or termination by the Company for Cause. In the
event of a termination due to a Termination Event, the Executive shall receive
his accrued Base Salary and accrued entitlements through the date of
termination. In the event the Executive resigns from the Company without Good
Reason, such resignation only becomes effective upon 60 days' written notice to
the Company.
Section 3.3 Resignation from the Board of Directors and Offices. In the
event of Executive's termination of employment for any reason (including the
failure of the Company to renew the Agreement), such termination or non-renewal
shall also be considered a resignation as a member of the Board of Directors, a
resignation from the board of directors of any affiliates or subsidiaries of the
Company and a resignation from any offices held by the Executive with the
Company or with any of its affiliates or subsidiaries.
ARTICLE IV: MISCONDUCT AND CONFIDENTIAL INFORMATION
Executive agrees to be bound by the provisions of the World Wide Business
Conduct Policy and the Employee Proprietary Rights and Confidentiality Agreement
attached hereto as Schedule B. The provisions of such documents are incorporated
into this Agreement.
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ARTICLE V: NON-COMPETITION; NON-SOLICITATION; INJUNCTIVE RELIEF
Simultaneously with the execution of this Agreement, Executive shall
execute and deliver to the Company a non-competition agreement in the form
attached hereto as Schedule C (the "Non-Competition Agreement"), which shall
become effective if and when this Agreement becomes effective as provided in
Section 1.1 hereof.
ARTICLE VI: INDEMNIFICATION
The Company shall, to the fullest extent permitted by applicable law
indemnify and hold harmless Executive from all claims or expenses that may be
asserted against the Company and affiliates thereof due to his employment, or
that may otherwise derive from Executive's employment as contemplated under this
Agreement, in accordance with the Company's charter and bylaws. The Company
shall purchase and maintain for the benefit of Executive a director's and
officer's liability policy.
ARTICLE VII: MISCELLANEOUS
Section 7.1 Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered, sent by facsimile or when mailed
by United States registered or certified mail, return receipt requested, postage
prepaid, addressed to such address or sent to such facsimile number as each
party may furnish to the other in writing from time to time. Unless notified
otherwise by Executive, copies of notices or other communications sent to
Executive shall be sent to the address noted on the signature page attached
hereto.
Section 7.2 Applicable Law, Jurisdiction and Venue. This Agreement is
entered into under, and shall be governed for all purposes by, the laws of the
State of Wisconsin. In any such litigation, each party hereto waives personal
service of any summons, complaint or other process and agrees that the service
thereof may be made by certified mail directed to such party at his or its
address for purposes of notice under Section 7.1 hereof.
Section 7.3 No Waiver. No failure by either party hereto at any time to
give notice of any breach by the other party of, or to require compliance with,
any condition or provision of this Agreement shall (i) be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time or (ii) preclude insistence upon strict compliance in the
future.
Section 7.4 Severability. If a court of competent jurisdiction determines
that any provision of this Agreement is invalid or unenforceable, then the
invalidity or unenforceability of that provision all not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
Section 7.5 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 Agreement.
Section 7.6 Headings. The paragraph headings have been inserted for
purposes of convenience and shall not be used for interpretive purposes.
Section 7.7 Gender and Plurals. Wherever the context so requires, the
masculine gender includes the feminine or neuter, and the singular number
includes the plural and
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conversely.
Section 7.8 Affiliate. As used in this Agreement, unless otherwise
indicated, "affiliate" shall have the same definition as set forth in the
Recapitalization Agreement.
Section 7.9 Assignment. This Agreement, and the rights and obligations of
the parties hereunder, are personal and neither this Agreement, nor any right,
benefit or obligation of either party hereto, shall be subject to voluntary or
involuntary assignment, alienation or transfer, whether by operation of law or
otherwise, without the prior written consent of the other party except that
vested rights to payment shall be subject to devise, and shall descend in
accordance with applicable laws of inheritance.
Section 7.10 Effects of Termination of Employment. Except as otherwise
provided herein or under any benefit plan or other agreement between the Company
and the Executive, termination of Executive's employment under this Agreement
shall not affect any right or obligation of either party hereto which is accrued
or vested prior to or upon such termination or the rights and obligations set
forth herein.
Section 7.11 Entire Agreement. This Agreement constitutes the entire
agreement of the parties with regard to the subject matter hereof, contains all
the covenants, promises, representations, warranties and agreements between the
parties with respect to employment of Executive by the Company, and supersedes
all prior employment agreements between the Executive and the Company or any of
its predecessors. Each party to this Agreement acknowledges that no
representation, inducement, promise or agreement, oral or written, has been made
by either party, or by anyone acting on behalf of either party, which is not
embodied herein, and that no agreement, statement, or promise relating to the
employment of Executive by the Company, which is not contained in this
Agreement, shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing and signed by the party to be charged.
Section 7.12 Attorney's Fees. Pursuant to the terms of a side letter (the
"Side Letter"), Executive shall be entitled to be reimbursed for reasonable
attorney's fees incurred in the negotiation of this Agreement to the limit
established in the Side Letter. In addition, Executive shall be entitled to
reimbursement of attorney's fees in any litigation between the Company and
Executive with respect to Executive's enforcement of this Agreement to the
extent Executive prevails in such litigation.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
MORRIS MATERIAL HANDLING, INC.
By: /s/ Michael S. Erwin
---------------------------------------
Name: Michael S. Erwin
Title: President
/s/ Martin L. Ditkof
-----------------------------------------
Executive
Acknowledged by
MHE INVESTMENTS, INC.
By: /s/ Michael S. Shein
---------------------------------------
Name: Michael S. Shein
Title: Vice President
/s/ Martin L. Ditkof
-----------------------------------------
Executive
8
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") by and between Morris Material
Handling, Inc., a Delaware corporation (the "Company"), and Richard J.
Niespodziani ("Executive").
W I T N E S S E T H:
WHEREAS, the Executive is a valued and important employee of the Company,
and possesses significant information about its strategic plans and other trade
secrets; and
WHEREAS, the Executive has been offered the opportunity to purchase units
of Niles, LLC, in connection with the recapitalization contemplated by that
certain Recapitalization Agreement, among Harnischfeger Corporation, the Sellers
named therein and MHE Investments, Inc., dated January 28, 1998 (the
"Recapitalization Agreement"), and to acquire options to purchase additional
units of MMH Holdings, Inc., ("MMH") the owner of all of the stock of the
Company; and
WHEREAS, the Executive desires to purchase such units and to acquire such
options, and understands that the offer to purchase units and acquire options is
contingent upon the execution of this Agreement; and
WHEREAS, the Company wishes to secure the services of Executive after the
Recapitalization, and Executive wishes to furnish such services to the Company,
pursuant to the terms and provisions of this Agreement;
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and obligations contained herein, the Company and Executive agree as follows:
ARTICLE I: EMPLOYMENT, TERM AND DUTIES
Section 1.1. Condition Precedent. This Agreement shall take effect
immediately upon Harnischfeger Corporation or one of its Affiliates (as that
term is defined in the Recapitalization Agreement) selling 50 percent or more of
the outstanding shares of MMH to any party which is an affiliate of Chartwell
Investments Inc., (the "Effective Date"). Should Harnischfeger Corporation or
one of its Affiliates not sell 50 percent or more of the outstanding shares of
the Company to a party which is an affiliate of Chartwell Investments Inc. prior
to July 31, 1998, then this Agreement becomes void ab initio.
Section 1.2. Term. Unless terminated sooner pursuant to the occurrence of
an "Employment Related Event" or a "Termination Event" (both terms as defined in
Article III) and subject to the other terms and provisions of this Agreement,
the Company agrees to employ Executive and Executive agrees to be employed by
the Company, for the period beginning as of the Effective Date and continuing
until the third anniversary of the Effective Date. The Agreement will be
extended for one year on the third anniversary of the Effective Date and on each
anniversary thereafter unless either party gives 60 days' written notice of
failure to renew or termination prior to any such anniversary date; provided,
however, that any such non-renewal by the Company shall void the Executive's
postemployment obligations contained in the Non-Competition Agreement referred
to in Article V of this Agreement. The Executive may voluntarily resign
employment at any time upon providing 60 days' written notice to the Company's
Board of Directors; provided, however, that the obligations of the Executive
under
<PAGE>
Article IV (Confidential Information) hereof, and the post-employment
obligations of Executive contained in the separate Non-Competition Agreement
referred to in Article V hereof shall survive such resignation. The Executive's
entitlement to any severance benefits or payments following termination of
employment shall be governed solely by Article III of this Agreement, and the
Executive shall have no entitlement to any such benefits or payments other than
as set forth in Article III of this Agreement, or as required to be provided to
the Executive by operation of law.
Section 1.3 Title. From and after the Effective Date, the Company shall
employ Executive in the position of Vice President, or such other title as
mutually agreed upon by the Company and the Executive.
Section 1.4 Duties. Executive agrees to serve in the position referred to
in Section 1.3 and to perform diligently and to the best of his abilities the
duties and services pertaining to such office, as well as such additional duties
and services appropriate to such office as the Board of Directors of the Company
("Board of Directors") may reasonably assign to Executive from time to time.
Section 1.5 Business Time and Efforts. Executive agrees, during the period
of employment by the Company, to devote all of his business time, energy and
best efforts to the business and affairs of the Company and its affiliates and
not to engage, directly or indirectly, in any other business or businesses,
whether or not similar to that of the Company, except with the prior written
consent of the Board of Directors.
ARTICLE II: COMPENSATION AND BENEFITS
Section 2.1 Base Salary. During the term of this Agreement, Executive
shall receive an annual base salary of $111,540, subject to annual review by the
Board of Directors.
Section 2.2 Bonus. The Company and Executive shall annually establish an
objective, performance-based bonus plan for Executive. The percentages, targets,
and other terms of the plan will be as mutually agreed upon between the
Compensation Committee of the Board of Directors of the Company and the Chief
Executive Officer of the Company. It is anticipated that, for fiscal year 1998,
the bonus plan will be based on Economic Value Added, while for fiscal 1999 and
after the plan will be based on EBITDA. Bonuses will be earned over the
Company's fiscal year ending October 31, and shall be paid by the Company to the
Executive as soon as practicable in accordance with the Company's bonus payment
procedures.
Section 2.3 Equity.
(a) Equity Purchase. Executive shall be eligible to purchase
an initial amount of Equity in Niles LLC for payment as agreed upon
between Niles LLC and the Executive.
(b) Equity Options. Executive shall be eligible to receive an
initial option grant of 200 A Options, 200 B Options and 276 C Options
pursuant to the terms of Schedule A, attached hereto.
Section 2.4 Other Perquisites. During his employment hereunder, Executive
shall be afforded the following incidental benefits:
(a) Expenses. Executive shall be entitled to be reimbursed for
all
2
<PAGE>
customary and reasonable expenses incurred by Executive in the performance
of his duties and responsibilities, subject to such reasonable
substantiation and documentation as may be required by the Company in
accordance with its normal policies.
(b) Other Company Benefits. Subject to the terms of each plan,
program or arrangement as the case may be, Executive and, to the extent
applicable, Executive's family, dependents and beneficiaries, shall be
allowed to participate in all benefits, plans and programs, including
improvements or modifications of the same, which are now, or may hereafter
be, available to similarly situated employees of the Company generally.
The Company shall not, however, by reason of this paragraph be obligated
to institute, maintain, or refrain from changing, amending or
discontinuing, any such benefit plan or program, so long as such changes
are similarly applicable to employees of the Company generally.
Section 2.5 Withholding of Taxes. The Company may withhold from any
benefits or compensation payable under this Agreement all federal, state, city
or other taxes as may be required pursuant to any law or governmental regulation
or ruling.
ARTICLE III: TERMINATION OF EMPLOYMENT
Section 3.1 Employment-Related Event. An "Employment-Related Event" means
any of the following: (a) Executive's resignation for Good Reason (as defined
below), (b) Executive's termination by the Company without Cause (as defined
below) or (c) Executive's death or permanent disability (as defined below).
Should an Employment Related Event occur, the Executive shall only be entitled
to the benefits and payments set forth below, and Executive specifically agrees
to sign a Release as drafted by the Company under which the Executive shall
agree to waive and release all other rights and entitlement, whether legal,
contractual or equitable (including waiving and releasing any claims alleging
discrimination and/or harassment to the maximum extent allowed by law) in order
to be entitled to such benefits and payments.
(a) Good Reason. The Executive may terminate his employment
under this Agreement for Good Reason, after having given the Company
written notice specifying the reason the Executive is terminating his
employment and having given the Company thirty days after such notice
within which to cure the condition specified. "Good Reason" means any of
the following: (i) a material reduction of the Executive's duties or
authority as provided in the Agreement or as later increased by the Board
of Directors; (ii) a substantial change in work conditions; (iii) a
material decrease in compensation or benefits; (iv) relocation of his
principal workplace over 50 miles from his initial workplace without
Executive's consent; (v) the breach of this Agreement by the Company or an
affiliate of the Company; (vi) a change in control of the Company (as
defined in Schedule D hereto); or (vii) the failure by the Company to
obtain the assumption of this Agreement by any successor to or assignee of
the Company or any purported termination of this Agreement which does not
satisfy the requirements of this Agreement. If at the end of such notice
period, the Company has not cured such condition, the written notice shall
take effect, and the Executive will be entitled to the following: (A)
continuation of his then current Base Salary (prior to any reduction that
constitutes Good Reason) for twelve months from the date of termination
payable in accordance with Company payroll practice; (B) continuation of
health and life insurance benefits for twenty-four months at the Company's
expense subject to applicable cost-sharing arrangements, co-payments, and
deductibles in place immediately prior the Executive's termination
(provided, however, that such health benefits shall not be counted toward
the Executive's entitlement for COBRA, and that such health and life
insurance
3
<PAGE>
benefits shall terminate immediately upon Executive obtaining employment
with a third party which provides health and life insurance benefits); (C)
a "pro-rated bonus" for the fiscal year in which the termination occurs
which shall be payable at the time the Company customarily pays bonuses;
(D) the continuation of all other perquisites for six months; (E)
reasonable outplacement assistance for six months (including out of pocket
expenses of the Executive to search for a job not to exceed $5000); and
(F) payment, if requested by the Executive, for all equity in MMH or the
Company owned by the Executive or his family (including but not limited to
Equity Units), payable in equal quarterly installments over the
twenty-four month period following termination, provided, however, that if
this option is requested, the equity shall be valued as of the date of
termination at its fair market value by the Compensation Committee of the
Board of Directors and shall be repurchased so long as permitted under the
terms of any financing documents, including but not limited to indentures
or loan agreements applicable to the Company or any direct or indirect
parent entity of the Company at such time. For purposes of this Agreement,
a "pro-rated bonus" means the portion of the bonus that is arrived at by
using the number of days the Executive was employed by the Company in the
year of termination as the numerator of a fraction of which 365 is the
denominator and then multiplying the bonus the Executive was otherwise
eligible to receive by such fraction.
(b) Termination by the Company without Cause. If the Company
terminates the Executive's employment under this Agreement without Cause,
the Executive shall be entitled to the following: (i) a lump sum payment
equal to his then current annual Base Salary plus a lump sum payment equal
to the Base Salary which would have otherwise been payable for the balance
of the fiscal year in which termination occurs, and (ii) the same benefits
and compensation and payable at the same time as provided in clauses (B)
through (F) of Section 3.1(a). "Cause" means any of the following acts by
the Executive which, if curable, have not been cured by Executive within
30 days' written notice thereof: (i) willful failure to substantially and
materially perform his duties as assigned to him by Board of Directors
(other than any such failure resulting from the Executive's reasonable
business judgment or incapacity due to physical or mental illness); (ii)
commission of a fraud on the Company; (iii) breach of fiduciary duty
involving material personal gain; or (iv) willful misconduct materially
and demonstrably injurious or detrimental to the Company or its
affiliates.
(c) Death or Permanent Disability. This Agreement shall
terminate immediately upon the Executive's Death or Permanent Disability.
Permanent Disability shall have the same meaning as set forth in the
Company's long term disability policy. Upon termination for Death or
Permanent Disability, the Executive, or his estate, shall receive the
following: (i) all accrued Base Salary and other accrued entitlements
earned through the date of termination, (ii) the continuation of Base
Salary for 90 days after such termination, and (iii) the compensation and
benefits set forth in clauses (B), (C), (D) and (F) of Section 3.1(a).
Section 3.2 Termination Event. "Termination Event" means the Executive's
resignation without Good Reason or termination by the Company for Cause. In the
event of a termination due to a Termination Event, the Executive shall receive
his accrued Base Salary and accrued entitlements through the date of
termination. In the event the Executive resigns from the Company without Good
Reason, such resignation only becomes effective upon 60 days' written notice to
the Company.
Section 3.3 Resignation from the Board of Directors and Offices. In the
event of Executive's termination of employment for any reason (including the
failure of the Company to
4
<PAGE>
renew the Agreement), such termination or non-renewal shall also be considered a
resignation as a member of the Board of Directors, a resignation from the board
of directors of any affiliates or subsidiaries of the Company and a resignation
from any offices held by the Executive with the Company or with any of its
affiliates or subsidiaries.
ARTICLE IV: MISCONDUCT AND CONFIDENTIAL INFORMATION
Executive agrees to be bound by the provisions of the World Wide Business
Conduct Policy and the Employee Proprietary Rights and Confidentiality Agreement
attached hereto as Schedule B. The provisions of such documents are incorporated
into this Agreement.
ARTICLE V: NON-COMPETITION; NON-SOLICITATION; INJUNCTIVE RELIEF
Simultaneously with the execution of this Agreement, Executive shall
execute and deliver to the Company a non-competition agreement in the form
attached hereto as Schedule C (the "Non-Competition Agreement"), which shall
become effective if and when this Agreement becomes effective as provided in
Section 1.1 hereof.
ARTICLE VI: INDEMNIFICATION
The Company shall, to the fullest extent permitted by applicable law
indemnify and hold harmless Executive from all claims or expenses that may be
asserted against the Company and affiliates thereof due to his employment, or
that may otherwise derive from Executive's employment as contemplated under this
Agreement, in accordance with the Company's charter and bylaws. The Company
shall purchase and maintain for the benefit of Executive a director's and
officer's liability policy.
ARTICLE VII: MISCELLANEOUS
Section 7.1 Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered, sent by facsimile or when mailed
by United States registered or certified mail, return receipt requested, postage
prepaid, addressed to such address or sent to such facsimile number as each
party may furnish to the other in writing from time to time. Unless notified
otherwise by Executive, copies of notices or other communications sent to
Executive shall be sent to the address noted on the signature page attached
hereto.
Section 7.2 Applicable Law, Jurisdiction and Venue. This Agreement is
entered into under, and shall be governed for all purposes by, the laws of the
State of Wisconsin. In any such litigation, each party hereto waives personal
service of any summons, complaint or other process and agrees that the service
thereof may be made by certified mail directed to such party at his or its
address for purposes of notice under Section 7.1 hereof.
Section 7.3 No Waiver. No failure by either party hereto at any time to
give notice of any breach by the other party of, or to require compliance with,
any condition or provision of this Agreement shall (i) be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time or (ii) preclude insistence upon strict compliance in the
future.
Section 7.4 Severability. If a court of competent jurisdiction determines
that any provision of this Agreement is invalid or unenforceable, then the
invalidity or unenforceability of that provision all not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
5
<PAGE>
Section 7.5 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 Agreement.
Section 7.6 Headings. The paragraph headings have been inserted for
purposes of convenience and shall not be used for interpretive purposes.
Section 7.7 Gender and Plurals. Wherever the context so requires, the
masculine gender includes the feminine or neuter, and the singular number
includes the plural and conversely.
Section 7.8 Affiliate. As used in this Agreement, unless otherwise
indicated, "affiliate" shall have the same definition as set forth in the
Recapitalization Agreement.
Section 7.9 Assignment. This Agreement, and the rights and obligations of
the parties hereunder, are personal and neither this Agreement, nor any right,
benefit or obligation of either party hereto, shall be subject to voluntary or
involuntary assignment, alienation or transfer, whether by operation of law or
otherwise, without the prior written consent of the other party except that
vested rights to payment shall be subject to devise, and shall descend in
accordance with applicable laws of inheritance.
Section 7.10 Effects of Termination of Employment. Except as otherwise
provided herein or under any benefit plan or other agreement between the Company
and the Executive, termination of Executive's employment under this Agreement
shall not affect any right or obligation of either party hereto which is accrued
or vested prior to or upon such termination or the rights and obligations set
forth herein.
Section 7.11 Entire Agreement. This Agreement constitutes the entire
agreement of the parties with regard to the subject matter hereof, contains all
the covenants, promises, representations, warranties and agreements between the
parties with respect to employment of Executive by the Company, and supersedes
all prior employment agreements between the Executive and the Company or any of
its predecessors. Each party to this Agreement acknowledges that no
representation, inducement, promise or agreement, oral or written, has been made
by either party, or by anyone acting on behalf of either party, which is not
embodied herein, and that no agreement, statement, or promise relating to the
employment of Executive by the Company, which is not contained in this
Agreement, shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing and signed by the party to be charged.
Section 7.12 Attorney's Fees. Pursuant to the terms of a side letter (the
"Side Letter"), Executive shall be entitled to be reimbursed for reasonable
attorney's fees incurred in the negotiation of this Agreement to the limit
established in the Side Letter. In addition, Executive shall be entitled to
reimbursement of attorney's fees in any litigation between the Company and
Executive with respect to Executive's enforcement of this Agreement to the
extent Executive prevails in such litigation.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
MORRIS MATERIAL HANDLING, INC.
By: /s/ Michael S. Erwin
---------------------------------------
Name: Michael S. Erwin
Title: President
/s/ Richard J. Niespodziani
-----------------------------------------
Executive
Acknowledged by
MHE INVESTMENTS, INC.
By: /s/ Michael S. Shein
---------------------------------------
Name: Michael S. Shein
Title: Vice President
/s/ Richard J. Niespodziani
-----------------------------------------
Executive
7
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") by and between Morris Material
Handling, Inc., a Delaware corporation (the "Company"), and Peter A. Kerrick
("Executive").
W I T N E S S E T H:
WHEREAS, the Executive is a valued and important employee of the Company,
and possesses significant information about its strategic plans and other trade
secrets; and
WHEREAS, the Executive has been offered the opportunity to purchase units
of Niles, LLC, in connection with the recapitalization contemplated by that
certain Recapitalization Agreement, among Harnischfeger Corporation, the Sellers
named therein and MHE Investments, Inc., dated January 28, 1998 (the
"Recapitalization Agreement"), and to acquire options to purchase additional
units of MMH Holdings, Inc., ("MMH") the owner of all of the stock of the
Company; and
WHEREAS, the Executive desires to purchase such units and to acquire such
options, and understands that the offer to purchase units and acquire options is
contingent upon the execution of this Agreement; and
WHEREAS, the Company wishes to secure the services of Executive after the
Recapitalization, and Executive wishes to furnish such services to the Company,
pursuant to the terms and provisions of this Agreement;
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and obligations contained herein, the Company and Executive agree as follows:
ARTICLE I: EMPLOYMENT, TERM AND DUTIES
Section 1.1. Condition Precedent. This Agreement shall take effect
immediately upon Harnischfeger Corporation or one of its Affiliates (as that
term is defined in the Recapitalization Agreement) selling 50 percent or more of
the outstanding shares of MMH to any party which is an affiliate of Chartwell
Investments Inc., (the "Effective Date"). Should Harnischfeger Corporation or
one of its Affiliates not sell 50 percent or more of the outstanding shares of
the Company to a party which is an affiliate of Chartwell Investments Inc. prior
to July 31, 1998, then this Agreement becomes void ab initio.
Section 1.2. Term. Unless terminated sooner pursuant to the occurrence of
an "Employment Related Event" or a "Termination Event" (both terms as defined in
Article III) and subject to the other terms and provisions of this Agreement,
the Company agrees to employ Executive and Executive agrees to be employed by
the Company, for the period beginning as of the Effective Date and continuing
until the third anniversary of the Effective Date. The Agreement will be
extended for one year on the third anniversary of the Effective Date and on each
anniversary thereafter unless either party gives 60 days' written notice of
failure to renew or termination prior to any such anniversary date; provided,
however, that any such non-renewal by the Company shall void the Executive's
postemployment obligations contained in the Non-Competition Agreement referred
to in Article V of this Agreement. The Executive may voluntarily resign
employment at any time upon providing 60 days' written notice to the Company's
Board of Directors; provided, however, that the obligations of the Executive
under Article IV (Confidential Information) hereof, and the post-employment
obligations of Executive
<PAGE>
contained in the separate Non-Competition Agreement referred to in Article V
hereof shall survive such resignation. The Executive's entitlement to any
severance benefits or payments following termination of employment shall be
governed solely by Article III of this Agreement, and the Executive shall have
no entitlement to any such benefits or payments other than as set forth in
Article III of this Agreement, or as required to be provided to the Executive by
operation of law.
Section 1.3 Title. From and after the Effective Date, the Company shall
employ Executive in the position of Vice President, or such other title as
mutually agreed upon by the Company and the Executive.
Section 1.4 Duties. Executive agrees to serve in the position referred to
in Section 1.3 and to perform diligently and to the best of his abilities the
duties and services pertaining to such office, as well as such additional duties
and services appropriate to such office as the Board of Directors of the Company
("Board of Directors") may reasonably assign to Executive from time to time.
Section 1.5 Business Time and Efforts. Executive agrees, during the period
of employment by the Company, to devote all of his business time, energy and
best efforts to the business and affairs of the Company and its affiliates and
not to engage, directly or indirectly, in any other business or businesses,
whether or not similar to that of the Company, except with the prior written
consent of the Board of Directors.
ARTICLE II: COMPENSATION AND BENEFITS
Section 2.1 Base Salary. During the term of this Agreement, Executive
shall receive an annual base salary of $104,496, subject to annual review by the
Board of Directors.
Section 2.2 Bonus. The Company and Executive shall annually establish an
objective, performance-based bonus plan for Executive. The percentages, targets,
and other terms of the plan will be as mutually agreed upon between the
Compensation Committee of the Board of Directors of the Company and the Chief
Executive Officer of the Company. It is anticipated that, for fiscal year 1998,
the bonus plan will be based on Economic Value Added, while for fiscal 1999 and
after the plan will be based on EBITDA. Bonuses will be earned over the
Company's fiscal year ending October 31, and shall be paid by the Company to the
Executive as soon as practicable in accordance with the Company's bonus payment
procedures.
Section 2.3 Equity.
(a) Equity Purchase. Executive shall be eligible to purchase
an initial amount of Equity in Niles LLC for payment as agreed upon
between Niles LLC and the Executive.
(b) Equity Options. Executive shall be eligible to receive an
initial option grant of 200 A Options, 200 B Options and 276 C Options
pursuant to the terms of Schedule A, attached hereto.
Section 2.4 Other Perquisites. During his employment hereunder, Executive
shall be afforded the following incidental benefits:
(a) Expenses. Executive shall be entitled to be reimbursed for
all customary and reasonable expenses incurred by Executive in the
performance of his
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<PAGE>
duties and responsibilities, subject to such reasonable substantiation and
documentation as may be required by the Company in accordance with its
normal policies.
(b) Other Company Benefits. Subject to the terms of each plan,
program or arrangement as the case may be, Executive and, to the extent
applicable, Executive's family, dependents and beneficiaries, shall be
allowed to participate in all benefits, plans and programs, including
improvements or modifications of the same, which are now, or may hereafter
be, available to similarly situated employees of the Company generally.
The Company shall not, however, by reason of this paragraph be obligated
to institute, maintain, or refrain from changing, amending or
discontinuing, any such benefit plan or program, so long as such changes
are similarly applicable to employees of the Company generally.
Section 2.5 Withholding of Taxes. The Company may withhold from any
benefits or compensation payable under this Agreement all federal, state, city
or other taxes as may be required pursuant to any law or governmental regulation
or ruling.
ARTICLE III: TERMINATION OF EMPLOYMENT
Section 3.1 Employment-Related Event. An "Employment-Related Event" means
any of the following: (a) Executive's resignation for Good Reason (as defined
below), (b) Executive's termination by the Company without Cause (as defined
below) or (c) Executive's death or permanent disability (as defined below).
Should an Employment Related Event occur, the Executive shall only be entitled
to the benefits and payments set forth below, and Executive specifically agrees
to sign a Release as drafted by the Company under which the Executive shall
agree to waive and release all other rights and entitlement, whether legal,
contractual or equitable (including waiving and releasing any claims alleging
discrimination and/or harassment to the maximum extent allowed by law) in order
to be entitled to such benefits and payments.
(a) Good Reason. The Executive may terminate his employment
under this Agreement for Good Reason, after having given the Company
written notice specifying the reason the Executive is terminating his
employment and having given the Company thirty days after such notice
within which to cure the condition specified. "Good Reason" means any of
the following: (i) a material reduction of the Executive's duties or
authority as provided in the Agreement or as later increased by the Board
of Directors; (ii) a substantial change in work conditions; (iii) a
material decrease in compensation or benefits; (iv) relocation of his
principal workplace over 50 miles from his initial workplace without
Executive's consent; (v) the breach of this Agreement by the Company or an
affiliate of the Company; (vi) a change in control of the Company (as
defined in Schedule D hereto); or (vii) the failure by the Company to
obtain the assumption of this Agreement by any successor to or assignee of
the Company or any purported termination of this Agreement which does not
satisfy the requirements of this Agreement. If at the end of such notice
period, the Company has not cured such condition, the written notice shall
take effect, and the Executive will be entitled to the following: (A)
continuation of his then current Base Salary (prior to any reduction that
constitutes Good Reason) for twelve months from the date of termination
payable in accordance with Company payroll practice; (B) continuation of
health and life insurance benefits for twenty-four months at the Company's
expense subject to applicable cost-sharing arrangements, co-payments, and
deductibles in place immediately prior the Executive's termination
(provided, however, that such health benefits shall not be counted toward
the Executive's entitlement for COBRA, and that such health and life
insurance benefits shall terminate immediately upon Executive obtaining
employment with a third
3
<PAGE>
party which provides health and life insurance benefits); (C) a "pro-rated
bonus" for the fiscal year in which the termination occurs which shall be
payable at the time the Company customarily pays bonuses; (D) the
continuation of all other perquisites for six months; (E) reasonable
outplacement assistance for six months (including out of pocket expenses
of the Executive to search for a job not to exceed $5000); and (F)
payment, if requested by the Executive, for all equity in MMH or the
Company owned by the Executive or his family (including but not limited to
Equity Units), payable in equal quarterly installments over the
twenty-four month period following termination, provided, however, that if
this option is requested, the equity shall be valued as of the date of
termination at its fair market value by the Compensation Committee of the
Board of Directors and shall be repurchased so long as permitted under the
terms of any financing documents, including but not limited to indentures
or loan agreements applicable to the Company or any direct or indirect
parent entity of the Company at such time. For purposes of this Agreement,
a "pro-rated bonus" means the portion of the bonus that is arrived at by
using the number of days the Executive was employed by the Company in the
year of termination as the numerator of a fraction of which 365 is the
denominator and then multiplying the bonus the Executive was otherwise
eligible to receive by such fraction.
(b) Termination by the Company without Cause. If the Company
terminates the Executive's employment under this Agreement without Cause,
the Executive shall be entitled to the following: (i) a lump sum payment
equal to his then current annual Base Salary plus a lump sum payment equal
to the Base Salary which would have otherwise been payable for the balance
of the fiscal year in which termination occurs, and (ii) the same benefits
and compensation and payable at the same time as provided in clauses (B)
through (F) of Section 3.1(a). "Cause" means any of the following acts by
the Executive which, if curable, have not been cured by Executive within
30 days' written notice thereof: (i) willful failure to substantially and
materially perform his duties as assigned to him by Board of Directors
(other than any such failure resulting from the Executive's reasonable
business judgment or incapacity due to physical or mental illness); (ii)
commission of a fraud on the Company; (iii) breach of fiduciary duty
involving material personal gain; or (iv) willful misconduct materially
and demonstrably injurious or detrimental to the Company or its
affiliates.
(c) Death or Permanent Disability. This Agreement shall
terminate immediately upon the Executive's Death or Permanent Disability.
Permanent Disability shall have the same meaning as set forth in the
Company's long term disability policy. Upon termination for Death or
Permanent Disability, the Executive, or his estate, shall receive the
following: (i) all accrued Base Salary and other accrued entitlements
earned through the date of termination, (ii) the continuation of Base
Salary for 90 days after such termination, and (iii) the compensation and
benefits set forth in clauses (B), (C), (D) and (F) of Section 3.1(a).
Section 3.2 Termination Event. "Termination Event" means the Executive's
resignation without Good Reason or termination by the Company for Cause. In the
event of a termination due to a Termination Event, the Executive shall receive
his accrued Base Salary and accrued entitlements through the date of
termination. In the event the Executive resigns from the Company without Good
Reason, such resignation only becomes effective upon 60 days' written notice to
the Company.
Section 3.3 Resignation from the Board of Directors and Offices. In the
event of Executive's termination of employment for any reason (including the
failure of the Company to renew the Agreement), such termination or non-renewal
shall also be considered a resignation as
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<PAGE>
a member of the Board of Directors, a resignation from the board of directors of
any affiliates or subsidiaries of the Company and a resignation from any offices
held by the Executive with the Company or with any of its affiliates or
subsidiaries.
ARTICLE IV: MISCONDUCT AND CONFIDENTIAL INFORMATION
Executive agrees to be bound by the provisions of the World Wide Business
Conduct Policy and the Employee Proprietary Rights and Confidentiality Agreement
attached hereto as Schedule B. The provisions of such documents are incorporated
into this Agreement.
ARTICLE V: NON-COMPETITION; NON-SOLICITATION; INJUNCTIVE RELIEF
Simultaneously with the execution of this Agreement, Executive shall
execute and deliver to the Company a non-competition agreement in the form
attached hereto as Schedule C (the "Non-Competition Agreement"), which shall
become effective if and when this Agreement becomes effective as provided in
Section 1.1 hereof.
ARTICLE VI: INDEMNIFICATION
The Company shall, to the fullest extent permitted by applicable law
indemnify and hold harmless Executive from all claims or expenses that may be
asserted against the Company and affiliates thereof due to his employment, or
that may otherwise derive from Executive's employment as contemplated under this
Agreement, in accordance with the Company's charter and bylaws. The Company
shall purchase and maintain for the benefit of Executive a director's and
officer's liability policy.
ARTICLE VII: MISCELLANEOUS
Section 7.1 Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered, sent by facsimile or when mailed
by United States registered or certified mail, return receipt requested, postage
prepaid, addressed to such address or sent to such facsimile number as each
party may furnish to the other in writing from time to time. Unless notified
otherwise by Executive, copies of notices or other communications sent to
Executive shall be sent to the address noted on the signature page attached
hereto.
Section 7.2 Applicable Law, Jurisdiction and Venue. This Agreement is
entered into under, and shall be governed for all purposes by, the laws of the
State of Wisconsin. In any such litigation, each party hereto waives personal
service of any summons, complaint or other process and agrees that the service
thereof may be made by certified mail directed to such party at his or its
address for purposes of notice under Section 7.1 hereof.
Section 7.3 No Waiver. No failure by either party hereto at any time to
give notice of any breach by the other party of, or to require compliance with,
any condition or provision of this Agreement shall (i) be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time or (ii) preclude insistence upon strict compliance in the
future.
Section 7.4 Severability. If a court of competent jurisdiction determines
that any provision of this Agreement is invalid or unenforceable, then the
invalidity or unenforceability of that provision all not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
5
<PAGE>
Section 7.5 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 Agreement.
Section 7.6 Headings. The paragraph headings have been inserted for
purposes of convenience and shall not be used for interpretive purposes.
Section 7.7 Gender and Plurals. Wherever the context so requires, the
masculine gender includes the feminine or neuter, and the singular number
includes the plural and conversely.
Section 7.8 Affiliate. As used in this Agreement, unless otherwise
indicated, "affiliate" shall has the same definition as set forth in the
Recapitalization Agreement.
Section 7.9 Assignment. This Agreement, and the rights and obligations of
the parties hereunder, are personal and neither this Agreement, nor any right,
benefit or obligation of either party hereto, shall be subject to voluntary or
involuntary assignment, alienation or transfer, whether by operation of law or
otherwise, without the prior written consent of the other party except that
vested rights to payment shall be subject to devise, and shall descend in
accordance with applicable laws of inheritance.
Section 7.10 Effects of Termination of Employment. Except as otherwise
provided herein or under any benefit plan or other agreement between the Company
and the Executive, termination of Executive's employment under this Agreement
shall not affect any right or obligation of either party hereto which is accrued
or vested prior to or upon such termination or the rights and obligations set
forth herein.
Section 7.11 Entire Agreement. This Agreement constitutes the entire
agreement of the parties with regard to the subject matter hereof, contains all
the covenants, promises, representations, warranties and agreements between the
parties with respect to employment of Executive by the Company, and supersedes
all prior employment agreements between the Executive and the Company or any of
its predecessors. Each party to this Agreement acknowledges that no
representation, inducement, promise or agreement, oral or written, has been made
by either party, or by anyone acting on behalf of either party, which is not
embodied herein, and that no agreement, statement, or promise relating to the
employment of Executive by the Company, which is not contained in this
Agreement, shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing and signed by the party to be charged.
Section 7.12 Attorney's Fees. Pursuant to the terms of a side letter (the
"Side Letter"), Executive shall be entitled to be reimbursed for reasonable
attorney's fees incurred in the negotiation of this Agreement to the limit
established in the Side Letter. In addition, Executive shall be entitled to
reimbursement of attorney's fees in any litigation between the Company and
Executive with respect to Executive's enforcement of this Agreement to the
extent Executive prevails in such litigation.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
MORRIS MATERIAL HANDLING, INC.
By: /s/ Michael S. Erwin
---------------------------------------
Name: Michael S. Erwin
Title: President
/s/ Peter A. Kerrick
-----------------------------------------
Executive
Acknowledged by
MHE INVESTMENTS, INC.
By: /s/ Michael S. Shein
---------------------------------------
Name: Michael S. Shein
Title: Vice President
/s/ Peter A. Kerrick
-----------------------------------------
Executive
7
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") by and between Morris Material
Handling, Inc., a Delaware corporation (the "Company"), and Edward J. Doolan
("Executive").
W I T N E S S E T H:
WHEREAS, the Executive is a valued and important employee of the Company,
and possesses significant information about its strategic plans and other trade
secrets; and
WHEREAS, the Executive has been offered the opportunity to purchase units
of Niles, LLC, in connection with the recapitalization contemplated by that
certain Recapitalization Agreement, among Harnischfeger Corporation, the Sellers
named therein and MHE Investments, Inc., dated January 28, 1998 (the
"Recapitalization Agreement"), and to acquire options to purchase additional
units of MMH Holdings, Inc., ("MMH") the owner of all of the stock of the
Company; and
WHEREAS, the Executive desires to purchase such units and to acquire such
options, and understands that the offer to purchase units and acquire options is
contingent upon the execution of this Agreement; and
WHEREAS, the Company wishes to secure the services of Executive after the
Recapitalization, and Executive wishes to furnish such services to the Company,
pursuant to the terms and provisions of this Agreement;
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and obligations contained herein, the Company and Executive agree as follows:
ARTICLE I: EMPLOYMENT, TERM AND DUTIES
Section 1.1. Condition Precedent. This Agreement shall take effect
immediately upon Harnischfeger Corporation or one of its Affiliates (as that
term is defined in the Recapitalization Agreement) selling 50 percent or more of
the outstanding shares of MMH to any party which is an affiliate of Chartwell
Investments Inc., (the "Effective Date"). Should Harnischfeger Corporation or
one of its Affiliates not sell 50 percent or more of the outstanding shares of
the Company to a party which is an affiliate of Chartwell Investments Inc. prior
to July 31, 1998, then this Agreement becomes void ab initio.
Section 1.2. Term. Unless terminated sooner pursuant to the occurrence of
an "Employment Related Event" or a "Termination Event" (both terms as defined in
Article III) and subject to the other terms and provisions of this Agreement,
the Company agrees to employ Executive and Executive agrees to be employed by
the Company, for the period beginning as of the Effective Date and continuing
until the third anniversary of the Effective Date. The Agreement will be
extended for one year on the third anniversary of the Effective Date and on each
anniversary thereafter unless either party gives 60 days' written notice of
failure to renew or termination prior to any such anniversary date; provided,
however, that any such non-renewal by the Company shall void the Executive's
postemployment obligations contained in the Non-Competition Agreement referred
to in Article V of this Agreement. The Executive may voluntarily resign
employment at any time upon providing 60 days' written notice to the Company's
Board of Directors; provided, however, that the obligations of the Executive
under Article IV (Confidential Information) hereof, and the post-employment
obligations of Executive
<PAGE>
contained in the separate Non-Competition Agreement referred to in Article V
hereof shall survive such resignation. The Executive's entitlement to any
severance benefits or payments following termination of employment shall be
governed solely by Article III of this Agreement, and the Executive shall have
no entitlement to any such benefits or payments other than as set forth in
Article III of this Agreement, or as required to be provided to the Executive by
operation of law.
Section 1.3 Title. From and after the Effective Date, the Company shall
employ Executive in the position of Vice President, or such other title as
mutually agreed upon by the Company and the Executive.
Section 1.4 Duties. Executive agrees to serve in the position referred to
in Section 1.3 and to perform diligently and to the best of his abilities the
duties and services pertaining to such office, as well as such additional duties
and services appropriate to such office as the Board of Directors of the Company
("Board of Directors") may reasonably assign to Executive from time to time.
Section 1.5 Business Time and Efforts. Executive agrees, during the period
of employment by the Company, to devote all of his business time, energy and
best efforts to the business and affairs of the Company and its affiliates and
not to engage, directly or indirectly, in any other business or businesses,
whether or not similar to that of the Company, except with the prior written
consent of the Board of Directors.
ARTICLE II: COMPENSATION AND BENEFITS
Section 2.1 Base Salary. During the term of this Agreement, Executive
shall receive an annual base salary of $109,800, subject to annual review by the
Board of Directors.
Section 2.2 Bonus. The Company and Executive shall annually establish an
objective, performance-based bonus plan for Executive. The percentages, targets,
and other terms of the plan will be as mutually agreed upon between the
Compensation Committee of the Board of Directors of the Company and the Chief
Executive Officer of the Company. It is anticipated that, for fiscal year 1998,
the bonus plan will be based on Economic Value Added, while for fiscal 1999 and
after the plan will be based on EBITDA. Bonuses will be earned over the
Company's fiscal year ending October 31, and shall be paid by the Company to the
Executive as soon as practicable in accordance with the Company's bonus payment
procedures.
Section 2.3 Equity.
(a) Equity Purchase. Executive shall be eligible to purchase
an initial amount of Equity in Niles LLC for payment as agreed upon
between Niles LLC and the Executive.
(b) Equity Options. Executive shall be eligible to receive an
initial option grant of 200 A Options, 200 B Options and 276 C Options
pursuant to the terms of Schedule A, attached hereto.
Section 2.4 Other Perquisites. During his employment hereunder, Executive
shall be afforded the following incidental benefits:
(a) Expenses. Executive shall be entitled to be reimbursed for
all customary and reasonable expenses incurred by Executive in the
performance of his
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duties and responsibilities, subject to such reasonable substantiation and
documentation as may be required by the Company in accordance with its
normal policies.
(b) Other Company Benefits. Subject to the terms of each plan,
program or arrangement as the case may be, Executive and, to the extent
applicable, Executive's family, dependents and beneficiaries, shall be
allowed to participate in all benefits, plans and programs, including
improvements or modifications of the same, which are now, or may hereafter
be, available to similarly situated employees of the Company generally.
The Company shall not, however, by reason of this paragraph be obligated
to institute, maintain, or refrain from changing, amending or
discontinuing, any such benefit plan or program, so long as such changes
are similarly applicable to employees of the Company generally.
Section 2.5 Withholding of Taxes. The Company may withhold from any
benefits or compensation payable under this Agreement all federal, state, city
or other taxes as may be required pursuant to any law or governmental regulation
or ruling.
ARTICLE III: TERMINATION OF EMPLOYMENT
Section 3.1 Employment-Related Event. An "Employment-Related Event" means
any of the following: (a) Executive's resignation for Good Reason (as defined
below), (b) Executive's termination by the Company without Cause (as defined
below) or (c) Executive's death or permanent disability (as defined below).
Should an Employment Related Event occur, the Executive shall only be entitled
to the benefits and payments set forth below, and Executive specifically agrees
to sign a Release as drafted by the Company under which the Executive shall
agree to waive and release all other rights and entitlement, whether legal,
contractual or equitable (including waiving and releasing any claims alleging
discrimination and/or harassment to the maximum extent allowed by law) in order
to be entitled to such benefits and payments.
(a) Good Reason. The Executive may terminate his employment
under this Agreement for Good Reason, after having given the Company
written notice specifying the reason the Executive is terminating his
employment and having given the Company thirty days after such notice
within which to cure the condition specified. "Good Reason" means any of
the following: (i) a material reduction of the Executive's duties or
authority as provided in the Agreement or as later increased by the Board
of Directors; (ii) a substantial change in work conditions; (iii) a
material decrease in compensation or benefits; (iv) relocation of his
principal workplace over 50 miles from his initial workplace without
Executive's consent; (v) the breach of this Agreement by the Company or an
affiliate of the Company; (vi) a change in control of the Company (as
defined in Schedule D hereto); or (vii) the failure by the Company to
obtain the assumption of this Agreement by any successor to or assignee of
the Company or any purported termination of this Agreement which does not
satisfy the requirements of this Agreement. If at the end of such notice
period, the Company has not cured such condition, the written notice shall
take effect, and the Executive will be entitled to the following: (A)
continuation of his then current Base Salary (prior to any reduction that
constitutes Good Reason) for twelve months from the date of termination
payable in accordance with Company payroll practice; (B) continuation of
health and life insurance benefits for twenty-four months at the Company's
expense subject to applicable cost-sharing arrangements, co-payments, and
deductibles in place immediately prior the Executive's termination
(provided, however, that such health benefits shall not be counted toward
the Executive's entitlement for COBRA, and that such health and life
insurance benefits shall terminate immediately upon Executive obtaining
employment with a third
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<PAGE>
party which provides health and life insurance benefits); (C) a "pro-rated
bonus" for the fiscal year in which the termination occurs which shall be
payable at the time the Company customarily pays bonuses; (D) the
continuation of all other perquisites for six months; (E) reasonable
outplacement assistance for six months (including out of pocket expenses
of the Executive to search for a job not to exceed $5000); and (F)
payment, if requested by the Executive, for all equity in MMH or the
Company owned by the Executive or his family (including but not limited to
Equity Units), payable in equal quarterly installments over the
twenty-four month period following termination, provided, however, that if
this option is requested, the equity shall be valued as of the date of
termination at its fair market value by the Compensation Committee of the
Board of Directors and shall be repurchased so long as permitted under the
terms of any financing documents, including but not limited to indentures
or loan agreements applicable to the Company or any direct or indirect
parent entity of the Company at such time. For purposes of this Agreement,
a "pro-rated bonus" means the portion of the bonus that is arrived at by
using the number of days the Executive was employed by the Company in the
year of termination as the numerator of a fraction of which 365 is the
denominator and then multiplying the bonus the Executive was otherwise
eligible to receive by such fraction.
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<PAGE>
(b) Termination by the Company without Cause. If the Company
terminates the Executive's employment under this Agreement without Cause,
the Executive shall be entitled to the following: (i) a lump sum payment
equal to his then current annual Base Salary plus a lump sum payment equal
to the Base Salary which would have otherwise been payable for the balance
of the fiscal year in which termination occurs, and (ii) the same benefits
and compensation and payable at the same time as provided in clauses (B)
through (F) of Section 3.1(a). "Cause" means any of the following acts by
the Executive which, if curable, have not been cured by Executive within
30 days' written notice thereof: (i) willful failure to substantially and
materially perform his duties as assigned to him by Board of Directors
(other than any such failure resulting from the Executive's reasonable
business judgment or incapacity due to physical or mental illness); (ii)
commission of a fraud on the Company; (iii) breach of fiduciary duty
involving material personal gain; or (iv) willful misconduct materially
and demonstrably injurious or detrimental to the Company or its
affiliates.
(c) Death or Permanent Disability. This Agreement shall
terminate immediately upon the Executive's Death or Permanent Disability.
Permanent Disability shall have the same meaning as set forth in the
Company's long term disability policy. Upon termination for Death or
Permanent Disability, the Executive, or his estate, shall receive the
following: (i) all accrued Base Salary and other accrued entitlements
earned through the date of termination, (ii) the continuation of Base
Salary for 90 days after such termination, and (iii) the compensation and
benefits set forth in clauses (B), (C), (D) and (F) of Section 3.1(a).
Section 3.2 Termination Event. "Termination Event" means the Executive's
resignation without Good Reason or termination by the Company for Cause. In the
event of a termination due to a Termination Event, the Executive shall receive
his accrued Base Salary and accrued entitlements through the date of
termination. In the event the Executive resigns from the Company without Good
Reason, such resignation only becomes effective upon 60 days' written notice to
the Company.
Section 3.3 Resignation from the Board of Directors and Offices. In the
event of Executive's termination of employment for any reason (including the
failure of the Company to renew the Agreement), such termination or non-renewal
shall also be considered a resignation as a member of the Board of Directors, a
resignation from the board of directors of any affiliates or subsidiaries of the
Company and a resignation from any offices held by the Executive with the
Company or with any of its affiliates or subsidiaries.
ARTICLE IV: MISCONDUCT AND CONFIDENTIAL INFORMATION
Executive agrees to be bound by the provisions of the World Wide Business
Conduct Policy and the Employee Proprietary Rights and Confidentiality Agreement
attached hereto as Schedule B. The provisions of such documents are incorporated
into this Agreement.
5
<PAGE>
ARTICLE V: NON-COMPETITION; NON-SOLICITATION; INJUNCTIVE RELIEF
Simultaneously with the execution of this Agreement, Executive shall
execute and deliver to the Company a non-competition agreement in the form
attached hereto as Schedule C (the "Non-Competition Agreement"), which shall
become effective if and when this Agreement becomes effective as provided in
Section 1.1 hereof.
ARTICLE VI: INDEMNIFICATION
The Company shall, to the fullest extent permitted by applicable law
indemnify and hold harmless Executive from all claims or expenses that may be
asserted against the Company and affiliates thereof due to his employment, or
that may otherwise derive from Executive's employment as contemplated under this
Agreement, in accordance with the Company's charter and bylaws. The Company
shall purchase and maintain for the benefit of Executive a director's and
officer's liability policy.
ARTICLE VII: MISCELLANEOUS
Section 7.1 Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered, sent by facsimile or when mailed
by United States registered or certified mail, return receipt requested, postage
prepaid, addressed to such address or sent to such facsimile number as each
party may furnish to the other in writing from time to time. Unless notified
otherwise by Executive, copies of notices or other communications sent to
Executive shall be sent to the address noted on the signature page attached
hereto.
Section 7.2 Applicable Law, Jurisdiction and Venue. This Agreement is
entered into under, and shall be governed for all purposes by, the laws of the
State of Wisconsin. In any such litigation, each party hereto waives personal
service of any summons, complaint or other process and agrees that the service
thereof may be made by certified mail directed to such party at his or its
address for purposes of notice under Section 7.1 hereof.
Section 7.3 No Waiver. No failure by either party hereto at any time to
give notice of any breach by the other party of, or to require compliance with,
any condition or provision of this Agreement shall (i) be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time or (ii) preclude insistence upon strict compliance in the
future.
Section 7.4 Severability. If a court of competent jurisdiction determines
that any provision of this Agreement is invalid or unenforceable, then the
invalidity or unenforceability of that provision all not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
Section 7.5 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 Agreement.
Section 7.6 Headings. The paragraph headings have been inserted for
purposes of convenience and shall not be used for interpretive purposes.
Section 7.7 Gender and Plurals. Wherever the context so requires, the
masculine gender includes the feminine or neuter, and the singular number
includes the plural and
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conversely.
Section 7.8 Affiliate. As used in this Agreement, unless otherwise
indicated, "affiliate" shall have the same definition as set forth in the
Recapitalization Agreement.
Section 7.9 Assignment. This Agreement, and the rights and obligations of
the parties hereunder, are personal and neither this Agreement, nor any right,
benefit or obligation of either party hereto, shall be subject to voluntary or
involuntary assignment, alienation or transfer, whether by operation of law or
otherwise, without the prior written consent of the other party except that
vested rights to payment shall be subject to devise, and shall descend in
accordance with applicable laws of inheritance.
Section 7.10 Effects of Termination of Employment. Except as otherwise
provided herein or under any benefit plan or other agreement between the Company
and the Executive, termination of Executive's employment under this Agreement
shall not affect any right or obligation of either party hereto which is accrued
or vested prior to or upon such termination or the rights and obligations set
forth herein.
Section 7.11 Entire Agreement. This Agreement constitutes the entire
agreement of the parties with regard to the subject matter hereof, contains all
the covenants, promises, representations, warranties and agreements between the
parties with respect to employment of Executive by the Company, and supersedes
all prior employment agreements between the Executive and the Company or any of
its predecessors. Each party to this Agreement acknowledges that no
representation, inducement, promise or agreement, oral or written, has been made
by either party, or by anyone acting on behalf of either party, which is not
embodied herein, and that no agreement, statement, or promise relating to the
employment of Executive by the Company, which is not contained in this
Agreement, shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing and signed by the party to be charged.
Section 7.12 Attorney's Fees. Pursuant to the terms of a side letter (the
"Side Letter"), Executive shall be entitled to be reimbursed for reasonable
attorney's fees incurred in the negotiation of this Agreement to the limit
established in the Side Letter. In addition, Executive shall be entitled to
reimbursement of attorney's fees in any litigation between the Company and
Executive with respect to Executive's enforcement of this Agreement to the
extent Executive prevails in such litigation.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
MORRIS MATERIAL HANDLING, INC.
By: /s/ Michael S. Erwin
---------------------------------------
Name: Michael S. Erwin
Title: President
/s/ Edward J. Doolan
-----------------------------------------
Executive
Acknowledged by
MHE INVESTMENTS, INC.
By: /s/ Michael S. Shein
---------------------------------------
Name: Michael S. Shein
Title: Vice President
/s/ Edward J. Doolan
-----------------------------------------
Executive
8
DATED MARCH 30, 1998
MORRIS MECHANICAL HANDLING
-and-
M J MADDOCK
----------------
SERVICE AGREEMENT
---------------
<PAGE>
THIS AGREEMENT is made the 30th day of March, One thousand nine hundred
and ninety-eight
BETWEEN:-
(1) MORRIS MECHANICAL HANDLING whose registered office is at P.O. Box 7,
North Road, Loughborough LE11 1RL.
(2) MICHAEL JOHN MADDOCK of Ulverscroft Close, Ashby Road, Gilmorton,
Lutterworth LE17 5LY.
WHEREBY IT IS AGREED THAT:-
1. INTERPRETATION AND DEFINITONS
1.1 In this Agreement the following words, phrases and expressions shall
have the following meanings:-
"the Board" the Directors of the Company present
at a meeting of the Directors or at a
duly convened meeting of a Committee
of the Directors
"the Commencement Date" the date of this agreement
"the Company" Morris Mechanical Handling Limited
"the Executive" Michael John Maddock
"the Group" the Company and its subsidiaries (as
defined in the Companies Act 1985 as
amended by the Companies Act 1989)
and any associated company (which
expression shall mean any company
which is not a subsidiary of which
not less than 20% of its equity share
capital is beneficially owned by the
Company) of the Company together with
MMH Holdings, Inc., a Delaware,
U.S.A. corporation.
1.2 Any reference to a statutory provision shall be deemed to include all
re-enactments and modifications of it or the provision referred to and any
regulations made under it or under the provision referred to.
<PAGE>
1.3 The headings in this Agreement have been inserted for convenience
only. They are not to affect its interpretation.
2. THE EXECUTIVE'S APPOINTMENT
2.1 The Company will employ the Executive and the Executive will serve the
Company on and subject to the terms and conditions of this Agreement.
2.2 The Executive's employment began on the Commencement Date. The
Executive's period of continuous employment (taking into account any
employment with a previous employer which counts towards that period)
began on 2nd January 1989.
2.3 The Executive's employment will continue from the Commencement Date
and thereafter unless and until it is terminated pursuant to clause 10 or
by either:-
2.3.1 the Company giving to the Executive not less than twelve
months written notice; or
2.3.2 The Executive giving to the Company not less than twelve
months written notice.
3. THE EXECUTIVE'S DUTIES AND OBLIGATIONS
3.1 The Executive is to act as Vice President -- Middle East/Asia Pacific
Region of Morris Mechanical Handling, Inc., reporting to the Chairman.
3.2 Whilst the Executive is employed by the Company he will:-
3.2.1 perform his duties with reasonable skill and care and to the
best of his ability
3.2.2 comply with all reasonable directions from time to time given
to him by the Board and at all times keep the Board properly
informed of matters which come to his attention which may
materially affect the business of the Company or any member of
the Group
3.2.3 devote the whole of his working time, abilities and attention
to his duties
3.2.4 work such hours as the Company may reasonably require whether
or not these are outside normal business hours
3.2.5 at all times serve the Company and the Group well and
faithfully.
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3.3 Whilst the Executive is employed by the Company he will not:-
3.3.1 do anything which may in the reasonable opinion of the Board
bring any member of the Group into disrepute or harm the
goodwill or commercial image of any member of the Group or
which is or is likely to be damaging or prejudicial to the
business and/or commercial interests of the Company or the
Group
3.3.2 be engaged or interested (except with the prior written
approval of the Board) in any other trade, profession,
business or occupation (including any public or private
activity which in the reasonable opinion of the Board may
interfere with the proper performance of his duties) or hold
any directorship or other office in any company or other body
whether incorporated or unincorporated.
3.4 Nothing contained in this Agreement shall preclude the Executive from
holding not more than 3% of the issued shares or other securities of any
class of a company which are quoted or dealt in on a recognized Stock
Exchange.
3.5 The initial location of the Executive is at North Road, Loughborough.
The Executive will however travel both within the UK and abroad as may be
necessary for the proper performance of his duties and will spend nights
away from the initial location and/or his home where that is necessary for
the performance of his duties. The Executive will not be required without
his consent to locate his office on a full time basis whether permanently
or temporarily to any place outside a radius of 50 miles from the initial
location.
3.6 There are no disciplinary rules on the date of this Agreement which
are specifically applicable to the Executive (other than the provisions of
this Agreement). The Executive shall be expected to behave at all times in
a manner appropriate to his position and responsibilities and to comply
with any staff rules in force from time to time. The Board may however
introduce and amend such disciplinary rules as it thinks fit.
3.7 If the Executive is dissatisfied with any disciplinary action taken
against him or has any grievance relating to his employment he may apply
for redress to the Chairman of the Company whose decision shall be final
and binding, subject to any recourse to law which the Executive may have.
3.8 Unless the Board prescribes otherwise, and save as expressly provided
in the Agreement there will be no specific terms or conditions relating to
the Executive's hours of work. The Executive shall work such hours as may
be necessary or appropriate from time to time to carry out his duties
properly and effectively.
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4. RENUMERATION AND EXPENSES
4.1 The Executive will receive a salary at the rate of (pound)80,900 per
annum. This will be reviewed by the Board (or by any Compensation or
Remuneration Committee established for that purpose) at least once a year.
4.2 The salary is payable by equal monthly installments in arrears on the
last day of each month (or such other day as the Board shall from time to
time decide). It will be deemed to accrue from day to day.
4.3 The salary includes all remuneration or fees to which the Executive
shall be entitled as a Director or officer of any member of the Group.
4.4 The Company or the relevant Group member will reimburse all reasonable
travelling, hotel, entertaining and other expenses properly incurred by
the Executive in the performance of his duties. The Executive will provide
whatever receipts or other supporting documentation may be required and
will comply with the Company's policy and rules relating to the incurring
and reimbursement of expenditure as may be in force from time to time.
4.5 The Executive will be entitled to receive a bonus calculated and paid
in accordance with the provisions of the management bonus scheme from time
to time maintained by the Company.
4.6 For each of 1998 and 1999, the Executive shall receive an additional
payment in the amount of (pound)56,250.
4.7 The Executive shall be eligible to receive an initial option grant
with respect to _____ "Equity Units" (as defined under the Company's
Option Plan in accordance with the general terms set forth in Schedule A).
5. BENEFITS
5.1 The Company will provide for the private and business use of the
Executive a suitable motor car in accordance with the policy of the
Company as determined by the Board from time to time.
5.2 The Company will pay the cost of insuring, taxing and maintaining the
car and will reimburse the Executive all the business and private running
expenses thereof. The Executive will ensure that the car is serviced in
accordance with the manufacturer's recommendations and that he complies at
all time with the requirements and provisions of the policy of insurance
in force in respect of the car from time to time.
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5.3 The car is to remain the property of the Company. On termination of
this Agreement the Executive is to return it in good condition (fair wear
and tear excepted) to the Company together with its keys and all documents
relating to it.
5.4 The Executive shall be entitled to benefits under such private health
plan as the Board may determine from time to time (on the National Scale
appropriate to the nearest hospital to the Executive's home) under its
rules from time to time in force for the benefit of the Executive his
spouse and his children who are resident in the United Kingdom and are
under the age of 21 or who are more than that age but are engaged in a
full time course of education.
5.5 The Company will reimburse the Executive with all reasonable expenses
incurred by the Executive arising out of the Executive's use of his home
telephone.
6. PENSION
6.1 Subject to the terms of the Trust Deed, the Scheme rules and any other
scheme documentation from time to time in force the Executive will be
entitled to join and be a member of the pension scheme or schemes to be
established by the Company and the Company will procure that the benefits
to which the Executive is entitled pursuant to such scheme or schemes are
equal in value overall to the benefits which the Executive would have been
entitled to under the Trafalgar House Executive Pension Scheme ("the
Scheme") in respect of the Executive's service in the scheme to the
Commencement Date. If he does so he will make contributions to and will be
entitled to benefits under the Scheme in accordance with the Trust Deed
and rules relating to it for the time being in force.
6.2 A Contracting-Out Certificate issued under the Social Security Pension
Act 1975 is in force in respect of the Executive's employment.
6.3 Under the terms of the Scheme currently in force and applicable to the
Executive, the Executive is entitled to retire early with the prior
written consent of both the Company and the trustees of the Scheme. The
Company hereby expressly grants its consent to the Executive retiring on
or at any time after his 62nd birthday should he wish to do so. The
Executive may in his absolute discretion retire on or after his 62nd
birthday but cannot be compelled by the Company to do so. The Company also
agrees to use all reasonable endeavours to procure the consent of the
trustees of the Scheme to the Executive retiring on or at any time after
his 62nd birthday should he wish to do so. The Company agrees to secure
the Executive's retirement on or at any time after his 62nd birthday on
the same basis as if the Executive had retired at age 65 and there shall
be no actuarial discounts applied to the Executive's entitlement for his
choosing to take early retirement. Insofar as it is required to do so in
order for this provision to be effective, the Company agrees to make such
payments as are necessary into the Scheme on behalf of the Executive to
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secure his early retirement without discounting his pension or lump sum
entitlement.
6.4 In the event that the Executive does choose to retire early, the
provisions relating to normal retirement age referred to elsewhere in this
Agreement shall be deemed altered to reflect the actual age at which the
Executive chooses to retire.
7. HOLIDAYS
7.1 The Executive will be entitled (in addition to normal pubic and Bank
holidays) to 25 working days' paid holiday each year. For these purposes
the holiday year. For these purposes the holiday year starts on the 1st
January.
7.2 If the employment of the Executive is terminated during any calendar
year he will be entitled to accrued holiday pay of one day's salary for
each day of his accrued entitlement which he has not taken. These
provisions will not apply if this Agreement is terminated pursuant to
clause 10.1 in which event the Executive will have no claim for accrued
holiday pay.
7.3 For the purposes of clause 7.2 holidays are deemed to accrue from day
to day and any holiday entitlement in respect of any holiday year not
utilized by the end of that year shall be forfeit.
7.4 All holidays are to be taken at times approved by the Board.
7.5 The Company may require the Executive to take any unused holiday
during any period of notice given by either party to terminate this
agreement.
8. SICKNESS AND MEDICAL EXAMINATION
8.1 If the Executive is prevented by sickness or injury from properly
performing his duties under this Agreement:-
8.1.1 during the first six continuous months of such absence he will
be entitled to continue to receive the salary and benefits set
out herein at full rate. After such period payment (other than
payment of any Statutory Sick Pay to which the Executive may
be entitled) will cease and the provisions of clause 8.3 will
apply.
8.1.2 He will claim all state sickness benefits available to him and
account to the Company for these during the period in which he
receives sick pay.
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8.2 Any salary paid to the Executive by virtue of clause 8.1.1 shall be
deemed to satisfy any entitlement of the Executive to receive Statutory
Sick Pay for the period to which the salary relates.
8.3 If the Executive continues for more than six continuous months to be
prevented by sickness or injury from properly performing his duties the
Executive will be entitled to such benefits as are available to him from
time to time under the rules of the permanent health insurance scheme of
the Company and the payment of salary or other benefits shall be at the
discretion of the Board. This clause takes effect subject to clause 10.
8.4 Salary paid by the Company to the Executive in respect of any period
of absence resulting from the negligence of a third party shall be
recoverable by the Company out of any damages he the is paid by or on
behalf of that third party.
8.5 The Board may at its discretion require the Executive to furnish
evidence satisfactory to it of any sickness or injury of the Executive. It
may also require him from time to time to undergo a medical examination by
a medical practitioner nominated by the Company. The Company will bear the
costs of any such examination and will be entitled to full disclosure of
the results.
9. CONFIDENTIALITY
9.1 By virtue of his senior position the Executive acknowledges that he
will acquire detailed knowledge of the commercial affairs and business
transactions of the Company and the Group including without limitation
trade secrets and confidential information about customers, suppliers,
terms of sale, terms of supply, plans for growth and expansion and
technical and product improvements and developments. The Executive is
hereby made expressly aware and agrees that all of such information ("the
Confidential Information") is the property of and confidential to the
Company and the Group.
9.2 The Executive shall keep secret and shall not at any time (either
during the continuance of this Agreement or after its termination
howsoever arising) divulge to any person or use of copy for his own or
another's benefit any of the Confidential Information. The Executive will
use reasonable endeavours to prevent the publication or disclosure of any
such information and will notify the Board forthwith of any instances of
disclosure of which he is aware.
9.3 The restrictions set out in clause 9.2 are not to apply to
information:-
9.3.1 divulged by the Executive in the proper performance of his
duties
9.3.2 required by an order of the Board any Court of competent
jurisdiction to be disclosed by the Executive
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9.3.3 within the public domain through no fault of the Executive.
10. TERMINATION
10.1 The company may (without prejudice to and in addition to any other
remedy and notwithstanding the provisions of clause 2.3) terminate this
Agreement (and Executive's employment) immediately and without notice or
payment in lieu of notice upon the death of Executive, the expiration of
the term hereof, or for "Cause". Cause shall exist if the Executive:-
10.1.1 becomes a patient within the meaning of the Mental Health Act
1983 or is otherwise absent from work through sickness or
disability for a period exceeding six months in any twelve
month period
10.1.2 is declared bankrupt by a court of competent jurisdiction,
applies for a receiving order or administration order, has a
receiving order or administration order made against him or
enters into any arrangement or composition with his creditors
or otherwise takes the benefit of any statutory provision for
the relief of insolvent debtors
10.1.3 without reasonable cause neglects refuses or fails to perform
all or any of his duties under this Agreement to an extent
which is material and continues to do so after having been
warned in writing by the Board about such neglect refusal or
failure
10.1.4 at any time and for whatever reason resigns from any
Directorship which he holds within the Group without the
consent of the Board or is disqualified from acting as a
Director.
10.2 A decision to terminate the Executive's employment pursuant to the
provisions of clause 10.1 shall be effective if taken or approved or
ratified by the Board and shall be communicated to the Executive in
writing.
10.3 The employment of the Executive and this Agreement will come to an
end automatically on the last day of the month in which the Executive
reaches normal retirement age (currently age 65), provided, however, that
the Executive may elect, in his sole discretion, to retire and terminate
his Employment and this Agreement upon his attainment of age 62.
10.4 Upon the termination of this Agreement under clause 10.1 or 10.3 the
Executive will be entitled to receive only the Accrued Benefits described
in clause 10.5.3(i). If Executive's employment is terminated during the
term hereof other
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than for Cause, death or the attainment of age 65, Executive shall be
entitled to receive all of the benefits described in clause 10.5.3.
10.5 The Executive's termination of this Agreement is governed under the
provisions set forth below.
10.5.1 Upon termination of this Agreement by Executive other than for
"Good Reason" (as hereinafter defined), Executive shall be
entitled to receive only the Accrued Benefits described in
clause 10.5.3(i).
10.5.2 Executive may terminate his employment under this Agreement
for Good Reason at any time during the term hereof unless this
Agreement has previously expired or been terminated by reason
of (i) the death of Executive, (ii) attainment by Executive of
age 65; (iii) termination of this Agreement by the Company for
Cause, or (iv) voluntary termination of this Agreement by
Executive other than for Good Reason. Termination by Executive
for "Good Reason" shall mean termination by Executive of his
employment hereunder because of:-
(i) the failure by the Company to pay or cause to be paid the
base salary, benefits, and bonus required by this Agreement
and a continuation of such failure for 10 days after the
Company receives notice thereof; or
(ii) a material diminishment in the responsibilities and
duties assigned to Executive by the Company or any other
material breach by the Company of any of the terms of this
Agreement and the continuation of such breach for thirty days
after the Company shall have received written notice of such
breach, which notice shall mean a notice that shall indicate
the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination under
the provision so indicated.
10.5.3 Upon any termination by Executive of his employment under this
Agreement for Good Reason, the Company shall forthwith:-
(i) pay or cause to be paid to Executive in cash the following
accrued benefits ("Accrued Benefits"): (A) all salary earned
or accrued through the termination date; (B) reimburse
Executive for any and all monies advanced by the Executive in
connection with Executive's employment for reasonable and
necessary expenses incurred by Executive through the
termination date; and (C) pay all other amounts and benefits
to which Executive may be entitled under the terms of any
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benefit plan of the Company. Payment of amounts other than
those described in subsection (C) hereof shall be made within
10 days after the termination date. Payment of amounts under
subsection (C) hereof shall be pursuant to the terms of any
such plans either by the Company or a trust implementing such
plan; and
(ii) pay or cause to be paid to Executive (a) for one year
after his termination, the annual base salary payable to
Executive hereunder immediately prior to such termination in
accordance with the Company's normal payroll practices, and
(b) a lump sum, payable upon termination, arrived at by
multiplying (pound)56,250 by a number equal to two minus "X",
where "X" equals the number of times Executive received the
additional amount payable pursuant to clause 4.6 hereof.
In addition, for purposes of the Company's medical, dental and life
insurance programs, Executive shall be considered and deemed for a
period of one year following such termination or until Executive
attains the age of 65 or until reasonably equivalent benefits are
paid or extended by a new employer, whichever first occurs, to be a
full-time employee of the Company and be entitled to all benefits,
rights and privileges thereunder. If at the end of such year, if
Executive has not attained the age of 65 or has not previously
received or is not then receiving equivalent benefits from a new
employer, the Company shall arrange, at its sole cost and expense
(but not including premiums therefor), to enable Executive to
convert the coverage under such polices to equivalent individual
policies.
10.6 On the termination of the Executive's employment for any reason:-
10.6.1 the Executive will at the request of the Company immediately
resign from all directorships, offices and trusteeships within
the Group then held by him without compensation for loss of
office as such director, officer or trustee. The Executive
irrevocably authorizes the Company to appoint some person in
his name and on his behalf to sign any documents and do any
things necessary to effect such resignation should he fail to
do so himself.
10.6.2 the Company may deduct from any salary or wages due from it to
the Executive any monies which are due from wages due the
Executive to it or to the Group.
10.6.3 the Executive will return forthwith to the Company all books,
papers, records, correspondence, notes, memoranda, sketches,
technical drawings, specifications, and other documents and
all other property belonging to the Company or any Group
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Company, to the Company's Head Office or as the Board shall
otherwise direct.
10.7 Any provision of this Agreement which is expressed to have effect
after its termination will continue in force in accordance with its terms.
11. POST TERMINATION OBLIGATIONS
11.1 The Executive shall not, directly or indirectly, during the period of
twelve months immediately following the termination of this Agreement in
any Specified Capacity:-
11.1.1 solicit or endeavour to solicit orders from or entice away
from any Relevant Company as defined in clause 11.4.3 in
connection with any business falling within the definition of
"Specified Business" set out in clause 11.4.2 or deal with any
person, firm, company or organization who shall have been a
client or customer of any Relevant Company during the twelve
months preceding such termination; and
11.1.2 attempt to induce or persuade any person who was employed by
any Relevant Company at the date of the termination of this
agreement or at any time during the twelve months preceding
such termination to leave such employment.
11.2 The Executive shall not, directly or indirectly, during the period of
twelve months after the termination of this agreement within the Specified
Areas in any Specified Capacity carry on or be interested, engaged or
concerned in all or any of the Specified Businesses in competition with
(i) the Company or (ii) any member of the Group.
11.3 The restrictions in clauses 11.1 and 11.2
11.3.1 shall not apply to the Executive if this Agreement is
terminated by the Company in breach of contract or if an
industrial tribunal makes an award of compensation for unfair
dismissal against the Company in respect of the termination of
the Executive's employment; and
11.3.2 any period of notice which is worked by the Executive
following termination or notice of termination by the Company
shall be deducted from the twelve month period for which
paragraphs 11.1 and 11.2 would otherwise apply; and
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11.3.3 are considered by the parties to be reasonable in all the
circumstances and for the legitimate and necessary protection
of the Confidential Information customer and trade connection
of the Company and the Group. If, however, any restriction is
found by a Court to be void as going beyond what is reasonable
in all the circumstances the restrictions will apply with such
modifications as may be necessary to render them valid and
effective.
11.4 For the purposes of this clause:-
11.4.1 "Specified Capacity" means each of the following capacities:-
11.4.1.1 as principal whether solely or jointly with any other
person
11.4.1.2 as partner with any other person
11.4.1.3 as agent for any other person
11.4.1.4 as an employee of any other person
11.4.1.5 as an officer of any company or
11.4.1.6 as the owner of any interest in any shares or other
securities in any company (other than in accordance
with clause 3.4).
11.4.2 "Specified Business" means each of the following taken
separately:-
11.4.2.1 the design, manufacture, sale and distribution of
cranes, lifting equipment and associated and
component products and/or
11.4.2.2 each other business and/or activity of each member of
the Group with or in which the Executive has been
involved or had responsibility for during the 12
months immediately preceding the termination of this
agreement.
11.4.3 "Relevant Company" means (i) the Company; and (ii) any member
of the Group.
11.4.4 "Specified Areas" includes the United Kingdom and countries
forming part of the Middle East/Asia Pacific region.
11.5 Each of the obligations contained in clause 11.1 above shall be a
separate and several obligation.
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12. INVENTIONS
12.1 If at any time during the continuance of this Agreement the Executive
shall discover, make or conceive either by himself or jointly with any
other person or persons any invention, discovery, formula, design,
process, adaptation or improvement ("Intellectual Property") which relates
to or is connected with or capable of being worked or employed in
connection with any trade or business for the time being carried on by the
Company and or the Group he shall forthwith supply in writing full
particulars concerning the same to the Company.
12.2 All ("Intellectual Property") which is either made in the course of
the normal duties of the Executive or in the course of duties falling
outside his normal duties but specifically assigned to him shall upon the
discovery making or conception thereof belong to and vest in the Company
absolutely and beneficially together with all rights to apply for patent
or other protection thereby obtained. The Executive shall if so required
by the Company and at the expense of the Company take all such steps and
execute such documents as may be necessary fully and effectually to vest
in the Company or as it may direct the full benefit of the said
Intellectual Property and to give to the Company or its nominees such
protection as it may require in respect thereof in any part of the world
whether by way of patents or otherwise howsoever.
12.3 In the event of any dispute arising between the Company and the
Executive as to whether or not any invention communicated falls within the
scope of sub-clause 12.2 hereof application will be made jointly by the
Company and the Executive to the Comptroller General of Patents in
accordance with Section 8 of the Patents Act 1977 for determination of the
matter and his decision shall be final and binding.
12.4 The Executive acknowledges that inventions may reasonably be expected
to result from the carrying out of his normal duties and of any duties
specifically assigned to him within the meaning of Section 39(1)(a) of the
Patents Act 1977.
12.5 The Executive acknowledges that because of the nature of his duties
and the particular responsibilities arising from the nature of his duties
he has a special obligation to further the interests of the undertaking of
the Company and the Group within the meaning of Section 39(1)(a) of the
Patents Act 1977.
12.6 The Executive hereby irrevocably appoints the Company to be his
attorney in his name and on his behalf to execute such instrument or do
such things and generally to use his name for the purpose of giving to the
Company (or its nominee) the benefit of the provisions of this clause and
in favour of any third party a certificate in writing signed by any
Director or Secretary of the Company that any instrument or act falls
within the authority hereby conferred shall be conclusive evidence that
such is the case. It is hereby agreed between the parties that the
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provisions of this Clause 12 shall survive in their entirety the
termination of the Executive's employment for whatsoever reason.
13. NOTICES
13.1 Any notice to be given under this Agreement to the Executive may be
given to him personally or sent to him by prepaid first class letter
addressed to him at his last known place of residence. Any notice to be
given to the Company may be served by leaving it at or sending it by
prepaid first class letter to its registered office for the time being.
13.2 Any notice served by post shall be deemed to have been served
forty-eight hours after it was posted and proof that the notice was
properly addressed, pre-paid and posted shall be sufficient evidence of
service.
14. GOVERNING LAW
This agreement shall be interpreted and enforced in accordance with the
laws of England.
15. SUPERSESSION OF PREVIOUS AGREEMENTS
This Agreement supersedes and is in substitution for any subsisting
agreements between the Company (or any Group member) and the Executive
relating to his employment. All such subsisting agreements are terminated
by mutual consent with effect from the Commencement Date.
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IN WITNESS whereof the parties have executed this Agreement on the date
set out above.
EXECUTED as a Deed by
MORRIS MECHANICAL HANDLING LIMITED
in the presence of:-
/s/ Steve Davis
Director
SIGNED as a DEED by the
said MICHAEL JOHN MADDOCK /s/ Michael John Maddock
in the presence of:
/s/ L.J. Belton
15
DATED MARCH 30, 1998
MORRIS MECHANICAL HANDLING
-and-
K B NORRIDGE
----------------
SERVICE AGREEMENT
---------------
<PAGE>
THIS AGREEMENT is made the 30th day of March, One thousand nine hundred
and ninety-eight
BETWEEN:-
(1) MORRIS MECHANICAL HANDLING whose registered office is at P.O. Box 7,
North Road, Loughborough LE11 1RL.
(2) KENNETH BRUCE NORRIDGE of 28 Sanders Road, Quorn, Leicestershire.
WHEREBY IT IS AGREED THAT:-
1. INTERPRETATION AND DEFINITONS
1.1 In this Agreement the following words, phrases and expressions shall
have the following meanings:-
"the Board" the Directors of the Company present at
a meeting of the Directors or at a duly
convened meeting of a Committee of the
Directors
"the Commencement Date" the date of this agreement
"the Company" Morris Mechanical Handling Limited
"the Executive" Kenneth Bruce Norridge
"the Group" the Company and its subsidiaries (as
defined in the Companies Act 1985 as
amended by the Companies Act 1989) and
any associated company (which expression
shall mean any company which is not a
subsidiary of which not less than 20% of
its equity share capital is beneficially
owned by the Company) of the Company
together with MMH Holdings, Inc., a
Delaware, U.S.A. corporation.
1.2 Any reference to a statutory provision shall be deemed to include all
re-enactments and modifications of it or the provision referred to and any
regulations made under it or under the provision referred to.
<PAGE>
1.3 The headings in this Agreement have been inserted for convenience
only. They are not to affect its interpretation.
2. THE EXECUTIVE'S APPOINTMENT
2.1 The Company will employ the Executive and the Executive will serve the
Company on and subject to the terms and conditions of this Agreement.
2.2 The Executive's employment began on the Commencement Date. The
Executive's period of continuous employment (taking into account any
employment with a previous employer which counts towards that period)
began on 1st January 1979.
2.3 The Executive's employment will continue from the Commencement Date
and thereafter unless and until it is terminated pursuant to clause 10 or
by either:-
2.3.1 the Company giving to the Executive not less than twelve
months written notice; or
2.3.2 The Executive giving to the Company not less than twelve
months written notice.
3. THE EXECUTIVE'S DUTIES AND OBLIGATIONS
3.1 The Executive is to act as Vice President, Europe and Africa Region of
Morris Mechanical Handling, Inc., reporting to the Chairman.
3.2 Whilst the Executive is employed by the Company he will:-
3.2.1 perform his duties with reasonable skill and care and to the
best of his ability
3.2.2 comply with all reasonable directions from time to time given
to him by the Board and at all times keep the Board properly
informed of matters which come to his attention which may
materially affect the business of the Company or any member of
the Group
3.2.3 devote the whole of his working time, abilities and attention
to his duties
3.2.4 work such hours as the Company may reasonably require whether
or not these are outside normal business hours
3.2.5 at all times serve the Company and the Group well and
faithfully.
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3.3 Whilst the Executive is employed by the Company he will not:-
3.3.1 do anything which may in the reasonable opinion of the Board
bring any member of the Group into disrepute or harm the
goodwill or commercial image of any member of the Group or
which is or is likely to be damaging or prejudicial to the
business and/or commercial interests of the Company or the
Group
3.3.2 be engaged or interested (except with the prior written
approval of the Board) in any other trade, profession,
business or occupation (including any public or private
activity which in the reasonable opinion of the Board may
interfere with the proper performance of his duties) or hold
any directorship or other office in any company or other body
whether incorporated or unincorporated.
3.4 Nothing contained in this Agreement shall preclude the Executive from
holding not more than 3% of the issued shares or other securities of any
class of a company which are quoted or dealt in on a recognized Stock
Exchange.
3.5 The initial location of the Executive is at North Road, Loughborough.
The Executive will however travel both within the UK and abroad as may be
necessary for the proper performance of his duties and will spend nights
away from the initial location and/or his home where that is necessary for
the performance of his duties. The Executive will not be required without
his consent to locate his office on a full time basis whether permanently
or temporarily to any place outside a radius of 50 miles from the initial
location.
3.6 There are no disciplinary rules on the date of this Agreement which
are specifically applicable to the Executive (other than the provisions of
this Agreement). The Executive shall be expected to behave at all times in
a manner appropriate to his position and responsibilities and to comply
with any staff rules in force from time to time. The Board may however
introduce and amend such disciplinary rules as it thinks fit.
3.7 If the Executive is dissatisfied with any disciplinary action taken
against him or has any grievance relating to his employment he may apply
for redress to the Chairman of the Company whose decision shall be final
and binding, subject to any recourse to law which the Executive may have.
3.8 Unless the Board prescribes otherwise, and save as expressly provided
in the Agreement there will be no specific terms or conditions relating to
the Executive's hours of work. The Executive shall work such hours as may
be necessary or appropriate from time to time to carry out his duties
properly and effectively.
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4. RENUMERATION AND EXPENSES
4.1 The Executive will receive a salary at the rate of (pound)79,000 per
annum. This will be reviewed by the Board (or by any Compensation or
Remuneration Committee established for that purpose) at least once a year.
4.2 The salary is payable by equal monthly installments in arrears on the
last day of each month (or such other day as the Board shall from time to
time decide). It will be deemed to accrue from day to day.
4.3 The salary includes all remuneration or fees to which the Executive
shall be entitled as a Director or officer of any member of the Group.
4.4 The Company or the relevant Group member will reimburse all reasonable
travelling, hotel, entertaining and other expenses properly incurred by
the Executive in the performance of his duties. The Executive will provide
whatever receipts or other supporting documentation may be required and
will comply with the Company's policy and rules relating to the incurring
and reimbursement of expenditure as may be in force from time to time.
4.5 The Executive will be entitled to receive a bonus calculated and paid
in accordance with the provisions of the management bonus scheme from time
to time maintained by the Company.
4.6 For each of 1998 and 1999, the Executive shall receive an additional
payment in the amount of (pound)56,250.
4.7 The Company will pay any monies to which the Executive is entitled
pursuant to this Agreement to such person as the Executive shall request
in writing (anywhere in the world).
4.8 The Executive shall be eligible to receive an initial option grant
with respect to _____ "Equity Units" (as defined under the Company's
Option Plan in accordance with the general terms set forth in Schedule A).
5. BENEFITS
5.1 The Company will provide for the private and business use of the
Executive a suitable motor car in accordance with the policy of the
Company as determined by the Board from time to time.
5.2 The Company will pay the cost of insuring, taxing and maintaining the
car and will reimburse the Executive all the business and private running
expenses thereof. The Executive will ensure that the car is serviced in
accordance with the manufacturer's recommendations and that he complies at
4
<PAGE>
all time with the requirements and provisions of the policy of insurance
in force in respect of the car from time to time.
5.3 The car is to remain the property of the Company. On termination of
this Agreement the Executive is to return it in good condition (fair wear
and tear excepted) to the Company together with its keys and all documents
relating to it.
5.4 The Executive shall be entitled to benefits under such private health
plan as the Board may determine from time to time (on the National Scale
appropriate to the nearest hospital to the Executive's home) under its
rules from time to time in force for the benefit of the Executive his
spouse and his children who are resident in the United Kingdom and are
under the age of 21 or who are more than that age but are engaged in a
full time course of education.
5.5 The Company will reimburse the Executive with all reasonable expenses
incurred by the Executive arising out of the Executive's use of his home
telephone.
5.6 The Executive will be paid an allowance of (pound)1,685 per month for
housing, utilities and related expenses (net of taxation and national
insurance which will be payable by the Company). Such sum will cease to be
payable if the Executive ceases to reside in the United Kingdom.
5.7 The Company will support an application for a new or extended work
permit on expiry of the Executive's current work permit.
5.8 The Company will pay the cost of all reasonable professional fees
charged in connection with the Executive taking advice in relation to
personal taxation and work permit matters not to exceed (pound)2,500 per
annum.
6. PENSION
6.1 Subject to the terms of the Trust Deed, the Scheme rules and any other
scheme documentation from time to time in force the Executive will be
entitled to join and be a member of the pension scheme or schemes to be
established by the Company and the Company will procure that the benefits
to which the Executive is entitled pursuant to such scheme or schemes are
equal in value overall to the benefits which the Executive would have been
entitled to under the Trafalgar House Executive Pension Scheme ("the
Scheme") in respect of the Executive's service in the scheme to the
Commencement Date. If he does so he will make contributions to and will be
entitled to benefits under the Scheme in accordance with the Trust Deed
and rules relating to it for the time being in force.
6.2 A Contracting-Out Certificate issued under the Social Security Pension
Act 1975 is in force in respect of the Executive's employment.
5
<PAGE>
7. HOLIDAYS
7.1 The Executive will be entitled (in addition to normal pubic and Bank
holidays) to 25 working days' paid holiday each year. For these purposes
the holiday year. For these purposes the holiday year starts on the 1st
January.
7.2 If the employment of the Executive is terminated during any calendar
year he will be entitled to accrued holiday pay of one day's salary for
each day of his accrued entitlement which he has not taken. These
provisions will not apply if this Agreement is terminated pursuant to
clause 10.1 in which event the Executive will have no claim for accrued
holiday pay.
7.3 For the purposes of clause 7.2 holidays are deemed to accrue from day
to day and any holiday entitlement in respect of any holiday year not
utilized by the end of that year shall be forfeit.
7.4 All holidays are to be taken at times approved by the Board.
7.5 The Company may require the Executive to take any unused holiday
during any period of notice given by either party to terminate this
agreement.
8. SICKNESS AND MEDICAL EXAMINATION
8.1 If the Executive is prevented by sickness or injury from properly
performing his duties under this Agreement:-
8.1.1 during the first six continuous months of such absence he will
be entitled to continue to receive the salary and benefits set
out herein at full rate. After such period payment (other than
payment of any Statutory Sick Pay to which the Executive may
be entitled) will cease and the provisions of clause 8.3 will
apply.
8.1.2 He will claim all state sickness benefits available to him and
account to the Company for these during the period in which he
receives sick pay.
8.2 Any salary paid to the Executive by virtue of clause 8.1.1 shall be
deemed to satisfy any entitlement of the Executive to receive Statutory
Sick Pay for the period to which the salary relates.
8.3 If the Executive continues for more than six continuous months to be
prevented by sickness or injury from properly performing his duties the
Executive will be entitled to such benefits as are available to him from
time to time under the rules of the permanent health insurance scheme of
the Company and the payment of salary or other benefits shall be at the
6
<PAGE>
discretion of the Board. This clause takes effect subject to clause 10.
8.4 Salary paid by the Company to the Executive in respect of any period
of absence resulting from the negligence of a third party shall be
recoverable by the Company out of any damages he the is paid by or on
behalf of that third party.
8.5 The Board may at its discretion require the Executive to furnish
evidence satisfactory to it of any sickness or injury of the Executive. It
may also require him from time to time to undergo a medical examination by
a medical practitioner nominated by the Company. The Company will bear the
costs of any such examination and will be entitled to full disclosure of
the results.
9. CONFIDENTIALITY
9.1 By virtue of his senior position the Executive acknowledges that he
will acquire detailed knowledge of the commercial affairs and business
transactions of the Company and the Group including without limitation
trade secrets and confidential information about customers, suppliers,
terms of sale, terms of supply, plans for growth and expansion and
technical and product improvements and developments. The Executive is
hereby made expressly aware and agrees that all of such information ("the
Confidential Information") is the property of and confidential to the
Company and the Group.
9.2 The Executive shall keep secret and shall not at any time (either
during the continuance of this Agreement or after its termination
howsoever arising) divulge to any person or use of copy for his own or
another's benefit any of the Confidential Information. The Executive will
use reasonable endeavours to prevent the publication or disclosure of any
such information and will notify the Board forthwith of any instances of
disclosure of which he is aware.
9.3 The restrictions set out in clause 9.2 are not to apply to
information:-
9.3.1 divulged by the Executive in the proper performance of his
duties
9.3.2 required by an order of the Board any Court of competent
jurisdiction to be disclosed by the Executive
9.3.3 within the public domain through no fault of the Executive.
10. TERMINATION
10.1 The company may (without prejudice to and in addition to any other
remedy and notwithstanding the provisions of clause 2.3) terminate this
Agreement (and Executive's employment) immediately and without notice or
payment in lieu of notice upon the death of Executive, the expiration
7
<PAGE>
of the term hereof, or for "Cause". Cause shall exist if the Executive:-
10.1.1 becomes a patient within the meaning of the Mental Health Act
1983 or is otherwise absent from work through sickness or
disability for a period exceeding six months in any twelve
month period
10.1.2 is declared bankrupt by a court of competent jurisdiction,
applies for a receiving order or administration order, has a
receiving order or administration order made against him or
enters into any arrangement or composition with his creditors
or otherwise takes the benefit of any statutory provision for
the relief of insolvent debtors
10.1.3 without reasonable cause neglects refuses or fails to perform
all or any of his duties under this Agreement to an extent
which is material and continues to do so after having been
warned in writing by the Board about such neglect refusal or
failure
10.1.4 at any time and for whatever reason resigns from any
Directorship which he holds within the Group without the
consent of the Board or is disqualified from acting as a
Director.
10.2 A decision to terminate the Executive's employment pursuant to the
provisions of clause 10.1 shall be effective if taken or approved or
ratified by the Board and shall be communicated to the Executive in
writing.
10.3 The employment of the Executive and this Agreement will come to an
end automatically on the last day of the month in which the Executive
reaches normal retirement age. This is currently 65 years of age.
10.4 Upon the termination of this Agreement under clause 10.1 or 10.3 the
Executive will be entitled to receive only the Accrued Benefits described
in clause 10.5.3(i). If Executive's employment is terminated during the
term hereof other than for Cause, death or the attainment of age 65,
Executive shall be entitled to receive all of the benefits described in
clause 10.5.3.
10.5 The Executive's termination of this Agreement is governed under the
provisions set forth below.
10.5.1 Upon termination of this Agreement by Executive other than
for "Good Reason" (as hereinafter defined), Executive shall be
entitled to receive only the Accrued Benefits described in
clause 10.5.3(i).
8
<PAGE>
10.5.2 Executive may terminate his employment under this Agreement
for Good Reason at any time during the term hereof unless this
Agreement has previously expired or been terminated by reason
of (i) the death of Executive, (ii) attainment by Executive of
age 65; (iii) termination of this Agreement by the Company for
Cause, or (iv) voluntary termination of this Agreement by
Executive other than for Good Reason. Termination by Executive
for "Good Reason" shall mean termination by Executive of his
employment hereunder because of:-
(i) the failure by the Company to pay or cause to be paid the
base salary, benefits, and bonus required by this Agreement
and a continuation of such failure for 10 days after the
Company receives notice thereof; or
(ii) a material diminishment in the responsibilities and
duties assigned to Executive by the Company or any other
material breach by the Company of any of the terms of this
Agreement and the continuation of such breach for thirty days
after the Company shall have received written notice of such
breach, which notice shall mean a notice that shall indicate
the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination under
the provision so indicated.
10.5.3 Upon any termination by Executive of his employment under
this Agreement for Good Reason, the Company shall forthwith:-
(i) pay or cause to be paid to Executive in cash the following
accrued benefits ("Accrued Benefits"): (A) all salary earned
or accrued through the termination date; (B) reimburse
Executive for any and all monies advanced by the Executive in
connection with Executive's employment for reasonable and
necessary expenses incurred by Executive through the
termination date; and (C) pay all other amounts and benefits
to which Executive may be entitled under the terms of any
benefit plan of the Company. Payment of amounts other than
those described in subsection (C) hereof shall be made within
10 days after the termination date. Payment of amounts under
subsection (C) hereof shall be pursuant to the terms of any
such plans either by the Company or a trust implementing such
plan; and
(ii) pay or cause to be paid to Executive (a) for one year
after his termination, the annual base salary payable to
Executive hereunder immediately prior to such termination in
accordance with the Company's normal payroll practices, and
9
<PAGE>
(b) a lump sum, payable upon termination, arrived at by
multiplying (pound)56,250 by a number equal to two minus "X",
where "X" equals the number of times Executive received the
additional amount payable pursuant to clause 4.6 hereof.
In addition, for purposes of the Company's medical, dental and life
insurance programs, Executive shall be considered and deemed for a
period of one year following such termination or until Executive
attains the age of 65 or until reasonably equivalent benefits are
paid or extended by a new employer, whichever first occurs, to be a
full-time employee of the Company and be entitled to all benefits,
rights and privileges thereunder. If at the end of such year, if
Executive has not attained the age of 65 or has not previously
received or is not then receiving equivalent benefits from a new
employer, the Company shall arrange, at its sole cost and expense
(but not including premiums therefor), to enable Executive to
convert the coverage under such polices to equivalent individual
policies.
10.6 On the termination of the Executive's employment for any reason:-
10.6.1 the Executive will at the request of the Company immediately
resign from all directorships within the Group then held by
him. The Executive irrevocably authorizes the Company to
appoint some person in his name and on his behalf to sign any
documents and do any things necessary to effect such
resignation should he fail to do so himself.
10.6.2 the Company may deduct from any salary or wages due from it
to the Executive any monies which are due from the Executive
to it or to the Group.
10.6.3 the Executive will return forthwith to the Company all books,
papers, records, correspondence, notes, memoranda, sketches,
technical drawings, specifications, and other documents and
all other property belonging to the Company, to the company's
Head Office or as the Board shall otherwise direct.
10.7 Any provision of this Agreement which is expressed to have effect
after its termination will continue in force in accordance with its terms.
10
<PAGE>
11. POST TERMINATION OBLIGATIONS
11.1 The Executive shall not, directly or indirectly, during the period of
twelve months immediately following the termination of this Agreement in
any Specified Capacity:-
11.1.1 solicit or endeavour to solicit orders from or entice away
from any Relevant Company as defined in clause 11.4.3 in
connection with any business falling within the definition of
"Specified Business" set out in clause 11.4.2 or deal with any
person, firm, company or organization who shall have been a
client or customer of any Relevant Company during the twelve
months preceding such termination; and
11.1.2 attempt to induce or persuade any person who was employed by
any Relevant Company at the date of the termination of this
agreement or at any time during the twelve months preceding
such termination to leave such employment.
11.2 The Executive shall not, directly or indirectly, during the period of
twelve months after the termination of this agreement within the Specified
Areas in any Specified Capacity carry on or be interested, engaged or
concerned in all or any of the Specified Businesses in competition with
(i) the Company or (ii) any member of the Group.
11.3 The restrictions in clauses 11.1 and 11.2
11.3.1 shall not apply to the Executive if this Agreement is
terminated by the Company in breach of contract or if an
industrial tribunal makes an award of compensation for unfair
dismissal against the Company in respect of the termination of
the Executive's employment; and
11.3.2 any period of notice which is worked by the Executive
following termination or notice of termination by the Company
shall be deducted from the twelve month period for which
paragraphs 11.1 and 11.2 would otherwise apply; and
11.3.3 are considered by the parties to be reasonable in all the
circumstances and for the legitimate and necessary protection
of the Confidential Information customer and trade connection
of the Company and the Group. If, however, any restriction is
found by a Court to be void as going beyond what is reasonable
in all the circumstances the restrictions will apply with such
modifications as may be necessary to render them valid and
effective.
11
<PAGE>
11.4 For the purposes of this clause:-
11.4.1 "Specified Capacity" means each of the following capacities:-
11.4.1.1 as principal whether solely or jointly with any other
person
11.4.1.2 as partner with any other person
11.4.1.3 as agent for any other person
11.4.1.4 as an employee of any other person
11.4.1.5 as an officer of any company or
11.4.1.6 as the owner of any interest in any shares or other
securities in any company (other than in accordance with
clause 3.4).
11.4.2 "Specified Business" means each of the following taken
separately:-
11.4.2.1 the design, manufacture, sale and distribution of
cranes, lifting equipment and associated and component
products and/or
11.4.2.2 each other business and/or activity of each member of
the Group with or in which the Executive has been
involved or had responsibility for during the 12 months
immediately preceding the termination of this agreement.
11.4.3 "Relevant Company" means (i) the Company; and (ii) any member
of the Group.
11.4.4 "Specified Areas" includes the United Kingdom, Europe and
Africa.
11.5 Each of the obligations contained in clause 11.1 above shall be a
separate and several obligation.
12. INVENTIONS
12.1 If at any time during the continuance of this Agreement the Executive
shall discover, make or conceive either by himself or jointly with any
other person or persons any invention, discovery, formula, design,
process, adaptation or improvement ("Intellectual Property") which relates
to or is connected with or capable of being worked or employed in
connection with any trade or business for the time being carried on by the
Company and or the Group he shall forthwith supply in writing full
particulars concerning the same to the Company.
12
<PAGE>
12.2 All ("Intellectual Property") which is either made in the course of
the normal duties of the Executive or in the course of duties falling
outside his normal duties but specifically assigned to him shall upon the
discovery making or conception thereof belong to and vest in the Company
absolutely and beneficially together with all rights to apply for patent
or other protection thereby obtained. The Executive shall if so required
by the Company and at the expense of the Company take all such steps and
execute such documents as may be necessary fully and effectually to vest
in the Company or as it may direct the full benefit of the said
Intellectual Property and to give to the Company or its nominees such
protection as it may require in respect thereof in any part of the world
whether by way of patents or otherwise howsoever.
12.3 In the event of any dispute arising between the Company and the
Executive as to whether or not any invention communicated falls within the
scope of sub-clause 12.2 hereof application will be made jointly by the
Company and the Executive to the Comptroller General of Patents in
accordance with Section 8 of the Patents Act 1977 for determination of the
matter and his decision shall be final and binding.
12.4 The Executive acknowledges that inventions may reasonably be expected
to result from the carrying out of his normal duties and of any duties
specifically assigned to him within the meaning of Section 39(1)(a) of the
Patents Act 1977.
12.5 The Executive acknowledges that because of the nature of his duties
and the particular responsibilities arising from the nature of his duties
he has a special obligation to further the interests of the undertaking of
the Company and the Group within the meaning of Section 39(1)(a) of the
Patents Act 1977.
12.6 The Executive hereby irrevocably appoints the Company to be his
attorney in his name and on his behalf to execute such instrument or do
such things and generally to use his name for the purpose of giving to the
Company (or its nominee) the benefit of the provisions of this clause and
in favour of any third party a certificate in writing signed by any
Director or Secretary of the Company that any instrument or act falls
within the authority hereby conferred shall be conclusive evidence that
such is the case. It is hereby agreed between the parties that the
provisions of this Clause 12 shall survive in their entirety the
termination of the Executive's employment for whatsoever reason.
13. PAYMENT
Subject to applicable law, any payment to which the Executive is entitled
to under the Agreement (including without limitation the bonus to which
the is entitled to be paid pursuant to clause 4.6 and the pension
contributions which the Company is to pay pursuant to clause 6.1) shall be
paid to such person as the Executive shall direct (anywhere in the world).
13
<PAGE>
14. NOTICES
14.1 Any notice to be given under this Agreement to the Executive may be
given to him personally or sent to him by prepaid first class letter
addressed to him at his last known place of residence. Any notice to be
given to the Company may be served by leaving it at or sending it by
prepaid first class letter to its registered office for the time being.
14.2 Any notice served by post shall be deemed to have been served
forty-eight hours after it was posted and proof that the notice was
properly addressed, pre-paid and posted shall be sufficient evidence of
service.
15. GOVERNING LAW
This agreement shall be interpreted and enforced in accordance with the
laws of England.
16. SUPERSESSION OF PREVIOUS AGREEMENTS
This Agreement supersedes and is in substitution for any subsisting
agreements between the Company (or any Group member) and the Executive
relating to his employment. All such subsisting agreements are terminated
by mutual consent with effect from the Commencement Date.
14
<PAGE>
IN WITNESS whereof the parties have executed this Agreement on the date
set out above.
EXECUTED as a Deed by
MORRIS MECHANICAL HANDLING LIMITED
in the presence of:-
/s/ Steve Davis
Director
SIGNED as a DEED by the
said KENNETH BRUCE NORRIDGE
in the presence of:
/s/ Kenneth Bruce Norridge
15
MMH Holdings, Inc.
Statement of Computation of Financial Ratios
(In thousands, except for ratios)
<TABLE>
<CAPTION>
Fiscal Year Ended October 31, For the Quarter Ended January 31,
----------------------------------------------- ---------------------------------
Pro Forma Pro Forma
1993 1994 1995 1996 1997 1997 1997 1998 1998
----------------------------------------------- ---------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges and
preferred dividends(1):
Income (loss) before income taxes
and minority interest N/A N/A $21,901 $29,934 $34,745 $ 9,896 $ 6,690 $ 4,112 $(2,124)
Add:
Interest Expense N/A N/A 200 245 792 26,503 48 845 6,684
Rental Expense N/A N/A 786 1,109 1,456 1,456 277 364 364
----------------------------------------------- ---------------------------------
Earnings (loss) adjusted for fixed charges N/A N/A 22,887 31,288 36,993 37,855 7,015 5,321 4,924
----------------------------------------------- ---------------------------------
Fixed Charges
Interest Expense N/A N/A 200 245 792 26,503 48 845 6,684
Rental Expense N/A N/A 786 1,109 1,456 1,456 277 364 364
Preferred Dividend Requirements N/A N/A -- -- -- 19,100 -- -- 5,215
----------------------------------------------- ---------------------------------
Total fixed charges N/A N/A 986 1,354 2,248 47,059 325 1,209 12,263
----------------------------------------------- ---------------------------------
Ratio of earnings to fixed charges and
preferred dividends N/A N/A 23.21 23.11 16.46 -- 21.58 4.40 --
=============================================== =================================
Deficiency of earnings to fixed charges
and preferred dividends N/A N/A -- -- -- $(9,204) -- -- $(7,339)
=============================================== =================================
</TABLE>
(1) For purposes of calculating the ratio of earnings to fixed charges and
preferred dividends, earnings are defined as net income before income
taxes and minority interest plus interest expense (including amortization
of debt issuance costs), and the portion of rental expense that is
representative of the interest factor (deemed to be one third of annual
rent expense). Preferred dividends, for purposes of the ratio, reflect
earnings before tax required to pay preferred stock dividends and assume
that such dividends are paid in kind.
<TABLE>
<CAPTION>
MMH Holdings, Inc. Subsidiaries
=============================================
Jurisdiction
of
Name Organization
=============================================
<S> <C>
3016117 Nova Scotia ULC Nova Scotia
- ---------------------------------------------
Birmingham Crane & Hoist, Inc. Alabama
- ---------------------------------------------
Butters Engineering
Services Limited Scotland
- ---------------------------------------------
CMH Material Handling, LLC South Carolina
- ---------------------------------------------
EPH Material Handling, LLC Pennsylvania
- ---------------------------------------------
Harnischfeger Distribution
& Service, LLC Wisconsin
- ---------------------------------------------
Hercules S.A. de C.V. Mexico
- ---------------------------------------------
HPH Material Handling, LLC Wisconsin
- ---------------------------------------------
Hydramach ULC Nova Scotia
- ---------------------------------------------
Invercoe Engineering Limited Scotland
- ---------------------------------------------
Kaverit Steel and Crane ULC Nova Scotia
- ---------------------------------------------
Linear Motors Limited U.K.
- ---------------------------------------------
Lowfile Limited U.K.
- ---------------------------------------------
Material Handling
Equipment Nevada
Corporation Nevada
- ---------------------------------------------
Merwin, LLC Delaware
- ---------------------------------------------
MHE Technologies, Inc. Delaware
- ---------------------------------------------
MHE Canada ULC Canada
- ---------------------------------------------
MMH (Holdings) Limited U.K.
=============================================
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Jurisdiction
of
Name Organization
=============================================
<S> <C>
MMH International Limited U.K.
- ---------------------------------------------
Mondel ULC Nova Scotia
- ---------------------------------------------
Morris Blooma Pte Ltd. Singapore
- ---------------------------------------------
Morris Material Handling, Inc. Delaware
- ---------------------------------------------
Morris Material Handling, LLC Delaware
- ---------------------------------------------
Morris Material Handling
Limited U.K.
- ---------------------------------------------
Morris Mechanical
Handling, Inc. Delaware
- ---------------------------------------------
Morris Mechanical Handling
Limited U.K.
- ---------------------------------------------
Morris Mechanical Handling
(Pty.) Limited South Africa
- ---------------------------------------------
MPH Crane, Inc. Ohio
- ---------------------------------------------
NPH Material Handling, Inc. Michigan
- ---------------------------------------------
P&H Middle East Ltd. Cayman Islands
- ---------------------------------------------
PHME Service, Inc. Delaware
- ---------------------------------------------
PHMH Holding Co. Inc. Delaware
- ---------------------------------------------
RedCrown, ULC U.K.
- ---------------------------------------------
Royce Limited U.K.
- ---------------------------------------------
SPH Crane & Hoist, Inc. Delaware
- ---------------------------------------------
U.K. Crane Services Limited U.K.
- ---------------------------------------------
The Vaughan Crane Company
Limited U.K.
=============================================
</TABLE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of MMH Holdings, Inc. of our report dated
December 30, 1997, except as to Note 13 which is as of March 30, 1998, relating
to the combined financial statements of the Material Handling Equipment Business
of Harnischfeger Industries, Inc., which appears in such Prospectus. We also
consent to the application of such report to the Financial Statement Schedule
for the three years ended October 31, 1997 appearing in Part II of this
Registration Statement when such schedule is read in conjunction with the
financial statements referred to in our report. The audits referred to in such
report also included the schedule. We also consent to the reference to us under
the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
May 12, 1998
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
--------------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
--------------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal
executive offices)
--------------------------
MMH Holdings, Inc.
(Exact name of obligor as specified in its charter)
Delaware 39-1716155
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
4915 South Howell Avenue 53207
2nd Floor (Zip code)
Milwaukee, Wisconsin
(Address of principal executive offices)
--------------------------
12% Exchange Debentures Due 2009
(Title of the indenture securities)
================================================================================
<PAGE>
-2-
GENERAL
1. General Information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it is
subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
The obligor currently is not in default under any of its outstanding
securities for which United States Trust Company of New York is Trustee.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14
and 15 of Form T-1 are not required under General Instruction B.
16. List of Exhibits
T-1.1 -- Organization Certificate, as amended, issued by the State of New
York Banking Department to transact business as a Trust Company, is
incorporated by reference to Exhibit T-1.1 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to the Trust
Indenture Act of 1939, as amended by the Trust Indenture Reform Act
of 1990 (Registration No. 33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE>
-3-
16. List of Exhibits
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company of New York, as
amended, is incorporated by reference to Exhibit T-1.4 to Form T-1
filed on September 15, 1995 with the Commission pursuant to the
Trust Indenture Act of 1939, as amended by the Trust Indenture
Reform Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939, as amended by the Trust Indenture
Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee pursuant
to law or the requirements of its supervising or examining
authority.
NOTE
As of May 5, 1998, the trustee had 2,999,020 shares of Common Stock outstanding,
all of which are owned by its parent company, U.S. Trust Corporation. The term
"trustee" in Item 2, refers to each of United States Trust Company of New York
and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 5th day
of May 1998.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ James E. Logan
-----------------------
James E. Logan
Vice President
<PAGE>
-4-
Exhibit T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
/S/ Gerard F. Ganey
------------------------------
By: Gerard F. Ganey
Senior Vice President
<PAGE>
-5-
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
DECEMBER 31, 1997
($ IN THOUSANDS)
ASSETS
Cash and Due from Banks $ 80,246
Short-Term Investments 386,006
Securities, Available for Sale 661,596
Loans 1,774,551
Less: Allowance for Credit Losses 16,202
----------
Net Loans 1,758,349
Premises and Equipment 61,477
Other Assets 124,499
----------
Total Assets $3,072,173
==========
LIABILITIES
Deposits:
Non-Interest Bearing $ 686,507
Interest Bearing 1,773,254
----------
Total Deposits 2,459,761
Short-Term Credit Facilities 295,342
Accounts Payable and Accrued Liabilities 149,775
----------
Total Liabilities $2,904,878
==========
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 49,541
Retained Earnings 100,235
Unrealized Gains on Securities
Available for Sale (Net of Taxes) 2,524
----------
Total Stockholder's Equity 167,295
----------
Total Liabilities and
Stockholder's Equity $3,072,173
==========
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
Richard E. Brinkmann, SVP & Controller
February 9, 1998
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<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> OCT-31-1997 OCT-31-1996 JAN-31-1998
<PERIOD-START> NOV-01-1996 NOV-01-1995 NOV-01-1997
<PERIOD-END> OCT-31-1997 OCT-31-1996 JAN-31-1998
<EXCHANGE-RATE> 1 1 1
<CASH> 1,532 3,821 6,317
<SECURITIES> 0 0 0
<RECEIVABLES> 83,539 76,669 76,797
<ALLOWANCES> 1,330 1,408 1,252
<INVENTORY> 33,497 37,239 36,509
<CURRENT-ASSETS> 122,003 124,365 124,719
<PP&E> 60,763 48,527 60,456
<DEPRECIATION> 21,396 18,340 22,462
<TOTAL-ASSETS> 199,600 189,058 200,379
<CURRENT-LIABILITIES> 70,760 89,842 63,167
<BONDS> 1,043 1,181 1,009
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 124,318 94,201 132,684
<TOTAL-LIABILITY-AND-EQUITY> 199,600 189,058 200,379
<SALES> 353,350 323,735 76,483
<TOTAL-REVENUES> 355,999 324,884 76,767
<CGS> 260,794 247,559 56,653
<TOTAL-COSTS> 320,462 294,868 71,810
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 792 82 845
<INCOME-PRETAX> 34,745 29,934 4,112
<INCOME-TAX> 13,874 11,488 1,987
<INCOME-CONTINUING> 20,853 18,446 2,139
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 20,853 18,446 2,139
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