<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1998
REGISTRATION NO. 333-52539
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GLOBAL HEALTH SCIENCES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
CALIFORNIA 2833 95-3267801
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
987 N. ENTERPRISE STREET
ORANGE, CALIFORNIA 92867
(714) 633-2320
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
DONALD J. LEWIS
GLOBAL HEALTH SCIENCES, INC.
987 N. ENTERPRISE ST.
ORANGE, CALIFORNIA 92867
(714) 633-2320
(Name, address, including zip code and telephone number, including area code, of
agent for service)
------------------------------
SEE TABLE OF ADDITIONAL REGISTRANTS BELOW
------------------------
WITH A COPY TO:
MICHAEL E. LUBOWITZ, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153-0119
(212) 310-8000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement. If any of
the securities being registered on this form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box: / /
If this form is filed to register additional securities for offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering: / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act check the following box and list the Securities Act registration statement
number of the earlier registration statement for the same offering: / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
STATE OR OTHER PRIMARY
JURISDICTION OF STANDARD ADDRESS, INCLUDING ZIP CODE AND
INCORPORATION INDUSTRIAL IRS EMPLOYER TELEPHONE NUMBER, INCLUDING AREA
EXACT NAME OF REGISTRANT OR CLASSIFICATION IDENTIFICATION CODE OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION CODE NUMBER NO. EXECUTIVE OFFICER
<S> <C> <C> <C> <C>
Global Health Sub, Inc. ............ California 2833 33-0801650 987 N. Enterprise Street
Orange, California 92867
(714) 633-2320
Raven Industries, Inc. ............. California 2833 33-0042849 987 N. Enterprise Street
Orange, California 92867
(714) 633-2320
West Coast Sales.................... California 2833 33-0554820 987 N. Enterprise Street
Orange, California 92867
(714) 633-2320
Dynamic Products.................... California 2833 33-0235847 987 N. Enterprise Street
Orange, California 92867
(714) 633-2320
D&F Industries, Inc. ............... California 2833 33-0801652 987 N. Enterprise Street
Orange, California 92867
(714) 633-2320
</TABLE>
<PAGE>
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. INFORMATION
CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT
BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THE PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 10, 1998
PRELIMINARY PROSPECTUS
OFFER TO EXCHANGE
ALL OUTSTANDING 11% SENIOR NOTES DUE 2008
FOR 11% SENIOR NOTES DUE 2008 WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
OF
GLOBAL HEALTH SCIENCES, INC.
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
SAN FRANCISCO TIME, ON , 1998, UNLESS EXTENDED.
------------------
Global Health Sciences, Inc., a California corporation (the "Company" or
"Global Health"), hereby offers, upon the terms and subject to the conditions
set forth in this Prospectus and the accompanying Letter of Transmittal (the
"Exchange Offer"), to exchange $1,000 principal amount of its 11% Senior Notes
due 2008 (the "New Notes") which have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), for each $1,000 principal amount of
its 11% Senior Notes due 2008 (the "Old Notes"), of which an aggregate principal
amount of $225,000,000 is outstanding as of the date hereof. The Old Notes were
issued and sold (the "Old Notes Offering") in a transaction exempt from the
registration requirements of the Securities Act and may not be offered or sold
in the United States unless so registered or pursuant to an applicable exemption
under the Securities Act.
The form and terms of the New Notes are identical to the form and terms of
the Old Notes except that the New Notes have been registered under the
Securities Act, and will not bear any legends restricting the transfer thereof.
The New Notes will evidence the same debt as the Old Notes and will be issued
pursuant to, and entitled to the benefits of, the Indenture governing the Old
Notes (the "Indenture"). The New Notes will be initially issued as a single,
permanent global certificate. See "Book Entry; Delivery and Form" and
"Description of the New Notes."
The Exchange Offer is being made in order to satisfy certain contractual
obligations of Global Health contained in the Registration Rights Agreement (as
defined herein). Based on no-action letters issued by the staff of the
Securities and Exchange Commission (the "Commission") to third parties, Global
Health believes that the New Notes issued pursuant to the Exchange Offer may be
offered for resale, resold and otherwise transferred by a holder thereof (other
than any such holder that is an "affiliate" of Global Health 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 such New
Notes are acquired in the ordinary course of such holder's business, such holder
is not engaging in and does not intend to engage in a distribution of such New
Notes and such holder has no arrangement or understanding with any person to
participate in the distribution of such New Notes. Any holder who tenders in the
Exchange Offer for the purpose of participating in a distribution of New Notes
cannot rely on such interpretation by the staff of the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transactions. Each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of such New
Notes. The letter of transmittal accompanying this Prospectus (the "Letter of
Transmittal") states that, by so acknowledging and by delivering a prospectus
meeting the requirements of the Securities Act, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of New Notes received
in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. Global Health has agreed that, for a period of 180 days after the
Expiration Date (as defined), it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution." There will be no cash proceeds to Global Health from the exchange
pursuant to the Exchange Offer. See "The Exchange Offer" and "Description of the
New Notes." As used herein, the term "Notes" means the Old Notes and the New
Notes treated as a single class.
The New Notes will bear interest from and including their respective dates
of issuance. Holders whose Old Notes are accepted for exchange will receive
accrued interest thereon to, but not including, the date of issuance of such New
Notes, such interest to be payable with the first interest payment on such New
Notes. Holders whose Old Notes are accepted for exchange will not receive any
payment in respect of interest thereon accrued after the issuance of the New
Notes. Global Health will accept for exchange any and all Old Notes validly
tendered and not withdrawn prior to 5:00 p.m., San Francisco time, on
, 1998, unless extended (as so extended, the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to the Expiration Date.
The Exchange Offer is subject to certain customary conditions. See "The Exchange
Offer." The Exchange Offer is not conditioned upon any minimum principal amount
of Old Notes being tendered for exchange.
The New Notes will be general unsecured senior obligations of the Company
and will rank PARI PASSU in right of payment with all other senior indebtedness
of the Company and senior in right of payment to all subordinated indebtedness
of the Company. The Company is a holding company with limited assets, other than
the stock of its subsidiaries, and conducts substantially all of its business
through its subsidiaries. The Old Notes are, and the New Notes will be,
unconditionally guaranteed, jointly and severally (the "Guarantees"), by all of
the Company's existing and future subsidiaries (the "Subsidiary Guarantors").
The Guarantees will be general unsecured obligations of the Subsidiary
Guarantors, will be subordinated in right of payment to all existing and future
Guarantor Senior Debt (as defined herein), including the guarantees to be
delivered by the Subsidiary Guarantors under the Acquisition Facility (as
defined herein), and will rank PARI PASSU in right of payment to all other
senior indebtedness of the Subsidiary Guarantors and senior in right of payment
to all subordinated obligations of the Subsidiary Guarantors. As of March 31,
1998, after giving pro forma effect to the Old Notes Offering, the Acquisition
Facility and the application of the net proceeds therefrom, the Company and the
Subsidiary Guarantors would have had approximately $1.5 million of indebtedness
outstanding other than the Notes and trade payables and undrawn availability of
$48.5 million under the Acquisition Facility which, if drawn, would constitute
outstanding senior indebtedness of the Company and the Subsidiary Guarantors.
See "Capitalization." The Indenture limits the incurrence of Debt (as defined)
and the issuance of Preferred Stock (as defined) by the Company and its
subsidiaries. See "Risk Factors" and "Description of New Notes--Certain
Covenants."
Prior to the Exchange Offer, there has been no public market for the New
Notes. Global Health does not intend to list the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system and there can be no assurance that an active public market for the New
Notes will develop.
See "Risk Factors" beginning on Page 17 for a discussion of certain factors
which holders of Old Notes should consider in connection with the Exchange
Offer.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
All statements other than statements of historical fact included in this
Prospectus, including without limitation, certain statements under the
"Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business" and located
elsewhere herein regarding the Company's operations, financial position and
business strategy, may constitute forward-looking statements. In addition,
forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "intend,"
"estimate," "anticipate," "believe" or "continue" or the negative thereof or
variations thereon or similar terminology. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable at
this time, 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 the Company's expectations ("Cautionary Statements") are
disclosed in this Prospectus, including, without limitation, in conjunction with
the forward-looking statements included in this Prospectus and under "Risk
Factors." All subsequent forward-looking statements attributable to the Company
or persons acting on its behalf are expressly qualified in their entirety by the
Cautionary Statements.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS.
UNLESS THE CONTEXT OTHERWISE REQUIRES, AS USED IN THIS PROSPECTUS (I) REFERENCES
TO "GLOBAL HEALTH" OR THE "COMPANY" MEAN GLOBAL HEALTH SCIENCES, INC. AND ITS
SUBSIDIARIES AND (II) ALL INFORMATION CONTAINED HEREIN GIVES EFFECT TO THE
REORGANIZATION (AS DEFINED HEREIN). IN ADDITION TO THE HISTORICAL FINANCIAL
INFORMATION OF D&F INDUSTRIES ("D&F") PRESENTED HEREIN, SUPPLEMENTAL INFORMATION
IS PRESENTED TO REFLECT THE COMBINED HISTORICAL FINANCIAL INFORMATION OF D&F,
WHICH WAS RENAMED GLOBAL HEALTH SCIENCES, INC. IN CONNECTION WITH THE
REORGANIZATION, AND OMNI-PAK AND AFFILIATES (AS DEFINED HEREIN). THE
SUPPLEMENTAL INFORMATION PRESENTS THE COMBINED GROUP'S HISTORICAL OPERATING
RESULTS WHICH, IN THE OPINION OF MANAGEMENT, PROVIDE A MORE MEANINGFUL
REPRESENTATION OF THE UNDERLYING BUSINESS AND CASH FLOWS. THESE ENTITIES
HISTORICALLY OPERATED UNDER COMMON MANAGEMENT AND HAD A HIGH DEGREE OF COMMON
OWNERSHIP, CUSTOMERS AND SYSTEMS, INCLUDING SIMILAR ACCOUNTING AND FINANCIAL
REPORTING SYSTEMS TO MANAGE THE COMBINED ENTERPRISES. STATISTICAL INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE DIETARY AND NUTRITIONAL SUPPLEMENT INDUSTRY
HAS BEEN DERIVED FROM PUBLICLY AVAILABLE SOURCES, INCLUDING PACKAGED FACTS
MARKET INTELLIGENCE REPORTS ("PACKAGED FACTS"), A PUBLICATION WRITTEN BY AN
INDEPENDENT RESEARCH, ADVISORY AND BUSINESS INTELLIGENCE CONSULTING FIRM, WHICH
THE COMPANY HAS NOT INDEPENDENTLY VERIFIED, BUT BELIEVES TO BE RELIABLE.
THE COMPANY
OVERVIEW
The Company is one of the world's leading developers and custom
manufacturers of dietary and nutritional supplements. The Company develops and
manufactures vitamins, minerals, herbs, teas and other supplements in tablet,
capsule and powder form in a variety of shapes, sizes, colors, flavors and
textures designed to meet its customers' specifications. The Company supplies
specialty products for branded distributors, branded retailers, television
marketing companies and network marketing organizations who then distribute
these products around the world. The Company controls the entire development
process for the vast majority of its products from the initial market
identification stage through formulation, manufacturing, label design and
distribution to its customers. The Company believes that it has distinguished
itself during its 20 years in the industry through its ability to develop
products in anticipation of market trends, its superior customer service and its
ability to produce a large variety of high quality products. According to
PACKAGED FACTS, domestic retail sales in the dietary and nutritional supplement
industry reached $6.5 billion in 1996 and are estimated to grow to $12.3 billion
by 2001. The Company believes that it is well positioned to capitalize on this
forecasted growth. For the fiscal year ended December 31, 1997, the Company's
sales increased by 26.0% to $182.4 million from $144.7 million for the same
period in 1996 and EBITDA (as defined herein) increased by 32.7% to $52.7
million from $39.7 million for the same period in 1996. See "Summary Unaudited
Pro Forma Condensed Combined Financial Data" for a discussion of EBITDA. In
addition, the ratio of earnings to fixed charges increased from 75.2x to 88.1x
and cash flows from operations increased 29.1% to $49.0 million in 1997 from
$38.0 million in 1996. Uses of cash flow from investing and financing activities
during the periods presented were principally purchases of equipment of $1.0
million in 1997 and $2.3 million in 1996, and cash dividends paid to
stockholders of $46.0 million in 1997 and $36.7 million in 1996.
During the three months ended March 31, 1998, sales increased 19.7% to $46.8
million from $39.1 million in the same period in 1997, net income increased
12.5% to $11.3 million from $10.1 million in the same period in 1997 and EBITDA
increased by 10.5% to $11.6 million from $10.5 million in the first quarter of
1997. In addition, the ratio of earnings to fixed charges increased to 115x in
the first quarter of 1998 from 101x in the first quarter of 1997 and cash flows
from operations increased 35.7% to $13.8 million from $10.2 million in the same
period in 1997. Uses of cash from investing and financing activities were
principally purchases of equipment of $0.6 million in the first quarter of 1998
and $0.2 million in the first
2
<PAGE>
quarter of 1997, and cash dividends paid to stockholders of $9.8 million in the
first quarter of 1998 and $6.0 million in the first quarter of 1997.
The Company's products are sold to over 60 customers, including Herbalife
International, Inc. ("Herbalife"), Natural Supplement Association, Inc. d/b/a
Experimental and Applied Sciences ("EAS") and Metagenics, Inc. ("Metagenics"),
who then distribute these products in over 35 countries. Herbalife, the
Company's largest customer, and one of the largest network marketing companies
specializing in a wide range of nutritional, weight management and personal care
products, reported retail sales of approximately $1.5 billion and net sales of
$782.5 million in 1997. For the fiscal year ended December 31, 1997, sales to
Herbalife represented approximately 76% of the Company's total sales. Since
1995, sales to non-Herbalife customers have grown from $14.8 million in 1995 to
$37.8 million in 1996 to $44.8 million in 1997. This represents a compound
growth rate of 74%, growing by 155% in 1996 and 19% in 1997. See
"Business--Sales and Distribution."
COMPETITIVE STRENGTHS
ABILITY TO INTRODUCE NEW AND INNOVATIVE PRODUCTS. A key to the Company's
success has been its ability to quickly develop and market new and innovative
products. The Company believes it has been an industry leader in the
introduction of new products that utilize new scientific and medical findings
and which anticipate customer demand. The Company's seven-member product
development team, led by Mr. Richard D. Marconi, the co-founder and principal
shareholder of the Company, who has over 40 years of experience in the
pharmaceutical and dietary and nutritional supplement industries, keeps abreast
of new developments by maintaining and building its extensive database and
library, reviewing a wide variety of scientific and medical journals and
attending industry seminars and conferences. The Company believes that its
ability to create new products, reformulate existing products and quickly
introduce these products to the marketplace will attract new customers and
places the Company in a position to capitalize on the strong anticipated growth
in the dietary and nutritional supplement industry.
FOCUS ON CUSTOMER SERVICE. The Company believes that its commitment to
customer service is its defining characteristic and has contributed to its
strong and loyal relationships with its customers. The Company's superior level
of customer service includes a flexible and responsive manufacturing process
that can accommodate simultaneous new product launches and unexpected customer
demand. Furthermore, the Company, at a customer's request, will assist such
customer with its foreign regulatory compliance process and coordinate its
global marketing efforts. The Company's ability to design, develop and
manufacture new products has enabled it to be a "one-stop shop" for most of its
customers, alleviating the necessity of current and potential customers to seek
out multiple manufacturers to fulfill all of their product needs. This
capability also creates a synergy between the Company and its customers in the
development and enhancement of a customer's products or product lines. The
Company believes that its high level of customer service is a competitive
advantage and it plans to aggressively market its superior customer service to
attract new customers.
HIGH PRODUCT QUALITY. The Company believes that its products meet the
highest quality standards in the industry. The Company believes that its
knowledge and expertise allow it to operate its manufacturing facilities in a
low-cost, highly efficient manner that provides the Company with a competitive
advantage. Utilizing technologically advanced laboratory equipment, the
Company's products are subject to product quality standards that include testing
each raw material for quality, physical conformity, cleanliness and, in the case
of botanicals, the absence of microorganisms. During the manufacturing process,
each tablet product is periodically tested for hardness, friability, thickness
and weight, and powder products are tested and sampled for proper mix and "taste
and mouth-feel" to ensure correct color and consistency. The Company believes
that these standards, developed over its 20 years in the industry, have earned
the Company a reputation for manufacturing high-quality products.
3
<PAGE>
EXTENSIVE EXPERIENCE WITH START-UPS. Since its inception, the Company has
placed significant emphasis on working with new companies in the dietary and
nutritional supplement industry to develop products and strategies that will
help these companies achieve their goals and will enable the Company to
establish loyal and profitable customer relationships. In 1980, the Company
worked with Herbalife, then a start-up company, to develop products that would
fit Herbalife's long-term objectives. Herbalife is not only the Company's
largest customer but also one of the largest network marketing companies in the
dietary and nutritional supplement industry. The Company also worked with EAS
when it began operations in 1994 to help the company create sports nutrition
products that would meet EAS's high standards and help EAS realize its
objectives in one of the fastest growing segments in the industry. For the year
ended December 31, 1997, sales to EAS totalled approximately $27.2 million.
Through these and other relationships, including manufacturing products for
Rockwood Cosmetics, Bally's Total Fitness and American Health Sciences, Inc.,
the Company has developed an expertise in developing and manufacturing products
for start-up companies and other companies attempting to break into the growing
dietary and nutritional supplement industry.
BUSINESS STRATEGY
EXPAND CUSTOMER BASE. The Company intends to increase sales by
significantly expanding its sales force, attracting new customers and developing
other outlets for its products. As the dietary and nutritional supplement
industry grows, the Company plans to take advantage of new opportunities, such
as sales through health maintenance organizations, mail order companies and
increased sales to network marketing organizations. The Company also intends to
expand its presence in the health food/retail market through customers such as
EAS, in the direct television market through customers such as The Good Doctors
and in direct sales to fitness centers through Bally's Total Fitness. Management
also plans to attract new customers in the United States and the growing markets
of Europe, Latin America and Asia.
INCREASE PRODUCTION CAPACITY TO MEET GROWING INDUSTRY DEMAND. According to
estimates by Packaged Facts, the dietary and nutritional supplement industry
will grow at a compound annual growth rate of 13.6% between 1996 and 2001 and
the herbal supplement segment of the industry will grow at a compound annual
growth rate of 16.4% between 1997 and 2002. Management believes that this
projected growth provides the Company with a significant opportunity to increase
sales and profits. The Company plans to make modest capital expenditures to
upgrade its information systems and increase production capacity in order to
address increasing demand. The Company also intends to purchase equipment and
expand its operations to new facilities as necessary to meet this demand.
SUPPLEMENT INTERNAL GROWTH THROUGH STRATEGIC ACQUISITIONS. The dietary and
nutritional supplement industry is highly fragmented and the Company believes
that the industry is in a favorable position for consolidation. Many of the
Company's competitors are private companies that produce and/or distribute only
a single line of products and would complement the Company's current business,
if acquired. Furthermore, as one of the industry's largest developers and
manufacturers of dietary and nutritional supplements, the Company believes that
there are significant opportunities to acquire companies that distribute these
products, many of which are smaller than the Company and lack their own
manufacturing capability. Certain of these companies also have distribution
channels not presently utilized by the Company's larger customers, including
direct mail, direct television marketing and distribution to health maintenance
organizations. Management believes that the Company is strategically positioned
to participate in the anticipated consolidation of the dietary and nutritional
supplement industry and intends to aggressively pursue acquisition opportunities
that would complement, enhance or vertically integrate existing operations.
Simultaneously with the consummation of the Old Notes Offering, the Company
entered into the $50.0 million Acquisition Facility.
4
<PAGE>
THE REORGANIZATION
Prior to the consummation of the Reorganization, the Company's operations
were conducted by four corporations: D&F, Raven Industries d/b/a Omni-Pak
Industries ("Omni-Pak"), Dynamic Products Inc. ("Dynamic") and West Coast Sales
("West Coast"). Historically, the four corporations operated under common
management and had a high degree of common ownership, customers and systems,
including similar accounting and financial reporting systems to manage the
combined enterprises. On April 23, 1998, the Company issued and sold
$225,000,000 in aggregrate principal amount of the Old Notes for net proceeds of
approximately $211.1 million. In connection with the consummation of the Old
Notes Offering, D&F, Omni-Pak, Dynamic and West Coast entered into a
reorganization agreement dated as of April 23, 1998 (the "Reorganization
Agreement") pursuant to which (i) D&F changed its name to Global Health
Sciences, Inc., (ii) Global Health Sciences, Inc. formed a new subsidiary,
Global Health Sub, Inc. ("Global Sub"), (iii) Global Sub formed four new
subsidiaries named D&F Industries, Inc. ("D&F Sub"), Raven Sub, Inc. ("Omni-Pak
Merger Sub"), New West Coast Sales, Inc. ("West Coast Merger Sub") and Dynamic
Sub, Inc. ("Dynamic Merger Sub"), (iv) Global Health Sciences, Inc. transferred
to D&F Sub all of its assets and liabilities except for its obligation under the
Notes and the common stock of Global Sub, (v) Global Health Sciences, Inc.
through Global Sub acquired Omni-Pak, Dynamic and West Coast (together referred
to herein as "Omni-Pak and Affiliates") from their respective shareholders for
approximately $137.9 million in cash and expenses, in transactions accounted for
under the purchase method of accounting, pursuant to the mergers of Omni-Pak
Merger Sub and Omni-Pak (with Omni-Pak as the surviving corporation), Dynamic
Merger Sub and Dynamic (with Dynamic as the surviving corporation) and West
Coast Merger Sub and West Coast (with West Coast as the surviving corporation),
and (vi) the shareholders of Global Health Sciences, Inc. received approximately
$58.7 million in cash in exchange for the cancellation of approximately 50% of
the outstanding common stock of Global Health Sciences, Inc. The transactions
described above are hereinafter referred to as the "Reorganization."
Approximately $196.6 million of the proceeds from the Old Notes Offering was
used to consummate the Reorganization.
In the Reorganization, Mr. Marconi received approximately $38.6 million from
the repurchase of his shares of Omni-Pak and Affiliates, Mr. Fred E. Siegel,
co-founder of the Company, received approximately $63.9 million from the
repurchase of his shares of Omni-Pak and Affiliates and a portion of his shares
of D&F and Mr. Mark Hughes, the Chairman and Chief Executive Officer of
Herbalife, received $43.0 million from the repurchase of his shares of Omni-Pak
and Affiliates. As a result of the consummation of the Reorganization, Mr.
Marconi and Mr. Siegel own 94% and 6%, respectively, of the common stock of
Global Health Sciences, Inc., and each of Global Sub, D&F Sub, Dynamic, Omni-Pak
and West Coast is a wholly-owned subsidiary of Global Health Sciences, Inc.
In accordance with historical practice, the Company distributed to those
persons that were shareholders at the time of the Reorganization, all net income
generated by the Company from January 1, 1998 through April 23, 1998 (the
"Original Issue Date") in excess of $2.0 million, in order for, among other
things, such shareholders to pay their required state and federal income taxes
for the period from January 1, 1998 through the Original Issue Date.
------------------------
The Company is a California corporation whose principal executive offices
are located at 987 N. Enterprise Street, Orange, California and whose telephone
number is (714) 633-2320.
5
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer is being made with respect to all of the Company's
outstanding 11% Senior Notes due 2008 (the "Old Notes"). On April 23, 1998, the
Company issued and sold $225.0 million in aggregate principal amount of the Old
Notes in the Old Notes Offering. The form and terms of the New Notes are the
same as the form and terms of the Old Notes, except that the New Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. The New Notes will evidence the same debt as
the Old Notes and will be issued pursuant to, and entitled to the benefits of,
the Indenture pursuant to which the Old Notes were issued. The Old Notes and the
New Notes are sometimes referred to collectively herein as the "Notes." The Old
Notes are, and the New Notes will be, unconditionally guaranteed by Global Sub,
Omni-Pak, Dynamic, West Coast and D&F Sub. See "Description of the New Notes."
<TABLE>
<S> <C>
The Exchange Offer........... $1,000 principal amount of New Notes in exchange for each
$1,000 principal amount of Old Notes. As of the date hereof,
$225,000,000 aggregate principal amount of the Old Notes are
outstanding. The terms of the New Notes and the Old Notes
are substantially identical.
Based on an interpretation by the staff of the Commission
set forth in no-action letters issued to third parties, the
Company believes that New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by a holder thereof
(other than any such holder that is an "affiliate" of the
Company within the meaning of Rule 405 promulgated under the
Securities Act), without compliance with the registration
and prospectus delivery provisions of the Securities Act;
provided that (i) such New Notes are acquired in the
ordinary course of business of such holder, (ii) such holder
is not engaging in and does not intend to engage in a
distribution of such New Notes, and (iii) such holder does
not have an arrangement or understanding with any person to
participate in the distribution of such New Notes. Any
holder who tenders in the Exchange Offer for the purpose of
participating in a distribution of the New Notes cannot rely
on such interpretation by the staff of the Commission and
must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a
secondary resale transaction. Each broker-dealer that
receives New Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will
deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such New
Notes. See "The Exchange Offer--Purpose and Effect" and
"Plan of Distribution."
Registration Rights In connection with the issuance of the Old Notes pursuant to
Agreement.................. the Old Notes Offering, the Company and the Subsidiary
Guarantors entered into a registration rights agreement (the
"Registration Rights Agreement") pursuant to which they
agreed to use their best efforts to cause a registration
statement to become effective with respect to an exchange
offer of a new security for the Old Notes. See "The Exchange
Offer--Purpose and Effect."
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Expiration Date.............. The Exchange Offer will expire at 5:00 p.m., San Francisco
time, on , 1998, or at such later date or time to
which it is extended (as so extended, the "Expiration
Date"). The Company does not intend to extend the Exchange
Offer, although it reserves the right to do so.
Withdrawal................... The tender of Old Notes pursuant to the Exchange Offer may
be withdrawn at any time prior to 5:00 p.m., San Francisco
time, on the Expiration Date. Any Old Notes not accepted for
exchange for any reason will be returned without expense to
the tendering holder thereof as promptly as practicable
after the expiration or termination of the Exchange Offer.
Interest on the New Notes and
Old Notes.................. The Notes will pay interest in cash at the rate of 11% per
annum, payable on May 1 and November 1 each year, commencing
on November 1, 1998 to the persons who are registered
holders on the immediately preceding April 15 and October
15. See "Description of the New Notes--Principal, Maturity
and Interest."
Conditions to the Exchange
Offer...................... The Exchange Offer is subject to certain customary
conditions, each of which may be waived by the Company. The
Exchange Offer is not conditioned upon any principal amount
of Old Notes being tendered for exchange pursuant to the
Exchange Offer. See "The Exchange Offer--Conditions."
Procedures for Tendering Old
Notes...................... Each holder of Old Notes wishing to accept the Exchange
Offer must complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in accordance with the
instructions contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or such
facsimile, together with such Old Notes and any other
required documentation, to Chase Manhattan Bank and Trust
Company, National Association (the "Exchange Agent") at the
address set forth herein unless an Agent's Message (as
defined herein) is transmitted in lieu of such Letter of
Transmittal. Tendered Old Notes must be received by the
Exchange Agent by 5:00 p.m., San Francisco time, on the
Expiration Date. By executing the Letter of Transmittal, or
by transmitting an Agent's Message, each holder will
represent to the Company that, among other things, (i) the
New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of such holder,
(ii) the holder is not engaging in and does not intend to
engage in a distribution of such New Notes, (iii) the holder
does not have an arrangement or understanding with any
person to participate in the distribution of such New Notes,
and (iv) the holder is not an "affiliate," as defined under
Rule 405 promulgated under the Securities Act, of the
Company. Pursuant to the Registration Rights Agreement, the
Company is required to file a registration statement for a
continuous offering pursuant to Rule 415 under the
Securities Act in respect of the Old Notes of any holder
that (i) would not receive freely tradeable New Notes in the
Exchange Offer, (ii) is a broker-dealer and owns Old Notes
acquired directly from the Company or an affiliate of the
Company, (iii) may not resell
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
New Notes acquired by it in the Exchange Offer without
delivering a prospectus and the prospectus contained in the
registration statement is not appropriate or (iv) is
ineligible to participate in the Exchange Offer and
indicates that it wishes to have its Old Notes registered
under the Securities Act. See "The Exchange
Offer--Procedures for Tendering."
Book-Entry Transfer.......... The Exchange Agent will make a request to establish an
account with respect to the Old Notes at The Depository
Trust Company (the "Book-Entry Transfer Facility") for
purposes of the Exchange Offer within two business days
after receipt of this Prospectus, and any financial
institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes
by causing the Book-Entry Transfer Facility to transfer such
Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer.
However, although delivery of Old Notes may be effected
through book-entry transfer at the Book-Entry Transfer
Facility, in order to properly tender Old Notes in the
Exchange Offer, the Letter of Transmittal (unless an Agent's
Message is transmitted in lieu thereof) (or facsimile
thereof), with any required signature guarantees and any
other required documents, must, in any case, be transmitted
to and received by the Exchange Agent at its address set
forth herein on or prior to the Expiration Date or the
guaranteed delivery procedures described below must be
complied with.
Special Procedures for
Beneficial Owner........... Any beneficial owner whose Old Notes are registered in the
name of a broker, dealer, commercial bank, trust company, or
other nominee (with respect to the New Notes, each, a
"Registered Holder") and who wishes to tender such Old Notes
should contact the Registered Holder promptly and instruct
such Registered Holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to completing and
executing the Letter of Transmittal and delivering such
owner's Old Notes, either make appropriate arrangements to
register ownership of the Old Notes in such beneficial
owner's name or obtain a properly completed bond power from
the Registered Holder. The transfer of registered ownership
may take considerable time. See "The Exchange
Offer--Procedures for Tendering."
Guaranteed Delivery
Procedures................. If a Registered Holder of the Old Notes desires to tender
such Old Notes and the Old Notes are not immediately
available, or time will not permit such holder's Old Notes
or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may
be effected according to the guaranteed delivery procedures
set forth in "The Exchange Offer--Guaranteed Delivery
Procedures."
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Acceptance of Old Notes and
Delivery of New Notes...... The Company will accept for exchange any and all Old Notes
which are properly tendered in the Exchange Offer prior to
5:00 p.m., San Francisco time, on the Expiration Date. The
New Notes issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date. See "The
Exchange Offer--Terms of the Exchange Offer."
Exchange Agent............... Chase Manhattan Bank and Trust Company, National Association
is serving as the Exchange Agent in connection with the
Exchange Offer.
Consequences of Failure to
Exchange................... The liquidity of the market for a holder's Old Notes could
be adversely affected upon completion of the Exchange Offer
if such holder does not participate in the Exchange Offer.
See "The Exchange Offer--Consequences of Failure to
Exchange."
Federal Income Tax
Consequences............... The exchange of Old Notes for New Notes pursuant to the
Exchange Offer will not be a taxable event for U.S. federal
income tax purposes. See "Material United States Federal
Income Tax Considerations."
</TABLE>
9
<PAGE>
SUMMARY DESCRIPTION OF THE NEW NOTES
<TABLE>
<S> <C>
Issuer....................... Global Health Sciences, Inc.
Securities Offered........... $225,000,000 aggregate principal amount of 11% Senior Notes
due 2008 which have been registered under the Securities Act
(the "New Notes").
Interest..................... The New Notes will bear interest at a rate of 11% per annum.
Interest on the New Notes will accrue from the date of
issuance and will be payable semi-annually on each May 1 and
November 1, commencing on November 1, 1998.
Maturity Date................ May 1, 2008.
Redemption................... The Notes will be redeemable, in whole or in part, at the
option of the Company, on or after May 1, 2003 at the
redemption prices set forth herein, plus accrued and unpaid
interest, if any, to the date of redemption. In addition, at
any time on or prior to May 1, 2001, the Company may, at its
option, use the net proceeds of one or more Public Equity
Offerings to redeem up to 35% of the principal amount of the
Notes at a redemption price equal to 111% of the principal
amount thereof plus accrued and unpaid interest, if any, to
the redemption date; PROVIDED, HOWEVER, that at least 65% of
the principal amount of Notes originally issued remain
outstanding immediately after any such redemption. See
"Description of the New Notes-- Redemption."
Ranking...................... The Notes will be general unsecured senior obligations of
the Company and will rank PARI PASSU in right of payment
with all other senior indebtedness of the Company and senior
in right of payment to all subordinated indebtedness of the
Company. The Company is a holding company with limited
assets, other than the stock of its subsidiaries, and
conducts substantially all of its business through its
subsidiaries. The Old Notes are, and the New Notes will be,
unconditionally guaranteed, jointly and severally (the
"Guarantees"), by all of the Company's existing and future
subsidiaries (the "Subsidiary Guarantors"). As of March 31,
1998, after giving pro forma effect to the Old Notes
Offering, the Acquisition Facility and the application of
the net proceeds therefrom, the Company and the Subsidiary
Guarantors would have approximately $1.5 million of
indebtedness outstanding (other than the Notes),
approximately $14.1 million of trade payables and undrawn
availability of $48.5 million under the Acquisition Facility
which, if drawn, would constitute outstanding senior
indebtedness of the Company and the Subsidiary Guarantors.
See "Capitalization".
Guarantees................... The Guarantees will be general unsecured obligations of the
Subsidiary Guarantors, will be subordinated in right of
payment to all existing and future Guarantor Senior Debt (as
defined), including the guarantees to be delivered by the
Subsidiary Guarantors under the Acquisition Facility, and
will rank PARI PASSU in right of payment to all other senior
indebtedness of the Subsidiary Guarantors and senior in
right of payment to all subordinated obligations of the
Subsidiary Guarantors. Under certain circumstances, the
Subsidiary Guarantors
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
may not make payments in respect of the Guarantees if a
default exists with respect to Guarantor Senior Debt. As of
March 31, 1998, after giving pro forma effect to the Old
Notes Offering, the Acquisition Facility and the application
of the net proceeds therefrom, the Company would have had
outstanding $1.5 million of Guarantor Senior Debt. See
"Description of the New Notes--Ranking and Subordinated
Guarantees."
Change of Control............ In the event of a Change of Control, the Company will be
obligated to make an offer to purchase all of the
outstanding Notes at a redemption price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest,
if any, to the purchase date. See "Description of the New
Notes--Change of Control."
Asset Sale Proceeds.......... The Company will be obligated in certain circumstances to
offer to purchase the Notes at a redemption price equal to
100% of the principal amount thereof, plus accrued and
unpaid interest, if any, with the net cash proceeds of
certain sales or other dispositions of assets. See
"Description of the New Notes--Certain Covenants--
Disposition of Proceeds of Asset Sales."
Certain Covenants............ The Indenture under which the Old Notes were issued and the
New Notes will be issued (the "Indenture") contains certain
covenants relating to, among other things, the following
matters: (i) limitations on additional indebtedness; (ii)
limitations on restricted payments; (iii) limitations on
transactions with affiliates; (iv) limitations on liens; (v)
limitations on creation of subsidiaries; (vi) limitations on
ownership of stock of wholly-owned subsidiaries; (vii)
limitations on dividends and other payment restrictions
affecting subsidiaries; (viii) limitations on sale and
leaseback transactions; and (ix) restrictions on mergers,
consolidations and transfers of all or substantially all of
the assets of the Company to another person. See
"Description of the New Notes--Certain Covenants."
Use of Proceeds.............. There will be no cash proceeds to the Company from the
Exchange Offer.
Exchange Offer; Registration
Rights..................... The Company and the Subsidiary Guarantors have agreed to use
their best efforts to cause to become effective by September
20, 1998, a registration statement with respect to the
Exchange Offer. In the event that changes in law or in
currently applicable interpretations of the staff of the
Commission do not permit the Company and the Subsidiary
Guarantors to effect the Exchange Offer, or if for any other
reason the Exchange Offer is not consummated by October 20,
1998, or if, under certain circumstances, a holder of the
Old Notes is not permitted to participate in the Exchange
Offer or, under certain circumstances, the initial purchaser
of the Old Notes requests, the Company and the Subsidiary
Guarantors will use their best efforts to cause to become
effective a shelf registration statement with respect to the
resale of the Old Notes and keep such shelf registration
statement continuously effective up to two years after the
Original Issue Date. If the Company and the Subsidiary
Guarantors are not in compliance with their exchange offer
or registration obligations, they
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
will be required to pay liquidated damages to the holders of
the Old Notes. See "Description of the New Notes--Exchange
Offer-- Purpose and Effect."
</TABLE>
RISK FACTORS
Prospective purchasers of the New Notes should consider carefully all of the
information contained in this Prospectus and, in particular, should evaluate the
specific factors set forth herein under "Risk Factors" regarding certain risks
involved in an investment in the New Notes.
12
<PAGE>
SUMMARY D&F HISTORICAL FINANCIAL DATA
The following table sets forth summary historical financial data of D&F (the
predecessor), as of and for each of the three years in the period ended December
31, 1997 and the three months ended March 31, 1998 and 1997. The information set
forth below should be read in conjunction with the "Unaudited Pro Forma
Condensed Combined Financial Statements," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Historical Financial
Statements (as defined herein), each of which is included elsewhere in this
Prospectus. The Company and each of its subsidiaries are S corporations and,
accordingly, all federal and a majority of state income taxes are paid directly
by the shareholders. The results of operations for the three months ended March
31, 1998 are not necessarily indicative of the results to be expected for the
full fiscal year.
<TABLE>
<CAPTION>
QUARTER ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales........................................ $ 52,164 $ 73,523 $ 85,191 $ 18,921 $ 22,372
Cost of sales................................ 34,895 47,958 55,020 12,134 15,595
--------- --------- --------- --------- ---------
Gross profit............................... 17,269 25,565 30,171 6,787 6,777
Selling, general and administrative
expenses................................... 5,462 6,347 7,088 1,536 1,750
--------- --------- --------- --------- ---------
Operating income............................. 11,807 19,218 23,083 5,251 5,027
Interest income (expense), net................. 76 56 82 33 38
--------- --------- --------- --------- ---------
Income before state income taxes............... 11,883 19,274 23,165 5,284 5,065
State income taxes(a).......................... 137 280 350 78 76
--------- --------- --------- --------- ---------
Net income(a).................................. $ 11,746 $ 18,994 $ 22,815 $ 5,206 $ 4,989
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
BALANCE SHEET DATA:
Cash and cash equivalents.................... $ 4,474 4,571 3,768 5,552 5,581
Working capital.............................. 3,258 4,048 5,612 6,094 7,114
Total assets................................. 11,948 13,670 16,736 16,455 18,698
Total debt................................... 640 540 420 510 400
Shareholders' equity (deficit)............... 5,170 6,328 7,596 8,309 9,359
OTHER DATA(B):
EBITDA....................................... $ 12,256 $ 19,722 $ 23,606 $ 5,326 $ 5,132
EBITDA margin................................ 23.5% 26.8% 27.7% 28.1% 22.9%
Cash flows provided by:
Operating activities....................... $ 14,447 $ 18,905 $ 21,090 $ 4,237 $ 5,426
Investing activities....................... (420) (871) (226) -- (367)
Financing activities....................... (11,344) (17,936) (21,667) (3,255) (3,246)
Capital expenditures......................... 420 871 226 -- 367
Dividends(a)(b).............................. 11,214 17,836 21,547 3,224 3,225
Depreciation and amortization................ 449 504 523 79 105
Ratio of total debt to EBITDA................ -- -- -- -- --
Ratio of EBITDA to interest expense.......... -- -- -- -- --
Ratio of earnings to fixed charges (c)....... 43.3x 75.2x 88.1x 78.7x 69.5x
</TABLE>
- ------------------------
See footnotes below.
13
<PAGE>
SUMMARY SUPPLEMENTAL COMBINED HISTORICAL FINANCIAL DATA
The following table sets forth summary historical combined D&F and Omni-Pak
and Affiliates financial data ("Combined Financial Data"), as of and for each of
the three years in the period ended December 31, 1997 and the three months ended
March 31, 1998 and 1997. The Combined Financial Data presents the combined
group's historical operating results, which, in the opinion of management,
provide a more meaningful representation of the underlying business and cash
flows. These entities historically operated under common management and had a
high degree of common ownership, customers and systems, including similar
accounting and financial reporting systems to manage the combined enterprises.
The information set forth below should be read in conjunction with the
"Unaudited Pro Forma Condensed Combined Financial Statements," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Historical Financial Statements, each of which is included elsewhere in this
Prospectus. The Company and each of its subsidiaries are S corporations and,
accordingly, all federal and a majority of state income taxes are paid directly
by the shareholders. The results of operations for the three months ended March
31, 1998 are not necessarily indicative of the results to be expected for the
full fiscal year.
<TABLE>
<CAPTION>
QUARTER ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales..................................... $ 85,264 $ 144,735 $ 182,385 $ 39,117 $ 46,842
Cost of sales............................. 55,382 94,758 117,733 25,979 32,124
--------- --------- --------- --------- ---------
Gross profit............................ 29,882 49,977 64,652 13,138 14,718
Selling, general and administrative
expenses................................ 8,246 11,203 13,019 2,973 3,286
--------- --------- --------- --------- ---------
Operating income.......................... 21,636 38,774 51,633 10,165 11,432
Interest income (expense), net.............. 144 162 279 55 72
--------- --------- --------- --------- ---------
Income before state income taxes............ 21,780 38,936 51,912 10,220 11,504
State income taxes(a)....................... 283 567 778 145 173
--------- --------- --------- --------- ---------
Net income(a)............................... $ 21,497 $ 38,369 $ 51,134 $ 10,075 $ 11,331
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
BALANCE SHEET DATA:
Cash and cash equivalents................. $ 8,155 $ 7,079 $ 8,957 $ 10,625 $ 12,377
Working capital........................... 6,601 6,901 12,032 11,091 13,059
Total assets.............................. 21,047 23,783 31,505 29,621 34,438
Total debt................................ 640 540 420 510 400
Shareholders' equity (deficit)............ 9,789 11,498 16,643 15,537 17,652
OTHER DATA(B):
EBITDA.................................... $ 22,363 $ 39,676 $ 52,669 $ 10,527 $ 11,634
EBITDA margin............................. 26.2% 27.4% 28.9% 26.9% 24.8%
Cash flows provided by:
Operating activities.................... $ 25,814 $ 37,995 $ 49,037 $ 10,174 $ 13,802
Investing activities.................... (786) (2,311) (1,050) (211) (587)
Financing activities.................... (20,939) (36,760) (46,109) (6,066) (9,795)
Capital expenditures...................... 786 2,311 1,050 211 587
Dividends(a)(b)........................... 20,808 36,660 45,989 6,036 9,775
Depreciation and amortization............. 727 902 1,036 362 202
Ratio of total debt to EBITDA............. -- -- -- -- --
Ratio of EBITDA to interest expense....... -- -- -- -- --
Ratio of earnings to fixed charges (c).... 56.0x 96.3x 115.4x 90.1x 92.4x
</TABLE>
- ------------------------
See footnotes below.
14
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following table sets forth the summary unaudited pro forma condensed
combined income statement data for the year ended December 31, 1997 and the
three months ended March 31, 1998, and summary unaudited pro forma condensed
combined balance sheet data as of March 31, 1998. The unaudited pro forma
condensed combined income statement data gives effect to the Old Notes Offering,
the Acquisition Facility and the Reorganization as if such transactions had
occurred at the beginning of the fiscal year presented. The unaudited pro forma
condensed combined balance sheet data gives effect to these transactions as if
they had occurred on March 31, 1998. The data presented below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Selected Historical and Pro Forma Financial Data"
and the Historical Financial Statements, which are included elsewhere in this
Prospectus. The summary unaudited pro forma financial data do not necessarily
reflect the results of operations or financial position of the Company that
would have actually resulted had the events referred to above been consummated
as of the date and for the period indicated and are not intended to project the
financial position or results of operations for any future period. The Company
and each of its subsidiaries are S corporations and, accordingly, all federal
and a majority of state income taxes are paid directly by the shareholders.
<TABLE>
<CAPTION>
PRO FORMA (D) PRO FORMA (D)
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
1997 1998
------------- -------------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF INCOME DATA:
Sales...................................................................... $ 182,385 $ 46,842
Cost of sales.............................................................. 117,733 32,124
------------- --------
Gross profit............................................................. 64,652 14,718
Selling, general and administrative expenses............................... 26,702 6,707
------------- --------
Operating income........................................................... 37,950 8,011
Interest income (expense), net............................................... (25,998) (6,497)
------------- --------
Income before state income taxes............................................. 11,952 1,514
State income taxes(a)........................................................ 384 23
------------- --------
Net income(a)................................................................ $ 11,568 $ 1,491
------------- --------
------------- --------
BALANCE SHEET DATA:
Cash and cash equivalents.................................................. $ 16,179
Working capital............................................................ 15,761
Total assets............................................................... 181,847
Total debt................................................................. 219,892
Shareholders' equity (deficit)............................................. (54,501)
OTHER DATA(B):
EBITDA..................................................................... $ 52,669 $ 11,634
EBITDA margin.............................................................. 28.9% 24.8%
Cash flows provided by:
Operating activities..................................................... $ 22,760 $ 7,233
Investing activities..................................................... (1,050) (587)
Financing activities..................................................... (46,109) (9,795)
Capital expenditures....................................................... 1,050 587
Dividends(a)(b)............................................................ 45,989 10,321
Depreciation and amortization.............................................. 14,719 3,623
Ratio of total debt to EBITDA.............................................. 4.2x 4.7x
Ratio of pro forma EBITDA to pro forma interest expense.................... 2.0x 1.8x
Ratio of earnings to fixed charges (c)..................................... 1.5x 1.2x
</TABLE>
- ------------------------
See footnotes on following page.
15
<PAGE>
- ------------------------
(a) The Company has elected S corporation status for federal and state income
tax purposes, and other than a 1.5% state tax, income tax is paid by the
Company's shareholders. The shareholders' effective combined federal and
state tax rate for 1997 was approximately 45%. The Company has historically
distributed as a dividend to its shareholders amounts sufficient for the
shareholders to pay their required taxes. In accordance with this practice,
the Company distributed to those persons that were shareholders at the time
of the Reorganization, all net income generated by the Company from January
1, 1998 through the Original Issue Date in excess of $2.0 million, in order
for such shareholders to pay such taxes for the period from January 1, 1998
through the Original Issue Date. On a pro forma basis for 1997 giving effect
to the Old Notes Offering and the Reorganization, the distribution related
to the tax payment would have been approximately $11.4 million, representing
the sum of 45% of pro forma net income of $12.5 million and 45% of pro forma
amortization of intangibles of $12.9 million, which will not be deductible
for income tax purposes.
(b) EBITDA is defined as net income before interest income (expense), income
taxes and depreciation and amortization. Management believes that EBITDA, as
well as the ratios of total debt to EBITDA and EBITDA to interest expense,
are measures commonly used by analysts and investors to determine a
company's ability to service and incur debt. Accordingly, this information
has been presented to permit a more complete analysis. However, EBITDA as
reported may not be comparable to similarly titled measures used by other
companies. EBITDA margin is computed by dividing EBITDA by sales. EBITDA
should not be considered a substitute for net income or cash flow data
prepared in accordance with generally accepted accounting principles (which
is also presented in the accompanying table) or as a measure of
profitability or liquidity.
(c) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges. Fixed charges consist of
interest expense (which includes amortization of deferred financing costs)
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest.
(d) The pro forma adjustments give effect to the Old Notes Offering, the
Acquisition Facility and the Reorganization. See "Unaudited Pro Forma
Condensed Combined Financial Statements."
16
<PAGE>
RISK FACTORS
EACH HOLDER OF OLD NOTES SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS IN ADDITION TO OTHER INFORMATION SET FORTH IN THIS PROSPECTUS BEFORE
ACCEPTING THE EXCHANGE OFFER, ALTHOUGH THE RISK FACTORS SET FORTH BELOW ARE
GENERALLY APPLICABLE TO THE OLD NOTES AS WELL AS THE NEW NOTES.
SUBSTANTIAL LEVERAGE
As a result of the Old Notes Offering, the Company has, for the first time,
significant debt service obligations. As of March 31, 1998, after giving effect
to the Acquisition Facility, the Old Notes Offering and the application of the
net proceeds therefrom, the Company and its subsidiaries would have had
approximately $219.9 million (net of original issue discount) of total
indebtedness outstanding and a deficit in shareholders' equity of approximately
$54.0 million. See "Capitalization." In addition, the Company entered into the
Acquisition Facility in connection with the consummation of the Old Notes
Offering which will allow the Company to borrow, on the terms and conditions
specified therein, an additional $48.5 million in indebtedness. Any outstanding
indebtedness under the Acquisition Facility will mature prior to the maturity
date of the Notes. See "Description of Acquisition Facility."
The degree to which the Company is leveraged could have important
consequences to the holders of the Notes, including, but not limited to: (i)
limiting the Company's ability to obtain additional financing for working
capital, capital expenditures or acquisitions, (ii) causing the Company to
dedicate a substantial portion of cash flow from operations to the payment of
interest on its indebtedness, thereby reducing funds available for investments
and (iii) increasing the Company's vulnerability to general economic downturns
and limiting its ability to withstand competitive pressures. The Company's
ability to make scheduled payments of interest on, or to refinance, its
indebtedness will depend on its future operating performance and cash flow,
which are subject to prevailing economic conditions, prevailing interest rate
levels, and financial, competitive, business and other factors, many of which
are beyond its control.
The Company believes that, based upon current levels of operations, it will
be able to meet its debt service obligations, including payments of interest on
the Notes when due. If, however, the Company cannot generate sufficient cash
flow to meet its debt service obligations, then the Company may be required to
refinance its indebtedness and may be forced to adopt an alternative strategy
that could include actions such as reducing or delaying capital expenditures,
selling assets, restructuring its indebtedness or seeking additional equity
capital. There is no assurance that refinancing would be permitted by the terms
of the Acquisition Facility or the Indenture or, along with the alternative
strategies, could be effected on a timely basis or on satisfactory terms. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
HOLDING COMPANY STRUCTURE
The Company is a holding company that conducts all of its operations through
its subsidiaries and whose only material asset is its equity interests in such
subsidiaries. As a result, the Company's ability to make debt service payments
is dependent upon the earnings and cash flows of the operations of its
subsidiaries and its ability to receive dividends and distributions from such
subsidiaries. The ability to receive such dividends and distributions is subject
to restrictions under the Acquisition Facility. There can be no assurance that
its subsidiaries will generate sufficient earnings and cash flows to pay
dividends or distribute funds to the Company to enable the Company to pay its
expenses and meet its obligations to pay interest on the Notes.
In addition, the Company's obligations under the Acquisition Facility are
secured by substantially all of the Company's assets, including the capital
stock of its existing and future subsidiaries. If an event of default under the
Acquisition Facility occurs, the lenders under the Acquisition Facility could
seek to enforce their rights against the collateral securing such facility,
including the capital stock of such subsidiaries. Moreover, any right of the
Company and its creditors, including holders of the Notes, to
17
<PAGE>
participate in the assets of any of the Company's subsidiaries upon any
liquidation or reorganization of any such subsidiary will be subject to the
prior claims of that subsidiary's creditors, including trade creditors and the
lenders under the Acquisition Facility.
SUBORDINATION OF GUARANTEES
The Subsidiary Guarantors, including Global Sub which is the borrower under
the Acquisition Facility, have delivered the Guarantees to unconditionally
guarantee the payment of principal and interest on the Notes when due. The
Subsidiary Guarantors other than Global Sub have also unconditionally guaranteed
the Company's obligations under the Acquisition Facility. The Guarantees of the
Subsidiary Guarantors will be subordinated in right of payment to all existing
and future Guarantor Senior Debt, which includes the Acquisition Facility and
the guarantee on a senior secured basis by the Subsidiary Guarantors of all
obligations under the Acquisition Facility (and refinancings thereof). In the
event of bankruptcy, liquidation or reorganization of any of the Subsidiary
Guarantors, the assets of such Subsidiary Guarantor will be available to pay
obligations on the Guarantees only after the guarantees under the Acquisition
Facility have been paid in full, and there may not be sufficient assets
remaining to pay amounts due on the Guarantees. See "Description of Acquisition
Facility."
RESTRICTIVE COVENANTS
The Acquisition Facility and the Indenture contain numerous restrictive
covenants limiting the discretion of the Company's management with respect to
certain business matters. These covenants place significant restrictions on,
among other things, the ability of the Company to incur additional indebtedness,
to create liens or other encumbrances, to pay dividends or make certain other
payments, investments, loans and guarantees and to sell or otherwise dispose of
assets and merge or consolidate with another entity. The Acquisition Facility
contains a number of financial covenants requiring the Company to meet certain
financial ratios and financial condition tests. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Description of
Acquisition Facility" and "Description of the New Notes--Certain Covenants." The
Company's ability to meet these financial ratios and financial condition tests
can be affected by events beyond its control, and there can be no assurance that
the Company will meet such ratios or such tests. A failure to comply with the
obligations in the Acquisition Facility or the Indenture could result in an
event of default under the Acquisition Facility or an Event of Default (as
defined) under the Indenture which, if not cured or waived, could permit
acceleration of the relevant indebtedness. If the indebtedness under the
Acquisition Facility were to be accelerated, there can be no assurance that the
assets of the Company would be sufficient to repay in full that indebtedness and
the other indebtedness of the Company, including the Notes.
DEPENDENCE ON SIGNIFICANT CUSTOMER; SUPPLY AGREEMENTS
A significant percentage of the Company's historical sales has been to
Herbalife, which accounted for approximately 76%, 74% and 83% of the Company's
sales in 1997, 1996 and 1995, respectively. The loss of Herbalife as a customer
or a significant reduction in purchase volume by Herbalife, for any reason,
including if Herbalife were to incur financial difficulties, would have a
material adverse effect on the Company's results of operations and financial
condition. Additionally, EAS represented approximately 15.0% and 12.0% of the
Company's sales in 1997 and 1996, respectively. The loss of EAS as a customer or
a significant reduction in purchase volume by EAS for any reason, including if
EAS were to incur financial difficulties, could have a material adverse effect
on the Company's results of operations, financial condition and cash flows.
Since 1980, the Company has supplied substantially all of Herbalife's
dietary and nutritional supplement products under various arrangements. In
September 1997, each of D&F, Omni-Pak and Dynamic entered into new agreements
with Herbalife that, unless renewed, will terminate after three years. The new
agreements provide prices discounted from the previous arrangements. These price
revisions could have an
18
<PAGE>
adverse effect on the profitability margins of the Company with respect to its
sales to Herbalife. Herbalife is permitted, for the first time, under these new
agreements to purchase certain of its powder products, tablets, capsules,
liquids and other products from manufacturers other than the Company, subject to
minimum purchase requirements, and the Company is no longer obligated to
manufacture all of Herbalife's dietary and nutritional product requirements. In
addition, the new agreements transfer ownership of product formulations for
substantially all of Herbalife's dietary and nutritional products to Herbalife.
As a result, Herbalife has the ability under these agreements to use alternative
sources for particular dietary and nutritional supplement products. Herbalife
has the right to terminate any of these agreements if, without the prior written
consent of Herbalife, Mr. Marconi ceases to own more than 50% of the capital
stock of the Company or is no longer an executive officer of the Company and
responsible for the day-to-day operations and management of the Company. In
addition, Herbalife may terminate any agreement if the Company fails to meet
certain service level requirements specified therein. See "Business--Sales and
Distribution."
Mr. Mark Hughes, Chairman and Chief Executive Officer of Herbalife, was
formerly a 20% shareholder of Dynamic and a 33% shareholder of Omni-Pak. A
portion of the proceeds of the Old Notes Offering was used to purchase all of
Mr. Hughes' shares of common stock of Dynamic and Omni-Pak. The Company cannot
predict whether its relationship with Herbalife will be affected as a result of
Mr. Hughes no longer being a shareholder of the Company or any of its
subsidaries.
CONTROL BY PRINCIPAL SHAREHOLDER
Mr. Marconi owns 94% of the Company's outstanding shares of capital stock.
As a result, Mr. Marconi has the ability to determine the outcome of all
corporate actions requiring shareholder approval, including, among other things,
the election of the Board of Directors, mergers, consolidations and the sale of
all, or substantially all, of the Company's assets. There can be no assurance
that the interests of Mr. Marconi, as the principal equity owner of the Company,
will not conflict with the interests of the holders of the Notes.
KEY PERSONNEL
The Company believes that its continued success depends to a significant
extent on the management and other skills of Mr. Marconi, as well as its ability
to retain other key employees and to attract skilled personnel in the future to
manage the growth of the Company. In connection with the consummation of the Old
Notes Offering, the Company entered into a five-year employment agreement with
Mr. Marconi. If Mr. Marconi ceases to be an executive officer of the Company and
responsible for the day-to-day operations and management of the Company,
Herbalife would have the right to terminate its supply agreements with the
Company. See "Business--Sales and Distribution." In connection with the
consummation of the Old Notes Offering, the Company entered into employment
agreements with Mr. Paul M. Buxbaum and Mr. Donald J. Lewis to become the
Company's new Chief Executive Officer and Chief Financial Officer, respectively.
Mr. Buxbaum and Mr. Lewis assumed the duties previously performed by Mr. Siegel.
As of June 1, 1998, the Company entered into an employment agreement with Mr.
Howard Simon to become Chief Operating Officer of the Company. See "Management."
The loss or unavailability of Mr. Marconi or the inability of Messrs. Buxbaum,
Lewis or Simon to successfully perform their duties could have a material
adverse effect on the Company. See "Management--Employment and Consulting
Agreements."
FUTURE ACQUISITIONS
One of the Company's business strategies is to pursue acquisitions that are
compatible with its strategic goals. Management is unable to predict whether or
when any prospective acquisition candidates will become available or the
likelihood of any transaction being completed should any negotiations
19
<PAGE>
commence. Future acquisitions could be financed by internally generated funds,
borrowings under the Acquisition Facility or another facility, public offerings
or private placements of equity or debt securities, or a combination of the
foregoing. There can be no assurance that the Company will be able to make
acquisitions on terms favorable to the Company and that such funds to finance an
acquisition will be available or permitted under the Company's financing
instruments. See "Description of the New Notes" and "Description of Acquisition
Facility." If the Company completes acquisitions, it will encounter various
associated risks, including the possible inability to integrate an acquired
business into the Company's operations, the possible failure to realize
anticipated synergies or benefits, 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 results of operations and financial
condition. See "Business--Business Strategy."
COMPETITION
The business of developing, manufacturing and selling dietary and
nutritional supplements is highly competitive. Certain of the Company's
competitors are larger than the Company, have resources greater than those of
the Company and are more vertically integrated. See "Business--Competition."
AVAILABILITY OF RAW MATERIALS
Substantially all of the Company's products contain ingredients and raw
materials that are harvested by and obtained from third-party suppliers, and
many of the ingredients are harvested internationally and/ or on a seasonal
basis. Although the Company currently utilizes several suppliers for these
ingredients and such ingredients are generally available from numerous sources,
an unexpected interruption of supply, such as a harvest failure or poor weather
conditions, could have a material adverse effect on the Company's results of
operations and financial condition.
PRODUCT LIABILITY
The Company, like other manufacturers of products that are ingested, faces
the risk of exposure to product liability claims in the event that the use of
its products results in injury. The Company has recently been named as a
defendant in an action originally filed against Herbalife and certain other
defendants in which the plaintiff alleges that the Thermojetics-TM- Green tablet
manufactured by the Company for Herbalife was defective and unsafe for its
intended use. The plaintiff is seeking damages for personal injury, pain and
suffering, lost wages and is also seeking punitive damages. There can be no
assurance that the Company will not be held liable for damages under such
lawsuit or whether additional lawsuits will be filed against the Company as a
result of products manufactured by the Company for Herbalife or other customers.
See "Business--Litigation." Although the Company has never been a party to a
product liability claim which had a material adverse effect on the Company's
results of operations or financial condition, there can be no assurance that
additional claims in the future will not have such a material adverse effect.
The Company maintains product liability insurance. There can be no assurance
that such insurance will continue to be available at a reasonable cost or, if
available, will be adequate to cover future liabilities, if any.
ENVIRONMENTAL LIABILITIES AND REGULATIONS
The Company's manufacturing operations are subject to extensive federal,
state and local environmental laws and regulations, including those relating to
the discharge and disposal of hazardous substances and the remediation of
environmental contamination. The Company believes that it is in material
compliance with such laws and is not subject to any material liabilities under
environmental law. Although the Company has never been party to an
administrative or judicial proceeding relating to environmental matters that had
a material adverse effect on its results of operations or financial condition,
there can be no assurance as to whether the Company will be subject to
environmental claims in the future. In addition, the Company cannot predict what
environmental legislation or regulations will be enacted in the future,
20
<PAGE>
how existing or future laws or regulations will be administered or interpreted
or what unknown environmental conditions may be found to exist on its
properties. Compliance with more stringent laws or regulations could require
additional expenditures by the Company.
GOVERNMENT REGULATION; ADVERSE PUBLICITY
The manufacturing, processing, formulating, packaging, labeling and
advertising of the Company's products are subject to regulation by one or more
federal agencies, including the U.S. Food and Drug Administration (the "FDA"),
the Federal Trade Commission (the "FTC") and the Environmental Protection Agency
(the "EPA"). The Company's activities are also regulated by various agencies of
the states, localities and foreign countries to which the Company's products are
distributed and in which the Company's products are sold.
The composition and labeling of dietary supplements, which comprise a
substantial portion of the Company's products, are most actively regulated by
the FDA under the provisions of the Federal Food, Drug, and Cosmetic Act (the
"FFDC"). The FFDC has been revised in recent years by the Nutrition Labeling and
Education Act of 1990 (the "NLEA") and the Dietary Supplement Health and
Education Act of 1994 (the "DSHEA"). In the judgment of the Company these
regulatory changes are generally favorable to the dietary supplement industry.
The Company exercises significant control over certain aspects of the labeling
of its customers' dietary and nutritional supplement products and may have some
regulatory responsibility for such labeling. See "Business--Regulatory Matters."
The FDA recently finalized regulations implementing certain labeling
provisions of the DSHEA. In addition, further labeling requirements may be
proposed by the FDA in response to a report issued in November 1997 by the
presidentially-appointed Commission on Dietary Supplement Labels. The Company
cannot determine what effect such regulations, if promulgated, will have on its
business in the future.
The DSHEA authorizes the FDA to promulgate good manufacturing practices
("GMPs") with respect to the manufacture of dietary supplements, which are to be
modeled after the current GMPs applicable to food products. The Company has
received, on a number of occasions following customary FDA inspections, notices
from the FDA citing GMP deficiencies. See "Business--Regulatory Matters."
The Company has attempted to promptly remedy any such deficiencies and these
actions have not had a material adverse effect on the Company's results of
operations or financial condition. There can be no assurance that the Company
will not receive additional deficiency notices from the FDA in the future, the
remedy for which, or the failure to remedy, could have a material adverse effect
on the Company's results of operations or financial condition.
The FDA frequently publishes advance notices of proposed rulemaking and
promulgates new regulations which affect or could affect the Company's business.
In 1997, for example, the FDA published an advance notice of proposed rulemaking
regarding GMP regulations for dietary supplements and issued final regulations
requiring dietary supplements to maintain 100% of the declared value of added
vitamins and minerals for the entire shelf life of the product. See
"Business--Regulatory Matters." There can be no assurance that such proposed
regulations will be promulgated, and if promulgated, will not require
manufacturing changes to comply with GMP regulations, the recall, reformulation
or discontinuance of certain products, or require additional recordkeeping,
warnings, expanded or different labeling, advertising and/or scientific
substantiation regarding ingredients. In addition, there can be no assurance
that these recent new regulations or future laws, regulations, interpretations
or applications, when and if promulgated, or disparate federal, state and local
regulatory schemes would not require similar actions by the Company. Any or all
of such requirements could have a material adverse effect on the Company's
results of operations and financial condition. Moreover, governmental
regulations in foreign countries where the Company plans to commence or expand
sales may prevent or delay entry into the market or prevent or delay the
introduction, or require the reformulation, of certain of the Company's
products.
21
<PAGE>
Certain of the Company's products include a Chinese herb known as "Ma Huang"
which contains naturally-occurring ephedrine. The Company estimates that these
products accounted for approximately 6% of the Company's sales for the fiscal
year ended December 31, 1997. Ma Huang has been the subject of certain adverse
publicity in the United States and other countries relating to alleged harmful
or adverse effects, including the deaths of several individuals. On April 10,
1996, the FDA issued a statement warning consumers of the significant health
risks of dietary supplements containing Ma Huang and advising them not to
purchase or consume such supplements. In June 1997, the FDA published a proposed
regulation that would establish relatively low levels (less than 8 milligrams
per single serving) of ephedrine that may lawfully be used in dietary supplement
products. The proposed regulation would prohibit: a recommendation of 24
milligrams or more of ephedrine per day; a combination of ephedrine with a known
stimulant; and a recommendation for long term use or sale with body building or
weight loss programs. The proposed regulation would also require labeling
against use of any product containing ephedrine for more than seven days and a
warning that taking more than the recommended serving may cause heart attack,
stroke, seizure or death. No final regulation has been promulgated. The
Company's products containing Ma Huang may become subject to further federal,
state, local or foreign laws or regulations which could require the Company to
reformulate or relabel its products with different warnings or revised
directions for use. While the Company believes that its Ma Huang products could
be reformulated and/or relabeled, there can be no assurance in that regard or
that reformulation and/or relabeling would not have a material adverse effect on
sales of such products. See "Business--Regulatory Matters."
ORIGINAL ISSUE DISCOUNT CONSEQUENCES OF NOTES
The Old Notes were issued at a discount from their principal amount at
maturity. Original issue discount (the difference between the aggregate
principal amount at maturity and the issue price of the Old Notes) will accrue
from the issue date of the Old Notes. Consequently, purchasers of Old Notes and
New Notes generally will be required to include amounts in gross income for
United States federal income tax purposes in advance of their receipt of the
cash payments to which the income is attributable. Such amounts in the aggregate
will be equal to the difference between the stated redemption price at maturity
and the issue price of the Old Notes. See "Certain United States Federal Income
Tax Consequences" for a more detailed discussion of the federal income tax
consequences of the purchase, ownership and disposition of the Notes.
CHANGE OF CONTROL
Upon a Change of Control, each holder of the Notes will have the right to
require the Company to purchase all or a portion of such holder's Notes at a
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest to the date of purchase. There can be no assurance that sufficient
funds will be available to the Company at the time of any Change of Control to
make any required repurchase of Notes tendered. See "Description of the New
Notes--Change of Control."
FRAUDULENT CONVEYANCE AND RELATED CONSIDERATIONS
The obligations of the Company under the Notes, and of the Subsidiary
Guarantors under the Guarantees, may be subject to review under relevant federal
and state fraudulent conveyance laws if a bankruptcy case or a lawsuit
(including in circumstances where bankruptcy is not involved) is commenced by or
on behalf of any unpaid creditor of the Company, its subsidiaries or a
representative of the Company's or its subsidiaries' creditors. If a court in
such a lawsuit were to find that, at the time the Company issued the Notes, the
Subsidiary Guarantors delivered the Guarantees or as a consequence of the
Reorganization, the Company or the Subsidiary Guarantors (i) intended to hinder,
delay or defraud any existing or future creditor or contemplated insolvency with
a design to prefer one or more creditors to the exclusion, in whole or in part,
of others or (ii) did not receive fair consideration or reasonably equivalent
value for issuing the Notes or delivering the Guarantees, as the case may be,
and the Company
22
<PAGE>
or any Subsidiary Guarantor (a) was insolvent, (b) was rendered insolvent, (c)
was engaged or about to be engaged in a business or transaction for which its
remaining assets constituted unreasonably small capital to carry on its business
or (d) intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured, such court could void the Notes or
the Guarantees and the Company's and such Subsidiary Guarantor's obligations
thereunder, and direct the return of any amounts paid thereunder to the Company
or such Subsidiary Guarantor or to a fund for the benefit of its creditors.
Alternatively, in such event, claims of the holders of the Notes could be
subordinated to claims of the other creditors of the Company or the Subsidiary
Guarantors.
The measure of insolvency for purposes of the foregoing will vary depending
upon the law of the jurisdiction that is being applied. Generally, however, a
company would be considered insolvent if the sum of its debts, including
contingent liabilities, is greater than all of its property at a fair valuation
or if the present fair saleable value of its assets is less than the amount that
will be required to pay its probable liability on its existing debts as they
become absolute and mature.
The consummation of the Reorganization may also be subject to review under
relevant state dividend laws if a lawsuit is commenced by or on behalf of any
creditor of the Company and its subsidiaries that was a creditor at the time of
the Reorganization and did not consent to the Reorganization. If a court were to
determine that the Reorganization violated any such applicable laws, it could
attempt to subordinate the claims of the holders of the Notes to such other
creditors of the Company.
The Company did not obtain any independent reports as to its solvency, or
the solvency of the Subsidiary Guarantors, either prior to, or after giving
effect to, the Old Notes Offering and the Reorganization. The Company believes,
however, that, based upon forecasts and other financial information and after
giving effect to the Old Notes Offering and the Reorganization, each of the
Company and the Subsidiary Guarantors is and will continue to be solvent, each
will have sufficient capital to carry on its business and each will be, and will
continue to be, able to pay its debts as they mature. In addition, the Company
believes the Reorganization will not violate state dividend laws. There can be
no assurance that a court passing on such questions would reach the same
conclusions. In rendering their opinions in connection with the Old Notes
Offering and the Reorganization, counsel for the Company and counsel for the
initial purchaser of the Old Notes did not express any opinion as to the
applicability of federal or state fraudulent transfer or conveyance laws, or
state dividend laws.
RESTRICTIONS ON RESALE AND ABSENCE OF A PUBLIC MARKET
Prior to the exchange of the New Notes offered hereby, there has been no
public market for any of the Notes, and there can be no assurance as to (i) the
liquidity of any such market that may develop, (ii) the ability of the holders
of New Notes to sell their New Notes or (iii) the price at which the holders of
New Notes will be able to sell their New Notes. If such market were to exist,
the New Notes could trade at prices that may be higher or lower than their
principal amount or purchase price, depending on many factors, including
prevailing interest rates, the market for similar notes, and the financial
performance of the Company. The Company does not intend to list the New Notes on
any securities exchange or to seek approval for quotations through any automated
quotation system and no active market for the New Notes is currently
anticipated. There is no assurance as to the liquidity of the trading market for
the New Notes. Citicorp Securities, Inc. has advised the Company that it
currently anticipate making a secondary market for the New Notes, but it is not
obligated to do so, and there is no assurance that an active or liquid public
trading market will develop for the New Notes.
EXCHANGE OFFER PROCEDURE
Issuance of the New Notes in exchange for Old Notes pursuant to the Exchange
Offer will be made only after a timely receipt by the Exchange Agent of
certificates for such Old Notes or a timely Book-Entry Confirmation (as defined)
of such Old Notes into the Exchange Agent's account at the Book-Entry
23
<PAGE>
Transfer Facility, a properly completed and duly executed Letter of Transmittal
(or an Agent's Message in lieu thereof) and all other required documents. All
questions as to the validity, form, eligibility (including time of receipt) and
acceptance of Old Notes tendered for exchange will be determined by the Company
in its sole discretion, which determination will be final and binding on all
parties. Therefore, holders of Old Notes desiring to tender such Old Notes in
exchange for the New Notes should allow sufficient time to ensure timely
delivery. Old Notes that are not tendered or are tendered but not accepted will,
following the consummation of the Exchange Offer, continue to be subject to the
existing restrictions upon transfer thereof and the Company will have no further
obligation to provide for the registration under the Securities Act of such Old
Notes except as described herein. See "The Exchange Offer--Purpose and Effect."
In addition, any holder of Old Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the New Notes will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or under trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. See "Plan of
Distribution." To the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Old Notes could be adversely affected. The Company does not intend to extend the
Exchange Offer although it reserves the right to do so. See "The Exchange
Offer."
24
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of D&F and the combined
capitalization of D&F and Omni-Pak and Affiliates as of March 31, 1998, as
adjusted to give effect to the Reorganization, the Old Notes Offering and the
Acquisition Facility and the application of the net proceeds therefrom. The
information presented below should be read in conjunction with the financial
statements of D&F, the combined financial statements of Omni-Pak and Affiliates
and the combined financial statements of D&F, Omni-Pak and Affiliates
(collectively, the "Historical Financial Statements") and the Unaudited Pro
Forma Condensed Combined Financial Statements, each of which is included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
-----------------------------------
ACTUAL
----------------------
D&F COMBINED AS ADJUSTED
--------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents(1)................................... $ 5,581 $ 12,377 $ 16,179
--------- ----------- -----------
--------- ----------- -----------
Long-term debt (including current portion):
Existing debt.............................................. $ 400 $ 400 $ --
Acquisition Facility(2).................................... -- -- 1,500
Notes offered hereby....................................... -- -- 218,392
--------- ----------- -----------
Total long-term debt..................................... $ 400 400 219,892
--------- ----------- -----------
Shareholders' equity (deficit):
Capital stock.............................................. 1,026 1,235 508
Retained earnings (deficit)................................ 8,333 16,417 (54,475)
--------- ----------- -----------
Total shareholders' equity (deficit)..................... 9,359 17,652 (53,967)
--------- ----------- -----------
Total capitalization..................................... $ 9,759 $ 18,052 $ 165,925
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
- ------------------------
(1) In accordance with past practice, the Company distributed to those persons
that were shareholders at the time of the Reorganization, all net income
generated by the Company from January 1, 1998 through the Original Issue
Date in excess of $2.0 million, primarily in order for such shareholders to
pay their required state and federal income taxes for the period from
January 1, 1998 through the Original Issue Date. Such distributions
aggregated $11.9 million and have been reflected in the As Adjusted column.
(2) Simultaneously with the consummation of the Old Notes Offering, the Company
received an initial advance under the Acquisition Facility of $1.5 million
to repay all existing indebtedness outstanding at the time of the Old Notes
Offering. After giving effect to such initial advance, the Company has
undrawn availability of $48.5 under the Acquisition Facility, of which $10.0
million may be used for working capital and general corporate purposes. The
entire facility may be used for future permitted acquisitions. See
"Description of Acquisition Facility."
25
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
SELECTED D&F FINANCIAL DATA
The following table sets forth selected D&F financial data as of and for
each of the five years ended December 31, 1997 and the three months ended March
31, 1998 and 1997. The balance sheet data presented below as of December 31,
1996 and 1997 and the statement of income data for each of the three years in
the period ended December 31, 1997 have been derived from the D&F Financial
Statements included elsewhere herein. The D&F Financial Statements were audited
by Deloitte & Touche LLP, independent auditors, as set forth in their report
also included herein. The selected balance sheet data as of December 31, 1993,
1994 and 1995 and the selected income statement data for the years ended
December 31, 1993 and 1994 have been derived from audited D&F Financial
Statements not presented herein. The information set forth below should be read
in conjunction with the "Unaudited Pro Forma Condensed D&F Financial
Statements," "Management Discussion and Analysis of Financial Condition and
Results of Operations" and the Historical Financial Statements, each of which is
included elsewhere in this Prospectus. The results of operations for the three
months ended March 31, 1998 are not necessarily indicative of the results to be
expected for the full fiscal year.
<TABLE>
<CAPTION>
QUARTER ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
----------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales............................... $ 56,211 $ 68,679 $ 52,164 $ 73,523 $ 85,191 $ 18,921 $ 22,372
Cost of sales....................... 34,682 44,337 34,895 47,958 55,020 12,134 15,595
--------- --------- --------- --------- --------- --------- ---------
Gross profit...................... 21,529 24,342 17,269 25,565 30,171 6,787 6,777
Selling, general and administrative
expenses.......................... 5,593 9,325 5,462 6,347 7,088 1,536 1,750
--------- --------- --------- --------- --------- --------- ---------
Operating income.................... 15,936 15,017 11,807 19,218 23,083 5,251 5,027
Interest income (expense), net........ 60 63 76 56 82 33 38
--------- --------- --------- --------- --------- --------- ---------
Income before state income taxes...... 15,996 15,080 11,883 19,274 23,165 5,284 5,065
State income taxes(a)................. 417 257 137 280 350 78 76
--------- --------- --------- --------- --------- --------- ---------
Net income(a)......................... $ 15,579 $ 14,823 $ 11,746 $ 18,994 $ 22,815 $ 5,206 $ 4,989
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
BALANCE SHEET DATA:
Cash and cash equivalents........... $ 5,277 $ 1,791 $ 4,474 4,571 3,768 5,552 5,581
Working capital..................... 6,137 2,696 3,258 4,048 5,612 6,094 7,114
Total assets........................ 13,027 11,693 11,948 13,670 16,736 16,455 18,698
Total debt.......................... 880 770 640 540 420 510 400
Shareholders' equity (deficit)...... 7,196 4,639 5,170 6,328 7,596 8,309 9,359
OTHER DATA(B):
EBITDA.............................. $ 16,095 $ 15,268 $ 12,256 $ 19,722 $ 23,606 $ 5,326 $ 5,132
EBITDA margin....................... 28.6% 22.2% 23.5% 26.8% 27.7% 28.1% 22.9%
Cash flows provided by:
Operating activities.............. $ 16,338 $ 16,143 $ 14,447 $ 18,905 $ 21,090 $ 4,237 $ 5,426
Investing activities.............. (463) (2,139) (420) (871) (226) -- (367)
Financing activities.............. (12,840) (17,490) (11,344) (17,936) (21,667) (3,255) (3,246)
Capital expenditures................ 333 1,134 420 871 226 -- 367
Dividends(a)(b)..................... 12,720 17,380 11,214 17,836 21,547 3,224 3,225
Depreciation and amortization....... 159 251 449 504 523 79 105
Ratio of total debt to EBITDA....... -- -- -- -- -- -- --
Ratio of earnings to fixed charges
(c)............................... 68.0x 56.6x 43.3x 75.2x 88.1x 78.7x 69.5x
</TABLE>
- ------------------------
See footnotes below.
26
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Balance Sheet gives
effect to the Old Notes Offering, the Acquisition Facility and the
Reorganization as if such transactions had occurred on March 31, 1998. The
Unaudited Pro Forma Condensed Combined Statement of Operations for the year
ended December 31, 1997 and the three months ended March 31, 1998 gives effect
to the Old Notes Offering, the Acquisition Facility and the Reorganization as if
such transactions had occurred at the beginning of the periods presented. As
part of the Reorganization, Mr. Marconi increased his ownership interest in the
Company to 94%. In addition, the Company and its predecessors, D&F, Omni-Pak,
West Coast and Dynamic, are S corporations, and other than a 1.5% state tax,
income tax is paid by the shareholders. The shareholders' combined federal and
state tax rate in 1997 was approximately 45%. The Company has historically
distributed as a dividend to its shareholders amounts sufficient for the
shareholders to pay their required income taxes. In accordance with this
practice, the Company distributed to those persons that were shareholders at the
time of the Reorganization, all net income generated by the Company from January
1, 1998 through the Original Issue Date in excess of $2.0 million, in order for
such shareholders to pay such taxes for the period from January 1, 1998 through
the Original Issue Date. On a pro forma basis for 1997 giving effect to the Old
Notes Offering and the Reorganization, the distribution related to the tax
payment would have been approximately $11.4 million in calendar 1997 and $2.2
million for the quarter ended March 31, 1998. Such amounts represent the sum of
45% of pro forma net income and 45% of pro forma amortization of intangibles,
which will not be deductible for income tax purposes. These amounts are not
included as income tax expense in the accompanying Unaudited Pro Forma Condensed
Combined Statement of Operations.
The Unaudited Pro Forma Condensed Combined Financial Statements should be
read in conjunction with "Capitalization," "Selected Historical and Pro Forma
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Historical Financial Statements, each of
which appears elsewhere in this Prospectus. The pro forma data do not purport to
represent what the Company's actual results of operations or financial position
would have been had the Old Notes Offering, the Acquisition Facility and the
Reorganization occurred on such dates. The Unaudited Pro Forma Condensed
Combined Statement of Operations data also do not purport to project the results
of operations of the Company for the current year or for any other period.
29
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
OMNI-PAK
D&F AND
INDUSTRIES AFFILIATES PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS(1) PRO FORMA
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................... $ 5,581 $ 6,796 $ 3,802(2) $ 16,179
Accounts receivable, net of allowances...................... 3,114 3,367 -- 6,481
Inventories................................................. 7,414 3,034 -- 10,448
Prepaid expenses and other current assets................... 344 265 -- 609
----------- ------------ ----------- -----------
Total current assets........................................ 16,453 13,462 3,802 33,717
Property and equipment, net................................. 2,245 2,348 -- 4,593
Intangibles and other assets................................ -- -- 143,537(3) 143,537
----------- ------------ ----------- -----------
TOTAL ASSETS $ 18,698 $ 15,810 147,339 $ 181,847
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued expenses....................... $ 8,939 $ 7,517 -- $ 16,456
Line of credit.............................................. 400 -- 1,100(4) 1,500
----------- ------------ ----------- -----------
Total current liabilities................................... 9,339 7,517 1,100 17,956
Long-term debt, less current installments................... -- -- 218,392(2) 218,392
Stockholders' Equity (Deficit)
Common stock................................................ 1,026 209 (727)(5) 508
Retained earnings (deficit)................................. 8,333 8,084 (71,426)(5) (55,009)
----------- ------------ ----------- -----------
Total stockholders' equity (deficit)........................ 9,359 8,293 (72,153) (54,501)
----------- ------------ ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)........ $ 18,698 $ 15,810 $ 147,339 $ 181,847
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
</TABLE>
30
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
OMNI-PAK
D&F AND
INDUSTRIES AFFILIATES PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS(1) PRO FORMA
----------- ------------ -------------- -----------
<S> <C> <C> <C> <C>
Net Sales.................................................. $ 85,191 $ 98,587 $ (1,393)(6) $ 182,385
Cost Of Sales.............................................. 55,020 64,106 (1,393)(6) 117,733
----------- ------------ -------------- -----------
Gross Profit............................................. 30,171 34,481 -- 64,652
Selling, general and administrative expenses............... 7,088 5,931 13,683(7) 26,702
----------- ------------ -------------- -----------
Operating income......................................... 23,083 28,550 (13,683) 37,950
Interest income (expense), net............................. 82 197 (26,277)(8) (25,998)
----------- ------------ -------------- -----------
Income before state taxes.................................. 23,165 28,747 (39,960) 11,952
State income taxes......................................... 350 428 (394)(9) 384
----------- ------------ -------------- -----------
Net income............................................... $ 22,815 $ 28,319 $ (39,568) $ 11,568
----------- ------------ -------------- -----------
----------- ------------ -------------- -----------
</TABLE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
OMNI-PAK
D&F AND
INDUSTRIES AFFILIATES PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS(1) PRO FORMA
----------- ------------ -------------- -----------
<S> <C> <C> <C> <C>
Net Sales.................................................. $ 22,372 $ 24,847 $ (377)(6) $ 46,842
Cost Of Sales.............................................. 15,595 16,906 $ (377)(6) 32,124
----------- ------------ ------- -----------
Gross Profit............................................. 6,777 7,941 -- 14,718
Selling, general and administrative expenses............... 1,750 1,536 3,421(7) 6,707
----------- ------------ ------- -----------
Operating income......................................... 5,027 6,405 (3,421) 8,011
Interest income (expense), net............................. 38 34 (6,569)(8) (6,497)
----------- ------------ ------- -----------
Income before state taxes.................................. 5,065 6,439 (9,990) 1,514
State income taxes......................................... 76 97 (150)(9) 23
----------- ------------ ------- -----------
Net income............................................... $ 4,989 $ 6,342 $ (9,840) $ 1,491
----------- ------------ ------- -----------
----------- ------------ ------- -----------
</TABLE>
31
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(IN THOUSANDS)
(1) The unaudited pro forma condensed combined financial statements give effect
to the Old Notes Offering, the Acquisition Facility and the Reorganization,
including the recapitalization of D&F, the Company's predecessor (the
"Recapitalization"), and the acquisition by the Company of Omni-Pak, Dynamic
and West Coast (collectively "Omni-Pak and Affiliates"). See "Prospectus
Summary--The Reorganization."
(2) Acquisition: The Acquisition will be accounted for under the purchase method
of accounting. The purchase price consists of $136,867 of cash and $1,000 of
estimated transaction costs and will be allocated to Omni-Pak and
Affiliates' net assets acquired based on their respective fair values as of
the closing date. Although the final allocation has not been determined, the
following sets forth certain preliminary allocations:
<TABLE>
<S> <C> <C> <C>
Goodwill and other intangibles............................... $ 136,294
Net assets of Omni-Pak and Affiliates at estimated fair
value........................................................ $ 1,573
Cash......................................................... $ 137,867
Prior to the completion of the allocation, the Company must determine the final
allocation of the purchase price. The Company believes that substantially all of the
purchase price over the net assets acquired will be allocated to goodwill and other
intangibles.
Recapitalization: The Recapitalization will result in the repurchase of 543,026 shares
of common stock at a total price of $58,700. This amount is allocated as a reduction of
stockholders' equity (deficit) as follows:
Common Stock................................................. $ 727
Retained earnings (deficit).................................. $ 57,973
Cash......................................................... $ 58,700
Issuance of the Old Notes: On April 23, 1998, $225,000 in aggregate principal amount of
the Old Notes were issued at 97.063% of face value.
Cash......................................................... $ 218,392
Old Notes Discount........................................... $ 6,608
Old Notes Payable............................................ $ 225,000
Debt Issue Costs............................................. $ 7,243
Cash......................................................... $ 7,243
Acquisition Facility: Concurrent with the issuance of the Old Notes, the Company
entered into a $50 million credit facility of which up to $10 million can be used for
working capital and other general corporate purposes. The Company borrowed $1,500, of
which $400 was used to repay the existing line of credit (see Note 4).
</TABLE>
32
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<S> <C> <C> <C>
The following summarizes the cash flows from the Recapitalization, the Offering and the
Acquisition:
Offering proceeds............................................ $ 218,392
Borrowing under working capital line......................... 1,500
Consideration paid for the Recapitalization.................. (58,700)
Consideration paid for the Acquisition....................... (137,867)
Transaction fees and expenses................................ (7,243)
Repay line of credit......................................... (400)
April distributions to shareholders.......................... (11,880)
-----------
Change in cash............................................... $ 3,802
-----------
-----------
</TABLE>
(3) Intangibles and other assets: The following represents the change in
intangibles and other assets resulting from the Offering and the
Acquisition:
<TABLE>
<S> <C> <C>
Excess of purchase price over net assets acquired..................... $ 136,294
Deferred debt costs................................................... 7,243
-----------
Total intangibles and other assets.................................... $ 143,537
-----------
-----------
</TABLE>
(4) Line of Credit: Reflects the incremental borrowing from the Acquisition
Facility:
<TABLE>
<S> <C> <C>
Total amount borrowed................................................. $ 1,500
Repay existing debt................................................... (400)
-----------
Change in line of credit.............................................. $ 1,100
-----------
-----------
</TABLE>
(5) Stockholders' equity (deficit):
<TABLE>
<S> <C> <C> <C>
Recapitalization:
Common Stock............................................. $ (727)
Retained earnings (deficit).............................. (57,973) $ (58,700)
-----------
Omni-Pak and Affiliates:
Net assets acquired...................................... $ (1,573)
April 1998 distributions................................. (6,720) (8,293)
-----------
D&F April 1998 distributions............................. (5,160)
-----------
Change in stockholders' equity........................... $ (72,153)
-----------
-----------
</TABLE>
(6) Elimination entries: Reflects elimination of intercompany sales and related
cost of sales between D&F and Omni-Pak and Affiliates.
(7) Selling, general and administrative expenses: Reflects amortization of
intangibles over 10 years.
33
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
(8) Interest income (expense), net: Reflects adjustments to interest expense as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
12/31/97
-------------
<S> <C> <C>
Interest on Old Notes at an effective rate of 11.5%..................................... $ 25,115
Amortization of deferred financing fees on Old Notes.................................... 624
Interest on Acquisition Facility........................................................ 88
Amortization of Acquisition Facility fees over 5 years.................................. 200
Fee for unused Acquisition Facility..................................................... 250
-------------
Adjustment to interest expense.......................................................... $ 26,277
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
3/31/98
-------------
<S> <C> <C>
Interest on Old Notes at an effective rate of 11.5%..................................... $ 6,279
Amortization of deferred financing fees on Old Notes.................................... 156
Interest on Acquisition Facility........................................................ 22
Amortization of Acquisition Facility fees over 5 years.................................. 50
Fee for unused Acquisition Facility..................................................... 62
-------------
Adjustment to interest expense.......................................................... $ 6,569
-------------
-------------
</TABLE>
(9) Provision for state income taxes: Reflects the adjustment to state income
taxes at 1.5% on the deductible portion of the adjustment to interest
expense. The Company is an S Corporation for Federal and California income
tax purposes; accordingly, income tax is paid by the Company's shareholders.
34
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE HISTORICAL
FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
The Company, founded in 1978 by Mr. Marconi and Mr. Siegel, is one of the
world's leading developers and custom manufacturers of dietary and nutritional
supplements. The Company develops specialty products for branded distribution
companies, branded retailers, television marketing companies and network
marketing organizations who then distribute such products throughout the world.
Prior to the Reorganization, the Company's operations were conducted by four
S corporations: D&F, Omni-Pak, Dynamic and West Coast. These companies were
reorganized in the Reorganization to consolidate related and complementary
business activities under one holding company, Global Health Sciences, Inc.
(formerly D&F). These companies historically operated under common management
and had a high degree of common ownership, customers and systems, including
similar accounting and financial reporting systems. As S corporations, all
federal and state income taxes (other than a minimum state income tax of 1.5%)
for each of such corporations are paid directly by the shareholders. The Company
makes quarterly distributions to its shareholders in order for such shareholders
to pay their state and federal income taxes. In 1997, the effective income tax
rate for the Company's shareholders was approximately 45%. The Company has
historically distributed, and intends to continue to distribute, as a dividend
to its shareholders amounts sufficient for the shareholders to pay their
required income taxes. On a pro forma basis for 1997 giving effect to the Old
Notes Offering and the Reorganization, the distribution related to the tax
payment would have been approximately $11.4 million, representing the sum of 45%
of pro forma net income of $12.5 million and 45% of pro forma amortization of
intangibles of $12.9 million, which will not be deductible for income tax
purposes.
In connection with the consummation of the Old Notes Offering, (i) D&F
changed its name to Global Health Sciences, Inc., (ii) Global Health Sciences,
Inc. formed Global Sub, (iii) Global Sub formed D&F Sub, Omni-Pak Merger Sub,
Dynamic Merger Sub and West Coast Merger Sub, (iv) Global Health Sciences, Inc.
transferred to D&F Sub all of its assets and liabilities except for its
obligation under the Notes and the capital stock of Global Sub, (v) Global
Health Sciences, Inc. acquired Omni-Pak and Affiliates for approximately $137.9
million in cash and expenses, in transactions accounted for under the purchase
method of accounting, pursuant to the mergers of Omni-Pak Merger Sub and
Omni-Pak (with Omni-Pak as the surviving corporation), Dynamic Merger Sub and
Dynamic (with Dynamic as the surviving corporation), and West Coast Merger Sub
and West Coast (with West Coast as the surviving corporation) and (vi) the
shareholders of Global Health Sciences, Inc. received approximately $58.7
million in cash in exchange for the cancellation of approximately 50% of the
outstanding capital stock of Global Health Sciences, Inc.
The Company's historical growth in sales and EBITDA has been primarily
attributable to increased sales to Herbalife, the Company's largest customer.
Sales to Herbalife have increased from approximately $70.5 million in fiscal
year 1995, representing approximately 83% of the Company's sales in that year,
to approximately $137.6 million in fiscal year 1997, representing approximately
76% of the Company's sales in that year. Due to the significant percentage of
the Company's sales attributable to Herbalife, fluctuations in Herbalife's
inventory levels or inaccurate sales forecasting by Herbalife have had adverse
effects on Company sales in the past and could have adverse effects in the
future. The Company and Herbalife recently entered into new three-year supply
agreements. See "Risk Factors--Dependence on Significant Customer; Supply
Agreements."
35
<PAGE>
The Company's cost of sales consists primarily of labor costs, materials and
manufacturing overhead. The Company's selling, general and administrative
expenses consist primarily of salaries and wages, sales commissions,
professional fees and rent.
In addition to the historical financial information and accompanying
discussion and analysis regarding D&F presented below, supplemental combined
historical financial information and accompanying discussion and analysis are
also presented because, in the opinion of management, such information provides
a more meaningful representation of the Company's underlying business and cash
flows.
D&F
QUARTER ENDED MARCH 31, 1998 COMPARED TO QUARTER ENDED MARCH 31, 1997
SALES. In the first quarter of 1998, sales increased by $3.5 million or
18.5 %, to $22.4 million compared to $18.9 million in the first quarter of 1997.
This increase in sales primarily resulted from an increase of (i) approximately
$2.1 million or 12.8%, to $18.5 million, in sales to Herbalife arising from
Herbalife's continued growth in foreign markets, particularly Japan and an
increase in its inventory levels to support such growth and (ii) approximately
$1.3 million, or 50.0%, in sales to other customers, particularly in the sports
and performance nutrition segment.
COST OF SALES AND GROSS PROFIT. Cost of sales increased by $3.5 million, or
28.9%, to $15.6 million in the first quarter of 1998 compared to $12.1 million
in the first quarter of 1997, while cost of sales as a percentage of sales
increased to 69.7% in the first quarter of 1998 compared to 64.1% in the first
quarter of 1997, thereby reducing the gross margin in the first quarter of 1998
to 30.3% from 35.9% in the first quarter of 1997. The increase in cost of sales
resulted from an increase in sales in the first quarter of 1998 compared to the
first quarter of 1997. The reduction in gross margin principally resulted from
price reductions given to Herbalife as a result of the new supply agreement.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $0.3 million, or 20.0%, to $1.8 million in
the first quarter of 1998 compared to $1.5 million in the first quarter of 1997.
As a percentage of sales, selling, general and administrative expenses increased
to 8.0% in the first quarter of 1998 compared to 7.9% in the first quarter of
1997. The increase in selling, general and administrative expenses primarily
resulted from an increase in (i) commissioned sales, (ii) personnel costs to
support growth in sales and (iii) product development costs. The reduction in
selling, general and administrative expenses as a percentage of sales primarily
resulted from economies of scale as sales volume increased.
NET INCOME. Net income decreased by $0.2 million, or 4.2%, to $5.0 million
in the first quarter of 1998 compared to $5.2 million in the first quarter of
1997. This decrease resulted primarily from a decrease in the gross margin on
sales to Herbalife as a result of the new supply agreement.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
SALES. In 1997, sales increased by $11.7 million, or 15.9%, to $85.2
million compared to $73.5 million in 1996. This increase in sales primarily
resulted from the increase in sales to Herbalife arising from Herbalife's
continued growth, particularly in Japan and Taiwan, and to an increase in
Herbalife's inventory levels to support such growth.
COST OF SALES AND GROSS PROFIT. Cost of sales increased by $7.1 million, or
14.7%, to $55.0 million in 1997 compared to $48.0 million in 1996, while cost of
sales as a percentage of sales decreased to 64.6% in 1997 compared to 65.2% in
1996, thereby improving the gross margin in 1997 to 35.4% from 34.8% in 1996.
The increase in cost of sales resulted from the increase in sales in 1997
compared to 1996, and the improvement in gross margin principally resulted from
efficiency improvements in manufacturing operations.
36
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $0.7 million, or 11.7%, to $7.1 million in
1997 compared to $6.3 million in 1996. As a percentage of sales, selling,
general and administrative expenses decreased to 8.3% in 1997 compared to 8.6%
in 1996. The increase in selling, general and administrative expenses primarily
resulted from an increase in (i) commissioned sales, (ii) personnel costs to
support growth in sales and (iii) product development costs. The reduction in
selling, general and administrative expenses as a percentage of sales primarily
resulted from economies of scale, as the Company's general and administrative
expenses remained relatively constant despite the increase in sales.
NET INCOME. Net income increased by $3.8 million, or 20.1%, to $22.8
million in 1997 compared to $19.0 million in 1996. This increase resulted
primarily from the 15.9% increase in sales and a slight improvement in gross
margin in 1997.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
SALES. In 1996, sales increased by $21.4 million, or 40.9%, to $73.5
million compared to $52.2 million in 1995. This increase in sales primarily
resulted from the increase in sales to Herbalife arising from Herbalife's
continued growth, particularly in Japan, Russia and Brazil, and the increase in
sales to other customers.
COST OF SALES AND GROSS PROFIT. Cost of sales increased by $13.1 million,
or 37.4%, to $48.0 million in 1996 compared to $34.9 million in 1995, while cost
of sales as a percentage of sales decreased to 65.2% in 1996 compared to 66.9%
in 1995, thereby improving the gross margin in 1996 to 34.8% from 33.1% in 1995.
The increase in cost of sales resulted from the increase in sales in 1996
compared to 1995, and the improvement in gross margin principally resulted from
efficiency improvements in manufacturing operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $0.9 million, or 16.2%, to $6.3 million in
1996 compared to $5.5 million in 1995. As a percentage of sales, selling,
general and administrative expenses decreased to 8.6% in 1996 compared to 10.5%
in 1995. The increase in selling, general and administrative expenses primarily
resulted from growth in sales, particularly commissions relating thereto. The
reduction in selling, general and administrative expenses as a percentage of
sales primarily resulted from economies of scale.
NET INCOME. Net income increased by $7.2 million, or 61.7%, to $19.0
million in 1996 compared to $11.7 million in 1995. This increase resulted
primarily from the 40.9% increase in sales, a slight improvement in gross margin
in 1995, and a decrease in selling, general and administrative costs as a
percentage of sales to 8.6% in 1996 from 10.5% in 1995.
LIQUIDITY AND CAPITAL RESOURCES
D&F's primary cash needs are working capital and capital expenditures. Prior
to the Reorganization, D&F financed its cash requirements through internally
generated cash flow. D&F currently expects that its primary source liquidity
will be cash flow from operations and the Acquisition Facility. The Acquisition
Facility is secured by all of the assets of the Company and has a five-year
term. It includes a $10.0 million sublimit for working capital and general
corporate purposes while all undrawn amounts will be available for acquisitions
permitted by the terms thereof. As of March 31, 1998, D&F had cash and cash
equivalents of approximately $5.6 million.
Cash provided by operating activities for the years ended December 31, 1997,
1996, and 1995 was $21.1 million, $18.9 million and $14.4 million, respectively.
The major operating uses for these periods resulted from changes in accounts
receivable, inventories and prepaid expenses and other current assets. The most
significant of these changes was the increase of $3.7 million in inventories for
the year ended December 31, 1997, which was primarily attributable to the
purchase of additional raw materials for the
37
<PAGE>
production of a RoseOx based product that did not meet its sales forecast. For
the quarter ended March 31, 1998 there were no significant changes except for a
reduction of inventory of $0.6 million.
Cash used in investing activities for the years ended December 31, 1997,
1996 and 1995 was $0.2 million, $0.9 million and $0.4 million, respectively.
Investing activities consisted of purchases of property and equipment.
Cash used by D&F in financing activities for the years ended December 31,
1997, 1996 and 1995 was $21.7 million, $17.9 million and $11.3 million,
respectively. The principal component of these financing activities for the
years ended December 31, 1997, 1996 and 1995 was cash dividends paid to
shareholders in the amount of $21.5 million, $17.8 million and $11.2 million,
respectively.
Cash increased by $1.8 million in the quarter ended March 31, 1998 compared
to $1.0 million in the quarter ended March 31, 1997. Cash provided by operations
was $5.4 million and $4.2 million in the first quarter of 1998 and the first
quarter of 1997, respectively. Distributions to shareholders were $3.2 million
in both the first quarter of 1998 and the first quarter of 1997. Additions to
property and equipment were $.4 million and $0 million in the first quarter of
1998 and the first quarter of 1997, respectively.
RAVEN INDUSTRIES D/B/A/ OMNI-PAK INDUSTRIES AND AFFILIATES
QUARTER ENDED MARCH 31, 1998 COMPARED TO QUARTER ENDED MARCH 31, 1997
SALES. In the first quarter of 1998, sales increased by $4.6 million or
22.7 %, to $24.8 million compared to $20.3 million in the first quarter of 1997.
This increase in sales primarily resulted from an increase of (i) approximately
$2.0 million or 16.8%, to $13.9 million, in sales to Herbalife arising from
Herbalife's continued growth in foreign markets, particularly Japan, and an
increase in its inventory levels to support such growth and (ii) approximately
$2.6 million, or 44.5%, in sales to EAS.
COST OF SALES AND GROSS PROFIT. Cost of sales increased by $3.0 million, or
21.6%, to $16.9 million in the first quarter of 1998 compared to $13.9 million
in the first quarter of 1997, while cost of sales as a percentage of sales
decreased to 68.1% in the first quarter of 1998 compared to 68.5% in the first
quarter of 1997, thereby increasing the gross margin in 1998 to 31.9% from 31.6%
in the first quarter of 1997. The increase in cost of sales resulted from an
increase in sales in the first quarter of 1998 compared to the first quarter of
1997. The gross margin increased principally as a result of the large increase
in EAS sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were effectively unchanged from the prior year. Selling,
general and administrative expenses were $1.5 million in both the first quarter
of 1998 and the first quarter of 1997. As a percentage of sales, selling,
general and administrative expenses decreased to 6.0% in the first quarter of
1998 compared to 7.4% in the first quarter of 1997, due to the increase in
sales.
NET INCOME. Net income increased by $1.5 million, or 30.1%, to $6.3 million
in the first quarter of 1998 compared to $4.9 million in the first quarter of
1997. This increase resulted primarily from the 22.7% increase in sales, a
slight improvement in gross margin in the first quarter of 1998 and a decrease
in selling, general and administrative costs as a percentage of sales.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
SALES. In 1997, sales increased by $25.2 million or 34.3 %, to $98.6
million compared to $73.4 million in 1996. This increase in sales primarily
resulted from an increase in sales to Herbalife arising from Herbalife's
continued growth in foreign markets, particularly Japan and Taiwan and an
increase in its inventory levels to support such growth and in sales to other
customers, particularly in the sports and performance nutrition segment.
38
<PAGE>
COST OF SALES AND GROSS PROFIT. Cost of sales increased by $15.1 million,
or 30.8%, to $64.1 million in 1997 compared to $49.0 million in 1996, while cost
of sales as a percentage of sales decreased to 65.0% in 1997 compared to 66.8%
in 1996, thereby improving the gross margin in 1997 to 35.0% from 33.2% in 1996.
The increase in cost of sales resulted from an increase in sales in 1997
compared to 1996. The improvement in gross margin principally resulted from the
efficiency improvements in manufacturing operations and the ability to pass
through increases in raw material costs to its customers.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $1.1 million, or 22.4%, to $5.9 million in
1997 compared to $4.9 million in 1996. As a percentage of sales, selling,
general and administrative expenses decreased to 6.0% in 1997 compared to 6.7%
in 1996. The increase in selling, general and administrative expenses primarily
resulted from an increase in (i) commissioned sales, (ii) personnel costs to
support growth in sales and (iii) product development costs. The reduction in
selling, general and administrative expenses as a percentage of sales primarily
resulted from economies of scale as sales volume increased.
NET INCOME. Net income increased by $8.9 million, or 45.9%, to $28.3
million in 1997 compared to $19.4 million in 1996. This increase resulted
primarily from the 34.3% increase in sales, a slight improvement in gross margin
in 1997 and a decrease in selling, general and administrative costs as a
percentage of sales.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
SALES. In 1996, sales increased by $38.9 million or 112.8%, to $73.4
million compared to $34.5 million in 1995. This increase in sales primarily
resulted from an increase in sales to Herbalife arising from Herbalife's
continued growth in foreign markets and in sales to other customers,
particularly in the sports and performance nutrition segment.
COST OF SALES AND GROSS PROFIT. Cost of sales increased by $27.1 million,
or 123.7%, to $49.0 million in 1996 compared to $21.9 million in 1995, while
cost of sales as a percentage of sales increased to 66.8% in 1996 compared to
63.5% in 1995, thereby reducing the gross margin in 1997 to 33.2% from 36.5% in
1995. The increase in cost of sales resulted from an increase in sales in 1996
compared to 1995. The reduction in gross margin principally resulted from raw
material price increases that were not passed through to customers until 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $2.1 million, or 75.0%, to $4.9 million in
1996 compared to $2.8 million in 1995. As a percentage of sales, selling,
general and administrative expenses decreased to 6.7% in 1996 compared to 8.1%
in 1995. The increase in selling, general and administrative expenses primarily
resulted from (i) commissioned sales, (ii) personnel costs to support growth in
sales and (iii) product development costs. The reduction in selling, general and
administrative expenses as a percentage of sales primarily resulted from
economies of scale, as general and administrative expenses did not grow
proportionately to the increase in sales.
NET INCOME. Net income increased by $9.6 million, or 98.0%, to $19.4
million in 1997 compared to $9.8 million in 1996. This increase resulted
primarily from the 112.8% increase in sales, a slight improvement in gross
margin in 1997 and a decrease in selling, general and administrative costs as a
percentage of sales.
LIQUIDITY AND CAPITAL RESOURCES
Omni-Pak and Affiliates primary cash needs are working capital and capital
expenditures which are financed through internally generated cash flow. As of
March 31, 1998, Omni-Pak and Affiliates had cash and cash equivalents of
approximately $6.8 million.
39
<PAGE>
Cash provided by operating activities for the years ended December 31, 1997,
1996, and 1995 was $27.9 million, $19.1 million and $11.1 million respectively.
The major operating uses for these periods resulted from changes in accounts
receivable, inventories and prepaid expenses and other current assets.
Cash used in investing activities for the years ended December 31, 1997,
1996 and 1995 was $0.8 million, $1.4 million and $0.2 million, respectively.
Investing activities consisted of purchases of property and equipment.
Cash used by Omni-Pak in financing activities for the years ended December
31, 1997, 1996 and 1995 was $24.4 million, $18.8 million and $9.6 million,
respectively. The principal component of these financing activities for the
years ended December 31, 1997, 1996 and 1995 was cash dividends paid to
shareholders in the amount of $24.4 million, $18.8 million and $9.6 million,
respectively.
Cash increased by $1.6 million in the quarter ended March 31, 1998 compared
to $2.6 million in the quarter ended March 31, 1997. Cash provided by operations
was $8.4 million and $5.4 million in the first quarter of 1998 and the first
quarter of 1997, respectively. Distributions to shareholders were $6.6 million
and $2.8 million in the first quarter of 1998 and the first quarter of 1997,
respectively. Additions to property and equipment were $.2 million and $0
million in the first quarter of 1998 and the first quarter of 1997,
respectively.
COMBINED D&F, OMNI-PAK AND AFFILIATES
QUARTER ENDED MARCH 31, 1998 COMPARED TO QUARTER ENDED MARCH 31, 1997
SALES. In the first quarter of 1998, sales increased by $7.7 million or
19.7%, to $46.8 million compared to $39.1 million in the first quarter of 1997.
This increase in sales primarily resulted from an increase of (i) approximately
$3.3 million or 9.8%, to $32.7 million, in sales to Herbalife arising from
Herbalife's continued growth in foreign markets, particularly Japan, and an
increase in its inventory levels to support such growth, (ii) approximately $3.2
million, or 55.2%, in sales to EAS arising from EAS's continued growth, and
(iii) $1.1 million in sales to other customers.
COST OF SALES AND GROSS PROFIT. Cost of sales increased by $6.1 million, or
23.5%, to $32.1 million in the first quarter of 1998 compared to $26.0 million
in the first quarter of 1997, while cost of sales as a percentage of sales
increased to 68.6% in the first quarter of 1998 compared to 66.5% in the first
quarter of 1997, thereby decreasing the gross margin in the first quarter of
1998 to 31.4% from 33.5% in the first quarter of 1997. The increase in cost of
sales resulted from an increase in sales in the first quarter of 1998 compared
to the first quarter of 1997. The reduction in gross margin principally resulted
from price reductions given to Herbalife as a result of the new supply
agreements.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $0.3 million, or 10.0%, to $3.3 million in
the first quarter of 1998 compared to $3.0 million in the first quarter of 1997.
As a percentage of sales, selling, general and administrative expenses decreased
to 7.1% in the first quarter of 1998 compared to 7.7% in the first quarter of
1997. The increase in selling, general and administrative expenses primarily
resulted from an increase in (i) commissioned sales, (ii) personnel costs to
support growth in sales and (iii) product development costs. The reduction in
selling, general and administrative expenses as a percentage of sales primarily
resulted from economies of scale as sales volume increased.
NET INCOME. Net income increased by $1.2 million, or 11.9%, to $11.3
million in the first quarter of 1998 compared to $10.1 million in the first
quarter of 1997. This increase resulted primarily from the 19.7% increase in
sales and a decrease in selling, general and administrative costs as a
percentage of sales to 7.1% from 7.7%.
40
<PAGE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
SALES. In 1997, sales increased by $37.7 million, or 26.0%, to $182.4
million compared to $144.7 million in 1996. This increase in sales primarily
resulted from an increase of (i) approximately $30.7 million or 28.8%, to $137.6
million, in sales to Herbalife arising from Herbalife's continued growth in
foreign markets, particularly Japan and Taiwan, and an increase in its inventory
levels to support such growth and (ii) approximately $7.0 million, or 18.3%, in
sales to other customers, particularly in the sports and performance nutrition
segment.
COST OF SALES AND GROSS PROFIT. Cost of sales increased by $23.0 million,
or 24.2%, to $117.7 million in 1997 compared to $94.8 million in 1996, while
cost of sales as a percentage of sales decreased to 64.6% in 1997 compared to
65.5% in 1996, thereby improving the gross margin in 1997 to 35.4% from 34.5% in
1996. The increase in cost of sales resulted from the Company's increase in
sales in 1997 compared to 1996. The improvement in the Company's gross margin
principally resulted from efficiency improvements in manufacturing operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $1.8 million, or 16.2%, to $13.0 million in
1997 compared to $11.2 million in 1996. As a percentage of sales, selling,
general and administrative expenses decreased to 7.1% in 1997 compared to 7.7%
in 1996. The increase in selling, general and administrative expenses primarily
resulted from an increase in (i) commissioned sales, (ii) personnel costs to
support growth in sales and (iii) product development costs. The reduction in
selling, general and administrative expenses as a percentage of sales primarily
resulted from economies of scale, as the Company's general and administrative
expenses remained relatively constant despite the increase in sales.
NET INCOME. Net income increased by $12.8 million, or 33.3%, to $51.1
million in 1997 compared to $38.4 million in 1996. This increase resulted
primarily from the 26.1% increase in sales, a slight improvement in gross margin
in 1997 and a decrease in selling, general and administrative costs as a
percentage of sales.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
SALES. In 1996, sales increased by $59.5 million, or 69.8%, to $144.7
million compared to $85.3 million in 1995. This increase in sales primarily
resulted from an increase of (i) approximately $36.4 million, or 51.6%, to
$106.9 million in sales to Herbalife arising primarily from Herbalife's
continued growth in foreign markets, particularly in Japan, Russia and Brazil,
and (ii) approximately $23.1 million in sales to other customers, particularly
in the sports and performance nutrition segment.
COST OF SALES AND GROSS PROFIT. Cost of sales increased by $39.4 million,
or 71.1%, to $94.8 million in 1996 compared to $55.4 million in 1995, while cost
of sales as a percentage of sales increased to 65.5% in 1996 compared to 65.0%
in 1995, resulting in a decrease in gross margin in 1996 to 34.5% from 35.0% in
1995. The increase in cost of sales resulted from the Company's increase in
sales in 1996 compared to 1995. The decrease in the Company's gross profit
margin principally resulted from a change in product mix.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $3.0 million or 35.9%, to $11.2 million in
1996 compared to $8.2 million in 1995. As a percentage of sales, selling,
general and administrative expenses decreased to 7.7% in 1996 compared to 9.7%
in 1995. The increase in selling, general and administrative expenses primarily
resulted from growth in sales, particularly commissions relating thereto. The
reduction in selling, general and administrative expenses as a percentage of
sales primarily resulted from economies of scale.
NET INCOME. Net income increased by $16.9 million, or 78.6%, to $38.4
million in 1997 compared to $21.5 million in 1996. This increase resulted
primarily from the 69.8% increase in sales and a decrease in selling, general
and administrative costs as a percentage of sales to 7.7% from 9.7% in 1995.
41
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash needs are working capital and capital
expenditures. Prior to the Reorganization, the Company financed its cash
requirements through internally generated cash flow. The Company currently
expects that its primary source of liquidity will be cash flow from operations
and the $50.0 million Acquisition Facility. The Acquisition Facility is secured
by all of the assets of the Company and its subsidiaries and has a five-year
term. It includes a $10.0 million sublimit for working capital and general
corporate purposes while all undrawn amounts will be available for acquisitions
permitted by the terms thereof. As of December 31, 1997, the Company had cash
and cash equivalents of approximately $9.0 million.
Cash provided by operating activities for the years ended December 31, 1997,
1996 and 1995 was $49.0 million, $38.0 million and $25.8 million, respectively.
The major operating uses for these periods resulted from changes in accounts
receivable, inventories and prepaid expenses and other current assets. The most
significant of these changes was the increase of $3.7 million in inventories for
the year ended December 31, 1997, which was primarily attributable to the
purchase of additional raw materials for the production of a RoseOx-based
product that did not meet its sales forecast.
Cash used by the Company in investing activities for the years ended
December 31, 1997, 1996 and 1995 was $1.0 million, $2.3 million and $0.8
million, respectively. The Company's investing activities consisted of purchases
of property and equipment.
Cash used by the Company in financing activities for the years ended
December 31, 1997, 1996 and 1995 was $46.1 million, $36.8 million and $20.9
million, respectively. The principal component of the Company's financing
activities for the years December 31, 1997, 1996 and 1995 was cash dividends
paid to the Company's shareholders in the amount of $46.0 million, $36.7 million
and $20.8 million, respectively. The Company has elected S Corporation status
for federal and state tax purposes, and other than a 1.5% state tax, income tax
is paid by the Company's shareholders. The Company distributes cash dividends to
shareholders to pay federal and state taxes, which were approximately 45% of net
income for 1996 and 1997.
The Company estimates that its aggregate capital expenditure requirements
for the year ended December 31, 1998 will be approximately $4.0 million. Under
the Indenture, the Company may purchase shares from its stockholders in an
amount not to exceed $4.0 million. At December 31, 1997, the Company's
consolidated indebtedness was $0.4 million, which consisted of one short-term
bank loan.
Cash increased by $3.4 million in the quarter ended March 31, 1998 compared
to $3.9 million in the quarter ended March 31, 1997. Cash provided by operations
was $13.8 million and $10.2 million in the first quarter of 1998 and the first
quarter of 1997, respectively. Distributions to shareholders were $9.8 million
and $6.0 million in the first quarter of 1998 and the first quarter of 1997,
respectively. Additions to property and equipment were $.6 million and $.2
million in the first quarter of 1998 and the first quarter of 1997,
respectively.
As of June 1, 1998, the Company's only debt, other than trade payables, is
the $218.4 million aggregate principal amount of the Notes (net of original
issue discount). After giving pro forma effect to the consummation of the Old
Notes Offering and the Reorganization, the Company would have had approximately
$16.2 million of cash on a pro forma basis as of March 31, 1998. The Company
believes that its available cash, internally generated cash flow and the
availability of undrawn amounts under the Acquisition Facility will be
sufficient to meet its working capital, capital expenditure and debt service
requirements in the foreseeable future.
42
<PAGE>
BUSINESS
OVERVIEW
The Company is one of the world's leading developers and custom
manufacturers of dietary and nutritional supplements. The Company develops and
manufactures vitamins, minerals, herbs, teas and other supplements in tablet,
capsule and powder form in a variety of shapes, sizes, colors, flavors and
textures designed to meet its customers' specifications. The Company supplies
specialty products for branded distributors, branded retailers, television
marketing companies and network marketing organizations who then distribute
these products around the world. The Company controls the entire development
process for the vast majority of its products from the initial market
identification stage through formulation, manufacturing, label design and
distribution to its customers. The Company believes that it has distinguished
itself during its 20 years in the industry through its ability to develop
products in anticipation of market trends, its superior customer service and its
ability to produce a large variety of high quality products. According to
Packaged Facts, domestic retail sales in the dietary and nutritional supplement
industry reached $6.5 billion in 1996 and are estimated to grow to $12.3 billion
by 2001. The Company believes that it is well positioned to capitalize on this
forecasted growth. For the fiscal year ended December 31, 1997, the Company's
sales increased by 26.0% to $182.4 million from $144.7 million for the same
period in 1996 and EBITDA increased by 32.7% to $52.7 million from $39.7 million
for the same period in 1996. During the three months ended March 31, 1998, sales
increased 19.7% to $46.8 million from $39.1 million in the same period in 1997,
net income increased 12.5% to $11.3 million from $10.1 million in the same
period in 1997 and EBITDA increased by 10.5% to $11.6 million from $10.5 million
in the first quarter of 1997. In addition, the ratio of earnings to fixed
charges increased from 101.5x in the first quarter of 1997 to 115.0x in the
first quarter of 1998 and cash flows from operations increased 35.7% to $13.8
million from $10.2 million in the same period in 1997. Uses of cash flow from
investing and financing activities were principally purchases of equipment of
$0.6 million in the first quarter of 1998 and $0.2 in the first quarter of 1997,
and cash dividends paid to stockholders of $9.8 in the first quarter of 1998 and
$6.0 in the first quarter of 1997.
The Company's products are sold to over 60 customers, including Herbalife,
EAS and Metagenics, who then distribute these products in over 35 countries.
Herbalife, the Company's largest customer, and one of the largest network
marketing companies specializing in a wide range of nutritional, weight
management and personal care products, reported retail sales of approximately
$1.5 billion and net sales of $782.5 million in 1997. For the fiscal year ended
December 31, 1997, sales to Herbalife represented approximately 76% of the
Company's total sales. Since 1995, sales to non-Herbalife customers have grown
from $14.8 million to $44.8 million in 1997, representing a compound annual
growth rate during this period of approximately 74.0%. See "Sales and
Distribution."
COMPETITIVE STRENGTHS
ABILITY TO INTRODUCE NEW AND INNOVATIVE PRODUCTS. A key to the Company's
success has been its ability to quickly develop and market new and innovative
products. The Company believes it has been an industry leader in the
introduction of new products that utilize new scientific and medical findings
and which anticipate customer demand. The Company's seven-member product
development team, led by Mr. Marconi, who has over 40 years of experience in the
pharmaceutical and dietary and nutritional supplement industries, keeps abreast
of new developments by maintaining and building its extensive database and
library, reviewing a wide variety of scientific and medical journals and
attending industry seminars and conferences. The Company believes that its
ability to create new products, reformulate existing products and quickly
introduce these products to the marketplace will attract new customers and
places the Company in a position to capitalize on the strong anticipated growth
in the dietary and nutritional supplement industry.
FOCUS ON CUSTOMER SERVICE. The Company believes that its commitment to
customer service is its defining characteristic and has contributed to its
strong and loyal relationships with its customers. The
43
<PAGE>
Company's superior level of customer service includes a flexible and responsive
manufacturing process that can accommodate simultaneous new product launches and
unexpected customer demand. Furthermore, the Company, at a customer's request,
will assist such customer with its foreign regulatory compliance process and
coordinate its global marketing efforts. The Company's ability to design,
develop and manufacture new products has enabled it to be a "one-stop shop" for
most of its customers, alleviating the necessity of current and potential
customers to seek out multiple manufacturers to fulfill all of their product
needs. This capability also creates a synergy between the Company and its
customers in the development and enhancement of a customer's products or product
lines. The Company believes that its high level of customer service is a
competitive advantage and it plans to aggressively market its focus on customer
service to attract new customers.
HIGH PRODUCT QUALITY. The Company believes that its products meet the
highest quality standards in the industry. The Company believes that its
knowledge and expertise allow it to operate its manufacturing facilities in a
low-cost, highly efficient manner that provides the Company with a competitive
advantage. Utilizing technologically advanced laboratory equipment, the
Company's products are subject to product quality standards that include testing
each raw material for quality, physical conformity, cleanliness and, in the case
of botanicals, the absence of microorganisms. During the manufacturing process,
each tablet product is periodically tested for hardness, friability, thickness
and weight, and powder products are tested and sampled for proper mix and "taste
and mouth-feel" to ensure correct color and consistency. The Company believes
that these standards, developed over its 20 years in the industry, have earned
the Company a reputation for manufacturing high-quality products.
EXTENSIVE EXPERIENCE WITH START-UPS. Since its inception, the Company has
placed significant emphasis on working with new companies in the dietary and
nutritional supplement industry to develop products and strategies that will
help these companies achieve their goals and will enable the Company to
establish loyal and profitable customer relationships. In 1980, the Company
worked with Herbalife, then a start-up company, to develop products that would
fit Herbalife's long-term objectives. Herbalife is now not only the Company's
largest customer but also one of the largest network marketing companies in the
dietary and nutritional supplement industry. The Company also worked with EAS
when it began operations in 1994 to help the company create sports nutrition
products that would meet EAS's high standards and help EAS realize its
objectives in one of the fastest growing segments in the industry. For the year
ended December 31, 1997, sales to EAS totalled approximately $27.2 million.
Through these and other relationships, including manufacturing products for
Rockwood Cosmetics, Bally's Total Fitness and American Health Sciences, Inc.,
the Company has developed an expertise in developing and manufacturing products
for start-up companies and other companies attempting to break into the growing
dietary and nutritional supplement industry.
BUSINESS STRATEGY
EXPAND CUSTOMER BASE. The Company intends to increase sales by
significantly expanding its sales force, attracting new customers and developing
outlets for its products. As the dietary and nutritional supplement industry
grows, the Company plans to take advantage of new opportunities, such as sales
through health maintenance organizations, mail order companies and increased
sales to network marketing organizations. The Company also intends to expand its
presence in the health food/retail market through customers such as EAS, in the
direct television market through customers such as The Good Doctors and in
direct sales to fitness centers through Bally's Total Fitness. Management also
plans to attract new customers in the United States and the growing markets of
Europe, Latin America and Asia.
INCREASE PRODUCTION CAPACITY TO MEET GROWING INDUSTRY DEMAND. According to
estimates by Packaged Facts, the dietary and nutritional supplement industry
will grow at a compound annual growth rate of 13.6% between 1996 and 2001, and
the herbal supplement segment of the industry will grow at a compound annual
growth rate of 16.4% between 1997 and 2002. Management believes that this
projected growth provides the Company with a significant opportunity to increase
sales and profits. The Company
44
<PAGE>
plans to make modest capital expenditures to upgrade its information systems and
increase production capacity in order to address increasing demand. The Company
also intends to purchase equipment and expand its operations to new facilities
as necessary to meet this demand.
SUPPLEMENT INTERNAL GROWTH THROUGH STRATEGIC ACQUISITIONS. The dietary and
nutritional supplement industry is highly fragmented and the Company believes
that the industry is in a favorable position for consolidation. Many of the
Company's competitors are private companies that produce and/or distribute only
a single line of products and would complement the Company's current business,
if acquired. Furthermore, as one of the industry's largest developers and
manufacturers of dietary and nutritional supplements, the Company believes that
there are significant opportunities to acquire companies that distribute these
products, many of which are smaller than the Company and lack their own
manufacturing capability. Certain of these companies also have distribution
channels not presently utilized by the Company's larger customers, including
direct mail, direct television marketing and distribution to health maintenance
organizations. Management believes that the Company is strategically positioned
to participate in the anticipated consolidation of the dietary and nutritional
supplement industry and intends to aggressively pursue acquisition opportunities
that would complement, enhance or vertically integrate existing operations.
INDUSTRY
According to PACKAGED FACTS, the domestic retail market for vitamins,
minerals and dietary supplements has grown at a compound annual growth rate of
15.0% from $3.7 billion in 1992 to $6.5 billion in 1996. By the year 2001,
domestic retail sales in the vitamins, minerals and dietary supplements market
are expected to exceed $12.3 billion, representing a compound annual growth rate
of 13.6% since 1996. The herbal supplement segment has been the fastest-growing
segment in the industry, having grown at a compound annual growth rate of 16.7%
between 1993 and 1997 to an estimated $2.0 billion in 1997. PACKAGED FACTS
expects this growth to continue, as herbal supplement sales are projected to
increase at a compound annual growth rate of 16.4% from $2.0 billion in 1997 to
over $4.2 billion in 2002.
Vitamins, minerals and dietary supplements are sold domestically primarily
through six channels of distribution: health and natural food stores,
drugstores, supermarkets, discount stores, mail order and direct sales
organizations. According to Packaged Facts, in 1996, mass market retailers
(e.g., drug stores, supermarkets and discount stores) accounted for
approximately 45.8% of sales, health and natural food stores accounted for
approximately 38.2% of sales, direct selling (including network marketing
organizations) accounted for approximately 12.6% of sales and mail order and
internet sales accounted for approximately 3.4% of sales.
PACKAGED FACTS estimates that a number of factors will continue to
contribute to the growth in the dietary and nutritional supplement industry,
including (i) the general trend toward preventive medicine and self-care, (ii)
an aging population interested in "living longer, living well," (iii) the impact
of the DSHEA and a generally positive industry and regulatory environment, (iv)
expanded mainstream distribution of dietary and nutritional supplement products,
(v) the expected introduction of new products, (vi) increased interest in
natural medicines, (vii) favorable research studies supporting the public
interest in dietary supplements, (viii) increased acceptance by the traditional
medical community and (ix) the fact that nearly half of the U.S. adult
population does not currently use dietary and nutritional supplements.
An important trend in the United States noted by Packaged Facts is the
growing acceptance of alternative approaches to good health. This trend has been
fueled by increasing health care costs, greater consumer awareness and
increasing demand for alternatives to traditional medicine. An example of this
trend is the recent decision by Oxford Health Plans, a large health maintenance
organization, to extend insurance coverage for certain practitioners of
alternative approaches to good health.
According to industry sources, 54.0% of the U.S. adult population, or 103.7
million consumers, used vitamins, minerals or dietary supplements in 1996, an
increase from 42.5% in 1993. According to Packaged
45
<PAGE>
Facts, persons over 45 are more likely to use dietary supplements than any other
age group, and the population segment aged 45-64 is expected to increase by
32.0% from 1990 to 2000.
The Company believes that the passage of the DSHEA is a favorable event for
the dietary and nutritional supplement industry. Under the DSHEA, for the first
time, persons are allowed to make concise scientific claims ("structure/function
statements") on product labels and in company literature. In addition, the DSHEA
allows for the use of independent, third-party literature to support vitamin,
minerals and dietary supplement sales which can be a significant sales tool. The
Company believes that a manufacturers' ability to better communicate the health
benefits of vitamins has had a significant impact on the growing trend toward
self-care and the increased sales of vitamin products. See "Regulatory Matters."
PRODUCTS
The Company manufactures on demand and on a large scale to its customers'
specifications a highly diversified array of products in tablet, capsule, powder
and liquid form. As a result of the Company's focus on custom manufacturing, it
is difficult to place each of the Company's products into one product category.
Management, however, estimates that the Company's products and their
corresponding percentage of 1997 sales may be divided in the following manner:
<TABLE>
<CAPTION>
<S> <C>
PRODUCT CATEGORY % OF 1997 SALES
- -------------------------------------------------------------- -----------------
Herbal products............................................... 30%
Weight control................................................ 27%
Sports and performance nutrition.............................. 17%
Special products.............................................. 26%
---
100%
---
---
</TABLE>
HERBAL PRODUCTS. Herbal products may be subdivided into herbal
supplements and herbal teas.
HERBAL SUPPLEMENTS. The Company's herbal supplements are sold to a
number of the Company's customers and are intended to address certain
physiological conditions such as bone and joint function, aging, visual
acuity and prostate health. The Company's herbal supplements are sold
primarily in the form of tablets and capsules. The Company also sells a
number of aloe-based products primarily as liquids and gels. All liquid and
gel products are subcontracted to other manufacturers. Common herbs used in
the Company's formulations include St. John's wort, ginkgo biloba,
echinacea, saw palmetto, garlic, schizandra berry extract, valerian root,
kava kava, ginseng and lutein.
HERBAL TEAS. The Company manufactures herbal teas in a variety of
flavors and with a number of different ingredients, including black (pekoe)
or green tea, ginseng, guarana and other herbs for toning and cleansing,
such as cardamon. These products are packaged primarily in jars.
WEIGHT CONTROL. The Company's weight control products consist primarily of
meal-replacement powders and various other dietary supplements designed to
satisfy certain nutritional needs and to aid in appetite and weight control. The
Company's weight control products provide a natural alternative for consumers
who demand all-natural products in their dietary weight control regimen. Weight
control products are sold primarily to Herbalife as well as to a number of other
customers. The meal-replacement powders come in different flavors and combine
any of various proteins, vitamins and minerals, polyunsaturated fats,
carbohydrates, dietary fibers and herbs. Weight control products are also sold
in the form of tablets and capsules and contain a variety of herbs, amino acids,
natural fibers and nutrients. Many of the Company's products are bundled
together as part of a full weight control program.
SPORTS AND PERFORMANCE NUTRITION. The Company's sports and performance
nutrition products represent the fastest-growing product segment for the
Company. These products are formulated for and targeted to athletes, body
builders and others who desire to improve their physical performance, physique,
mental alertness and general well-being in conjunction with a fitness program.
The products are sold to
46
<PAGE>
customers such as EAS and Bally's Total Fitness and consist of a variety of high
protein powders, including those combined with carbohydrates and proper fats
and/or enhanced with creatine or hydroxy methyl butyrate. Sports and performance
nutrition products also include powders high in carbohydrates for rehydration,
weight gain and quick energy, as well as tablets containing ginseng and other
ingredients.
SPECIAL PRODUCTS. The Company's special products represent a broad range of
products and may be subdivided into the following categories:
VITAMINS, MINERALS AND AMINO ACIDS. The Company manufactures and sells
to a majority of its customers a number of vitamins, minerals and amino
acids primarily in tablet and capsule form. The most common of such products
is the Company's multivitamins/minerals, which provide a range of essential
vitamins and minerals. The Company also manufactures natural multivitamins,
such as water-soluble B-complex and various vitamin C sources, and
multiminerals containing minerals such as calcium, magnesium, potassium,
zinc, chromium and various trace minerals. The Company's amino acid products
come in tablets, capsules and powders and consist of amino acids such as
tyrosine, lysine and arginine and combinations thereof, and peptide specific
peptidase, which is taken to increase the utilization of certain amino
acids.
COMBINATION PRODUCTS. A distinguishing characteristic of the Company is
its ability to develop innovative products by adding herbs to various other
ingredients to create products that combine the benefits of vitamins,
minerals and herbal supplements. This practice allows the Company to meet a
wide range of customer needs. The Company sells these combination products
to a majority of its customers. These products generally come in tablets and
capsules and represent a growing portion of the Company's sales.
OTHER PRODUCTS. The Company manufactures other products in order to meet
the specific requirements of certain customers including pet products and
products intended to aid in the treatment of poisonings. These products
currently account for a small but growing percentage of the Company's sales.
The Company also manufactures over-the-counter ("OTC") drugs and pet
products in solid and powder form. The Company subcontracts to other
manufacturers its liquid, ointment and gel products, including aloe drinks,
acne and arthritis creams, herbal shampoos and fish oil capsules.
PRODUCT DEVELOPMENT
The Company believes that its ability to anticipate market trends, identify
target groups, develop new and innovative products and formulate these products
for the marketplace provides significant internal growth potential and places
the Company in a position to capitalize on the growth in the dietary and
nutritional supplement industry. The Company continually monitors new and
developing health and nutrition trends to anticipate its customers' needs and to
introduce new products and reformulate existing ones. The Company's ability to
design, develop and manufacture new products has enabled it to be a "one-stop
shop" for most of its customers, alleviating the necessity of current and
potential customers to seek out multiple manufacturers to fulfill product needs.
This approach also creates a synergy between the Company and its customers in
the development and enhancement of a customer's products or product lines.
The Company will often begin its development process by identifying target
groups with certain physiological needs (e.g., weight control or prostate
health) and then develop a dietary supplement product to respond to such
conditions. The Company also develops a product based on a newly discovered or
unique raw material or on a new application of an existing raw material. After
either identifying a target group or a new raw material, the Company will then
develop a product in its pilot laboratory. The Company refines the new product
in the pilot laboratory to ensure that it contains the proper mix of ingredients
to respond to the physiological problem for which it has been designed or that
it makes proper use of the new raw material. The Company also ensures that the
new product can be manufactured on a large scale, in an economical and efficient
manner and with satisfactory size, shape, color, solubility and shelf life.
After developing the product, the Company will present the product to an
appropriate customer
47
<PAGE>
who will, if interested, enter into an agreement with the Company for the right
to, in most instances, exclusively distribute the new product in return for the
obligation on the part of the customer to exclusively purchase such product from
the Company.
Another method of product development is the formulation of new or modified
products in response to a customer's request. Customers will often approach the
Company to request a product containing particular ingredients or a product
designed for a specific condition. In response, the product development team
will then develop a product for that customer that meets its particular
specifications using the same development techniques discussed above.
The Company's seven-member product development team, led by Mr. Marconi,
includes a former NASA scientist who assisted in the development of a nutrition
program for early space flights and a former member of the USDA's Human
Nutrition Institute. The team is responsible for new product formulations,
herbal and nutritional ingredient use and formulation safety. The Company
maintains an extensive collection of literature on herbal remedies and products
and the product development team keeps abreast of new developments by reviewing
a wide variety of scientific and medical journals and attending industry, FDA,
United States Pharmacopoeia Convention, Inc. ("USP") and other scientific
seminars and conferences. The Company also maintains consulting arrangements
with a number of well-respected scientists and other experts, some of whom
participated in the drafting and passage of the DSHEA. These scientists and
other experts are also consulted periodically in order to identify new health
trends prior to and during the development of new products.
MANUFACTURING AND PRODUCT QUALITY
The Company believes that it has distinguished itself within the dietary and
nutritional supplement industry through consistently manufacturing high quality
products. All of the Company's products are manufactured and packaged at
facilities located in Orange County, California, all of which are located within
a ten-mile radius.
The facilities include a 17,500 square foot facility that contains the
Company's granulation plant and administrative offices. Equipment at the
granulation plant includes wall ovens, fluid bed dryers and wet granulators.
Equipment at the Company's 60,000 square foot tablet and capsule facility
includes high speed tablet presses, encapsulating machines, large capacity
blenders, a large hammermill, miscellaneous mills and oscillators and various
coating machines and pans. The tablet and capsule facility also contains
production offices and warehousing and receiving departments. Tablets and
capsules manufactured by the Company are then packaged at a 38,000 square foot
packaging facility. The Company's powder products are manufactured and packaged
at a 44,000 square foot production facility that contains blending equipment
consisting of three dual head can-filling lines, two dual head small
bottle-filling lines and four automatic packeting lines. Raw materials for the
Company's powder products are received and prepared for blending at a 50,800
square foot facility from which the finished products are shipped to the
Company's customers. The Company also maintains an additional warehousing
facility totalling 22,000 square feet. The 44,000 square foot powder production
and packaging facility previously housed both the production and corporate sales
offices for Omni-Pak, but with the construction of the 50,800 square foot
facility, it can now be expanded for increased manufacturing capability. The
Company conducts its operations at separate facilities to help prevent
interruption in production.
The Company's manufacturing facilities are capable of producing over one
billion capsules and tablets and over six million pounds of blended powder per
month. These facilities are also capable of filling on a monthly basis
approximately 1.2 million cans and large bottles, approximately 1.2 million
small bottles and approximately 4.3 million packets. The Company custom
manufactures all of its products to meet its customers' specifications and, as a
result, maintains a very low finished goods inventory. The Company normally
operates two work shifts, but has the capability to run three, if necessary, to
meet its customers' needs.
48
<PAGE>
The Company owns all of the equipment housed in its manufacturing
facilities. The Company's flexible manufacturing lines enable it to service its
equipment without materially interrupting production by shifting output among
various lines. Equipment servicing is generally completed in-house by employees
of the Company. The Company has also designed modifications to its equipment to
produce better quality products.
The Company purchases its raw materials from several foreign and domestic
third-party suppliers, one of which accounted for more than 10% of the Company's
total purchases in 1997. Several of these raw materials are harvested on a
seasonal basis. See "Risk Factors--Availability of Raw Materials." The Company's
raw material needs are readily available from multiple suppliers and the Company
is not dependent on any single supplier.
The Company maintains a quality control department at each production
facility, led by individuals with backgrounds in pharmacology and nutrition.
Each product undergoes comprehensive quality control testing procedures in the
Company's on-site quality control laboratories from the receipt of all incoming
raw materials through the distribution of the finished product. Each laboratory
contains equipment such as computerized liquid chromatographs, automatic
spectrometers, dissolutioned testers, disintegration testers and each laboratory
has complete microbiological testing capabilities. Incoming raw materials are
subjected to numerous testing procedures, including liquid chromatography and
infrared spectrophotometry, to ensure that the product is unadulterated and
labeled correctly. Moreover, in order to easily identify the origin of the
ingredients contained in its products and ensure traceability, the Company
tracks each ingredient by assigning it a commodity number and lot number. Tablet
products are frequently tested during the manufacturing process for friability,
thickness, hardness and weight. In addition, periodically throughout production,
quality control personnel will take samples to perform product assays. After a
product is manufactured, it is subjected to stability, dissolution and potency
tests. The Company's powder products are tested and sampled in the laboratory
for proper mix and "taste and mouth-feel" to ensure correct color and
consistency.
SALES AND DISTRIBUTION
The Company's products are sold throughout the United States, Europe and
Asia by over 60 customers, including Herbalife, EAS, Metagenics, Bally's Total
Fitness, Rockwood Cosmetics and Nature's Life. Herbalife, which has been a
customer of the Company since its formation in 1980, is the Company's largest
customer. Products manufactured for Herbalife are specially formulated and
packaged only for Herbalife's distribution channel and are not available through
retailers. Sales to Herbalife represented 76%, 74% and 83% of the Company's
total sales in 1997, 1996 and 1995, respectively. Additionally, sales to EAS
represented approximately 15.0% and 12.0% of the Company's sales in 1997 and
1996, respectively. Since 1995, sales to non-Herbalife customers have grown from
$14.8 million to $44.8 million in 1997. The Company intends to expand its
presence in the health food/retail market through such customers as EAS, in the
growing direct television market through such customers as The Good Doctors, and
in direct sales to fitness centers through Bally's Total Fitness. In addition,
the Company plans to expand its sales in international markets by developing new
customers and by supplying the needs of its existing customers in the growing
markets of Europe, Latin America and Asia. See "Business Strategy."
In September 1997, D&F, Omni-Pak and Dynamic entered into separate
three-year agreements with Herbalife replacing their previous agreements.
Pursuant to these new agreements, Herbalife is required to purchase from each of
D&F, Omni-Pak and Dynamic, respectively, any combination of products in an
aggregate dollar amount equal to at least the sum of (i) 80% of the aggregate
dollar amount of all purchases made by Herbalife of nutritional supplement
products manufactured by the Company and by another supplier in accordance with
a product formula developed by the Company and (ii) 40% of the aggregate dollar
amount of all purchases made by Herbalife of independent nutritional supplement
products manufactured by suppliers other than the Company. The agreements cover
all products currently manufactured for Herbalife for distribution in the
countries in which Herbalife currently distributes such products. The prices for
the products purchased by Herbalife are fixed, subject to adjustment in the
event
49
<PAGE>
of a variation (upwards or downwards) in excess of five percent in the aggregate
actual cost of the raw materials used to manufacture the products supplied to
Herbalife. The agreements also provide the Company with a right of first refusal
to become the primary manufacturing source for Herbalife for certain new
products developed by Herbalife for distribution in the countries in which
Herbalife distributes products currently manufactured by the Company. Pursuant
to the agreements, the Company transferred to Herbalife those formulas owned by
the Company for all products manufactured by the Company exclusively for
Herbalife at January 1998. In the event of a material breach of the agreement by
either party, the breaching party has 60 days to cure such breach. If such
breach is not cured within such period, the non-breaching party can terminate
each agreement with 60 days' prior written notice. In addition, Herbalife may
terminate any agreement if the Company fails to meet certain service level
requirements or immediately following a change in control. A change in control
is triggered in the event that, among other things, without the prior written
consent of Herbalife, Mr. Marconi ceases to own more than 50% of the capital
stock of the Company or if Mr. Marconi is no longer an executive officer of the
Company and responsible for the day-to-day operations and management of the
Company.
A portion of the proceeds of the Old Notes Offering was used by the Company
to purchase all outstanding shares of common stock of Omni-Pak and Dynamic owned
by Mr. Hughes, Chairman of the Board and Chief Executive Officer of Herbalife.
Mr. Hughes previously owned 33% of the common stock of Omni-Pak and 20% of the
common stock of Dynamic. See "Prospectus Summary--The Reorganization," "Certain
Related Party Transactions" and "Risk Factors--Dependence on Significant
Customer; Supply Agreements."
COMPETITION
The dietary and nutritional supplement industry is highly fragmented. The
industry includes (i) companies that produce products for specialty health and
natural food stores, (ii) companies that manufacture products for the mass
retail market and (iii) direct sales and mail order companies. The Company
competes on the basis of customer service, product quality, pricing and
marketing support. There are numerous dietary and nutritional supplement
manufacturers of general products, including Twin Laboratories, Inc., NBTY,
Inc., Rexall Sundown, Inc. and Leiner Health Products Group Inc., some of which
are larger and have resources greater than the Company.
REGULATORY MATTERS
The manufacturing, packaging, labeling, advertising, distribution and sale
of the Company's products are subject to regulation by one or more federal
agencies, including the FDA, the FTC and the EPA, and various agencies of the
states, localities and foreign countries in which the Company's products are
sold. The FDA, pursuant to the FFDC, regulates the production, packaging,
labeling and distribution of dietary and nutritional supplements. The FTC
regulates the advertising of such products.
The FFDC was recently amended by the DSHEA. The DSHEA created a new
statutory framework governing the composition and labeling of dietary
supplements. Under the DSHEA, "dietary supplements" are defined as any product
(except tobacco) intended to supplement the diet that contains at least one of
the following dietary ingredients: (i) a vitamin, (ii) a mineral, (iii) an herb
or botanical, (iv) an amino acid, (v) other dietary ingredients for human use to
supplement the diet or (vi) concentrates, metabolites, extracts or combinations
of (i) through (v) above. Dietary ingredients meeting this definition are
excluded from regulation as a food additive.
Under the DSHEA, dietary ingredients that were on the market in the United
States prior to October 15, 1994 may be sold without the FDA's pre-market
approval and without notifying the FDA. The marketing of a product containing a
new dietary ingredient (one not on the market prior to October 15, 1994)
requires that: (i) it has been used as an article of food without being
chemically altered or (ii) there is evidence of a history of use or other
evidence of safety establishing that it is reasonably expected to be safe and
such evidence is supplied to the FDA at least 75 days before the initial use of
any new dietary ingredient. There can be no assurance that the FDA will accept
the evidence of prior use or safety
50
<PAGE>
presented for any new dietary ingredient that the Company may decide to use in
the future and the FDA's refusal to accept any such evidence could result in a
determination that either the product is adulterated or the product must be
regulated as a food additive, which requires FDA approval prior to marketing.
Under the DSHEA, the burden of proving the safety of the dietary supplement is
shifted from the manufacturers to the FDA. The FDA may object only if a product
or ingredient presents a "significant and unreasonable risk of illness or
injury" or poses an imminent safety hazard.
The DSHEA provides for specific nutrition labeling requirements for dietary
supplements. The DSHEA permits the manufacturer of a dietary supplement to make
substantiated, truthful and non-misleading "statements of nutritional support"
with respect to the product, including an accurate description of how a nutrient
affects the structure or function of the human body and a general description of
well-being resulting from consumption of a dietary ingredient. The claim must be
accompanied by a disclaimer stating that the product has not been evaluated by
the FDA. There can be no assurance that the FDA will not determine that a given
statement of nutritional support is not adequately substantiated, or is an
unapproved drug claim rather than a statement of nutritional support. Either
determination may entail costly and time-consuming clinical studies and may
entail the deletion or modification of such statement. The FDA has finalized
certain regulations to implement the labeling provisions of the DSHEA. Further
FDA regulations may be proposed by the FDA in response to a report issued in
November 1997 by the Commission on Dietary Supplement Labels which was
established to provide recommendations on labeling claims for dietary
supplements.
The Company exercises significant control over the labeling of its
customers' nutritional and dietary supplement products. The Company designs the
"Nutrition Facts" box required by the NLEA for its powdered products. The
Company performs some review of the proposed structure/function claims made on
the labels of the dietary supplement products for compliance with the DSHEA.
Submission of these claims as required by the FFDC is the obligation of the
Company's customers, but the Company does submit to the FDA labels for many of
the dietary supplements that contain structure/function claims. Maintaining the
substantiation for such claims as required under the FFDC is the obligation of
the Company's customers. Similarly, the Company's customers are responsible for
making the required submissions to the FDA for any new dietary ingredients.
A number of the products sold by the Company, including some protein powders
and any products labeled for meal replacement, are conventional foods as opposed
to dietary supplements. The NLEA dictates the labeling claims permissible for
such products, which are more limited in scope than those for dietary
supplements. Some of the Company's products will require label revisions to
comply.
The DSHEA also allows the dissemination of third party literature to promote
the sale of dietary supplements to consumers at retail or by mail order. Such
literature, if distributed, must (i) not be false or misleading; (ii) not
promote a particular manufacturer or brand; (iii) present a balanced view of the
available information; and (iv) be physically separated from supplement products
if displayed in a store.
The DSHEA authorizes the FDA to promulgate GMPs with respect to the
manufacture of dietary supplements, to be modeled after the current GMPs
applicable to food products. On February 6, 1997, the FDA published an advance
notice of proposed rulemaking ("ANPR") in which it requested public comment
concerning whether to adopt GMP regulations for dietary supplements. The ANPR
reprinted and requested comments on a draft regulatory framework prepared by the
dietary supplement industry addressing the appropriate scope and content for
dietary supplement GMP regulations. The comment period for this ANPR closed on
May 7, 1997. The Company cannot predict in what form such regulations, if
adopted, would be enacted. As with any new regulations, if adopted, the Company
will take all necessary steps to attempt to comply with such new regulations.
On September 23, 1997, the FDA issued final regulations reiterating the
FDA's position that dietary supplements must maintain 100% of the declared value
of added vitamins and minerals for the entire shelf life of the product. As with
any new regulations, the Company will take all necessary steps to attempt to
comply with such new regulations. During the past ten years, the Company has
received four Form 483
51
<PAGE>
notices following customary FDA inspections. These notices cited numerous GMP
deficiencies including those relating to product labeling, product validation
and testing, equipment and facility cleanliness and maintenance, personnel
training, and recordkeeping. The FDA also previously issued two Warning Letters
to the Company stating that products manufactured by the Company were
adulterated because they were not manufactured in accordance with GMPs. In 1994,
the Company paid $75,000 in settlement of a claim brought by a California state
agency which concerned alleged violations of California food and drug laws. The
Company believes that it is currently in material compliance with the California
food and drug laws related to such claim.
The NLEA prohibits the use of any health claim describing the relationship
between a nutrient and a disease or health-related condition for foods,
including dietary supplements, unless the claim is supported by significant
scientific agreement and is approved by the FDA by regulation. Regulations
promulgated by the FDA to date allow the use of health claims for dietary
supplements only in connection with osteoporosis and the use of folic acid for
neural tube defects. The NLEA also prohibits the use of most nutrient content
descriptors ("high" or "low") unless the specific descriptor complies with the
FDA regulations governing nutrient content claims. Under the recently enacted
Food and Drug Administration Modernization Act of 1997, both health claims and
nutrient claims are permitted to be made on the basis of authoritative
statements of governmental bodies other than the FDA, so long as the FDA is
notified of the claim and the authoritative statement and is presented with a
balanced representation of the scientific literature concerning such claim.
Certain of the Company's products are regulated as pet foods. The claims
permitted by the FFDC for such products are more limited than those for human
foods or dietary supplements, and such products are not included within the
purview of the NLEA or the DSHEA. A company marketing such products must
register its labels with state authorities. Other products sold by the Company
are OTC drugs or veterinary drugs. The Company must register with the FDA and
the State of California, provide drug listings annually and comply with current
GMP requirements in the manufacture and record keeping relating to these
products. To the extent that certain of the Company's products are sold with
drug claims on their labels, those products would require inclusion as OTC
drugs. The Company will be required to relabel and register some of its products
accordingly. The Company also sells products regulated by the FDA as cosmetics,
which must meet specified labeling requirements and minimum safety standards.
The Company is also subject to regulation under various foreign, state and
local laws that include provisions regulating, among other things, the marketing
of dietary supplements and the operations of direct sales programs.
The Company may be subject to additional laws or regulations administered by
the FDA or other federal, state or foreign regulatory authorities, the repeal of
laws or regulations favorable to the industry (such as the DSHEA), or more
stringent interpretations of current laws or regulations. The FTC, for example,
has actively investigated the dietary and nutritional supplement industry in the
past few years, and certain of the Company's customers have signed consent
orders which could, in the future, affect the volume of product that the
customers will order from the Company. The Company cannot determine what effect
future laws, regulations, guidance or policy of the FDA, when and if
promulgated, will have on its business in the future. Such regulations may,
however, among other things, require changes in manufacturing, expanded or
different labeling for the Company's dietary and nutritional supplements,
require the recall, reformulation, or discontinuance of certain products, or
require scientific substantiation regarding ingredients, product claims or
safety. See "Risk Factors--Government Regulation; Adverse Publicity."
The USP is a non-governmental, voluntary standard-setting organization. Its
drug standards are incorporated by reference into the FFDC as the standards that
must be met for the listed drugs, unless compliance with those standards is
specifically disclaimed. USP standards exist for most prescription and
non-prescription pharmaceuticals.
The USP began adopting standards for vitamin and mineral dietary supplements
in 1994. These standards cover composition (nutrient ingredient potency and
combinations), disintegration, dissolution,
52
<PAGE>
manufacturing practices and testing requirements. These standards are codified
in the USP Monographs and the USP Manufacturing Practices. In 1995, USP
compliance included the standards for disintegration and dissolution. While USP
standards for vitamins are voluntary, and not incorporated into federal law,
customers of the Company may demand that products they are supplied meet these
standards. Inaccurate label claims of compliance with the USP may expose a
company to FDA scrutiny for such claims. In addition, the FDA may in the future
require compliance, or such a requirement may be included in new dietary
supplement legislation. All of the Company's vitamin products (excluding certain
dietary supplements products for which no USP standards have been adopted) are
formulated to comply with existing USP standards.
Certain of the Company's products contain a Chinese herb known as "Ma
Huang," which contains naturally occurring ephedrine. The Company estimates that
these products accounted for approximately 6% of the Company's sales in the
fiscal year ended December 31, 1997. Ma Huang has been the subject of certain
adverse publicity in the United States and other countries relating to alleged
harmful or adverse effects, including the deaths of several individuals.
On April 10, 1996, the FDA issued a statement warning consumers not to
purchase or consume dietary supplements containing ephedrine with labels
portraying the products as apparent alternatives to illegal street drugs. None
of the Company's products which contain Ma Huang are marketed for such purpose.
The FDA explained that the products portrayed as alternatives to illegal street
drugs pose significant health risks to consumers--dizziness, headache,
gastrointestinal distress, irregular heartbeat, heart palpitations, heart
attack, strokes, seizures and death, and that the labels on such product claim
or imply that they produce such effects as euphoria, increased sexual
sensations, heightened awareness, increased energy and other effects. In August
1996, the FDA sent warning letters to several companies marketing such products
as alternatives to street drugs, indicating that enforcement action with respect
to such products may be initiated.
In August 1996, the FDA convened a Food Advisory Committee meeting to review
and make recommendations concerning the safety and appropriate labeling of
dietary supplements containing Ma Huang. The FDA, after considering the
differing views expressed at the Committee meeting, proposed regulations in June
of 1997 that would require reduced dosages coupled with strict manufacturing
standards, labeling restrictions and a prohibition against combining Ma Huang
with body building or weight loss products and with other central nervous system
stimulants such as caffeine. There can be no assurance that such regulations
will not prohibit either the sale of dietary supplements containing Ma Huang in
combination with any other ingredients or the sale of all dietary supplements
containing any Ma Huang. The promulgation of such regulations could require the
Company to reformulate and relabel substantially all of its Ma Huang products.
There can be no assurance as to the final form or content of any FDA regulations
concerning dietary supplements containing Ma Huang or as to the effect that any
attendant adverse publicity or resulting reformulation and relabeling of the
Company's products would have on the sale of such products.
A number of foreign, state and local governmental entities limit ephedrine
levels and require appropriate warnings on product labels, regulate products
containing ephedrine as controlled substances or prohibit sales of products
which contain Ma Huang by individuals other than licensed pharmacists. There are
also federal, state and local proposals to broaden the regulation of, or
otherwise limit or prohibit, the sale of products containing ephedrine.
The Company's products containing Ma Huang may become subject to further
federal, state, local or foreign laws or regulations, which could require the
Company to: (i) reformulate its products with reduced ephedrine levels or with a
substitute for Ma Huang and/or (ii) relabel its products with different warnings
or revised directions for use. Even in the absence of further laws or
regulations, the Company may elect to reformulate and/or relabel its products
which contain Ma Huang. While the Company believes that its Ma Huang products
could be reformulated and relabeled, there can be no assurance in that regard or
that reformulation and/or relabeling would not have a material adverse effect on
sales of such products.
53
<PAGE>
PROPERTIES
The Company leases the following facilities in Orange County, California:
(i) a 38,000 square foot tablet and capsule packaging facility; (ii) a 60,000
square foot tablet and capsule manufacturing facility; (iii) a 17,500 square
foot facility that includes a granulation plant and administrative offices; (iv)
a 44,000 square foot powder production and packaging facility; (v) a 22,000
square foot warehouse; and (vi) a 50,800 square foot facility which contains
receiving, shipping and administrative departments.
The Company's leases have terms of three to ten years. In 1997, the Company
paid an aggregate of approximately $1.2 million in rent on its facilities.
The Company believes that its facilities and equipment are maintained in
good operating condition.
YEAR 2000 COMPLIANCE
The Company is in the process of modifying, upgrading or replacing its
computer software applications and systems to accommodate the "year 2000" dating
changes necessary to permit correct recording of year dates for 2000 and later
years. The Company does not expect that the cost of its year 2000 compliance
program will be material to its financial condition or results of operations.
The Company believes that it will be able to achieve compliance by the end of
1999, and does not currently anticipate any material disruption of its
operations as the result of any failure by the Company to be in compliance. The
Company does not currently have any information concerning the compliance status
of its suppliers.
EMPLOYEES
At June 1, 1998, the Company employed approximately 375 persons. Of these
employees, 97 are in executive or administrative capacities with the remaining
employees in manufacturing, shipping and packaging positions. None of the
Company's employees are represented by a labor union. The Company considers its
relationship with its employees to be good.
At June 1, 1998, the Company also utilized approximately 402 temporary
employees. These employees are supplied to the Company by two temporary agencies
that maintain offices at the Company's manufacturing facilities. This enables
the Company to utilize temporary employees to adjust staffing levels on a daily
basis in response to fluctuations in demand or an unexpected increase in sales
volume.
LITIGATION
On March 31, 1998, the Company was named as a defendant in an action
originally filed by John W. Rowles in the Contra Costa County Superior Court on
June 13, 1997 against Mr. Mark Hughes, Herbalife and an Herbalife distributor.
The plaintiff alleges that Thermojetics-TM- Green tablets manufactured by the
Company for Herbalife, which contain ephedrine, was defective and unsafe for its
intended use and caused the plaintiff to suffer an acute myocardial infarction.
Plaintiff is claiming an unspecified amount of damages for personal injury, pain
and suffering, lost wages and is also seeking punitive damages.
The Company cannot predict at this time whether it will incur any liability
as a result of this lawsuit, and if such liability is incurred, the extent
thereof. The Company believes that if it incurs any liability in this action, it
would be insured against such liability under its product liability insurance.
The Company has approximately $2.0 million in available product liability
insurance. The Company's insurance carrier has acknowledged coverage for this
lawsuit, under its standard reservation of rights. There can be no assurance
that the Company will not be subject to additional lawsuits alleging injuries
caused by products of the Company or if insurance will be available to cover any
liabilities related thereto. See "Risk Factors-- Product Liability."
The Company is not currently involved in any litigation which it believes
would have a material adverse effect on the Company's results of operations or
financial condition.
54
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY PERSONNEL
The following table identifies each of the directors, executive officers and
key personnel of the Company. Each director is elected at the annual meeting of
shareholders to serve until the next annual meeting or until his successor is
elected or appointed.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Mr. Richard D. Marconi............................... 63 Chairman of the Board and President
Mr. Paul M. Buxbaum.................................. 43 Chief Executive Officer and Director
Mr. Donald J. Lewis.................................. 47 Chief Financial Officer, Senior Vice President and
Director
Mr. Howard Simon..................................... 54 Chief Operating Officer
Mr. Steve Kochen..................................... 44 Vice President, Operations
Dr. William Wheeler.................................. 49 Director of Sales, Technical Services
Dr. Sat Paul Dewan................................... 61 Technical Director
Sen. Dennis DeConcini................................ 60 Director
Mr. Brad Gates....................................... 59 Director
</TABLE>
MR. RICHARD D. MARCONI co-founded the Company in 1978 and is the Chairman of
the Board of Directors and President. Mr. Marconi has been in the food
supplement and pharmaceutical industries for 40 years. Mr. Marconi is a director
of American Health Sciences, Inc. and is Chairman of the Marconi Foundation for
Kids.
MR. PAUL M. BUXBAUM became Chief Executive Officer of the Company upon
consummation of the Old Notes Offering. Since 1993, Mr. Buxbaum has been owner
and principal executive officer of The Buxbaum Group, a consumer products
consulting group, specializing in asset evaluations for lending institutions,
crisis management services, inventory acquisitions and bankruptcy liquidations.
Mr. Buxbaum will devote his full time to his duties as Chief Executive Officer
of the Company. Since 1993, Mr. Buxbaum has served as Chairman of the Board of
Ames Department Stores, Inc. of Rocky Hill, Connecticut, and since 1995 he has
served as a director of Richmond Gordman 1/2 Price Stores of Omaha, Nebraska.
From 1991 through 1996, Mr. Buxbaum served on the Board of Directors of
Herbalife and in 1997 served as Chairman of the Board of Jay Jacobs Stores of
Seattle, Washington. In April 1998, Mr. Buxbaum was appointed a director of
Lamont Apparel Inc.
MR. DONALD J. LEWIS entered into a consulting arrangement with the Company
in February 1998 and became Chief Financial Officer and Senior Vice President
upon consummation of the Old Notes Offering. Prior to joining the Company, Mr.
Lewis was Chief Financial Officer of Visy Industries (U.S.A.), Inc. from 1995 to
1998 and was an audit partner with Arthur Andersen & Co. from 1984 to 1995.
MR. HOWARD SIMON became Chief Operating Officer of the Company in June 1998.
Prior thereto, Mr Simon served first as Chief Operating Officer and then as
President of Cosmetic Group USA, from 1993 to 1998.
MR. STEVE KOCHEN joined the Company in February 1993 and since that time has
served as its Vice President of Operations and Chief Legal Counsel. Prior
thereto, Mr. Kochen was President and Chief Executive Officer of Arbonne
International (USA) from 1990-1992. Mr. Kochen was also President and Chief
Executive officer of Biogenics, Inc. from 1986-1990. Mr. Kochen is currently
serving on the Board of Directors of the Marconi Foundation for Kids.
DR. WILLIAM WHEELER has been the Director of Sales, Technical Services since
1994. Dr. Wheeler is responsible for new product research and development and
technical support and is also responsible for new product formulations, herbal
and nutritional ingredient use, formulation safety and nutritional and
55
<PAGE>
OTC product evaluations. Prior to 1994, Dr. Wheeler was general manager at SPI
Nutritionals, a division of ICN Pharmaceuticals, and director of technical
services at Kemin Industries. Dr. Wheeler was also staff nutritionist for
President Carter from 1978 to 1980 and for the 1996 Olympic Decathlon Team. In
addition, Dr. Wheeler is currently a member of three professional societies, the
American Dietetics Association, the American Institute of Nutrition and the
American Society of Clinical Nutrition and a former member of the USDA Human
Nutrition Institute.
DR. SAT PAUL DEWAN has been the Technical Director of the Company since
1978. Dr. Dewan supervises all quality control and quality assurance-related
functions including product assays, physical testing and microbiological
testing. Dr. Dewan is responsible for completing validations and stability
studies for new products. Dr. Dewan is a former NASA scientist who assisted in
the development of a nutritional program for early space flights.
SENATOR DENNIS DECONCINI became a member of the Board of Directors of the
Company in connection with the consummation of the Old Notes Offering. From
January 1977 through January 1995, Senator DeConcini served as a United States
Senator from Arizona. During his senatorial term, Senator DeConcini served as a
member of the Appropriations Committee and the Judiciary Committee. Senator
DeConcini is a member of numerous boards of directors, including the Federal
Home Loan Mortgage Corporation, the Schuff Steel Company and RDL Commercial
Technologies Corporation.
MR. BRAD GATES became a member of the Board of Directors of the Company in
connection with the consummation of the Old Notes Offering. Since 1974, Mr.
Gates has served as Sheriff of Orange County, California. Mr. Gates currently
serves on the boards of directors of the Orange County Council of the Boy Scouts
of America and the Newport Sports Collection Foundation. In addition, Mr. Gates
is a member of various civic and professional organizations.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation for the
fiscal year ended December 31, 1997 awarded to or earned by the Chief Executive
Officer and the other executive officers of the Company as of December 31, 1997.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------------
<S> <C> <C> <C> <C>
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- -------------------------------------------------------------------- --------- ------------ ----------- -------------
Fred E. Siegel...................................................... 1997 $ 2,000,000 -- $ 99,840(1)
Chief Executive Officer
Richard D. Marconi.................................................. 1997 2,000,000 -- 122,483(2)
President and Chairman
Steve Kochen........................................................ 1997 169,650 -- 8,350(3)
Vice President, Operations
Sat Paul Dewan...................................................... 1997 98,233 -- 4,954(4)
Technical Director
William Wheeler..................................................... 1997 108,400 -- --
Director of Sales, Technical Services
</TABLE>
- ------------------------
(1) Included in "Other Annual Compensation" for Mr. Siegel are: $4,750,
representing the Company's contribution to a 401(k) plan; $14,400,
representing an automobile allowance; $57,685, representing automobile lease
payments paid by the Company; and $23,005, representing insurance premiums
paid by the Company.
56
<PAGE>
(2) Included in "Other Annual Compensation" for Mr. Marconi are: $4,750,
representing the Company's contribution to a 401(k) plan; $14,400,
representing an automobile allowance; $52,580, representing automobile lease
payments paid by the Company; and $50,753, representing insurance premiums
paid by the Company.
(3) Included in "Other Annual Compensation" for Mr. Kochen are: $4,750,
representing the Company's contribution to a 401(k) plan; and $3,600,
representing an automobile allowance.
(4) Included in "Other Annual Compensation" for Mr. Dewan are: $2,554,
representing the Company's contribution to a 401(k) plan; and $2,400,
representing an automobile allowance.
In addition, each of the Company's subsidiaries paid dividends to its
shareholders in 1997. See "Selected Historical and Pro Forma Financial Data."
The directors of the Company do not receive compensation for their services as
such. No benefit plan or similar compensation existed for any of the persons
named above at December 31, 1997. The Company intends to adopt a share incentive
plan in order to provide incentives to attract, retain and motivate highly
competent persons as executive management, employees and directors of the
Company and of any affiliate thereof. This plan will provide such persons with
opportunities to acquire shares of common stock of Global Health, or to receive
monetary payments based on the value of such shares pursuant to certain
benefits. Benefits under the plan will be available for grant in any one or a
combination of stock options, stock appreciation rights, stock awards,
performance awards and stock units.
EMPLOYMENT AND CONSULTING AGREEMENTS
Upon consummation of the Reorganization, the Company entered into employment
agreements with Mr. Marconi, Mr. Paul M. Buxbaum and Mr. Donald J. Lewis to
serve as President, Chief Executive Officer and Chief Financial Officer and
Senior Vice President, respectively, of the Company and entered into a
consulting agreement with Mr. Fred E. Siegel. On June 1, 1998, the Company
entered into an employment agreement with Mr. Howard Simon to serve as Chief
Operating Officer of the Company.
The employment agreement with Mr. Marconi provides that he is employed as
President of the Company for a term of five years, renewable upon 90 days' prior
notice by the Company to Mr. Marconi. The agreement provides for a base salary
of $2 million and an annual bonus to be determined by the Board of Directors of
the Company to the extent the Company's EBITDA exceeds $50 million in any year
during the term of the Agreement, which amount can be up to 15% of the amount by
which EBITDA in such year exceeds $50 million. Upon a change of control (as
defined therein), Mr. Marconi has the right to terminate his employment. In such
event, the Company would be required to pay Mr. Marconi his pro rated base
salary and bonus (if one was received the year prior to termination) at the time
of termination plus one year severance pay equal to his annual salary. The
agreement also provides that Mr. Marconi will serve as Chairman of the Board of
Directors of the Company.
The employment agreement with Mr. Buxbaum provides that he is employed as
Chief Executive Officer of the Company for a term of three years, renewable upon
90 days' prior notice by the Company to Mr. Buxbaum. The agreement provides for
a base salary of $450,000 and an annual bonus to be determined by the Board of
Directors of the Company. Upon a change of control (as defined therein), Mr.
Buxbaum has the right to terminate his employment. In such event, the Company
would be required to pay Mr. Buxbaum his pro rated base salary and bonus (if one
was received the year prior to termination) at the time of termination plus one
year severance pay equal to his annual salary. In addition, Mr. Marconi has
agreed to grant to Mr. Buxbaum an option to acquire up to 20% of the common
stock of Global Health Sciences, Inc. owned by Mr. Marconi on the Original Issue
Date at the fair market value thereof as of the Original Issue Date. See
"Certain Related Party Transactions."
The employment agreements with Mr. Lewis and Mr. Simon provide that Mr.
Lewis is employed as Chief Financial Officer and Senior Vice President of the
Company and Mr. Simon as Chief Operating
57
<PAGE>
Officer, each for a term of three years, renewable upon 90 days' prior notice by
the Company to the executive. Each agreement provides for a base salary of
$225,000 and an annual bonus to be determined by the Board of Directors of the
Company. Upon a change of control (as defined therein), each executive has the
right to terminate his employment. In such event, the Company would be required
to pay such executive his pro rated base salary and bonus (if one was received
the year prior to termination) at the time of termination plus one year
severance pay equal to his annual salary.
The consulting agreement with Mr. Siegel engaged him to perform advisory and
consulting services to the Company, including post-Reorganization transition
matters, for a weekly fee of $20,000 for each week that Mr. Siegel provided such
services to the Company. The initial term of the agreement was 30 days and
expired (and was not renewed by the Company) at the end of May 1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the ownership of
the outstanding common stock of the Company (the "Common Stock"), as of June 1,
1998, by each person known to the Company to own beneficially more than 5% of
the Common Stock outstanding on that date. No other person owns any Common
Stock.(1)
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF TOTAL VOTING
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP CLASS POWER
- ------------------------------------ ------------------------------------ ----------- --------------- -----------------
<S> <C> <C> <C> <C>
Common Stock Richard D. Marconi 500,000 94% 94%
Global Health Sciences, Inc.
987 N. Enterprise Street
Orange, California 92867
Common Stock Fred E. Siegel 31,915 6% 6%
2475 South Coast Highway
Laguna Beach, California 92651
</TABLE>
- ------------------------
(1) As described above, Mr. Marconi has granted Mr. Buxbaum an option to acquire
up to 20% of the Common Stock owned by Mr. Marconi on the Original Issue
Date at the fair market value thereof on such date. This option will vest
over a period of years, the term of which has not yet been determined.
58
<PAGE>
CERTAIN RELATED PARTY TRANSACTIONS
Mr. Hughes, the Chairman and Chief Executive Officer of Herbalife, owned
10,000 shares of common stock of Omni-Pak (which represented approximately 33%
of the then outstanding common stock) and 20,000 shares of common stock of
Dynamic (which represented approximately 20% of the then outstanding common
stock) prior to the consummation of the Old Notes Offering. Pursuant to the
Reorganization, Mr. Hughes received $43.0 million of the proceeds of the Old
Notes Offering in consideration for the Company's purchase of all outstanding
shares of Omni-Pak and Dynamic owned by Mr. Hughes. Herbalife accounted for 76%
of the Company's sales in 1997. See "Prospectus Summary--The Reorganization" and
"Business--Sales and Distribution."
The facility containing the Company's corporate headquarters and granulation
factory is leased by the Company pursuant to the terms of a three-year lease
agreement by and among the Company, Mr. Marconi, Mr. Siegel, Ms. Blossom Siegel
and Ms. Dorothy Marconi. The base rent is approximately $7,000 per month. Mr.
Marconi is Chairman of the Board and President of the Company. Prior to the
consummation of the Reorganization and the Old Notes Offering, Mr. Siegel was
Chief Executive Officer of the Company.
The Company has engaged BGA Consulting to perform certain consulting
services relating to the operation of the Company. The consulting agreement has
a three-year term and provides for an annual consulting fee of $400,000. In
addition, in consideration for its services to the Company in connection with
the Old Notes Offering and the Reorganization, BGA Consulting received directly
from the Company's shareholders at the time of the Reorganization, a fee equal
to approximately $2.4 million. See "Prospectus Summary--The Reorganization." Mr.
Buxbaum, Chief Executive Officer of the Company, is the President of BGA
Consulting.
59
<PAGE>
DESCRIPTION OF ACQUISITION FACILITY
Concurrently with the Old Notes Offering, the Company entered into the
Acquisition Facility. The following is a summary description of the principal
terms of the Acquisition Facility and is subject to, and qualified in its
entirety by reference to, the definitive Acquisition Facility and related
documents. A copy of the Acquisition Facility has been filed as an Exhibit to
the Registration Statement of which this Prospectus is a part.
In connection with the consummation of the Old Notes Offering, the Company,
Citicorp USA, Inc., as Administrative Agent, Citibank, N.A. as Issuing Bank,
Bank of America NT&SA, as Documentation Agent and the financial institutions
party thereto acting as lenders, entered into an agreement to provide a five-
year, $50.0 million acquisition and working capital facility (the "Acquisition
Facility") to Global Sub, of which no more than $10.0 million is available for
working capital and other general corporate purposes of Global Sub and its
subsidiaries, including the issuance by Citibank, N.A. of letters of credit. All
undrawn amounts under the Acquisition Facility is available for acquisitions
permitted by the terms thereof. The Acquisition Facility is secured by the
assets, including the capital stock, of the Company and all of its subsidiaries
and is guaranteed by the Company and all of its subsidiaries.
The Acquisition Facility under certain circumstances, requires Global Sub to
make mandatory prepayments and commitment reductions. In addition, Global Sub is
permitted pursuant to the terms of the Acquisition Facility to make optional
prepayments and commitment reductions. Borrowings under the Acquisition Facility
bear interest at either a base rate or a eurodollar rate plus an applicable
margin based upon the ratio of consolidated net funded debt of the Company and
its subsidiaries to EBITDA of Global Sub and its subsidiaries (which margin will
not exceed 1.50% for base rate loans or 2.75% for eurodollar rate loans). Global
Sub will pay the lenders a fee of 50 basis points per annum on the unused
portion of the Acquisition Facility, and a letter of credit fee equal to the
applicable margin for eurodollar loans less 0.25%. In addition, Global Sub will
pay to the Issuing Bank a fee of 25 basis points per annum.
The loan documents for the Acquisition Facility contain certain covenants
that, among other things, restrict the ability of the Company and its
subsidiaries to dispose of assets, incur additional indebtedness, incur
guarantee obligations, repay indebtedness or amend debt instruments, pay
dividends, create liens on assets, make investments, make acquisitions, engage
in mergers or consolidations, make capital expenditures, or engage in certain
transactions with subsidiaries and affiliates and otherwise restrict corporate
activities. In addition, the Acquisition Facility requires Global Sub and its
subsidiaries and the Company to comply with certain financial ratios and
maintenance tests. Borrowings under the Acquisition Facility to fund future
acquisitions are subject to additional conditions, including financial
conditions.
60
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were sold by the Company on April 23, 1998 to Citicorp
Securities, Inc., Citibank Canada Securities Limited and Citibank International
plc (the "Initial Purchaser"). In connection therewith, the Company entered into
the Indenture and the Registration Rights Agreement, which agreements require
that the Company file a registration statement under the Securities Act with
respect to the New Notes and, upon the effectiveness of such registration
statement, offer to the holders of the Old Notes the opportunity to exchange
their Old Notes for a like principal amount of New Notes, which will be issued
without a restrictive legend and, except as set forth below, may be reoffered
and resold by the holders without registration under the Securities Act. Upon
the completion of the Exchange Offer, the Company's obligations with respect to
the registration of the Old Notes and the New Notes will terminate, except as
provided below. Copies of the Indenture and the Registration Rights Agreement
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part. As a result of the filing and the effectiveness of the
Registration Statement, certain prospective increases in the interest rate on
the Old Notes provided for in the Registration Rights Agreement will not occur.
Following the completion of the Exchange Offer, holders of Old Notes not
tendered will not have any further registration rights, except as provided
below, and the Old Notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for the Old Notes could be
adversely affected upon completion of the Exchange Offer.
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by a holder thereof (other than any
such holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with registration and prospectus
delivery provisions of the Securities Act; provided that such holder represents
to the Company that (i) such New Notes are acquired in the ordinary course of
business of such holder, (ii) such holder is not engaging in and does not intend
to engage in a distribution of such New Notes and (iii) such holder has no
arrangement or understanding with any person to participate in the distribution
of such New Notes. Any holder who tenders in the Exchange Offer for the purpose
of participating in a distribution of the New Notes cannot rely on such
interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction, including the selling
securityholder information required by Item 507 of Regulation S-K. Each
broker-dealer that receives New Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
may be deemed a statutory underwriter for purposes of the Securities Act and, as
a result, it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such New Notes. See "Plan of
Distribution."
For each Old Note properly tendered and accepted pursuant to the Exchange
Offer, the holder of such Old Note will receive accrued interest thereon to, but
not including, the date of issuance of such New Notes, such interest to be
payable with the first interest payment on such New Notes. Holders whose Old
Notes are accepted for exchange will not receive any payment in respect of
interest thereon accrued after the issuance of the New Notes. The New Notes will
bear interest from and including their respective dates of issuance.
Each holder of the Old Notes who wishes to exchange the Old Notes for New
Notes in the Exchange Offer will be required to represent in the Letter of
Transmittal that (i) it is not an affiliate of the Company or Subsidiary
Guarantors, (ii) the New Notes to be received by it were acquired in the
ordinary course of its business, (iii) it is not engaging in and does not intend
to engage in a distribution of the New Notes and
61
<PAGE>
(iv) it has no arrangement or understanding with any person to participate in
the distribution (within the meaning of the Securities Act) of the New Notes.
In the event that (i) applicable law or interpretations of the staff of the
Commission do not permit the Company to effect the Exchange Offer, (ii) in
certain circumstances, the Initial Purchaser so requests, (iii) any holder of
the Old Notes (other than the Initial Purchaser) is not eligible to participate
in the Exchange Offer, or (iv) for any reason the Exchange Offer is not
consummated by October 20, 1998, the Company and the Subsidiary Guarantors will,
at their cost, (a) as promptly as reasonably practicable, file a shelf
registration statement covering resales of the Old Notes (a "Shelf Registration
Statement"), (b) use their best efforts to cause such Shelf Registration
Statement to be declared effective under the Securities Act and (c) use their
best efforts to keep effective such Shelf Registration Statement until the
earlier of two years after the Original Issue Date and such time as all of the
applicable Old Notes have been sold thereunder. The Company and the Subsidiary
Guarantors will, in the event of the filing of a Shelf Registration Statement,
provide to each holder of the Old Notes copies of the prospectus which is a part
of such Shelf Registration Statement. A holder that sells its Old Notes pursuant
to a Shelf Registration Statement generally will 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 Registration Rights Agreements which are applicable to such
holder (including certain indemnification obligations).
If (A) the Exchange Offer has not been consummated by October 20, 1998 or
(B) the Commission shall have issued a stop order suspending the effectiveness
of the Registration Statement or the Shelf Registration Statement at a time when
either of such is required to be kept effective by the Company and the
Subsidiary Guarantors, then the liquidated damages (the "Additional Amounts")
will accrue on the Old Notes over and above the stated interest at a rate of
0.25% per annum for the first 90 days commencing on (x) October 20, 1998 with
respect to clause (A) above, or (y) the date the Registration Statement or the
Shelf Registration Statement ceases to be effective in the case of (B) above,
the rate of such Additional Amounts increasing by an additional 0.25% per annum
at the beginning of each subsequent 90-day period; PROVIDED, HOWEVER, that the
Additional Amounts payable on the Old Notes may not exceed in the aggregate 1.0%
per annum; and PROVIDED FURTHER, that upon the consummation of the Exchange
Offer in the case of clause (A) above, or upon the effectiveness of the
Registration Statement or Shelf Registration Statement which had ceased to
remain effective in the case of clause (B) above, the Additional Amounts
accruing on the Old Notes as a result of such clause (or the relevant subclause
thereof), as the case may be, shall cease to accrue.
CONSEQUENCES OF FAILURE TO EXCHANGE
Following the completion of the Exchange Offer holders of Old Notes not
tendered will not have any further registration rights, except as set forth
above, and the Old Notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for a holder's Old Notes
could be adversely affected upon completion of the Exchange Offer if such holder
does not participate in the Exchange Offer.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., San Francisco time, on
the Expiration Date. The Company will issue $1,000 principal amount of New Notes
in exchange for each $1,000 principal amount of outstanding Old Notes accepted
in the Exchange Offer. Holders may tender some or all of their Old Notes
pursuant to the Exchange Offer. However, Old Notes may be tendered only in
integral multiples of $1,000 in principal amount.
62
<PAGE>
The form and terms of New Notes are the same as the form and terms of the
Old Notes, except that the New Notes have been registered under the Securities
Act and hence will not bear legends restricting the transfer thereof. The New
Notes will evidence the same debt as the Old Notes and will be issued pursuant
to, and entitled to the benefits of, the Indenture pursuant to which the Old
Notes were issued and will be deemed one issue of notes, together with the Old
Notes.
As of the date of this Prospectus, $225,000,000 aggregate principal amount
of the Old Notes were outstanding. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered holders and to others believed to
have beneficial interests in the Old Notes. The Company intends to conduct the
Exchange Offer in accordance with the applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Commission promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as, and if the Company has given oral (promptly confirmed in writing) or
written notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering holders for the purpose of receiving the New Notes from
the Company. If any tendered Old Notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, except as set forth below under
"--Transfer Taxes," transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"--Fees and Expenses" below.
EXPIRATION DATE; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., San Francisco time, on
, 1998, unless the Company, in its sole discretion, extends the
Exchange Offer (in which case the term "Expiration Date" shall mean the later
date and time to which the Exchange Offer is extended). The Company does not
intend to extend the Exchange Offer although it reserves the right to do so by
giving oral (promptly confirmed in writing) or written notice of such extension
to the Exchange Agent and by giving each registered holder notice by means of a
press release or other public announcement of any extension, in each case, prior
to 9:00 a.m., New York City time, on the next business day after the scheduled
Expiration Date. The Company also reserves the right, in its sole discretion,
(i) to delay accepting any Old Notes or, if any of the conditions set forth
below under "--Conditions" shall not have been satisfied or waived, to terminate
the Exchange Offer or (ii) to amend the terms of the Exchange Offer in any
manner, by giving oral (promptly confirmed in writing) or written notice of such
delay or termination to the Exchange Agent, and by complying with Rule 14e-1(d)
promulgated under the Exchange Act to the extent such Rule applies. The Company
acknowledges and undertakes to comply with the provisions of Rule 14e-1(c)
promulgated under the Exchange Act, which requires the Company to pay the
consideration offered, or return the Old Notes surrendered for exchange,
promptly after the termination or withdrawal of the Exchange Offer. Any such
extension, termination or amendment will be followed as promptly as practicable
by a notice to holders of Old Notes.
PROCEDURES FOR TENDERING
Only a registered holder of Old Notes may tender such Old Notes in the
Exchange Offer. To tender in the Exchange Offer, a registered holder (except
those holders delivering an Agent's Message) must complete, sign, and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of
63
<PAGE>
Transmittal or such facsimile to the Exchange Agent prior to the Expiration
Date. In addition, either (i) certificates for such Old Notes must be received
by the Exchange Agent along with the Letter of Transmittal, or (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date, or (iii) the registered holder must
comply with the guaranteed delivery procedures described below. To be tendered
effectively, the Letter of Transmittal (or an Agent's Message in lieu thereof)
and other required documents must be received by the Exchange Agent at the
address set forth below under "Exchange Agent" prior to the Expiration Date.
The tender by a registered holder which is not withdrawn prior to the
Expiration Date will constitute an agreement between such holder and the Company
in accordance with the terms and subject to the conditions set forth herein and
in the Letter of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company, or other nominee and who wishes to
tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering such
owner's Old Notes, either make appropriate arrangements to register ownership of
the Old Notes in such beneficial owner's name or obtain a properly completed
bond power from the registered holder. The transfer of registered ownership may
take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below) unless
(A) Old Notes tendered pursuant hereto are tendered (i) by a registered holder
who has not completed the box entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution and (B) the box entitled "Special
Registration Instructions" on the Letter of Transmittal has not been completed.
In the event that signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantee
must be by a financial institution (including most banks, savings and loan
associations and brokerage houses) that is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion Program
or the Stock Exchanges Medallion Program (each an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power and signed by such registered
holder as such registered holder's name appears on such Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
64
<PAGE>
All questions as to the validity, form, eligibility (including time of
receipt), acceptance, and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The Company's 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, defects or
irregularities in connection with tenders of Old Notes must be cured within such
time as the Company shall determine. Although the Company intends to notify
holders of defects or irregularities with respect to tenders of Old Notes,
neither the Company, the Exchange Agent nor any other person shall incur any
liability for failure to give such notification. Tenders of Old Notes will not
be deemed to have been made until such defects or irregularities have been cured
or waived. Any Old Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for, or to offer New Notes for, any Old Notes that
remain outstanding subsequent to the Expiration Date or, as set forth below
under "Conditions," to terminate the Exchange Offer and, to the extent permitted
by applicable law, purchase Old Notes in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or offers
could differ from the terms of the Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (i) the New Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of such holder, (ii) the holder is
not engaging in and does not intend to engage in a distribution of such New
Notes, (iii) the holder does not have an arrangement or understanding with any
person to participate in the distribution of such New Notes and (iv) the holder
is not an "affiliate," as defined under Rule 405 of the Securities Act, of the
Company or any Subsidiary Guarantor.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal (or an Agent's Message in lieu thereof) and all other required
documents. If any tendered Old Notes are not accepted for any reason set forth
in the terms and conditions of the Exchange Offer or if Old Notes are submitted
for a greater principal amount than the holder desires to exchange, such
unaccepted or non-exchanged Old Notes (or Old Notes in substitution therefor)
will be returned without expense to the tendering holder thereof (or, in the
case of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described below, such non-exchanged Old Notes will be credited to
such tendering holder's account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the expiration or termination of the
Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after receipt of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or
65
<PAGE>
facsimile thereof, with any required signature guarantees (unless an Agent's
Message is transmitted in lieu thereof) and any other required documents, must,
in any case, be transmitted to and received by the Exchange Agent at the address
set forth below under "Exchange Agent" on or prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility and received by the Exchange Agent and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from a participant tendering Old Notes that
are the subject of such Book-Entry Confirmation that such participant has
received and agrees to be bound by the Letter of Transmittal and that the
Company may enforce such agreement against such participant.
The term "Holder" or "holder" with respect to the Exchange Offer means any
person in whose name Old Notes are registered on the books of the Company or any
person who has obtained a properly completed bond power from the registered
holder or any participant in the Book-Entry Transfer Facility whose name appears
on a security position listing as the holder of Old Notes (which for the purpose
of the Exchange Offer, include beneficial interests in the Old Notes held by
direct or indirect participants in the Book-Entry Transfer Facility and Old
Notes held in definitive form).
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes and
such Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) on or prior to 5:00 p.m., San Francisco
time, on the Expiration Date, the Exchange Agent receives from such Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by facsimile
transmission (if available to such holder), mail or hand delivery), setting
forth the name and address of the holder of Old Notes and the amount of Old
Notes tendered, stating that the tender is being made thereby and guaranteeing
that within three New York Stock Exchange ("NYSE") trading days after the date
of execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, the Letter of Transmittal (or facsimile
thereof or an Agent's Message in lieu thereof) and any other documents required
by the Letter of Transmittal will be deposited by the Eligible Institution with
the Exchange Agent, and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, the Letter of Transmittal (or facsimile thereof or an Agent's Message in
lieu thereof) and all other documents required by the Letter of Transmittal, are
received by the Exchange Agent within three NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., San
Francisco time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth below under "Exchange Agent" prior to 5:00 p.m.,
San Francisco time, on the Expiration Date. Any such notice of withdrawal must
(i) specify the name of the person having deposited the Old Notes to be
withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn
(including the certificate number or numbers and principal amount of such Old
Notes, or, in the case of Old Notes transferred by book-entry transfer, the name
and number of the account at the Book-Entry Transfer Facility to be credited),
(iii) be signed by the holder in the same manner as the original signature on
the Letter of Transmittal by which such Old Notes were
66
<PAGE>
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee register the transfer of
such Old Notes into the name of the person withdrawing the tender, and (iv)
specify the name in which any such Old Notes 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 notices will be determined by
the Company, whose determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender, or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures described under "Procedures for Tendering" above at any time
on or prior to 5:00 p.m., San Francisco time, on the Expiration Date.
CONDITIONS
Notwithstanding any other provision of the Exchange Offer and subject to its
obligations pursuant to the Registration Rights Agreement, the Company shall not
be required to accept for exchange, or to issue New Notes in exchange for, any
Old Notes and may terminate or amend the Exchange Offer, if at any time before
the acceptance of such New Notes for exchange any of the following events shall
occur:
A. any injunction, order or decree shall have been issued by any court
or any governmental agency that would prohibit, prevent or otherwise
materially impair the ability of the Company to proceed with the Exchange
Offer; or
B. the Exchange Offer shall violate any applicable law or any
applicable interpretation of the staff of the Commission.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and such right shall be deemed an ongoing right which may be asserted at
any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened by the Commission or be in
effect with respect to the Registration Statement of which this Prospectus is a
part or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended.
The Exchange Offer is not conditioned on any minimum principal amount of Old
Notes being tendered for exchange.
ASSISTANCE
All executed Letters of Transmittal should be directed to the Exchange
Agent. Questions and requests for assistance may be directed to the Exchange
Agent as provided below under "Exchange Agent."
67
<PAGE>
EXCHANGE AGENT
Chase Manhattan Bank and Trust Company, National Association has been
appointed as Exchange Agent for the Exchange Offer. Questions, requests for
assistance and requests for additional copies of the Prospectus, the Letter of
Transmittal and other related documents should be directed to the Exchange Agent
addressed as follows:
BY REGISTERED OR CERTIFIED MAIL, BY HAND
OR BY OVERNIGHT COURIER:
Chase Manhattan Bank and Trust Company, National Association
101 California Street, Suite 2725
San Francisco, California 94111
<TABLE>
<S> <C>
By Facsimile: By Telephone:
(415) 693-8850 (415) 954-9507
</TABLE>
The Exchange Agent also acts as trustee under the Indenture.
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
approximately $ which includes fees and expenses of the Exchange Agent,
accounting, legal, printing and related fees and expenses.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct the
Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
ACCOUNTING TREATMENT
The Company will not recognize any gain or loss for accounting purposes upon
the consummation of the Exchange Offer. The expense of the Exchange Offer will
be amortized by the Company over the term of the New Notes under generally
accepted accounting principles.
68
<PAGE>
DESCRIPTION OF THE NEW NOTES
The Old Notes were issued under an indenture dated as of April 23, 1998 (the
"Indenture") between the Company, the Subsidiary Guarantors and Chase Manhattan
Bank and Trust Company, National Association, as trustee (the "Trustee"). A copy
of the Indenture has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The New Notes also will be issued under the
Indenture, which will be qualified under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act") upon the effectiveness of the Registration
Statement. The form and terms of the New Notes and the Old Notes are the same
except that the New Notes have been registered under the Securities Act and,
therefore, will not bear legends restricting the transfer thereof. As used
herein the term "Notes" means the New Notes and the Old Notes treated as a
single class.
The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Trust Indenture Act, and to all of the provisions of the
Indenture, including the definitions of certain terms therein and those terms
made a part of the Indenture by reference to the Trust Indenture Act. The
definitions of certain capitalized terms used in the following summary are set
forth below under "Certain Definitions."
GENERAL
The New Notes will be issued only in registered form, without coupons, in
denominations of $1,000 principal amount and integral multiples thereof.
Principal of and interest on the New Notes will be payable, and the New Notes
will be transferable, at the corporate trust office or agency of the Trustee in
the City of New York maintained for such purposes. No service charge will be
made for any registration of transfer or exchange of the New Notes, except for
any tax or other governmental charge that may be imposed in connection
therewith.
Any Old Notes that remain outstanding after the completion of the Exchange
Offer, together with the New Notes issued in connection with the Exchange Offer,
will be treated as a single class of securities under the Indenture.
MATURITY, INTEREST AND PRINCIPAL
The Notes will be unsecured senior obligations of the Company. The
securities issuable under the Indenture are limited in aggregate principal
amount to $325,000,000, of which $225,000,000 were issued in the Old Notes
Offering. The Notes will mature on May 1, 2008. Additional securities may be
issued in one or more series from time to time subject to the limitations set
forth under "--Certain Covenants-- Limitation on Additional Indebtedness" and
restrictions under the Acquisition Facility. Interest on the Notes will accrue
at a rate of 11% per annum and be payable in cash semi-annually in arrears on
each May 1 and November 1 (each, an "Interest Payment Date"), commencing
November 1, 1998 to Holders of record of the Notes at the close of business on
the April 15 and October 15 preceding the applicable Interest Payment Date.
Interest will accrue from the most recent Interest Payment Date to which
interest has been paid or duly provided for or, if no interest has been paid or
duly provided for, from the date of original issuance. Interest will be computed
on the basis of a 360-day year of twelve 30-day months. Interest on overdue
principal and (to the extent permitted by law) on overdue installments of
interest will continue to accrue at the above rate.
REDEMPTION
OPTIONAL REDEMPTION. The Notes are redeemable, in whole or in part, at the
option of the Company, at any time on or after May 1, 2003, at the redemption
prices (expressed as percentages of principal
69
<PAGE>
amount) set forth below plus accrued and unpaid interest to the redemption date,
if redeemed during the 12-month period beginning on May 1 of the years indicated
below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
2003.............................................................................. 105.500%
2004.............................................................................. 103.667%
2005.............................................................................. 101.833%
2006 and thereafter............................................................... 100.000%
</TABLE>
OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS. At any time on or prior
to May 1, 2001, the Company may, at its option, use the Net Proceeds of one or
more Public Equity Offerings (as defined below) to redeem up to 35% of the
principal amount of the Notes at a redemption price equal to 111% of the
principal amount thereof plus accrued and unpaid interest to the redemption
date; provided, however, that at least 65% of the principal amount of Notes
originally issued remain outstanding immediately after any such redemption (it
being expressly agreed that for purposes of determining whether this condition
is satisfied, Notes owned by the Company or any of its Affiliates shall be
deemed not to be outstanding). In order to effect the foregoing redemption with
the proceeds of any Public Equity Offering, the Company shall make such
redemption not more than 90 days following the consummation of any Public Equity
Offering.
As used in the preceding paragraph, "Public Equity Offering" means any
public offering of Common Stock (other than Disqualified Capital Stock) of the
Company which is undertaken pursuant to a registration statement filed with and
declared effective by the Commission in accordance with the Securities Act.
SELECTION AND NOTICE. In the event that less than all of the Notes are to
be redeemed at any time, selection of Notes for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed or, if the Notes are not listed
on a national securities exchange, on a pro rata basis, by lot or by such method
as the Trustee shall deem fair and appropriate; provided that no Notes of $1,000
principal amount or less shall be redeemed in part. Notice of redemption shall
be mailed by first class mail at least 30 but not more than 60 calendar days
before the redemption date to each Holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
will cease to accrue on Notes or portions thereof called for redemption.
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control (the
date of such occurrence being the "Change of Control Date") the Company will
notify the Holders in writing of such occurrence and will make an offer to
purchase (the "Change of Control Offer"), on a Business Day (the "Change of
Control Payment Date") not later than 60 Business Days following the Change of
Control Date, all Notes then outstanding at a purchase price equal to 101% of
the aggregate principal amount thereof, plus accrued and unpaid interest, if
any, thereon to the Change of Control Payment Date. All Notes properly tendered
pursuant to such Change of Control Offer and not withdrawn pursuant thereto will
be purchased on the Change of Control Payment Date. See "Risk Factors--Change of
Control."
Notice of a Change of Control Offer will be mailed by the Company to the
Holders not less than 30 calendar days nor more than 60 calendar days before the
Change of Control Payment Date. The Change of Control Offer is required to
remain open for at least 20 Business Days and until the close of business on the
Change of Control Payment Date.
70
<PAGE>
The Company will comply with any tender offer rules under the Exchange Act
which may then be applicable, including, but not limited to, Rule 14e-1
thereunder, and any other applicable laws, rules and regulations, in connection
with any Change of Control Offer.
RANKING AND SUBORDINATED GUARANTEES
The Indebtedness of the Company evidenced by the Old Notes is, and the New
Notes will be, senior obligations of the Company. The Notes will rank senior in
right of payment to all future subordinated Indebtedness of the Company and will
rank PARI PASSU in right of payment with all other existing or future
indebtedness of the Company that is not by its terms subordinate to the Notes.
The Old Notes are, and the New Notes will be, fully and unconditionally
guaranteed (the "Guarantees") on a general unsecured basis, as to payment of
principal, premium, if any, and interest, jointly and severally, by the
Subsidiary Guarantors. The Guarantees will be subordinated to the prior payment
in full in cash of the Acquisition Facility and the Guarantor Senior Debt, which
includes the guarantees to be delivered by the Subsidiary Guarantors under the
Acquisition Facility, and will rank PARI PASSU in right of payment to all other
senior indebtedness of the Subsidiary Guarantors and senior in right of payment
to all subordinated obligations of the Subsidiary Guarantors.
Upon any payment or distribution of assets of the Subsidiary Guarantors of
any kind or character, whether in cash, property or securities, to creditors
upon any liquidation, dissolution, winding up, reorganization, assignment for
the benefit of creditors or marshaling of assets of the Subsidiary Guarantors or
in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Subsidiary Guarantors or their property, whether
voluntary or involuntary, all obligations due or to become due upon all
Guarantor Senior Debt shall first be paid in full in cash, before any payment or
distribution of any kind or character is made on account of any obligations on
the Guarantees, or for the acquisition of all or any part of any of the Notes or
Guarantees for cash or property or otherwise; and until all such obligations
with respect to all Guarantor Senior Debt are paid in full, in cash, any
distribution to which the holders of the Guarantees would be entitled but for
the subordination provisions will be made to the holders of Guarantor Senior
Debt as their interests may appear. If any default occurs and is continuing in
the payment when due, whether at maturity, upon any redemption, by declaration
or otherwise, of any principal of, premium and interest on, unpaid drawings for
letters of credit issued in respect of, or fees with respect to, or any other
obligation in respect of, any Guarantor Senior Debt, no payment of any kind or
character shall be made by or on behalf of the Subsidiary Guarantors or any
other Person on its or their behalf with respect to any obligations on the
Guarantees or to acquire any of the obligations covered by the Guarantees for
cash or property or otherwise.
In addition, if any other event of default occurs and is continuing with
respect to any Guarantor Senior Debt, as such event of default is defined in the
instrument creating or evidencing such Guarantor Senior Debt, permitting the
holders of such Guarantor Senior Debt then outstanding to accelerate the
maturity thereof (or the obligations guaranteed thereby) and if the
Representative for the Guarantor Senior Debt gives written notice of the event
of default to the Trustee (a "Default Notice"), then, unless and until all
events of default have been cured or waived in writing or have ceased to exist
or the Trustee receives notice from the Representative for the respective
Guarantor Senior Debt terminating the Blockage Period (as defined below), during
the 180 days after the delivery of such Default Notice (the "Blockage Period"),
none of the Subsidiary Guarantors nor any other Person on their behalf shall (x)
make any payment of any kind or character with respect to any obligations
evidenced by the Guarantees or (y) acquire all or any part of the obligations
covered by the Guarantees for cash or property or otherwise. Notwithstanding
anything herein to the contrary, in no event will a Blockage Period extend
beyond 180 days from the date the payment on the Notes was due and only one such
Blockage Period may be commenced within any 360 consecutive days. No event of
default which existed or was continuing on the date of the commencement of any
Blockage Period with respect to the Guarantor Senior Debt shall be, or be made,
the basis for commencement of a second Blockage Period by the Representative of
such
71
<PAGE>
Guarantor Senior Debt whether or not within a period of 360 consecutive days,
unless such event of default shall have been cured by the Subsidiary Guarantors
or waived for a period of not less than 90 consecutive days.
By reason of such subordination, in the event of the insolvency of the
Subsidiary Guarantors, creditors of the Subsidiary Guarantors who are not
holders of Guarantor Senior Debt, including the holders of the Guarantees, may
recover less, ratably, than holders of Guarantor Senior Debt.
Each Subsidiary Guarantor unconditionally guarantees, on a subordinated
basis as described above, jointly and severally, to each Holder and the Trustee,
the full and prompt performance of the Company's obligations under the Indenture
and the Notes, including the payment of principal of and interest on the Notes.
The obligations of each Subsidiary Guarantor are limited to the maximum amount
as will, after giving effect to all other contingent and fixed liabilities of
such Subsidiary Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Subsidiary Guarantor in respect of
the obligations of such other Subsidiary Guarantor under its Guarantee or
pursuant to its contribution obligations under the Indenture, result in the
obligations of such Subsidiary Guarantor under the Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law. Each
Subsidiary Guarantor that makes a payment or distribution under a Guarantee
shall be entitled to a contribution from each other Subsidiary Guarantor in a
pro rata amount based on the Adjusted Net Assets of each Subsidiary Guarantor.
A Subsidiary Guarantor shall be released from all of its obligations under
its Guarantee if all of its assets or Capital Stock is sold, in each case in a
transaction in compliance with the "Disposition of Proceeds of Asset Sales"
covenants below, or the Subsidiary Guarantor merges with or into or consolidates
with, or transfers all or substantially all of its assets in compliance with
"Certain Covenants--Limitation on Mergers and Certain Other Transactions" below,
and such Subsidiary Guarantor has delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent herein provided for relating to such transaction have been complied
with.
The Notes also will be effectively subordinated to all secured Indebtedness
of the Company's Subsidiaries (including all secured Indebtedness outstanding
under the Acquisition Facility and to all secured Guarantor Senior Debt of the
Subsidiary Guarantors) to the extent of the value of any assets securing such
Indebtedness. As of the Issue Date the Company will have no Subsidiaries other
than the Subsidiary Guarantors.
Separate financial statements for all of the Subsidiary Guarantors are not
included herein because such Subsidiary Guarantors are jointly and severally
liable with respect to the Company's obligations pursuant to the Notes, and the
aggregate net assets, earnings and equity of the Subsidiary Guarantors and the
Company are substantially equivalent to the net assets, earnings and equity of
the Company on a consolidated basis.
PROVISION FOR FINANCIAL INFORMATION
The Indenture, whether or not required by the rules and regulations of the
Commission, so long as the Notes are outstanding, provides that beginning with
the first fiscal quarter following the Issue Date (as defined herein) the
Company will deliver to the Trustee within 15 days after the filing of the same
with the Commission, copies of the quarterly and annual reports and of the
information, documents and other reports, if any, which the Company is required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act;
PROVIDED, HOWEVER, that the Company will deliver to the Trustee comparable
information with respect to the fiscal quarter preceding the Issue Date on or
prior to June 15, 1998. The Indenture further provides that, notwithstanding
that the Company may not be subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act, the Company will file with the Commission, to the
extent permitted, and provide the Trustee and Holders with such quarterly and
annual reports and such information, documents and other reports specified in
Sections 13 and 15(d) of the Exchange Act. The Company will also make such
reports available to prospective investors, securities analysts and broker-
72
<PAGE>
dealers upon their request. In addition, for so long as any Notes remain
outstanding, the Company will furnish to the holders of Notes and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act, and, to
any beneficial holder of Notes, if not obtainable from the Commission,
information of the type that would be filed with the Commission pursuant to the
foregoing provisions upon the request of any such holder. The Company will also
comply with the other provisions of Section 314(a) of the Trust Indenture Act.
GOVERNING LAW
The Indenture, the Notes and the Guarantees are governed by the laws of the
State of New York, without regard to the principles of conflicts of law.
CERTAIN COVENANTS
Set forth below are certain covenants which are contained in the Indenture.
LIMITATION ON ADDITIONAL INDEBTEDNESS. The Indenture provides that the
Company will not, and will not permit any of its Subsidiaries to, create, incur,
assume, issue, guarantee or in any manner become, directly or indirectly, liable
for or with respect to the payment of ("incur"), any Indebtedness, including,
without limitation, any Acquired Indebtedness, except for Indebtedness falling
within at least one of the following categories:
(a) Indebtedness under the Notes, the Guarantees and the Indenture, and
Indebtedness and Guarantees of such Indebtedness under the Indenture
properly incurred in clause (d) below;
(b) Indebtedness of the Company and its Subsidiaries outstanding on the
Issue Date after giving effect to the application of the proceeds from the
sale of the Notes;
(c) Indebtedness of the Company and the Subsidiary Guarantors under one
or more Acquisition Facilities in an aggregate principal amount at any one
time outstanding not to exceed $60,000,000;
(d) Indebtedness of the Company or any Subsidiary Guarantor (which
amount may, but need not be, incurred in whole or in part under the
Acquisition Facility), if at the time of incurrence and after giving effect
thereto, no Default or Event of Default exists and the Company's EBITDA
Coverage Ratio, would have been at least 2.0 to 1;
(e) obligations under Interest Rate Protection Obligations and Currency
Protection Obligations incurred in the ordinary course of business to the
extent that such obligations have been entered into for bona fide hedging
purposes and not for speculation or other purposes (which amount may, but
need not be, incurred in whole or in part under the Acquisition Facility);
provided that, with respect to Interest Rate Protection Obligations, the
notional principal amount of such Indebtedness does not exceed, at the time
of the incurrence of such Indebtedness, the principal amount of Indebtedness
to which such Interest Rate Protection Obligations relate;
(f) replacements, renewals, refinancings and extensions of the
Indebtedness incurred under the immediately preceding clauses (b) or (d);
provided that any such replacement, renewal, refinancing or extension (x) is
scheduled to mature either (a) no earlier than the Indebtedness being
replaced, renewed, refinanced or extended, or (b) after the maturity date of
the Notes, (y) the portion, if any, of such replacement, renewal,
refinancing or extension that is scheduled to mature on or prior to the
maturity date of the Notes has a weighted average life to maturity at the
time such Indebtedness is incurred that is equal to or greater than the
weighted average life to maturity of the portion of the Indebtedness being
replaced, renewed, refinanced or extended that is scheduled to mature on or
prior to the maturity date of the Notes, and (z) shall not exceed the
principal amount (plus accrued interest and prepayment premium, if any) of
the Indebtedness being replaced, renewed, refinanced or extended;
73
<PAGE>
(g) Purchase Money Indebtedness and Capitalized Lease Obligations of the
Company or any Subsidiary Guarantor in an aggregate amount which does not
exceed $2,500,000 at any time outstanding;
(h) Indebtedness of the Company owing to and held by any Wholly-Owned
Subsidiary of the Company or Indebtedness of a Wholly-Owned Subsidiary of
the Company owing to and held by the Company or any other Wholly-Owned
Subsidiary of the Company; PROVIDED, HOWEVER, that any subsequent transfer
or event which results in any such Wholly-Owned Subsidiary ceasing to be a
Wholly-Owned Subsidiary of the Company or any subsequent transfer of any
such Indebtedness (except to the Company or another Wholly-Owned Subsidiary
of the Company) would be deemed, in each case, to constitute the incurrence
of such Indebtedness by the issuer thereof;
(i) Indebtedness of the Company or a Wholly-Owned Subsidiary of the
Company in respect of performance bonds, bankers' acceptances, surety or
appeal bonds or similar instruments provided by the Company and its
Wholly-Owned Subsidiaries in the ordinary course of business and which do
not secure other Indebtedness; and
(j) other Indebtedness of the Company or any Subsidiary Guarantor (which
amount may be, but need not be, incurred in whole or in part under the
Acquisition Facility) not to exceed $10,000,000 at any time outstanding.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, incur any Indebtedness which by its terms (or by the
terms of any agreement governing such Indebtedness) is subordinated in right of
payment to any other Indebtedness of the Company unless such Indebtedness is
also by its terms (or by the terms of any agreement governing such Indebtedness)
made expressly subordinate in right of payment to the Notes pursuant to
subordination provisions that are substantively identical to the subordination
provisions of such Indebtedness (or such agreement) that are most favorable to
the holders of any other Indebtedness of the Company.
Indebtedness shall be deemed to have been incurred by the survivor of a
merger, at the time of such merger, and with respect to an acquired Subsidiary,
at the time of such acquisition.
LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. The Indenture provides that
the Company will not, and will not permit any of its Subsidiaries to, make any
capital contributions, advances or loans to, or investments in (including by way
of guarantee), or purchases of Capital Stock or other securities of, any Person
(collectively, "Investments"), except: (i) Investments by the Company in or to
any Wholly-Owned Subsidiary and Investments or loans in or to the Company or a
Wholly-Owned Subsidiary by any Subsidiary (or a person who becomes a
Wholly-Owned Subsidiary as a result of such Investment or who merges or
consolidates into the Company or a Wholly-Owned Subsidiary of the Company); (ii)
Investments represented by accounts receivable created or acquired in the
ordinary course of business and Investments received in respect thereof upon the
insolvency of the payor; (iii) Investments under or pursuant to Interest Rate
Protection Obligations or Currency Protection Obligations in each case entered
into for hedging and not for speculative purposes; (iv) advances to employees in
the ordinary course of business not in excess of $1,000,000 at any one time
outstanding; (v) Investments, not exceeding $5,000,000 in the aggregate, in
joint ventures, partnerships or persons that are not Wholly-Owned Subsidiaries,
provided that such Investments are made solely for the purpose of acquiring
businesses or property reasonably related to the Company's business as of the
Issue Date, including reasonably related extensions thereof; (vi) Investments in
another Person which were received as consideration for an Asset Sale in
accordance with the "Disposition of Proceeds of Asset Sales" covenant; (vii)
Investments in Cash Equivalents; (viii) Investments the payment for which
consists exclusively of Capital Stock (excluding Disqualified Capital Stock) of
the Company; (ix) any transaction to the extent it constitutes an Investment
that is permitted by and made in accordance with the provisions of the second
paragraph of the covenant described under "--Limitations on Transactions with
Affiliates"; and (x) Investments permitted to be made in accordance with the
"Limitation on Restricted Payments" covenant.
74
<PAGE>
LIMITATION ON RESTRICTED PAYMENTS. The Indenture provides that the Company
will not, and will not cause or permit any of its Subsidiaries to, directly or
indirectly, make any Restricted Payment, unless:
(a) no Default or Event of Default will have occurred and be continuing
at the time of or after giving effect to such Restricted Payment;
(b) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments declared or made after the Issue
Date does not exceed the sum of (1) 50% of (a) the Company's cumulative
Consolidated Net Income (or in the event such cumulative Consolidated Net
Income is a deficit, minus 100% of such deficit) minus (b) Permitted
Payments since the Issue Date made pursuant to (v)(b) below; provided that
Permitted Payments made pursuant to (v)(a) and (v)(c) below shall not count
in this calculation, (2) 100% of the aggregate Net Proceeds and the fair
market value of marketable securities and property received by the Company
from the issue or sale, after the Issue Date, of Capital Stock (other than
Disqualified Capital Stock) of the Company (excluding any such Net Proceeds
received from issuances and sales financed directly or indirectly using
funds borrowed from the Company or any Subsidiary of the Company, until and
to the extent such borrowing is repaid) or any Indebtedness or other
securities of the Company convertible into or exercisable for Capital Stock
(other than Disqualified Capital Stock) of the Company which has been so
converted, exercised or exchanged, as the case may be, and (3) $1,000,000;
and
(c) at the time of such Restricted Payment, the Company could incur
$1.00 of additional Indebtedness pursuant to clause (d) of the "Limitation
on Additional Indebtedness" covenant.
For purposes of determining the amount expended for Restricted Payments,
cash distributed shall be valued at the face amount thereof and property other
than cash shall be valued at its Fair Market Value.
The provisions of this covenant will not prohibit the following (each, a
"Permitted Payment"): (i) the payment of any dividend within 60 calendar days
after the date of declaration thereof, if at such date of declaration such
payment would comply with the provisions of the Indenture; (ii) the payment,
defeasance, purchase, redemption, prepayment, acquisition or retirement of any
Capital Stock of the Company or Indebtedness of the Company that is subordinate
in right of payment to the Notes, by conversion into or by an exchange for,
Capital Stock of the Company that is not Disqualified Capital Stock or out of
the Net Proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of other Capital Stock (other than Disqualified
Capital Stock) of the Company; provided that such net cash proceeds shall not
count for purposes of the calculations in paragraph (b) above; (iii) the
redemption or retirement of Indebtedness of the Company that is subordinate in
right of payment to the Notes in exchange for, by conversion into, or out of the
Net Proceeds of, a substantially concurrent sale of Indebtedness of the Company
(other than to a Subsidiary of the Company) that is contractually subordinated
in right of payment to the Notes and that is permitted to be incurred in
accordance with clause (f) of the "Limitation on Additional Indebtedness"
covenant; (iv) purchases of Capital Stock deemed to occur upon the exercise of
stock options if such Capital Stock represents a portion of the exercise price
thereof; (v) (a) the payment to shareholders of the Company pursuant to the
Reorganization Agreement consistent with past practices for the purpose of
distributing net income generated by the Company for the period of January 1,
1998 through the Issue Date; (b) so long as the Company remains an S
Corporation, the payment of distributions to shareholders of the Company to the
extent necessary to permit such shareholders to pay federal and state income tax
liabilities arising from income of the Company allocable to such shareholders
and attributable to them solely as a result of the Company being an S
Corporation for federal and state income tax purposes and (c) the purchase of
additional shares from the Company's shareholders in an amount not to exceed
$4,000,000; and (vi) payments to purchase Capital Stock of the Company from
management or employees of the Company or any of its Subsidiaries, or their
authorized representatives, upon the happening of an event which provides for
payment under any applicable plan, or upon the death, disability or termination
of employment of such employees, in aggregate amounts under this clause (vi) not
to exceed $500,000 in any fiscal year of the Company.
75
<PAGE>
In determining the amount of Restricted Payments permissible under clause
(b) above, amounts expended pursuant to clauses (i), (iv) and (vi) in the
preceding paragraph shall be included as Restricted Payments.
LIMITATION ON LIENS. The Indenture provides that the Company will not, and
will not permit any of its Subsidiaries to, directly or indirectly, create,
incur, assume or suffer to exist any Lien (other than a Permitted Lien) of any
kind upon any of its property or assets now owned or hereafter acquired by it
unless the Notes are equally and ratably secured by such Lien; provided that if
the Indebtedness secured by such Lien is subordinate or junior in right of
payment to the Notes then the Lien securing such Indebtedness shall be
subordinate or junior in priority to the Lien securing the Notes at least to the
same extent as such Indebtedness is subordinate or junior to the Notes.
LIMITATION ON SALE-LEASEBACK TRANSACTIONS. The Indenture provides that the
Company will not, and will not permit any of its Subsidiaries to, enter into,
renew or extend any Sale-Leaseback Transaction unless (i) (a) after giving
effect to such Sale-Leaseback Transaction on a pro forma basis, the Company is
in compliance with the "Limitation on Liens" covenant and could incur
Indebtedness pursuant to the "Limitation on Additional Indebtedness" covenant at
least equal in amount to the Attributable Debt associated with such
Sale-Leaseback Transaction, and (b) the sale price in such Sale-Leaseback
Transaction is at least equal to the Fair Market Value of such property, and the
Company or such Wholly-Owned Subsidiary shall apply the Net Asset Sale Proceeds
of such sale in the manner provided under the "Disposition of Proceeds of Asset
Sales" covenant below, or (ii) the lease is between the Company and a
Wholly-Owned Subsidiary of the Company or between Wholly-Owned Subsidiaries of
the Company.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Indenture provides that the Company will not, and will not
permit any of its Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective or enter into any agreement with
any Person that would cause any consensual encumbrance or restriction of any
kind on the ability of any Subsidiary of the Company to (a) pay dividends, in
cash or otherwise, or make any other distributions on its Capital Stock or any
other interest or participation in, or measured by, its profits owned by the
Company or a Subsidiary of the Company, (b) make any loans or advances to or pay
any Indebtedness owed to, the Company or any Subsidiary of the Company or (c)
transfer any of its properties or assets to the Company or to any Subsidiary of
the Company, except for (i) encumbrances or restrictions existing under or
contemplated by or by reason of the Notes, the Indenture and the Guarantees,
(ii) encumbrances or restrictions existing under or contemplated by agreements
as in effect on the Issue Date, (iii) encumbrances or restrictions existing
under the Acquisition Facility, (iv) encumbrances or restrictions with respect
to a Person that is not a Subsidiary of the Company on the Issue Date, in
existence at the time such Person becomes a Subsidiary of the Company (but not
created in contemplation of such Person becoming such a Subsidiary), (v)
encumbrances or restrictions existing under or by reason of applicable law, (vi)
encumbrances or restrictions existing by reason of any Lien permitted under the
"Limitation on Liens" covenant, (vii) encumbrances or restrictions existing
under any agreement for the sale of assets of the Company or any Subsidiary of
the Company, or the Capital Stock of any Subsidiary of the Company, (viii)
customary provisions restricting subletting or assignment of leases entered into
in the ordinary course of business and consistent with past practices, (ix)
Purchase Money Indebtedness, but only to the extent such purchase money
obligation only imposes encumbrances and restrictions on the property so
acquired, and (x) encumbrances or restrictions existing under any agreement that
refinances, replaces, renews or extends an agreement containing a restriction
permitted by clauses (i), (ii), (iii) and (iv) above; provided that the terms
and conditions of any such restrictions are not materially less favorable to the
Holders (other than with respect to clause (iii) above, in the event the lenders
require additional security) than those under or pursuant to the agreement being
replaced or the agreement evidencing the Indebtedness refinanced as determined
by the Board of Directors of the Company in their reasonable and good faith
judgment.
DISPOSITION OF PROCEEDS OF ASSET SALES. The Indenture provides that the
Company will not, and will not permit any of its Subsidiaries to, directly or
indirectly, consummate any Asset Sale unless (i) the
76
<PAGE>
consideration received in respect of such Asset Sale is at least equal to the
Fair Market Value of the assets subject to such Asset Sale and (ii) at least 75%
of the value of the consideration therefrom received by the Company or such
Subsidiary is in the form of (A) cash or Cash Equivalents or (B) the assumption
by the Person acquiring the assets in such Asset Sale of Indebtedness of the
Company or any of its Subsidiaries with the effect that none of the Company or
any of its Subsidiaries will have any obligation with respect to such
Indebtedness. The Company or the applicable Subsidiary, as the case may be, will
either (w) within 360 calendar days of consummation of the Asset Sale apply the
Net Asset Sale Proceeds from such Asset Sale to permanently repay Indebtedness
under the Acquisition Facility (for purposes of this clause, a repayment of any
amount owing under the Acquisition Facility shall be deemed a permanent
repayment to the extent the amount represented by such repayment is not drawn
upon by any Subsidiary of the Company for a period of nine months following such
repayment), or (x) within 360 calendar days of such Asset Sale apply the Net
Asset Sale Proceeds from such Asset Sale to an investment in properties and
assets that replace the properties and assets that were the subject of such
Asset Sale or in properties and assets that will be used in the business of the
Company and its Subsidiaries existing on the Issue Date or in businesses
reasonably related thereto, including reasonably related extensions thereof, or
(y) a combination of prepayment and investment permitted by the foregoing
clauses (w) and (x) or (z) apply any Net Asset Sale Proceeds from any Asset Sale
that are not applied pursuant to clause (w), (x) or (y) above (such amounts,
"Excess Proceeds") as provided below.
When the aggregate amount of Excess Proceeds equals or exceeds $5,000,000,
the Company will make an offer to purchase (an "Asset Sale Offer") ratably from
all Holders of the Notes, not more than 60 calendar days thereafter (the "Excess
Proceeds Payment Date") that portion of outstanding Notes purchasable with such
Excess Proceeds, at a price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, thereon to the purchase date.
To the extent that the Asset Sale Offer is not fully subscribed, the Company may
use the unutilized portion of such Excess Proceeds for general corporate
purposes. If the aggregate principal amount, plus accrued and unpaid interest,
if any, thereon of Notes validly tendered and not withdrawn by Holders thereof
exceeds the Excess Proceeds, Notes to be purchased will be selected by the
Trustee on a pro rata basis based upon amounts tendered (with such adjustments
as may be deemed appropriate by the Trustee so that only Notes in denominations
of $1,000, or integral multiples thereof, shall be purchased). Upon completion
of such Asset Sale Offer, the amount of Excess Proceeds will be reset to zero.
Notice of an Asset Sale Offer will be mailed to the Holders as shown on the
register of Holders not less than 30 calendar days nor more than 60 calendar
days before the Excess Proceeds Payment Date, with a copy to the Trustee, and
will comply with the procedures set forth in the Indenture. Upon receiving
notice of the Asset Sale Offer, Holders may elect to tender their Notes in whole
or in part in integral multiples of $1,000 principal amount in exchange for
cash. An Asset Sale Offer shall remain open for a period of 20 Business Days or
such longer period as may be required by law.
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Subsidiaries as an entirety to a
Person in a transaction permitted under "Limitation on Mergers and Certain Other
Transactions" below, the Surviving Entity shall be deemed to have sold the
properties and assets of the Company and its Subsidiaries not so transferred for
purposes of the second paragraph of this covenant, and will comply with the
Asset Sale provisions of the Indenture with respect to such deemed sale as if it
were an Asset Sale. In addition, the Fair Market Value of such properties and
assets of the Company or its Subsidiaries deemed to be sold pursuant to this
paragraph will be deemed to be Net Asset Sale Proceeds for purposes of the Asset
Sale provisions of the Indenture.
If an offer is made to repurchase the Notes in an Asset Sale Offer, the
Company will comply with any tender offer rules under the Exchange Act,
including, but not limited to, Rule 14e-1 thereunder, and any other applicable
laws, rules and regulations in connection with any such offer.
LIMITATION ON CREATION OF SUBSIDIARIES. The Company will not create or
acquire, and will not permit any of its Subsidiaries to create or acquire, any
Subsidiary other than (i) a Subsidiary existing as of the
77
<PAGE>
Issue Date, or (ii) a Subsidiary that is acquired or created in connection with
the acquisition by the Company of a related business or asset; provided,
however, that each Subsidiary acquired or created pursuant to clause (ii) shall
have executed and delivered a supplemental indenture in accordance with the
terms of the Indenture (together with such other documentation relating thereto
as the Trustee shall require, including, without limitation, opinions of counsel
as to the enforceability of such supplemental indenture), pursuant to which such
Subsidiary will become a Subsidiary Guarantor; PROVIDED, FURTHER, HOWEVER,
subsidiaries created for the sole purpose of consummating a merger or
acquisition and having total assets with a book value less than $100,000 shall
not be required to comply with this clause (ii) until the merger or acquisition
is consummated and only to the extent such Subsidiary survives such merger or
until such Subsidiary's total assets exceed the above amount.
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. The Indenture provides that
the Company will not, and will not cause or permit any of its Subsidiaries to,
directly or indirectly, enter into any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service or the lending of any funds) with or for the benefit of
any of its Affiliates (each, an "Affiliate Transaction"), other than such
transactions as are entered into and conducted in good faith and which are on
terms that are fair to the Company or such Subsidiary and no less favorable to
the Company or such Subsidiary than those that could have been obtained in a
comparable transaction on an arm's-length basis from a Person that is not an
Affiliate. All Affiliate Transactions or series of Affiliate Transactions
involving aggregate payments or other market value in excess of $1,000,000 must
also be approved, prior to the consummation thereof, by a majority of the
disinterested members of the Board of Directors of the Company and evidenced by
a Board Resolution (or, if there is only one disinterested director, it must be
approved by such member). Any Affiliate Transaction or series of Affiliate
Transactions involving aggregate payments or other market value in excess of
$2,500,000, or as to which there are no disinterested directors, is also subject
to the further requirement that the Company obtain an opinion of an Independent
Financial Advisor with experience in appraising the terms and conditions of the
relevant type of transaction (or series of transactions) stating that the
transaction (or series of transactions) is fair, from a financial point of view,
to the Company or such Subsidiary.
The foregoing restrictions will not apply to (i) transactions between the
Company and any of its Wholly-Owned Subsidiaries or among its Wholly-Owned
Subsidiaries; (ii) agreements in effect on the Issue Date and amendments or
renewals thereof that are not more disadvantageous to the Holders in any
material respect than the original agreements as in effect on the Issue Date;
(iii) transactions permitted by, and complying with the provisions of the
covenant described under "Limitation on Mergers and Certain Other Transactions";
(iv) Restricted Payments made in accordance with the "Limitation on Restricted
Payments" covenant; (v) reasonable fees and compensation and indemnification and
similar arrangements with officers, directors and employees of the Company or
any of its Subsidiaries and payments thereunder as determined in good faith by
the Company's Board of Directors; and (vi) transactions with customers, clients,
joint venture partners or purchasers or sellers of goods or services, in each
case, in the ordinary course of business (including, without limitation,
pursuant to joint venture agreements) and otherwise in compliance with the terms
of the Indenture which are fair to the Company or its Subsidiaries, in the
reasonable determination of the Board of Directors of the Company or the senior
management thereof, or are on terms at least as favorable as might reasonably
have been obtained at such time from an unaffiliated party.
OWNERSHIP OF CAPITAL STOCK OF WHOLLY-OWNED SUBSIDIARIES. The Indenture
provides that the Company will at all times maintain and cause each Subsidiary
to maintain, record and beneficial ownership of all of the Capital Stock (other
than directors' qualifying shares or an immaterial amount of shares required to
be owned by other Persons pursuant to applicable law) of each Subsidiary of the
Company; provided, that a Wholly-Owned Subsidiary of the Company may provide for
earn out or other similar obligations in connection with the acquisition of a
business for the purpose of financing such acquisition, provided that the
Company at all times shall maintain ownership of at least 85% of the Capital
Stock of such Wholly-
78
<PAGE>
Owned Subsidiary. The provisions of this covenant shall not apply to the Capital
Stock of any such Subsidiary that shall be disposed of in its entirety or
consolidated or merged with or into the Company or a Subsidiary of the Company,
in accordance with the provisions described under "Disposition of Proceeds of
Asset Sales" above and "Limitation on Mergers and Certain Other Transactions"
below.
LIMITATION ON MERGERS AND CERTAIN OTHER TRANSACTIONS. The Indenture
provides that the Company will not, and will not permit any of its Subsidiaries
to, consolidate with or merge with or into or sell, assign, convey, lease or
transfer all or substantially all of the properties and assets of the Company or
any of its Subsidiaries as an entirety to any Person in a single transaction or
through a series of transactions, unless: (a) the Company or such Subsidiary
shall be the continuing Person or the resulting, surviving or transferee Person
(the "Surviving Entity") shall be a corporation, limited liability company or
partnership organized and existing under the laws of the United States of
America or any state thereof or the District of Columbia, (b) the Surviving
Entity shall expressly assume, by a supplemental indenture executed and
delivered to the Trustee, in form reasonably satisfactory to the Trustee, all of
the obligations of the Company or such Subsidiary, as the case may be, under the
Notes, the Guarantees and the Indenture; (c) immediately before and immediately
after giving effect to such transaction, or series of transactions (including,
without limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions), no
Default or Event of Default shall have occurred and be continuing; (d) the
Company or the Surviving Entity shall immediately after giving effect to such
transaction or series of transactions (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of the transaction or series of transactions) have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such transaction or series of transactions; (e) immediately
after giving effect to such transaction or series of transactions, the Company
or the Surviving Entity could incur $1.00 of additional Indebtedness pursuant to
clause (d) of the "Limitation on Additional Indebtedness" covenant; and (f) the
Company or such Surviving Entity shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel stating that such consolidation,
merger, sale, assignment, conveyance, transfer or lease and, if a supplemental
indenture is required in connection with such transaction or series of
transactions, such supplemental indenture complies with the applicable
provisions of the Indenture and that all conditions precedent in the Indenture
relating to the transaction or series of transactions have been satisfied.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture:
(a) Default in the payment of any interest on the Notes when it becomes
due and continuance of such Default for a period of 30 calendar days;
(b) Default in the payment of the principal of, or premium, if any, on
the Notes when due;
(c) the failure of the Company to comply with any of the terms or
provisions of "Change of Control" or "Certain Covenants--Disposition of
Proceeds of Asset Sales";
(d) Default in the performance, or breach, of any covenant in the
Indenture (other than defaults specified in clauses (a), (b) or (c) above),
and continuance of such Default or breach for a period of 30 calendar days
after written notice specifying the Default to the Company by the Trustee or
to the Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the outstanding Notes;
(e) failure by the Company or any Subsidiary of the Company (i) to make
payment at maturity with respect to any other Indebtedness under one or more
classes or issues of Indebtedness in an aggregate principal amount of
$5,000,000 or more; or (ii) to perform any term, covenant, condition, or
provision of one or more classes or issues of Indebtedness in an aggregate
principal amount of
79
<PAGE>
$5,000,000 or more, which failure, in the case of this clause (ii), results
in an acceleration of the maturity thereof;
(f) one or more judgments, orders or decrees for the payment of money in
excess of $5,000,000, either individually or in an aggregate amount (to the
extent not covered by a reputable third-party insurance company as to which
the insurer has acknowledged coverage), shall be entered against the Company
or any Subsidiary of the Company or any of their respective properties and
shall not be discharged and there shall have been a period of 60 calendar
days during which a stay of enforcement of such judgment or order, by reason
of pending appeal or otherwise, shall not be in effect;
(g) certain events of bankruptcy or insolvency with respect to the
Company or any Subsidiary of the Company shall have occurred; or
(h) any of the Guarantees ceases to be in full force and effect or any
of the Guarantees is declared by a court of competent jurisdiction to be
null and void and unenforceable or any of the Guarantees is found by a court
of competent jurisdiction to be invalid or any of the Subsidiary Guarantors
denies its liability under its Guarantee (other than by reason of release of
a Subsidiary Guarantor in accordance with the terms of the Indenture).
If an Event of Default (other than an Event of Default specified in clause
(g) with respect to the Company) occurs and is continuing, then the Trustee or
the Holders of at least 25% in aggregate principal amount of the outstanding
Notes may, by written notice to the Company and the Trustee (if given by
Holders), which notice shall specify the respective Event of Default, declare
the entire principal amount of all the outstanding Notes to be due and payable
immediately, together with all accrued and unpaid interest and premium, if any,
thereon (such aggregate principal amount, together with accrued and unpaid
interest and premium, if any, thereon, the "Default Amount"), provided, however,
that so long as the Acquisition Facility shall be in effect any such
acceleration shall not be effective until the earlier of (x) five (5) business
days after receipt by the Company and the Representatives under the Acquisition
Facility of such acceleration notice and (y) the acceleration of any
Indebtedness under the Acquisition Facility. Upon any such declaration (except
as provided in the preceding sentence), the Default Amount shall become due and
payable immediately. Notwithstanding the foregoing, if an Event of Default
specified in clause (g) occurs with respect to the Company and is continuing,
then the Default Amount shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder.
After a declaration of acceleration, the Holders of a majority in aggregate
principal amount of outstanding Notes by notice to the Trustee, may rescind such
declaration of acceleration if all existing Events of Default have been cured or
waived (other than nonpayment of the Default Amount that has become due solely
as a result of such acceleration) and if the rescission of acceleration would
not conflict with any judgment or decree. The Holders of a majority in aggregate
principal amount of the outstanding Notes also have the right to waive past
defaults under the Indenture except a default in the payment of the principal
of, or interest or premium, if any, on any Note, or in respect of a covenant or
a provision which cannot be modified or amended without the consent of all
Holders.
No Holder has any right to institute any proceeding with respect to the
Indenture for any remedy thereunder, unless (i) the Holders of at least 25% in
aggregate principal amount of the outstanding Notes have made written request,
and offered reasonable indemnity, to the Trustee to institute such proceeding as
Trustee, (ii) the Trustee has failed to institute such proceeding within 15
calendar days after receipt of such notice and (iii) the Trustee has not within
such 15-day period received directions inconsistent with such written request by
Holders of a majority in aggregate principal amount of the outstanding Notes.
Such limitations do not apply, however, to a suit instituted by a Holder for the
enforcement of the payment of the principal of, premium, if any, or accrued
interest (if any) on, any Note held by such Holder on or after the respective
due dates expressed in such Note.
80
<PAGE>
During the continuance of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
is not under any obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
shall have offered to the Trustee reasonable security or indemnity. Subject to
certain provisions of the Indenture concerning the rights of the Trustee, the
Holders of a majority in aggregate principal amount of the outstanding Notes
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred on the Trustee.
DEFEASANCE
The Company and the Subsidiary Guarantors may at any time terminate all of
their obligations with respect to the Notes ("defeasance"), except for certain
obligations, including, without limitation, those regarding any trust
established for a defeasance and obligations to register the transfer or
exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes,
and to maintain agencies in respect of the Notes. The Company and the Subsidiary
Guarantors may at any time terminate their obligations under certain covenants
set forth in the Indenture, some of which are described under "ACertain
Covenants" above, and any omission to comply with such obligations shall not
constitute a Default or an Event of Default with respect to the Notes ("covenant
defeasance"). In order to exercise either defeasance or covenant defeasance, the
Company and the Subsidiary Guarantors must irrevocably deposit in trust with the
Trustee, for the benefit of the Holders, money or United States government
obligations, or a combination thereof, in such aggregate amounts as will be
sufficient to pay the principal of, interest and premium, if any, on the Notes
to maturity or redemption and comply with certain other conditions, including
the delivery of an Opinion of Counsel as to certain tax matters.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of Notes)
as to all outstanding Notes when either (a) all Notes theretofore authenticated
and delivered (except lost, stolen or destroyed Notes which have been replaced
or paid and Notes for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust) have been delivered to the Trustee
for cancellation; or (b) (i) all such Notes not theretofore delivered to the
Trustee for cancellation have become due and payable and the Company has
irrevocably deposited or caused to be deposited with the Trustee as trust funds
in trust solely for that purpose an aggregate amount of money sufficient to pay
and discharge the entire Indebtedness on the Notes not theretofore delivered to
the Trustee for cancellation, for principal, interest and premium, if any; (ii)
the Company has paid all sums payable by it under the Indenture; and (iii) the
Company has delivered irrevocable instructions to the Trustee to apply the
deposited money toward the payment of the Notes at maturity. In addition, the
Company must deliver an Officers' Certificate and an Opinion of Counsel stating
that all conditions precedent to satisfaction and discharge have been complied
with.
AMENDMENTS AND WAIVERS
From time to time the Company and the Subsidiary Guarantors, when authorized
by a Board Resolution, and the Trustee may, without the consent of the Holders,
amend, waive or supplement the Indenture and the Notes, for certain specified
purposes, including, among other things, curing ambiguities, defects or
inconsistencies, maintaining the qualification of the Indenture under the Trust
Indenture Act or making any change that does not adversely affect the rights of
any Holder. Other amendments and modifications of the Indenture may be made by
the Company, the Subsidiary Guarantors and the Trustee with the consent of the
Holders of not less than a majority of the aggregate principal amount of the
81
<PAGE>
outstanding Notes; provided that no such modification or amendment may, without
the consent of the Holder of each outstanding Note affected thereby, (i) reduce
the principal of, change the fixed maturity of or alter the redemption
provisions of, the Notes, (ii) change the currency in which the principal of any
Note or the accrued interest or premium (if any) thereon is payable, (iii)
reduce the percentage in principal amount of outstanding Notes whose Holders
must consent to an amendment, supplement or waiver or consent to take any action
under the Indenture or the Notes, (iv) impair the right set forth in the
Indenture to institute suit for the enforcement of any payment on or with
respect to the Notes (other than any such payment that has become due solely as
a result of the acceleration of the maturity of the Notes), (v) waive a Default
in payment with respect to the Notes, (vi) reduce the rate of or change the time
for payment of interest on the Notes, (vii) adversely affect the ranking of the
Notes or the Guarantees or (viii) release any Subsidiary Guarantor from any of
its obligations under its Guarantee or the Indenture otherwise than in
accordance with the terms of the Indenture.
REGARDING THE TRUSTEE
Chase Manhattan Bank and Trust Company, National Association is the Trustee
under the Indenture.
CERTAIN DEFINITIONS
Set forth below is a summary of defined terms used herein and certain
defined terms used in the Indenture. Reference is made to the Indenture for the
full definition of all such terms to be used therein.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Subsidiary of the
Company or at the time it merges or consolidates with the Company or any of its
Subsidiaries or assumed in connection with the acquisition of assets from such
Person and in each case not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Subsidiary of the
Company or such acquisition, merger or consolidation.
"Acquisition Facility" means (i) the Acquisition Facility, dated as of April
23, 1998, between Global Sub, the Company and the Subsidiary Guarantors, the
lenders party thereto in their capacities as lenders thereunder, Citibank, N.A.,
as issuing bank, Bank of America NT&SA, as documentation agent and Citicorp USA,
Inc., as administrative agent, together with the documents related thereto or
executed in connection therewith (including, without limitation, any guarantee
agreements, security documents and Interest Rate Protection Obligations), (ii)
any one or more additional agreements among the Company and/or any of its
Subsidiaries and one or more financial institutions providing for the making of
loans on a term or revolving basis and/or the issuance of letters of credit to
the extent incurred for the purpose of financing acquisitions, and (iii) any
agreement extending the maturity of, refinancing, renewing, replacing or
otherwise restructuring (including increasing the amount of available financings
thereunder (provided that such increase in borrowings is permitted by clauses
(c) and (d) of the "Limitation on Additional Indebtedness" covenant above)) all
or any portion of the Indebtedness or commitments or letters of credit under any
such agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders, in each case as such agreements
under the foregoing clauses (i), (ii) and (iii) may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time.
"Additional Amounts" has the meaning ascribed to such term under "Exchange
Offer--Purpose and Effect."
"Adjusted Net Assets" of any Person at any date shall mean the lesser of (x)
the amount by which the fair value of the property of such Person exceeds the
total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities),
but excluding liabilities under the Guarantee of such Person at such date and
(y) the amount by which the present fair salable value of the assets of such
Person at such date exceeds the amount that will be required to pay the probable
liability of such Person on its debts (after giving effect to all other fixed
and contingent
82
<PAGE>
liabilities and after giving effect to any collection from any Subsidiary of
such Person in respect of the obligations of such Person under the Guarantee of
such Person), excluding liabilities in respect of the Guarantee of such Person,
as they become absolute and matured.
"Affiliate" of any specified Person means any other Person which, directly
or indirectly, controls, is controlled by or is under direct or indirect common
control with, such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise, and the terms
"affiliated," "controlling" and "controlled" have meanings correlative to the
foregoing.
"Affiliate Transaction" has the meaning ascribed to such term under
"--Certain Covenants--Limitations on Transactions with Affiliates."
"Asset Acquisition" means (i) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise), or purchase or
acquisition of Capital Stock, by the Company or any of its Wholly-Owned
Subsidiaries in any other Person, in either case pursuant to which such Person
shall become a Wholly-Owned Subsidiary of the Company or any of its Wholly-Owned
Subsidiaries or shall be merged with or into the Company or any of its
Wholly-Owned Subsidiaries or (ii) any acquisition by the Company or any of its
Wholly-Owned Subsidiaries of the assets of any Person which constitute all of an
operating unit or business of such Person.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (including by means of sale-leaseback), assignment or other
transfer or disposition to any Person other than the Company or any Wholly-Owned
Subsidiary, in one transaction or a series of related transactions, of (i) any
Capital Stock of any Subsidiary of the Company (including by way of issuance by
such Subsidiary) or (ii) any other property or asset of the Company or any
Subsidiary of the Company other than inventory in the ordinary course, in each
case, other than such transactions or series of related transactions which do
not exceed $500,000. For the purposes of this definition, the term "Asset Sale"
will not include (a) any disposition of properties or assets of the Company or
any Subsidiary of the Company that is governed under and complies with the
requirements set forth in "--Certain Covenants--Limitation on Mergers and
Certain Other Transactions," "--Limitation on Sale-Leaseback Transactions" or
"--Limitation on Restricted Payments" above; or (b) dispositions of obsolete or
worn out equipment in the ordinary course of business and consistent with past
practice.
"Asset Sale Offer" has the meaning ascribed to such term under "--Certain
Covenants--Disposition of Proceeds of Asset Sales."
"Attributable Debt" means, in respect of a Sale-Leaseback Transaction, as at
the time of determination, the greater of (i) the Fair Market Value of the
property subject to such arrangement or (ii) the present value (discounted at
the interest rate borne by the Notes, compounded semi-annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such arrangement (including any period for which such lease
has been extended).
"Board Resolution" means with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person to have been
duly adopted, in good faith, by the Board of Directors of such Person and to be
in full force and effect on the date of such certification.
"Business Day" means a day other than a Saturday, a Sunday or day which
banking institutions in the City of New York are not required to be open.
"Capital Stock" means any and all shares, interests, participations or other
equivalents (however designated) of any Person, including Common Stock or
Preferred Stock and including any rights, options or warrants with respect
thereto.
83
<PAGE>
"Capitalized Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified and
accounted as a capital lease obligation under GAAP, and, for the purpose of the
Indenture, the amount of such obligation at any date will be the capitalized
amount thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means, at any time (i) any evidence of Indebtedness with
a maturity of 365 calendar days or less issued or directly and fully guaranteed
or insured by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of America
is pledged in support thereof); (ii) certificates of deposit or acceptances or
money market deposits with a maturity of 365 calendar days or less of any
financial institution that is a member of the United States Federal Reserve
System having combined capital and surplus and undivided profits of not less
than $500,000,000; (iii) commercial paper with a maturity of 365 calendar days
or less issued by a corporation (except an Affiliate of the Company) organized
under the laws of any state of the United States or the District of Columbia and
rated at least A-1 by S&P or at least P-1 by Moody's; (iv) repurchase agreements
and reverse repurchase agreements relating to marketable direct obligations
issued or unconditionally guaranteed by the United States Government or issued
by any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within 365 calendar days from the date of
acquisition; provided that, in the case of obligations issued or guaranteed by
the United States of America, the terms of such agreements comply with the
guidelines set forth in the United States Federal Financial Agreements of
Depository Institutions with Securities and Others, as adopted by the United
States Comptroller of the Currency; and (v) investments in money market funds
which invest substantially all their assets in securities of the types described
in (i)-(iv) above.
"Change of Control" means (a) all or substantially all of the assets of the
Company are sold, leased, exchanged or otherwise transferred to any person or
entity or group of persons or entities acting in concert as a partnership or
other group (a "Group of Persons") other than a Permitted Holder (or other than
to a Wholly-Owned Subsidiary of the Company), (b) the Company is merged or
consolidated with or into another corporation with the effect that the Permitted
Holders hold less than 50% of the combined voting power of the then outstanding
securities of the surviving corporation of such merger or the corporation
resulting from such consolidation ordinarily (and apart from rights arising
under special circumstances) having the right to vote in the election of
directors, (c) a majority of the board of directors of the Company shall be
replaced, over a two-year period, from the directors who constituted the board
of directors at the beginning of such period, and such replacement shall not
have been approved by the board of directors as constituted at the beginning of
such period, (d) a Person or Group of Persons (other than the Permitted Holders)
shall, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise, beneficially own (within the
meaning of Rule 13d-3 under the Exchange Act) Common Stock of the Company or
securities of the Company representing 50% or more of the Common Stock or voting
power of the then outstanding securities of the Company, or (e) the Permitted
Holders cease to own at least 50% of the Voting Capital Stock of the Company.
"Change of Control Date" has the meaning ascribed to such term under "Change
of Control."
"Change of Control Offer" has the meaning ascribed to such term under
"Change of Control."
"Change of Control Payment Date" has the meaning ascribed to such term under
"Change of Control."
"Commission" means the United States Securities and Exchange Commission.
"Common Stock" means, with respect to any Person, any and all shares,
interests (including partnership interests) or other participations in, and
other equivalents (however designated and whether voting or nonvoting) of such
Person's common stock or ordinary shares or interests, whether or not
outstanding at the Issue Date, and includes, without limitation, all series and
classes of such common stock or ordinary shares or interests.
84
<PAGE>
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense
(including amortization or write-off of deferred financing costs of such Person
and its consolidated Subsidiaries during such period and any premium or penalty
paid in connection with redeeming or retiring Indebtedness or any series of
Disqualified Capital Stock or Preferred Stock of the Company and its
consolidated Subsidiaries prior to the stated maturity thereof pursuant to the
agreements governing such Indebtedness, Disqualified Capital Stock or Preferred
Stock, as the case may be) and (ii) the product of (x) the amount of all
dividend payments on any series of Disqualified Capital Stock of such Person and
any series of Disqualified Capital Stock or Preferred Stock of its Subsidiaries
(other than dividends paid in Capital Stock which is not Disqualified Capital
Stock) paid, accrued or scheduled to be paid or accrued during such period times
(y) a fraction, the numerator of which is one and the denominator of which is
one minus the then current effective consolidated federal, state and local tax
rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the aggregate of the interest expense (without deduction for interest
income) of such Person and its Subsidiaries for such period, on a consolidated
basis, as determined in accordance with GAAP, and including (a) all amortization
of original issue discount and deferred financing costs; (b) the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by such Person and its Subsidiaries during such period; (c) net
cash costs under all Interest Rate Protection Obligations (including
amortization of fees); (d) all capitalized interest; and (e) the interest
portion of any deferred payment obligations for such period.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP consistently
applied; provided, that (a) the Net Income of any other Person in which the
Person in question or one of its Subsidiaries has a joint interest with a third
party (which interest does not cause the Net Income of such other Person to be
consolidated into the Net Income of the Person in question in accordance with
GAAP) shall be included only to the extent of the amount of dividends or
distributions paid to the Person in question or the Subsidiary, (b) the Net
Income of any Subsidiary of such Person that is subject to any legal, consensual
or other restriction or limitation on the payment of dividends or the making of
other distributions shall be excluded to the extent of such restriction or
limitation, (c) (i) the Net Income (or 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 gain (but not loss) resulting from an Asset Sale by such Person
or any of its Subsidiaries other than in the ordinary course of business shall,
in each case, be excluded, and (d) extraordinary gains and losses (and any
related tax effects) and any one-time increase or decrease to Net Income which
is required to be recorded because of the adoption of new accounting practices
or standards required by GAAP, shall in each case be excluded.
"Consolidated Net Worth" means, with respect to any Person at any date of
determination, the consolidated equity represented by such Person's Capital
Stock (other than Disqualified Capital Stock) at such date, as determined on a
consolidated basis in accordance with GAAP. "covenant defeasance" has the
meaning ascribed to such term under "Defeasance."
"Currency Protection Obligations" means obligations under any foreign
exchange contract, currency swap agreement, or other similar agreement or
arrangement designed to protect the Company and its Subsidiaries against
fluctuations in currency values and entered into for hedging and not speculative
purposes.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Default Amount" has the meaning ascribed to such term under "Events of
Default." "defeasance" has the meaning ascribed to such term under "Defeasance."
85
<PAGE>
"Disqualified Capital Stock" means, with respect to any Person, any Capital
Stock which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is exchangeable for Indebtedness, or is redeemable
or required to be purchased at the option of the holder thereof, in whole or in
part, on or prior to the maturity date of the Notes.
"EBITDA" means, for a period ending at the close of any fiscal quarter, the
sum of: (a) Consolidated Net Income for such period, PLUS (b) to the extent
deducted in determining Consolidated Net Income, the sum of all expenses of the
Company and its Subsidiaries, on a consolidated basis, in accordance with GAAP
for such period in respect of (i) depreciation, (ii) amortization excluding
amortization of capitalized debt issuance costs, (iii) Consolidated Interest
Expense, (iv) consolidated income taxes, and (v) any other non-cash charges to
the extent deducted from or reflected in Consolidated Net Income except for any
non-cash charges that represent accruals of, or reserves for, cash disbursements
to be made in any future accounting period. Notwithstanding the foregoing, the
provision for taxes based on the income and profits of, and the depreciation,
amortization and other non-cash charges of, a Subsidiary shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Subsidiary was included in calculating
the Consolidated Net Income and only if a corresponding amount could, at the
date of determination, be paid as a dividend by such Subsidiary to the Company.
"EBITDA Coverage Ratio" means the ratio of (a) EBITDA for the four fiscal
quarters immediately preceding the determination date to (b) Consolidated Fixed
Charges calculated on a PRO FORMA basis for such four fiscal quarters. For
purposes of this definition, if the date of the transaction giving rise to the
need to calculate the EBITDA Coverage Ratio (the "Transaction Date") occurs
prior to the date on which the Company's consolidated financial statements for
the four full fiscal quarters subsequent to the Issue Date are first available,
EBITDA and Consolidated Fixed Charges shall be calculated, in the case of the
Company, after giving effect on a PRO FORMA basis as if the Notes outstanding on
the date of the Transaction Date were issued on the first day of such four full
fiscal quarter period and the assets and liabilities of the Company as of the
Transaction Date had been contributed to or assumed by the Company on such first
day. In addition to and without limitation of the foregoing, for purposes of
this definition, EBITDA and Consolidated Fixed Charges shall be calculated after
giving effect on a PRO FORMA basis for the period of such calculation to (i) the
incurrence or repayment of any Indebtedness of such Person or any of its
Subsidiaries (and the application of the proceeds thereof) at any time during
the period (the "Reference Period") (A) commencing on the first day of the four
full fiscal quarter period for which financial statements are available that
precedes the Transaction Date and (B) ending on and including the Transaction
Date, including, without limitation, the incurrence or repayment of the
Indebtedness (and the application of the proceeds thereof) giving rise to the
need to make such calculation, as if such incurrence or repayment occurred on
the first day of the Reference Period; provided, that if such Person or any of
its Subsidiaries directly or indirectly guarantees Indebtedness of a third
Person, the above clause shall give effect to the incurrence of such guaranteed
Indebtedness as if such Person or Subsidiary had directly incurred such
guaranteed Indebtedness and (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of the Company or any of its Wholly-Owned
Subsidiaries (including any Person who becomes a Wholly-Owned Subsidiary as a
result of the Asset Acquisition) incurring Acquired Indebtedness) occurring
during the Reference Period (it being expressly understood that such calculation
shall also give effect on a PRO FORMA BASIS to any increase or decrease in
Consolidated Net Income (including any PRO FORMA expense and cost reductions
calculated on a basis consistent with Regulation S-X under the Exchange Act)
attributable to such Asset Sale or Asset Acquisition, as if such Asset Sale or
Asset Acquisition occurred on the first day of the Reference Period) and any
retirement of Indebtedness in connection with such Asset Sale or Asset
Acquisition, as if such Asset Sale or Asset Acquisition and/or retirement
occurred on the first day of the Reference Period. Furthermore, in calculating
the denominator (but not the numerator) of this "EBITDA Coverage Ratio," (1)
interest on Indebtedness determined on a fluctuating basis as of the Transaction
Date
86
<PAGE>
and which will continue to be so determined thereafter shall be deemed to accrue
at a fixed rate PER ANNUM equal to the rate of interest on such Indebtedness in
effect on the Transaction Date; (2) if interest on any Indebtedness actually
incurred on the Transaction Date may optionally be determined at an interest
rate based upon a factor of a prime or similar rate, a eurocurrency interbank
offered rate, or other rates, then the interest rate in effect on the
Transaction Date will be deemed to be in effect during the Reference Period; and
(3) notwithstanding clause (1) above, interest on Indebtedness determined on a
fluctuating basis, to the extent such interest is covered by agreements relating
to Interest Rate Protection Obligations, shall be deemed to accrue at the rate
PER ANNUM resulting after giving effect to the operation of such agreements.
"Event of Default" has the meaning ascribed to such term under "Events of
Default."
"Excess Proceeds" has the meaning ascribed to such term under "Certain
Covenants--Disposition of Proceeds of Asset Sales."
"Excess Proceeds Payment Date" has the meaning ascribed to such term under
"Certain Covenants-- Disposition of Proceeds of Asset Sales."
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" or "fair value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length transaction,
for cash, between a willing seller and a willing 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 shall be evidenced by a Board Resolution.
"GAAP" means generally accepted accounting principles as in effect from time
to time in the United States of America.
"Group of Persons" has the meaning ascribed to such term in the definition
of "Change of Control."
"Guarantees" has the meaning ascribed to such term under "Ranking and
Subordinated Guarantees."
"Guarantor Senior Debt" means with respect to any Subsidiary Guarantor, the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on, and all amounts owing in respect of, all
monetary obligations of every nature under the Acquisition Facility and of any
guarantees by the Subsidiary Guarantors of Indebtedness under the Acquisition
Facility, including, without limitation, obligations to pay principal, premium
and interest, reimbursement obligations under letters of credit, fees, expenses
and indemnities unless the Acquisition Facility expressly provides that such
Indebtedness shall not be senior in right of payment to the Guarantee of such
Subsidiary Guarantor.
"Holders" means the holders from time to time of the Notes. "incur" has the
meaning ascribed to such term under "Certain CovenantsALimitation on Additional
Indebtedness."
"Indebtedness" means, with respect to any Person, without duplication, (i)
any liability, contingent or otherwise, of such Person (A) 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 (B) evidenced by a note, debenture or
similar instrument or letters of credit (including a purchase money obligation
or other obligation relating to the deferred purchase price of property and any
Capitalized Lease Obligations); (ii) any liability of others of the kind
described in the preceding clause (i) which such Person has guaranteed or which
is otherwise its legal liability; (iii) any obligation secured by a Lien to
which the property or assets of such Person are subject, whether or not the
obligations secured thereby shall have been assumed by or shall otherwise be
such Person's legal liability; (iv) Capitalized Lease Obligations, Currency
Protection Obligations and Interest Rate Protection Obligations; (v) the
Attributable Debt of any Sale-Leaseback Transaction; (vi) Disqualified Capital
Stock; and (vii) any and all deferrals, renewals, extensions and refundings of,
87
<PAGE>
or amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clause (i), (ii), (iii), (iv), (v) or (vi).
"Independent" when used with respect to any specified Person means such a
Person who (a) is in fact independent, (b) does not have any direct financial
interest or any material indirect financial interest in the Company or any
Affiliate of the Company and (c) is not an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions
for the Company or any of its Affiliates.
"Independent Financial Advisor" means an accounting, appraisal or investment
banking or consulting firm of national recognition within the United States that
is, in the reasonable judgment of the Board of Directors of the Company,
qualified to perform the tasks for which such firm has been engaged and
Independent with respect to the Company and its Affiliates.
"Initial Purchaser" means, collectively, Citicorp Securities, Inc., Citibank
Canada Securities Limited and Citibank International plc.
"Interest Payment Date" has the meaning ascribed to such term under
"Maturity, Interest and Principal."
"Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include without limitation, interest rate swaps, caps,
floors, collars and similar agreements and, in each case, entered into for
hedging and not for speculative purposes.
"Investment" has the meaning ascribed to such term under "Certain
Covenants--Limitation on Investments, Loans and Advances."
"Issue Date" means April 23, 1998.
"Lien" means, with respect to any Person, any mortgage, deed of trust,
pledge, lien, lease, encumbrance, easement, restriction, covenant, right-of-way,
charge or adverse claim affecting title or resulting in an encumbrance against
real or personal (tangible or intangible) property or any interest therein of
such Person, or a security interest of any kind (including, without limitation,
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person, and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statute or statutes) of any jurisdiction other than to reflect ownership by a
third party of property leased to the referent Person or any of its Subsidiaries
under a lease that is not in the nature of a conditional sale or title retention
agreement).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Asset Sale Proceeds" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents, including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations with respect to
Indebtedness are financed or sold with recourse to the Company or any of its
Subsidiaries) net of (i) brokerage commissions and other reasonable fees and
expenses (including reasonable fees and expenses of counsel and investment
bankers) incurred in connection with such Asset Sale; (ii) provisions for all
taxes payable as a result of such Asset Sale; (iii) payments made to retire
Indebtedness secured by the assets subject to such Asset Sale to the extent
required pursuant to the terms of such Indebtedness; and (iv) appropriate
amounts to be provided by the Company or any of its Subsidiaries, as the case
may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any of its
Subsidiaries, as the case may be, after such Asset Sale, including, without
88
<PAGE>
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"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, as determined in good faith by the Board of Directors of the Company,
at the time of receipt) and (b) in the case of any exchange, exercise,
conversion or surrender of outstanding securities of any kind of the Company for
or into shares of Capital Stock of the Company which is not Disqualified Capital
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 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).
"Officer" means, with respect to any Person, the Chairman of the Board of
Directors, the Chief Executive Officer, the Chief Financial Officer, the
Treasurer or the Controller of such Person.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by two Officers or by an Officer and either the Secretary or an Assistant
Secretary of such Person.
"Opinion of Counsel" means a written opinion from legal counsel who and
which is reasonably acceptable to the Trustee complying with the requirements of
the Indenture. Such legal counsel shall be outside counsel and not an employee
of or in-house counsel to the Company.
"Permitted Holder" means Richard D. Marconi, any spouse of Mr. Marconi, any
lineal descendants of Mr. Marconi, any trust or estate the sole beneficiaries of
which are Mr. Marconi, any spouses of Mr. Marconi or any lineal descendants of
Mr. Marconi, or any entity owned or controlled by any of the foregoing.
"Permitted Liens" means (i) Liens in favor of the Company or a Subsidiary of
the Company; (ii) Liens existing on the Issue Date; (iii) Liens securing
Indebtedness and other obligations related thereto (including accrued interest,
fees and reimbursements and indemnities thereon and other obligations related
thereto) incurred under the Acquisition Facility; provided, that the incurrence
of such Indebtedness is otherwise permitted under the Indenture; (iv) Liens on
assets of a Person when it becomes a Subsidiary and Liens securing Acquired
Indebtedness incurred in accordance with the "Limitation on Additional
Indebtedness" covenant; provided, that in each case (A) such Liens secured such
assets or Acquired Indebtedness at the time of and prior to such Person becoming
a Subsidiary or the incurrence of such Acquired Indebtedness by the Company or a
Subsidiary of the Company and were not granted in connection with, or in
anticipation of, the incurrence of such Acquired Indebtedness by the Company or
a Subsidiary of the Company and (B) such Liens do not extend to or cover any
property or assets of the Company or of any of its Subsidiaries other than the
property or assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company or a Subsidiary of the
Company and are no more favorable to the lienholders than those securing the
Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by
the Company or a Subsidiary of the Company; (v) leases and subleases of real
property which do not interfere with the ordinary conduct of the business of the
Company or any of its Subsidiaries, and which are made on customary and usual
terms applicable to similar properties; (vi) Liens securing Indebtedness
incurred to finance Indebtedness secured by a Lien permitted under the Indenture
and is permitted to be refinanced under the Indenture, provided that such Liens
do not extend to or cover any property or assets of the Company or any of its
Subsidiaries not securing the Indebtedness so refinanced; (vii) any interest or
title of a lessor or sublessor, or any Lien in favor of a landlord, arising
under any real or personal property lease under which the Company or any of its
Subsidiaries is a lessee, sublessee or subtenant (other than any interest or
title and/or any Lien
89
<PAGE>
securing any Capitalized Lease Obligation); (viii) Liens securing Capitalized
Lease Obligations, Purchase Money Indebtedness, purchase money mortgages or
pledges or other purchase money liens upon any property acquired by the Company
or any Subsidiary of the Company after the Issue Date which are acquired or held
by such entity in the ordinary course of business and are securing solely the
purchase price or lease rental of such property or are Indebtedness incurred
solely for the purpose of financing or refinancing the acquisition or lease of
such property (but only to the extent the Indebtedness secured by such liens
shall otherwise be permitted under the covenants set forth herein); (ix) with
respect to any Person, any Lien arising by reason of (a) any judgment, decree or
order of any court, so long as such Lien is being contested in good faith and is
adequately bonded, and any appropriate legal proceedings which may have been
duly initiated for the review of such judgment, decree or order shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired, (b) taxes not yet delinquent or which are
being contested in good faith, (c) security for payment of workers' compensation
or other insurance, (d) security for the performance of tenders, contracts
(other than contracts for the payment of money) or leases, (e) deposits to
secure public or statutory obligations, or in lieu of surety or appeal bonds,
(f) operation of law in favor of carriers, warehouseman, landlords, mechanics,
materialman, laborers, employees or suppliers, incurred in the ordinary course
of business for sums which are not yet delinquent or are being contested in good
faith by negotiations or by appropriate proceedings which suspend the collection
thereof, (g) security for surety or appeal bonds, and (h) easements,
rights-of-way, zoning and similar covenants and restrictions and other similar
encumbrances or title defects which, in the aggregate, are not substantial in
amount, and which do not in any case materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of the Company or any of its Subsidiaries; and (x) other Liens
securing Indebtedness if the Indebtedness secured by the Lien, plus all other
Indebtedness secured by Liens (excluding Indebtedness secured by Liens permitted
by (i) through (ix) above) at the time of determination do not exceed
$1,000,000.
"Permitted Payments" has the meaning ascribed to such term under "Certain
Covenants--Limitation on Restricted Payments."
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, trust, unincorporated organization or government or
any agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other class of Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation or otherwise.
"Purchase Money Indebtedness" means Indebtedness of the Company or its
Wholly-Owned Subsidiaries incurred for the purpose of financing all or any part
of the purchase price or the cost of installation, construction or improvement
of any property or equipment.
"Reorganization Agreement" means the reorganization agreement as in effect
on the Issue Date, among the Company and its Subsidiaries, together with the
documents referred to therein, pursuant to which the Reorganization was
consummated.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Guarantor Senior Debt; provided that if, and
for so long as, any Guarantor Senior Debt lacks such a representative, then the
Representative for such Guarantor Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Guarantor Senior
Debt in respect of any Guarantor Senior Debt.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution on Capital Stock 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 any Subsidiary of the
Company (other than (x) dividends or distributions payable solely in Capital
Stock (other than Disqualified Capital Stock) or in options, warrants or other
rights to purchase Capital Stock (other than Disqualified Capital
90
<PAGE>
Stock), and (y) in the case of Subsidiaries of the Company, dividends or
distributions payable to the Company or to a Wholly-Owned Subsidiary of the
Company), (ii) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company, (iii) the making of any principal
payment on, purchase, defeasance, redemption, prepayment, decrease or other
acquisition or retiring for value, prior to any scheduled final maturity,
scheduled repayment or scheduled sinking fund payment, of any Indebtedness of
the Company that is subordinate or junior in right of payment to the Notes, and
(iv) the making of any Investment other than an Investment permitted under
clauses (i) through (x) of the "Limitation on Investments, Loans and Advances"
covenant.
"S Corporation" means an S corporation for purposes of the Internal Revenue
Code of 1986, as amended.
"Sale-Leaseback Transaction" means any direct or indirect arrangement, or
series of related arrangements, with any Person or to which any Person is a
party, providing for the leasing to the Company or to a Subsidiary of the
Company of any property, whether owned by the Company or by any Subsidiary of
the Company at the Issue Date or later acquired, which has been or is to be sold
or transferred by the Company or such Subsidiary of the Company to such Person
or to any other Person from whom funds have been or are to be advanced by such
Person on the security of such property.
"S&P" means Standard & Poor's Rating Service and its successors.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary," with respect to any Person, means (i) any corporation of which
the outstanding Capital Stock having at least a majority of the votes entitled
to be cast in the election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, by such Person or (ii) any other
Person (other than a corporation) including a partnership in which the Company,
a Subsidiary of the Company or the Company and a Subsidiary of the Company,
directly or indirectly, at the date of determination thereof, has at least a
majority ownership interest.
"Subsidiary Guarantor" means (i) Global Sub, D&F Sub, Omni-Pak, Dynamic and
West Coast, and (ii) each of the Company's Subsidiaries that in the future
executes a supplemental indenture in which such Subsidiary agrees to be bound by
the terms of the Indenture as a Subsidiary Guarantor; provided that any Person
constituting a Subsidiary Guarantor as described above shall cease to constitute
a Subsidiary Guarantor when its respective Guarantee is released in accordance
with the terms of the Indenture.
"Surviving Entity" has the meaning ascribed to such term under "Certain
Covenants--Limitation on Mergers and Certain Other Transactions."
"Trustee" has the meaning ascribed to such term in the first paragraph under
the caption "Description of the New Notes."
"Trust Indenture Act" has the meaning ascribed to such term in the first
paragraph under the caption "Description of the New Notes."
"Voting Capital Stock" means, with respect to any Person, Capital Stock of
any class or kind ordinarily having the power to vote for the election of
directors, managers or other members of the governing body of such Person.
"Wholly-Owned Subsidiary" means any Subsidiary of such Person of which all
the outstanding voting securities (other than in the case of a foreign
Subsidiary, directors' qualifying shares or an immaterial amount of shares
required to be owned by other Persons pursuant to applicable law) are owned by
such Person or any Wholly-Owned Subsidiary of such Person; provided that a
Wholly-Owned Subsidiary of the Company may provide for earn out or other similar
obligations in connection with the acquisition of a business for the purpose of
financing such acquisition, provided that the Company at all times shall
maintain ownership of at least 85% of the Capital Stock of such Wholly-Owned
Subsidiary.
91
<PAGE>
BOOK-ENTRY; DELIVERY AND FORM
The Old Notes purchased on the Original Issue Date by (i) "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act)
("QIBs") were represented by a single permanent global certificate in
definitive, fully registered form (the "QIB Global Certificate"), and (ii) non
U.S. Persons (as defined in Regulation S under the Securities Act) in offers and
sales that occurred outside the United States were represented by a single
global certificate in definitive, fully registered form (the "Regulation S
Global Certificate" and, together with the QIB Global Certificate, the
"Unregistered Global Certificates"). Except for New Notes issued to Non-Global
Purchasers (as defined below), the New Notes will initially be issued in the
form of one or more global certificates (collectively, the "Exchange Global
Certificates"). The Unregistered Global Certificates were deposited on the
closing of the Old Notes Offering and the Exchange Global Certificates will be
deposited on the date of the closing of the Exchange Offer with, or on behalf
of, The Depository Trust Company ("DTC") and registered in the name of a nominee
of DTC.
New Notes (i) originally purchased by or transferred to non U.S. persons or
institutional "accredited investors" (within the meaning of subparagraph (a)(1),
(2), (3) or (7) of Rule 501 under the Securities Act) who are not QIBs or (ii)
held by QIBs who elect to take physical delivery of their certificates instead
of holding their interest through Global Notes (and which are thus ineligible to
trade through DTC) (collectively referred to herein as the "Non-Global
Purchasers") will be issued in registered certificated form ("Certificated
Note"). Upon the transfer to a QIB of any Certificated Note initially issued to
a Non-Global Purchaser, such Certificated Note will, unless the transferee
requests otherwise or such Global Note has previously been exchanged in whole
for Certificated Notes, be exchanged for an interest in such Global Notes.
"Global Note" means the Old Notes represented by the Unregistered Global
Certificates or the New Notes represented by the Exchange Global Certificates,
as the case may be.
THE EXCHANGE GLOBAL CERTIFICATES
The Company expects that pursuant to procedures established by DTC (i) upon
deposit of the Exchange Global Certificates, DTC or its custodian will credit,
on its internal system, portions of the Exchange Global Certificates in the
respective accounts of persons who have accounts with such depositary and (ii)
ownership of the New Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC or its nominee
(with respect to interests of participant (as defined below)) and the records of
participants (with respect to interests of persons other than participants).
Ownership of beneficial interests in the Exchange Global Certificates will be
limited to persons who have accounts with DTC ("participants") or persons who
hold interests through participants.
Holders may hold their interests in the Exchange Global Certificates
directly through DTC if they are participants in such system, or indirectly
through organizations which are participants in the system.
So long as DTC, or its nominee, is the registered owner or holder of the
Exchange Global Certificates, DTC or such nominee will be considered the sole
owner or holder of the New Notes represented by the Exchange Global Certificates
for all purposes under the Indenture and for any other purposes with respect to
the New Notes. No beneficial Certificate owner of an interest in the Exchange
Global Certificates will be able to transfer such interest except in accordance
with DTC's applicable procedures, in addition to those provided for under the
Indenture with respect to the Notes.
Payments of the principal of, premium (if any) and interest on, the Exchange
Global Certificates will be made to DTC or its nominee, as the case may be, as
the registered owner thereof. Neither the Company nor the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Exchange
Global Certificates or for maintaining, supervising or reviewing any records
relating to such beneficial interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
the principal of, premium (if any) and interest on, the Exchange Global
Certificates, will credit participants' accounts with
92
<PAGE>
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Exchange Global Certificates, as the case may be,
as shown on the records of DTC or its nominees. The Company also expects that
payments by participants to owners of beneficial interests in such Exchange
Global Certificates held through such participants will be governed by standing
instructions and customary practice, as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. If a holder
requires physical delivery of a Certificated Security for any reason, including
to sell Notes to persons in states which require physical delivery of such
securities or to pledge such securities, such holder must transfer its interest
in the Exchange Global Certificates in accordance with the normal procedures of
DTC including, with respect to the Notes, the procedures set forth in the
Indenture.
Any beneficial interest in one of the Exchange Global Certificates that is
transferred to a person who takes delivery in the form of an interest in the
other Exchange Global Certificate will, upon transfer, cease to own an interest
in such Exchange Global Certificate and, accordingly, will thereafter be subject
to all transfer restrictions, if any, and other procedures applicable to
beneficial interests in such other Exchange Global Certificate with respect to
the applicable notes for as long as it remains such an interest.
DTC has advised the Company that DTC will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
accounts the DTC interests in the Exchange Global Certificates is credited and
only in respect of the aggregate principal amount of Notes, as the case may be,
as to which such participant or participants has or have given such direction.
However, if there is an Event of Default under the Indenture, DTC will exchange
the Exchange Global Certificates for Certificated Securities, which it will
distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Although DTC has agreed to follow the foregoing procedures in order to
facilitate transfers of interests in the Exchange Global Certificates among
participants of DTC, it is under no obligation to perform such procedures, and
such procedures may be discontinued at any time. Neither the Company nor the
Trustee will have any responsibility for the performance by DTC of its direct or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
Interests in the Exchange Global Certificates will be exchanged for
Certificated Securities if (i) DTC notifies the Company that it is unwilling or
unable to continue as depositary for the Exchange Global Certificates, or DTC
ceases to be a "Clearing Agency" registered under the Exchange Act, and a
successor depositary is not appointed by the Company within 40 days, or (ii) an
Event of Default has occurred and is continuing with respect to the Notes. Upon
the occurrence of any of the events described in the preceding sentence, the
Company will cause the appropriate Certificated Securities to be delivered.
93
<PAGE>
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Weil, Gotshal & Manges LLP, counsel to the Company, the
following summary, as it relates to conclusions or statements of law, accurately
sets forth the material United States federal ("federal") income tax
consequences of the purchase, ownership and disposition of Notes as well as the
exchange of Old Notes for New Notes pursuant to the Exchange Offer. This
discussion is a summary and does not consider all aspects of federal income
taxation that may be relevant to the purchase, ownership and disposition of
Notes by a Holder or the exchange by a Holder of Old Notes for New Notes
pursuant to the Exchange Offer, in light of such Holder's personal
circumstances. The discussion also does not address the federal income tax
consequences of ownership of Notes not held as capital assets within the meaning
of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"),
or the federal income tax consequences to Holders subject to special treatment
under the federal income tax laws, such as dealers in securities or foreign
currency, tax-exempt investors, real estate investment trusts, regulated
investment companies, banks, thrifts, insurance companies or other financial
institutions, persons that hold the Notes as a position in a "straddle," or as
part of a "synthetic security" or "hedge," "conversion transaction" or other
integrated investment, persons that have a "functional currency" other than the
U.S. dollar, or investors in pass-through entities. In addition, this discussion
is generally limited to the tax consequences to initial Holders that purchased
the Old Notes at the "issue price." For this purpose, the "issue price" of an
Old Note is the first price at which a substantial part of the Old Notes was
sold to the public for money (excluding sales to bond houses, brokers, or
similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers). Moreover, the effect of any applicable state,
local or foreign tax laws is not discussed.
This discussion is based upon the Code, existing and proposed regulations
thereunder ("Treasury Regulations"), and current administrative rulings and
court decisions. All of the foregoing are subject to change, possibly on a
retroactive basis, and any such change could affect the continuing validity of
this discussion.
Persons considering the purchase, ownership and disposition of Notes as well
as the exchange of Old Notes for New Notes pursuant to the Exchange Offer should
consult their own tax advisors concerning the application of federal income tax
laws, as well as the laws of any state, local or foreign taxing jurisdiction, to
their particular situations.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is limited to the federal income tax consequences
relevant to a Holder that is (i) a citizen or resident (as defined in Section
7701(b)(1) of the Code) of the United States, (ii) a corporation organized under
the laws of the United States or any political subdivision thereof or therein,
(iii) an estate the income of which is subject to federal income tax regardless
of its source, or (iv) a trust with respect to which a court within the United
States is able to exercise primary supervision over its administration and one
or more U.S. persons have the authority to control all of its substantial
decisions (a "U.S. Holder"). Certain federal income tax consequences relevant to
a Holder other than a U.S. Holder are discussed separately below.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF EXCHANGING OLD NOTES FOR NEW NOTES
The exchange of Old Notes for New Notes pursuant to the Exchange Offer will
not result in U.S. income tax consequences to U.S. Holders effecting such
exchange pursuant to the Exchange Offer. A U.S. Holder effecting such exchange
will have the same adjusted basis and holding period in the New Notes as it had
in the Old Notes exchanged therefor.
94
<PAGE>
STATED INTEREST AND ORIGINAL ISSUE DISCOUNT
The stated interest on a Note will be taxable to a U.S. Holder as ordinary
interest income either at the time it accrues or is received, depending upon
such U.S. Holder's method of accounting for federal income tax purposes. The Old
Notes were issued with original issue discount ("OID") for federal income tax
purposes. All U.S. Holders of Notes will be required to include OID in income as
it accrues, regardless of such holders' regular method of accounting for federal
income tax purposes. OID generally will be treated as interest income to the
U.S. Holder and will accrue on a yield-to-maturity basis over the life of the
Note, as discussed below.
The amount of OID with respect to a Note will be an amount equal to the
excess of the stated redemption price at maturity of such Note over the "issue
price" (as defined above) of such Note. The stated redemption price at maturity
of each Note will include all cash payments required to be made under the Note
through maturity, other than payments of "qualified stated interest." Stated
interest on the Note will qualify as qualified stated interest. Accordingly, the
amount of OID with respect to a Note will be equal to the excess of the Note's
principal amount over its issue price.
The amount of OID accruing to a Holder with respect to any Note will be the
sum of the "daily portions" of OID with respect to such Note for each day during
the taxable year (or portion thereof) on which such Holder owns such Note
("accrued OID"). The daily portion is determined by allocating to each day in
any "accrual period" a pro rata portion of the OID allocable to that accrual
period. An accrual period for a Note may be of any length and may vary in length
over the term of a Note provided that each accrual period is no longer than one
year and each scheduled payment of principal or interest occurs either on the
final day or on the first day of an accrual period. The amount of OID accruing
during any full accrual period with respect to a Note will be equal to the
following amount: (i) the "adjusted issue price" of such Note at the beginning
of that accrual period, multiplied by (ii) the yield to maturity of such Note
(taking into account the length of the accrual period). The adjusted issue price
of a Note at the beginning of its first accrual period will be equal to its
issue price. The adjusted issue price at the beginning of any subsequent accrual
period will be equal to (i) the adjusted issue price at the beginning of the
preceding accrual period, plus (ii) the amount of OID accrued during the
preceding accrual period, minus (iii) any payments made on the Note during the
preceding accrual period and on the first day of such subsequent accrual period,
other than payments of stated interest on a Note.
Under these rules, a Holder generally will have to include in income
increasingly greater amounts of OID in successive accrual periods. The "yield to
maturity" of a Note is the discount rate that, when used in computing the
present value of all payments to be made on a Note, produces an amount equal to
the issue price of the Note.
In the event of a Change of Control, the Holders of Notes will have the
right to require the Company to purchase their Notes. The Treasury Regulations
provide that the right of Holders of the Notes to require redemption of the
Notes upon the occurrence of a Change of Control will not affect the yield or
maturity date of the Notes unless, based on all the facts and circumstances as
of the Issue Date, it is more likely than not that a Change of Control giving
rise to the redemption right will occur. The Company does not intend to treat
this redemption provision of the Notes as affecting the computation of the yield
to maturity of the Notes.
The Company may redeem the Notes at any time on or after a certain date,
and, in certain circumstances, may redeem or repurchase all or a portion of the
Notes any time prior to the maturity date. Under the Treasury Regulations, the
Company is deemed to exercise any option to redeem if the exercise of such
option would lower the yield of the debt instrument. The Company believes, and
intends to take the position, that it will not be treated as having exercised an
option to redeem under these rules.
In certain cases, in the event the Company does not comply with certain
covenants set forth in the Registration Rights Agreement, the Company will be
obligated to pay specified liquidated damages to the
95
<PAGE>
Holders of the Notes. The Company believes the contingency that the Company will
pay such additional amounts is "remote and incidental" within the meaning of the
applicable Treasury Regulations. On that basis, the Company believes such
additional amounts, if any, will be taxable to U.S. Holders as ordinary income
at the time such amounts accrue or are received in accordance with each such
Holder's method of accounting for federal income tax purposes.
TAX BASIS
A U.S. Holder's adjusted tax basis in a Note at a given date generally will
be equal to the purchase price paid by such U.S. Holder for such Note, increased
by the amount of OID previously included in income with respect to the Notes and
decreased by all prior payments received on the Notes, other than payments of
stated interest.
SALE OR REDEMPTION OF NOTES
Unless a nonrecognition provision applies, the sale, exchange, redemption
(including pursuant to an offer by the Company) or other disposition of a Note
will be a taxable event for federal income tax purposes ("Taxable Disposition").
In such event, a U.S. Holder generally will recognize gain or loss equal to the
difference between (i) the amount of cash plus the fair market value of any
other property received upon the Taxable Disposition (other than in respect of
accrued and unpaid stated interest thereon) and (ii) the U.S. Holder's adjusted
tax basis therein (other than any tax basis attributable to accrued and unpaid
stated interest). Such gain or loss generally will be capital gain or loss, and
in the case of non-corporate U.S. Holders, capital gain from the sale or
exchange of a Note will be taxed at different rates depending upon whether the
holding period of such Note is more than one year but not more than eighteen
months, or more than 18 months. U.S. Holders are advised to consult their tax
advisors regarding the treatment of amounts attributable to interest that is
accrued but unpaid at the date of a Taxable Disposition of the Notes. The
deductibility of capital losses is subject to certain limitations.
ADDITIONAL AMOUNTS
The Company intends to take the position that any Additional Amounts
described above under "Exchange Offer--Purpose and Effect" will be taxable to a
U.S. Holder of a Note as ordinary income in accordance with the Holder's usual
method of accounting for federal income tax purposes. The Internal Revenue
Service (the "Service") may take a different position, however, which could
affect the timing of the Holder's income with respect to the Additional Amounts.
BACKUP WITHHOLDING
A U.S. Holder of Notes may be subject to "backup withholding" at a rate of
31% with respect to certain "reportable payments" including interest payments
and, under certain circumstances, principal payments on the Notes. These backup
withholding rules apply if the U.S. Holder, among other things, (i) fails to
furnish a social security number or other taxpayer identification number ("TIN")
certified under penalties of perjury within a reasonable time after the request
therefor, (ii) furnishes an incorrect TIN, (iii) fails to report properly
interest, or (iv) under certain circumstances, fails to provide a certified
statement, signed under penalties of perjury, that the TIN furnished is the
correct number and that such Holder is not subject to backup withholding. A U.S.
Holder who does not provide the Company with its correct TIN also may be subject
to penalties imposed by the Service. Any amount withheld from a payment to a
U.S. Holder under the back-up withholding rules is creditable against the U.S.
Holder's federal income tax liability, provided the required information is
furnished to the Service. Backup withholding will not apply, however, with
respect to payments made to certain Holders, including corporations and tax-
exempt organizations, provided their exemption from backup withholding is
properly established.
96
<PAGE>
The Company will report to the U.S. Holders of Notes and to the Service the
amount of any "reportable payments" for each calendar year and the amount of tax
withheld, if any, with respect to such payments.
NON-U.S. HOLDERS
The following discussion is limited to the federal income tax consequences
relevant to a Holder of a Note that is not a U.S. Holder, as defined above (a
"Non-U.S. Holder").
For purposes of withholding tax on interest discussed below, a non-resident
alien or other non-resident fiduciary of an estate or trust will be considered a
Non-U.S. Holder. For purposes of the following discussion, interest (including
OID) from the Notes, as well as gain on the sale, exchange (including the
exchange of Old Notes for New Notes pursuant to the Exchange Offer) or other
disposition of Notes, will be considered to be "U.S. trade or business income"
if such income or gain is (i) effectively connected with the conduct of a U.S.
trade or business or, (ii) in the case of a Non U.S. Holder that is a resident
of a nation with which the United States has entered into an income tax treaty,
attributable to a permanent establishment (or, in the case of an individual, a
fixed base) in the United States.
STATED INTEREST
Generally, any interest paid (including OID) to a Non-U.S. Holder that is
not U.S. trade or business income will not be subject to federal income tax if
the interest qualifies as "portfolio interest." Interest on the Notes will
generally qualify as portfolio interest if (i) the Non-U.S. Holder does not
actually or constructively own 10% or more of the total voting power of all
voting stock of the Company and is not a "controlled foreign corporation" with
respect to which the Company is a "related person" within the meaning of the
Code, and (ii) the beneficial owner (a) under penalties of perjury, certifies
that the beneficial owner is not a U.S. person and such certificate provides the
beneficial owner's name and address, and (b) is not a bank receiving interest on
an extension of credit made pursuant to a loan agreement made in the ordinary
course of its trade or business.
The gross amount of payments of interest to a Non-U.S. Holder that neither
qualify for the portfolio interest exception nor are U.S. trade or business
income will be subject to federal income tax at the rate of 30%, unless a United
States income tax treaty applies to reduce or eliminate withholding. U.S. trade
or business income will be taxed at regular federal income tax rates rather than
the 30% gross rate. In the case of a Non-U.S. Holder that is a corporation, such
U.S. trade or business income may also be subject to the "branch profits tax"
(which is generally imposed on a foreign corporation on the actual or deemed
repatriation from the United States of earnings and profits attributable to U.S.
trade or business income) at a rate of 30%. The branch profits tax may not apply
(or may apply at a reduced rate) if the recipient is a qualified resident of
certain countries with which the United States has an income tax treaty. To
claim the benefit of a tax treaty or to claim exemption from withholding because
the income is U.S. trade or business income, the Non-U.S. Holder must provide a
properly executed Form 1001 or 4224 (or such successor forms as the Service
designates), as applicable, prior to the payment of interest. These forms must
be periodically updated. Under final Treasury Regulations that will be effective
for payments after December 31, 1999 (the "Final Regulations"), the Forms 1001
and 4224 may be replaced by Form W-8. Also, under the Final Regulations, a
Non-U.S. Holder who is claiming the benefit of a treaty in certain circumstances
may be required to obtain a federal TIN and to provide certain documentary
evidence issued by foreign governmental authorities to prove residence in the
foreign country. Certain special procedures are provided in the Final
Regulations for payments through qualified intermediaries. Prospective
purchasers are urged to consult their tax advisors regarding the Final
Regulations.
97
<PAGE>
SALE, EXCHANGE OR REDEMPTION OF NOTES
Except as described below and subject to the discussion concerning backup
withholding, any gain realized by a Non-U.S. Holder on the sale, exchange
(including the exchange of Old Notes for New Notes pursuant to the Exchange
Offer), redemption or other disposition of a Note generally will not be subject
to federal income tax, provided that (i) such gain is not U.S. trade or business
income; (ii) the Non-U.S. Holder is not an individual who holds the Note as a
capital asset, is present in the United States for 183 days or more in the
taxable year of the disposition and who meets certain other requirements; and
(iii) the Non-U.S. Holder is not subject to tax pursuant to the provisions of
federal tax law applicable to certain U.S. expatriates (including certain former
citizens or residents of the United States).
FEDERAL ESTATE TAX
Notes held (or treated as held) by an individual who is not a citizen or
resident of the United States (for federal estate tax purposes) at the time of
his or her death will not be subject to the federal estate tax, provided that
(i) the individual does not actually or constructively own 10% or more of the
total voting power of all voting stock of the Company and (ii) income on the
Notes was not U.S. trade or business income.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the Service and to each Non-U.S. Holder
any interest that is subject to withholding, exempt from federal withholding tax
pursuant to a tax treaty, or exempt from federal income tax under the portfolio
interest exception. Copies of such information returns may also be made
available under the provisions of a specific treaty or agreement to the tax
authorities of the country in which the Non-U.S. Holder resides.
The Treasury Regulations provide that backup withholding and information
reporting will not apply to payments of principal on the Notes by the Company to
a Non-U.S. Holder, if the Holder certifies, under penalties of perjury, as to
its non-U.S. status or otherwise establishes an exemption (provided that neither
the Company nor its paying agent has actual knowledge that the Holder is a U.S.
person or that the conditions of any other exemption are not, in fact,
satisfied).
The payment of the proceeds from the disposition of Notes to or through the
U.S. office of any U.S. or foreign broker will be subject to information
reporting and possible backup withholding unless the owner certifies, under
penalties of perjury, as to its non-U.S. status or otherwise establishes an
exemption (provided that the broker does not have actual knowledge that the
Holder is a U.S. person or that the conditions of any other exemptions are not,
in fact, satisfied). The payment of the proceeds from the disposition of a Note
to or through a non-U.S. office of a non-U.S. broker will not be subject to
information reporting or backup withholding unless the non-U.S. broker has
certain types of relationships with the United States (a "U.S. related person").
In the case of the payment of proceeds from the disposition of the Notes to
or through a non-U.S. office of a broker that is either a U.S. person or a U.S.
related person, the Treasury Regulations require information reporting (but not
backup withholding) on the payment unless the broker has documentary evidence in
its files that the owner is a Non-U.S. Holder and the broker has no knowledge to
the contrary.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or credit against such Non-U.S.
Holder's federal income tax liability, provided that the requisite procedures
are followed.
The Final Regulations make modifications to the information reporting and
backup withholding rates described above. Prospective purchasers are urged to
consult their tax advisor regarding the Final Regulations.
98
<PAGE>
THE PRECEDING DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES IS A SUMMARY NOT
INTENDED TO ADDRESS EVERY ASPECT OF TAXATION THAT MAY BE RELEVANT TO EVERY
HOLDER. ACCORDINGLY, EACH INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR AS TO
PARTICULAR TAX CONSEQUENCES TO IT OF PURCHASING, HOLDING AND DISPOSING OF NOTES
OF THE COMPANY AS WELL AS THE EXCHANGE OF OLD NOTES FOR NEW NOTES PURSUANT TO
THE EXCHANGE OFFER, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL
OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE LAWS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales of such
New Notes. This Prospectus, as it may be amended or supplemented from time to
time, may be used by all persons subject to the prospectus delivery requirements
of the Securities Act, including broker-dealers in connection with resales of
New Notes received in exchange for Old Notes where such Old Notes were acquired
as a result of market-making activities or other trading activities. The Company
has agreed that, for a period of 180 days after the Expiration Date, it will
make this Prospectus, as amended or supplemented, available to any broker-dealer
for use in connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Securities Act, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer other than commissions or concessions of any
brokers or dealers and will indemnify holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the validity of the securities offered
hereby will be passed upon for the Company by Weil, Gotshal & Manges LLP, New
York, New York.
EXPERTS
The Historical Financial Statements as of December 31, 1997 and 1996 and for
each of the years in the three year period ended December 31, 1997 included in
this Prospectus have been audited by Deloitte
99
<PAGE>
& Touche LLP, independent auditors, as stated in their reports appearing herein,
and are included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act with respect to the New Notes offered hereby. As
permitted by the rules and regulations of the Commission, this Prospectus omits
certain information, exhibits and undertakings contained in the Registration
Statement. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement,
including the exhibits thereto and the financial statements, notes and schedules
filed as a part thereof. The Registration Statement (and the exhibits and
schedules thereto), as well as the periodic reports and other information filed
by the Company with the Commission, may be inspected and copied at the public
reference section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission located at 7 World Trade Center, Suite 1300, New York, New York 10048
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such
information can also be reviewed through the Commission's Electronic Data
Gathering, Analysis and Retrieval System which is publicly available through the
Commission's Web Site (http:www.sec.gov). Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or document filed as an exhibit to the Registration Statement, each
such statement being qualified by such reference.
Pursuant to the Indenture, the Company has agreed to furnish to the Trustee
and to registered holders of the Notes without cost to the Trustee or such
registered holders, copies of all reports and other information that would be
required to be filed by the Company with the Commission under the Exchange Act,
whether or not the Company is then required to file reports with the Commission.
100
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
D&F INDUSTRIES (PREDECESSOR ENTITY) PAGE
---------
<S> <C>
Independent Auditors' Report......................................................... F-3
Balance Sheets....................................................................... F-4
Statements of Income................................................................. F-5
Statements of Stockholders' Equity................................................... F-6
Statements of Cash Flows............................................................. F-7
Notes to Financial Statements........................................................ F-8
<CAPTION>
RAVEN INDUSTRIES D/B/A/ OMNI-PAK INDUSTRIES AND AFFILIATES PAGE
---------
<S> <C>
Independent Auditors' Report......................................................... F-12
Combined Balance Sheets.............................................................. F-13
Combined Statements of Income........................................................ F-14
Combined Statements of Stockholders' Equity.......................................... F-15
Combined Statements of Cash Flows.................................................... F-16
Notes to Combined Financial Statements............................................... F-17
<CAPTION>
D&F INDUSTRIES, RAVEN INDUSTRIES D/B/A/ OMNI-PAK INDUSTRIES
AND AFFILIATES PAGE
---------
<S> <C>
Independent Auditors' Report......................................................... F-20
Combined Balance Sheets.............................................................. F-21
Combined Statements of Income........................................................ F-22
Combined Statements of Stockholders' Equity.......................................... F-23
Combined Statements of Cash Flows.................................................... F-24
Notes to Combined Financial Statements............................................... F-25
See Continuation Page
</TABLE>
F-1
<PAGE>
INDEX TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
D&F INDUSTRIES (PREDECESSOR ENTITY) - FOR THE QUARTER ENDED MARCH 31, 1998
(UNAUDITED) PAGE
---------
<S> <C>
Balance Sheets....................................................................... F-29
Statements of Income................................................................. F-30
Statements of Cash Flows............................................................. F-31
Notes to Financial Statements........................................................ F-32
<CAPTION>
RAVEN INDUSTRIES D/B/A/ OMNI-PAK INDUSTRIES AND AFFILIATES - FOR THE QUARTER ENDED
MARCH 31, 1998 (UNAUDITED) PAGE
---------
<S> <C>
Combined Balance Sheets.............................................................. F-34
Combined Statements of Income........................................................ F-35
Combined Statements of Cash Flows.................................................... F-36
Notes to Combined Financial Statements............................................... F-37
<CAPTION>
D&F INDUSTRIES, RAVEN INDUSTRIES D/B/A/ OMNI-PAK INDUSTRIES
AND AFFILIATES - FOR THE QUARTER ENDED MARCH 31, 1998 (UNAUDITED) PAGE
---------
<S> <C>
Combined Balance Sheets.............................................................. F-38
Combined Statements of Income........................................................ F-39
Combined Statements of Cash Flows.................................................... F-40
Notes to Combined Financial Statements............................................... F-41
</TABLE>
The financial statements which follow are those of the predecessor, D&F
Industries, those of the acquired companies, Raven Industries d/b/a/ Omni-Pak
Industries and Affiliates, and the supplemental combined financial statements of
D&F Industries, Raven Industries d/b/a Omni-Pak Industries and Affiliates (the
"Combined Financial Statements"). The Combined Financial Statements are being
presented because, in the opinion of management, they provide a more meaningful
representation of the underlying business and cash flows. These entities
historically operated under common management and had a high degree of common
ownership, customers and systems, including similar accounting and financial
reporting systems to manage the combined enterprises.
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
D&F Industries:
We have audited the accompanying balance sheets of D&F Industries (the
"Company"), as of December 31, 1997 and 1996, and the related statements of
income, stockholders' equity, and cash flows for each of the three years in the
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1997 and
1996, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, CA
February 25, 1998
F-3
<PAGE>
D&F INDUSTRIES (PREDECESSOR ENTITY)
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
ASSETS (NOTE 4)
Current Assets:
Cash and cash equivalents (Note 1)............................................... $ 3,767,609 $ 4,570,961
Accounts receivable (Note 1)..................................................... 2,864,279 2,362,585
Inventories (Notes 1 and 2)...................................................... 8,040,251 4,300,736
Prepaid expenses and other current assets........................................ 80,029 155,509
------------- -------------
Total current assets........................................................... 14,752,168 11,389,791
Property and Equipment, Net (Notes 1 and 3)........................................ 1,983,412 2,280,010
------------- -------------
Total............................................................................ $ 16,735,580 $ 13,669,801
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit (Note 4).......................................................... $ 420,000 $ 540,000
Accounts payable................................................................. 7,633,062 6,249,560
Accrued expenses and other current liabilities................................... 1,086,934 552,115
------------- -------------
Total current liabilities...................................................... 9,139,996 7,341,675
------------- -------------
Commitments and Contingencies (Notes 5 and 6)
Stockholders' Equity:
Common stock; no par value, authorized,
2,000,000 shares; issued and
outstanding, 1,075,000 shares.................................................. 1,026,211 1,026,211
Retained earnings................................................................ 6,569,373 5,301,915
------------- -------------
Total stockholders' equity..................................................... 7,595,584 6,328,126
------------- -------------
Total........................................................................ $ 16,735,580 $ 13,669,801
------------- -------------
------------- -------------
</TABLE>
See notes to financial statements.
F-4
<PAGE>
D&F INDUSTRIES (PREDECESSOR ENTITY)
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Sales (Notes 1 and 6)............................................... $ 85,191,329 $ 73,523,072 $ 52,164,353
Cost of sales....................................................... 55,019,915 47,958,393 34,894,801
------------- ------------- -------------
Gross profit...................................................... 30,171,414 25,564,679 17,269,552
Selling, general and administrative expenses
(Notes 5 and 6)................................................... 7,088,489 6,347,455 5,462,458
------------- ------------- -------------
Operating income.................................................. 23,082,925 19,217,224 11,807,094
Interest (income) expense (Note 4).................................. (82,451) (56,237) (76,319)
------------- ------------- -------------
Income before provision for state income taxes...................... 23,165,376 19,273,461 11,883,413
Provision for state income taxes (Note 1)........................... 350,618 279,420 137,090
------------- ------------- -------------
Net income.......................................................... $ 22,814,758 $ 18,994,041 $ 11,746,323
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See notes to financial statements.
F-5
<PAGE>
D&F INDUSTRIES (PREDECESSOR ENTITY)
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------------ RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
---------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994............................. 1,075,000 $ 1,026,211 $ 3,612,351 $ 4,638,562
Net income............................................. 11,746,323 11,746,323
Cash dividends......................................... (11,214,400) (11,214,400)
---------- ------------ ------------- -------------
Balance at December 31, 1995............................. 1,075,000 1,026,211 4,144,274 5,170,485
Net income............................................. 18,994,041 18,994,041
Cash dividends......................................... (17,836,400) (17,836,400)
---------- ------------ ------------- -------------
Balance at December 31, 1996............................. 1,075,000 1,026,211 5,301,915 6,328,126
Net income............................................. 22,814,758 22,814,758
Cash dividends......................................... (21,547,300) (21,547,300)
---------- ------------ ------------- -------------
Balance at December 31, 1997............................. 1,075,000 $ 1,026,211 $ 6,569,373 $ 7,595,584
---------- ------------ ------------- -------------
---------- ------------ ------------- -------------
</TABLE>
See notes to financial statements.
F-6
<PAGE>
D&F INDUSTRIES (PREDECESSOR ENTITY)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................... $ 22,814,758 $ 18,994,041 $ 11,746,323
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................ 522,875 503,697 448,526
Changes in operating assets and liabilities:
Accounts receivable.......................................... (501,694) (383,091) 762,557
Inventories.................................................. (3,739,515) (827,127) 1,624,266
Prepaid expenses and other current assets.................... 75,480 (46,982) 12,070
Accounts payable............................................. 1,383,502 719,908 (109,799)
Accrued expenses and other current liabilities............... 534,819 (55,644) (37,391)
-------------- -------------- --------------
Net cash provided by operating activities.................. 21,090,225 18,904,802 14,446,552
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES -
Purchases of property and equipment............................ (226,277) (870,961) (419,767)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid............................................ (21,547,300) (17,836,400) (11,214,400)
Principal payments under note payable.......................... (40,000) (130,000)
Principal payments under line of credit, net................... (120,000) (60,000)
-------------- -------------- --------------
Net cash used in financing activities........................ (21,667,300) (17,936,400) (11,344,400)
-------------- -------------- --------------
Net increase (decrease) in cash and cash equivalents............. (803,352) 97,441 2,682,385
Cash and cash equivalents, beginning of year..................... 4,570,961 4,473,520 1,791,135
-------------- -------------- --------------
Cash and Cash equivalents, end of year........................... $ 3,767,609 $ 4,570,961 $ 4,473,520
-------------- -------------- --------------
-------------- -------------- --------------
Supplemental disclosures of cash flow information -
Cash paid during the period for:
Interest..................................................... $ 42,549 $ 50,540 $ 62,811
Income taxes................................................. 350,618 279,420 137,090
</TABLE>
See notes to financial statements.
F-7
<PAGE>
D&F INDUSTRIES (PREDECESSOR ENTITY)
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS--D&F Industries (the "Company") is primarily engaged
in the manufacture of nutritional supplements, including vitamins, minerals and
other nutrition-related products.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS--The Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents. To reduce its credit risk, the Company monitors the credit standing
of the financial institutions that hold the Company's cash and cash equivalents.
ACCOUNTS RECEIVABLE AND SIGNIFICANT CUSTOMERS--Financial instruments that
potentially subject the Company to a concentration of credit risk consist
primarily of trade accounts receivable. The Company performs ongoing credit
evaluations of its customers and maintains, when necessary, an allowance for
potential credit losses.
The Company's largest customer is Herbalife International, Inc.
("Herbalife"). Sales to Herbalife represented 85%, 80% and 85% of net sales in
1997, 1996 and 1995, respectively. Receivables from Herbalife also represented
41%, 38% and 72% of total accounts receivable at December 31, 1997, 1996 and
1995, respectively. The Chief Executive Officer of Herbalife owns one-third of
the outstanding shares of Omni-Pak Industries and twenty percent of the
outstanding shares of Dynamic Products, which entities are under common
management. See Note 6 for a discussion of the Herbalife supply contract.
INVENTORIES--Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
PROPERTY AND EQUIPMENT--Property and equipment is stated at cost.
Depreciation and amortization are provided for on the straight-line method using
estimated useful lives of 7 years for equipment and 31 years for buildings.
Leasehold improvements are amortized over the life of the related asset or the
term of the lease, whichever is shorter.
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable based upon undiscounted cash flows. Impairment losses would be
recognized if the carrying amount of the asset exceeds its fair value.
REVENUE RECOGNITION--Sales are recorded when merchandise is shipped. Sales
returns are not significant.
INCOME TAXES--The Company has elected S corporation status for federal and
state income tax purposes, and other than a 1.5% state tax, taxable income is
passed through to the Company's shareholders.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The Company has estimated the fair
value of its financial instruments using the following methods and assumptions:
the carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable, and the line of credit approximate fair value.
F-8
<PAGE>
D&F INDUSTRIES (PREDECESSOR ENTITY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997, 1996 AND 1995
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Raw materials........................................ $6,758,813 $3,378,667
Work in process...................................... 1,022,275 586,093
Finished goods....................................... 259,163 335,976
--------- ---------
Total................................................ $8,040,251 $4,300,736
--------- ---------
--------- ---------
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Equipment............................................ $7,114,384 $6,925,398
Leasehold improvements............................... 1,199,913 1,163,022
Land................................................. 149,500 149,500
--------- ---------
8,463,797 8,237,920
Less accumulated depreciation and amortization....... 6,480,385 5,957,910
--------- ---------
Total................................................ $1,983,412 $2,280,010
--------- ---------
--------- ---------
</TABLE>
4. LINE OF CREDIT
The Company has a line of credit agreement with a bank under which it may
borrow up to $2,000,000. The Company had borrowings of $420,000 and $540,000
outstanding at December 31, 1997 and 1996, respectively. Borrowings accrue
interest at the bank's reference rate, which was 8.50% and 8.25% at December 31,
1997 and 1996, respectively. The line of credit is collateralized by
substantially all of the Company's assets. In addition, the agreement contains
financial covenants related to the Company's ratio of debt to tangible net worth
and require the Company to maintain minimum levels of net income.
During 1995, the Company had a note payable to a bank which was payable in
monthly installments of $10,000, plus interest at the bank's reference rate,
8.5%, at December 31, 1995. The note was repaid in 1996.
5. EMPLOYEE BENEFITS
The Company has a qualified 401(k) retirement plan for its full-time
employees and makes matching contributions in an amount equal to 50% of the
first 6% of the employee's compensation. In addition, the Company may make
additional contributions at the discretion of the Board of Directors. Total
contributions to the plan were $92,369 in 1997, $89,503 in 1996 and $77,238 in
1995.
F-9
<PAGE>
D&F INDUSTRIES (PREDECESSOR ENTITY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997, 1996 AND 1995
6. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES.--The Company leases certain of its operating facilities.
Facility leases contain rent escalation clauses. Leases are primarily net
leases, which require the payment of executory costs such as real estate taxes,
insurance, common area maintenance and other operating costs in addition to
minimum rentals.
The Company also rents an operating facility from an entity affiliated
through common ownership. The facility is rented on a month-to-month basis.
Total rent paid to this entity was $83,520 in 1997, 1996 and 1995. The Company
also leases certain equipment under noncancelable operating leases. The Company
is committed under facility and equipment operating leases for minimum rental
payments as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- --------------------------------------------------------------------------------
<S> <C>
1998............................................................................ $ 749,213
1999............................................................................ 689,585
2000............................................................................ 697,771
2001............................................................................ 715,662
2002............................................................................ 759,260
Thereafter...................................................................... 181,663
------------
Total....................................................................... $ 3,793,154
------------
------------
</TABLE>
Rental expense for the period ended December 31, 1997, 1996 and 1995 was
$669,325, $629,474 and $655,852, respectively.
AGREEMENT WITH HERBALIFE--During the periods presented, the Company had an
agreement with Herbalife under which Herbalife agreed to purchase all of its
requirements for tablets, capsules and related products from the Company. In
return, the Company was contractually restricted from selling the products sold
to Herbalife to others. The agreement also provided the Company a right of first
refusal to establish any manufacturing facility outside North America that
Herbalife proposed to develop or acquire and the right to receive certain
royalty payments in the event such manufacturing facility was contracted for or
acquired by Herbalife and the Company's right of first refusal was exercised.
In September 1997, the Company signed a new three-year agreement with
Herbalife, which became effective on January 12, 1998. Among other matters, the
terms of the new agreement eliminate certain exclusivity clauses from the
contract, but contain clauses which require Herbalife to purchase certain
minimum inventory requirements of certain specified products from the Company at
agreed upon prices.
LITIGATION. The Company is subject to legal proceedings and claims that
arise in the ordinary course of business. Management does not expect the
resolution of these legal matters to have a material adverse effect on the
Company's financial statements.
7. RELATED-PARTY TRANSACTION
The Company sells products to an entity affiliated through common ownership.
The affiliated company, in turn, sells the product to Herbalife. Sales to the
affiliated company were $1,393,251 in 1997,
F-10
<PAGE>
D&F INDUSTRIES (PREDECESSOR ENTITY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997, 1996 AND 1995
7. RELATED-PARTY TRANSACTION (CONTINUED)
$1,162,327 in 1996 and $1,370,086 in 1995. The Company had a receivable from the
affiliated company of $101,000 at December 31, 1997 and $44,630 at December 31,
1996.
In addition, the Company sells products to other entities affiliated through
common ownership. Sales to other affiliate company were $1,183,086 in 1996. The
Company had receivables from the affiliated companies of $474,912 at December
31, 1996.
F-11
<PAGE>
INDEPENDENT AUDITORS' REPORT
Raven Industries
d/b/a Omni-Pak Industries and Affiliates:
We have audited the accompanying combined balance sheets of Raven Industries
d/b/a Omni-Pak Industries and Affiliates (collectively, the "Companies"), which
are under common management, as of December 31, 1997 and 1996, and the related
combined statements of income, stockholders' equity, and cash flows for each of
the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Companies as of December 31, 1997 and
1996, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, CA
February 25, 1998
F-12
<PAGE>
RAVEN INDUSTRIES D/B/A
OMNI-PAK INDUSTRIES AND AFFILIATES
COMBINED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents (Note 1)............................................... $ 5,188,823 $ 2,507,576
Accounts receivable (Note 1)..................................................... 3,105,727 1,760,685
Inventories (Notes 1 and 2)...................................................... 3,810,203 3,855,233
Prepaid expenses and other current assets........................................ 137,591 97,961
------------- -------------
Total current assets........................................................... 12,242,344 8,221,455
Property and Equipment, Net (Notes 1 and 3)........................................ 2,627,738 2,317,384
------------- -------------
Total.......................................................................... $ 14,870,082 $ 10,538,839
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable................................................................. $ 4,672,239 $ 4,025,328
Accrued expenses and other current liabilities................................... 1,151,257 1,343,577
------------- -------------
Total current liabilities...................................................... 5,823,496 5,368,905
------------- -------------
Commitments and Contingencies (Notes 4 and 5)
Stockholders' Equity:
Common stock..................................................................... 208,760 208,760
Retained earnings................................................................ 8,837,826 4,961,174
------------- -------------
Total stockholders' equity..................................................... 9,046,586 5,169,934
------------- -------------
Total.............................................................................. $ 14,870,082 $ 10,538,839
------------- -------------
------------- -------------
</TABLE>
See notes to combined financial statements.
F-13
<PAGE>
RAVEN INDUSTRIES D/B/A
OMNI-PAK INDUSTRIES AND AFFILIATES
COMBINED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Sales (Notes 1 and 5)............................................... $ 98,587,163 $ 73,412,870 $ 34,534,492
Cost of Sales....................................................... 64,106,613 49,001,033 21,921,705
------------- ------------- -------------
Gross Profit...................................................... 34,480,550 24,411,837 12,612,787
Selling, General and Administrative Expenses
(Notes 4 and 5)................................................... 5,930,940 4,855,212 2,783,398
------------- ------------- -------------
Operating Income.................................................. 28,549,610 19,556,625 9,829,389
Interest (Income) Expense and Other................................. (197,072) (105,575) (67,185)
------------- ------------- -------------
Income Before Provision for State Income Taxes...................... 28,746,682 19,662,200 9,896,574
Provision for State Income Taxes (Note 1)........................... 428,030 287,210 146,312
------------- ------------- -------------
Net Income........................................................ $ 28,318,652 $ 19,374,990 $ 9,750,262
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See notes to combined financial statements.
F-14
<PAGE>
RAVEN INDUSTRIES D/B/A
OMNI-PAK INDUSTRIES AND AFFILIATES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
OMNI-PAK INDUSTRIES AFFILIATES
COMMON STOCK COMMON TOTAL
--------------------- STOCK RETAINED STOCKHOLDERS'
SHARES AMOUNT AMOUNT EARNINGS EQUITY
--------- ---------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994....................... 30,000 $ 150,000 $ 58,760 $ 4,254,322 $ 4,463,082
Net income....................................... 9,750,262 9,750,262
Cash Dividends................................... (9,594,500) (9,594,500)
--------- ---------- --------- ------------- -------------
Balance at December 31, 1995....................... 30,000 150,000 58,760 4,410,084 4,618,844
Net income....................................... 19,374,990 19,374,990
Cash dividends................................... (18,823,900) (18,823,900)
--------- ---------- --------- ------------- -------------
Balance at December 31, 1996....................... 30,000 150,000 58,760 4,961,174 5,169,934
Net income....................................... 28,318,652 28,318,652
Cash dividends................................... (24,442,000) (24,442,000)
--------- ---------- --------- ------------- -------------
Balance at December 31, 1997....................... 30,000 $ 150,000 $ 58,760 $ 8,837,826 $ 9,046,586
--------- ---------- --------- ------------- -------------
--------- ---------- --------- ------------- -------------
</TABLE>
See notes to combined financial statements.
F-15
<PAGE>
RAVEN INDUSTRIES D/B/A
OMNI-PAK INDUSTRIES AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------- ----------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................... $ 28,318,652 $ 19,374,990 $ 9,750,262
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................ 513,083 397,902 278,750
Changes in operating assets and liabilities:
Accounts receivable........................................ (1,345,042) (161,054) 388,021
Inventories................................................ 45,030 (1,284,053) (1,164,739)
Prepaid expenses and other current assets.................. (39,630) (20,677) (3,525)
Accounts payable........................................... 646,911 838,139 1,799,292
Accrued expenses and other current liabilities............. (192,320) (54,806) 109,428
------------- ----------------- ------------
Net cash provided by operating activities................ 27,946,684 19,090,441 11,157,489
------------- ----------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES--
Purchases of property and equipment............................ (823,437) (1,439,968) (155,565)
------------- ----------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES--
Cash dividends paid............................................ (24,442,000) (18,823,900) (9,594,500)
------------- ----------------- ------------
Net increase (decrease) in cash and cash equivalents............. 2,681,247 (1,173,427) 1,407,424
Cash and cash equivalents, beginning of year..................... 2,507,576 3,681,003 2,273,579
------------- ----------------- ------------
Cash and cash equivalents, end of year........................... $ 5,188,823 $ 2,507,576 $ 3,681,003
------------- ----------------- ------------
------------- ----------------- ------------
Supplemental disclosures of cash flow information--..............
Cash paid during the period for--Income taxes.................. $ 428,030 $ 287,210 $ 146,312
</TABLE>
See notes to combined financial statements.
F-16
<PAGE>
RAVEN INDUSTRIES D/B/A
OMNI-PAK INDUSTRIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION. The accompanying financial statements include
the accounts of Raven Industries d/b/a Omni-Pak Industries ("Omni-Pak") and its
affiliated entities (the "Affiliates"), collectively referred to as the
"Companies." Omni-Pak is primarily engaged in the manufacture of nutritional
supplements, primarily drink powders. The Affiliates consist of Dynamic Products
Inc. and West Coast Sales. These entities sell nutritional supplements
manufactured by Omni-Pak and D&F Industries ("D&F"). The Companies are under
common management. Summarized financial information for the affiliates as of and
for the year ended December 31, 1997 is as follows:
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS. The Companies consider all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents. To reduce its credit risk, the Company monitors the credit standing
of the financial institutions that hold the Company's cash and cash equivalents.
ACCOUNTS RECEIVABLE AND SIGNIFICANT CUSTOMERS--Financial instruments that
potentially subject the Companies to a concentration of credit risk consist
primarily of trade accounts receivable. The Companies perform ongoing credit
evaluations of its customers and maintains, when necessary, an allowance for
potential credit losses.
The Companies' largest customer is Herbalife International, Inc.
("Herbalife"). The Chief Executive Officer of Herbalife owns one-third of the
outstanding common shares of Omni-Pak Industries and 20% of Dynamic Products,
Inc. Sales to Herbalife represented 68%, 67% and 80% of net sales in 1997, 1996
and 1995, respectively. Receivables from Herbalife also represented 72%, 24% and
66% of total accounts receivable at December 31, 1997, 1996 and 1995,
respectively. See Note 6 for a discussion of the Herbalife supply contract. In
addition, sales to Natural Supplement Association, Inc. d/b/a Experimental and
Applied Sciences ("EAS") represented 26% of net sales in 1997 and 23% of net
sales in 1996. Receivables from EAS represented 16% and 41% of total accounts
receivable at December 31, 1997 and 1996, respectively.
INVENTORIES. Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
PROPERTY AND EQUIPMENT. Property and equipment is stated at cost.
Depreciation and amortization are provided for on the straight-line method using
estimated useful lives of seven years for equipment and 31 years for buildings.
Leasehold improvements are amortized over the life of the related asset or the
term of the lease, whichever is shorter.
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable based upon undiscounted cash flows. Impairment losses would be
recognized if the carrying amount of the asset exceeds its fair value.
REVENUE RECOGNITION. Sales are recorded when merchandise is shipped. Sales
returns are not significant.
F-17
<PAGE>
RAVEN INDUSTRIES D/B/A
OMNI-PAK INDUSTRIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS. The Company has estimated the fair
value of its financial instruments using the following methods and assumptions:
the carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable and approximate fair value.
INCOME TAXES. The Companies have elected S corporation status for federal
and state income tax purposes, and other than a 1.5% state tax, taxable income
is passed through to the Companies' shareholders.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Raw materials..................................................... $ 2,325,438 $ 2,728,951
Work in process................................................... 637,492 451,700
Finished goods.................................................... 847,273 674,582
------------ ------------
Total............................................................. $ 3,810,203 $ 3,855,233
------------ ------------
------------ ------------
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Equipment......................................................... $ 3,452,724 $ 3,065,464
Leasehold improvements............................................ 1,217,686 781,509
Building.......................................................... 420,524 420,524
------------ ------------
5,090,934 4,267,497
Less accumulated depreciation and amortization.................... 2,463,196 1,950,113
------------ ------------
Total............................................................. $ 2,627,738 $ 2,317,384
------------ ------------
------------ ------------
</TABLE>
4. EMPLOYEE BENEFITS
The Companies have qualified 401(k) retirement plans for their full-time
employees and make matching contributions in an amount equal to 50% of the first
6% of the employee's compensation. In addition, the Companies may make
additional contributions at the discretion of the Board of Directors. Total
contributions to the plan were $38,956 in 1997; $27,668 in 1996; and $25,208 in
1995.
5. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES--The Companies lease certain of their operating facilities.
Facility leases contain rent escalation clauses. Leases are primarily net
leases, which require the payment of executory costs such as
F-18
<PAGE>
RAVEN INDUSTRIES D/B/A
OMNI-PAK INDUSTRIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997, 1996 AND 1995
5. COMMITMENTS AND CONTINGENCIES (CONTINUED)
real estate taxes, insurance, common area maintenance and other operating costs
in addition to minimum rentals.
The Companies also lease certain equipment under noncancelable operating
leases. The Companies are committed under facility and equipment operating
leases for minimum rental payments as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- --------------------------------------------------------------------------------
<S> <C>
1998............................................................................ $ 618,118
1999............................................................................ 645,875
2000............................................................................ 675,025
2001............................................................................ 705,648
2002............................................................................ 649,774
Thereafter...................................................................... 2,263,731
------------
Total....................................................................... $ 5,558,171
------------
------------
</TABLE>
Rental expense for the period ended December 31, 1997, 1996 and 1995 was
$562,812, $446,477 and $345,540, respectively.
AGREEMENT WITH HERBALIFE--During the periods presented, the Companies have
an agreement with Herbalife under which Herbalife has agreed to purchase all of
its requirements for tablets, capsules and related products from the Companies.
In return, the Companies were contractually restricted from selling the products
sold to Herbalife to others. The agreement also provided the Companies a right
of first refusal to establish any manufacturing facility outside North America
that Herbalife proposed to develop or acquire and the right to receive certain
royalty payments in the event such manufacturing facility was contracted for or
acquired by Herbalife and the Companies' right of first refusal was exercised.
In September 1997, the Companies signed a new three-year agreement with
Herbalife, which became effective on January 12, 1998. Among other matters, the
terms of the new agreement eliminate certain exclusivity clauses from the
contract but contain clauses which require Herbalife to purchase certain minimum
inventory requirements of certain specified products from the Companies at
agreed upon prices.
LITIGATION--The Companies are subject to legal proceedings and claims that
arise in the ordinary course of business. Management does not expect the
resolution of these legal matters to have a material adverse effect on the
Companies' financial statements.
6. RELATED-PARTY TRANSACTIONS
The Company sells raw materials to an entity affiliated through common
ownership. Sales to the affiliated company were $26,365 in 1996 and $23,705 in
1995. The Company had a receivable from the affiliated Company of $3,175 at
December 31, 1996.
* * * * * *
F-19
<PAGE>
INDEPENDENT AUDITORS' REPORT
D&F Industries, Raven Industries
d/b/a Omni-Pak Industries and Affiliates:
We have audited the accompanying combined balance sheets of D&F Industries,
Raven Industries d/ b/a Omni-Pak Industries and Affiliates (collectively, the
"Companies"), which are under common management, as of December 31, 1997 and
1996, and the related combined statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Companies' management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Companies as of December 31, 1997 and
1996, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, CA
February 25, 1998
F-20
<PAGE>
D&F INDUSTRIES, RAVEN INDUSTRIES D/B/A/
OMNI-PAK INDUSTRIES AND AFFILIATES
COMBINED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS (NOTE 4) 1997 1996
- ----------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 1)............................................... $ 8,956,432 $ 7,078,537
Accounts receivable (Note 1)..................................................... 5,869,102 3,697,130
Inventories (Notes 1 and 2)...................................................... 11,850,454 8,155,969
Prepaid expenses and other current assets........................................ 217,620 253,470
------------- -------------
Total current assets........................................................... 26,893,608 19,185,106
------------- -------------
Property and Equipment, Net (Notes 1 and 3)...................................... 4,611,150 4,597,394
------------- -------------
Total.......................................................................... $ 31,504,758 $ 23,782,500
------------- -------------
------------- -------------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Line of credit (Note 4).......................................................... $ 420,000 $ 540,000
Accounts payable................................................................. 12,204,397 9,848,748
Accrued expenses and other current liabilities................................... 2,238,191 1,895,692
------------- -------------
Total current liabilities...................................................... 14,862,588 12,284,440
------------- -------------
Commitments and Contingencies (Notes 5 and 6)
Stockholders' Equity:
Common stock..................................................................... 1,234,971 1,234,971
Retained earnings................................................................ 15,407,199 10,263,089
------------- -------------
Total stockholders' equity..................................................... 16,642,170 11,498,060
------------- -------------
Total............................................................................ $ 31,504,758 $ 23,782,500
------------- -------------
------------- -------------
</TABLE>
See notes to combined financial statements
F-21
<PAGE>
D&F INDUSTRIES, RAVEN INDUSTRIES D/B/A/
OMNI-PAK INDUSTRIES AND AFFILIATES
COMBINED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- -------------
<S> <C> <C> <C>
Sales (Notes 1 and 6)............................................ $ 182,385,241 $ 144,735,099 $ 85,263,834
Cost of sales.................................................... 117,733,277 94,758,583 55,381,495
-------------- -------------- -------------
Gross profit................................................... 64,651,964 49,976,516 29,882,339
Selling, general and administrative expenses
(Notes 5 and 6)................................................ 13,019,429 11,202,667 8,245,856
-------------- -------------- -------------
Operating income............................................... 51,632,535 38,773,849 21,636,483
Interest (income) expense and other (Note 4)..................... (279,523) (161,812) (143,504)
-------------- -------------- -------------
Income before provision for state income taxes................... 51,912,058 38,935,661 21,779,987
Provision for state income taxes (Note 1)........................ 778,648 566,630 283,402
-------------- -------------- -------------
Net income..................................................... $ 51,133,410 $ 38,369,031 $ 21,496,585
-------------- -------------- -------------
-------------- -------------- -------------
</TABLE>
See notes to combined financial statements
F-22
<PAGE>
D&F INDUSTRIES, RAVEN INDUSTRIES D/B/A/
OMNI-PAK INDUSTRIES AND AFFILIATES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
OMNI-PARK
D&F INDUSTRIES INDUSTRIES AFFILIATES
COMMON STOCK COMMON STOCK COMMON TOTAL
-------------------- -------------------- STOCK RETAINED STOCKHOLDERS'
SHARES AMOUNT SHARE AMOUNT AMOUNT EARNINGS EQUITY
--------- --------- --------- --------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994................... 1,075,000 $1,026,211 30,000 $ 150,000 $ 58,760 $7,866,673 $9,101,644
Net income................................... 21,496,585 21,496,585
Cash dividends............................... (20,808,900) (20,808,900)
--------- --------- --------- --------- ----------- ---------- ------------
Balance, December 31, 1995................... 1,075,000 1,026,211 30,000 150,000 58,760 8,554,358 9,789,329
Net income................................... 38,369,031 38,369,031
Cash dividends............................... (36,660,300) (36,660,300)
--------- --------- --------- --------- ----------- ---------- ------------
Balance, December 31, 1996................... 1,075,000 1,026,211 30,000 150,000 58,760 10,263,089 11,498,060
Net income................................... 51,133,410 51,133,410
Cash dividends............................... (45,989,300) (45,989,300)
--------- --------- --------- --------- ----------- ---------- ------------
Balance, December 31, 1997................... 1,075,000 $1,026,211 30,000 $ 150,000 $ 58,760 $15,407,199 $16,642,170
--------- --------- --------- --------- ----------- ---------- ------------
--------- --------- --------- --------- ----------- ---------- ------------
</TABLE>
See notes to financial statements
F-23
<PAGE>
D&F INDUSTRIES, RAVEN INDUSTRIES D/B/A/
OMNI-PAK INDUSTRIES AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................ $ 51,133,410 $ 38,369,031 $ 21,496,585
Adjustments to reconcile net income to net cash provided by
operating activities:
Gain on sale of property and equipment..........................
Depreciation and amortization................................... 1,035,958 901,599 727,276
Changes in operating assets and liabilities:
Accounts receivable........................................... (2,171,972) (223,122) 1,255,695
Inventories................................................... (3,694,485) (2,111,180) 669,789
Prepaid expenses and other current assets..................... 35,850 (67,659) 8,545
Accounts payable.............................................. 2,355,649 1,237,024 1,584,376
Accrued expenses and other current liabilities................ 342,499 (110,450) 72,037
------------- ------------- -------------
Net cash provided by operating activities................... 49,036,909 37,995,243 25,814,303
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............................... (1,049,714) (2,310,929) (785,594)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid............................................... (45,989,300) (36,660,300) (20,808,900)
Principal payments under note payable............................. (40,000) (130,000)
Principal payments under line of credit, net...................... (120,000) (60,000)
------------- ------------- -------------
Net cash used in financing activities....................... (46,109,300) (36,760,300) (20,938,900)
------------- ------------- -------------
Net Increase (Decrease) in Cash and Cash Equivalents................ 1,877,895 (1,075,986) 4,089,809
Cash and Cash Equivalents, Beginning of Year........................ 7,078,537 8,154,523 4,064,714
------------- ------------- -------------
Cash and Cash Equivalents, End of Year.............................. $ 8,956,432 $ 7,078,537 $ 8,154,523
------------- ------------- -------------
------------- ------------- -------------
Supplemental Disclosures of Cash Flow Information -Cash paid during
the year for:
Interest........................................................ $ 42,549 $ 50,540 $ 62,811
Income taxes.................................................... 773,041 546,327 337,300
</TABLE>
See notes to combined financial statements.
F-24
<PAGE>
D&F INDUSTRIES, RAVEN INDUSTRIES D/B/A/
OMNI-PAK INDUSTRIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION The accompanying financial statements include the
accounts of D&F Industries ("D&F"), Raven Industries d/b/a Omni-Pak Industries,
("Omni-Pak") and their affiliated entities (the "Affiliates"), collectively
referred to as the "Companies." D&F is primarily engaged in the manufacture of
nutritional supplements, including vitamins, minerals and other
nutrition-related products. Omni-Pak is primarily engaged in the manufacture of
nutritional supplements, primarily drink powders. The Affiliates consist of
Dynamic Products, Inc. and West Coast Sales. These entities sell nutritional
supplements manufactured by D&F and Omni-Pak. The Companies are under common
management.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS--The Companies consider all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents. To reduce their credit risk, the Companies monitor the credit
standing of the financial institutions that hold the Companies' cash and cash
equivalents.
ACCOUNTS RECEIVABLE AND SIGNIFICANT CUSTOMERS--Financial instruments that
potentially subject the Companies to a concentration of credit risk consist
primarily of trade accounts receivable. The Companies perform ongoing credit
evaluations of their customers and maintain, when necessary, an allowance for
potential credit losses.
The Companies' largest customer is Herbalife International, Inc.
("Herbalife"). The Chief Executive Officer of Herbalife owns one-third of the
outstanding common shares of Omni-Pak and 20% of Dynamic Products, Inc. Sales to
Herbalife represented 76%, 74% and 83% of sales in 1997, 1996 and 1995,
respectively. Receivables from Herbalife also represented 56%, 32% and 69% of
total accounts receivable at December 31, 1997, 1996 and 1995, respectively. See
Note 6 for a discussion of the Herbalife supply contract. In addition, sales to
Natural Supplement Association, Inc. d/b/a Experimental and Applied Sciences
("EAS") represented 15% of sales in 1997 and 12% of sales in 1996. Receivables
from EAS represented 15% and 21% of total accounts receivable at December 31,
1997 and 1996, respectively.
INVENTORIES--Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
PROPERTY AND EQUIPMENT--Property and equipment are stated at cost.
Depreciation and amortization are provided for on the straight-line method using
estimated useful lives of 7 years for equipment and 31 years for buildings.
Leasehold improvements are amortized over the life of the related asset or the
term of the lease, whichever is shorter.
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable based upon undiscounted cash flows. Impairment losses would be
recognized if the carrying amount of the asset exceeds its fair value.
REVENUE RECOGNITION--Sales are recorded when merchandise is shipped. Sales
returns are not significant.
F-25
<PAGE>
D&F INDUSTRIES, RAVEN INDUSTRIES D/B/A/
OMNI-PAK INDUSTRIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS--The Companies have estimated the fair
value of their financial instruments using the following methods and
assumptions: the carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable, and the line of credit approximate fair value.
INCOME TAXES--The Companies have elected S corporation status for federal
and state income tax purposes, and other than a 1.5% state tax, taxable income
is passed through to the Companies' shareholders.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
---------- ---------
<S> <C> <C>
Raw materials....................................... $9,084,252 $6,107,618
Work in process..................................... 1,659,767 1,037,793
Finished goods...................................... 1,106,435 1,010,558
---------- ---------
Total............................................... $11,850,454 $8,155,969
---------- ---------
---------- ---------
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
---------- ---------
<S> <C> <C>
Equipment........................................... $10,567,108 $9,990,862
Leasehold improvements.............................. 2,417,599 1,944,531
Building............................................ 420,524 420,524
Land................................................ 149,500 149,500
---------- ---------
13,554,731 12,505,417
Less accumulated depreciation and amortization...... 8,943,581 7,908,023
---------- ---------
Total............................................... $4,611,150 $4,597,394
---------- ---------
---------- ---------
</TABLE>
4. LINE OF CREDIT
D&F has a line of credit agreement with a bank under which it may borrow up
to $2,000,000. D&F had borrowings of $420,000 and $540,000 outstanding at
December 31, 1997 and 1996, respectively. Borrowings accrue interest at the
bank's reference rate, which was 8.5% and 8.25% at December 31, 1997 and 1996,
respectively.
The line of credit agreement is collateralized by substantially all of D&F's
assets. In addition, the agreement contains financial covenants related to D&F's
ratio of debt to tangible net worth and requires D&F to maintain minimum levels
of net income.
F-26
<PAGE>
D&F INDUSTRIES, RAVEN INDUSTRIES D/B/A/
OMNI-PAK INDUSTRIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
4. LINE OF CREDIT (CONTINUED)
During 1995, D&F had a note payable to a bank that was payable in monthly
installments of $10,000, plus interest at the bank's reference rate, 8.5%, at
December 31, 1995. The note was repaid in 1996.
5. EMPLOYEE BENEFITS
The Companies have qualified 401(k) retirement plans for their full-time
employees and make matching contributions in an amount equal to 50% of the first
6% of the employee's compensation. In addition, the Companies may make
additional contributions at the discretion of the Boards of Directors. Total
contributions to the plan were $131,325 in 1997, $117,171 in 1996 and $102,446
in 1995.
6. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES--The Companies lease certain of their operating facilities.
Facility leases contain rent escalation clauses. Leases are primarily net
leases, which require the payment of executory costs such as real estate taxes,
insurance, common area maintenance and other operating costs in addition to
minimum rentals.
The Companies also rent an operating facility from an entity affiliated
through common ownership. The facility is rented on a month-to-month basis.
Total rent paid to this entity was $83,520 in 1997, 1996 and 1995.
The Companies also lease certain equipment under noncancelable operating
leases. Most equipment and automobile leases include options to purchase the
equipment and automobiles at fair market value at lease expiration.
The Companies are committed under facility and equipment operating leases
for minimum rental payments as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- --------------------------------------------------------------------------------
<S> <C>
1998............................................................................ $ 1,367,331
1999............................................................................ 1,335,460
2000............................................................................ 1,372,796
2001............................................................................ 1,421,310
2002............................................................................ 1,409,034
Thereafter...................................................................... 2,445,394
------------
Total....................................................................... $ 9,351,325
------------
------------
</TABLE>
Rental expense for the years ended December 31, 1997, 1996 and 1995 was
$1,232,137, $1,075,951 and $1,001,392, respectively.
AGREEMENT WITH HERBALIFE--During the periods presented, the Companies had an
agreement with Herbalife whereby Herbalife had agreed to purchase all of its
requirements for tablets, capsules and related products from the Companies. In
return, the Companies were contractually restricted from selling the products
sold to Herbalife to others. The agreement also provided the Companies a right
of first
F-27
<PAGE>
D&F INDUSTRIES, RAVEN INDUSTRIES D/B/A/
OMNI-PAK INDUSTRIES AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
refusal to establish any manufacturing facility outside North America that
Herbalife proposed to develop or acquire and the right to receive certain
royalty payments in the event such manufacturing facility was contracted for or
acquired by Herbalife, and the Companies' right of first refusal was exercised.
In September 1997, the Companies signed a new three-year agreement with
Herbalife, which became effective on January 12, 1998. Among other matters, the
terms of the new agreement eliminate certain exclusivity clauses from the
contract but contain clauses that require Herbalife to purchase certain minimum
inventory requirements of certain specified products from the Companies at
agreed-upon prices.
LITIGATION--The Companies are subject to legal proceedings and claims that
arise in the ordinary course of business. Management does not expect the
resolution of these legal matters to have a material adverse effect on the
Companies' financial statements.
* * * * * *
F-28
<PAGE>
D&F INDUSTRIES (PREDECESSOR ENTITY)
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
1998
-----------
<S> <C>
ASSETS
Current assets.........................................................................................
Cash and cash equivalents............................................................................ $ 5,581
Accounts receivable, net of allowances............................................................... 3,114
Inventories.......................................................................................... 7,414
Prepaid expenses and other current assets............................................................ 344
-----------
Total current assets............................................................................. 16,453
Property and equipment, net............................................................................ 2,245
-----------
TOTAL ASSETS..................................................................................... $ 18,698
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses................................................................ $ 8,939
Line of credit....................................................................................... 400
-----------
Total current liabilities........................................................................ 9,339
Commitments and Contingencies
Stockholders' Equity
Common stock, no par, authorized- 2,000,000 shares, issued and outstanding- 1,075,000 shares......... 1,026
Retained earnings.................................................................................... 8,333
-----------
Total stockholders' equity....................................................................... 9,359
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....................................................... $ 18,698
-----------
-----------
</TABLE>
See notes to condensed financial statements.
F-29
<PAGE>
D&F INDUSTRIES (PREDECESSOR ENTITY)
CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDING
MARCH 31,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Net sales................................................................................... $ 22,372 $ 18,921
Cost of sales............................................................................... 15,595 12,134
--------- ---------
Gross profit............................................................................ 6,777 6,787
Selling, general and administrative expenses................................................ 1,750 1,536
--------- ---------
Operating income............................................................................ 5,027 5,251
Interest (income) expense................................................................... (38) (33)
--------- ---------
Income before income taxes.................................................................. 5,065 5,284
Provision for state income taxes............................................................ 76 78
--------- ---------
Net income.................................................................................. $ 4,989 $ 5,206
--------- ---------
--------- ---------
</TABLE>
See notes to condensed financial statements.
F-30
<PAGE>
D&F INDUSTRIES (PREDECESSOR ENTITY)
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDING
MARCH 31,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Cash Flows From (For) Operating Activities:
Net income................................................................................. $ 4,989 $ 5,206
Depreciation and amortization.............................................................. 105 75
Changes in operating assets and liabilities:
Accounts receivable...................................................................... (249) (629)
Inventories.............................................................................. 626 (1,300)
Prepaid expenses and other current assets................................................ (264) 73
Accounts payable and accrued expenses.................................................... 219 812
--------- ---------
Net cash from operating activities....................................................... 5,426 4,237
--------- ---------
Cash Flows For Investing Activities:
Additions to property and equipment........................................................ (367) --
--------- ---------
Net cash for investing activities........................................................ (367) --
--------- ---------
Cash Flows From (For) Financing Activities:
Cash dividends paid........................................................................ (3,226) (3,225)
Principal payments under line of credit, net............................................... (20) (30)
--------- ---------
Net cash from (for) financing activities................................................. (3,246) (3,255)
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents......................................... 1,813 982
Cash and Cash Equivalents, at Beginning of Period............................................ 3,768 4,571
--------- ---------
Cash and Cash Equivalents, at End of Period.................................................. $ 5,581 $ 5,553
--------- ---------
--------- ---------
</TABLE>
See notes to condensed financial statements.
F-31
<PAGE>
D&F INDUSTRIES (PREDECESSOR ENTITY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited condensed combined financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Article 10 of Regulation S-X.
In the opinion of management, all adjustments (consisting of only normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ending March 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1998.
NOTE 2--SUBSEQUENT EVENTS
ACQUISITION AND RECAPITALIZATION--On April 23, 1998, the Company acquired
100% of the common stock of Omni-Pak and Affiliates for a total purchase price
of $137,867, of which $136,300 is expected to be allocated to goodwill and other
intangibles. In addition, the Company paid $58,700 to repurchase approximately
543,000 outstanding shares from its stockholders. In connection with these
transactions, BGA Consulting was paid a fee of $2,400 by the Company's
stockholders and the stockholders of Omni-Pak and Affiliates. The Company's
Chief Executive Officer, Mr. Paul Buxbaum, is the President of BGA Consulting.
LONG-TERM NOTES--In connection with the transactions described above, the
Company issued the Notes due 2008 in aggregate principal amount of $225,000.
Expenses related to the issuance of the Notes were $7,243. The stated interest
rate on the Notes is 11%. The Notes were issued at a discount of $6,608 for an
effective rate of approximately 11.5%. The Indenture places certain limitations
on incurrence of additional debt, acquisitions, investments and dividends.
ACQUISITION FACILITY--Effective April 23, 1997, the Company entered into a
new credit agreement (the "Acquisition Facility") which allows it to borrow up
to $50,000 under a line of credit through April 2003, of which no more than
$10,000 is available for working capital and general corporate purposes. Under
the Acquisition Facility, borrowings bear interest at the Company's election
either at the bank's prime rate plus certain margins, which range from 75 to 150
basis points or at LIBOR plus certain margins, which range from 200 to 275 basis
points. The Acquisition Facility requires the Company to maintain financial
ratios related to leverage, consolidated EBITDA, cash interest coverage and
fixed charge coverage. In addition, the Acquisition Facility limits the amount
of annual capital expenditures and cash dividends.
CASH DISTRIBUTIONS TO STOCKHOLDERS--In April 1998, distributions totaling
$5,160 were made to stockholders of record.
NOTE 3--CUSTOMER SALES FOR THE QUARTER ENDED MARCH 31:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Herbalife..................................................... $ 18,519 $ 16,353
Other Customers............................................... 3,853 2,568
--------- ---------
$ 22,372 $ 18,921
--------- ---------
--------- ---------
</TABLE>
F-32
<PAGE>
D&F INDUSTRIES (PREDECESSOR ENTITY)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
NOTE 4--INVENTORIES
Inventories consist of the following at March 31, 1998:
<TABLE>
<CAPTION>
1998
---------
<S> <C>
Raw materials................................................. $ 5,678
Work in process............................................... 941
Finished goods................................................ 795
---------
$ 7,414
---------
---------
</TABLE>
NOTE 5--NEW ACCOUNTING PRINCIPLES
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
which establishes standards for reporting and display of comprehensive income,
its components and accumulated balances. The statement, which the Company
adopted in the first quarter of 1998, establishes standards for reporting and
displaying comprehensive income and its components in a full set of general
purpose financial statements. There are no adjustments between net income and
comprehensive income for the periods presented.
F-33
<PAGE>
RAVEN INDUSTRIES D/B/A
OMNI-PAK INDUSTRIES AND AFFILIATES
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
1998
-----------
<S> <C>
ASSETS
Current assets
Cash and cash equivalents........................................................ $ 6,796
Accounts receivable, net of allowances........................................... 3,367
Inventories...................................................................... 3,034
Prepaid expenses and other current assets........................................ 265
-----------
Total current assets......................................................... 13,462
Property and equipment, net........................................................ 2,348
-----------
TOTAL ASSETS................................................................. $ 15,810
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses............................................ $ 7,517
-----------
Total current liabilities.................................................... 7,517
Commitments and Contingencies
Stockholders' Equity
Common stock..................................................................... 209
Retained earnings................................................................ 8,084
-----------
Total stockholders' equity................................................... 8,293
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................... $ 15,810
-----------
-----------
</TABLE>
See notes to condensed financial statements.
F-34
<PAGE>
RAVEN INDUSTRIES D/B/A
OMNI-PAK INDUSTRIES AND AFFILIATES
CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDING
MARCH 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Net sales................................................. $ 24,847 $ 20,281
Cost of sales............................................. 16,906 13,905
--------- ---------
Gross profit............................................ 7,941 6,376
Selling, general and administrative expenses.............. 1,536 1,454
--------- ---------
Operating income........................................ 6,405 4,922
Interest (income) expense--net............................ (34) (22)
--------- ---------
Income before income taxes................................ 6,439 4,944
Provision for state income taxes.......................... 97 75
--------- ---------
Net income.............................................. $ 6,342 $ 4,869
--------- ---------
--------- ---------
</TABLE>
See notes to condensed financial statements.
F-35
<PAGE>
RAVEN INDUSTRIES D/B/A
OMNI-PAK INDUSTRIES AND AFFILIATES
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDING
MARCH 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash Flows From (For) Operating Activities:
Net income................................................................................. $ 6,342 $ 4,869
Depreciation and amortization.............................................................. 97 75
Changes in operating assets and liabilities:
Accounts receivable...................................................................... (404) (943)
Inventories.............................................................................. 776 180
Prepaid expenses and other current assets................................................ (127) 4
Accounts payable and accrued expenses.................................................... 1,694 1,233
--------- ---------
Net cash from operating activities....................................................... 8,378 5,418
--------- ---------
Cash Flows For Investing Activities:
Additions to property and equipment........................................................ (221) (42)
--------- ---------
Net cash for investing activities........................................................ (221) (42)
--------- ---------
Cash Flows From (For) Financing Activities:
Cash dividends paid........................................................................ (6,550) (2,810)
--------- ---------
Net cash from (for) financing activities................................................. (6,550) (2,810)
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents......................................... 1,607 2,566
Cash and Cash Equivalents, at Beginning of Period............................................ 5,189 2,508
--------- ---------
Cash and Cash Equivalents, at End of Period.................................................. $ 6,796 $ 5,074
--------- ---------
--------- ---------
</TABLE>
See notes to condensed financial statements.
F-36
<PAGE>
RAVEN INDUSTRIES D/B/A
OMNI-PAK INDUSTRIES AND AFFILIATES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited condensed combined financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Article 10 of Regulation S-X.
In the opinion of management, all adjustments (consisting of only normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ending March 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1998.
NOTE 2--SUBSEQUENT EVENTS
On April 23, 1998 D&F Industries, Inc. acquired 100% of the common stock of
Omni-Pak and Affiliates for a total purchase price of $137,867.
In April, 1998, distributions totaling $6,720 were made to the stockholders
of record.
NOTE 3--CUSTOMER SALES FOR THE QUARTER ENDED MARCH 31:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Herbalife............................................................... $ 13,925 $ 11,879
EAS..................................................................... 8,399 5,770
Other Customers......................................................... 2,523 2,632
--------- ---------
$ 24,847 $ 20,281
--------- ---------
--------- ---------
</TABLE>
NOTE 4--INVENTORIES
Inventories consist of the following at March 31, 1998:
<TABLE>
<CAPTION>
1998
---------
<S> <C>
Raw materials...................................................................... $ 1,736
Work in process.................................................................... 845
Finished goods..................................................................... 453
---------
$ 3,034
---------
---------
</TABLE>
NOTE 5--NEW ACCOUNTING PRINCIPLES
In June 1997, the FASB issued SFAS No.130, "Reporting Comprehensive Income"
which establishes standards for reporting and display of comprehensive income,
its components and accumulated balances. The statement, which the Company
adopted in the first quarter of 1998, establishes standards for reporting and
displaying comprehensive income and its components in a full set of general
purpose financial statements. There are no adjustments between net income and
comprehensive income for the periods presented.
F-37
<PAGE>
D&F INDUSTRIES, RAVEN INDUSTRIES D/B/A
OMNI-PAK INDUSTRIES AND AFFILIATES
CONDENSED COMBINED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
1998
-----------
<S> <C>
ASSETS
Current assets
Cash and cash equivalents............................................................................ $ 12,377
Accounts receivable, net of allowances............................................................... 6,411
Inventories.......................................................................................... 10,448
Prepaid expenses and other current assets............................................................ 609
-----------
Total current assets............................................................................... 29,845
Property and equipment, net............................................................................ 4,593
-----------
TOTAL ASSETS....................................................................................... $ 34,438
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses................................................................ $ 16,386
Line of credit....................................................................................... 400
-----------
Total current liabilities.......................................................................... 16,786
Commitments and Contingencies
Stockholders' Equity
Common stock......................................................................................... 1,235
Retained earnings.................................................................................... 16,417
-----------
Total stockholders' equity......................................................................... 17,652
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......................................................... $ 34,438
-----------
-----------
</TABLE>
See notes to condensed combined financial statements.
F-38
<PAGE>
D&F INDUSTRIES, RAVEN INDUSTRIES D/B/A
OMNI-PAK INDUSTRIES AND AFFILIATES
CONDENSED COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDING
MARCH 31,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Net sales................................................................................... $ 46,842 $ 39,117
Cost of sales............................................................................... 32,124 25,979
--------- ---------
Gross profit.............................................................................. 14,718 13,138
Selling, general and administrative expenses................................................ 3,286 2,973
--------- ---------
Operating income.......................................................................... 11,432 10,165
Interest (income) expense................................................................... (72) (55)
--------- ---------
Income before income taxes.................................................................. 11,504 10,220
Provision for state income taxes............................................................ 173 145
--------- ---------
Net income................................................................................ $ 11,331 $ 10,075
--------- ---------
--------- ---------
</TABLE>
See notes to condensed combined financial statements.
F-39
<PAGE>
D&F INDUSTRIES, RAVEN INDUSTRIES D/B/A
OMNI-PAK INDUSTRIES AND AFFILIATES
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDING
MARCH 31,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Cash Flows From (For) Operating Activities:
Net income................................................................................ $ 11,331 $ 10,075
Depreciation and amortization............................................................. 202 362
Changes in operating assets and liabilities:
Accounts receivable..................................................................... (684) (1,326)
Inventories............................................................................. 1,402 (1,119)
Prepaid expenses and other current assets............................................... (392) 62
Accounts payable and accrued expenses................................................... 1,943 2,120
--------- ---------
Net cash from operating activities...................................................... 13,802 10,174
--------- ---------
Cash Flows For Investing Activities:
Additions to property and equipment....................................................... (587) (211)
--------- ---------
Net cash for investing activities....................................................... (587) (211)
--------- ---------
Cash Flows From (For) Financing Activities:
Cash dividends paid....................................................................... (9,775) (6,036)
Principal payments under line of credit, net.............................................. (20) (30)
--------- ---------
Net cash from (for) financing activities................................................ (9,795) (6,066)
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents........................................ 3,420 3,897
Cash and Cash Equivalents, at Beginning of Period........................................... 8,957 7,079
--------- ---------
Cash and Cash Equivalents, at End of Period................................................. $ 12,377 $ 10,976
--------- ---------
--------- ---------
</TABLE>
See notes to condensed combined financial statements.
F-40
<PAGE>
D&F INDUSTRIES, RAVEN INDUSTRIES D/B/A
OMNI-PAK INDUSTRIES AND AFFILIATES
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited condensed combined financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Article 10 of Regulation S-X.
In the opinion of management, all adjustments (consisting of only normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ending March 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1998.
NOTE 2--SUBSEQUENT EVENTS
ACQUISITION AND RECAPITALIZATION--On April 23, 1998, D&F Industries (the
predecessor entity) acquired 100% of the common stock of Omni-Pak and Affiliates
for a total purchase price of $137,867, of which $136,300 is expected to be
allocated to goodwill and other intangibles. In addition, D&F Industries paid
$58,700 to repurchase approximately 543,000 outstanding shares from its
stockholders. In connection with these transactions, BGA Consulting was paid a
fee of $2,400 by the Company's stockholders. The Company's Chief Executive
Officer, Mr. Paul Buxbaum, is the President of BGA Consulting.
LONG-TERM NOTES--In connection with the transactions described above, the
Company issued the Notes in an aggregate principal amount of $225,000. Expenses
related to the issuance of the Notes were $7,243. The stated interest rate on
the Notes is 11%. The Notes were issued at a discount of $6,608 for an effective
rate of approximately 11.5%. The Indenture places certain limitations on
incurrence of additional debt, acquisitions, investments and dividends.
ACQUISITION FACILITY--Effective April 23, 1997, the Company entered into a
new credit agreement (the "Acquisition Facility") which allows it to borrow up
to $50,000 under a line of credit through April 2003, of which no more than
$10,000 is available for working capital and general corporate purposes. Under
the Acquisition Facility, borrowings bear interest at the Company's election
either at the bank's prime rate plus certain margins, which range from 75 to 150
basis points or at LIBOR plus certain margins, which range from 200 to 275 basis
points. The Acquisition Facility requires the Company to maintain financial
ratios related to leverage, consolidated EBITDA, cash interest coverage and
fixed charge coverage. In addition, the Acquisition Facility limits the amount
of annual capital expenditures and cash dividends.
CASH DISTRIBUTIONS TO STOCKHOLDERS--In April 1998, distributions totaling
$11,880 were made to stockholders of record.
NOTE 3--CUSTOMER SALES FOR THE QUARTER ENDED MARCH 31:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Herbalife............................................................... $ 32,671 $ 29,350
EAS..................................................................... 9,027 5,769
Other Customers......................................................... 5,144 3,998
--------- ---------
$ 46,842 $ 39,117
--------- ---------
--------- ---------
</TABLE>
F-41
<PAGE>
D&F INDUSTRIES, RAVEN INDUSTRIES D/B/A
OMNI-PAK INDUSTRIES AND AFFILIATES
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
NOTE 4--INVENTORIES
Inventories consist of the following at March 31, 1998:
<TABLE>
<S> <C>
Raw materials...................................................... $ 7,414
Work in process.................................................... 1,786
Finished goods..................................................... 1,248
---------
$ 10,448
---------
---------
</TABLE>
NOTE 5--NEW ACCOUNTING PRINCIPLES
In June 1997, the FASB issued SFAS No.130, "Reporting Comprehensive Income"
which establishes standards for reporting and display of comprehensive income,
its components and accumulated balances. The statement, which the Company
adopted in the first quarter of 1998, establishes standards for reporting and
displaying comprehensive income and its components in a full set of general
purpose financial statements. There are no adjustments between net income and
comprehensive income for the periods presented.
F-42
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OTHER THAN
THOSE TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN
ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................
Risk Factors..................................
Capitalization................................
Selected Historical and Pro Forma Financial
Data........................................
Unaudited Pro Forma condensed Continued
Financial Statements........................
Management's Discussion and Analysis of
Financial Condition and Results of
Operations..................................
Business Management...........................
Executive Compensation........................
Security Ownership of Certain Beneficial
Owners and Management.......................
Certain Related Party Transactions............
Description of Acquisition Facility...........
Description of the New Notes..................
Book-Entry; Delivery and Form.................
Material United States Federal Income Tax
Consequences................................
Plan of Distribution..........................
Legal Matters.................................
Independent Public Accountants................
Available Information.........................
Index to Financial Statements.................
</TABLE>
$225,000,000
[LOGO]
GLOBAL HEALTH
SCIENCES, INC.
11% SENIOR NOTES
DUE 2008
--------------
PROSPECTUS
--------------
DATED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Global Health Sciences, Inc., Global Health Sub, Inc., Raven Industries,
Inc., Dynamic Products Inc., West Coast Sales and D&F Industries, Inc.
(collectively, the "Registrants") are California corporations. Section
204(a)(10) of the California General Corporation Law (the "CGCL") enables a
corporation in its original articles of incorporation or an amendment thereto to
eliminate or limit the personal liability of a director to the corporation or
its shareholders for monetary damages for breach of the director's duties to the
corporation, except for (i) acts or omissions that involve intentional
misconduct or a knowing and culpable violation of law, (ii) acts or omissions
that a director believes to be contrary to the best interests of the corporation
or its shareholders, or that involve the absence of good faith on the part of
the director, (iii) receipt of an improper personal benefit, (iv) acts or
omissions that show a reckless disregard for the director's duty to the
corporation or its shareholders in circumstances in which the director was aware
or should have been aware, in the ordinary course of performing a director's
duties, of a risk of serious injury to the corporation or its shareholders, (v)
acts or omissions that constitute an unexcused pattern of inattention that
amounts to an abdication of the director's duty to the corporation or its
shareholders, (vi) pursuant to Section 310 of the CGCL (for interested
transactions between the corporation and a director or a corporation, firm or
association in which the director has a material financial interest or (vii)
pursuant to Section 316 (for improper loans, distributions or guarantees).
Article V of the Articles of Incorporation of each of Dynamic Products Inc.,
Raven Industries, Inc. and West Coast Sales and Article VI of the Articles of
Incorporation of each of Global Health Sub, Inc. and D&F Industries, Inc.
provide that each corporation is authorized to provide indemnification from and
against any and all expenses, judgments, fines, settlements and other
liabilities incurred by its agents (as defined in Section 317 of the CGCL) for
breach of duty to the corporation and its shareholders through by-law provisions
or through agreements with its agents or both to the fullest extent possible
under California law. Article IV of the Articles of Incorporation of each of
Dynamic Products Inc., Raven Industries, Inc. and West Coast Sales and Article V
of the Articles of Incorporation of each of Global Health Sub, Inc. and D&F
Industries, Inc. provide that the liability of the directors of each of the
corporations for monetary damages shall be eliminated to the fullest extent
permissible under California law.
The By-Laws of Global Health Sciences, Inc. provides that the corporation
shall have power to indemnify any person who was or is a party or is threatened
to be made a party to any proceeding by reason of the fact that such person is
or was an agent (i.e., director, officer, employee or other agent) of the
corporation against judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation. The By-Laws of each of Global Health Sub,
Inc., Dynamic Products, Inc., Raven Industries, Inc., West Coast Sales and D&F
Industries, Inc. provide that the each corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any proceeding by
reason of the fact that such person is or was an agent (i.e., director, officer,
employee or other agent) of the corporation against judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------------
<C> <S>
*2.1 Agreement and Plan of Reorganization dated as of April 23, 1998 by and among Global Health
Sciences, Inc., Global Health Sub, Inc., Raven Sub, Inc., Raven Industries, Dynamic Sub, Inc.,
Dynamic Products Inc, New West Coast Sales, Inc., West Coast Sales and Global Merger Sub, Inc.
*3.1(i) Articles of Incorporation of Global Health Sciences, Inc.
*3.1(ii) Articles of Incorporation of Global Health Sub, Inc.
*3.1(iii) Articles of Incorporation of Raven Industries, Inc.
*3.1(iv) Articles of Incorporation of Dynamic Products Inc.
*3.1(v) Articles of Incorporation of West Coast Sales
*3.1(vi) Articles of Incorporation of D&F Industries, Inc.
*3.2(i) By-Laws of Global Health Sciences, Inc.
*3.2(ii) By-Laws of Global Health Sub, Inc.
*3.2(iii) By-Laws of Raven Industries, Inc.
*3.2(iv) By-Laws of Dynamic Products Inc.
*3.2(v) By-Laws of West Coast Sales
*3.2(vi) By-Laws of D&F Industries, Inc.
*4.1 Indenture, dated as of April 23, 1998, by and among the Registrants and Chase Manhattan Bank and
Trust Company, National Association, as trustee
*4.2 Form of Notes (included in Exhibit 4.1)
*4.3 Registration Rights Agreement dated as of April 23, 1998 by and among the Registrants, Citicorp
Securities, Inc., Citibank Canada Securities Limited and Citibank International plc
*4.4 Guarantees of Global Health Sub, Inc., Raven Industries, Inc., Dynamic Products Inc., West Coast
Sales and D&F Industries, Inc. under Indenture (included in Exhibit 4.1)
*4.5 Credit Agreement dated as of April 23, 1998 among Global Health Sub, Inc., Global Health Sciences,
Inc., the Lenders party thereto, Citicorp USA, Inc., Citibank, N.A., and Bank of America NT&SA
*4.6 Guaranty, Indemnity and Subordination Agreement dated as of April 23, 1998 among Global Health
Sciences, Inc., D&F Industries, Inc., Raven Industries, Inc., Dynamic Products Inc. and West Coast
Sales
*4.7 Pledge and Security Agreement dated as of April 23, 1998 by and among Global Health Sub, Inc.,
Global Health Sciences, Inc., D&F Industries, Inc., Raven Industries, Inc., Dynamic Products Inc.,
West Coast Sales and Citicorp USA, Inc.
**5 Opinion of Weil, Gotshal & Manges LLP re: legality
*8 Opinion of Weil, Gotshal & Manges LLP re: tax matters
10.1 Supply Agreement dated as of September 2, 1997 by and between Raven Industries, Inc. and Herbalife
International of America, Inc. ("Herbalife") (incorporated by reference to Exhibit 10.23 to
Herbalife's Form 10-K for the year ended December 31, 1997)
10.2 Supply Agreement dated as of September 2, 1997 by and between Dynamic Products Inc. and Herbalife
(incorporated by reference to Exhibit 10.22 to Herbalife's Form 10-K for the year ended December
31, 1997)
10.3 Supply Agreement dated as of September 2, 1997 by and between Global Health and Herbalife
(incorporated by reference to Exhibit 10.21 to Herbalife's Form 10-K for the year ended December
31, 1997)
*10.4 Employment Agreement dated as of April 23, 1998 by and between Global Health Sciences, Inc. and
Richard D. Marconi
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------------
<C> <S>
*10.5 Employment Agreement dated as of April 23, 1998 by and between Global Health Sciences, Inc. and
Paul M. Buxbaum
*10.6 Employment Agreement dated as of April 23, 1998 by and between Global Health Sciences, Inc. and
Donald J. Lewis
*10.7 Consulting Agreement dated as of April 23, 1998 by and between Global Health Sciences, Inc. and BGA
Consulting
*10.8 Employment Agreement dated as of June 1, 1998 by and between Global Health Sciences, Inc. and
Howard Simon
**12 Computation of Ratio of Earnings to Fixed Charges
*21 Subsidiaries of the Registrants
*23.1 Consent of Deloitte & Touche LLP
*23.2 Consent of Weil, Gotshal & Manges LLP (included in Exhibit 8)
***24 Power of Attorney
*25 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended of Chase
Manhattan Bank and Trust Company, National Association as trustee under the Indenture
27 Financial Data Schedule for the quarter ended March 31, 1998, which is submitted electronically to
the Commission for information only
*99.1 Form of Letter of Transmittal
*99.2 Form of Notice of Guaranteed Delivery
**99.3 Form of Exchange Agent Agreement between Chase Manhattan Bank and Trust Company, National
Association and Global Health Sciences, Inc.
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by Amendment.
*** Previously filed.
(B) SCHEDULES.
None.
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the foregoing provisions, or otherwise, such
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of such 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, each Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) Each 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.
(c) Each 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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the City of Orange,
State of California, on the 10th day of July 1998.
<TABLE>
<S> <C> <C>
GLOBAL HEALTH SCIENCES, INC.
By: /s/ PAUL M. BUXBAUM
-----------------------------------------
Name: Paul M. Buxbaum
Title: Chief Executive Officer
</TABLE>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ DONALD J. LEWIS Chief Financial Officer, July 10, 1998
---------------------------- Senior Vice President
Donald J. Lewis and Director (Principal
Financial Officer and
Principal Accounting
Officer)
/s/ RICHARD D. MARCONI President, Chairman of the July 10, 1998
---------------------------- Board and Director
Richard D. Marconi
/s/ DENNIS DECONCINI Director July 10, 1998
----------------------------
Dennis DeConcini
/s/ BRADLEY GATES Director July 10, 1998
----------------------------
Bradley Gates
/s/ PAUL M. BUXBAUM Chief Executive Officer July 10, 1998
---------------------------- and Director (Principal
Paul M. Buxbaum Executive Officer)
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the City of Orange,
State of California, on the 10th day of July 1998.
<TABLE>
<S> <C> <C>
GLOBAL HEALTH SUB, INC.
BY: /S/ PAUL M. BUXBAUM
-----------------------------------------
Paul M. Buxbaum
CHIEF EXECUTIVE OFFICER
</TABLE>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ DONALD J. LEWIS Chief Financial Officer, July 10, 1998
---------------------------- Secretary and Director
Donald J. Lewis (Principal Financial
Officer and Principal
Accounting Officer)
/s/ RICHARD D. MARCONI Chairman of the Board and July 10, 1998
---------------------------- Director
Richard D. Marconi
/s/ PAUL M. BUXBAUM Chief Executive Officer July 10, 1998
---------------------------- and Director
Paul M. Buxbaum (Principal Executive
Officer)
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the City of Orange,
State of California, on the 10th day of July 1998.
<TABLE>
<S> <C> <C>
RAVEN INDUSTRIES, INC.
By: /s/ PAUL M. BUXBAUM
-----------------------------------------
Name: Paul M. Buxbaum
Title: Chief Executive Officer
</TABLE>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ DONALD J. LEWIS Chief Financial Officer, July 10, 1998
---------------------------- Secretary and Director
Donald J. Lewis (Principal Financial
Officer and Principal
Accounting Officer)
/s/ RICHARD D. MARCONI President and Director July 10, 1998
----------------------------
Richard D. Marconi
/s/ PAUL M. BUXBAUM Chief Executive Officer July 10, 1998
---------------------------- and Director (Principal
Paul M. Buxbaum Executive Officer)
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the City of Orange,
State of California, on the 10th day of July 1998.
<TABLE>
<S> <C> <C>
DYNAMIC PRODUCTS INC.
By: /s/ PAUL M. BUXBAUM
-----------------------------------------
Paul M. Buxbaum
CHIEF EXECUTIVE OFFICER
</TABLE>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ DONALD J. LEWIS Chief Financial Officer, July 10, 1998
---------------------------- Secretary and Director
Donald J. Lewis (Principal Financial
Officer and Principal
Accounting Officer)
/s/ RICHARD D. MARCONI Director July 10, 1998
----------------------------
Richard D. Marconi
/s/ PAUL M. BUXBAUM Chief Executive Officer July 10, 1998
---------------------------- and Director (Principal
Paul M. Buxbaum Executive Officer)
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the City of Orange,
State of California, on the 10th day of July 1998.
<TABLE>
<S> <C> <C>
WEST COAST SALES
By: /s/ PAUL M. BUXBAUM
-----------------------------------------
Name: Paul M. Buxbaum
Title: Chief Executive Officer
</TABLE>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ DONALD J. LEWIS Chief Financial Officer, July 10, 1998
---------------------------- Secretary and Director
Donald J. Lewis (Principal Financial
Officer and Principal
Accounting Officer)
/s/ RICHARD D. MARCONI Director July 10, 1998
----------------------------
Richard D. Marconi
/s/ PAUL M. BUXBAUM Chief Executive Officer July 10, 1998
---------------------------- and Director (Principal
Paul M. Buxbaum Executive Officer)
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the City of Orange,
State of California, on the 10th day of July 1998.
<TABLE>
<S> <C> <C>
D&F INDUSTRIES, INC.
By: /s/ PAUL M. BUXBAUM
-----------------------------------------
Name: Paul M. Buxbaum
Title: Chief Executive Officer
</TABLE>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ DONALD J. LEWIS Chief Financial Officer July 10, 1998
---------------------------- and Director (Principal
Donald J. Lewis Financial Officer and
Principal Accounting
Officer)
/s/ RICHARD D. MARCONI President and Director July 10, 1998
----------------------------
Richard D. Marconi
/s/ PAUL M. BUXBAUM Chief Executive Officer July 10, 1998
---------------------------- and Director (Principal
Paul M. Buxbaum Executive Officer)
II-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- ------------- ------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
*2.1 Agreement and Plan of Reorganization dated as of April 23, 1998 by and among Global Health
Sciences, Inc., Global Health Sub, Inc., Raven Sub, Inc., Raven Industries, Dynamic Sub,
Inc., Dynamic Products Inc, New West Coast Sales, Inc., West Coast Sales and Global Merger
Sub, Inc.
*3.1(i) Articles of Incorporation of Global Health Sciences, Inc.
*3.1(ii) Articles of Incorporation of Global Health Sub, Inc.
*3.1(iii) Articles of Incorporation of Raven Industries, Inc.
*3.1(iv) Articles of Incorporation of Dynamic Products Inc.
*3.1(v) Articles of Incorporation of West Coast Sales
*3.1(vi) Articles of Incorporation of D&F Industries, Inc.
*3.2(i) By-Laws of Global Health Sciences, Inc.
*3.2(ii) By-Laws of Global Health Sub, Inc.
*3.2(iii) By-Laws of Raven Industries, Inc.
*3.2(iv) By-Laws of Dynamic Products Inc.
*3.2(v) By-Laws of West Coast Sales
*3.2(vi) By-Laws of D&F Industries, Inc.
*4.1 Indenture, dated as of April 23, 1998, by and among the Registrants and Chase Manhattan
Bank and Trust Company, National Association, as trustee
*4.2 Form of Notes (included in Exhibit 4.1)
*4.3 Registration Rights Agreement dated as of April 23, 1998 by and among the Registrants,
Citicorp Securities, Inc., Citibank Canada Securities Limited and Citibank International
plc
*4.4 Guarantees of Global Health Sub, Inc., Raven Industries, Inc., Dynamic Products Inc., West
Coast Sales and D&F Industries, Inc. under Indenture (included in Exhibit 4.1)
*4.5 Credit Agreement dated as of April 23, 1998 among Global Health Sub, Inc., Global Health
Sciences, Inc., the Lenders party thereto, Citicorp USA, Inc., Citibank, N.A., and Bank of
America NT&SA
*4.6 Guaranty, Indemnity and Subordination Agreement dated as of April 23, 1998 among Global
Health Sciences, Inc., D&F Industries, Inc., Raven Industries, Inc., Dynamic Products Inc.
and West Coast Sales
*4.7 Pledge and Security Agreement dated as of April 23, 1998 by and among Global Health Sub,
Inc., Global Health Sciences, Inc., D&F Industries, Inc., Raven Industries, Inc., Dynamic
Products Inc., West Coast Sales and Citicorp USA, Inc.
**5 Opinion of Weil, Gotshal & Manges LLP re: legality
*8 Opinion of Weil, Gotshal & Manges LLP re: tax matters
10.1 Supply Agreement dated as of September 2, 1997 by and between Raven Industries, Inc. and
Herbalife International of America, Inc. ("Herbalife") (incorporated by reference to
Exhibit 10.23 to Herbalife's Form 10-K for the year ended December 31, 1997)
10.2 Supply Agreement dated as of September 2, 1997 by and between Dynamic Products Inc. and
Herbalife (incorporated by reference to Exhibit 10.22 to Herbalife's Form 10-K for the year
ended December 31, 1997)
10.3 Supply Agreement dated as of September 2, 1997 by and between Global Health and Herbalife
(incorporated by reference to Exhibit 10.21 to Herbalife's Form 10-K for the year ended
December 31, 1997)
*10.4 Employment Agreement dated as of April 23, 1998 by and between Global Health Sciences, Inc.
and Richard D. Marconi
*10.5 Employment Agreement dated as of April 23, 1998 by and between Global Health Sciences, Inc.
and Paul M. Buxbaum
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- ------------- ------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
*10.6 Employment Agreement dated as of April 23, 1998 by and between Global Health Sciences, Inc.
and Donald J. Lewis
*10.7 Consulting Agreement dated as of April 23, 1998 by and between Global Health Sciences, Inc.
and BGA Consulting
*10.8 Employment Agreement dated as of June 1, 1998 by and between Global Health Sciences, Inc.
and Howard Simon
**12 Computation of Ratio of Earnings to Fixed Charges
*21 Subsidiaries of the Registrants
*23.1 Consent of Deloitte & Touche LLP
*23.2 Consent of Weil, Gotshal & Manges LLP (included in Exhibit 8)
***24 Power of Attorney
*25 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended of
Chase Manhattan Bank and Trust Company, National Association as trustee under the Indenture
27 Financial Data Schedule for the quarter ended March 31, 1998, which is submitted
electronically to the Commission for information only
*99.1 Form of Letter of Transmittal
*99.2 Form of Notice of Guaranteed Delivery
**99.3 Form of Exchange Agent Agreement between Chase Manhattan Bank and Trust Company, National
Association and Global Health Sciences, Inc.
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by Amendment.
*** Previously filed.
<PAGE>
EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
by and among
GLOBAL HEALTH SCIENCES, INC.
GLOBAL HEALTH SUB, INC.
RAVEN SUB, INC.
D&F INDUSTRIES, INC.
DYNAMIC SUB, INC.
NEW WEST COAST SALES, INC.
RAVEN INDUSTRIES D/B/A
OMNI-PAK INDUSTRIES
DYNAMIC PRODUCTS, INC.
WEST COAST SALES
and
GLOBAL MERGER SUB, INC.
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS; RULES OF CONSTRUCTION............................. 2
1.1 Definitions.................................................. 2
1.2 Rules of Construction........................................ 4
SECTION 2. CONTRIBUTION OF ASSETS, ETC..................................... 4
2.1 Conveyance and Contribution of Assets........................ 4
2.2 Retained Assets.............................................. 4
2.3 Assumption of Liabilities.................................... 4
2.4 Retained Liabilities......................................... 5
2.5 No Representations or Warranties............................. 5
SECTION 3. THE MERGERS.................................................... 5
3.1 The Omni-Pak Merger.......................................... 5
3.2 The Dynamic Merger........................................... 5
3.3 The West Coast Merger........................................ 5
3.4 The Global Health Merger..................................... 5
SECTION 4. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY, NEW OMNI-PAK, OLD OMNI-PAK, DYNAMIC,
NEW DYNAMIC, WEST COAST, NEW WEST COAST
AND GLOBAL SUB............................................................. 6
4.1 Organization................................................. 6
4.2 Authorization; Execution; Binding Effect..................... 6
4.3 No Lawsuits; Consents and Approvals; No Violation............ 6
4.4 Capitalization............................................... 7
4.5 Disclosure................................................... 9
SECTION 5. ADDITIONAL AGREEMENTS.......................................... 10
5.1 Merger Agreements............................................ 10
5.2 Expenses..................................................... 10
5.3 Confidentiality.............................................. 10
5.4 Further Assurances and Cooperation........................... 10
5.5 Acknowledgment and Consent................................... 10
SECTION 6. CONDITIONS TO CLOSING.......................................... 11
6.1 Conditions to Closing by All Parties......................... 11
6.2 Additional Conditions to Closing by the Parties.............. 11
i
<PAGE>
SECTION 7. CLOSING........................................................ 12
7.1 The Closing.................................................. 12
7.2 Items/Documents Delivered and Exchanged at the Closing....... 12
SECTION 8. NO SURVIVAL OF REPRESENTATIONS AND
WARRANTIES........................................................... 13
SECTION 9. MISCELLANEOUS.................................................. 13
9.1 Binding Effect............................................... 14
9.2 Governing Law; Venue......................................... 14
9.3 Assignability................................................ 14
9.4 Counterparts................................................. 14
9.5 Amendments................................................... 14
9.6 Severability................................................. 14
9.7 Consents..................................................... 15
9.8 Waiver....................................................... 15
9.9 Attorneys' Fees.............................................. 15
9.10 Third-Party Beneficiaries.................................... 15
9.11 Titles and Subtitles......................................... 15
9.12 Entire Agreement............................................. 15
SCHEDULES
SCHEDULE 4.4(i) Shareholders of the Company
SCHEDULE 4.4(iii) Shareholders of Old Omni-Pak
SCHEDULE 4.4(iv) Shareholders of Old Dynamic
SCHEDULE 4.4(vi) Shareholders of Old West Coast
SCHEDULE 4.4(viiii) Shareholders of Global Merger Sub
ii
<PAGE>
EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of April 23, 1998, by and among Global Health Sciences, Inc., a
California corporation formerly known as D&F Industries (the "Company"), Global
Health Sub, Inc., a California corporation and a direct, wholly-owned subsidiary
of the Company ("Global Sub"), Raven Sub, Inc., a California corporation and a
direct, wholly-owned subsidiary of Global Sub ("New Omni-Pak"), D&F Industries,
Inc., a California corporation and a direct, wholly-owned subsidiary of Global
Sub ("New D&F"), Dynamic Sub, Inc., a California corporation and a direct,
wholly-owned subsidiary of Global Sub ("New Dynamic"), New West Coast Sales,
Inc., a California corporation and a direct, wholly-owned subsidiary of Global
Sub ("New West Coast"), Raven Industries d/b/a Omni-Pak Industries, a California
corporation ("Old Omni-Pak"), Dynamic Products, Inc., a California corporation
("Old Dynamic"), West Coast Sales, a California corporation ("Old West Coast"),
and Global Health Merger Sub, Inc., a California corporation ("Global Merger
Sub").
WHEREAS, each of the Parties (as defined herein) desires to engage in a
series of transactions (collectively the "Reorganization") pursuant to which,
among other things, (i) substantially all of the assets of the Company and the
liabilities associated therewith will be assigned and transferred to, and
assumed by, New D&F, (ii) New Omni-Pak will merge with and into Old Omni-Pak,
(iii) New Dynamic will merge with and into Old Dynamic, (iv) New West Coast will
merge with and into Old West Coast and (v) Global Merger Sub will merge with and
into the Company;
WHEREAS, the Company intends to offer (the "Debt Offering"), pursuant to
the terms of an indenture (the "Indenture") to be entered into with Chase
Manhattan Bank and Trust Company, National Association, $225,000,000 in
aggregate principal amount of 11% Senior Notes due 2008 (the "Notes") in a Rule
144A private placement transaction in order to, among other things, finance the
consummation of certain transactions contemplated by the Reorganization;
WHEREAS, in connection with the consummation of the Reorganization, Global
Sub intends to enter into a five-year, $50 million revolving credit facility
with
<PAGE>
Citicorp USA, Inc. and certain other financial institutions (the "Acquisition
Facility");
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained herein, the Parties hereby agree as
follows:
SECTION 1. DEFINITIONS; RULES OF CONSTRUCTION
1.1 Definitions. In addition to the capitalized terms defined elsewhere in this
Agreement, the following defined terms shall have the meanings ascribed to them
below for all purposes of this Agreement:
(i) "Acquisition Facility Documents" shall mean the Credit Agreement dated
as of April 23, 1998 between Global Sub, as borrower, the Company, as guarantor,
Citibank N.A., as issuing bank, Citicorp USA, Inc., as administrative agent, the
Bank of America, NT&SA, as documentation agent, and the lenders party thereto
and the other Loan Documents (as defined therein) to be executed in connection
therewith;
(ii) "CGCL" shall mean the California General Corporation Law;
(iii) "Closing" shall have the meaning set forth in Section 7.1;
(iv) "Company Common Stock" shall mean the outstanding shares of common
stock of the Company;
(v) "Dynamic Merger" shall have the meaning set forth in Section 3.2;
(vi) "Dynamic Merger Agreement" shall mean that certain Agreement and Plan
of Merger dated as of April 23, 1998 by and among the Company, New Dynamic, Old
Dynamic and the shareholders of such entities party thereto;
(vii) "Global Health Merger" shall have the meaning set forth in Section
3.4;
(viii) "Global Health Merger Agreement" shall mean that certain Agreement
and Plan of Merger dated as of April 23, 1998 by and among the Company, Global
Merger Sub and the shareholders of such entities party thereto;
2
<PAGE>
(ix) "Merger Agreements" shall mean the Omni-Pak Merger Agreement, the
Dynamic Merger Agreement, the West Coast Merger Agreement and the Global Health
Merger Agreement;
(x) "Mergers" shall mean the Omni-Pak Merger, the Dynamic Merger, the West
Coast Merger and the Global Health Merger;
(xi) "Old Dynamic Common Stock" shall mean the outstanding shares of
common stock of Old Dynamic;
(xii) "Old Omni-Pak Common Stock" shall mean the outstanding shares of
common stock of Old Omni-Pak;
(xiii) "Old West Coast Common Stock" shall mean the outstanding shares of
common stock of Old West Coast.
(xiv) "Omni-Pak Merger" shall have the meaning set forth in Section 3.1;
(xv) "Omni-Pak Merger Agreement" shall mean that certain Agreement and
Plan of Merger dated as of April 23, 1998 by and among the Company, Old
Omni-Pak, New Omni-Pak, and the shareholders of such entities party thereto;
(xvi) "Party" or "Parties" shall mean each party to this Agreement,
individually or collectively, as appropriate, for the context used;
(xvii) "Person" shall mean an individual, a corporation, an association, a
partnership, a limited liability company, a trust or estate, a government or any
department or agency thereof;
(xviii) "Retained Assets" shall mean all of the Company's right, title and
interest in and to the capital stock of Global Sub;
(xix) "Retained Liabilities" shall mean all of the Company's obligations
and liabilities under the Notes, the Indenture and the Acquisition Facility
Documents (and which shall not include New D&F's liabilities as a guarantor of
the Notes and as a guarantor of the obligations under the Acquisition Facility
Documents);
3
<PAGE>
(xx) "Transaction Documents" shall mean this Agreement and all other
documents executed on or prior to the Closing in connection herewith, including
the Merger Agreements and the Acquisition Facility Documents;
(xxi) "West Coast Merger" shall have the meaning set forth in Section 3.3;
and
(xxii) "West Coast Merger Agreement" shall mean that certain Agreement and
Plan of Merger dated as of April 23, 1998 by and among the Company, New West
Coast, Old West Coast and the shareholders of such entities party thereto.
1.2 Rules of Construction. As used in this Agreement, neutral pronouns and
any variations thereof shall be deemed to include the feminine and masculine and
all terms used in the singular shall be deemed to include the plural, and vice
versa, as the context may require. The words "hereof," "herein" and "hereunder"
and other words of similar import refer to this Agreement as a whole, including
the Schedules hereto, as the same may from time to time be amended or
supplemented and not to any subdivision contained in this Agreement. The word
"including" when used hereof is not intended to be exclusive and means
"including, without limitation". References hereof to section, subsection or
exhibit shall refer to the appropriate section, subsection or exhibit in or to
this Agreement.
SECTION 2. CONTRIBUTION OF ASSETS, ETC.
2.1 Conveyance and Contribution of Assets. Subject to Section 6, and for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company, by this Agreement, hereby conveys, assigns, transfers
and delivers to New D&F free and clear of all claims, liens and encumbrances and
contractually imposed restrictions, effective as of the Closing, all of the
right, title and interest of the Company in and to its properties, assets,
goodwill and rights of every kind and nature, wherever located, whether real or
personal, tangible or intangible, actual or contingent, other than the Retained
Assets (all of such properties, assets, goodwill and rights to be transferred,
collectively the "Transferred Assets").
2.2 Retained Assets. Notwithstanding anything in this Agreement to the contrary,
the Company shall retain, and shall not convey, assign, transfer or deliver to
New D&F, the Retained Assets.
4
<PAGE>
2.3 Assumption of Liabilities. In partial consideration for the foregoing
conveyance, assignment, transfer and delivery of the Transferred Assets at the
Closing, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, New D&F, by this Agreement, hereby
assumes as of the Closing and agrees to pay when due and to perform and
discharge, to the extent that the same have not been satisfied and discharged
prior to the Closing, all of the debts, claims, obligations, liabilities,
contracts and commitments of the Company of every kind and nature, whether
known, unknown, contingent, absolute, determined, indeterminable or otherwise on
as of the Closing and whether incurred, accruing or arising from facts existing
and or events occurring prior to, at or after the Closing, relating to or
arising out of the Transferred Assets, other than the Retained Liabilities;
provided, however, that in no event shall the debts, claims, obligations,
liabilities, contracts and commitments assumed by New D&F exceed the tax basis
of the Transferred Assets.
2.4 Retained Liabilities. Notwithstanding anything in this Agreement to the
contrary, the Company shall retain, and New D&F shall not assume or have any
liability with respect to, the Retained Liabilities.
2.5 No Representations or Warranties. The conveyance, assignment, transfer, and
delivery of the Transferred Assets by the Company to New D&F is without
representations or warranties of any kind by the Company. By its execution of
this Agreement, New D&F is accepting the Transferred Assets "AS IS, WHERE IS."
SECTION 3. THE MERGERS
3.1 The Omni-Pak Merger. In accordance with the provisions of the Omni-Pak
Merger Agreement, New Omni-Pak shall be merged with and into Old Omni-Pak as of
the Effective Time (as defined therein), with Old Omni-Pak as the surviving
corporation (the "Omni-Pak Merger"). The By-Laws of New Omni-Pak as in effect
immediately prior to the Effective Time shall be the By-Laws of Old Omni-Pak, as
the surviving corporation of the Omni-Pak Merger (the "Omni-Pak Surviving
Corporation"), unless and until altered, amended or repealed as provided in the
CGCL, the Articles of Incorporation of the Omni-Pak Surviving Corporation or
such By-Laws. The directors of New Omni-Pak immediately prior to the Effective
Time shall be the directors of the Omni-Pak Surviving Corporation and shall hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the Articles of
Incorporation and By-Laws of
5
<PAGE>
the Omni-Pak Surviving Corporation, or as otherwise provided by law. The
officers of New Omni-Pak immediately prior to the Effective Time shall be the
officers of the Omni-Pak Surviving Corporation and shall hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualify in the manner provided in the Articles of Incorporation and By-Laws
of the Omni-Pak Surviving Corporation, or as otherwise provided by law.
3.2 The Dynamic Merger. In accordance with the provisions of the Dynamic Merger
Agreement, New Dynamic shall be merged with and into Old Dynamic as of the
Effective Time (as defined therein), with Old Dynamic as the surviving
corporation (the "Dynamic Merger"). The By-Laws of New Dynamic as in effect
immediately prior to the Effective Time shall be the By-Laws of Old Dynamic, as
the surviving corporation of the Dynamic Merger (the "Dynamic Surviving
Corporation"), unless and until altered, amended or repealed as provided in the
CGCL, the Articles of Incorporation of the Dynamic Surviving Corporation or such
By-Laws. The directors of New Dynamic immediately prior to the Effective Time
shall be the directors of the Dynamic Surviving Corporation and shall hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the Articles of
Incorporation and By-Laws of the Dynamic Surviving Corporation, or as otherwise
provided by law. The officers of New Dynamic immediately prior to the Effective
Time shall be the officers of the Dynamic Surviving Corporation and shall hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the Articles of
Incorporation and By-Laws of the Dynamic Surviving Corporation, or as otherwise
provided by law.
3.3 The West Coast Merger. In accordance with the provisions of the West Coast
Merger Agreement, New West Coast shall be merged with and into Old West Coast as
of the Effective Time (as defined therein), with Old West Coast as the surviving
corporation (the "West Coast Merger"). The By-Laws of New West Coast as in
effect immediately prior to the Effective Time shall be the By-Laws of Old West
Coast, as the surviving corporation of the West Coast Merger (the "West Coast
Surviving Corporation"), unless and until altered, amended or repealed as
provided in the CGCL, the Articles of Incorporation of the West Coast Surviving
Corporation or such By-Laws. The directors of New West Coast immediately prior
to the Effective Time shall be the directors of the West Coast Surviving
Corporation and shall hold office from the Effective Time until their respective
successors are duly elected or appointed and qualify in the manner provided in
the Articles of Incorporation and By-Laws of the West Coast Surviving
Corporation, or as otherwise provided by law. The officers
6
<PAGE>
of New West Coast immediately prior to the Effective Time shall be the officers
of the West Coast Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and qualify
in the manner provided in the Articles of Incorporation and By-Laws of the West
Coast Surviving Corporation, or as otherwise provided by law.
3.4 The Global Health Merger. In accordance with the provisions of the Global
Health Merger Agreement, Global Merger Sub shall be merged with and into the
Company as of the Effective Time (as defined therein), with the Company as the
surviving corporation (the "Global Health Merger"). The By-Laws of Global Merger
Sub as in effect immediately prior to the Effective Time shall be the By-Laws of
the Company, as the surviving corporation of the Global Health Merger (the
"Global Health Surviving Corporation"), unless and until altered, amended or
repealed as provided in the CGCL, the Articles of Incorporation of the Global
Health Surviving Corporation or such By-Laws. The directors of Global Merger Sub
immediately prior to the Effective Time shall be the directors of the Global
Health Surviving Corporation and shall hold office from the Effective Time until
their respective successors are duly elected or appointed and qualify in the
manner provided in the Articles of Incorporation and By-Laws of the Global
Health Surviving Corporation, or as otherwise provided by law. The officers of
Global Merger Sub immediately prior to the Effective Time shall be the officers
of the Global Health Surviving Corporation and shall hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualify in the manner provided in the Articles of Incorporation and By-Laws
of the Global Health Surviving Corporation, or as otherwise provided by law.
SECTION 4. REPRESENTATIONS AND WARRANTIES
OF THE PARTIES
Each of the Parties severally, and not jointly, represents and warrants to
the other Parties as follows:
4.1 Organization. Such Party is a corporation duly organized, validly existing
and in good standing under the laws of the State of California, and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
4.2 Authorization; Execution; Binding Effect. Such Party has full corporate
power and authority to execute and deliver this Agreement and the other
Transaction
7
<PAGE>
Documents to which such Party is a party, and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by such Party of
this Agreement and the other Transaction Documents to which such Party is a
party, the performance of each of its obligations hereunder and thereunder and
the consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by all requisite corporate action and, subject to
any shareholder approval obtained pursuant to the Merger Agreements, all
shareholder action, as applicable, and no other corporate proceedings on the
part of such Party are necessary to authorize this Agreement and the other
Transaction Documents. This Agreement and the other Transaction Documents to
which such Party is a party have been duly and validly executed and delivered by
such Party, and when executed and delivered by the other Parties hereto or
thereto will constitute valid and binding agreements of such Party, enforceable
against such Party in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights and remedies generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4.3 No Lawsuits; Consents and Approvals; No Violation. There is no lawsuit,
proceeding, or investigation pending or, to the knowledge of such Party,
threatened against such Party which might question the validity or propriety of
this Agreement or the other Transaction Documents or the transactions
contemplated hereby and thereby. Except for the filing and recordation of the
Merger Agreements and the delivering of the officers' certificates substantially
in the form attached as exhibits thereto (the "Officers' Certificates") as
required by the CGCL, no filing with, and no permit, authorization, consent or
approval of, any governmental authority is necessary for execution and delivery
by such Party of this Agreement and the other Transaction Documents or the
consummation by such Party of the transactions contemplated hereby and thereby.
Neither the execution and delivery of this Agreement and the other Transaction
Documents by such Party nor the consummation of the transactions contemplated
hereby or thereby nor compliance by such Party with any of the provisions hereof
or thereof will (i) conflict with or result in any breach of any provision of
the Articles of Incorporation or the By-Laws of such Party, (ii) result in a
violation or breach of, or constitute a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or assets of such Party or (iii) violate any order, writ, injunction,
decree, statute, rule or regulation
8
<PAGE>
applicable to such Party or any of its properties or assets, excluding from the
foregoing clauses (ii) and (iii) violations, breaches or defaults that, either
individually or in the aggregate, would not have a material adverse effect on
the business, operations or financial condition of such Party.
4.4 Capitalization.
(i) The authorized capital stock of the Company consists of 2,000,000
shares of Company Common Stock, of which 1,075,000 shares are issued and
outstanding as of the date hereof. All of such issued and outstanding shares of
Company Common Stock are fully paid, non-assessable and free of preemptive
rights and are owned of record, and to the knowledge of the Company,
beneficially on the date hereof as set forth on Schedule 4.4(i) hereto. There
are not now, and at the Closing there will not be, any existing options,
warrants, calls, commitments or other agreements to which the Company is a party
requiring the issuance of additional Company Common Stock or other securities
convertible or exchangeable for Company Common Stock or other equity securities
of the Company.
(ii) The authorized capital stock of Old Omni-Pak consists of 100,000
shares of Old Omni-Pak Common Stock, of which 30,000 shares are issued and
outstanding as of the date hereof. All of such issued and outstanding shares of
Old Omni-Pak Common Stock are fully paid, non-assessable and free of preemptive
rights and are owned of record, and to the knowledge of Old Omni-Pak,
beneficially on the date hereof as set forth on Schedule 4.4(ii) hereto. There
are not now, and at the Closing there will not be, any existing options,
warrants, calls, commitments, or other agreements to which Old Omni-Pak is a
party requiring the issuance of Old Omni-Pak Common Stock or other securities
convertible or exchangeable for Old Omni-Pak Common Stock or other equity
securities of Old Omni-Pak.
(iii) The authorized capital stock of New Omni-Pak consists of 1,000
shares of common stock, par value $0.01 per share ("New Omni-Pak Common Stock"),
of which 100 shares are issued and outstanding as of the date hereof. All of
such issued and outstanding shares of New Omni-Pak Common Stock are fully paid,
non-assessable and free of preemptive rights and are owned of record and
beneficially by Global Sub. There are not now, and at the Closing there will not
be, any existing options, warrants, calls, commitments, or other agreements to
which New Omni-Pak is a party requiring the issuance of New Omni-Pak Common
Stock or other securities convertible or exchangeable for New Omni-Pak Common
Stock or other equity securities of New Omni-Pak.
9
<PAGE>
(iv) The authorized capital stock of Old Dynamic consists of 100,000
shares of Old Dynamic Common Stock, of which 100,000 shares are issued and
outstanding as of the date hereof. All of such issued and outstanding shares of
Old Dynamic Common Stock are fully paid, non-assessable and free of preemptive
rights and are owned of record, and to the knowledge of Old Dynamic,
beneficially on the date hereof as set forth on Schedule 4.4(iv) hereto. There
are not now, and at the Closing there will not be, any existing options,
warrants, calls, commitments, or other agreements to which Old Dynamic is a
party requiring the issuance of Old Dynamic Common Stock or other securities
convertible or exchangeable for Old Dynamic Common Stock or other equity
securities of Old Dynamic.
(v) The authorized capital stock of New Dynamic consists of 1,000 shares
of common stock, par value $0.01 per share ("New Dynamic Common Stock"), of
which 100 shares are issued and outstanding as of the date hereof. All of such
issued and outstanding shares of New Dynamic Common Stock are fully paid,
non-assessable and free of preemptive rights and are owned of record and
beneficially by Global Sub. There are not now, and at the Closing there will not
be, any existing options, warrants, calls, commitments, or other agreements to
which New Dynamic is a party requiring the issuance of New Dynamic Common Stock
or other securities convertible or exchangeable for New Dynamic Common Stock or
other equity securities of New Dynamic.
(vi) The authorized capital stock of Old West Coast consists of 100,000
shares of Old West Coast Common Stock, of which 2,000 shares are issued and
outstanding as of the date hereof. All of such issued and outstanding shares of
Old West Coast Common Stock are fully paid, non-assessable and free of
preemptive rights and are owned of record, and to the knowledge of Old West
Coast, beneficially on the date hereof as set forth on Schedule 4.4(vi) hereto.
There are not now, and at the Closing there will not be, any existing options,
warrants, calls, commitments, or other agreements to which Old West Coast is a
party requiring the issuance of Old West Coast Common Stock or other securities
convertible or exchangeable for Old West Coast Common Stock or other equity
securities of Old West Coast.
(vii) The authorized capital stock of New West Coast consists of 1,000
shares of common stock, par value $0.01 per share ("New West Coast Common
Stock"), of which 100 shares are issued and outstanding as of the date hereof.
All of such issued and outstanding shares of New West Coast Common Stock are
fully paid, non-assessable and free of preemptive rights and are owned of record
and beneficially by Global Sub. There are not now, and at the Closing there will
not be, any existing
10
<PAGE>
options, warrants, calls, commitments, or other agreements to which New West
Coast is a party requiring the issuance of New West Coast Common Stock or other
securities convertible or exchangeable for New West Coast Common Stock or other
equity securities of New West Coast.
(viii) The authorized capital stock of Global Merger Sub consists of 1,000
shares of common stock, par value $0.01 per share ("Global Merger Sub Common
Stock"), of which 100 shares are issued and outstanding as of the date hereof.
All of such issued and outstanding shares of Global Merger Sub Common Stock are
fully paid, non-assessable and free of preemptive rights and are owned of
record, and to the knowledge of Global Merger Sub, beneficially on the date
hereof as set forth on Schedule 4.4(viii) hereto. There are not now, and at the
Closing there will not be, any existing options, warrants, calls, commitments,
or other agreements to which Global Merger Sub is a party requiring the issuance
of Global Merger Sub Common Stock or other securities convertible or
exchangeable for Global Merger Sub Common Stock or other equity securities of
Global Merger Sub.
4.5 Disclosure. No representation or warranty by such Party in this Agreement
and no statement contained in either this Agreement or any of the other
Transaction Documents, when considered as a whole, contains any untrue statement
by such Party of a material fact or omits any material fact necessary to make
such statements contained herein or therein in light of the circumstances under
which they were made not misleading.
SECTION 5. ADDITIONAL AGREEMENTS
5.1 Merger Agreements. On or prior to the Closing, (i) each of New Omni-Pak and
Old Omni-Pak shall cause the Omni-Pak Merger Agreement to be executed and
delivered, (ii) each of New Dynamic and Old Dynamic shall cause the Dynamic
Merger Agreement to be executed and delivered, (iii) each of New West Coast and
Old West Coast shall cause the West Coast Merger Agreement to be executed and
delivered and (iv) the Company and Global Merger Sub shall cause the Global
Health Merger Agreement to be executed and delivered.
5.2 Expenses. Each Party shall pay its own expenses incurred (including the fees
of counsel, consultants, advisors and similar parties) on such Party's behalf in
connection with the negotiation and consummation of the transactions
contemplated by this Agreement and the other Transaction Documents.
11
<PAGE>
5.3 Confidentiality. Each Party agrees not to disclose to any third party the
terms of this Agreement and the other Transaction Documents except: (i) as
required by law; or (ii) to professional advisors who have a need to know and
are bound by a professional duty to maintain confidentiality; or (iii) in
connection with any legal proceedings arising out of this Agreement.
5.4 Further Assurances and Cooperation. Each Party shall execute and deliver
such instruments and take such other actions as the other Parties may reasonably
require in order to carry out the intent of this Agreement and the other
Transaction Documents and shall use reasonable efforts to cause such Party's
officers, employees, attorneys, agents, investment bankers, accountants, and
other authorized representatives to cooperate fully in customary and reasonable
respects with each other Party.
5.5 Acknowledgment and Consent. Each Party hereby consents to the transactions
contemplated by the Reorganization and acknowledges and agrees that the delivery
of the Omni-Pak Per Share Merger Consideration (as defined in the Omni-Pak
Merger Agreement), the Dynamic Per Share Merger Consideration (as defined in the
Dynamic Merger Agreement), the West Coast Per Share Merger Consideration (as
defined in the West Coast Merger Agreement) and the Global Health Per Share
Merger Consideration (as defined in the Global Health Merger Agreement), when
paid, and all payments past, present or future expressly contemplated in the
Transaction Documents, are not distributions within the meaning of Section 166
of the CGCL.
SECTION 6. CONDITIONS TO CLOSING
6.1 Conditions to Closing by All Parties. The obligations of each Party hereto
to take any and all actions to deliver the documents and items described in
Section 7.2 hereof as of the Closing is, at its option, subject to the
satisfaction, on or before the Closing, or waiver of the following conditions:
(i) no litigation by any regulatory body or private party is pending in
which (a) an injunction is or may be sought against the transactions
contemplated hereby, or relief is or may be sought against any Party hereto as a
result of this Agreement and (b) in the good faith judgment of such Party (based
upon the advice of its legal counsel), such regulatory body or private party has
a reasonable possibility of success and such relief would have a material
adverse effect on such Party or the transactions contemplated hereby;
12
<PAGE>
(ii) no order shall have been entered, and not vacated, by a court or
administrative agency of competent jurisdiction, in any action or proceeding
which enjoins, restrains or prohibits execution of this Agreement or the other
Transaction Documents or consummation of the transactions contemplated hereby or
thereby;
(iii) the Company shall have received the net proceeds of the Debt
Offering; and
(iv) the Acquisition Facility Documents shall have been executed and
delivered by the parties thereto.
6.2 Additional Conditions to Closing by the Parties. In addition to the matters
set forth in Section 6.1, the obligations of each Party to take all the actions
to deliver the documents and other items described in Section 7.2 hereof as of
the Closing is, at each Party's option, subject to the satisfaction, on or
before the Closing, or waiver of the following conditions:
(i) the representations and warranties of the other Parties contained in
Section 4 hereof shall be true, complete and correct in all material respects on
and as of the Closing; and
(ii) the other Parties shall have performed or complied in all material
respects with all agreements, obligations and conditions contained herein
required to be performed or complied with by such Parties prior to or at the
Closing.
SECTION 7. CLOSING
7.1 The Closing. Subject to the satisfaction of the conditions set forth in
Section 6 hereof (or the waiver thereof by the Party entitled to waive that
condition), the closing of the Reorganization (the "Closing") shall take place
at the offices of Weil, Gotshal & Manges LLP located at 767 Fifth Avenue, New
York, New York (or at such other place or manner as the Parties may designate in
writing) at 9:00 a.m. on April 23, 1998, or on such other date as the Parties
hereto may designate in writing.
7.2 Items/Documents Delivered and Exchanged at the Closing. At the Closing,
subject to the other terms and conditions of this Agreement, the following
actions shall be taken by, or the following items and documents as well as any
other
13
<PAGE>
appropriate items and documents specified herein, properly executed, shall be
delivered by and to, the appropriate Parties:
(i) the Company and Global Merger Sub shall deliver to each other the
executed Global Health Merger Agreement;
(ii) the certificates representing the shares of Company Common Stock to
be cancelled pursuant to the Global Health Merger and the certificates
representing the shares of Global Merger Sub Common Stock shall be delivered to
the Company for cancellation;
(iii) Old Omni-Pak and New Omni-Pak shall deliver to each other the
executed Omni-Pak Merger Agreement;
(iv) the certificates representing the shares of Old Omni-Pak Common Stock
shall be delivered to Old Omni-Pak for cancellation;
(v) Old Dynamic and New Dynamic shall deliver to each other the executed
Dynamic Merger Agreement;
(vi) the certificates representing the shares of Old Dynamic Common Stock
shall be delivered to Old Dynamic for cancellation;
(vii) Old West Coast and New West Coast shall deliver to each other the
executed West Coast Merger Agreement;
(viii) the certificates representing the shares of Old West Coast Common
Stock shall be delivered to Old West Coast for cancellation; and
(ix) each of Global Sub, New D&F, Old Omni-Pak, Old Dynamic, Old West
Coast, New Omni-Pak, New Dynamic and New West Coast shall deliver to the Company
evidence that such company will qualify for the Qualified Subchapter S
Subsidiary Election.
14
<PAGE>
SECTION 8. NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES
8.1 Each and every representation and warranty delivered by the Parties at or in
connection with this Agreement shall expire with, and be terminated and
extinguished upon, the Closing.
SECTION 9. MISCELLANEOUS
9.1 Binding Effect. All covenants and agreements contained in this Agreement by
or on behalf of any of the Parties shall bind and inure to the benefit of the
respective successors and assigns of the Parties.
9.2 Governing Law; Venue. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to any
principles of choice of law or conflicts of law. Each Party hereby irrevocably
consents and submits to the jurisdiction of the United States District Court for
the Central District of California or a state court of the State of California
sitting in Los Angeles County in any action or proceeding arising out of or
relating to this Agreement, the other Transaction Documents or the consummation
of the transactions contemplated hereby and thereby, and each Party hereby
irrevocably agrees that all claims in respect of any such action or proceeding
may be heard and determined in either such court. Each Party hereby irrevocably
waives any objection which such Party now or hereafter may have to the laying of
venue for any action or proceeding arising out of or relating to this Agreement
on the other Transaction Documents brought in the United States District Court
for the Central District of California or a state court of the State of
California sitting in Los Angeles County and any objection on the grounds that
any such action or proceeding in either of such courts has been brought in an
inconvenient forum.
9.3 Assignability. No Party shall assign, transfer or delegate any rights or
obligations under this Agreement, in whole or in part.
9.4 Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. A facsimile copy of an executed signature page shall be
deemed an original.
15
<PAGE>
9.5 Amendments. Except as otherwise provided herein, this Agreement may not be
amended or modified, and no provisions hereof may be waived, except by an
instrument in writing signed on behalf of each of the Parties hereto.
9.6 Severability. If any provision of this Agreement shall be held by a court of
competent jurisdiction to be contrary to law or public policy or otherwise
unenforceable: (i) the remaining provisions of this Agreement and any portions
thereof shall remain in full force and effect; (ii) the affected provision shall
be enforced to the fullest extent of the Parties' stated intent consistent with
the law and public policy; and (iii) the Parties shall negotiate, in good faith,
a substitute, valid and enforceable provision which most nearly reflects the
Parties' stated intention as set forth in such affected provision.
9.7 Consents. Any consent or approval permitted under this Agreement may be made
by the Party entitled to give its consent or approval in its sole discretion.
9.8 Waiver. No delay or omission by any Party to exercise any right or power
hereunder shall impair such right or power or be construed to be a waiver
thereof. A waiver by any Party of any of the covenants to be performed by any
other Party or any breach thereof shall not be effective except pursuant to a
written instrument signed by the Party or Parties waiving compliance, and shall
not be construed to be a waiver of any succeeding breach thereof or of any other
covenant herein contained.
9.9 Attorneys' Fees. If any Party brings an action against another Party to
enforce its rights under this Agreement, the prevailing Party shall be entitled
to recover its costs and expenses, including attorneys' fees and costs, incurred
in connection with such action, including any appeal of such action. In the
event that a Party brings such an action against more than one of the other
Parties to this Agreement, any attorneys' fees awarded against such other
Parties shall be apportioned among such other Parties as determined by the
prevailing Party.
9.10 Third-Party Beneficiaries. This Agreement is not intended to confer a
third-party beneficiary status or right of action upon any Person other than the
Parties hereto in any manner whatsoever.
9.11 Titles and Subtitles. The titles and subtitles used in this Agreement are
for convenience only and are not to be considered in construing or interpreting
any term or provision of this Agreement.
16
<PAGE>
9.12 Entire Agreement. This Agreement and the other Transaction Documents
constitute the sole and entire agreement of the Parties with respect to the
subject matter hereof and supersede all prior written or oral discussions or
agreements with respect thereto.
17
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.
GLOBAL HEALTH SCIENCES, INC.
By:
-------------------------------
Name: Fred E. Siegel
Title: President
GLOBAL HEALTH SUB, INC.
By:
-------------------------------
Name: Donald J. Lewis
Title: Secretary
D&F INDUSTRIES, INC.
By:
-------------------------------
Name: Richard D. Marconi
Title: Secretary
RAVEN INDUSTRIES D/B/A
OMNI-PAK INDUSTRIES
By:
-------------------------------
Name: Fred E. Siegel
Title: President
DYNAMIC PRODUCTS, INC.
By:
-------------------------------
Name: Fred E. Siegel
Title: President
18
<PAGE>
WEST COAST SALES
By:
-------------------------------
Name: Fred E. Siegel
Title: President
RAVEN SUB, INC.
By:
-------------------------------
Name: Donald J. Lewis
Title: Secretary
GLOBAL HEALTH MERGER SUB, INC.
By:
-------------------------------
Name: Richard D. Marconi
Title: President
DYNAMIC SUB, INC.
By:
-------------------------------
Name: Donald J. Lewis
Title: Secretary
NEW WEST COAST SALES, INC.
By:
-------------------------------
Name: Donald J. Lewis
Title: Secretary
19
<PAGE>
SCHEDULE 4.4(i)
Shareholders of the Company
<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
Richard Marconi 500,000
Fred Siegel 250,000
Blossom Siegel 250,000
Betty Anne Eckert 25,000
Elaine Berke 50,000
---------
1,075,000
</TABLE>
20
<PAGE>
SCHEDULE 4.4(ii)
Shareholders of Old Omni-Pak
<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
Richard Marconi 8,500
Fred Siegel 8,500
Mark Hughes 10,000
Ed Alosio 3,000
------
30,000
</TABLE>
21
<PAGE>
SCHEDULE 4.4(iv)
Shareholders of Old Dynamic
<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
Fred Siegel 50,000
Mark Hughes 20,000
Ed Alosio 25,000
David Katzen 5,000
-------
100,000
</TABLE>
22
<PAGE>
SCHEDULE 4.4(vi)
Shareholders of Old West Coast
<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
Richard Marconi 1,000
Fred Siegel 1,000
-----
2,000
</TABLE>
23
<PAGE>
SCHEDULE 4.4 (viii)
Shareholders of Global Merger Sub
<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
Richard Marconi 94
Fred Siegel 6
---
100
</TABLE>
24
<PAGE>
[STAMP]
870869
FILED
In the office of the Secretary of State
of the State of California
AUG 4 1978
MARCH FONG EU, Secretary of State
By /s/ Bill Holden
---------------
Deputy
ARTICLES OF INCORPORATION
OF
D & F INDUSTRIES
I
The name of this corporation is D & F INDUSTRIES.
II
The purpose of this corporation is to engage in any lawful act or activity for
which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III
The name and address in the State of California of this corporation's initial
agent for service of process is:
Richard D. Marconi
987 North Enterprise Way
Orange, California 92667
IV
This corporation is authorized to issue only one class of shares of stock; and
the total number of shares which this corporation is authorized to issue is
1,000,000.
DATED: August 3, 1978
/s/ Richard D. Marconi
----------------------
Richard D. Marconi
I hereby declare that I am the person who executed the foregoing Articles of
Incorporation, which execution is my act and deed.
/s/ Richard D. Marconi
----------------------
Richard D. Marconi
<PAGE>
[STAMP]
[SEAL] 870869
FILED
In the office of the Secretary of State
of the State of California
AUG 24 1978
MARCH FONG EU, Secretary of State
By /s/ James E. Harris
-------------------
Deputy
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION
OF
D & F INDUSTRIES
RICHARD D. MARCONI certifies that:
1. He is the incorporator of said Corporation.
2. He adopts the following amendment of Articles of Incorporation of
said corporation. Article IV shall be amended to read as follows:
"This corporation is authorized to issue only one class of shares of
stock; and the total number of shares which this corporation is
authorized to issue is 2,000,000."
3. Said corporation has issued no shares and no directors were named in
the Articles of Incorporation or have been elected.
/s/ Richard D. Marconi
------------------------------------
Richard D. Marconi, Incorporator
The undersigned declares under penalty of perjury that the matters set out
in the foregoing Certificate are true of his own knowledge.
Executed at Covina, California on August 7, 1978.
/s/ Richard D. Marconi
------------------------------------
Richard D. Marconi, Incorporator
<PAGE>
ARTICLES OF INCORPORATION
OF
GLOBAL HEALTH SUB, INC.
ARTICLE I
The name of the corporation is GLOBAL HEALTH SUB, INC.
ARTICLE II
The purpose of the corporation is to engage in any act or activity for which a
corporation may be organized under the General Corporation Law of California
other than the banking business or the practice of a profession.
ARTICLE III
The name of the corporation's initial agent for service of process is CT
Corporation System.
ARTICLE IV
The corporation is authorized to issue one class of shares to be designated
common stock, par value of $0.01 per share. The total number of shares of common
stock which the corporation is authorized to issue is One Thousand (1,000).
ARTICLE V
The liability of the directors of the corporation for monetary damages shall be
eliminated to the fullest extent permissible under California law.
<PAGE>
ARTICLE VI
The corporation is authorized to provide indemnification from and against any
and all expenses, judgments, fines, settlements, and other liabilities incurred
by its agents (as defined in Section 317 of the California Corporations Code)
for breach of duty to the corporation and its shareholders through by-law
provisions or through agreements with its agents or both to the fullest extent
possible under California law.
IN WITNESS WHEREOF, I hereby declare under penalty of perjury under the laws of
the State of California that the matters set forth in these Articles are true
and correct of my own knowledge.
Executed at New York, New York on April 1, 1998.
/s/ Michael E. Lubowitz
--------------------------------
Michael E. Lubowitz
Sole Incorporator
2
<PAGE>
[STAMP]
1303638
FILED
In the office of the Secretary of State
of the State of California
APR 3 1984
MARCH FONG EU, Secretary of State
By /s/ [ILLEGIBLE]
-------------------
Deputy
ARTICLES OF INCORPORATION
OF
OMNI-PACK INDUSTRIES
I.
The name of this corporation is
OMNI-PACK INDUSTRIES
II.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
The name and address in the State of California of this
corporation's initial agent for services of process is:
Fred E. Siegel
987 North Enterprise Way
Orange, CA 92667
IV.
This corporation is authorized to issue only one class of shares of
stock; and the total number of shares which this corporation is authorized to
issue is 100,000.
DATED: March 28, 1984
/s/ Fred E. Siegel
-----------------------------
Fred E. Siegel
Incorporator
I declare that I am the person who executed the foregoing Articles
of Incorporation, which execution is my act and deed.
/s/ Fred E. Siegel
-----------------------------
Fred E. Siegel
<PAGE>
[STAMP]
1303638
A280601
FILED
In the office of the Secretary of State
of the State of California
AUG 13 1984
MARCH FONG EU, Secretary of State
By /s/ James E. Harris
-------------------
Deputy
NAME CHANGE TO: OMNI-PAK INDUSTRIES
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
OMNI-PACK INDUSTRIES
A California corporation
I, FRED E. SIEGEL, certify that:
1. I am the sole incorporator of Omni-Pack Industries, a California
corporation.
2. Article I of the Articles of Incorporation of said corporation
shall be amended to read in full as follows:
"I
The name of the corporation is
OMNI-PAK INDUSTRIES"
3. No directors of the corporation were named in the Articles of
Incorporation or have been elected.
4. No shares of the corporation have been issued.
5. I have adopted the foregoing amendment of the Articles of
Incorporation as sole incorporator of the corporation, in accordance with
Section 901 of the California Corporations Code.
DATED: April 10, 1984
/s/ Fred E. Siegel
-----------------------------
FRED E. SIEGEL
I declare under penalty of perjury that the matters set forth above
are true and correct of my own knowledge, and that this document and declaration
were executed on April 10, 1984, at Orange, California.
/s/ Fred E. Siegel
-----------------------------
FRED E. SIEGEL
<PAGE>
[STAMP]
1303638
A330487
FILED
In the office of the Secretary of State
of the State of California
MAR 9 1987
/s/ March Fong Eu
MARCH FONG EU, Secretary of State
RAVEN INDUSTRIES
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION
OF
OMNI-PAK INDUSTRIES,
a California Corporation
Fred E. Siegel and Edward Alosio certify that:
1. They are the duly elected President and Secretary, respectively,
of Omni-Pak Industries, a California corporation.
2. Article I of the Articles of Incorporation is amended to read as
follows:
"I. The name of this corporation is Raven Industries."
3. The foregoing amendment of Articles of Incorporation has been
duly approved by the Board of Directors pursuant to Section 902 of the
Corporations Code.
4. The foregoing amendment of Articles of Incorporation has been
duly approved by the required vote of shareholders pursuant to Section 902 of
the Corporations Code. The corporation has only one class of shares. The total
number of outstanding shares entitled to vote with respect to the foregoing
Amendment was 30,000 shares. The number of shares voting in favor of the
Amendment exceeded the vote required in that the affirmative vote of a majority
of the outstanding shares was required for the approval of the Amendment and the
Amendment was approved by the affirmative vote of 100% of the outstanding voting
shares.
We further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this Certificate are true and
correct of our own knowledge.
Dated: February 12, l987 /s/ Fred E. Siegel
-----------------------------
Fred E. Siegel, President
/s/ Edward Alosio
-----------------------------
Edward Alosio, Secretary
[SEAL]
<PAGE>
[STAMP]
1405139
FILED
In the office of the Secretary of State
of the State of California
Apr 21, 1987
/s/ March Fung Eu
MARCH FUNG EU, Secretary of State
ARTICLES OF INCORPORATION
OF
DYNAMIC PRODUCTS INC.
I.
The name of this corporation is Dynamic Products Inc.
II.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
The name and address of the individual in the State of California of this
corporation's initial agent for service of process is:
Fred E. Siegel
7012 Belgrave Avenue
Garden Grove, California 92641
IV.
This corporation is authorized to issue only one class of shares of stock;
and the total number of shares which this corporation is authorized to issue is
100,000.
DATED: April 21, 1987
/s/ Edward J. Eckert
-----------------------------
Edward J. Eckert, Incorporator
I declare that I am the person who executed the foregoing Articles of
Incorporation, which execution is my act and deed.
/s/ Edward J. Eckert
-----------------------------
Edward J. Eckert
[SEAL]
<PAGE>
[STAMP]
1721823
FILED
In the office of the Secretary of State
of the State of California
Mar 16, 1993
/s/ March Fung Eu
MARCH FUNG EU, Secretary of State
ARTICLES OF INC0RPORATION
OF
WEST COAST SALES
I
The name of this corporation is West Coast Sales.
II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
III
The name and address in the State of California of this
corporation's initial agent for service of process is:
Fred E Siegel
987 North Enterprise Way
Orange, California 92667
IV
This corporation is authorized to issue only one class of shares of
stock; and the total number of shares which this corporation is authorized to
issue is 100,000.
V
The liability of the directors of the corporation for monetarv
damages shall be eliminated to the fullest extent permissible under California
law.
<PAGE>
VI
The corporation is authorized to provide indemnification of agents
(as defined in Section 317 of the Corporations Code) for breach of duty to the
corporation and its stockholders through bylaw provisions or through agreements
with the agents, or both, in excess of the indemnification otherwise permitted
by Section 317 of the Corporations Code, subject to the limits on such excess
indemnification set forth in Section 204 of the Corporations Code.
DATED: March 8, 1993.
/s/ N. Cris Prince
-----------------------------
N. Cris Prince, Incorporator
<PAGE>
ARTICLES OF INCORPORATION
OF
D & F INDUSTRIES, INC.
ARTICLE I
The name of the corporation is D & F INDUSTRIES, INC.
ARTICLE II
The purpose of the corporation is to engage in any lawful act or activity for
which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
The name of the corporation's initial agent for service of process is CT
Corporation System.
ARTICLE IV
The corporation is authorized to issue one class of shares to be designated
common stock, par value of $0.01 per share. The total number of shares of common
stock which the corporation is authorized to issue is One Thousand (1,000).
ARTICLE V
The liability of the directors of the corporation for monetary damages shall be
eliminated to the fullest extent permissible under California law.
<PAGE>
ARTICLE VI
The corporation is authorized to provide indemnification from and against any
and all expenses, judgments, fines, settlements, and other liabilities incurred
by its agents (as defined in Section 317 of the California Corporations Code)
for breach of duty to the corporation and its shareholders through by-law
provisions or through agreements with its agents or both to the fullest extent
possible under California law.
IN WITNESS WHEREOF, I hereby declare under penalty of perjury under the laws of
the State of California that the matters set forth in these Articles are true
and correct of my own knowledge.
Executed at New York, New York on March 31, 1998.
/s/ Michael E. Lubowitz
--------------------------------
Michael E. Lubowitz
Sole Incorporator
<PAGE>
BY LAWS
Bylaws for the regulation,
except as otherwise provided by statute
or its Articles of Incorporation of
D&F Industries
a California Corporation
ARTICLE I. OFFICES
Section 1. PRINCIPAL EXECUTIVE OFFICE. The principal executive
office of the corporation is hereby fixed and located at: 987 North Enterprise
Way, Orange, California 92667. The Board of Directors (herein called the
"Board") is hereby granted full power and authority to change said principal
executive office from one location to another. Any such change shall be noted on
the Bylaws opposite this Section, or this Section may be amended to state the
new location.
Section 2. OTHER OFFICES. Branch or subordinate offices may at any
time be established by the Board at any place or places.
ARTICLE II. SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held
either at the principal executive office of the corporation or at any other
place within or without the State of California which may be designated either
by the Board or by the written consent of all persons entitled to vote thereat,
given either before or after the meeting and filed with the Secretary.
Section 2. ANNUAL MEETINGS. The annual meetings of shareholders
shall be held on May 15, at 6:00 o'clock p.m., local time, or such other date or
such other time as may be fixed by the Board; provided, however, that should
said day fall upon a Saturday, Sunday, or legal holiday observed by the
corporation at its principal executive office, then any such annual meeting of
shareholders shall be held at the same time and place on the next day thereafter
ensuing which is a full business day. At such meetings directors shall be
elected and any other proper business may be transacted.
Section 3. SPECIAL MEETINGS. Special meetings of the shareholders
may be called at any time by the Board, the Chairman
-1-
<PAGE>
of the Board, the President, or by the holders of shares entitled to cast not
less than 10 percent of the votes at such meeting. Upon request in writing to
the Chairman of the Board, the President, any Vice-President or the Secretary
by any person (other than the Board) entitled to call a special meeting of
shareholders, the officer forthwith shall cause notice to be given to the
shareholders entitled to vote that a meeting will be held at a time requested by
the person or persons calling the meeting, not less than 35 nor more than 60
days after the receipt of the request. If the notice is not given within 20 days
after receipt of the request, the persons entitled to call the meeting may give
the notice.
Section 4. NOTICE OF ANNUAL OR SPECIAL MEETING. Written notice of
each annual or special meeting of shareholders shall be given not less than 10
nor more than 60 days before the date of the meeting to each shareholder
entitled to vote thereat. Such notice shall state the place, date, and hour of
the meeting and (i) in the case of a special meeting the general nature of the
business to be transacted, and no other business may be transacted, or (ii) in
the case of the annual meeting, those matters which the Board, at the time of
the mailing of the notice, intends to present for action by the shareholders,
but, subject to the provisions of applicable law, any proper matter may be
presented at the meeting for such action. The notice of any meeting at which
directors are to be elected shall include the names of nominees intended at the
time of the notice to be presented by management for election.
Notice of a shareholders' meeting shall be given either personally
or by mail or by other means of written communication, addressed to the
shareholder at the address of such shareholder appearing on the books of the
corporation or given by the shareholder to the corporation for the purpose of
notice; or, if no such address appears or is given, at the place where the
principal executive office of the corporation is located or by publication at
least once in a newspaper of general circulation in the county in which the
principal executive office is located. Notice by mail shall be deemed to have
been given at the time a written notice is deposited in the United States mails,
postage prepaid. Any other written notice shall be deemed to have been given at
the time it is personally delivered to the recipient or is delivered to a common
carrier for transmission, or actually transmitted by the person giving the
notice by electronic means, to the recipient.
Section 4. QUORUM. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute
-2-
<PAGE>
a quorum at any meeting of shareholders. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
Section 6. ADJOURNED MEETING AND NOTICE THEREOF. Any shareholders'
meeting, whether or not a quorum is present, may be adjourned from time to time
by the vote of a majority of the shares, the holders of which are either present
in person or represented by proxy thereat, but in the absence of a quorum
(except as provided in Section 5 of this Article) no other business may be
transacted at such meeting.
It shall not be necessary to give any notice of the time and place
of the adjourned meeting or of the business to be transacted thereat, other than
by announcement at the meeting at which such adjournment is taken; provided,
however, when any shareholders' meeting is adjourned for more than 45 days or,
if after adjournment a new record date is fixed for the adjourned meeting,
notice of the adjourned meeting shall be given as in the case of an original
meeting.
Section 7. VOTING. The shareholders entitled to notice of any
meeting or to vote at any such meeting shall be only persons in whose name
shares stand on the stock records of the corporation on the record date
determined in accordance with Section 8 of this Article.
Voting shall in all cases be subject to the provisions of Chapter 7
of the California General Corporation Law and to the following provisions:
(a) Subject to clause (g), shares held by an administrator,
executor, guardian, conservator or custodian may be voted by such holder either
in person or by proxy, without a transfer of such shares into the holder's name;
and shares standing in the name of a trustee may be voted by the trustee, either
in person or by proxy, but no trustee shall be entitled to vote shares held by
such trustee without a transfer of such shares into the trustee's name.
(b) Shares standing in the name of a receiver may be voted by such
receiver; and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into the receiver's name if authority
to do so is contained
-3-
<PAGE>
in the order of the court by which such receiver was appointed.
(c) Subject to the provisions of Section 705 of the California
General Corporation Law, and except where otherwise agreed in writing between
the parties, a shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so transferred.
(d) Shares standing in the name of a minor may be voted and the
corporation may treat all rights incident thereto as exercisable by the minor,
in person or by proxy, whether or not the corporation has notice, actual or
constructive, of the nonage, unless a guardian of the minor's property has been
appointed and written notice of such appointment given to the corporation.
(e) Shares standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent or proxyholder as the bylaws of
such other corporation may prescribe or, in the absence of such provision, as
the Board of Directors of such other corporation may determine or, in the
absence of such determination, by the chairman of the board, president or any
vice-president of such other corporation, or by any other person authorized to
do so by the board, president or any vice-president of such other corporation.
Shares which are purported to be voted or any proxy purported to be executed in
the name of a corporation (whether or not any title of the person signing is
indicated) shall be presumed to be voted or the proxy executed in accordance
with the provisions of this subdivision, unless the contrary is shown.
(f) Shares of the corporation owned by any subsidiary shall not be
entitled to vote on any matter.
(g) Shares held by the corporation in a fiduciary capacity, and
shares of the corporation held in a fiduciary capacity by any subsidiary, shall
not be entitled to vote on any matter, except to the extent that the settlor or
beneficial owner possesses and exercises a right to vote or to give the
corporation binding instructions as to how to vote such shares.
(h) If shares stand of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in common,
husband and wife as community property, tenants by the entirety, voting
trustees, persons entitled to vote under a shareholder voting agreement or
otherwise,
-4-
<PAGE>
or if two or more persons (including proxyholders) have the same fiduciary
relationship respecting the same shares, unless the secretary of the corporation
is given written notice to the contrary and is furnished with a copy of the
instrument or order appointing them or creating the relationship wherein it is
so provided, their acts with respect to voting shall have the following effect:
(i) If only one votes, such act binds all;
(ii) If more than one vote, the act of the majority so voting
binds all;
(iii) If more than one vote, but the vote is evenly split on
any particular matter, each faction may vote the securities in question
proportionately.
If the instrument so filed or the registration of the shares shows
that any such tenancy is held in unequal interests, a majority or even split for
the purpose of this section shall be a majority or even split in interest.
Subject to the following sentence and to the provisions of Section
708 of the California General Corporation Law, every shareholder entitled to
vote at any election of directors may cumulate such shareholder's votes and give
one candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the shareholder's shares are
entitled, or distribute the shareholder's votes on the same principle among as
many candidates as the shareholder thinks fit. No shareholder shall be entitled
to cumulate votes for any candidate or candidates pursuant to the preceding
sentence unless such candidate or candidates' names have been placed in
nomination prior to the voting and the shareholder has given notice, at the
meeting prior to the voting of the shareholder's intention to cumulate the
shareholder's votes. If any one shareholder has given such notice, all
shareholders may cumulate their votes for candidates in nomination.
Elections need not be by ballot, provided, however, that all
elections for directors must be by ballot upon demand made by a shareholder at
the meeting and before the voting begins.
In any election of directors, the candidates receiving the highest
number of votes of the shares entitled to be voted for them up to the number of
directors to be elected by such shares are elected.
-5-
<PAGE>
Section 8. RECORD DATE. The Board may fix, in advance, a record date
for the determination of the shareholders entitled to notice of any meeting or
to vote or entitled to receive payment of any dividend or other distribution, or
any allotment of rights, or to exercise rights in respect of any other lawful
action. The record date so fixed shall be not more than 60 nor less than 10 days
prior to the date of the meeting nor more than 60 days prior to any other
action. When a record date is so fixed, only shareholders of record on that date
are entitled to notice of and to vote at the meeting or to receive the dividend,
distribution, or allotment of rights, or to exercise of the rights, as the case
may be, notwithstanding any transfer of shares on the books of the corporation
after the record date. A determination of shareholders of record entitled to
notice of or to vote at a meeting of shareholders shall apply to any adjournment
of the meeting unless the Board fixes a new record date for the adjourned
meeting. The Board shall fix a new record date if the meeting is adjourned for
more than 45 days.
If no record date is fixed by the Board, the record date for
determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the close
of business on the business day next preceding the day on which the meeting is
held. The record date for determining shareholders for any purpose other than
set forth in this Section 8 or Section 10 of this Article shall be at the close
of business on the day on which the Board adopts the resolution relating
thereto, or the sixtieth day prior to the date of such other action, whichever
is later.
Section 9. CONSENT OF ABSENTEES. The transactions of any meeting of
shareholders, however called and noticed, and wherever held, are as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present either in person or by proxy, and if, either before or after the
meeting, each of the persons entitled to vote, not present in person or by
proxy, signs a written waiver of notice, or a consent to the holding of the
meeting or an approval of the minutes thereof. All such waivers, consents, or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Neither the business to be transacted at nor the purpose
of any regular or special meeting of shareholders need be specified in any
written waiver of notice, except as provided in Section 601(f) of the California
General Corporation Law.
-6-
<PAGE>
Section 10. ACTION WITHOUT MEETING. Subject to Section 603 of the
California General Corporation Law, any action which, under any provision of the
California General Corporation Law, may be taken at any annual or special
meeting of shareholders, may be taken without a meeting and without prior notice
if a consent in writing, setting forth the action so taken, shall be signed by
the holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Unless a
record date for voting purposes be fixed as provided in Section 8 of this
Article, the record date for determining shareholders entitled to give consent
pursuant to this Section 10, when no prior action by the Board has been taken,
shall be the day on which the first written consent is given.
Section 11. PROXIES. Every person entitled to vote shares has the
right to do so either in person or by one or more persons authorized by a
written proxy executed by such shareholder and filed with the Secretary. Any
proxy duly executed is not revoked and continues in full force and effect until
revoked by the person executing it prior to the vote pursuant thereto by a
writing delivered to the corporation stating that the proxy is revoked or by a
subsequent proxy executed by, or by attendance at the meeting and voting in
person by, the person executing the proxy; provided, however, that no proxy
shall be valid after the expiration of 11 months from the date of its execution
unless otherwise provided in the proxy.
Section 12. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the Board may appoint any persons other than nominees for office
as inspectors of election to act at such meeting and any adjournment thereof. If
inspectors of election be not so appointed, or if any persons so appointed fail
to appear or refuse to act, the chairman of any such meeting may, and on the
request of any shareholder or shareholder's proxy shall, make such appointment
at the meeting. The number of inspectors shall be either one or three. If
appointed at a meeting on the request of one or more shareholders or proxies,
the majority of shares present shall determine whether one or three inspectors
are to be appointed.
The duties of such inspectors shall be as prescribed by Section
707(b) of the California General Corporation Law and shall include: determining
the number of shares outstanding and the voting power of each; the shares
represented at the meeting, the existence of a quorum; the authenticity,
validity,
-7-
<PAGE>
and effect of proxies; receiving votes, ballots, or consents; hearing and
determining all challenges and questions in any way arising in connection with
the right to vote; counting and tabulating all votes or consents, determining
when the polls shall close; determining the result; and doing such acts as may
be proper to conduct the election or vote with fairness to all shareholders. If
there are three inspectors of election, the decision, act, or certificate of a
majority is effective in all respects as the decision, act, or certificate of
all.
ARTICLE III. DIRECTORS
Section 1. POWERS. Subject to limitations of the Articles, of these
Bylaws, and of the California General Corporation Law relating to action
required to be approved by the shareholders or by the outstanding shares, the
business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the Board. The Board may
delegate the management of the day-to-day operation of the business of the
corporation to a management company or other person provided that the business
and affairs of the corporation shall be managed and all corporate powers shall
be exercised under the ultimate direction of the Board. Without prejudice to
such general powers, but subject to the same limitations, it is hereby expressly
declared that the Board shall have the following powers in addition to the other
powers enumerated in these Bylaws:
(a) To select and remove all the other officers, agents, and
employees of the corporation, prescribe the powers and duties for them as may
not be inconsistent with law, or with the Articles or these Bylaws, fix their
compensation, and require from them security for faithful service.
(b) To conduct, manage, and control the affairs and business of the
corporation and to make such rules and regulations therefor not inconsistent
with law, or with the Articles or these Bylaws, as they may deem best.
(c) To adopt, make, and use a corporate seal, and to prescribe the
forms of certificates of stock, and to alter the form of such seal and of such
certificates from time to time as in their judgment they may deem best.
(d) To authorize the issuance of shares of stock of the corporation
from time to time, upon such terms and for such consideration as may be lawful.
-8-
<PAGE>
(e) To borrow money and incur indebtedness for the purposes of the
corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations, or other evidences of debt and securities therefor.
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized
number of directors shall be not less than 3 nor more than 5 until changed by
amendment of the Articles or by a Bylaw duly adopted by the shareholders. The
exact number of directors shall be fixed, within the limits specified, by the
Board or the shareholders in the same manner provided in these Bylaws for the
amendment hereof. The exact number of directors shall be 3 until changed as
provided in this Section 2.
Section 3. ELECTION AND TERM OF OFFICE. The directors shall be
elected at each annual meeting of shareholders but if any such annual meeting is
not held or the directors are not elected thereat, the directors may be elected
at any special meeting of shareholders held for that purpose. Each director
shall hold office until the next annual meeting and until a successor has been
elected and qualified.
Section 4. VACANCIES. Any director may resign effective upon giving
written notice to the Chairman of the Board, the President, Secretary, or the
Board, unless the notice specifies a later time for the effectiveness of such
resignation. If the resignation is effective at a future time, a successor may
be elected to take office when the resignation becomes effective.
Vacancies in the Board, including those existing as a result of a
removal of a director, may be filled by a majority of the remaining directors,
though less than a quorum, or by a sole remaining director, and each director so
elected shall hold office until the next annual meeting and until such
director's successor has been elected and qualified.
A vacancy or vacancies in the Board shall be deemed to exist in case
of the death, resignation, or removal of any director, or if the authorized
number of directors be increased, or if the shareholders fail, at any annual or
special meeting of shareholders at which any director or directors are elected,
to elect the full authorized number of directors to be voted for at that
meeting.
The Board may declare vacant the office of a director who has been
declared of unsound mind by an order of court or convicted of a felony.
-9-
<PAGE>
The Board may declare vacant the office of a director who has been
declared of unsound mind by an order of court or convicted of a felony.
The shareholders may elect a director or directors at any time to
fill any vacancy or vacancies not filled by the directors. Any such election by
written consent requires the consent of a majority of the outstanding shares
entitled to vote. If the Board accepts the resignation of a director tendered to
take effect at a future time, the Board or the shareholders shall have power to
elect a successor to take office when the resignation is to become effective.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of the director's term
of office.
Section 5. PLACE OF MEETING. Regular or special meetings of the
Board shall be held at any place within or without the State of California which
has been designated from time to time by the Board. In the absence of such
designation regular meetings shall be held at the principal executive office of
the corporation.
Section 6. REGULAR MEETINGS. Immediately following each annual
meeting of shareholders the Board shall hold a regular meeting for the purpose
of organization, election of officers, and the transaction of other business.
Other regular meetings of the Board shall be held without call on
May 15; provided, however, should said day fall upon a Saturday, Sunday, or
legal holiday observed by the corporation at its principal executive office,
then said meeting shall be held at the same time on the next day thereafter
ensuing which is a full business day. Call and notice of all regular meetings of
the Board are hereby dispensed with.
Section 7. SPECIAL MEETINGS. Special meetings of the Board for any
purpose or purposes may be called at any time by the Chairman of the Board, the
President, or any VicePresident or the Secretary or by any two directors.
Special meetings of the Board shall be held upon four days' written
notice or 48 hours' notice given personally or by telephone, telegraph, telex,
or other similar means of communication. Any such notice shall be addressed or
delivered to each director at such director's address as it is shown upon the
records of the corporation or as may have been given to the corporation by the
director for purposes of notice or, if such address is
-10-
<PAGE>
not shown on such records or is not readily ascertainable, at the place in which
the meetings of the directors are regularly held.
Notice by mail shall be deemed to have been given at the time a
written notice is deposited in the United States mails, postage prepaid. Any
other written notice shall be deemed to have been given at the time it is
personally delivered to the recipient or is delivered to a common carrier for
transmission, or actually transmitted by the person giving the notice by
electronic means, to the recipient. Oral notice shall be deemed to have been
given at the time it is communicated, in person or by telephone or wireless, to
the recipient or to a person at the office of the recipient who the person
giving the notice has reason to believe will promptly communicate it to the
recipient.
Section 8. QUORUM. A majority of the authorized number of directors
constitutes a quorum of the Board for the transaction of business, except to
adjourn as hereinafter provided. Every act or decision done or made by a
majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board, unless a greater number be
required by law or by the Articles. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
directors, if any action taken is approved by at least a majority of the
required quorum for such meeting.
Section 9. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE.
Members of the Board may participate in a meeting through use of conference
telephone or similar communications equipment, so long as all members
participating in such meeting can hear one another.
Section 10. WAIVER OF NOTICE. The transactions of any meeting of the
Board, however called and noticed or wherever held, are as valid as though had
at a meeting duly held after regular call and notice if a quorum be present and
if, either before or after the meeting, each of the directors not present signs
a written waiver of notice, a consent to holding such meeting or an approval of
the minutes thereof. All such waivers, consents, or approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.
Section 11. ADJOURNMENT. A majority of the directors present,
whether or not a quorum is present, may adjourn any directors' meeting to
another time and place. Notice of the time and place of holding an adjourned
meeting need not be given
-11-
<PAGE>
to absent directors if the time and place be fixed at the meeting adjourned. If
the meeting is adjourned for more than 24 hours, notice of any adjournment to
another time or place shall be given prior to the time of the adjourned meeting
to the directors who were not present at the time of the adjournment.
Section 12. FEES AND COMPENSATION. Directors and members of
committees may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by the Board.
Section 13. ACTION WITHOUT MEETING. Any action required or permitted
to be taken by the Board may be taken without a meeting if all members of the
Board shall individually or collectively consent in writing to such action. Such
consent or consents shall have the same effect as a unanimous vote of the Board
and shall be filed with the minutes of the proceedings of the Board.
Section 14. RIGHTS OF INSPECTION. Every director shall have the
absolute right at any reasonable time to inspect and copy all books, records,
and documents of every kind and to inspect the physical properties of the
corporation and also of its subsidiary corporations, domestic or foreign. Such
inspection by a director may be made in person or by agent or attorney and
includes the right to copy and obtain extracts.
Section 15. COMMITTEES. The Board may appoint one or more
committees, each consisting of two or more directors, and delegate to such
committees any of the authority of the Board except with respect to:
(a) The approval of any action for which the General Corporation Law
also requires shareholders' approval for approval of the outstanding shares;
(b) The filling of vacancies on the Board or on any committee;
(c) The fixing of compensation of the directors for serving on the
Board or on any committee;
(d) The amendment or repeal of Bylaws or the adoption of new Bylaws;
(e) The amendment or repeal of any resolution of the Board which by
its express terms is not so amendable or repealable;
-12-
<PAGE>
(f) A distribution to the shareholders of the corporation except at
a rate or in a periodic amount or within a price range determined by the Board;
(g) The appointment of other committees of the Board or the members
thereof.
Any such committee must be appointed by resolution adopted by a
majority of the authorized number of directors and may be designated an
Executive Committee or by such other name as the Board shall specify. The Board
shall have the power to prescribe the manner in which proceedings of any such
committee shall be conducted. In the absence of any such prescription, such
committee shall have the power to prescribe the manner in which its proceedings
shall be conducted. Unless the Board or such committee shall otherwise provide,
the regular and special meetings and other actions of any such committee shall
be governed by the provisions of this Article applicable to meetings and actions
of the Board. Minutes shall be kept of each meeting of each committee.
ARTICLE IV. OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a
president, a secretary, and a treasurer. The corporation may also have, at the
discretion of the Board, a chairman of the board, one or more vice-presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be elected or appointed in accordance with the provisions
of Section 3 of this Article.
Section 2. ELECTION. The officers of the corporation, except such
officers as may be elected or appointed in accordance with the provisions of
Section 3 or Section 5 of this Article, shall be chosen annually by, and shall
serve at the pleasure of, the Board, and shall hold their respective offices
until their resignation, removal, or other disqualification from service, or
until their respective successors shall be elected.
Section 3. SUBORDINATE OFFICERS. The Board may elect, and may
empower the President to appoint, such other officers as the business of the
corporation may require, each of whom shall hold office for such period, have
such authority, and perform such duties as are provided in these Bylaws or as
the Board may from time to time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be removed,
either with or without cause, by the Board of Directors at any time, or, except
in the case of an officer chosen by the Board, by any officer upon whom such
power of removal may
-13-
<PAGE>
be conferred by the Board. Any such removal shall be without prejudice to the
rights, if any, of the officer under any contract of employment of the officer.
Any officer may resign at any time by giving written notice to the
corporation, but without prejudice to the rights, if any, of the corporation
under any contract to which the officer is a party. Any such resignation shall
take effect at the date of the receipt of such notice or at any later time
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these Bylaws for regular election or appointment to
such office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if
there shall be such an officer, shall, if present, preside at all meetings of
the Board and exercise and perform such other powers and duties as may be from
time to time assigned by the Board.
Section 7. PRESIDENT. Subject to such powers, if any, as may be
given by the Board to the Chairman of the Board, if there be such an officer,
the President is the general manager and chief executive officer of the
corporation and has, subject to the control of the Board, general supervision,
direction, and control of the business and officers of the corporation. The
President shall preside at all meetings of the shareholders and, in the absence
of the Chairman of the Board, or if there be none, at all meetings of the Board.
The President has the general powers and duties of management usually vested in
the office of president and general manager of a corporation and such other
powers and duties as may be prescribed by the Board.
Section 8. VICE-PRESIDENTS. In the absence or disability of the
President, the Vice-Presidents in order of their rank as fixed by the Board or,
if not ranked, the Vice-President designated by the Board, shall perform all
the duties of the President, and when so acting shall have all the powers of,
and be subject to all the restrictions upon, the President. The Vice-Presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the Board.
Section 9. SECRETARY. The Secretary shall keep or cause to be kept,
at the principal executive office or such
-14-
<PAGE>
other place as the Board may order, a book of minutes of all meetings of
shareholders, the Board, and its committees, with the time and place of holding,
whether regular or special, and, if special, how authorized, the notice thereof
given, the names of those present at Board and committee meetings, the number of
shares present or represented at shareholders' meetings, and the proceedings
thereof. The Secretary shall keep, or cause to be kept, a copy of the Bylaws of
the corporation at the principal executive office or business office in
accordance with Section 213 of the California General Corporation Law.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, if one be appointed, a share register, or a duplicate share register,
showing the names of the shareholders and their addresses, the number and
classes of shares held by each, the number and date of certificates issued for
the same, and the number and date of cancellation of every certificate
surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the Board and of any committees thereof
required by these Bylaws or by law to be given, shall keep the seal of the
corporation in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board.
Section 10. TREASURER. The Treasurer is the chief financial officer
of the corporation and shall keep and maintain, or cause to be kept and
maintained, adequate and correct accounts of the properties and business
transactions of the corporation, and shall send or cause to be sent to the
shareholders of the corporation such financial statements and reports as are by
law or these Bylaws required to be sent to them. The books of account shall at
all times be open to inspection by any director.
The treasurer shall deposit all moneys and other valuables in the
name and to the credit of the corporation with such depositaries as may be
designated by the Board. The Treasurer shall disburse the funds of the
corporation as may be ordered by the Board, shall render to the President and
directors, whenever they request it, an account of all transactions as Treasurer
and of the financial condition of the corporation, and shall have such other
powers and perform such other duties as may be prescribed by the Board.
-15-
<PAGE>
ARTICLE V. OTHER PROVISIONS
Section 1. INSPECTION OF CORPORATE RECORDS.
(a) A shareholder or shareholders holding at least five percent in
the aggregate of the outstanding voting shares of the corporation or who hold at
least one percent of such voting shares and have filed a Schedule 14B with the
United States Securities and Exchange Commission relating to the election of
directors of the corporation shall have an absolute right to do either or both
of the following:
(i) Inspect and copy the record of shareholders' names and
addresses and shareholdings during usual business hours upon five business days'
prior written demand upon the corporation; or
(ii) Obtain from the transfer agent, if any, for the
corporation, upon five business days' prior written demand and upon the tender
of its usual charges for such a list (the amount of which charges shall be
stated to the shareholder by the transfer agent upon request), a list of the
shareholders' names and addresses who are entitled to vote for the election of
directors and their shareholdings, as of the most recent record date for which
it has been compiled or as of a date specified by the shareholder subsequent to
the date of demand.
(b) The record of shareholders shall also be open to inspection and
copying by any shareholder or holder of a voting trust certificate at any time
during usual business hours upon written demand on the corporation, for a
purpose reasonably related to such holder's interest as a shareholder or holder
of a voting trust certificate.
(c) The accounting books and records and minutes of proceedings of
the shareholders and the Board and committees of the Board shall be open to
inspection upon written demand on the corporation of any shareholder or holder
of a voting trust certificate at any reasonable time during usual business
hours, for a purpose reasonably related to such holder's interests as a
shareholder or as a holder of such voting trust certificate.
(d) Any inspection and copying under this Article may be made in
person or by agent or attorney.
Section 2. INSPECTION OF BYLAWS. The corporation shall keep in its
principal executive office the original or a copy of these Bylaws as amended to
date which shall be open to inspection
-16-
<PAGE>
by shareholders at all reasonable times during office hours. If the principal
executive office of the corporation is outside the State of California and the
corporation has no principal business office in such state, it shall upon the
written notice of any shareholder furnish to such shareholder a copy of these
Bylaws as amended to date.
Section 3. ENDORSEMENT OF DOCUMENTS; CONTRACTS. Subject to the
provisions of applicable law, any note, mortgage, evidence of indebtedness,
contract, share certificate, conveyance, or other instrument in writing and any
assignment or endorsements thereof executed or entered into between this
corporation and any other person, when signed by the Chairman of the Board, the
President or any Vice-President, and the Secretary, any Assistant Secretary,
the Treasurer or any Assistant Treasurer of this corporation shall be valid and
binding on this corporation in the absence of actual knowledge on the part of
the other person that the signing officers had not authority to execute the
same. Any such instruments may be signed by any other person or persons and in
such manner as from time to time shall be determined by the Board and, unless so
authorized by the Board, no officer, agent, or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or amount.
Section 4. CERTIFICATES OF STOCK. Every holder of shares of the
corporation shall be entitled to have a certificate signed in the name of the
corporation by the Chairman of the Board, the President or a Vice-President and
by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary, certifying the number of shares and the class or series of shares
owned by the shareholder. Any or all of the signatures on the certificate may be
facsimile. If any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if such person were an
officer, transfer agent, or registrar at the date of issue.
Certificates for shares may be issued prior to full payment under
such restrictions and for such purposes as the Board may provide; provided,
however, that on any certificate issued to represent any partly paid shares, the
total amount of the consideration to be paid therefor and the amount paid
thereon shall be stated.
-17-
<PAGE>
Except as provided in this Section no new certificate for shares
shall be issued in lieu of an old one unless the latter is surrendered and
cancelled at the same time. The Board may, however, in case any certificate for
shares is alleged to have been lost, stolen, or destroyed, authorize the
issuance of a new certificate in lieu thereof, and the corporation may require
that the corporation be given a bond or other adequate security sufficient to
indemnify it against any claim that may be made against it (including expense or
liability) on account of the alleged loss, theft, or destruction of such
certificate or the issuance of such new certificate.
Section 5. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
President or any other officer or officers authorized by the Board or the
President are each authorized to vote, represent, and exercise on behalf of the
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of the corporation. The authority herein
granted may be exercised either by any such officer in person or by any other
person authorized so to do by proxy or power of attorney duly executed by said
officer.
Section 6. STOCK PURCHASE PLANS. The corporation may adopt and carry
out a stock purchase plan or agreement or stock option plan or agreement
providing for the issue and sale for such consideration as may be fixed of its
unissued shares, or of issued shares acquired or to be acquired, to one or more
of the employees or directors of the corporation or of a subsidiary or to a
trustee on their behalf and for the payment for such shares in installments or
at one time, and may provide for aiding any such persons in paying for such
shares by compensation for services rendered, promissory notes, or otherwise.
Any such stock purchase plan or agreement or stock option plan or
agreement may include, among other features, the fixing of eligibility for
participation therein, the class and price of shares to be issued or sold under
the plan or agreement, the number of shares which may be subscribed for, the
method of payment therefor, the reservation of title until full payment
therefor, the effect of the termination of employment and option or obligation
on the part of the corporation to repurchase the shares upon termination of
employment, restrictions upon transfer of the shares, the time limits of and
termination of the plan, and any other matters, not in violation of applicable
law, as may be included in the plan as approved or authorized by the Board or
any committee of the Board.
Section 7. ANNUAL REPORT TO SHAREHOLDERS. The annual report to
shareholders referred to in Section 1501 of the California
-18-
<PAGE>
General Corporation Law is expressly waived, but nothing herein shall be
interpreted as prohibiting the Board from issuing annual or other periodic
reports to shareholders.
Section 8. CONSTRUCTION AND DEFINITIONS. Unless the context
otherwise requires, the general provisions, rules of construction, and
definitions contained in the General Provisions of the California Corporations
Code and in the California General Corporation Law shall govern the construction
of these Bylaws.
ARTICLE VI. INDEMNIFICATION
Section 1. DEFINITIONS. For the purposes of this Article, "agent"
includes any person who is or was a director, officer, employee, or other agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise, or was a
director, officer, employee, or agent of a foreign or domestic corporation which
was a predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation; "proceeding" includes any threatened,
pending, or completed action or proceeding, whether civil, criminal,
administrative or investigative; and "expenses" includes attorneys' fees and any
expenses of establishing a right to indemnification under Section 4 or Section
5(c).
Section 2. INDEMNIFICATIONS IN ACTIONS BY THIRD PARTIES. The
corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any proceeding (other than an action by or in
the right of the corporation) by reason of the fact that such person is or was
an agent of the corporation, against expenses, judgments, fines, settlements,
and other amounts actually and reasonably incurred in connection with such
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in the best interests of the corporation and, in the
case of a criminal proceeding, had no reasonable cause to believe the conduct of
such person was unlawful. The termination of any 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 the person reasonably believed to be in the best
interests of the corporation or that the person had reasonable cause to believe
that the person's conduct was unlawful.
-19-
<PAGE>
Section 3. INDEMNIFICATION IN ACTIONS BY OR IN THE RIGHT OF THE
CORPORATION. The corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending, or
completed action by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that such person is or was an agent of the
corporation, against expenses actually and reasonably incurred by such person in
connection with the defense or settlement of such action if such person acted in
good faith, in a manner such person believed to be in the best interests of the
corporation, and with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar circumstances. No
indemnification shall be made under this Section 3.
(a) In respect of any claim, issue, or matter as to which such
person shall have been adjudged to be liable to the corporation in the
performance of such person's duty to the corporation, unless and only to the
extent that the court in which such action was brought shall determine upon
application that, in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for the expenses which such court
shall determine;
(b) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval; or
(c) Of expenses incurred in defending a threatened or pending action
which is settled or otherwise disposed of without court approval.
Section 4. INDEMNIFICATION AGAINST EXPENSES. To the extent that an
agent of the corporation has been successful on the merits in defense of any
proceeding referred to in Sections 2 or 3 or in defense of any claim, issue or
matter therein, the agent shall be indemnified against expenses actually and
reasonably incurred by the agent in connection therewith.
Section 5. REQUIRED DETERMINATIONS. Except as provided in Section 4,
any indemnification under this Article shall be made by the corporation only if
authorized in the specific case, upon a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 by:
(a) A majority vote of a quorum consisting of directors who are not
parties to such proceeding;
-20-
<PAGE>
(b) Approval of the shareholders, with the shares owned by the
person to be indemnified not being entitled to vote thereon; or
(c) The court in which such proceeding is or was pending upon
application made by the corporation or the agent or the attorney or other person
rendering services in connection with the defense, whether or not such
application by the agent, attorney, or other person is opposed by the
corporation.
Section 6. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by the corporation prior to the final disposition of
such proceeding upon receipt of an undertaking by or on behalf of the agent to
repay such amount unless it shall be determined ultimately that the agent is
entitled to be indemnified as authorized in this Article.
Section 7. OTHER INDEMNIFICATION. No provision made by the
corporation to indemnify its or its subsidiary's directors or officers for the
defense of any proceeding, whether contained in the Articles, Bylaws, a
resolution of shareholders or directors, an agreement, or otherwise, shall be
valid unless consistent with this Article. Nothing contained in this Article
shall affect any right to indemnification to which persons other than such
directors and officers may be entitled by contract or otherwise.
Section 8. FORMS OF INDEMNIFICATION NOT PERMITTED. No
indemnification or advance shall be made under this Article, except as provided
in Section 4 or Section 5(c) in any circumstance where it appears:
(a) That it would be inconsistent with a provision of the Articles,
Bylaws, a resolution of the shareholders or an agreement in effect at the time
of the accrual of the alleged cause of action asserted in the proceeding in
which the expenses were incurred or other amounts were paid, which prohibits or
otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
Section 9. INSURANCE. The corporation shall have power to purchase
and maintain insurance on behalf of any agent of the corporation against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such whether or not the corporation would have the
power to indemnify the agent against such liability under the
-21-
<PAGE>
provisions of this Article.
Section 10. NONAPPLICABILITY TO FIDUCIARIES OF EMPLOYEE BENEFIT
PLANS. This Article does not apply to any proceeding against any trustee,
investment manager, or other fiduciary of an employee benefit plan in such
person's capacity as such, even though such person may also be an agent of the
corporation as defined in Section 1. Nothing contained in this Article shall
limit any right to indemnification to which such a trustee, investment manager,
or other fiduciary may be entitled by contract or otherwise which shall be
enforceable to the extent permitted by applicable law other than Section 317 of
the California General Corporation Law.
ARTICLE VII. EMERGENCY PROVISIONS
Section 1. GENERAL. The provisions of this Article shall be
operative only during a national emergency declared by the President of the
United States or the person performing the President's functions, or in the
event of a nuclear, atomic, or other attack on the United States or a disaster
making it impossible or impracticable for the corporation to conduct its
business without recourse to the provisions of this Article. Said provisions in
such event shall override all other Bylaws of this corporation in conflict with
any provisions of this Article, and shall remain operative so long as it remains
impossible or impracticable to continue the business of the corporation
otherwise, but thereafter shall be inoperative; provided that all actions taken
in good faith pursuant to such provisions shall thereafter remain in full force
and effect unless and until revoked by action taken pursuant to the provisions
of the Bylaws other than those contained in this Article.
Section 2. UNAVAILABLE DIRECTORS. All directors of the corporation
who are not available to perform their duties as directors by reason of physical
or mental incapacity or for any other reason or who are unwilling to perform
their duties or whose whereabouts are unknown shall automatically cease to be
directors, with like effect as if such persons had resigned as directors, so
long as such unavailability continues.
Section 3. AUTHORIZED NUMBER OF DIRECTORS. The authorized number of
directors shall be the number of directors remaining after eliminating those who
have ceased to be directors pursuant to Section 2, or the minimum number
required by law, whichever number is greater.
-22-
<PAGE>
Section 4. QUORUM. The number of directors necessary to constitute a
quorum shall be one-third of the authorized number of directors as specified in
the foregoing Section, or such other minimum number as, pursuant to the law or
lawful decree then in force, it is possible for the Bylaws of a corporation to
specify.
Section 5. CREATION OF EMERGENCY COMMITTEE. In the event the number
of directors remaining after eliminating those who have ceased to be directors
pursuant to Section 2 is less than the minimum number of authorized directors
required by law, then until the appointment of additional directors to make up
such required minimum, all the powers and authorities which the Board could by
law delegate, including all powers and authorities which the Board could
delegate to a committee, shall be automatically vested in an emergency
committee, and the emergency committee shall thereafter manage the affairs of
the corporation pursuant to such powers and authorities and shall have all such
other powers and authorities as may by law or lawful decree be conferred on any
person or body of persons during a period of emergency.
Section 6. CONSTITUTION OF EMERGENCY COMMITTEE. The emergency
committee shall consist of all the directors remaining after eliminating those
who have ceased to be directors pursuant to Section 2, provided that such
remaining directors are not less than three in number. In the event such
remaining directors are less than three in number, the emergency committee shall
consist of three persons, who shall be the remaining director or directors and
either one or two officers or employees of the corporation, as the remaining
director or directors may in writing designate. If there is no remaining
director, the emergency committee shall consist of the three most senior
officers of the corporation who are available to serve, and if and to the extent
that officers are not available, the most senior employees of the corporation.
Seniority shall be determined in accordance with any designation of seniority in
the minutes of the proceedings of the Board, and in the absence of such
designation, shall be determined by rate of remuneration. In the event that
there are no remaining directors and no officers or employees of the corporation
available, the emergency committee shall consist of three persons designated in
writing by the shareholder owning the largest number of shares of record as of
the date of the last record date.
Section 7. POWERS OF EMERGENCY COMMITTEE. The emergency committee,
once appointed, shall govern its own procedures and shall have power to increase
the number of members thereof beyond the original number, and in the event of a
vacancy or vacancies
-23-
<PAGE>
therein, arising at any time, the remaining member or members of the emergency
committee shall have the power to fill such vacancy or vacancies. In the event
at any time after its appointment, all members of the emergency committee shall
die or resign or become unavailable to act for any reason whatsoever, a new
emergency committee shall be appointed in accordance with the foregoing
provisions of this Article.
Section 8. DIRECTORS BECOMING AVAILABLE. Any person who has ceased
to be a director pursuant to the provisions of Section 2 and who thereafter
becomes available to serve as a director shall automatically become a member of
the emergency committee.
Section 9. ELECTION OF BOARD OF DIRECTORS. The emergency committee
shall, as soon after its appointment as is practicable, take all requisite
action to secure the election of a board of directors, and upon such election
all the powers and authorities of the emergency committee shall cease.
Section 10. TERMINATION OF EMERGENCY COMMITTEE. In the event, after
the appointment of an emergency committee, a sufficient number of persons who
ceased to be directors pursuant to Section 2 become available to serve as
directors, so that if they had not ceased to be directors as aforesaid, there
would be enough directors to constitute the minimum number of directors required
by law, then all such persons shall automatically be deemed to be reappointed as
directors and the powers and authorities of the emergency committee shall be at
an end.
ARTICLE VIII. AMENDMENTS
These Bylaws may be amended or repealed either by approval of the
outstanding shares or by the approval of the Board; provided, however, that
after the issuance of shares, a Bylaw specifying or changing a fixed number of
directors or the maximum or minimum number or changing from a fixed to a
variable Board or vice versa may only be adopted by approval of the outstanding
shares.
-24-
<PAGE>
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
That I am the duly elected, qualified and acting Secretary of D&F
Industries, and that the above and foregoing Bylaws, comprising of 24 pages,
including this page, constitute the Bylaws of said corporation duly adopted as
such by unanimous written consent of the Board of Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed
the seal of said corporation on this 17th day of August, 1978.
(S E A L) /s/ Richard D. Marconi
-----------------------------
Richard D. Marconi
-25-
<PAGE>
CERTIFICATE OF AMENDMENT
I, the undersigned, do hereby certify:
That I am the duly elected, qualified and acting Secretary of D & F
Industries, Inc.
Article III, Section 2 of the Bylaws is hereby amended to read:
"Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The
authorized number of directors shall be three (3) until changed by
amendment of the Bylaws duly adopted by the shareholders amending
this Section 2."
The amendment herein set forth has been duly approved by shareholders
holding all issued and outstanding shares of D & F Industries, Inc.
Dated:December 15, 1994.
/s/ Richard D. Marconi
-----------------------------
Richard D. Marconi, Secretary
<PAGE>
WRITTEN CONSENT OF OUTSTANDING SHARES
APPROVING AMENDMENT TO BYLAWS
We, the undersigned, are the holders of all issued and outstanding shares
of D & F Industries, Inc., a California corporation, and each of us holds the
number of such shares set opposite our signatures below. We hereby consent to,
and do, adopt the following amendment to Article III, Section 2 of the Bylaws of
the corporation.
Article III, Section 2 is hereby amended to read:
"Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The
authorized number of directors shall be three (3) until changed by
amendment of the Bylaws duly adopted by the shareholders amending
this Section 2."
Dated: December 15, 1994.
Name Number of Shares
---- ----------------
/s/ Richard D. Marconi 500,000
----------------------------
Richard D. Marconi
/s/ Fred E. Siegel 500,000
----------------------------
Fred E. Siegel
/s/ Elaine M. Berke 500,000
----------------------------
Elaine M. Berke
/s/ Bettyann Eckert 25,000
----------------------------
Bettyann Eckert
<PAGE>
AMENDMENT OF BYLAWS
OF
D & F INDUSTRIES
The undersigned, being the duly elected and acting secretary of D &
F Industries, a California corporation (the "Company"), hereby certifies that
the following resolution amending Section 2 of Article III of the amended Bylaws
of the Company was duly adopted by the written consent of the requisite vote of
shareholders of the Company dated as of September 15, 1992, and that such
resolution has not been amended, modified or revoked and continues in full force
and effect as of the date hereof.
RESOLVED, that Section 2 of Article III of the amended Bylaws of the
Company is hereby amended in its entirety to read as follows:
"Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The
authorized number of directors shall be two (2) until changed by
amendment of the Bylaws duly adopted by the shareholders amending
this Section 2."
WITNESS my signature this 15th day of September 1992.
/s/ Richard D. Marconi
-----------------------------
Richard D. Marconi
Secretary
<PAGE>
BY-LAWS
OF
GLOBAL HEALTH SUB, INC.
a California corporation
<PAGE>
BY-LAWS
OF
GLOBAL HEALTH SUB, INC.
a California corporation
(this "Corporation")
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office for the
transaction of business of this Corporation may be designated and changed by
approval of a majority of the authorized members of the Board of Directors (the
"Board") and additional offices may be established and maintained at such other
place or places, either within or outside California, as the Board may from time
to time designate.
Section 2. OTHER OFFICES. Branch or subordinate offices may at any
time be established by the Board at any place or places where this Corporation
is qualified to do business.
ARTICLE II
DIRECTORS - MANAGEMENT
Section 1. RESPONSIBILITY OF BOARD OF DIRECTORS. Subject to the
provisions of the California General Corporation Law as set forth in the
California Corporations Code (the "Code") and to any limitations in the Articles
of Incorporation (the "Articles") of this Corporation relating to action
required to be approved by its shareholders (the "Shareholders"), as that term
is defined in Section 153 of the Code, or by the outstanding shares, as that
term is defined in Section 152 of the Code, the business and affairs of this
Corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the Board. The Board may delegate the management of the
day-to-day operation of the business of this Corporation to an Executive
Committee, provided that the business and affairs of this Corporation shall be
managed and all corporate powers shall be exercised under the ultimate direction
of the Board. The creation of the Executive Committee and appointment of its
members must be approved by a majority of the Directors in office
<PAGE>
at the time of its creation. To the extent specified by the Board and permitted
by law, the Executive Committee may exercise the authority of the Board.
Section 2. STANDARD OF CARE. Each member of the Board (a "Director"
or the "Directors") shall perform the duties of a Director, including the duties
as a member of any committee of the Board upon which the Director may serve, in
good faith, in a manner such Director believes to be in the best interests of
this Corporation, and with such care, including reasonable inquiry, as an
ordinary prudent person in a like position would use under similar
circumstances.
Section 3. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized
number of Directors shall initially be determined by the Board but in no event
shall the number be less than three (3) or more than seven (7); provided,
however, that (i) before shares are issued, the number may be one or two, (ii)
so long as this Corporation has only one Shareholder, the number may be one or
two, and (iii) so long as this Corporation has only two Shareholders, the number
may be two. After the issuance of shares, the indefinite number of Directors may
be changed, or a definite number fixed without provision for an indefinite
number, by an amendment to this by-law duly adopted by the vote or written
consent of the holders of a majority of the outstanding shares entitled to vote;
provided, however, that an amendment reducing the number or the minimum number
of Directors to a number less than five (5) cannot be adopted if the votes cast
against its adoption at a meeting of the Shareholders, or the shares not
consenting in the case of action by written consent, are equal to more than 16
2/3% of the outstanding shares entitled to vote. No amendment may change the
stated maximum number of authorized Directors to a number greater than two times
the stated minimum number of Directors minus one. Directors need not be
Shareholders.
Section 4. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall
be elected at each annual meeting of the Shareholders to hold office until the
next annual meeting. Each Director, including a Director elected to fill a
vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.
Section 5. VACANCIES. Except as otherwise provided herein, vacancies
in the Board may be filled at a meeting by a majority of the remaining
Directors, though less than a quorum, by the unanimous written consent of the
Directors then in office or by a sole remaining Director, except that a vacancy
created by the removal of a Director by the vote or written consent of the
Shareholders or by court order may be filled only by (i) the vote of a majority
of the shares entitled to
2
<PAGE>
vote represented at a duly held meeting at which a quorum is present, or (ii)
the written consent of the holders of a majority of the outstanding shares
entitled to vote. Each Director so elected shall hold office until the next
annual meeting of the Shareholders and until a successor has been elected and
qualified. A vacancy or vacancies in the Board shall exist (i) in the event of
the death, resignation, or removal of any Director; (ii) if the Board by
resolution declares vacant the office of a Director who has been declared of
unsound mind by an order of court or convicted of a felony; (iii) if the
authorized number of Directors is increased; or (iv) if the Shareholders fail,
at any meeting of Shareholders at which any Director or Directors are elected,
to elect the number of Directors to be voted for at that meeting. The
Shareholders may elect a Director or Directors at any time to fill any vacancy
or vacancies not filled by the Directors, but any such election by written
consent shall require the consent of a majority of the outstanding shares
entitled to vote. Any Director may resign effective on giving written notice to
the Chairman of the Board, the President, the Secretary or the Board, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a Director is effective at a future time, the Board may elect a
successor to take office when the resignation becomes effective. No reduction of
the authorized number of Directors shall have the effect of removing any
Director before that Director's term of office expires.
Section 6. REMOVAL OF DIRECTORS. The entire Board or any individual
Director may be removed from office as provided by Sections 303 and 304 of the
Code. Any such vacancy or vacancies thereby created shall be filled by a
majority vote of the Directors; provided, however, if there are no Directors
remaining in office, then by a majority vote of the shares entitled to vote
represented at a special meeting at which a quorum is present, or, by the
written consent of the holders of a majority of the outstanding shares entitled
to vote.
Section 7. NOTICE, PLACE AND MANNER OF MEETINGS. Meetings of the
Board may be called by the President or any Director and shall be held at the
principal office of this Corporation, unless some other place is designated in
the notice of the meeting. Members of the Board may participate in a meeting
through use of a conference telephone or similar communications equipment so
long as all members participating in such a meeting can hear one another.
Accurate minutes of any meeting of the Board or any committee thereof, shall be
maintained by the Secretary or other person designated for that purpose.
Section 8. ANNUAL MEETINGS. The annual meeting of the Board shall be
held immediately following the adjournment of the annual meeting of the
Shareholders.
3
<PAGE>
Section 9. SPECIAL MEETINGS - NOTICES - WAIVERS. Special meetings of
the Board may be called at any time by the President or, if he or she is absent,
unable, or refuses to act, by any Director. At least forty-eight (48) hours
prior notice of the time and place of special meetings shall be delivered
personally to the Directors or personally communicated to them by a corporate
Officer by telephone or facsimile transmission. If the notice is sent to a
Director by letter, it shall be addressed to him or her at his or her address as
it is shown upon the records of this Corporation, or if it is not so shown on
such records or is not readily ascertainable, at the place in which the meetings
of the Directors are regularly held. In case such notice is mailed, it shall be
deposited in the United States mail, postage prepaid, in the place in which the
principal office of this Corporation is located at least four (4) days prior to
the time of the holding of the meeting. Such mailing, facsimile transmission,
telephoning or delivery as above provided shall be due, legal and personal
notice to such Director. If (i) all or a majority of the Directors are present
at any Directors' meeting and said meeting is not properly called or noticed as
set forth in these By-Laws and all Directors, including those not present, sign
a waiver of notice of such meeting or a consent to holding the meeting or an
approval of the minutes thereof, whether prior to or after the holding of such
meeting, which said waiver, consent or approval shall be filed with the
Secretary of this Corporation, or (ii) a Director attends a meeting without
notice but without protesting, prior thereto or at its commencement, the lack of
notice, then the transactions thereof are as valid as if had at a meeting
regularly called and noticed.
Section 10. ACTION WITHOUT A MEETING BY WRITTEN CONSENT. Any action
required or permitted to be taken by the Board may be taken without a meeting,
if all members of the Board individually or collectively consent in writing to
that action. Any action by written consent shall have the same effect as a
unanimous vote of the Board. All such written consents shall be filed with the
minutes of the proceedings of the Board.
Section 11. QUORUM. A majority of the number of Directors as fixed
by these By-Laws shall be necessary to constitute a quorum for the transaction
of business, and the action of a majority of the Directors present at any
meeting at which there is a quorum, when duly assembled, is valid as a corporate
act; provided that a minority of the Directors, in the absence of a quorum, may
adjourn from time to time, but may not transact any business. A meeting at which
a quorum is initially present may continue to transact business, notwithstanding
the withdrawal of Directors, if any action taken is approved by a majority of
the required quorum for such meeting.
4
<PAGE>
Section 12. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given to absent Directors if the time
and place be fixed at the meeting adjourned and held within twenty-four (24)
hours, but if adjourned more than twenty-four (24) hours, notice shall be given
to all Directors not present at the time of the adjournment.
Section 13. COMPENSATION OF DIRECTORS. Directors, in that capacity,
shall not receive any stated salary for their services, but by resolution of the
Board a fixed sum and expense of attendance, if any, may be allowed for
attendance at each regular and special meeting of the Board; provided that
nothing herein contained shall be construed to preclude any Director from
serving this Corporation in any other capacity and receiving compensation
therefor.
ARTICLE III
OFFICERS
Section 1. OFFICERS. The officers of this Corporation shall be: a
President, a Chief Financial Officer and a Secretary. This Corporation may also
have, at the discretion of the Board, a Chief Operating Officer, one or more
Vice Presidents (including Executive Vice Presidents), one or more Assistant
Secretaries, one or more Assistant Chief Financial Officers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article III. Any number of offices may be held by the same person.
Section 2. ELECTION. The officers of this Corporation, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article, shall be elected annually by the Board, and each
shall hold office until he or she shall resign or shall be removed or otherwise
disqualified to serve, or a successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board may appoint such
other officers as the business of this Corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in these By-Laws or as the Board may from time to time
determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
rights, if any, of an officer under any contract of employment, any officer may
be removed, either with or without cause, by the Board, at any regular or
special meeting of the Board, or, except in case of an officer chosen by the
Board, by
5
<PAGE>
any officer upon whom such power of removal may be conferred by the Board. Any
officer may resign at any time by giving written notice to this Corporation. Any
resignation shall take effect at the date of the receipt of that notice or at
any later time specified in that notice; and, unless otherwise specified in that
notice, the acceptance of the resignation shall not be necessary to make it
effective. Any resignation is without prejudice to the rights, if any, of this
Corporation under any contract to which the officer is a party.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the By-Laws for regular appointments to that office.
Section 6. PRESIDENT. Subject to the control of the Board, the
President shall have general supervision, direction and control of the business
and officers of this Corporation. The President shall have the general powers
and duties of management usually vested in the office of President of a
corporation, and shall have such other powers and duties as may be prescribed by
the Board or these By-Laws. The President shall preside at all meetings of the
Shareholders and at all meetings of the Board. The President shall be the Chief
Executive Officer and shall have the powers and duties prescribed in this
section.
Section 7. VICE PRESIDENTS. The Vice Presidents, if any, shall have
such powers and perform such duties as from time to time may be prescribed by
the Board or these By-Laws.
Section 8. SECRETARY. The Secretary shall keep, or cause to be kept,
a book of minutes at the principal office or such other place as the Board may
order, of all meetings of Directors and Shareholders, with the time and place of
holding, whether regular or special, and if special, how authorized, the notice
thereof given, the names of those present at Directors' meetings, the number of
shares present or represented at Shareholders' meetings and the proceedings
thereof. The Secretary shall keep, or cause to be kept, at the principal office
or at the office of this Corporation's transfer agent, a share register, or
duplicate share register, showing the names of the Shareholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for the same, and the number and date of cancellation of
every certificate surrendered for cancellation. The Secretary shall give, or
cause to be given, notice of all the meetings of the Shareholders and of the
Board required by these By-Laws or by law to be given. He or she shall keep, or
cause to be kept, the seal of this Corporation in safe custody, and shall have
such other
6
<PAGE>
powers and perform such other duties as may be prescribed by the Board or by
these By-Laws.
Section 9. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep and maintain, or cause to be kept and maintained in accordance with
generally accepted accounting principles, adequate and correct accounts of the
properties and business transactions of this Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
earnings (or surplus) and shares. The books of account shall at all reasonable
times be open to inspection by any Director. This officer or his or her designee
shall deposit all moneys and other valuables in the name and to the credit of
this Corporation with such depositaries as may be designated by the Board. He or
she shall disburse the funds of this Corporation as may be ordered by the Board,
shall render to the President and Directors, whenever they request it, an
account of all of his or her transactions and of the financial condition of this
Corporation, and shall have such other powers and perform such other duties as
may be prescribed by the Board or these By-Laws.
Section 10. CONTROLLER. The Controller, if any, shall have the
duties as may be assigned from time to time by the President or the Board.
ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 1. PLACE OF MEETINGS. All meetings of the Shareholders shall
be held at the principal office of this Corporation unless some other
appropriate and convenient location be designated for that purpose from time to
time by the Board.
Section 2. ANNUAL MEETINGS. The annual meeting of the Shareholders
shall be held, each year, on such date and at such time as is determined by the
Board. At the annual meeting, the Shareholders shall elect a Board, consider
reports of the affairs of this Corporation and transact such other business as
may be properly brought before said meeting.
Section 3. SPECIAL MEETINGS. Special meetings of the Shareholders
may be called at any time by the Board, the President, or by one or more
Shareholders holding not less than 10% of the voting power of this Corporation.
Except as provided hereafter, notice shall be given as for the annual meeting.
Upon receipt of a written request addressed to the President or Secretary,
mailed or delivered personally to such officer by any person (other than the
Board) entitled to call a
7
<PAGE>
special meeting of Shareholders, such officer shall cause notice to be given, to
the Shareholders entitled to vote, that a meeting will be held at a time
requested by the person or persons calling the meeting, not less than
thirty-five (35) nor more than sixty (60) days after receipt of such request. If
such notice is not given within twenty (20) days after receipt of such request,
the persons calling the meeting may give notice thereof in the manner provided
by these By-Laws or apply to the Superior Court as provided in Section 305(c) of
the Code.
Section 4. NOTICE OF MEETINGS - REPORTS. Notice of meetings, annual
or special, shall be given in writing not less than ten (10) nor more than sixty
(60) days before the date of the meeting to Shareholders entitled to vote
thereat. Such notice shall be given by the Secretary or the Assistant Secretary,
or if there be no such officer, or in the case of his or her neglect or refusal,
by any Director or Shareholder. Such notices or any reports shall be given
personally or by mail or other means of written communication as provided in
Section 601 of the Code and shall be sent to the Shareholder's address appearing
on the books of this Corporation, or supplied by him or her to this Corporation
for the purpose of notice, and in the absence thereof, as provided in said
Section 601. Notice of any meeting of Shareholders shall specify the place, the
day and the hour of meeting, and (i) in case of a special meeting, the general
nature of the business to be transacted and no other business may be transacted,
or (ii) in the case of an annual meeting, those matters which the Board at date
of mailing intends to present for action by the Shareholders. At any meetings
where Directors are to be elected, notice shall include the names of the
nominees, if any, intended at date of notice to be presented by management for
election. If a Shareholder supplied no address, notice shall be deemed to have
been given if mailed to the place where the principal office of this
Corporation, in California, is situated, or published at least once in some
newspaper of general circulation in the County of said principal office. Notice
shall be deemed given at the time it is delivered personally or deposited in the
mail or sent by other means of written communication. The officer giving such
notice or report shall prepare and file an affidavit or declaration thereof.
When a meeting is adjourned for forty-five (45) days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting;
provided, however, it shall not be necessary to give any notice of adjournment
or of the business to be transacted at an adjourned meeting other than by
announcement at the meeting at which such adjournment is taken.
Section 5. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDER. The
transactions of any meeting of Shareholders, however called and noticed, shall
be as valid as though said transactions occurred at a meeting duly held after
regular call and notice, if a quorum be present either in person or by proxy,
8
<PAGE>
and if, either before or after the meeting, each of the Shareholders entitled to
vote, not present in person or by proxy, sign a written waiver of notice, or a
consent to the holding of such meeting or an approval of the minutes thereof.
All such waivers, consents or approvals shall be filed with the corporate
records or made a part of the minutes of the meeting. Attendance shall
constitute a waiver of notice, unless objection shall be made as provided in
Section 601(e) of the Code.
Section 6. SHAREHOLDERS ACTING WITHOUT A MEETING - ELECTION OF
DIRECTORS. Any action which may be taken at a meeting of the Shareholders may be
taken without a meeting or notice of meeting if authorized by a writing signed
by all of the Shareholders entitled to vote at a meeting for such purpose, and
filed with the Secretary of this Corporation; provided, however, that while
ordinarily Directors can only be elected by unanimous written consent under
Section 603(d) of the Code, if the Directors fail to fill a vacancy, then a
Director to fill that vacancy may be elected by the written consent of persons
holding a majority of shares entitled to vote for the election of Directors.
Section 7. OTHER ACTIONS WITHOUT A MEETING. Unless otherwise
provided in the Code, any action which may be taken at any annual or special
meeting of Shareholders may be taken without a meeting and without prior notice,
if a consent in writing, setting forth the action so taken, signed by the
holders of the outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Unless the
consents of all Shareholders entitled to vote have been solicited in writing:
(i) Notice of any Shareholder approval pursuant to Sections
310, 317, 1201 or 2007 of the Code without a meeting by less than
unanimous written consent shall be given at least ten (10) days before the
consummation of the action authorized by such approval; and
(ii) Prompt notice shall be given of the taking of any other
corporate action approved by Shareholders without a meeting by less than
unanimous written consent, to each of those Shareholders entitled to vote
who have not consented in writing.
Any Shareholder giving a written consent, or the Shareholder's proxyholders, or
a transferee of the shares of a personal representative of the Shareholder or
their respective proxyholders, may revoke the consent by a writing received by
this Corporation prior to the time that written consents of the number of shares
required to authorize
9
<PAGE>
the proposed action have been filed with the Secretary of this Corporation, but
may not do so thereafter. Such revocation is effective upon its receipt by the
Secretary of this Corporation.
Section 8. QUORUM. The holders of a majority of the shares entitled
to vote thereat, present in person, or represented by proxy, shall constitute a
quorum at all meetings of the Shareholders for the transaction of business
except as otherwise provided by law, by the Articles of Incorporation of this
Corporation, or by these ByLaws. If, however, such majority shall not be present
or represented at any meeting of the Shareholders, the Shareholders entitled to
vote thereat, present in person, or by proxy, shall have the power to adjourn
the meeting from time to time, until the requisite amount of voting shares shall
be present. At such adjourned meeting at which the requisite amount of voting
shares shall be represented, any business may be transacted which might have
been transacted at a meeting as originally notified. If a quorum be initially
present, the Shareholders may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Shareholders to leave less than a
quorum, if any action taken is approved by a majority of the Shareholders
required to initially constitute a quorum.
Section 9. VOTING. Only persons in whose names shares entitled to
vote stand on the stock records of this Corporation on the day of any meeting of
Shareholders, unless some other day be fixed by the Board for the determination
of Shareholders of record, and then on such other day, shall be entitled to vote
at such meeting. Provided that prior to the voting at a meeting, a candidate's
name has been placed in nomination and one or more Shareholders has given notice
at the meeting of the Shareholder's intent to cumulate the Shareholder's votes,
every Shareholder entitled to vote at any election for Directors may cumulate
their votes and give one candidate a number of votes equal to the number of
Directors to be elected multiplied by the number of votes to which his or her
shares are entitled, or distribute his or her votes on the same principle among
as many candidates as he or she thinks fit. If any one Shareholder has given
such notice, all Shareholders may cumulate their votes for candidates in
nomination. The candidates receiving the highest number of votes up to the
number of Directors to be elected are elected.
Section 10. RECORD DATE. In order that this Corporation may
determine the Shareholders entitled to notice of any meeting or to vote or
entitled to receive payment of any dividend or other distribution or allotment
of any rights or entitled to exercise any rights in respect of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than sixty (60) nor less than ten (10) days prior to the date of such meeting
nor more than sixty (60) days prior to any
10
<PAGE>
other action. In such case, only Shareholders of record on the date so fixed
shall be entitled to notice of and to vote at such meeting, or to receive such
dividends, distribution or allotment of rights, or to exercise such rights, as
the case may be, notwithstanding any transfer of any share on the books of this
Corporation after any record date fixed as aforesaid. The Board may close the
books of this Corporation against transfers of shares during the whole or any
part of such period. If no record date is fixed: (i) the record date for
determining Shareholders entitled to notice of or to vote at a meeting of
Shareholders shall be at the close of business on the business day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held; (ii) the record date for determining Shareholders entitled to
give consent to corporate action in writing without a meeting, when no prior
action by the Board is necessary, shall be the day on which the first written
consent is given; and (iii) the record date for determining Shareholders for any
other purpose shall be at the close of business on the day on which the Board
adopts the resolution relating thereto, or the sixtieth (60th) day prior to the
date of such other action, whichever is later.
Section 11. PROXIES. Every Shareholder entitled to vote, or to
execute consents, may do so, either in person or by written proxy, executed in
accordance with the provisions of Sections 604 and 705 of the Code and filed
with the Secretary of this Corporation.
Section 12. ORGANIZATION. The President, or in the absence of the
President, any Vice President, shall call the meeting of the Shareholders to
order, and shall act as chairman of the meeting. In the absence of the President
and all of the Vice Presidents, Shareholders shall appoint a chairman for such
meeting. The Secretary of this Corporation shall act as Secretary of all
meetings of the Shareholders, but in the absence of the Secretary at any meeting
of the Shareholders, the presiding officer may appoint any person to act as
Secretary of the meeting.
Section 13. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders the Board may, if they so elect, appoint inspectors of election to
act at such meeting or any adjournment thereof. If inspectors of election be not
so appointed, or if any persons so appointed fail to appear or refuse to act,
the chairman of any such meeting may, and on the request of any Shareholder or
his or her proxy shall, make such appointment at the meeting in which case the
number of inspectors shall be either one (1) or three (3) as determined by a
majority of the Shareholders represented at the meeting.
11
<PAGE>
ARTICLE V
CERTIFICATES AND TRANSFER OF SHARES
Section 1. CERTIFICATES FOR SHARES. Certificates for shares shall be
of such form and device as the Board may designate and shall state the name of
the record holder of the shares represented thereby, its number, date of
issuance, the number of shares for which it is issued, a statement of the
rights, privileges, preferences and restrictions, if any, a statement as to the
redemption or conversion, if any, a statement of liens or restrictions upon
transfer or voting, if any, if the shares be assessable or, if assessments are
collectible by personal action, a plain statement of such facts. All
certificates shall be signed in the name of this Corporation by the President or
a Vice President and by the Chief Financial Officer or any Assistant Chief
Financial Officer or the Secretary or any Assistant Secretary, certifying the
number of shares and the class or series of shares owned by the Shareholder. Any
or all of the signatures on the certificate may be facsimile. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed on a certificate shall have ceased to be that officer,
transfer agent, or registrar before that certificate is issued, it may be issued
by this Corporation with the same effect as if that person were an officer,
transfer agent, or registrar at the date of issue.
Section 2. TRANSFER ON THE BOOKS. Upon surrender to the Secretary or
transfer agent of this Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of this Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 3. LOST OR DESTROYED CERTIFICATES. Any person claiming a
certificate of stock to be lost or destroyed shall make an affidavit or
affirmation of that fact and shall, if the Directors so require, give this
Corporation a bond of indemnity, in form and with one or more sureties
satisfactory to the Board, in at least double the value of the stock represented
by said certificate, whereupon a new certificate may be issued in the same tenor
and for the same number of shares as the one alleged to be lost or destroyed.
Section 4. TRANSFER AGENTS AND REGISTRARS. The Board may appoint one
or more transfer agents or transfer clerks, and one or more registrars, which
shall be an incorporated bank or trust company, either domestic or foreign, who
shall be appointed at such times and places as the requirements of this
Corporation may necessitate and the Board may designate.
12
<PAGE>
Section 5. CLOSING STOCK TRANSFER BOOKS. The Board may close the
books of this Corporation against transfers of shares as provided in Article IV,
Section 10 of these By-laws.
ARTICLE VI
RECORDS - REPORTS - INSPECTION
Section 1. RECORDS. This Corporation shall maintain, in accordance
with generally accepted accounting principles, adequate and correct accounts,
books and records of its business and properties. All of such books, records and
accounts shall be kept at its principal office, as fixed by the Board from time
to time.
Section 2. INSPECTION OF BOOKS AND RECORDS. All books and records
provided for in Section 1500 of the Code shall be open to inspection by the
Directors and Shareholders from time to time and in the manner provided in
Section 1600 through 1602, inclusive, of the Code.
Section 3. CERTIFICATION AND INSPECTION OF BYLAWS. The original or a
copy of these By-Laws, as amended from time to time, certified by the Secretary,
shall be kept at this Corporation's principal office and shall be open to
inspection by the Shareholders of this Corporation at all reasonable times
during office hours.
Section 4. CONTRACTS, ETC. -- HOW EXECUTED. The Board, except as
otherwise provided by these By-Laws, may authorize any officer or officers,
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of this Corporation. Such authority may be general or
confined to specific instances. Unless so authorized by the Board, no officer,
agent or employee shall have any power or authority to bind this Corporation by
any contract or agreement, or to pledge its credit, or to render it liable for
any purpose or to any amount, except as provided in Section 313 of the Code.
ARTICLE VII
ANNUAL REPORTS
Section 1. WAIVER OF ANNUAL REPORTS TO SHAREHOLDER. The annual
report to Shareholders referred to in Section 1501 of the Code is expressly
waived so long as this Corporation shall have less than one
13
<PAGE>
hundred (100) Shareholders. However, nothing herein shall be interpreted as
prohibiting the Board from issuing annual or other periodic reports to the
Shareholders of this Corporation as they consider appropriate.
ARTICLE VIII
AMENDMENTS TO BYLAWS
Section 1. AMENDMENTS. After initial By-Laws of this Corporation
shall have been adopted by the incorporator or incorporators of this
Corporation, the By-Laws may be amended or repealed or new By-Laws may be
adopted by the Shareholders entitled to exercise a majority of the voting power
or by the Board; provided, however, that the Board shall have no control over
any By-Law which changes the authorized number of Directors of this Corporation;
provided, further, than any control over the By-Laws herein vested in the Board
shall be subject to the authority of the aforesaid Shareholders to amend or
repeal the By-Laws or to adopt new By-Laws; and provided further that any By-Law
amendment or new By-law which changes the minimum number of Directors to a
number less than five (5) shall require authorization by the greater proportion
of voting power of the Shareholders as provided in Article II, Section 3 of
these By-Laws.
Section 2. RECORD OF AMENDMENTS. Whenever an amendment or new By-Law
is adopted, it shall be copied in the book of By-Laws with the original By-Laws,
in the appropriate place. If any By-Law is repealed, the fact of repeal with the
date of the meeting at which the repeal was enacted or written assent was filed
shall be stated in said book.
ARTICLE IX
CORPORATE SEAL
The corporate seal shall be circular in form, and shall have
inscribed thereon the name of this Corporation, the date of its incorporation,
and the word "California".
14
<PAGE>
ARTICLE X
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS, AND EXPENSES. For the purposes of
this Article, "agent" means any person who is or was a Director, officer,
employee, or other agent of this Corporation, or is or was serving at the
request of this Corporation as a Director, officer, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, or was a Director, officer, employee, or agent of a foreign or
domestic corporation which was a predecessor corporation of this Corporation or
of another enterprise at the request of such predecessor corporation;
"proceeding" means any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative, or investigative; and "expenses"
includes, without limitation, attorneys' fees and any expenses of establishing a
right to indemnification under Section 4 or Section 5 of this Article.
Section 2. ACTIONS OTHER THAN BY THIS CORPORATION. This Corporation
shall indemnify any person who was or is a party, or is threatened to be made a
party, to any proceeding (other than an action by or in the right of this
Corporation to procure a judgment in its favor) by reason of the fact that such
person is or was an agent of this Corporation, against expenses, judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with such proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in the best interests of this
Corporation and, in the case of a criminal proceeding, had no reasonable cause
to believe the conduct of such person was unlawful. The termination of any
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 the person reasonably
believed to be in the best interests of this Corporation or that the person had
reasonable cause to believe that the person's conduct was unlawful.
Section 3. ACTIONS BY THIS CORPORATION. This 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 by or in the right of this
Corporation to procure a judgment in its favor by reason of the fact that such
person is or was an agent of this Corporation, against expenses actually and
reasonably incurred by such person in connection with the defense or settlement
of such action if such person acted in good faith, in a manner such person
believed to be in the best interests of this
15
<PAGE>
Corporation. No indemnification shall be made under this Section 3 for any of
the following:
(i) In respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to this Corporation and its
Shareholders, unless and only to the extent that the court in which such
proceeding is or was pending shall determine upon application that, in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for the expenses which the court shall
determine; or
(ii) Of amounts paid in settling or otherwise disposing of a
pending action without court approval; or
(iii) Of expenses incurred in defending a pending action which
is settled or otherwise disposed of without court approval.
Section 4. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent
of this Corporation has been successful on the merits in defense of any
proceeding referred to in Sections 2 or 3 of this Article, or in defense of any
claim, issue, or matter therein, the agent shall be indemnified against expenses
actually and reasonably incurred by the agent in connection therewith.
Section 5. REQUIRED APPROVAL. Except as provided in Section 4 of
this Article, any indemnification under this Article shall be made by this
Corporation only if authorized in the specific case, upon a determination that
indemnification of the agent is proper in the circumstances because the agent
has met the applicable standard of conduct set forth in Sections 2 or 3 of this
Article by any of the following:
(i) A majority vote of a quorum consisting of Directors who
are not parties to such proceeding;
(ii) If such a quorum of Directors is not obtainable, by
independent legal counsel in a written opinion;
(iii) Approval of the Shareholders, with the shares owned by
the person to be indemnified not being entitled to vote thereon. For the
purposes of this subsection, "approval of the Shareholders" means approved
or ratified by the affirmative vote of a majority of the shares of this
Corporation represented and voting at a duly held meeting at which a
quorum is present
16
<PAGE>
(which shares voting affirmatively shall also constitute at least a
majority of the required quorum) or by the written consent signed by the
holders of a majority of the outstanding shares entitled to vote, which
written consent shall be procedurally procured in the manner provided by
law; or
(iv) The court in which the proceeding is or was pending upon
application made by this Corporation or the agent of the attorney or other
person rendering services in connection with the defense, whether or not
such application by the agent, attorney, or other person is opposed by
this Corporation.
Section 6. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Corporation before the final disposition of
the proceedings on receipt of an undertaking by or on behalf of the agent to
repay the amount of the advance unless it shall be determined ultimately that
the agent is entitled to be indemnified as authorized in this Article.
Section 7. OTHER RIGHTS AUTHORIZED. The indemnification provided by
this Article shall not be exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote of
Shareholders, or vote of disinterested Directors or otherwise, both as to action
in an official capacity and as to action in another capacity while holding such
office, to the extent such additional rights to indemnification are authorized
in the Articles of Incorporation of this Corporation. Nothing contained in this
Section shall affect any right to indemnification to which persons other than
Directors and officers of this Corporation or any subsidiary hereof may be
entitled by contract, the Articles of Incorporation or otherwise.
Section 8. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Section 4 or Section 5(c), in any
circumstance where it appears:
(i) That it would be inconsistent with a provision of the
articles, by-laws, a resolution of the Shareholders or an agreement in
effect at the time of the accrual of the alleged cause of action asserted
in the proceeding in which the expenses were incurred or other amounts
were paid, which prohibits or otherwise limits indemnification; or
(ii) That it would be inconsistent with any condition
expressly imposed by a court in approving a settlement.
17
<PAGE>
Section 9. INSURANCE. Upon and in the event of a determination by
the Board to purchase such insurance, this Corporation shall purchase and
maintain insurance on behalf of any agent of this Corporation against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such whether or not this Corporation would have the
power to indemnify the agent against that liability under the provisions of this
Section.
Section 10. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN. This
Article does not apply to any proceeding against any trustee, investment
manager, or other fiduciary of an employee benefit plan in that person's
capacity as such, even though that person may also be an agent of this
Corporation as defined in Section 1 of this Article. Nothing contained in this
Article shall limit any right to indemnification to which such a trustee,
investment manager, or other fiduciary may be entitled by contract or otherwise,
which shall be enforceable to the extent permitted by applicable law other than
this Article.
Section 11. RIGHT TO INDEMNITY CONTINUES. The rights to indemnity
provided for in this Article shall 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 the person.
ARTICLE XI
MISCELLANEOUS
Section 1. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of
other corporations standing in the name of this Corporation may be voted or
represented and all incidents thereto may be exercised on behalf of this
Corporation by the Chairman of the Board, the President, the Secretary or an
Assistant Secretary.
Section 2. ACCOUNTING YEAR. The accounting year of this Corporation
shall be fixed by resolution of the Board.
18
<PAGE>
CERTIFICATE BY SECRETARY OF ADOPTION BY DIRECTORS' VOTE
I, the undersigned, do hereby certify:
That I am the duly elected and acting Secretary of GLOBAL HEALTH
SUB, INC., a California corporation (this "Corporation"), that the foregoing
By-Laws, comprising eighteen (18) pages, constitute the By-Laws of this
Corporation as duly adopted by action of the Board of Directors of this
Corporation on April 17, 1998.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed
the seal of said Corporation this 17 day of April, 1998.
By: /s/ Donald J. Lewis
--------------------------------
Donald J. Lewis
Secretary
<PAGE>
BY-LAWS
OF
RAVEN SUB, INC.
a California corporation
<PAGE>
BY-LAWS
OF
RAVEN SUB, INC.
a California corporation
(this "Corporation")
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office for the
transaction of business of this Corporation may be designated and changed by
approval of a majority of the authorized members of the Board of Directors (the
"Board") and additional offices may be established and maintained at such other
place or places, either within or outside California, as the Board may from time
to time designate.
Section 2. OTHER OFFICES. Branch or subordinate offices may at any
time be established by the Board at any place or places where this Corporation
is qualified to do business.
ARTICLE II
DIRECTORS - MANAGEMENT
Section 1. RESPONSIBILITY OF BOARD OF DIRECTORS. Subject to the
provisions of the California General Corporation Law as set forth in the
California Corporations Code (the "Code") and to any limitations in the Articles
of Incorporation (the "Articles") of this Corporation relating to action
required to be approved by its shareholders (the "Shareholders"), as that term
is defined in Section 153 of the Code, or by the outstanding shares, as that
term is defined in Section 152 of the Code, the business and affairs of this
Corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the Board. The Board may delegate the management of the
day-to-day operation of the business of this Corporation to an Executive
Committee, provided that the business and affairs of this Corporation shall be
managed and all corporate powers shall be exercised under the ultimate direction
of the Board. The creation of the Executive Committee and
<PAGE>
appointment of its members must be approved by a majority of the Directors in
office at the time of its creation. To the extent specified by the Board and
permitted by law, the Executive Committee may exercise the authority of the
Board.
Section 2. STANDARD OF CARE. Each member of the Board (a "Director"
or the "Directors") shall perform the duties of a Director, including the duties
as a member of any committee of the Board upon which the Director may serve, in
good faith, in a manner such Director believes to be in the best interests of
this Corporation, and with such care, including reasonable inquiry, as an
ordinary prudent person in a like position would use under similar
circumstances.
Section 3. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized
number of Directors shall initially be determined by the Board but in no event
shall the number be less than three (3) or more than seven (7); provided,
however, that (i) before shares are issued, the number may be one or two, (ii)
so long as this Corporation has only one Shareholder, the number may be one or
two, and (iii) so long as this Corporation has only two Shareholders, the number
may be two. After the issuance of shares, the indefinite number of Directors may
be changed, or a definite number fixed without provision for an indefinite
number, by an amendment to this by-law duly adopted by the vote or written
consent of the holders of a majority of the outstanding shares entitled to vote;
provided, however, that an amendment reducing the number or the minimum number
of Directors to a number less than five (5) cannot be adopted if the votes cast
against its adoption at a meeting of the Shareholders, or the shares not
consenting in the case of action by written consent, are equal to more than
16 2/3% of the outstanding shares entitled to vote. No amendment may change the
stated maximum number of authorized Directors to a number greater than two times
the stated minimum number of Directors minus one. Directors need not be
Shareholders.
Section 4. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall
be elected at each annual meeting of the Shareholders to hold office until the
next annual meeting. Each Director, including a Director elected to fill a
vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.
Section 5. VACANCIES. Except as otherwise provided herein, vacancies
in the Board may be filled at a meeting by a majority of the remaining
Directors, though less than a quorum, by the unanimous written consent of the
Directors then in office or by a sole remaining Director, except that a vacancy
created
2
<PAGE>
by the removal of a Director by the vote or written consent of the Shareholders
or by court order may be filled only by (i) the vote of a majority of the shares
entitled to vote represented at a duly held meeting at which a quorum is
present, or (ii) the written consent of the holders of a majority of the
outstanding shares entitled to vote. Each Director so elected shall hold office
until the next annual meeting of the Shareholders and until a successor has been
elected and qualified. A vacancy or vacancies in the Board shall exist (i) in
the event of the death, resignation, or removal of any Director; (ii) if the
Board by resolution declares vacant the office of a Director who has been
declared of unsound mind by an order of court or convicted of a felony; (iii) if
the authorized number of Directors is increased; or (iv) if the Shareholders
fail, at any meeting of Shareholders at which any Director or Directors are
elected, to elect the number of Directors to be voted for at that meeting. The
Shareholders may elect a Director or Directors at any time to fill any vacancy
or vacancies not filled by the Directors, but any such election by written
consent shall require the consent of a majority of the outstanding shares
entitled to vote. Any Director may resign effective on giving written notice to
the Chairman of the Board, the President, the Secretary or the Board, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a Director is effective at a future time, the Board may elect a
successor to take office when the resignation becomes effective. No reduction of
the authorized number of Directors shall have the effect of removing any
Director before that Director's term of office expires.
Section 6. REMOVAL OF DIRECTORS. The entire Board or any individual
Director may be removed from office as provided by Sections 303 and 304 of the
Code. Any such vacancy or vacancies thereby created shall be filled by a
majority vote of the Directors; provided, however, if there are no Directors
remaining in office, then by a majority vote of the shares entitled to vote
represented at a special meeting at which a quorum is present, or, by the
written consent of the holders of a majority of the outstanding shares entitled
to vote.
Section 7. NOTICE, PLACE AND MANNER OF MEETINGS. Meetings of the
Board may be called by the President or any Director and shall be held at the
principal office of this Corporation, unless some other place is designated in
the notice of the meeting. Members of the Board may participate in a meeting
through use of a conference telephone or similar communications equipment so
long as all members participating in such a meeting can hear one another.
Accurate minutes of any meeting of the Board or any committee thereof, shall be
maintained by the Secretary or other person designated for that purpose.
3
<PAGE>
Section 8. ANNUAL MEETINGS. The annual meeting of the Board shall be
held immediately following the adjournment of the annual meeting of the
Shareholders.
Section 9. SPECIAL MEETINGS - NOTICES - WAIVERS. Special meetings of
the Board may be called at any time by the President or, if he or she is absent,
unable, or refuses to act, by any Director. At least forty-eight (48) hours
prior notice of the time and place of special meetings shall be delivered
personally to the Directors or personally communicated to them by a corporate
Officer by telephone or facsimile transmission. If the notice is sent to a
Director by letter, it shall be addressed to him or her at his or her address as
it is shown upon the records of this Corporation, or if it is not so shown on
such records or is not readily ascertainable, at the place in which the meetings
of the Directors are regularly held. In case such notice is mailed, it shall be
deposited in the United States mail, postage prepaid, in the place in which the
principal office of this Corporation is located at least four (4) days prior to
the time of the holding of the meeting. Such mailing, facsimile transmission,
telephoning or delivery as above provided shall be due, legal and personal
notice to such Director. If (i) all or a majority of the Directors are present
at any Directors' meeting and said meeting is not properly called or noticed as
set forth in these By-Laws and all Directors, including those not present, sign
a waiver of notice of such meeting or a consent to holding the meeting or an
approval of the minutes thereof, whether prior to or after the holding of such
meeting, which said waiver, consent or approval shall be filed with the
Secretary of this Corporation, or (ii) a Director attends a meeting without
notice but without protesting, prior thereto or at its commencement, the lack of
notice, then the transactions thereof are as valid as if had at a meeting
regularly called and noticed.
Section 10. ACTION WITHOUT A MEETING BY WRITTEN CONSENT. Any action
required or permitted to be taken by the Board may be taken without a meeting,
if all members of the Board individually or collectively consent in writing to
that action. Any action by written consent shall have the same effect as a
unanimous vote of the Board. All such written consents shall be filed with the
minutes of the proceedings of the Board.
Section 11. QUORUM. A majority of the number of Directors as fixed
by these By-Laws shall be necessary to constitute a quorum for the transaction
of business, and the action of a majority of the Directors present at any
meeting at which there is a quorum, when duly assembled, is valid as a corporate
act; provided that a minority of the Directors, in the absence of a quorum, may
adjourn from time to time,
4
<PAGE>
but may not transact any business. A meeting at which a quorum is initially
present may continue to transact business, notwithstanding the withdrawal of
Directors, if any action taken is approved by a majority of the required quorum
for such meeting.
Section 12. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given to absent Directors if the time
and place be fixed at the meeting adjourned and held within twenty-four (24)
hours, but if adjourned more than twenty-four (24) hours, notice shall be given
to all Directors not present at the time of the adjournment.
Section 13. COMPENSATION OF DIRECTORS. Directors, in that capacity,
shall not receive any stated salary for their services, but by resolution of the
Board a fixed sum and expense of attendance, if any, may be allowed for
attendance at each regular and special meeting of the Board; provided that
nothing herein contained shall be construed to preclude any Director from
serving this Corporation in any other capacity and receiving compensation
therefor.
ARTICLE III
OFFICERS
Section 1. OFFICERS. The officers of this Corporation shall be: a
President, a Chief Financial Officer and a Secretary. This Corporation may also
have, at the discretion of the Board, a Chief Operating Officer, one or more
Vice Presidents (including Executive Vice Presidents), one or more Assistant
Secretaries, one or more Assistant Chief Financial Officers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article III. Any number of offices may be held by the same person.
Section 2. ELECTION. The officers of this Corporation, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article, shall be elected annually by the Board, and each
shall hold office until he or she shall resign or shall be removed or otherwise
disqualified to serve, or a successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board may appoint such
other officers as the business of this Corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in these By-Laws or as the Board may from time to time
determine.
5
<PAGE>
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
rights, if any, of an officer under any contract of employment, any officer may
be removed, either with or without cause, by the Board, at any regular or
special meeting of the Board, or, except in case of an officer chosen by the
Board, by any officer upon whom such power of removal may be conferred by the
Board. Any officer may resign at any time by giving written notice to this
Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of this Corporation under any contract to which the officer is a
party.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the By-Laws for regular appointments to that office.
Section 6. PRESIDENT. Subject to the control of the Board, the
President shall have general supervision, direction and control of the business
and officers of this Corporation. The President shall have the general powers
and duties of management usually vested in the office of President of a
corporation, and shall have such other powers and duties as may be prescribed by
the Board or these By-Laws. The President shall preside at all meetings of the
Shareholders and at all meetings of the Board. The President shall be the Chief
Executive Officer and shall have the powers and duties prescribed in this
section.
Section 7. VICE PRESIDENTS. The Vice Presidents, if any, shall have
such powers and perform such duties as from time to time may be prescribed by
the Board or these By-Laws.
Section 8. SECRETARY. The Secretary shall keep, or cause to be kept,
a book of minutes at the principal office or such other place as the Board may
order, of all meetings of Directors and Shareholders, with the time and place of
holding, whether regular or special, and if special, how authorized, the notice
thereof given, the names of those present at Directors' meetings, the number of
shares present or represented at Shareholders' meetings and the proceedings
thereof. The Secretary shall keep, or cause to be kept, at the principal office
or at the office of this Corporation's transfer agent, a share register, or
duplicate share register, showing the names of the Shareholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for the same, and the number and
6
<PAGE>
date of cancellation of every certificate surrendered for cancellation. The
Secretary shall give, or cause to be given, notice of all the meetings of the
Shareholders and of the Board required by these By-Laws or by law to be given.
He or she shall keep, or cause to be kept, the seal of this Corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the Board or by these By-Laws.
Section 9. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep and maintain, or cause to be kept and maintained in accordance with
generally accepted accounting principles, adequate and correct accounts of the
properties and business transactions of this Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
earnings (or surplus) and shares. The books of account shall at all reasonable
times be open to inspection by any Director. This officer or his or her designee
shall deposit all moneys and other valuables in the name and to the credit of
this Corporation with such depositaries as may be designated by the Board. He or
she shall disburse the funds of this Corporation as may be ordered by the Board,
shall render to the President and Directors, whenever they request it, an
account of all of his or her transactions and of the financial condition of this
Corporation, and shall have such other powers and perform such other duties as
may be prescribed by the Board or these By-Laws.
Section 10. CONTROLLER. The Controller, if any, shall have the
duties as may be assigned from time to time by the President or the Board.
ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 1. PLACE OF MEETINGS. All meetings of the Shareholders shall
be held at the principal office of this Corporation unless some other
appropriate and convenient location be designated for that purpose from time to
time by the Board.
Section 2. ANNUAL MEETINGS. The annual meeting of the Shareholders
shall be held, each year, on such date and at such time as is determined by the
Board. At the annual meeting, the Shareholders shall elect a Board, consider
reports of the affairs of this Corporation and transact such other business as
may be properly brought before said meeting.
7
<PAGE>
Section 3. SPECIAL MEETINGS. Special meetings of the Shareholders
may be called at any time by the Board, the President, or by one or more
Shareholders holding not less than 10% of the voting power of this Corporation.
Except as provided hereafter, notice shall be given as for the annual meeting.
Upon receipt of a written request addressed to the President or Secretary,
mailed or delivered personally to such officer by any person (other than the
Board) entitled to call a special meeting of Shareholders, such officer shall
cause notice to be given, to the Shareholders entitled to vote, that a meeting
will be held at a time requested by the person or persons calling the meeting,
not less than thirty-five (35) nor more than sixty (60) days after receipt of
such request. If such notice is not given within twenty (20) days after receipt
of such request, the persons calling the meeting may give notice thereof in the
manner provided by these By-Laws or apply to the Superior Court as provided in
Section 305(c) of the Code.
Section 4. NOTICE OF MEETINGS - REPORTS. Notice of meetings, annual
or special, shall be given in writing not less than ten (10) nor more than sixty
(60) days before the date of the meeting to Shareholders entitled to vote
thereat. Such notice shall be given by the Secretary or the Assistant Secretary,
or if there be no such officer, or in the case of his or her neglect or refusal,
by any Director or Shareholder. Such notices or any reports shall be given
personally or by mail or other means of written communication as provided in
Section 601 of the Code and shall be sent to the Shareholder's address appearing
on the books of this Corporation, or supplied by him or her to this Corporation
for the purpose of notice, and in the absence thereof, as provided in said
Section 601. Notice of any meeting of Shareholders shall specify the place, the
day and the hour of meeting, and (i) in case of a special meeting, the general
nature of the business to be transacted and no other business may be transacted,
or (ii) in the case of an annual meeting, those matters which the Board at date
of mailing intends to present for action by the Shareholders. At any meetings
where Directors are to be elected, notice shall include the names of the
nominees, if any, intended at date of notice to be presented by management for
election. If a Shareholder supplied no address, notice shall be deemed to have
been given if mailed to the place where the principal office of this
Corporation, in California, is situated, or published at least once in some
newspaper of general circulation in the County of said principal office. Notice
shall be deemed given at the time it is delivered personally or deposited in the
mail or sent by other means of written communication. The officer giving such
notice or report shall prepare and file an affidavit or declaration thereof.
When a meeting is adjourned for forty-five (45) days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting;
provided, however, it shall not be necessary to give any notice of
8
<PAGE>
adjournment or of the business to be transacted at an adjourned meeting other
than by announcement at the meeting at which such adjournment is taken.
Section 5. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDER. The
transactions of any meeting of Shareholders, however called and noticed, shall
be as valid as though said transactions occurred at a meeting duly held after
regular call and notice, if a quorum be present either in person or by proxy,
and if, either before or after the meeting, each of the Shareholders entitled to
vote, not present in person or by proxy, sign a written waiver of notice, or a
consent to the holding of such meeting or an approval of the minutes thereof.
All such waivers, consents or approvals shall be filed with the corporate
records or made a part of the minutes of the meeting. Attendance shall
constitute a waiver of notice, unless objection shall be made as provided in
Section 601(e) of the Code.
Section 6. SHAREHOLDERS ACTING WITHOUT A MEETING -- ELECTION OF
DIRECTORS. Any action which may be taken at a meeting of the Shareholders may be
taken without a meeting or notice of meeting if authorized by a writing signed
by all of the Shareholders entitled to vote at a meeting for such purpose, and
filed with the Secretary of this Corporation; provided, however, that while
ordinarily Directors can only be elected by unanimous written consent under
Section 603(d) of the Code, if the Directors fail to fill a vacancy, then a
Director to fill that vacancy may be elected by the written consent of persons
holding a majority of shares entitled to vote for the election of Directors.
Section 7. OTHER ACTIONS WITHOUT A MEETING. Unless otherwise
provided in the Code, any action which may be taken at any annual or special
meeting of Shareholders may be taken without a meeting and without prior notice,
if a consent in writing, setting forth the action so taken, signed by the
holders of the outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Unless the
consents of all Shareholders entitled to vote have been solicited in writing:
(i) Notice of any Shareholder approval pursuant to Sections
310, 317, 1201 or 2007 of the Code without a meeting by less than
unanimous written consent shall be given at least ten (10) days before the
consummation of the action authorized by such approval; and
9
<PAGE>
(ii) Prompt notice shall be given of the taking of any other
corporate action approved by Shareholders without a meeting by less than
unanimous written consent, to each of those Shareholders entitled to vote
who have not consented in writing.
Any Shareholder giving a written consent, or the Shareholder's proxyholders, or
a transferee of the shares of a personal representative of the Shareholder or
their respective proxyholders, may revoke the consent by a writing received by
this Corporation prior to the time that written consents of the number of shares
required to authorize the proposed action have been filed with the Secretary of
this Corporation, but may not do so thereafter. Such revocation is effective
upon its receipt by the Secretary of this Corporation.
Section 8. QUORUM. The holders of a majority of the shares
entitled to vote thereat, present in person, or represented by proxy, shall
constitute a quorum at all meetings of the Shareholders for the transaction
of business except as otherwise provided by law, by the Articles of
Incorporation of this Corporation, or by these By-Laws. If, however, such
majority shall not be present or represented at any meeting of the
Shareholders, the Shareholders entitled to vote thereat, present in person,
or by proxy, shall have the power to adjourn the meeting from time to time,
until the requisite amount of voting shares shall be present. At such
adjourned meeting at which the requisite amount of voting shares shall be
represented, any business may be transacted which might have been transacted
at a meeting as originally notified. If a quorum be initially present, the
Shareholders may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Shareholders to leave less than a
quorum, if any action taken is approved by a majority of the Shareholders
required to initially constitute a quorum.
Section 9. VOTING. Only persons in whose names shares entitled to
vote stand on the stock records of this Corporation on the day of any meeting of
Shareholders, unless some other day be fixed by the Board for the determination
of Shareholders of record, and then on such other day, shall be entitled to vote
at such meeting. Provided that prior to the voting at a meeting, a candidate's
name has been placed in nomination and one or more Shareholders has given notice
at the meeting of the Shareholder's intent to cumulate the Shareholder's votes,
every Shareholder entitled to vote at any election for Directors may cumulate
their votes and give one candidate a number of votes equal to the number of
Directors to be elected multiplied by the number of votes to which his or her
shares are entitled, or distribute his or her votes on the same principle among
as many candidates as he or she thinks fit. If any
10
<PAGE>
one Shareholder has given such notice, all Shareholders may cumulate their votes
for candidates in nomination. The candidates receiving the highest number of
votes up to the number of Directors to be elected are elected.
Section 10. RECORD DATE. In order that this Corporation may
determine the Shareholders entitled to notice of any meeting or to vote or
entitled to receive payment of any dividend or other distribution or allotment
of any rights or entitled to exercise any rights in respect of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than sixty (60) nor less than ten (10) days prior to the date of such meeting
nor more than sixty (60) days prior to any other action. In such case, only
Shareholders of record on the date so fixed shall be entitled to notice of and
to vote at such meeting, or to receive such dividends, distribution or allotment
of rights, or to exercise such rights, as the case may be notwithstanding any
transfer of any share on the books of this Corporation after any record date
fixed as aforesaid. The Board may close the books of this Corporation against
transfers of shares during the whole or any part of such period. If no record
date is fixed: (i) the record date for determining Shareholders entitled to
notice of or to vote at a meeting of Shareholders shall be at the close of
business on the business day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held; (ii) the record date for
determining Shareholders entitled to give consent to corporate action in writing
without a meeting, when no prior action by the Board is necessary, shall be the
day on which the first written consent is given; and (iii) the record date for
determining Shareholders for any other purpose shall be at the close of business
on the day on which the Board adopts the resolution relating thereto, or the
sixtieth (60th) day prior to the date of such other action, whichever is later.
Section 11. PROXIES. Every Shareholder entitled to vote, or to
execute consents, may do so, either in person or by written proxy, executed in
accordance with the provisions of Sections 604 and 705 of the Code and filed
with the Secretary of this Corporation.
Section 12. ORGANIZATION. The President, or in the absence of the
President, any Vice President, shall call the meeting of the Shareholders to
order, and shall act as chairman of the meeting. In the absence of the President
and all of the Vice Presidents, Shareholders shall appoint a chairman for such
meeting. The Secretary of this Corporation shall act as Secretary of all
meetings of the Shareholders, but in the absence of the Secretary at any meeting
of the Shareholders, the presiding officer may appoint any person to act as
Secretary of the meeting.
11
<PAGE>
Section 13. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders the Board may, if they so elect, appoint inspectors of election to
act at such meeting or any adjournment thereof. If inspectors of election be not
so appointed, or if any persons so appointed fail to appear or refuse to act,
the chairman of any such meeting may, and on the request of any Shareholder or
his or her proxy shall, make such appointment at the meeting in which case the
number of inspectors shall be either one (1) or three (3) as determined by a
majority of the Shareholders represented at the meeting.
ARTICLE V
CERTIFICATES AND TRANSFER OF SHARES
Section 1. CERTIFICATES FOR SHARES. Certificates for shares shall be
of such form and device as the Board may designate and shall state the name of
the record holder of the shares represented thereby, its number, date of
issuance, the number of shares for which it is issued, a statement of the
rights, privileges, preferences and restrictions, if any, a statement as to the
redemption or conversion, if any, a statement of liens or restrictions upon
transfer or voting, if any, if the shares be assessable or, if assessments are
collectible by personal action, a plain statement of such facts. All
certificates shall be signed in the name of this Corporation by the President
and by the Chief Financial Officer or any Assistant Chief Financial Officer or
the Secretary or any Assistant Secretary, certifying the number of shares and
the class or series of shares owned by the Shareholder. Any or all of the
signatures on the certificate may be facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature has been placed
on a certificate shall have ceased to be that officer, transfer agent, or
registrar before that certificate is issued, it may be issued by this
Corporation with the same effect as if that person were an officer, transfer
agent, or registrar at the date of issue.
Section 2. TRANSFER ON THE BOOKS. Upon surrender to the Secretary or
transfer agent of this Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of this Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 3. LOST OR DESTROYED CERTIFICATES. Any person claiming a
certificate of stock to be lost or destroyed shall make an affidavit or
affirmation of that fact and shall, if the Directors so require, give this
Corporation a
12
<PAGE>
bond of indemnity, in form and with one or more sureties satisfactory to the
Board, in at least double the value of the stock represented by said
certificate, whereupon a new certificate may be issued in the same tenor and for
the same number of shares as the one alleged to be lost or destroyed.
Section 4. TRANSFER AGENTS AND REGISTRARS. The Board may appoint one
or more transfer agents or transfer clerks, and one or more registrars, which
shall be an incorporated bank or trust company, either domestic or foreign, who
shall be appointed at such times and places as the requirements of this
Corporation may necessitate and the Board may designate.
Section 5. CLOSING STOCK TRANSFER BOOKS. The Board may close the
books of this Corporation against transfers of shares as provided in Article IV,
Section 10 of these By-Laws.
ARTICLE VI
RECORDS - REPORTS - INSPECTION
Section 1. RECORDS. This Corporation shall maintain, in accordance
with generally accepted accounting principles, adequate and correct accounts,
books and records of its business and properties. All of such books, records and
accounts shall be kept at its principal office, as fixed by the Board from time
to time.
Section 2. INSPECTION OF BOOKS AND RECORDS. All books and records
provided for in Section 1500 of the Code shall be open to inspection by the
Directors and Shareholders from time to time and in the manner provided in
Section 1600 through 1602, inclusive, of the Code.
Section 3. CERTIFICATION AND INSPECTION OF BY-LAWS. The original
or a copy of these By-Laws, as amended from time to time, certified by the
Secretary, shall be kept at this Corporation's principal office and shall be
open to inspection by the Shareholders of this Corporation at all reasonable
times during office hours.
Section 4. CONTRACTS, ETC. -- HOW EXECUTED. The Board, except as
otherwise provided by these By-Laws, may authorize any officer or officers,
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of this Corporation. Such authority may be general or
confined to
13
<PAGE>
specific instances. Unless so authorized by the Board, no officer, agent or
employee shall have any power or authority to bind this Corporation by any
contract or agreement, or to pledge its credit, or to render it liable for any
purpose or to any amount, except as provided in Section 313 of the Code.
ARTICLE VII
ANNUAL REPORTS
Section 1. WAIVER OF ANNUAL REPORTS TO SHAREHOLDER. The annual
report to Shareholders referred to in Section 1501 of the Code is expressly
waived so long as this Corporation shall have less than one hundred (100)
Shareholders. However, nothing herein shall be interpreted as prohibiting the
Board from issuing annual or other periodic reports to the Shareholders of this
Corporation as they consider appropriate.
ARTICLE VIII
AMENDMENTS TO BYLAWS
Section 1. AMENDMENTS. After initial By-Laws of this Corporation
shall have been adopted by the incorporator or incorporators of this
Corporation, the By-Laws may be amended or repealed or new By-Laws may be
adopted by the Shareholders entitled to exercise a majority of the voting power
or by the Board; provided, however, that the Board shall have no control over
any By-Law which changes the authorized number of Directors of this Corporation;
provided, further, than any control over the By-Laws herein vested in the Board
shall be subject to the authority of the aforesaid Shareholders to amend or
repeal the By-Laws or to adopt new By-Laws; and provided further that any By-Law
amendment or new By-Law which changes the minimum number of Directors to a
number less than five (5) shall require authorization by the greater proportion
of voting power of the Shareholders as provided in Article II, Section 3 of
these By-Laws.
Section 2. RECORD OF AMENDMENTS. Whenever an amendment or new By-Law
is adopted, it shall be copied in the book of By-Laws with the original By-Laws,
in the appropriate place. If any By-Law is repealed, the fact of repeal with the
date of the meeting at which the repeal was enacted or written assent was filed
shall be stated in said book.
14
<PAGE>
ARTICLE IX
CORPORATE SEAL
The corporate seal shall be circular in form, and shall have
inscribed thereon the name of this Corporation, the date of its incorporation,
and the word "California".
ARTICLE X
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS, AND EXPENSES. For the purposes of
this Article, "agent" means any person who is or was a Director, officer,
employee, or other agent of this Corporation, or is or was serving at the
request of this Corporation as a Director, officer, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, or was a Director, officer, employee, or agent of a foreign or
domestic corporation which was a predecessor corporation of this Corporation or
of another enterprise at the request of such predecessor corporation;
"proceeding" means any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative, or investigative; and "expenses"
includes, without limitation, attorneys' fees and any expenses of establishing a
right to indemnification under Section 4 or Section 5 of this Article.
Section 2. ACTIONS OTHER THAN BY THIS CORPORATION. This Corporation
shall indemnify any person who was or is a party, or is threatened to be made a
party, to any proceeding (other than an action by or in the right of this
Corporation to procure a judgment in its favor) by reason of the fact that such
person is or was an agent of this Corporation, against expenses, judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with such proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in the best interests of this
Corporation and, in the case of a criminal proceeding, had no reasonable cause
to believe the conduct of such person was unlawful. The termination of any
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 the person reasonably
believed to be in the best interests of this Corporation or that the person had
reasonable cause to believe that the person's conduct was unlawful.
15
<PAGE>
Section 3. ACTIONS BY THIS CORPORATION. This 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 by or in the right of this
Corporation to procure a judgment in its favor by reason of the fact that such
person is or was an agent of this Corporation, against expenses actually and
reasonably incurred by such person in connection with the defense or settlement
of such action if such person acted in good faith, in a manner such person
believed to be in the best interests of this Corporation. No indemnification
shall be made under this Section 3 for any of the following:
(i) In respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to this Corporation and its
Shareholders, unless and only to the extent that the court in which such
proceeding is or was pending shall determine upon application that, in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for the expenses which the court shall
determine; or
(ii) Of amounts paid in settling or otherwise disposing of a
pending action without court approval; or
(iii) Of expenses incurred in defending a pending action which
is settled or otherwise disposed of without court approval.
Section 4. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent
of this Corporation has been successful on the merits in defense of any
proceeding referred to in Sections 2 or 3 of this Article, or in defense of any
claim, issue, or matter therein, the agent shall be indemnified against expenses
actually and reasonably incurred by the agent in connection therewith.
Section 5. REQUIRED APPROVAL. Except as provided in Section 4 of
this Article, any indemnification under this Article shall be made by this
Corporation only if authorized in the specific case, upon a determination that
indemnification of the agent is proper in the circumstances because the agent
has met the applicable standard of conduct set forth in Sections 2 or 3 of this
Article by any of the following:
(i) A majority vote of a quorum consisting of Directors who
are not parties to such proceeding;
16
<PAGE>
(ii) If such a quorum of Directors is not obtainable, by
independent legal counsel in a written opinion;
(iii) Approval of the Shareholders, with the shares owned by
the person to be indemnified not being entitled to vote thereon. For the
purposes of this subsection, "approval of the Shareholders" means approved
or ratified by the affirmative vote of a majority of the shares of this
Corporation represented and voting at a duly held meeting at which a
quorum is present (which shares voting affirmatively shall also constitute
at least a majority of the required quorum) or by the written consent
signed by the holders of a majority of the outstanding shares entitled to
vote, which written consent shall be procedurally procured in the manner
provided by law; or
(iv) The court in which the proceeding is or was pending upon
application made by this Corporation or the agent of the attorney or other
person rendering services in connection with the defense, whether or not
such application by the agent, attorney, or other person is opposed by
this Corporation.
Section 6. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Corporation before the final disposition of
the proceedings on receipt of an undertaking by or on behalf of the agent to
repay the amount of the advance unless it shall be determined ultimately that
the agent is entitled to be indemnified as authorized in this Article.
Section 7. OTHER RIGHTS AUTHORIZED. The indemnification provided by
this Article shall not be exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote of
Shareholders, or vote of disinterested Directors or otherwise, both as to action
in an official capacity and as to action in another capacity while holding such
office, to the extent such additional rights to indemnification are authorized
in the Articles of Incorporation of this Corporation. Nothing contained in this
Section shall affect any right to indemnification to which persons other than
Directors and officers of this Corporation or any subsidiary hereof may be
entitled by contract, the Articles of Incorporation or otherwise.
Section 8. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Section 4 or Section 5(c), in any
circumstance where it appears:
17
<PAGE>
(i) That it would be inconsistent with a provision of the
articles, by-laws, a resolution of the Shareholders or an agreement in
effect at the time of the accrual of the alleged cause of action asserted
in the proceeding in which the expenses were incurred or other amounts
were paid, which prohibits or otherwise limits indemnification; or
(ii) That it would be inconsistent with any condition
expressly imposed by a court in approving a settlement.
Section 9. INSURANCE. Upon and in the event of a determination by
the Board to purchase such insurance, this Corporation shall purchase and
maintain insurance on behalf of any agent of this Corporation against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such whether or not this Corporation would have the
power to indemnify the agent against that liability under the provisions of this
Section.
Section 10. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN. This
Article does not apply to any proceeding against any trustee, investment
manager, or other fiduciary of an employee benefit plan in that person's
capacity as such, even though that person may also be an agent of this
Corporation as defined in Section 1 of this Article. Nothing contained in this
Article shall limit any right to indemnification to which such a trustee,
investment manager, or other fiduciary may be entitled by contract or otherwise,
which shall be enforceable to the extent permitted by applicable law other than
this Article.
Section 11. RIGHT TO INDEMNITY CONTINUES. The rights to indemnity
provided for in this Article shall 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 the person.
18
<PAGE>
ARTICLE XI
MISCELLANEOUS
Section 1. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of
other corporations standing in the name of this Corporation may be voted or
represented and all incidents thereto may be exercised on behalf of this
Corporation by the Chairman of the Board, the President, the Secretary or an
Assistant Secretary.
Section 2. ACCOUNTING YEAR. The accounting year of this Corporation
shall be fixed by resolution of the Board.
19
<PAGE>
CERTIFICATE BY SECRETARY OF ADOPTION BY DIRECTORS' VOTE
I, the undersigned, do hereby certify:
That I am the duly elected and acting Secretary of RAVEN SUB, INC.,
a California corporation (this "Corporation"), that the foregoing By-Laws,
comprising nineteen (19) pages, constitute the By-Laws of this Corporation as
duly adopted by action of the Board of Directors of this Corporation on April
17, 1998.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed
the seal of said Corporation this 17 day of April, 1998.
By: /s/ Donald J. Lewis
--------------------------------
Donald J. Lewis
Secretary
<PAGE>
BY-LAWS
OF
DYNAMIC SUB, INC.
a California corporation
<PAGE>
BY-LAWS
OF
DYNAMIC SUB, INC.
a California corporation
(this "Corporation")
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office for the
transaction of business of this Corporation may be designated and changed by
approval of a majority of the authorized members of the Board of Directors (the
"Board") and additional offices may be established and maintained at such other
place or places, either within or outside California, as the Board may from time
to time designate.
Section 2. OTHER OFFICES. Branch or subordinate offices may at any
time be established by the Board at any place or places where this Corporation
is qualified to do business.
ARTICLE II
DIRECTORS - MANAGEMENT
Section 1. RESPONSIBILITY OF BOARD OF DIRECTORS. Subject to the
provisions of the California General Corporation Law as set forth in the
California Corporations Code (the "Code") and to any limitations in the Articles
of Incorporation (the "Articles") of this Corporation relating to action
required to be approved by its shareholders (the "Shareholders"), as that term
is defined in Section 153 of the Code, or by the outstanding shares, as that
term is defined in Section 152 of the Code, the business and affairs of this
Corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the Board. The Board may delegate the management of the
day-to-day operation of the business of this Corporation to an Executive
Committee, provided that the business and affairs of this Corporation shall be
managed and all corporate powers shall be exercised under the ultimate direction
of the Board. The creation of the Executive Committee and
<PAGE>
appointment of its members must be approved by a majority of the Directors in
office at the time of its creation. To the extent specified by the Board and
permitted by law, the Executive Committee may exercise the authority of the
Board.
Section 2. STANDARD OF CARE. Each member of the Board (a "Director"
or the "Directors") shall perform the duties of a Director, including the duties
as a member of any committee of the Board upon which the Director may serve, in
good faith, in a manner such Director believes to be in the best interests of
this Corporation, and with such care, including reasonable inquiry, as an
ordinary prudent person in a like position would use under similar
circumstances.
Section 3. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized
number of Directors shall initially be determined by the Board but in no event
shall the number be less than three (3) or more than seven (7); provided,
however, that (i) before shares are issued, the number may be one or two, (ii)
so long as this Corporation has only one Shareholder, the number may be one or
two, and (iii) so long as this Corporation has only two Shareholders, the number
may be two. After the issuance of shares, the indefinite number of Directors may
be changed, or a definite number fixed without provision for an indefinite
number, by an amendment to this by-law duly adopted by the vote or written
consent of the holders of a majority of the outstanding shares entitled to vote;
provided, however, that an amendment reducing the number or the minimum number
of Directors to a number less than five (5) cannot be adopted if the votes cast
against its adoption at a meeting of the Shareholders, or the shares not
consenting in the case of action by written consent, are equal to more than
16 2/3% of the outstanding shares entitled to vote. No amendment may change the
stated maximum number of authorized Directors to a number greater than two times
the stated minimum number of Directors minus one. Directors need not be
Shareholders.
Section 4. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall
be elected at each annual meeting of the Shareholders to hold office until the
next annual meeting. Each Director, including a Director elected to fill a
vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.
Section 5. VACANCIES. Except as otherwise provided herein, vacancies
in the Board may be filled at a meeting by a majority of the remaining
Directors, though less than a quorum, by the unanimous written consent of the
Directors then in office or by a sole remaining Director, except that a vacancy
created
2
<PAGE>
by the removal of a Director by the vote or written consent of the Shareholders
or by court order may be filled only by (i) the vote of a majority of the shares
entitled to vote represented at a duly held meeting at which a quorum is
present, or (ii) the written consent of the holders of a majority of the
outstanding shares entitled to vote. Each Director so elected shall hold office
until the next annual meeting of the Shareholders and until a successor has been
elected and qualified. A vacancy or vacancies in the Board shall exist (i) in
the event of the death, resignation, or removal of any Director; (ii) if the
Board by resolution declares vacant the office of a Director who has been
declared of unsound mind by an order of court or convicted of a felony; (iii) if
the authorized number of Directors is increased; or (iv) if the Shareholders
fail, at any meeting of Shareholders at which any Director or Directors are
elected, to elect the number of Directors to be voted for at that meeting. The
Shareholders may elect a Director or Directors at any time to fill any vacancy
or vacancies not filled by the Directors, but any such election by written
consent shall require the consent of a majority of the outstanding shares
entitled to vote. Any Director may resign effective on giving written notice to
the Chairman of the Board, the President, the Secretary or the Board, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a Director is effective at a future time, the Board may elect a
successor to take office when the resignation becomes effective. No reduction of
the authorized number of Directors shall have the effect of removing any
Director before that Director's term of office expires.
Section 6. REMOVAL OF DIRECTORS. The entire Board or any individual
Director may be removed from office as provided by Sections 303 and 304 of the
Code. Any such vacancy or vacancies thereby created shall be filled by a
majority vote of the Directors; provided, however, if there are no Directors
remaining in office, then by a majority vote of the shares entitled to vote
represented at a special meeting at which a quorum is present, or, by the
written consent of the holders of a majority of the outstanding shares entitled
to vote.
Section 7. NOTICE, PLACE AND MANNER OF MEETINGS. Meetings of the
Board may be called by the President or any Director and shall be held at the
principal office of this Corporation, unless some other place is designated in
the notice of the meeting. Members of the Board may participate in a meeting
through use of a conference telephone or similar communications equipment so
long as all members participating in such a meeting can hear one another.
Accurate minutes of any meeting of the Board or any committee thereof, shall be
maintained by the Secretary or other person designated for that purpose.
3
<PAGE>
Section 8. ANNUAL MEETINGS. The annual meeting of the Board shall be
held immediately following the adjournment of the annual meeting of the
Shareholders.
Section 9. SPECIAL MEETINGS - NOTICES - WAIVERS. Special meetings of
the Board may be called at any time by the President or, if he or she is absent,
unable, or refuses to act, by any Director. At least forty-eight (48) hours
prior notice of the time and place of special meetings shall be delivered
personally to the Directors or personally communicated to them by a corporate
Officer by telephone or facsimile transmission. If the notice is sent to a
Director by letter, it shall be addressed to him or her at his or her address as
it is shown upon the records of this Corporation, or if it is not so shown on
such records or is not readily ascertainable, at the place in which the meetings
of the Directors are regularly held. In case such notice is mailed, it shall be
deposited in the United States mail, postage prepaid, in the place in which the
principal office of this Corporation is located at least four (4) days prior to
the time of the holding of the meeting. Such mailing, facsimile transmission,
telephoning or delivery as above provided shall be due, legal and personal
notice to such Director. If (i) all or a majority of the Directors are present
at any Directors' meeting and said meeting is not properly called or noticed as
set forth in these By-Laws and all Directors, including those not present, sign
a waiver of notice of such meeting or a consent to holding the meeting or an
approval of the minutes thereof, whether prior to or after the holding of such
meeting, which said waiver, consent or approval shall be filed with the
Secretary of this Corporation, or (ii) a Director attends a meeting without
notice but without protesting, prior thereto or at its commencement, the lack of
notice, then the transactions thereof are as valid as if had at a meeting
regularly called and noticed.
Section 10. ACTION WITHOUT A MEETING BY WRITTEN CONSENT. Any action
required or permitted to be taken by the Board may be taken without a meeting,
if all members of the Board individually or collectively consent in writing to
that action. Any action by written consent shall have the same effect as a
unanimous vote of the Board. All such written consents shall be filed with the
minutes of the proceedings of the Board.
Section 11. QUORUM. A majority of the number of Directors as fixed
by these By-Laws shall be necessary to constitute a quorum for the transaction
of business, and the action of a majority of the Directors present at any
meeting at which there is a quorum, when duly assembled, is valid as a corporate
act; provided that a minority of the Directors, in the absence of a quorum, may
adjourn from time to time,
4
<PAGE>
but may not transact any business. A meeting at which a quorum is initially
present may continue to transact business, notwithstanding the withdrawal of
Directors, if any action taken is approved by a majority of the required quorum
for such meeting.
Section 12. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given to absent Directors if the time
and place be fixed at the meeting adjourned and held within twenty-four (24)
hours, but if adjourned more than twenty-four (24) hours, notice shall be given
to all Directors not present at the time of the adjournment.
Section 13. COMPENSATION OF DIRECTORS. Directors, in that capacity,
shall not receive any stated salary for their services, but by resolution of the
Board a fixed sum and expense of attendance, if any, may be allowed for
attendance at each regular and special meeting of the Board; provided that
nothing herein contained shall be construed to preclude any Director from
serving this Corporation in any other capacity and receiving compensation
therefor.
ARTICLE III
OFFICERS
Section 1. OFFICERS. The officers of this Corporation shall be: a
President, a Chief Financial Officer and a Secretary. This Corporation may also
have, at the discretion of the Board, a Chief Operating Officer, one or more
Vice Presidents (including Executive Vice Presidents, one or more Assistant
Secretaries, one or more Assistant Chief Financial Officers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article III. Any number of offices may be held by the same person.
Section 2. ELECTION. The officers of this Corporation, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article, shall be elected annually by the Board, and each
shall hold office until he or she shall resign or shall be removed or otherwise
disqualified to serve, or a successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board may appoint such
other officers as the business of this Corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in these By-Laws or as the Board may from time to time
determine.
5
<PAGE>
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
rights, if any, of an officer under any contract of employment, any officer may
be removed, either with or without cause, by the Board, at any regular or
special meeting of the Board, or, except in case of an officer chosen by the
Board, by any officer upon whom such power of removal may be conferred by the
Board. Any officer may resign at any time by giving written notice to this
Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of this Corporation under any contract to which the officer is a
party.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the By-Laws for regular appointments to that office.
Section 6. PRESIDENT. Subject to the control of the Board, the
President shall have general supervision, direction and control of the business
and officers of this Corporation. The President shall have the general powers
and duties of management usually vested in the office of President of a
corporation, and shall have such other powers and duties as may be prescribed by
the Board or these By-Laws. The President shall preside at all meetings of the
Shareholders and at all meetings of the Board. The President shall be the Chief
Executive Officer and shall have the powers and duties prescribed in this
section.
Section 7. VICE PRESIDENTS. The Vice Presidents, if any, shall have
such powers and perform such duties as from time to time may be prescribed by
the Board or these By-Laws.
Section 8. SECRETARY. The Secretary shall keep, or cause to be kept,
a book of minutes at the principal office or such other place as the Board may
order, of all meetings of Directors and Shareholders, with the time and place of
holding, whether regular or special, and if special, how authorized, the notice
thereof given, the names of those present at Directors' meetings, the number of
shares present or represented at Shareholders' meetings and the proceedings
thereof. The Secretary shall keep, or cause to be kept, at the principal office
or at the office of this Corporation's transfer agent, a share register, or
duplicate share register, showing the names of the Shareholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for the same, and the number and
6
<PAGE>
date of cancellation of every certificate surrendered for cancellation. The
Secretary shall give, or cause to be given, notice of all the meetings of the
Shareholders and of the Board required by these By-Laws or by law to be given.
He or she shall keep, or cause to be kept, the seal of this Corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the Board or by these By-Laws.
Section 9. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep and maintain, or cause to be kept and maintained in accordance with
generally accepted accounting principles, adequate and correct accounts of the
properties and business transactions of this Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
earnings (or surplus) and shares. The books of account shall at all reasonable
times be open to inspection by any Director. This officer or his or her designee
shall deposit all moneys and other valuables in the name and to the credit of
this Corporation with such depositaries as may be designated by the Board. He or
she shall disburse the funds of this Corporation as may be ordered by the Board,
shall render to the President and Directors, whenever they request it, an
account of all of his or her transactions and of the financial condition of this
Corporation, and shall have such other powers and perform such other duties as
may be prescribed by the Board or these By-Laws.
Section 10. CONTROLLER. The Controller, if any, shall have the
duties as may be assigned from time to time by the President or the Board.
ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 1. PLACE OF MEETINGS. All meetings of the Shareholders shall
be held at the principal office of this Corporation unless some other
appropriate and convenient location be designated for that purpose from time to
time by the Board.
Section 2. ANNUAL MEETINGS. The annual meeting of the Shareholders
shall be held, each year, on such date and at such time as is determined by the
Board. At the annual meeting, the Shareholders shall elect a Board, consider
reports of the affairs of this Corporation and transact such other business as
may be properly brought before said meeting.
7
<PAGE>
Section 3. SPECIAL MEETINGS. Special meetings of the Shareholders
may be called at any time by the Board, the President, or by one or more
Shareholders holding not less than 10% of the voting power of this Corporation.
Except as provided hereafter, notice shall be given as for the annual meeting.
Upon receipt of a written request addressed to the President or Secretary,
mailed or delivered personally to such officer by any person (other than the
Board) entitled to call a special meeting of Shareholders, such officer shall
cause notice to be given, to the Shareholders entitled to vote, that a meeting
will be held at a time requested by the person or persons calling the meeting,
not less than thirty-five (35) nor more than sixty (60) days after receipt of
such request. If such notice is not given within twenty (20) days after receipt
of such request, the persons calling the meeting may give notice thereof in the
manner provided by these By-Laws or apply to the Superior Court as provided in
Section 305(c) of the Code.
Section 4. NOTICE OF MEETINGS - REPORTS. Notice of meetings, annual
or special, shall be given in writing not less than ten (10) nor more than sixty
(60) days before the date of the meeting to Shareholders entitled to vote
thereat. Such notice shall be given by the Secretary or the Assistant Secretary,
or if there be no such officer, or in the case of his or her neglect or refusal,
by any Director or Shareholder. Such notices or any reports shall be given
personally or by mail or other means of written communication as provided in
Section 601 of the Code and shall be sent to the Shareholder's address appearing
on the books of this Corporation, or supplied by him or her to this Corporation
for the purpose of notice, and in the absence thereof, as provided in said
Section 601. Notice of any meeting of Shareholders shall specify the place, the
day and the hour of meeting, and (i) in case of a special meeting, the general
nature of the business to be transacted and no other business may be transacted,
or (ii) in the case of an annual meeting, those matters which the Board at date
of mailing intends to present for action by the Shareholders. At any meetings
where Directors are to be elected, notice shall include the names of the
nominees, if any, intended at date of notice to be presented by management for
election. If a Shareholder supplied no address, notice shall be deemed to have
been given if mailed to the place where the principal office of this
Corporation, in California, is situated, or published at least once in some
newspaper of general circulation in the County of said principal office. Notice
shall be deemed given at the time it is delivered personally or deposited in the
mail or sent by other means of written communication. The officer giving such
notice or report shall prepare and file an affidavit or declaration thereof.
When a meeting is adjourned for forty-five (45) days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting;
provided, however, it shall not be necessary to give any notice of
8
<PAGE>
adjournment or of the business to be transacted at an adjourned meeting other
than by announcement at the meeting at which such adjournment is taken.
Section 5. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDER. The
transactions of any meeting of Shareholders, however called and noticed, shall
be as valid as though said transactions occurred at a meeting duly held after
regular call and notice, if a quorum be present either in person or by proxy,
and if, either before or after the meeting, each of the Shareholders entitled to
vote, not present in person or by proxy, sign a written waiver of notice, or a
consent to the holding of such meeting or an approval of the minutes thereof.
All such waivers, consents or approvals shall be filed with the corporate
records or made a part of the minutes of the meeting. Attendance shall
constitute a waiver of notice, unless objection shall be made as provided in
Section 601(e) of the Code.
Section 6. SHAREHOLDERS ACTING WITHOUT A MEETING -- ELECTION OF
DIRECTORS. Any action which may be taken at a meeting of the Shareholders may be
taken without a meeting or notice of meeting if authorized by a writing signed
by all of the Shareholders entitled to vote at a meeting for such purpose, and
filed with the Secretary of this Corporation; provided, however, that while
ordinarily Directors can only be elected by unanimous written consent under
Section 603(d) of the Code, if the Directors fail to fill a vacancy, then a
Director to fill that vacancy may be elected by the written consent of persons
holding a majority of shares entitled to vote for the election of Directors.
Section 7. OTHER ACTIONS WITHOUT A MEETING. Unless otherwise
provided in the Code, any action which may be taken at any annual or special
meeting of Shareholders may be taken without a meeting and without prior notice,
if a consent in writing, setting forth the action so taken, signed by the
holders of the outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Unless the
consents of all Shareholders entitled to vote have been solicited in writing:
(i) Notice of any Shareholder approval pursuant to Sections
310, 317, 1201 or 2007 of the Code without a meeting by less than
unanimous written consent shall be given at least ten (10) days before the
consummation of the action authorized by such approval; and
9
<PAGE>
(ii) Prompt notice shall be given of the taking of any other
corporate action approved by Shareholders without a meeting by less than
unanimous written consent, to each of those Shareholders entitled to vote
who have not consented in writing. Any Shareholder giving a written
consent, or the Shareholder's proxyholders, or a transferee of the shares
of a personal representative of the Shareholder or their respective
proxyholders, may revoke the consent by a writing received by this
Corporation prior to the time that written consents of the number of
shares required to authorize the proposed action have been filed with the
Secretary of this Corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the Secretary of this
Corporation.
Section 8. QUORUM. The holders of a majority of the shares
entitled to vote thereat, present in person, or represented by proxy, shall
constitute a quorum at all meetings of the Shareholders for the transaction
of business except as otherwise provided by law, by the Articles of
Incorporation of this Corporation, or by these By-Laws. If, however, such
majority shall not be present or represented at any meeting of the
Shareholders, the Shareholders entitled to vote thereat, present in person,
or by proxy, shall have the power to adjourn the meeting from time to time,
until the requisite amount of voting shares shall be present. At such
adjourned meeting at which the requisite amount of voting shares shall be
represented, any business may be transacted which might have been transacted
at a meeting as originally notified. If a quorum be initially present, the
Shareholders may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Shareholders to leave less than a
quorum, if any action taken is approved by a majority of the Shareholders
required to initially constitute a quorum.
Section 9. VOTING. Only persons in whose names shares entitled to
vote stand on the stock records of this Corporation on the day of any meeting of
Shareholders, unless some other day be fixed by the Board for the determination
of Shareholders of record, and then on such other day, shall be entitled to vote
at such meeting. Provided that prior to the voting at a meeting, a candidate's
name has been placed in nomination and one or more Shareholders has given notice
at the meeting of the Shareholder's intent to cumulate the Shareholder's votes,
every Shareholder entitled to vote at any election for Directors may cumulate
their votes and give one candidate a number of votes equal to the number of
Directors to be elected multiplied by the number of votes to which his or her
shares are entitled, or distribute his or her votes on the same principle among
as many candidates as he or she thinks fit. If any one Shareholder has given
such notice, all Shareholders may cumulate their votes for
10
<PAGE>
candidates in nomination. The candidates receiving the highest number of votes
up to the number of Directors to be elected are elected.
Section 10. RECORD DATE. In order that this Corporation may
determine the Shareholders entitled to notice of any meeting or to vote or
entitled to receive payment of any dividend or other distribution or allotment
of any rights or entitled to exercise any rights in respect of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than sixty (60) nor less than ten (10) days prior to the date of such meeting
nor more than sixty (60) days prior to any other action. In such case, only
Shareholders of record on the date so fixed shall be entitled to notice of and
to vote at such meeting, or to receive such dividends, distribution or allotment
of rights, or to exercise such rights, as the case may be notwithstanding any
transfer of any share on the books of this Corporation after any record date
fixed as aforesaid. The Board may close the books of this Corporation against
transfers of shares during the whole or any part of such period. If no record
date is fixed: (i) the record date for determining Shareholders entitled to
notice of or to vote at a meeting of Shareholders shall be at the close of
business on the business day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held; (ii) the record date for
determining Shareholders entitled to give consent to corporate action in writing
without a meeting, when no prior action by the Board is necessary, shall be the
day on which the first written consent is given; and (iii) the record date for
determining Shareholders for any other purpose shall be at the close of business
on the day on which the Board adopts the resolution relating thereto, or the
sixtieth (60th) day prior to the date of such other action, whichever is later.
Section 11. PROXIES. Every Shareholder entitled to vote, or to
execute consents, may do so, either in person or by written proxy, executed in
accordance with the provisions of Sections 604 and 705 of the Code and filed
with the Secretary of this Corporation.
Section 12. ORGANIZATION. The President, or in the absence of the
President, any Vice President, shall call the meeting of the Shareholders to
order, and shall act as chairman of the meeting. In the absence of the President
and all of the Vice Presidents, Shareholders shall appoint a chairman for such
meeting. The Secretary of this Corporation shall act as Secretary of all
meetings of the Shareholders, but in the absence of the Secretary at any meeting
of the Shareholders, the presiding officer may appoint any person to act as
Secretary of the meeting.
11
<PAGE>
Section 13. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders the Board may, if they so elect, appoint inspectors of election to
act at such meeting or any adjournment thereof. If inspectors of election be not
so appointed, or if any persons so appointed fail to appear or refuse to act,
the chairman of any such meeting may, and on the request of any Shareholder or
his or her proxy shall, make such appointment at the meeting in which case the
number of inspectors shall be either one (1) or three (3) as determined by a
majority of the Shareholders represented at the meeting.
ARTICLE V
CERTIFICATES AND TRANSFER OF SHARES
Section 1. CERTIFICATES FOR SHARES. Certificates for shares shall be
of such form and device as the Board may designate and shall state the name of
the record holder of the shares represented thereby, its number, date of
issuance, the number of shares for which it is issued, a statement of the
rights, privileges, preferences and restrictions, if any, a statement as to the
redemption or conversion, if any, a statement of liens or restrictions upon
transfer or voting, if any, if the shares be assessable or, if assessments are
collectible by personal action, a plain statement of such facts. All
certificates shall be signed in the name of this Corporation by the President
and by the Chief Financial Officer or any Assistant Chief Financial Officer or
the Secretary or any Assistant Secretary, certifying the number of shares and
the class or series of shares owned by the Shareholder. Any or all of the
signatures on the certificate may be facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature has been placed
on a certificate shall have ceased to be that officer, transfer agent, or
registrar before that certificate is issued, it may be issued by this
Corporation with the same effect as if that person were an officer, transfer
agent, or registrar at the date of issue.
Section 2. TRANSFER ON THE BOOKS. Upon surrender to the Secretary or
transfer agent of this Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of this Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 3. LOST OR DESTROYED CERTIFICATES. Any person claiming a
certificate of stock to be lost or destroyed shall make an affidavit or
affirmation of that fact and shall, if the Directors so require, give this
Corporation a
12
<PAGE>
bond of indemnity, in form and with one or more sureties satisfactory to the
Board, in at least double the value of the stock represented by said
certificate, whereupon a new certificate may be issued in the same tenor and for
the same number of shares as the one alleged to be lost or destroyed.
Section 4. TRANSFER AGENTS AND REGISTRARS. The Board may appoint one
or more transfer agents or transfer clerks, and one or more registrars, which
shall be an incorporated bank or trust company, either domestic or foreign, who
shall be appointed at such times and places as the requirements of this
Corporation may necessitate and the Board may designate.
Section 5. CLOSING STOCK TRANSFER BOOKS. The Board may close the
books of this Corporation against transfers of shares as provided in Article IV,
Section 10 of these By-Laws.
ARTICLE VI
RECORDS - REPORTS - INSPECTION
Section 1. RECORDS. This Corporation shall maintain, in accordance
with generally accepted accounting principles, adequate and correct accounts,
books and records of its business and properties. All of such books, records and
accounts shall be kept at its principal office, as fixed by the Board from time
to time.
Section 2. INSPECTION OF BOOKS AND RECORDS. All books and records
provided for in Section 1500 of the Code shall be open to inspection by the
Directors and Shareholders from time to time and in the manner provided in
Section 1600 through 1602, inclusive, of the Code.
Section 3. CERTIFICATION AND INSPECTION OF BY-LAWS. The original
or a copy of these By-Laws, as amended from time to time, certified by the
Secretary, shall be kept at this Corporation's principal office and shall be
open to inspection by the Shareholders of this Corporation at all reasonable
times during office hours.
Section 4. CONTRACTS, ETC. -- HOW EXECUTED. The Board, except as
otherwise provided by these By-Laws, may authorize any officer or officers,
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of this Corporation. Such authority may be general or
confined to
13
<PAGE>
specific instances. Unless so authorized by the Board, no officer, agent or
employee shall have any power or authority to bind this Corporation by any
contract or agreement, or to pledge its credit, or to render it liable for any
purpose or to any amount, except as provided in Section 313 of the Code.
ARTICLE VII
ANNUAL REPORTS
Section 1. WAIVER OF ANNUAL REPORTS TO SHAREHOLDER. The annual
report to Shareholders referred to in Section 1501 of the Code is expressly
waived so long as this Corporation shall have less than one hundred (100)
Shareholders. However, nothing herein shall be interpreted as prohibiting the
Board from issuing annual or other periodic reports to the Shareholders of this
Corporation as they consider appropriate.
ARTICLE VIII
AMENDMENTS TO BYLAWS
Section 1. AMENDMENTS. After initial By-Laws of this Corporation
shall have been adopted by the incorporator or incorporators of this
Corporation, the By-Laws may be amended or repealed or new By-Laws may be
adopted by the Shareholders entitled to exercise a majority of the voting power
or by the Board; provided, however, that the Board shall have no control over
any By-Law which changes the authorized number of Directors of this Corporation;
provided, further, than any control over the By-Laws herein vested in the Board
shall be subject to the authority of the aforesaid Shareholders to amend or
repeal the By-Laws or to adopt new By-Laws; and provided further that any By-Law
amendment or new By-law which changes the minimum number of Directors to a
number less than five (5) shall require authorization by the greater proportion
of voting power of the Shareholders as provided in Article II, Section 3 of
these By-Laws.
Section 2. RECORD OF AMENDMENTS. Whenever an amendment or new By-Law
is adopted, it shall be copied in the book of By-Laws with the original By-Laws,
in the appropriate place. If any By-Law is repealed, the fact of repeal with the
date of the meeting at which the repeal was enacted or written assent was filed
shall be stated in said book.
14
<PAGE>
ARTICLE IX
CORPORATE SEAL
The corporate seal shall be circular in form, and shall have
inscribed thereon the name of this Corporation, the date of its incorporation,
and the word "California".
ARTICLE X
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS, AND EXPENSES. For the purposes of
this Article, "agent" means any person who is or was a Director, officer,
employee, or other agent of this Corporation, or is or was serving at the
request of this Corporation as a Director, officer, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, or was a Director, officer, employee, or agent of a foreign or
domestic corporation which was a predecessor corporation of this Corporation or
of another enterprise at the request of such predecessor corporation;
"proceeding" means any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative, or investigative; and "expenses"
includes, without limitation, attorneys' fees and any expenses of establishing a
right to indemnification under Section 4 or Section 5 of this Article.
Section 2. ACTIONS OTHER THAN BY THIS CORPORATION. This Corporation
shall indemnify any person who was or is a party, or is threatened to be made a
party, to any proceeding (other than an action by or in the right of this
Corporation to procure a judgment in its favor) by reason of the fact that such
person is or was an agent of this Corporation, against expenses, judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with such proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in the best interests of this
Corporation and, in the case of a criminal proceeding, had no reasonable cause
to believe the conduct of such person was unlawful. The termination of any
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 the person reasonably
believed to be in the best interests of this Corporation or that the person had
reasonable cause to believe that the person's conduct was unlawful.
15
<PAGE>
Section 3. ACTIONS BY THIS CORPORATION. This 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 by or in the right of this
Corporation to procure a judgment in its favor by reason of the fact that such
person is or was an agent of this Corporation, against expenses actually and
reasonably incurred by such person in connection with the defense or settlement
of such action if such person acted in good faith, in a manner such person
believed to be in the best interests of this Corporation. No indemnification
shall be made under this Section 3 for any of the following:
(i) In respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to this Corporation and its
Shareholders, unless and only to the extent that the court in which such
proceeding is or was pending shall determine upon application that, in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for the expenses which the court shall
determine; or
(ii) Of amounts paid in settling or otherwise disposing of a
pending action without court approval; or
(iii) Of expenses incurred in defending a pending action which
is settled or otherwise disposed of without court approval.
Section 4. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent
of this Corporation has been successful on the merits in defense of any
proceeding referred to in Sections 2 or 3 of this Article, or in defense of any
claim, issue, or matter therein, the agent shall be indemnified against expenses
actually and reasonably incurred by the agent in connection therewith.
Section 5. REQUIRED APPROVAL. Except as provided in Section 4 of
this Article, any indemnification under this Article shall be made by this
Corporation only if authorized in the specific case, upon a determination that
indemnification of the agent is proper in the circumstances because the agent
has met the applicable standard of conduct set forth in Sections 2 or 3 of this
Article by any of the following:
(i) A majority vote of a quorum consisting of Directors who
are not parties to such proceeding;
16
<PAGE>
(ii) If such a quorum of Directors is not obtainable, by
independent legal counsel in a written opinion;
(iii) Approval of the Shareholders, with the shares owned by
the person to be indemnified not being entitled to vote thereon. For the
purposes of this subsection, "approval of the Shareholders" means approved
or ratified by the affirmative vote of a majority of the shares of this
Corporation represented and voting at a duly held meeting at which a
quorum is present (which shares voting affirmatively shall also constitute
at least a majority of the required quorum) or by the written consent
signed by the holders of a majority of the outstanding shares entitled to
vote, which written consent shall be procedurally procured in the manner
provided by law; or
(iv) The court in which the proceeding is or was pending upon
application made by this Corporation or the agent of the attorney or other
person rendering services in connection with the defense, whether or not
such application by the agent, attorney, or other person is opposed by
this Corporation.
Section 6. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Corporation before the final disposition of
the proceedings on receipt of an undertaking by or on behalf of the agent to
repay the amount of the advance unless it shall be determined ultimately that
the agent is entitled to be indemnified as authorized in this Article.
Section 7. OTHER RIGHTS AUTHORIZED. The indemnification provided by
this Article shall not be exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote of
Shareholders, or vote of disinterested Directors or otherwise, both as to action
in an official capacity and as to action in another capacity while holding such
office, to the extent such additional rights to indemnification are authorized
in the Articles of Incorporation of this Corporation. Nothing contained in this
Section shall affect any right to indemnification to which persons other than
Directors and officers of this Corporation or any subsidiary hereof may be
entitled by contract, the Articles of Incorporation or otherwise.
Section 8. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Section 4 or Section 5(c), in any
circumstance where it appears:
17
<PAGE>
(i) That it would be inconsistent with a provision of the
articles, by-laws, a resolution of the Shareholders or an agreement in
effect at the time of the accrual of the alleged cause of action asserted
in the proceeding in which the expenses were incurred or other amounts
were paid, which prohibits or otherwise limits indemnification; or
(ii) That it would be inconsistent with any condition
expressly imposed by a court in approving a settlement.
Section 9. INSURANCE. Upon and in the event of a determination by
the Board to purchase such insurance, this Corporation shall purchase and
maintain insurance on behalf of any agent of this Corporation against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such whether or not this Corporation would have the
power to indemnify the agent against that liability under the provisions of this
Section.
Section 10. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN. This
Article does not apply to any proceeding against any trustee, investment
manager, or other fiduciary of an employee benefit plan in that person's
capacity as such, even though that person may also be an agent of this
Corporation as defined in Section 1 of this Article. Nothing contained in this
Article shall limit any right to indemnification to which such a trustee,
investment manager, or other fiduciary may be entitled by contract or otherwise,
which shall be enforceable to the extent permitted by applicable law other than
this Article.
Section 11. RIGHT TO INDEMNITY CONTINUES. The rights to indemnity
provided for in this Article shall 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 the person.
18
<PAGE>
ARTICLE XI
MISCELLANEOUS
Section 1. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of
other corporations standing in the name of this Corporation may be voted or
represented and all incidents thereto may be exercised on behalf of this
Corporation by the Chairman of the Board, the President, the Secretary or an
Assistant Secretary.
Section 2. ACCOUNTING YEAR. The accounting year of this Corporation
shall be fixed by resolution of the Board.
19
<PAGE>
CERTIFICATE BY SECRETARY OF ADOPTION BY DIRECTORS' VOTE
I, the undersigned, do hereby certify:
That I am the duly elected and acting Secretary of DYNAMIC SUB,
INC., a California corporation (this "Corporation"), that the foregoing By-Laws,
comprising nineteen (19) pages, constitute the By-Laws of this Corporation as
duly adopted by action of the Board of Directors of this Corporation on April
17, 1998.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed
the seal of said Corporation this 17 day of April, 1998.
By: /s/ Donald J. Lewis
------------------------
Donald J. Lewis
Secretary
<PAGE>
BY-LAWS
OF
NEW WEST COAST SALES, INC.
a California corporation
<PAGE>
BY-LAWS
OF
NEW WEST COAST SALES, INC.
a California corporation
(this "Corporation")
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office for the
transaction of business of this Corporation may be designated and changed by
approval of a majority of the authorized members of the Board of Directors (the
"Board") and additional offices may be established and maintained at such other
place or places, either within or outside California, as the Board may from time
to time designate.
Section 2. OTHER OFFICES. Branch or subordinate offices may at any
time be established by the Board at any place or places where this Corporation
is qualified to do business.
ARTICLE II
DIRECTORS - MANAGEMENT
Section 1. RESPONSIBILITY OF BOARD OF DIRECTORS. Subject to the
provisions of the California General Corporation Law as set forth in the
California Corporations Code (the "Code") and to any limitations in the Articles
of Incorporation (the "Articles") of this Corporation relating to action
required to be approved by its shareholders (the "Shareholders"), as that term
is defined in Section 153 of the Code, or by the outstanding shares, as that
term is defined in Section 152 of the Code, the business and affairs of this
Corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the Board. The Board may delegate the management of the
day-to-day operation of the business of this Corporation to an Executive
Committee, provided that the business and affairs of this Corporation shall be
managed and all corporate powers shall be exercised under the ultimate direction
of the Board. The creation of the Executive Committee and
<PAGE>
appointment of its members must be approved by a majority of the Directors in
office at the time of its creation. To the extent specified by the Board and
permitted by law, the Executive Committee may exercise the authority of the
Board.
Section 2. STANDARD OF CARE. Each member of the Board (a "Director"
or the "Directors") shall perform the duties of a Director, including the duties
as a member of any committee of the Board upon which the Director may serve, in
good faith, in a manner such Director believes to be in the best interests of
this Corporation, and with such care, including reasonable inquiry, as an
ordinary prudent person in a like position would use under similar
circumstances.
Section 3. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized
number of Directors shall initially be determined by the Board but in no event
shall the number be less than three (3) or more than seven (7); provided,
however, that (i) before shares are issued, the number may be one or two, (ii)
so long as this Corporation has only one Shareholder, the number may be one or
two, and (iii) so long as this Corporation has only two Shareholders, the number
may be two. After the issuance of shares, the indefinite number of Directors may
be changed, or a definite number fixed without provision for an indefinite
number, by an amendment to this by-law duly adopted by the vote or written
consent of the holders of a majority of the outstanding shares entitled to vote;
provided, however, that an amendment reducing the number or the minimum number
of Directors to a number less than five (5) cannot be adopted if the votes cast
against its adoption at a meeting of the Shareholders, or the shares not
consenting in the case of action by written consent, are equal to more than 16
2/3% of the outstanding shares entitled to vote. No amendment may change the
stated maximum number of authorized Directors to a number greater than two times
the stated minimum number of Directors minus one. Directors need not be
Shareholders.
Section 4. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall
be elected at each annual meeting of the Shareholders to hold office until the
next annual meeting. Each Director, including a Director elected to fill a
vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.
Section 5. VACANCIES. Except as otherwise provided herein, vacancies
in the Board may be filled at a meeting by a majority of the remaining
Directors, though less than a quorum, by the unanimous written consent of the
Directors then in office or by a sole remaining Director, except that a vacancy
created
2
<PAGE>
by the removal of a Director by the vote or written consent of the Shareholders
or by court order may be filled only by (i) the vote of a majority of the shares
entitled to vote represented at a duly held meeting at which a quorum is
present, or (ii) the written consent of the holders of a majority of the
outstanding shares entitled to vote. Each Director so elected shall hold office
until the next annual meeting of the Shareholders and until a successor has been
elected and qualified. A vacancy or vacancies in the Board shall exist (i) in
the event of the death, resignation, or removal of any Director; (ii) if the
Board by resolution declares vacant the office of a Director who has been
declared of unsound mind by an order of court or convicted of a felony; (iii) if
the authorized number of Directors is increased; or (iv) if the Shareholders
fail, at any meeting of Shareholders at which any Director or Directors are
elected, to elect the number of Directors to be voted for at that meeting. The
Shareholders may elect a Director or Directors at any time to fill any vacancy
or vacancies not filled by the Directors, but any such election by written
consent shall require the consent of a majority of the outstanding shares
entitled to vote. Any Director may resign effective on giving written notice to
the Chairman of the Board, the President, the Secretary or the Board, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a Director is effective at a future time, the Board may elect a
successor to take office when the resignation becomes effective. No reduction of
the authorized number of Directors shall have the effect of removing any
Director before that Director's term of office expires.
Section 6. REMOVAL OF DIRECTORS. The entire Board or any individual
Director may be removed from office as provided by Sections 303 and 304 of the
Code. Any such vacancy or vacancies thereby created shall be filled by a
majority vote of the Directors; provided, however, if there are no Directors
remaining in office, then by a majority vote of the shares entitled to vote
represented at a special meeting at which a quorum is present, or, by the
written consent of the holders of a majority of the outstanding shares entitled
to vote.
Section 7. NOTICE, PLACE AND MANNER OF MEETINGS. Meetings of the
Board may be called by the President or any Director and shall be held at the
principal office of this Corporation, unless some other place is designated in
the notice of the meeting. Members of the Board may participate in a meeting
through use of a conference telephone or similar communications equipment so
long as all members participating in such a meeting can hear one another.
Accurate minutes of any meeting of the Board or any committee thereof, shall be
maintained by the Secretary or other person designated for that purpose.
3
<PAGE>
Section 8. ANNUAL MEETINGS. The annual meeting of the Board shall be
held immediately following the adjournment of the annual meeting of the
Shareholders.
Section 9. SPECIAL MEETINGS - NOTICES - WAIVERS. Special meetings of
the Board may be called at any time by the President or, if he or she is absent,
unable, or refuses to act, by any Director. At least forty-eight (48) hours
prior notice of the time and place of special meetings shall be delivered
personally to the Directors or personally communicated to them by a corporate
Officer by telephone or facsimile transmission. If the notice is sent to a
Director by letter, it shall be addressed to him or her at his or her address as
it is shown upon the records of this Corporation, or if it is not so shown on
such records or is not readily ascertainable, at the place in which the meetings
of the Directors are regularly held. In case such notice is mailed, it shall be
deposited in the United States mail, postage prepaid, in the place in which the
principal office of this Corporation is located at least four (4) days prior to
the time of the holding of the meeting. Such mailing, facsimile transmission,
telephoning or delivery as above provided shall be due, legal and personal
notice to such Director. If (i) all or a majority of the Directors are present
at any Directors' meeting and said meeting is not properly called or noticed as
set forth in these By-Laws and all Directors, including those not present, sign
a waiver of notice of such meeting or a consent to holding the meeting or an
approval of the minutes thereof, whether prior to or after the holding of such
meeting, which said waiver, consent or approval shall be filed with the
Secretary of this Corporation, or (ii) a Director attends a meeting without
notice but without protesting, prior thereto or at its commencement, the lack of
notice, then the transactions thereof are as valid as if had at a meeting
regularly called and noticed.
Section 10. ACTION WITHOUT A MEETING BY WRITTEN CONSENT. Any action
required or permitted to be taken by the Board may be taken without a meeting,
if all members of the Board individually or collectively consent in writing to
that action. Any action by written consent shall have the same effect as a
unanimous vote of the Board. All such written consents shall be filed with the
minutes of the proceedings of the Board.
Section 11. QUORUM. A majority of the number of Directors as fixed
by these By-Laws shall be necessary to constitute a quorum for the transaction
of business, and the action of a majority of the Directors present at any
meeting at which there is a quorum, when duly assembled, is valid as a corporate
act; provided that a minority of the Directors, in the absence of a quorum, may
adjourn from time to time,
4
<PAGE>
but may not transact any business. A meeting at which a quorum is initially
present may continue to transact business, notwithstanding the withdrawal of
Directors, if any action taken is approved by a majority of the required quorum
for such meeting.
Section 12. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given to absent Directors if the time
and place be fixed at the meeting adjourned and held within twenty-four (24)
hours, but if adjourned more than twenty-four (24) hours, notice shall be given
to all Directors not present at the time of the adjournment.
Section 13. COMPENSATION OF DIRECTORS. Directors, in that capacity,
shall not receive any stated salary for their services, but by resolution of the
Board a fixed sum and expense of attendance, if any, may be allowed for
attendance at each regular and special meeting of the Board; provided that
nothing herein contained shall be construed to preclude any Director from
serving this Corporation in any other capacity and receiving compensation
therefor.
ARTICLE III
OFFICERS
Section 1. OFFICERS. The officers of this Corporation shall be: a
President, a Chief Financial Officer and a Secretary. This Corporation may also
have, at the discretion of the Board, a Chief Operating Officer, one or more
Vice Presidents (including Executive Vice Presidents, one or more Assistant
Secretaries, one or more Assistant Chief Financial Officers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article III. Any number of offices may be held by the same person.
Section 2. ELECTION. The officers of this Corporation, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article, shall be elected annually by the Board, and each
shall hold office until he or she shall resign or shall be removed or otherwise
disqualified to serve, or a successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board may appoint such
other officers as the business of this Corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in these By-Laws or as the Board may from time to time
determine.
5
<PAGE>
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
rights, if any, of an officer under any contract of employment, any officer may
be removed, either with or without cause, by the Board, at any regular or
special meeting of the Board, or, except in case of an officer chosen by the
Board, by any officer upon whom such power of removal may be conferred by the
Board. Any officer may resign at any time by giving written notice to this
Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of this Corporation under any contract to which the officer is a
party.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the By-Laws for regular appointments to that office.
Section 6. PRESIDENT. Subject to the control of the Board, the
President shall have general supervision, direction and control of the business
and officers of this Corporation. The President shall have the general powers
and duties of management usually vested in the office of President of a
corporation, and shall have such other powers and duties as may be prescribed by
the Board or these By-Laws. The President shall preside at all meetings of the
Shareholders and at all meetings of the Board. The President shall be the Chief
Executive Officer and shall have the powers and duties prescribed in this
section.
Section 7. VICE PRESIDENTS. The Vice Presidents, if any, shall have
such powers and perform such duties as from time to time may be prescribed by
the Board or these By-Laws.
Section 8. SECRETARY. The Secretary shall keep, or cause to be kept,
a book of minutes at the principal office or such other place as the Board may
order, of all meetings of Directors and Shareholders, with the time and place of
holding, whether regular or special, and if special, how authorized, the notice
thereof given, the names of those present at Directors' meetings, the number of
shares present or represented at Shareholders' meetings and the proceedings
thereof. The Secretary shall keep, or cause to be kept, at the principal office
or at the office of this Corporation's transfer agent, a share register, or
duplicate share register, showing the names of the Shareholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for the same, and the number and
6
<PAGE>
date of cancellation of every certificate surrendered for cancellation. The
Secretary shall give, or cause to be given, notice of all the meetings of the
Shareholders and of the Board required by these By-Laws or by law to be given.
He or she shall keep, or cause to be kept, the seal of this Corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the Board or by these By-Laws.
Section 9. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep and maintain, or cause to be kept and maintained in accordance with
generally accepted accounting principles, adequate and correct accounts of the
properties and business transactions of this Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
earnings (or surplus) and shares. The books of account shall at all reasonable
times be open to inspection by any Director. This officer or his or her designee
shall deposit all moneys and other valuables in the name and to the credit of
this Corporation with such depositaries as may be designated by the Board. He or
she shall disburse the funds of this Corporation as may be ordered by the Board,
shall render to the President and Directors, whenever they request it, an
account of all of his or her transactions and of the financial condition of this
Corporation, and shall have such other powers and perform such other duties as
may be prescribed by the Board or these By-Laws.
Section 10. CONTROLLER. The Controller, if any, shall have the
duties as may be assigned from time to time by the President or the Board.
ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 1. PLACE OF MEETINGS. All meetings of the Shareholders shall
be held at the principal office of this Corporation unless some other
appropriate and convenient location be designated for that purpose from time to
time by the Board.
Section 2. ANNUAL MEETINGS. The annual meeting of the Shareholders
shall be held, each year, on such date and at such time as is determined by the
Board. At the annual meeting, the Shareholders shall elect a Board, consider
reports of the affairs of this Corporation and transact such other business as
may be properly brought before said meeting.
7
<PAGE>
Section 3. SPECIAL MEETINGS. Special meetings of the Shareholders
may be called at any time by the Board, the President, or by one or more
Shareholders holding not less than 10% of the voting power of this Corporation.
Except as provided hereafter, notice shall be given as for the annual meeting.
Upon receipt of a written request addressed to the President or Secretary,
mailed or delivered personally to such officer by any person (other than the
Board) entitled to call a special meeting of Shareholders, such officer shall
cause notice to be given, to the Shareholders entitled to vote, that a meeting
will be held at a time requested by the person or persons calling the meeting,
not less than thirty-five (35) nor more than sixty (60) days after receipt of
such request. If such notice is not given within twenty (20) days after receipt
of such request, the persons calling the meeting may give notice thereof in the
manner provided by these By-Laws or apply to the Superior Court as provided in
Section 305(c) of the Code.
Section 4. NOTICE OF MEETINGS - REPORTS. Notice of meetings, annual
or special, shall be given in writing not less than ten (10) nor more than sixty
(60) days before the date of the meeting to Shareholders entitled to vote
thereat. Such notice shall be given by the Secretary or the Assistant Secretary,
or if there be no such officer, or in the case of his or her neglect or refusal,
by any Director or Shareholder. Such notices or any reports shall be given
personally or by mail or other means of written communication as provided in
Section 601 of the Code and shall be sent to the Shareholder's address appearing
on the books of this Corporation, or supplied by him or her to this Corporation
for the purpose of notice, and in the absence thereof, as provided in said
Section 601. Notice of any meeting of Shareholders shall specify the place, the
day and the hour of meeting, and (i) in case of a special meeting, the general
nature of the business to be transacted and no other business may be transacted,
or (ii) in the case of an annual meeting, those matters which the Board at date
of mailing intends to present for action by the Shareholders. At any meetings
where Directors are to be elected, notice shall include the names of the
nominees, if any, intended at date of notice to be presented by management for
election. If a Shareholder supplied no address, notice shall be deemed to have
been given if mailed to the place where the principal office of this
Corporation, in California, is situated, or published at least once in some
newspaper of general circulation in the County of said principal office. Notice
shall be deemed given at the time it is delivered personally or deposited in the
mail or sent by other means of written communication. The officer giving such
notice or report shall prepare and file an affidavit or declaration thereof.
When a meeting is adjourned for forty-five (45) days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting;
provided, however, it shall not be necessary to give any notice of
8
<PAGE>
adjournment or of the business to be transacted at an adjourned meeting other
than by announcement at the meeting at which such adjournment is taken.
Section 5. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDER. The
transactions of any meeting of Shareholders, however called and noticed, shall
be as valid as though said transactions occurred at a meeting duly held after
regular call and notice, if a quorum be present either in person or by proxy,
and if, either before or after the meeting, each of the Shareholders entitled to
vote, not present in person or by proxy, sign a written waiver of notice, or a
consent to the holding of such meeting or an approval of the minutes thereof.
All such waivers, consents or approvals shall be filed with the corporate
records or made a part of the minutes of the meeting. Attendance shall
constitute a waiver of notice, unless objection shall be made as provided in
Section 601(e) of the Code.
Section 6. SHAREHOLDERS ACTING WITHOUT A MEETING -- ELECTION OF
DIRECTORS. Any action which may be taken at a meeting of the Shareholders may be
taken without a meeting or notice of meeting if authorized by a writing signed
by all of the Shareholders entitled to vote at a meeting for such purpose, and
filed with the Secretary of this Corporation; provided, however, that while
ordinarily Directors can only be elected by unanimous written consent under
Section 603(d) of the Code, if the Directors fail to fill a vacancy, then a
Director to fill that vacancy may be elected by the written consent of persons
holding a majority of shares entitled to vote for the election of Directors.
Section 7. OTHER ACTIONS WITHOUT A MEETING. Unless otherwise
provided in the Code, any action which may be taken at any annual or special
meeting of Shareholders may be taken without a meeting and without prior notice,
if a consent in writing, setting forth the action so taken, signed by the
holders of the outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Unless the
consents of all Shareholders entitled to vote have been solicited in writing:
(i) Notice of any Shareholder approval pursuant to Sections
310, 317, 1201 or 2007 of the Code without a meeting by less than
unanimous written consent shall be given at least ten (10) days before the
consummation of the action authorized by such approval; and
9
<PAGE>
(ii) Prompt notice shall be given of the taking of any other
corporate action approved by Shareholders without a meeting by less than
unanimous written consent, to each of those Shareholders entitled to vote
who have not consented in writing. Any Shareholder giving a written
consent, or the Shareholder's proxyholders, or a transferee of the shares
of a personal representative of the Shareholder or their respective
proxyholders, may revoke the consent by a writing received by this
Corporation prior to the time that written consents of the number of
shares required to authorize the proposed action have been filed with the
Secretary of this Corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the Secretary of this
Corporation.
Section 8. QUORUM. The holders of a majority of the shares
entitled to vote thereat, present in person, or represented by proxy, shall
constitute a quorum at all meetings of the Shareholders for the transaction
of business except as otherwise provided by law, by the Articles of
Incorporation of this Corporation, or by these By-Laws. If, however, such
majority shall not be present or represented at any meeting of the
Shareholders, the Shareholders entitled to vote thereat, present in person,
or by proxy, shall have the power to adjourn the meeting from time to time,
until the requisite amount of voting shares shall be present. At such
adjourned meeting at which the requisite amount of voting shares shall be
represented, any business may be transacted which might have been transacted
at a meeting as originally notified. If a quorum be initially present, the
Shareholders may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Shareholders to leave less than a
quorum, if any action taken is approved by a majority of the Shareholders
required to initially constitute a quorum.
Section 9. VOTING. Only persons in whose names shares entitled to
vote stand on the stock records of this Corporation on the day of any meeting of
Shareholders, unless some other day be fixed by the Board for the determination
of Shareholders of record, and then on such other day, shall be entitled to vote
at such meeting. Provided that prior to the voting at a meeting, a candidate's
name has been placed in nomination and one or more Shareholders has given notice
at the meeting of the Shareholder's intent to cumulate the Shareholder's votes,
every Shareholder entitled to vote at any election for Directors may cumulate
their votes and give one candidate a number of votes equal to the number of
Directors to be elected multiplied by the number of votes to which his or her
shares are entitled, or distribute his or her votes on the same principle among
as many candidates as he or she thinks fit. If any one Shareholder has given
such notice, all Shareholders may cumulate their votes for
10
<PAGE>
candidates in nomination. The candidates receiving the highest number of votes
up to the number of Directors to be elected are elected.
Section 10. RECORD DATE. In order that this Corporation may
determine the Shareholders entitled to notice of any meeting or to vote or
entitled to receive payment of any dividend or other distribution or allotment
of any rights or entitled to exercise any rights in respect of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than sixty (60) nor less than ten (10) days prior to the date of such meeting
nor more than sixty (60) days prior to any other action. In such case, only
Shareholders of record on the date so fixed shall be entitled to notice of and
to vote at such meeting, or to receive such dividends, distribution or allotment
of rights, or to exercise such rights, as the case may be notwithstanding any
transfer of any share on the books of this Corporation after any record date
fixed as aforesaid. The Board may close the books of this Corporation against
transfers of shares during the whole or any part of such period. If no record
date is fixed: (i) the record date for determining Shareholders entitled to
notice of or to vote at a meeting of Shareholders shall be at the close of
business on the business day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held; (ii) the record date for
determining Shareholders entitled to give consent to corporate action in writing
without a meeting, when no prior action by the Board is necessary, shall be the
day on which the first written consent is given; and (iii) the record date for
determining Shareholders for any other purpose shall be at the close of business
on the day on which the Board adopts the resolution relating thereto, or the
sixtieth (60th) day prior to the date of such other action, whichever is later.
Section 11. PROXIES. Every Shareholder entitled to vote, or to
execute consents, may do so, either in person or by written proxy, executed in
accordance with the provisions of Sections 604 and 705 of the Code and filed
with the Secretary of this Corporation.
Section 12. ORGANIZATION. The President, or in the absence of the
President, any Vice President, shall call the meeting of the Shareholders to
order, and shall act as chairman of the meeting. In the absence of the President
and all of the Vice Presidents, Shareholders shall appoint a chairman for such
meeting. The Secretary of this Corporation shall act as Secretary of all
meetings of the Shareholders, but in the absence of the Secretary at any meeting
of the Shareholders, the presiding officer may appoint any person to act as
Secretary of the meeting.
11
<PAGE>
Section 13. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders the Board may, if they so elect, appoint inspectors of election to
act at such meeting or any adjournment thereof. If inspectors of election be not
so appointed, or if any persons so appointed fail to appear or refuse to act,
the chairman of any such meeting may, and on the request of any Shareholder or
his or her proxy shall, make such appointment at the meeting in which case the
number of inspectors shall be either one (1) or three (3) as determined by a
majority of the Shareholders represented at the meeting.
ARTICLE V
CERTIFICATES AND TRANSFER OF SHARES
Section 1. CERTIFICATES FOR SHARES. Certificates for shares shall be
of such form and device as the Board may designate and shall state the name of
the record holder of the shares represented thereby, its number, date of
issuance, the number of shares for which it is issued, a statement of the
rights, privileges, preferences and restrictions, if any, a statement as to the
redemption or conversion, if any, a statement of liens or restrictions upon
transfer or voting, if any, if the shares be assessable or, if assessments are
collectible by personal action, a plain statement of such facts. All
certificates shall be signed in the name of this Corporation by the President or
Vice President and by the Chief Financial Officer or any Assistant Chief
Financial Officer or the Secretary or any Assistant Secretary, certifying the
number of shares and the class or series of shares owned by the Shareholder. Any
or all of the signatures on the certificate may be facsimile. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed on a certificate shall have ceased to be that officer,
transfer agent, or registrar before that certificate is issued, it may be issued
by this Corporation with the same effect as if that person were an officer,
transfer agent, or registrar at the date of issue.
Section 2. TRANSFER ON THE BOOKS. Upon surrender to the Secretary or
transfer agent of this Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of this Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 3. LOST OR DESTROYED CERTIFICATES. Any person claiming a
certificate of stock to be lost or destroyed shall make an affidavit or
affirmation of that fact and shall, if the Directors so require, give this
Corporation a
12
<PAGE>
bond of indemnity, in form and with one or more sureties satisfactory to the
Board, in at least double the value of the stock represented by said
certificate, whereupon a new certificate may be issued in the same tenor and for
the same number of shares as the one alleged to be lost or destroyed.
Section 4. TRANSFER AGENTS AND REGISTRARS. The Board may appoint one
or more transfer agents or transfer clerks, and one or more registrars, which
shall be an incorporated bank or trust company, either domestic or foreign, who
shall be appointed at such times and places as the requirements of this
Corporation may necessitate and the Board may designate.
Section 5. CLOSING STOCK TRANSFER BOOKS. The Board may close the
books of this Corporation against transfers of shares as provided in Article IV,
Section 10 of these By-Laws.
ARTICLE VI
RECORDS - REPORTS - INSPECTION
Section 1. RECORDS. This Corporation shall maintain, in accordance
with generally accepted accounting principles, adequate and correct accounts,
books and records of its business and properties. All of such books, records and
accounts shall be kept at its principal office, as fixed by the Board from time
to time.
Section 2. INSPECTION OF BOOKS AND RECORDS. All books and records
provided for in Section 1500 of the Code shall be open to inspection by the
Directors and Shareholders from time to time and in the manner provided in
Section 1600 through 1602, inclusive, of the Code.
Section 3. CERTIFICATION AND INSPECTION OF BY-LAWS. The original
or a copy of these By-Laws, as amended from time to time, certified by the
Secretary, shall be kept at this Corporation's principal office and shall be
open to inspection by the Shareholders of this Corporation at all reasonable
times during office hours.
Section 4. CONTRACTS, ETC. -- HOW EXECUTED. The Board, except as
otherwise provided by these By-Laws, may authorize any officer or officers,
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of this Corporation. Such authority may be general or
confined to
13
<PAGE>
specific instances. Unless so authorized by the Board, no officer, agent or
employee shall have any power or authority to bind this Corporation by any
contract or agreement, or to pledge its credit, or to render it liable for any
purpose or to any amount, except as provided in Section 313 of the Code.
ARTICLE VII
ANNUAL REPORTS
Section 1. WAIVER OF ANNUAL REPORTS TO SHAREHOLDER. The annual
report to Shareholders referred to in Section 1501 of the Code is expressly
waived so long as this Corporation shall have less than one hundred (100)
Shareholders. However, nothing herein shall be interpreted as prohibiting the
Board from issuing annual or other periodic reports to the Shareholders of this
Corporation as they consider appropriate.
ARTICLE VIII
AMENDMENTS TO BYLAWS
Section 1. AMENDMENTS. After initial By-Laws of this Corporation
shall have been adopted by the incorporator or incorporators of this
Corporation, the By-Laws may be amended or repealed or new By-Laws may be
adopted by the Shareholders entitled to exercise a majority of the voting power
or by the Board; provided, however, that the Board shall have no control over
any By-Law which changes the authorized number of Directors of this Corporation;
provided, further, than any control over the By-Laws herein vested in the Board
shall be subject to the authority of the aforesaid Shareholders to amend or
repeal the By-Laws or to adopt new By-Laws; and provided further that any By-Law
amendment or new By-Law which changes the minimum number of Directors to a
number less than five (5) shall require authorization by the greater proportion
of voting power of the Shareholders as provided in Article II, Section 3 of
these By-Laws.
Section 2. RECORD OF AMENDMENTS. Whenever an amendment or new By-Law
is adopted, it shall be copied in the book of By-Laws with the original By-Laws,
in the appropriate place. If any By-Law is repealed, the fact of repeal with the
date of the meeting at which the repeal was enacted or written assent was filed
shall be stated in said book.
14
<PAGE>
ARTICLE IX
CORPORATE SEAL
The corporate seal shall be circular in form, and shall have
inscribed thereon the name of this Corporation, the date of its incorporation,
and the word "California".
ARTICLE X
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS, AND EXPENSES. For the purposes of
this Article, "agent" means any person who is or was a Director, officer,
employee, or other agent of this Corporation, or is or was serving at the
request of this Corporation as a Director, officer, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, or was a Director, officer, employee, or agent of a foreign or
domestic corporation which was a predecessor corporation of this Corporation or
of another enterprise at the request of such predecessor corporation;
"proceeding" means any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative, or investigative; and "expenses"
includes, without limitation, attorneys' fees and any expenses of establishing a
right to indemnification under Section 4 or Section 5 of this Article.
Section 2. ACTIONS OTHER THAN BY THIS CORPORATION. This Corporation
shall indemnify any person who was or is a party, or is threatened to be made a
party, to any proceeding (other than an action by or in the right of this
Corporation to procure a judgment in its favor) by reason of the fact that such
person is or was an agent of this Corporation, against expenses, judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with such proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in the best interests of this
Corporation and, in the case of a criminal proceeding, had no reasonable cause
to believe the conduct of such person was unlawful. The termination of any
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 the person reasonably
believed to be in the best interests of this Corporation or that the person had
reasonable cause to believe that the person's conduct was unlawful.
15
<PAGE>
Section 3. ACTIONS BY THIS CORPORATION. This 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 by or in the right of this
Corporation to procure a judgment in its favor by reason of the fact that such
person is or was an agent of this Corporation, against expenses actually and
reasonably incurred by such person in connection with the defense or settlement
of such action if such person acted in good faith, in a manner such person
believed to be in the best interests of this Corporation. No indemnification
shall be made under this Section 3 for any of the following:
(i) In respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to this Corporation and its
Shareholders, unless and only to the extent that the court in which such
proceeding is or was pending shall determine upon application that, in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for the expenses which the court shall
determine; or
(ii) Of amounts paid in settling or otherwise disposing of a
pending action without court approval; or
(iii) Of expenses incurred in defending a pending action which
is settled or otherwise disposed of without court approval.
Section 4. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent
of this Corporation has been successful on the merits in defense of any
proceeding referred to in Sections 2 or 3 of this Article, or in defense of any
claim, issue, or matter therein, the agent shall be indemnified against expenses
actually and reasonably incurred by the agent in connection therewith.
Section 5. REQUIRED APPROVAL. Except as provided in Section 4 of
this Article, any indemnification under this Article shall be made by this
Corporation only if authorized in the specific case, upon a determination that
indemnification of the agent is proper in the circumstances because the agent
has met the applicable standard of conduct set forth in Sections 2 or 3 of this
Article by any of the following:
(i) A majority vote of a quorum consisting of Directors who
are not parties to such proceeding;
16
<PAGE>
(ii) If such a quorum of Directors is not obtainable, by
independent legal counsel in a written opinion;
(iii) Approval of the Shareholders, with the shares owned by
the person to be indemnified not being entitled to vote thereon. For the
purposes of this subsection, "approval of the Shareholders" means approved
or ratified by the affirmative vote of a majority of the shares of this
Corporation represented and voting at a duly held meeting at which a
quorum is present (which shares voting affirmatively shall also constitute
at least a majority of the required quorum) or by the written consent
signed by the holders of a majority of the outstanding shares entitled to
vote, which written consent shall be procedurally procured in the manner
provided by law; or
(iv) The court in which the proceeding is or was pending upon
application made by this Corporation or the agent of the attorney or other
person rendering services in connection with the defense, whether or not
such application by the agent, attorney, or other person is opposed by
this Corporation.
Section 6. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Corporation before the final disposition of
the proceedings on receipt of an undertaking by or on behalf of the agent to
repay the amount of the advance unless it shall be determined ultimately that
the agent is entitled to be indemnified as authorized in this Article.
Section 7. OTHER RIGHTS AUTHORIZED. The indemnification provided by
this Article shall not be exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote of
Shareholders, or vote of disinterested Directors or otherwise, both as to action
in an official capacity and as to action in another capacity while holding such
office, to the extent such additional rights to indemnification are authorized
in the Articles of Incorporation of this Corporation. Nothing contained in this
Section shall affect any right to indemnification to which persons other than
Directors and officers of this Corporation or any subsidiary hereof may be
entitled by contract, the Articles of Incorporation or otherwise.
Section 8. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Section 4 or Section 5(c), in any
circumstance where it appears:
17
<PAGE>
(i) That it would be inconsistent with a provision of the
articles, by-laws, a resolution of the Shareholders or an agreement in
effect at the time of the accrual of the alleged cause of action asserted
in the proceeding in which the expenses were incurred or other amounts
were paid, which prohibits or otherwise limits indemnification; or
(ii) That it would be inconsistent with any condition
expressly imposed by a court in approving a settlement.
Section 9. INSURANCE. Upon and in the event of a determination by
the Board to purchase such insurance, this Corporation shall purchase and
maintain insurance on behalf of any agent of this Corporation against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such whether or not this Corporation would have the
power to indemnify the agent against that liability under the provisions of this
Section.
Section 10. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN. This
Article does not apply to any proceeding against any trustee, investment
manager, or other fiduciary of an employee benefit plan in that person's
capacity as such, even though that person may also be an agent of this
Corporation as defined in Section 1 of this Article. Nothing contained in this
Article shall limit any right to indemnification to which such a trustee,
investment manager, or other fiduciary may be entitled by contract or otherwise,
which shall be enforceable to the extent permitted by applicable law other than
this Article.
Section 11. RIGHT TO INDEMNITY CONTINUES. The rights to indemnity
provided for in this Article shall 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 the person.
18
<PAGE>
ARTICLE XI
MISCELLANEOUS
Section 1. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of
other corporations standing in the name of this Corporation may be voted or
represented and all incidents thereto may be exercised on behalf of this
Corporation by the Chairman of the Board, the President, the Secretary or an
Assistant Secretary.
Section 2. ACCOUNTING YEAR. The accounting year of this Corporation
shall be fixed by resolution of the Board.
19
<PAGE>
CERTIFICATE BY SECRETARY OF ADOPTION BY DIRECTORS' VOTE
I, the undersigned, do hereby certify:
That I am the duly elected and acting Secretary of NEW WEST COAST
SALES, INC., a California corporation (this "Corporation"), that the foregoing
By-Laws, comprising nineteen (19) pages, constitute the By-Laws of this
Corporation as duly adopted by action of the Board of Directors of this
Corporation on April 17, 1998.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed
the seal of said Corporation this 17 day of April, 1998.
By: /s/ Donald J. Lewis
-------------------------
Donald J. Lewis
Secretary
<PAGE>
BYLAWS
OF
D & F INDUSTRIES, INC.
a California corporation
<PAGE>
BY-LAWS
OF
D & F INDUSTRIES, INC.
a California corporation
(this "Corporation")
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office for the
transaction of business of this Corporation may be designated and changed by
approval of a majority of the authorized members of the Board of Directors (the
"Board") and additional offices may be established and maintained at such other
place or places, either within or outside California, as the Board may from time
to time designate.
Section 2. OTHER OFFICES. Branch or subordinate offices may at any
time be established by the Board at any place or places where this Corporation
is qualified to do business.
ARTICLE II
DIRECTORS - MANAGEMENT
Section 1. RESPONSIBILITY OF BOARD OF DIRECTORS. Subject to the
provisions of the California General Corporation Law as set forth in the
California Corporations Code (the "Code") and to any limitations in the Articles
of Incorporation (the "Articles") of this Corporation relating to action
required to be approved by its shareholders (the "Shareholders"), as that term
is defined in Section 153 of the Code, or by the outstanding shares, as that
term is defined in Section 152 of the Code, the business and affairs of this
Corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the Board. The Board may delegate the management of the
day-to-day operation of the business of this Corporation to an Executive
Committee, provided that the business and affairs of this Corporation shall be
managed and all corporate powers shall be exercised under the ultimate direction
of the Board. The creation of the Executive Committee and
<PAGE>
appointment of its members must be approved by a majority of the Directors in
office at the time of its creation. To the extent specified by the Board and
permitted by law, the Executive Committee may exercise the authority of the
Board.
Section 2. STANDARD OF CARE. Each member of the Board (a "Director"
or the "Directors") shall perform the duties of a Director, including the duties
as a member of any committee of the Board upon which the Director may serve, in
good faith, in a manner such Director believes to be in the best interests of
this Corporation, and with such care, including reasonable inquiry, as an
ordinary prudent person in a like position would use under similar
circumstances.
Section 3. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized
number of Directors shall initially be determined by the Board but in no event
shall the number be less than three (3) or more than seven (7); provided,
however, that (i) before shares are issued, the number may be one or two, (ii)
so long as this Corporation has only one Shareholder, the number may be one or
two, and (iii) so long as this Corporation has only two Shareholders, the number
may be two. After the issuance of shares, the indefinite number of Directors may
be changed, or a definite number fixed without provision for an indefinite
number, by an amendment to this by-law duly adopted by the vote or written
consent of the holders of a majority of the outstanding shares entitled to vote;
provided, however, that an amendment reducing the number or the minimum number
of Directors to a number less than five (5) cannot be adopted if the votes cast
against its adoption at a meeting of the Shareholders, or the shares not
consenting in the case of action by written consent, are equal to more than
16 2/3% of the outstanding shares entitled to vote. No amendment may change the
stated maximum number of authorized Directors to a number greater than two times
the stated minimum number of Directors minus one. Directors need not be
Shareholders.
Section 4. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall
be elected at each annual meeting of the Shareholders to hold office until the
next annual meeting. Each Director, including a Director elected to fill a
vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.
Section 5. VACANCIES. Except as otherwise provided herein, vacancies
in the Board may be filled at a meeting by a majority of the remaining
Directors, though less than a quorum, by the unanimous written consent of the
Directors then in office or by a sole remaining Director, except that a vacancy
created
2
<PAGE>
by the removal of a Director by the vote or written consent of the Shareholders
or by court order may be filled only by (i) the vote of a majority of the shares
entitled to vote represented at a duly held meeting at which a quorum is
present, or (ii) the written consent of the holders of a majority of the
outstanding shares entitled to vote. Each Director so elected shall hold office
until the next annual meeting of the Shareholders and until a successor has been
elected and qualified. A vacancy or vacancies in the Board shall exist (i) in
the event of the death, resignation, or removal of any Director; (ii) if the
Board by resolution declares vacant the office of a Director who has been
declared of unsound mind by an order of court or convicted of a felony; (iii) if
the authorized number of Directors is increased; or (iv) if the Shareholders
fail, at any meeting of Shareholders at which any Director or Directors are
elected, to elect the number of Directors to be voted for at that meeting. The
Shareholders may elect a Director or Directors at any time to fill any vacancy
or vacancies not filled by the Directors, but any such election by written
consent shall require the consent of a majority of the outstanding shares
entitled to vote. Any Director may resign effective on giving written notice to
the Chairman of the Board, the President, the Secretary or the Board, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a Director is effective at a future time, the Board may elect a
successor to take office when the resignation becomes effective. No reduction of
the authorized number of Directors shall have the effect of removing any
Director before that Director's term of office expires.
Section 6. REMOVAL OF DIRECTORS. The entire Board or any individual
Director may be removed from office as provided by Sections 303 and 304 of the
Code. Any such vacancy or vacancies thereby created shall be filled by a
majority vote of the Directors; provided, however, if there are no Directors
remaining in office, then by a majority vote of the shares entitled to vote
represented at a special meeting at which a quorum is present, or, by the
written consent of the holders of a majority of the outstanding shares entitled
to vote.
Section 7. NOTICE, PLACE AND MANNER OF MEETINGS. Meetings of the
Board may be called by the President or any Director and shall be held at the
principal office of this Corporation, unless some other place is designated in
the notice of the meeting. Members of the Board may participate in a meeting
through use of a conference telephone or similar communications equipment so
long as all members participating in such a meeting can hear one another.
Accurate minutes of any meeting of the Board or any committee thereof, shall be
maintained by the Secretary or other person designated for that purpose.
3
<PAGE>
Section 8. ANNUAL MEETINGS. The annual meeting of the Board shall be
held immediately following the adjournment of the annual meeting of the
Shareholders.
Section 9. SPECIAL MEETINGS - NOTICES - WAIVERS. Special meetings of
the Board may be called at any time by the President or, if he or she is absent,
unable, or refuses to act, by any Director. At least forty-eight (48) hours
prior notice of the time and place of special meetings shall be delivered
personally to the Directors or personally communicated to them by a corporate
Officer by telephone or facsimile transmission. If the notice is sent to a
Director by letter, it shall be addressed to him or her at his or her address as
it is shown upon the records of this Corporation, or if it is not so shown on
such records or is not readily ascertainable, at the place in which the meetings
of the Directors are regularly held. In case such notice is mailed, it shall be
deposited in the United States mail, postage prepaid, in the place in which the
principal office of this Corporation is located at least four (4) days prior to
the time of the holding of the meeting. Such mailing, facsimile transmission,
telephoning or delivery as above provided shall be due, legal and personal
notice to such Director. If (i) all or a majority of the Directors are present
at any Directors' meeting and said meeting is not properly called or noticed as
set forth in these By-Laws and all Directors, including those not present, sign
a waiver of notice of such meeting or a consent to holding the meeting or an
approval of the minutes thereof, whether prior to or after the holding of such
meeting, which said waiver, consent or approval shall be filed with the
Secretary of this Corporation, or (ii) a Director attends a meeting without
notice but without protesting, prior thereto or at its commencement, the lack of
notice, then the transactions thereof are as valid as if had at a meeting
regularly called and noticed.
Section 10. ACTION WITHOUT A MEETING BY WRITTEN CONSENT. Any action
required or permitted to be taken by the Board may be taken without a meeting,
if all members of the Board individually or collectively consent in writing to
that action. Any action by written consent shall have the same effect as a
unanimous vote of the Board. All such written consents shall be filed with the
minutes of the proceedings of the Board.
Section 11. QUORUM. A majority of the number of Directors as fixed
by these By-Laws shall be necessary to constitute a quorum for the transaction
of business, and the action of a majority of the Directors present at any
meeting at which there is a quorum, when duly assembled, is valid as a corporate
act; provided that a minority of the Directors, in the absence of a quorum, may
adjourn from time to time,
4
<PAGE>
but may not transact any business. A meeting at which a quorum is initially
present may continue to transact business, notwithstanding the withdrawal of
Directors, if any action taken is approved by a majority of the required quorum
for such meeting.
Section 12. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given to absent Directors if the time
and place be fixed at the meeting adjourned and held within twenty-four (24)
hours, but if adjourned more than twenty-four (24) hours, notice shall be given
to all Directors not present at the time of the adjournment.
Section 13. COMPENSATION OF DIRECTORS. Directors, in that capacity,
shall not receive any stated salary for their services, but by resolution of the
Board a fixed sum and expense of attendance, if any, may be allowed for
attendance at each regular and special meeting of the Board; provided that
nothing herein contained shall be construed to preclude any Director from
serving this Corporation in any other capacity and receiving compensation
therefor.
ARTICLE III
OFFICERS
Section 1. OFFICERS. The officers of this Corporation shall be: a
President, a Chief Financial Officer and a Secretary. This Corporation may also
have, at the discretion of the Board, a Chief Operating Officer, one or more
Vice Presidents (including Executive Vice Presidents, one or more Assistant
Secretaries, one or more Assistant Chief Financial Officers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article III. Any number of offices may be held by the same person.
Section 2. ELECTION. The officers of this Corporation, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article, shall be elected annually by the Board, and each
shall hold office until he or she shall resign or shall be removed or otherwise
disqualified to serve, or a successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board may appoint such
other officers as the business of this Corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in these By-Laws or as the Board may from time to time
determine.
5
<PAGE>
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
rights, if any, of an officer under any contract of employment, any officer may
be removed, either with or without cause, by the Board, at any regular or
special meeting of the Board, or, except in case of an officer chosen by the
Board, by any officer upon whom such power of removal may be conferred by the
Board. Any officer may resign at any time by giving written notice to this
Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of this Corporation under any contract to which the officer is a
party.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the By-Laws for regular appointments to that office.
Section 6. PRESIDENT. Subject to the control of the Board, the
President shall have general supervision, direction and control of the business
and officers of this Corporation. The President shall have the general powers
and duties of management usually vested in the office of President of a
corporation, and shall have such other powers and duties as may be prescribed by
the Board or these By-Laws. The President shall preside at all meetings of the
Shareholders and at all meetings of the Board. The President shall be the Chief
Executive Officer and shall have the powers and duties prescribed in this
section.
Section 7. VICE PRESIDENTS. The Vice Presidents, if any, shall have
such powers and perform such duties as from time to time may be prescribed by
the Board or these By-Laws.
Section 8. SECRETARY. The Secretary shall keep, or cause to be kept,
a book of minutes at the principal office or such other place as the Board may
order, of all meetings of Directors and Shareholders, with the time and place of
holding, whether regular or special, and if special, how authorized, the notice
thereof given, the names of those present at Directors' meetings, the number of
shares present or represented at Shareholders' meetings and the proceedings
thereof. The Secretary shall keep, or cause to be kept, at the principal office
or at the office of this Corporation's transfer agent, a share register, or
duplicate share register, showing the names of the Shareholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for the same, and the number and
6
<PAGE>
date of cancellation of every certificate surrendered for cancellation. The
Secretary shall give, or cause to be given, notice of all the meetings of the
Shareholders and of the Board required by these By-Laws or by law to be given.
He or she shall keep, or cause to be kept, the seal of this Corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the Board or by these By-Laws.
Section 9. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep and maintain, or cause to be kept and maintained in accordance with
generally accepted accounting principles, adequate and correct accounts of the
properties and business transactions of this Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
earnings (or surplus) and shares. The books of account shall at all reasonable
times be open to inspection by any Director. This officer or his or her designee
shall deposit all moneys and other valuables in the name and to the credit of
this Corporation with such depositaries as may be designated by the Board. He or
she shall disburse the funds of this Corporation as may be ordered by the Board,
shall render to the President and Directors, whenever they request it, an
account of all of his or her transactions and of the financial condition of this
Corporation, and shall have such other powers and perform such other duties as
may be prescribed by the Board or these By-Laws.
Section 10. CONTROLLER. The Controller, if any, shall have the
duties as may be assigned from time to time by the President or the Board.
ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 1. PLACE OF MEETINGS. All meetings of the Shareholders shall
be held at the principal office of this Corporation unless some other
appropriate and convenient location be designated for that purpose from time to
time by the Board.
Section 2. ANNUAL MEETINGS. The annual meeting of the Shareholders
shall be held, each year, on such date and at such time as is determined by the
Board. At the annual meeting, the Shareholders shall elect a Board, consider
reports of the affairs of this Corporation and transact such other business as
may be properly brought before said meeting.
7
<PAGE>
Section 3. SPECIAL MEETINGS. Special meetings of the Shareholders
may be called at any time by the Board, the President, or by one or more
Shareholders holding not less than 10% of the voting power of this Corporation.
Except as provided hereafter, notice shall be given as for the annual meeting.
Upon receipt of a written request addressed to the President or Secretary,
mailed or delivered personally to such officer by any person (other than the
Board) entitled to call a special meeting of Shareholders, such officer shall
cause notice to be given, to the Shareholders entitled to vote, that a meeting
will be held at a time requested by the person or persons calling the meeting,
not less than thirty-five (35) nor more than sixty (60) days after receipt of
such request. If such notice is not given within twenty (20) days after receipt
of such request, the persons calling the meeting may give notice thereof in the
manner provided by these By-Laws or apply to the Superior Court as provided in
Section 305(c) of the Code.
Section 4. NOTICE OF MEETINGS - REPORTS. Notice of meetings, annual
or special, shall be given in writing not less than ten (10) nor more than sixty
(60) days before the date of the meeting to Shareholders entitled to vote
thereat. Such notice shall be given by the Secretary or the Assistant Secretary,
or if there be no such officer, or in the case of his or her neglect or refusal,
by any Director or Shareholder. Such notices or any reports shall be given
personally or by mail or other means of written communication as provided in
Section 601 of the Code and shall be sent to the Shareholder's address appearing
on the books of this Corporation, or supplied by him or her to this Corporation
for the purpose of notice, and in the absence thereof, as provided in said
Section 601. Notice of any meeting of Shareholders shall specify the place, the
day and the hour of meeting, and (i) in case of a special meeting, the general
nature of the business to be transacted and no other business may be transacted,
or (ii) in the case of an annual meeting, those matters which the Board at date
of mailing intends to present for action by the Shareholders. At any meetings
where Directors are to be elected, notice shall include the names of the
nominees, if any, intended at date of notice to be presented by management for
election. If a Shareholder supplied no address, notice shall be deemed to have
been given if mailed to the place where the principal office of this
Corporation, in California, is situated, or published at least once in some
newspaper of general circulation in the County of said principal office. Notice
shall be deemed given at the time it is delivered personally or deposited in the
mail or sent by other means of written communication. The officer giving such
notice or report shall prepare and file an affidavit or declaration thereof.
When a meeting is adjourned for forty-five (45) days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting;
provided, however, it shall not be necessary to give any notice of
8
<PAGE>
adjournment or of the business to be transacted at an adjourned meeting other
than by announcement at the meeting at which such adjournment is taken.
Section 5. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDER. The
transactions of any meeting of Shareholders, however called and noticed, shall
be as valid as though said transactions occurred at a meeting duly held after
regular call and notice, if a quorum be present either in person or by proxy,
and if, either before or after the meeting, each of the Shareholders entitled to
vote, not present in person or by proxy, sign a written waiver of notice, or a
consent to the holding of such meeting or an approval of the minutes thereof.
All such waivers, consents or approvals shall be filed with the corporate
records or made a part of the minutes of the meeting. Attendance shall
constitute a waiver of notice, unless objection shall be made as provided in
Section 601(e) of the Code.
Section 6. SHAREHOLDERS ACTING WITHOUT A MEETING -- ELECTION OF
DIRECTORS. Any action which may be taken at a meeting of the Shareholders may be
taken without a meeting or notice of meeting if authorized by a writing signed
by all of the Shareholders entitled to vote at a meeting for such purpose, and
filed with the Secretary of this Corporation; provided, however, that while
ordinarily Directors can only be elected by unanimous written consent under
Section 603(d) of the Code, if the Directors fail to fill a vacancy, then a
Director to fill that vacancy may be elected by the written consent of persons
holding a majority of shares entitled to vote for the election of Directors.
Section 7. OTHER ACTIONS WITHOUT A MEETING. Unless otherwise
provided in the Code, any action which may be taken at any annual or special
meeting of Shareholders may be taken without a meeting and without prior notice,
if a consent in writing, setting forth the action so taken, signed by the
holders of the outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Unless the
consents of all Shareholders entitled to vote have been solicited in writing:
(i) Notice of any Shareholder approval pursuant to Sections
310, 317, 1201 or 2007 of the Code without a meeting by less than
unanimous written consent shall be given at least ten (10) days before the
consummation of the action authorized by such approval; and
9
<PAGE>
(ii) Prompt notice shall be given of the taking of any other
corporate action approved by Shareholders without a meeting by less than
unanimous written consent, to each of those Shareholders entitled to vote
who have not consented in writing. Any Shareholder giving a written
consent, or the Shareholder's proxyholders, or a transferee of the shares
of a personal representative of the Shareholder or their respective
proxyholders, may revoke the consent by a writing received by this
Corporation prior to the time that written consents of the number of
shares required to authorize the proposed action have been filed with the
Secretary of this Corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the Secretary of this
Corporation.
Section 8. QUORUM. The holders of a majority of the shares
entitled to vote thereat, present in person, or represented by proxy, shall
constitute a quorum at all meetings of the Shareholders for the transaction
of business except as otherwise provided by law, by the Articles of
Incorporation of this Corporation, or by these By-Laws. If, however, such
majority shall not be present or represented at any meeting of the
Shareholders, the Shareholders entitled to vote thereat, present in person,
or by proxy, shall have the power to adjourn the meeting from time to time,
until the requisite amount of voting shares shall be present. At such
adjourned meeting at which the requisite amount of voting shares shall be
represented, any business may be transacted which might have been transacted
at a meeting as originally notified. If a quorum be initially present, the
Shareholders may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Shareholders to leave less than a
quorum, if any action taken is approved by a majority of the Shareholders
required to initially constitute a quorum.
Section 9. VOTING. Only persons in whose names shares entitled to
vote stand on the stock records of this Corporation on the day of any meeting of
Shareholders, unless some other day be fixed by the Board for the determination
of Shareholders of record, and then on such other day, shall be entitled to vote
at such meeting. Provided that prior to the voting at a meeting, a candidate's
name has been placed in nomination and one or more Shareholders has given notice
at the meeting of the Shareholder's intent to cumulate the Shareholder's votes,
every Shareholder entitled to vote at any election for Directors may cumulate
their votes and give one candidate a number of votes equal to the number of
Directors to be elected multiplied by the number of votes to which his or her
shares are entitled, or distribute his or her votes on the same principle among
as many candidates as he or she thinks fit. If any one Shareholder has given
such notice, all Shareholders may cumulate their votes for
10
<PAGE>
candidates in nomination. The candidates receiving the highest number of votes
up to the number of Directors to be elected are elected.
Section 10. RECORD DATE. In order that this Corporation may
determine the Shareholders entitled to notice of any meeting or to vote or
entitled to receive payment of any dividend or other distribution or allotment
of any rights or entitled to exercise any rights in respect of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than sixty (60) nor less than ten (10) days prior to the date of such meeting
nor more than sixty (60) days prior to any other action. In such case, only
Shareholders of record on the date so fixed shall be entitled to notice of and
to vote at such meeting, or to receive such dividends, distribution or allotment
of rights, or to exercise such rights, as the case may be notwithstanding any
transfer of any share on the books of this Corporation after any record date
fixed as aforesaid. The Board may close the books of this Corporation against
transfers of shares during the whole or any part of such period. If no record
date is fixed: (i) the record date for determining Shareholders entitled to
notice of or to vote at a meeting of Shareholders shall be at the close of
business on the business day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held; (ii) the record date for
determining Shareholders entitled to give consent to corporate action in writing
without a meeting, when no prior action by the Board is necessary, shall be the
day on which the first written consent is given; and (iii) the record date for
determining Shareholders for any other purpose shall be at the close of business
on the day on which the Board adopts the resolution relating thereto, or the
sixtieth (60th) day prior to the date of such other action, whichever is later.
Section 11. PROXIES. Every Shareholder entitled to vote, or to
execute consents, may do so, either in person or by written proxy, executed in
accordance with the provisions of Sections 604 and 705 of the Code and filed
with the Secretary of this Corporation.
Section 12. ORGANIZATION. The President, or in the absence of the
President, any Vice President, shall call the meeting of the Shareholders to
order, and shall act as chairman of the meeting. In the absence of the President
and all of the Vice Presidents, Shareholders shall appoint a chairman for such
meeting. The Secretary of this Corporation shall act as Secretary of all
meetings of the Shareholders, but in the absence of the Secretary at any meeting
of the Shareholders, the presiding officer may appoint any person to act as
Secretary of the meeting.
11
<PAGE>
Section 13. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders the Board may, if they so elect, appoint inspectors of election to
act at such meeting or any adjournment thereof. If inspectors of election be not
so appointed, or if any persons so appointed fail to appear or refuse to act,
the chairman of any such meeting may, and on the request of any Shareholder or
his or her proxy shall, make such appointment at the meeting in which case the
number of inspectors shall be either one (1) or three (3) as determined by a
majority of the Shareholders represented at the meeting.
ARTICLE V
CERTIFICATES AND TRANSFER OF SHARES
Section 1. CERTIFICATES FOR SHARES. Certificates for shares shall be
of such form and device as the Board may designate and shall state the name of
the record holder of the shares represented thereby, its number, date of
issuance, the number of shares for which it is issued, a statement of the
rights, privileges, preferences and restrictions, if any, a statement as to the
redemption or conversion, if any, a statement of liens or restrictions upon
transfer or voting, if any, if the shares be assessable or, if assessments are
collectible by personal action, a plain statement of such facts. All
certificates shall be signed in the name of this Corporation by the President
and by the Chief Financial Officer or any Assistant Chief Financial Officer or
the Secretary or any Assistant Secretary, certifying the number of shares and
the class or series of shares owned by the Shareholder. Any or all of the
signatures on the certificate may be facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature has been placed
on a certificate shall have ceased to be that officer, transfer agent, or
registrar before that certificate is issued, it may be issued by this
Corporation with the same effect as if that person were an officer, transfer
agent, or registrar at the date of issue.
Section 2. TRANSFER ON THE BOOKS. Upon surrender to the Secretary or
transfer agent of this Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of this Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 3. LOST OR DESTROYED CERTIFICATES. Any person claiming a
certificate of stock to be lost or destroyed shall make an affidavit or
affirmation of that fact and shall, if the Directors so require, give this
Corporation a
12
<PAGE>
bond of indemnity, in form and with one or more sureties satisfactory to the
Board, in at least double the value of the stock represented by said
certificate, whereupon a new certificate may be issued in the same tenor and for
the same number of shares as the one alleged to be lost or destroyed.
Section 4. TRANSFER AGENTS AND REGISTRARS. The Board may appoint one
or more transfer agents or transfer clerks, and one or more registrars, which
shall be an incorporated bank or trust company, either domestic or foreign, who
shall be appointed at such times and places as the requirements of this
Corporation may necessitate and the Board may designate.
Section 5. CLOSING STOCK TRANSFER BOOKS. The Board may close the
books of this Corporation against transfers of shares as provided in Article IV,
Section 10 of these By-Laws.
ARTICLE VI
RECORDS - REPORTS - INSPECTION
Section 1. RECORDS. This Corporation shall maintain, in accordance
with generally accepted accounting principles, adequate and correct accounts,
books and records of its business and properties. All of such books, records and
accounts shall be kept at its principal office, as fixed by the Board from time
to time.
Section 2. INSPECTION OF BOOKS AND RECORDS. All books and records
provided for in Section 1500 of the Code shall be open to inspection by the
Directors and Shareholders from time to time and in the manner provided in
Section 1600 through 1602, inclusive, of the Code.
Section 3. CERTIFICATION AND INSPECTION OF BY-LAWS. The original
or a copy of these By-Laws, as amended from time to time, certified by the
Secretary, shall be kept at this Corporation's principal office and shall be
open to inspection by the Shareholders of this Corporation at all reasonable
times during office hours.
Section 4. CONTRACTS, ETC. -- HOW EXECUTED. The Board, except as
otherwise provided by these By-Laws, may authorize any officer or officers,
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of this Corporation. Such authority may be general or
confined to
13
<PAGE>
specific instances. Unless so authorized by the Board, no officer, agent or
employee shall have any power or authority to bind this Corporation by any
contract or agreement, or to pledge its credit, or to render it liable for any
purpose or to any amount, except as provided in Section 313 of the Code.
ARTICLE VII
ANNUAL REPORTS
Section 1. WAIVER OF ANNUAL REPORTS TO SHAREHOLDER. The annual
report to Shareholders referred to in Section 1501 of the Code is expressly
waived so long as this Corporation shall have less than one hundred (100)
Shareholders. However, nothing herein shall be interpreted as prohibiting the
Board from issuing annual or other periodic reports to the Shareholders of this
Corporation as they consider appropriate.
ARTICLE VIII
AMENDMENTS TO BYLAWS
Section 1. AMENDMENTS. After initial By-Laws of this Corporation
shall have been adopted by the incorporator or incorporators of this
Corporation, the By-Laws may be amended or repealed or new By-Laws may be
adopted by the Shareholders entitled to exercise a majority of the voting power
or by the Board; provided, however, that the Board shall have no control over
any By-Law which changes the authorized number of Directors of this Corporation;
provided, further, than any control over the By-Laws herein vested in the Board
shall be subject to the authority of the aforesaid Shareholders to amend or
repeal the By-Laws or to adopt new By-Laws; and provided further that any By-Law
amendment or new By-Law which changes the minimum number of Directors to a
number less than five (5) shall require authorization by the greater proportion
of voting power of the Shareholders as provided in Article II, Section 3 of
these By-Laws.
Section 2. RECORD OF AMENDMENTS. Whenever an amendment or new By-Law
is adopted, it shall be copied in the book of By-Laws with the original By-Laws,
in the appropriate place. If any By-Law is repealed, the fact of repeal with the
date of the meeting at which the repeal was enacted or written assent was filed
shall be stated in said book.
14
<PAGE>
ARTICLE IX
CORPORATE SEAL
The corporate seal shall be circular in form, and shall have
inscribed thereon the name of this Corporation, the date of its incorporation,
and the word "California".
ARTICLE X
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS, AND EXPENSES. For the purposes of
this Article, "agent" means any person who is or was a Director, officer,
employee, or other agent of this Corporation, or is or was serving at the
request of this Corporation as a Director, officer, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, or was a Director, officer, employee, or agent of a foreign or
domestic corporation which was a predecessor corporation of this Corporation or
of another enterprise at the request of such predecessor corporation;
"proceeding" means any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative, or investigative; and "expenses"
includes, without limitation, attorneys' fees and any expenses of establishing a
right to indemnification under Section 4 or Section 5 of this Article.
Section 2. ACTIONS OTHER THAN BY THIS CORPORATION. This Corporation
shall indemnify any person who was or is a party, or is threatened to be made a
party, to any proceeding (other than an action by or in the right of this
Corporation to procure a judgment in its favor) by reason of the fact that such
person is or was an agent of this Corporation, against expenses, judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with such proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in the best interests of this
Corporation and, in the case of a criminal proceeding, had no reasonable cause
to believe the conduct of such person was unlawful. The termination of any
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 the person reasonably
believed to be in the best interests of this Corporation or that the person had
reasonable cause to believe that the person's conduct was unlawful.
15
<PAGE>
Section 3. ACTIONS BY THIS CORPORATION. This 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 by or in the right of this
Corporation to procure a judgment in its favor by reason of the fact that such
person is or was an agent of this Corporation, against expenses actually and
reasonably incurred by such person in connection with the defense or settlement
of such action if such person acted in good faith, in a manner such person
believed to be in the best interests of this Corporation. No indemnification
shall be made under this Section 3 for any of the following:
(i) In respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to this Corporation and its
Shareholders, unless and only to the extent that the court in which such
proceeding is or was pending shall determine upon application that, in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for the expenses which the court shall
determine; or
(ii) Of amounts paid in settling or otherwise disposing of a
pending action without court approval; or
(iii) Of expenses incurred in defending a pending action which
is settled or otherwise disposed of without court approval.
Section 4. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent
of this Corporation has been successful on the merits in defense of any
proceeding referred to in Sections 2 or 3 of this Article, or in defense of any
claim, issue, or matter therein, the agent shall be indemnified against expenses
actually and reasonably incurred by the agent in connection therewith.
Section 5. REQUIRED APPROVAL. Except as provided in Section 4 of
this Article, any indemnification under this Article shall be made by this
Corporation only if authorized in the specific case, upon a determination that
indemnification of the agent is proper in the circumstances because the agent
has met the applicable standard of conduct set forth in Sections 2 or 3 of this
Article by any of the following:
(i) A majority vote of a quorum consisting of Directors who
are not parties to such proceeding;
16
<PAGE>
(ii) If such a quorum of Directors is not obtainable, by
independent legal counsel in a written opinion;
(iii) Approval of the Shareholders, with the shares owned by
the person to be indemnified not being entitled to vote thereon. For the
purposes of this subsection, "approval of the Shareholders" means approved
or ratified by the affirmative vote of a majority of the shares of this
Corporation represented and voting at a duly held meeting at which a
quorum is present (which shares voting affirmatively shall also constitute
at least a majority of the required quorum) or by the written consent
signed by the holders of a majority of the outstanding shares entitled to
vote, which written consent shall be procedurally procured in the manner
provided by law; or
(iv) The court in which the proceeding is or was pending upon
application made by this Corporation or the agent of the attorney or other
person rendering services in connection with the defense, whether or not
such application by the agent, attorney, or other person is opposed by
this Corporation.
Section 6. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Corporation before the final disposition of
the proceedings on receipt of an undertaking by or on behalf of the agent to
repay the amount of the advance unless it shall be determined ultimately that
the agent is entitled to be indemnified as authorized in this Article.
Section 7. OTHER RIGHTS AUTHORIZED. The indemnification provided by
this Article shall not be exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote of
Shareholders, or vote of disinterested Directors or otherwise, both as to action
in an official capacity and as to action in another capacity while holding such
office, to the extent such additional rights to indemnification are authorized
in the Articles of Incorporation of this Corporation. Nothing contained in this
Section shall affect any right to indemnification to which persons other than
Directors and officers of this Corporation or any subsidiary hereof may be
entitled by contract, the Articles of Incorporation or otherwise.
Section 8. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Section 4 or Section 5(c), in any
circumstance where it appears:
17
<PAGE>
(i) That it would be inconsistent with a provision of the
articles, by-laws, a resolution of the Shareholders or an agreement in
effect at the time of the accrual of the alleged cause of action asserted
in the proceeding in which the expenses were incurred or other amounts
were paid, which prohibits or otherwise limits indemnification; or
(ii) That it would be inconsistent with any condition
expressly imposed by a court in approving a settlement.
Section 9. INSURANCE. Upon and in the event of a determination by
the Board to purchase such insurance, this Corporation shall purchase and
maintain insurance on behalf of any agent of this Corporation against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such whether or not this Corporation would have the
power to indemnify the agent against that liability under the provisions of this
Section.
Section 10. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN. This
Article does not apply to any proceeding against any trustee, investment
manager, or other fiduciary of an employee benefit plan in that person's
capacity as such, even though that person may also be an agent of this
Corporation as defined in Section 1 of this Article. Nothing contained in this
Article shall limit any right to indemnification to which such a trustee,
investment manager, or other fiduciary may be entitled by contract or otherwise,
which shall be enforceable to the extent permitted by applicable law other than
this Article.
Section 11. RIGHT TO INDEMNITY CONTINUES. The rights to indemnity
provided for in this Article shall 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 the person.
18
<PAGE>
ARTICLE XI
MISCELLANEOUS
Section 1. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of
other corporations standing in the name of this Corporation may be voted or
represented and all incidents thereto may be exercised on behalf of this
Corporation by the Chairman of the Board, the President, the Secretary or an
Assistant Secretary.
Section 2. ACCOUNTING YEAR. The accounting year of this Corporation
shall be fixed by resolution of the Board.
19
<PAGE>
CERTIFICATE BY SECRETARY OF ADOPTION BY DIRECTORS' VOTE
I, the undersigned, do hereby certify:
That I am the duly elected and acting Secretary of D & F INDUSTRIES,
INC., a California corporation (this "Corporation"), that the foregoing By-Laws,
comprising nineteen (19) pages, constitute the By-Laws of this Corporation as
duly adopted by action of the Board of Directors of this Corporation on April
17, 1998.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed
the seal of said Corporation this 17 day of April, 1998.
By: /s/ Donald J. Lewis
----------------------------------
Donald J. Lewis
Secretary
<PAGE>
- ------------------------------------------------------------------------------
GLOBAL HEALTH SCIENCES, INC., as Issuer,
The SUBSIDIARY GUARANTORS named herein
and
CHASE MANHATTAN BANK and TRUST COMPANY,
NATIONAL ASSOCIATION, as Trustee
----------------------
INDENTURE
Dated as of April 23, 1998
----------------------
up to $325,000,000
11% Senior Notes due 2008
- ------------------------------------------------------------------------------
<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
(b)................................................ 7.08; 7.10; 11.02
(b)(1)............................................. 7.10
(b)(9)............................................. 7.10
(c)................................................ N.A.
311(a)................................................ 7.11
(b)................................................ 7.11
(c)................................................ N.A.
312(a)................................................ 2.05
(b)................................................ 10.03
(c)................................................ 10.03
313(a)................................................ 7.06
(b)(1)............................................. 7.06
(b)(2)............................................. 7.06
(c)................................................ 11.02
(d)................................................ 7.06
314(a)................................................ 4.02; 4.04; 11.02
(b)................................................ N.A.
(c)(1)............................................. 11.04; 11.05
(c)(2)............................................. 11.04; 11.05
(c)(3)............................................. N.A.
(d)................................................ N.A.
(e)................................................ 10.05
(f)................................................ N.A.
315(a)................................................ 7.01; 7.02
(b)................................................ 7.05; 10.02
(c)................................................ 7.01
(d)................................................ 6.05; 7.01; 7.02
(e)................................................ 6.11
316(a) (last sentence)................................ 11.06
(a)(1)(A).......................................... 6.05
(a)(1)(B).......................................... 6.04
(a)(2)............................................. 8.02
(b)................................................ 6.07
(c)................................................ 8.04
317(a)(1)............................................. 6.08
(a)(2)............................................. 6.09
(b)................................................ 7.12
318(a)................................................ 11.01
N.A. means Not Applicable
- --------------------
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to
be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.............................................1
Section 1.02. Other Definitions......................................21
Section 1.03. Incorporation by Reference of Trust
Indenture Act........................................22
Section 1.04. Rules of Construction..................................22
ARTICLE 2 THE NOTES
Section 2.01. Dating; Incorporation of Form in Indenture.............23
Section 2.02. Execution and Authentication...........................24
Section 2.03. Registrar and Paying Agent.............................25
Section 2.04. Paying Agent to Hold Money in Trust....................25
Section 2.05. Noteholder Lists.......................................26
Section 2.06. Transfer and Exchange..................................26
Section 2.07. Replacement Notes......................................27
Section 2.08. Outstanding Notes......................................28
Section 2.09. Temporary Notes........................................28
Section 2.10. Cancellation...........................................28
Section 2.11. Defaulted Interest.....................................29
Section 2.12. Deposit of Moneys......................................29
Section 2.13. CUSIP Number...........................................29
Section 2.14. Book-Entry Provisions for Global Notes.................30
Section 2.15. Special Transfer Provisions............................31
ARTICLE 3 REDEMPTION
Section 3.01. Notices to Trustee.....................................34
Section 3.02. Selection by Trustee of Notes to Be
Redeemed.............................................34
Section 3.03. Notice of Redemption...................................34
Section 3.04. Effect of Notice of Redemption.........................35
Section 3.05. Deposit of Redemption Price............................36
Section 3.06. Notes Redeemed in Part.................................36
Section 3.07. Redemption.............................................36
ARTICLE 4 COVENANTS
Section 4.01. Payment of Notes.......................................37
Section 4.02. Provision of Financial Statements and Other
Information..........................................38
Section 4.03. Waiver of Stay, Extension or Usury Laws................39
Section 4.04. Compliance Certificate.................................39
-i-
<PAGE>
Section 4.05. Taxes..................................................40
Section 4.06. Limitation on Additional Indebtedness..................40
Section 4.07. Limitation on Restricted Payments......................42
Section 4.08. Disposition of Proceeds of Asset Sales.................44
Section 4.09. Limitation on Transactions with Affiliates.............47
Section 4.10. Limitations on Liens...................................49
Section 4.11. Limitations on Investments, Loans and
Advances.............................................49
Section 4.12. Limitation on Sale-Leaseback Transactions..............50
Section 4.13. Corporate Existence....................................50
Section 4.14. Change of Control......................................50
Section 4.15. Maintenance of Office or Agency........................53
Section 4.16. Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries..................53
Section 4.17. Ownership of Capital Stock of Wholly-Owned
Subsidiaries.........................................54
Section 4.18. Limitation on Creation of Subsidiaries.................55
Section 4.19. Further Assurances.....................................55
ARTICLE 5 SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger and
Sale of Assets.......................................55
Section 5.02. Successor Person Substituted...........................56
ARTICLE 6 DEFAULTS AND REMEDIES
Section 6.01. Events of Default......................................57
Section 6.02. Acceleration...........................................59
Section 6.03. Other Remedies.........................................60
Section 6.04. Waiver of Past Defaults and Events of
Default. ............................................60
Section 6.05. Control by Majority....................................60
Section 6.06. Limitation on Suits....................................61
Section 6.07. Rights of Holders to Receive Payment...................61
Section 6.08. Collection Suit by Trustee.............................62
Section 6.09. Trustee May File Proofs of Claim.......................62
Section 6.10. Priorities.............................................63
Section 6.11. Undertaking for Costs..................................63
ARTICLE 7 TRUSTEE
Section 7.01. Duties of Trustee......................................63
-ii-
<PAGE>
Section 7.02. Rights of Trustee......................................65
Section 7.03. Individual Rights of Trustee...........................66
Section 7.04. Trustee's Disclaimer...................................66
Section 7.05. Notice of Defaults.....................................66
Section 7.06. Reports by Trustee to Holders..........................67
Section 7.07. Compensation and Indemnity.............................67
Section 7.08. Replacement of Trustee.................................68
Section 7.09. Successor Trustee by Consolidation, Merger
or Conversion........................................70
Section 7.10. Eligibility; Disqualification..........................70
Section 7.11. Preferential Collection of Claims Against
Company..............................................70
Section 7.12. Paying Agents..........................................70
ARTICLE 8 AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders.............................71
Section 8.02. With Consent of Holders................................72
Section 8.03. Compliance with Trust Indenture Act....................74
Section 8.04. Revocation and Effect of Consents......................74
Section 8.05. Notation on or Exchange of Notes.......................74
Section 8.06. Trustee to Sign Amendments, etc........................75
ARTICLE 9 DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Satisfaction and Discharge of Indenture................75
Section 9.02. Legal Defeasance.......................................76
Section 9.03. Covenant Defeasance....................................77
Section 9.04. Conditions to Defeasance or Covenant
Defeasance...........................................77
Section 9.05. Deposited Money and U.S. Government
Obligations to Be Held in Trust; Other
Miscellaneous Provisions.............................79
Section 9.06. Reinstatement..........................................80
Section 9.07. Moneys Held by Paying Agent............................80
Section 9.08. Moneys Held by Trustee.................................81
Section 9.09. Qualifying Trustee.....................................81
ARTICLE 10 SUBORDINATED GUARANTEES
SECTION 10.01. Unconditional Guarantees of the Subsidiary
Guarantors; Subordination; etc.......................81
Section 10.02. Costs and Expenses.....................................89
Section 10.03. Limitation on Liability................................89
Section 10.04. Successors and Assigns.................................89
Section 10.05. No Waiver..............................................89
Section 10.06. Modification...........................................90
-iii-
<PAGE>
Section 10.07. Release of Subsidiary Guarantor........................90
Section 10.08. Execution of Supplemental Indenture for
Future Subsidiary Guarantors.........................90
Section 10.09. Execution and Delivery of Guarantees...................91
ARTICLE 11 MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls...........................92
Section 11.02. Notices................................................92
Section 11.03. Communications by Holders with Other
Holders..............................................93
Section 11.04. Certificate and Opinion as to Conditions
Precedent............................................93
Section 11.05. Statements Required in Certificate and
Opinion..............................................94
Section 11.06. When Treasury Notes Disregarded........................94
Section 11.07. Rules by Trustee (and Agents)..........................95
Section 11.08. Business Days; Legal Holidays..........................95
Section 11.09. Governing Law..........................................95
Section 11.10. No Adverse Interpretation of Other
Agreements...........................................95
Section 11.11. No Recourse Against Others.............................95
Section 11.12. Successors.............................................96
Section 11.13. Multiple Counterparts..................................96
Section 11.14. Table of Contents, Headings, etc.......................96
Section 11.15. Separability...........................................96
-iv-
<PAGE>
Page
----
EXHIBITS
Exhibit A. Form of Note...............................................A-1
Exhibit B. Form of Legend for Global Notes............................B-1
Exhibit C. Form of Certificate to Be Delivered in Connection
with Transfers to Non-QIB Accredited Investors.............C-1
Exhibit D. Form of Certificate to Be Delivered in Connection
with Transfers Pursuant to Regulation S....................D-1
Exhibit E. Form of Subordinated Guarantee.............................E-1
Exhibit F. Form of Supplemental Indenture.............................F-1
-v-
<PAGE>
INDENTURE, dated as of April 23, 1998, between GLOBAL HEALTH
SCIENCES, INC., a California corporation (the "Company"), each of the Company's
subsidiaries (each a "Subsidiary Guarantor," and collectively, the "Subsidiary
Guarantors"), and CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION,
a national banking association, as Trustee (the "Trustee").
The Company has duly authorized the creation of an issue of 11%
Senior Notes due 2008, to be issued initially in the principal amount of
$225,000,000 and thereafter in an additional amount, if any, up to $100,000,000
subject to the terms and conditions contained herein; and 11% Senior Notes due
2008 to be issued in exchange for the 11% Senior Notes due 2008 pursuant to a
Registration Rights Agreement (as defined) and, to provide therefor, the Company
has duly authorized the execution and delivery of this Indenture. All things
necessary to make the Notes (as defined), when duly issued and executed by the
Company and authenticated and delivered hereunder, the valid and binding
obligations of the Company and to make this Indenture a valid and binding
agreement of the Company, have been done. All things necessary to make the
Guarantees (as defined) of the Subsidiary Guarantors named herein the valid and
binding obligations of such Subsidiary Guarantors and to make this Indenture a
valid and binding agreement thereof, have been done.
Each party agrees as follows for the benefit of the other parties
and for the equal and ratable benefit of the Holders of the Company's 11% Senior
Notes due 2008 (the "Notes").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Subsidiary of the
Company or at the time it merges or consolidates with the Company or any of its
Subsidiaries or assumed in connection with the acquisition of assets from such
Person and in each case not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Subsidiary of the
Company or such acquisition, merger or consolidation.
<PAGE>
-2-
"Acquisition Facility" means (i) the Acquisition Facility, dated as
of April 23, 1998, between Global Sub, the Company and the other Subsidiary
Guarantors, the lenders party thereto in their capacities as lenders thereunder,
Citibank, N.A., as issuing bank, Bank of America NT&SA, as documentation agent
and Citicorp USA, Inc., as administrative agent, together with the documents
related thereto or executed in connection therewith (including, without
limitation, any guarantee agreements, security documents and Interest Rate
Protection Obligations), (ii) any one or more additional agreements among the
Company and/or any of its Subsidiaries and one or more financial institutions
providing for the making of loans on a term or revolving basis and/or the
issuance of letters of credit to the extent incurred for the purpose of
financing acquisitions, and (iii) any agreement extending the maturity of,
refinancing, renewing, replacing or otherwise restructuring (including
increasing the amount of available financings thereunder (provided that such
increase in borrowings is permitted by Section 4.06(c), (d), (e), (g), and (j))
all or any portion of the Indebtedness or commitments or letters of credit under
any such agreement or any successor or replacement agreement and whether by the
same or any other agent, lender or group of lenders, in each case as such
agreements under the foregoing clauses (i), (ii) and (iii) may be amended
(including any amendment and restatement thereof), supplemented or otherwise
modified from time to time.
"Additional Amounts" shall have the meaning set forth in the
Registration Rights Agreement.
"Adjusted Net Assets" of any Person at any date shall mean the
lesser of (x) the amount by which the fair value of the property of such Person
exceeds the total amount of liabilities, including, without limitation,
contingent liabilities (after giving effect to all other fixed and contingent
liabilities), but excluding liabilities under the Guarantee of such Person at
such date and (y) the amount by which the present fair salable value of the
assets of such Person at such date exceeds the amount that will be required to
pay the probable liability of such Person on its debts (after giving effect to
all other fixed and contingent liabilities and after giving effect to any
collection from any Subsidiary of such Person in respect of the obligations of
such Person under the Guarantee of such Person), excluding liabilities in
respect of the Guarantee of such Person, as they become absolute and matured.
"Affiliate" of any specified Person means any other Person which,
directly or indirectly, controls, is controlled
<PAGE>
-3-
by or is under direct or indirect common control with, such specified Person.
For the purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "affiliated," "controlling" and
"controlled" have meanings correlative to the foregoing.
"Affiliate Transaction" has the meaning ascribed to such term under
Section 4.09.
"Agent" means any Registrar, Paying Agent, co-Registrar or agent for
service of notices and demands.
"Asset Acquisition" means (i) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise), or purchase or
acquisition of Capital Stock, by the Company or any of its Wholly-Owned
Subsidiaries in any other Person, in either case pursuant to which such Person
shall become a Wholly-Owned Subsidiary of the Company or any of its Wholly-Owned
Subsidiaries or shall be merged with or into the Company or any of its
Wholly-Owned Subsidiaries or (ii) any acquisition by the Company or any of its
Wholly-Owned Subsidiaries of the assets of any Person which constitute all of an
operating unit or business of such Person.
"Asset Sale" means any direct or indirect sale, issuance,
conveyance, transfer, lease (including by means of sale-leaseback), assignment
or other transfer or disposition to any Person other than the Company or any
Wholly-Owned Subsidiary, in one transaction or a series of related transactions,
of (i) any Capital Stock of any Subsidiary of the Company (including by way of
issuance by such Subsidiary) or (ii) any other property or asset of the Company
or any Subsidiary of the Company other than inventory in the ordinary course, in
each case, other than such transactions or series of related transactions which
do not exceed $500,000. For the purposes of this definition, the term "Asset
Sale" will not include (a) any disposition of properties or assets of the
Company or any Subsidiary of the Company that is governed under and complies
with the requirements set forth in Sections 5.01, 4.12, or 4.07; or (b)
dispositions of obsolete or worn out equipment in the ordinary course of
business and consistent with past practice.
"Asset Sale Offer" has the meaning ascribed to such term under
Section 4.08.
<PAGE>
-4-
"Attributable Debt" means, in respect of a Sale-Leaseback
Transaction, as at the time of determination, the greater of (i) the Fair Market
Value of the property subject to such arrangement or (ii) the present value
(discounted at the interest rate borne by the Notes, compounded semi-annually)
of the total obligations of the lessee for rental payments during the remaining
term of the lease included in such arrangement (including any period for which
such lease has been extended).
"Authenticating Agent" has the meaning provided in Section 2.02.
"Board of Directors" means the board of directors of any Person or
any committee authorized to act therefor.
"Board Resolution" means with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted, in good faith, by the Board of Directors of such
Person and to be in full force and effect on the date of such certification.
"Business Day" means a day other than a Saturday, a Sunday or day
which banking institutions in the City of New York are not required to be open.
"Capital Stock" means any and all shares, interests, participations
or other equivalents (however designated) of any Person, including Common Stock
or Preferred Stock and including any rights, options or warrants with respect
thereto.
"Capitalized Lease Obligation" means any obligation to pay rent or
other amounts under a lease of (or other agreement conveying the right to use)
any property (whether real, personal or mixed) that is required to be classified
and accounted as a capital lease obligation under GAAP, and, for the purpose of
this Indenture, the amount of such obligation at any date will be the
capitalized amount thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means, at any time (i) any evidence of
Indebtedness with a maturity of 365 calendar days or less issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) certificates of deposit
or acceptances or money market deposits with a maturity of 365 calendar days or
less of any financial institution that is a member of the United States Federal
Reserve Sys-
<PAGE>
-5-
tem having combined capital and surplus and undivided profits of not less than
$500,000,000; (iii) commercial paper with a maturity of 365 calendar days or
less issued by a corporation (except an Affiliate of the Company) organized
under the laws of any state of the United States or the District of Columbia and
rated at least A-1 by S&P or at least P-1 by Moody's; (iv) repurchase agreements
and reverse repurchase agreements relating to marketable direct obligations
issued or unconditionally guaranteed by the United States Government or issued
by any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within 365 calendar days from the date of
acquisition; provided that, in the case of obligations issued or guaranteed by
the United States of America, the terms of such agreements comply with the
guidelines set forth in the United States Federal Financial Agreements of
Depository Institutions with Securities and Others, as adopted by the United
States Comptroller of the Currency; and (v) investments in money market funds
which invest substantially all their assets in securities of the types described
in (i)-(iv) above.
"Change of Control" means (a) all or substantially all of the assets
of the Company are sold, leased, exchanged or otherwise transferred to any
person or entity or group of persons or entities acting in concert as a
partnership or other group (a "Group of Persons") other than a Permitted Holder
(or other than to a Wholly-Owned Subsidiary of the Company) (b) the Company is
merged or consolidated with or into another corporation with the effect that the
Permitted Holders hold less than 50% of the combined voting power of the then
outstanding securities of the surviving corporation of such merger or the
corporation resulting from such consolidation ordinarily (and apart from rights
arising under special circumstances) having the right to vote in the election of
directors, (c) a majority of the board of directors of the Company shall be
replaced, over a two-year period, from the directors who constituted the board
of directors at the beginning of such period, and such replacement shall not
have been approved by the board of directors as constituted at the beginning of
such period, (d) a Person or Group of Persons (other than the Permitted Holders)
shall, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise, beneficially own (within the
meaning of Rule 13d-3 under the Exchange Act) Common Stock of the Company or
securities of the Company representing 50% or more of the Common Stock or voting
power of the then outstanding securities of the Company, or (e) the Permitted
Holders cease to own at least 50% of the Voting Capital Stock of the Company.
<PAGE>
-6-
"Change of Control Date" has the meaning ascribed to such term under
Section 4.14.
"Change of Control Offer" has the meaning ascribed to such term
under Section 4.14.
"Change of Control Payment Date" has the meaning ascribed to such
term under Section 4.14.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means, with respect to any Person, any and all
shares, interests (including partnership interests) or other participations in,
and other equivalents (however designated and whether voting or nonvoting) of
such Person's common stock or ordinary shares or interests, whether or not
outstanding at the Issue Date, and includes, without limitation, all series and
classes of such common stock or ordinary shares or interests.
"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 the successor.
"Company Request" means any written request signed in the name of
the Company by an Officer of the Company and attested to by the Secretary or any
Assistant Secretary of the Company.
"Consolidated Fixed Charges" means, with respect to any Person for
any period, the sum, without duplication, of (i) Consolidated Interest Expense
(including amortization or write-off of deferred financing costs of such Person
and its consolidated Subsidiaries during such period and any premium or penalty
paid in connection with redeeming or retiring Indebtedness or any series of
Disqualified Capital Stock or Preferred Stock of the Company and its
consolidated Subsidiaries prior to the stated maturity thereof pursuant to the
agreements governing such Indebtedness, Disqualified Capital Stock or Preferred
Stock, as the case may be) and (ii) the product of (x) the amount of all
dividend payments on any series of Disqualified Capital Stock of such Person and
any series of Disqualified Capital Stock or Preferred Stock of its Subsidiaries
(other than dividends paid in Capital Stock which is not Disqualified Capital
Stock) paid, accrued or scheduled to be paid or accrued during such period times
(y) a fraction, the numerator of which
<PAGE>
-7-
is one and the denominator of which is one minus the then current effective
consolidated federal, state and local tax rate of such Person, expressed as a
decimal.
"Consolidated Interest Expense" means, with respect to any Person
for any period, the aggregate of the interest expense (without deduction for
interest income) of such Person and its Subsidiaries for such period, on a
consolidated basis, as determined in accordance with GAAP, and including (a) all
amortization of original issue discount and deferred financing costs; (b) the
interest component of Capitalized Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by such Person and its Subsidiaries during such
period; (c) net cash costs under all Interest Rate Protection Obligations
(including amortization of fees); (d) all capitalized interest; and (e) the
interest portion of any deferred payment obligations for such period.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP
consistently applied; provided, that (a) the Net Income of any other Person in
which the Person in question or one of its Subsidiaries has a joint interest
with a third party (which interest does not cause the Net Income of such other
Person to be consolidated into the Net Income of the Person in question in
accordance with GAAP) shall be included only to the extent of the amount of
dividends or distributions paid to the Person in question or the Subsidiary, (b)
the Net Income of any Subsidiary of such Person that is subject to any legal,
consensual or other restriction or limitation on the payment of dividends or the
making of other distributions shall be excluded to the extent of such
restriction or limitation, (c)(i) the Net Income (or 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 gain (but not loss) resulting from an Asset
Sale by such Person or any of its Subsidiaries other than in the ordinary course
of business shall, in each case, be excluded, and (d) extraordinary gains and
losses (and any related tax effects) and any one-time increase or decrease to
Net Income which is required to be recorded because of the adoption of new
accounting practices or standards required by GAAP, shall in each case be
excluded.
"Consolidated Net Worth" means, with respect to any Person at any
date of determination, the consolidated equity represented by such Person's
Capital Stock (other than Dis-
<PAGE>
-8-
qualified Capital Stock) at such date, as determined on a consolidated basis in
accordance with GAAP.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at 101 California Street, Suite 2725, San Francisco, California 94111-5830.
"covenant defeasance" has the meaning ascribed to such term under
Section 9.03.
"Currency Protection Obligations" means obligations under any
foreign exchange contract, currency swap agreement, or other similar agreement
or arrangement designed to protect the Company and its Subsidiaries against
fluctuations in currency values and entered into for hedging and not speculative
purposes.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or passage of
time or both would be, an Event of Default.
"Default Amount" has the meaning ascribed to such term under Section
6.02.
"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.
"Disqualified Capital Stock" means, with respect to any Person, any
Capital Stock which, by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is exchangeable for Indebtedness, or is redeemable
or required to be purchased at the option of the holder thereof, in whole or in
part, on or prior to the maturity date of the Notes.
"EBITDA" means, for a period ending at the close of any fiscal
quarter, the sum of: (a) Consolidated Net Income for such period, plus (b) to
the extent deducted in determining
<PAGE>
-9-
Consolidated Net Income, the sum of all expenses of the Company and its
Subsidiaries, on a consolidated basis, in accordance with GAAP for such period
in respect of (i) depreciation, (ii) amortization excluding amortization of
capitalized debt issuance costs, (iii) Consolidated Interest Expense, (iv)
consolidated income taxes, and (v) any other non-cash charges to the extent
deducted from or reflected in Consolidated Net Income except for any non-cash
charges that represent accruals of, or reserves for, cash disbursements to be
made in any future accounting period. Notwithstanding the foregoing, the
provision for taxes based on the income and profits of, and the depreciation,
amortization and other non-cash charges of a Subsidiary shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Subsidiary was included in calculating
the Consolidated Net Income and only if a corresponding amount could, at the
date of determination, be paid as a dividend by such Subsidiary to the Company.
"EBITDA Coverage Ratio" means the ratio of (a) EBITDA for the four
fiscal quarters immediately preceding the determination date to (b) Consolidated
Fixed Charges calculated on a pro forma basis for such four fiscal quarters. For
purposes of this definition, if the date of the transaction giving rise to the
need to calculate the EBITDA Coverage Ratio (the "Transaction Date") occurs
prior to the date on which the Company's consolidated financial statements for
the four full fiscal quarters subsequent to the Issue Date are first available,
EBITDA and Consolidated Fixed Charges shall be calculated, in the case of the
Company, after giving effect on a pro forma basis as if the Notes outstanding on
the date of the Transaction Date were issued on the first day of such four full
fiscal quarter period and the assets and liabilities of the Company as of the
Transaction Date had been contributed to or assumed by the Company on such first
day. In addition to and without limitation of the foregoing, for purposes of
this definition, EBITDA and Consolidated Fixed Charges shall be calculated after
giving effect on a pro forma basis for the period of such calculation to (i) the
incurrence or repayment of any Indebtedness of such Person or any of its
Subsidiaries (and the application of the proceeds thereof) at any time during
the period (the "Reference Period") (A) commencing on the first day of the four
full fiscal quarter period for which financial statements are available that
precedes the Transaction Date and (B) ending on and including the Transaction
Date, including, without limitation, the incurrence or repayment of the
Indebtedness (and the application of the proceeds thereof) giving rise to the
need to make such calculation, as if such incurrence or repayment oc-
<PAGE>
-10-
curred on the first day of the Reference Period; provided, that if such Person
or any of its Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the above clause shall give effect to the incurrence of such
guaranteed Indebtedness as if such Person or Subsidiary had directly incurred
such guaranteed Indebtedness and (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of the Company or any of its Wholly-Owned
Subsidiaries (including any Person who becomes a Wholly-Owned Subsidiary as a
result of the Asset Acquisition) incurring Acquired Indebtedness) occurring
during the Reference Period (it being expressly understood that such calculation
shall also give effect on a pro forma basis to any increase or decrease in
Consolidated Net Income (including any pro forma expense and cost reductions
calculated on a basis consistent with Regulation S-X under the Exchange Act)
attributable to such Asset Sale or Asset Acquisition, as if such Asset Sale or
Asset Acquisition occurred on the first day of the Reference Period) and any
retirement of Indebtedness in connection with such Asset Sale or Asset
Acquisition, as if such Asset Sale or Asset Acquisition and/or retirement
occurred on the first day of the Reference Period. Furthermore, in calculating
the denominator (but not the numerator) of this "EBITDA Coverage Ratio," (1)
interest on Indebtedness determined on a fluctuating basis as of the Transaction
Date and which will continue to be so determined thereafter shall be deemed to
accrue at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to be in effect during the
Reference Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Rate Protection Obligations, shall be
deemed to accrue at the rate per annum resulting after giving effect to the
operation of such agreements.
"Event of Default" has the meaning ascribed to such term under
Section 6.01.
"Excess Proceeds" has the meaning ascribed to such term under
Section 4.08.
<PAGE>
-11-
"Excess Proceeds Payment Date" has the meaning ascribed to such term
under Section 4.08.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means senior debt securities of the Company with
substantially identical terms as the Notes issued on the Issue Date, to be
exchanged for such Notes in a Registered Exchange (as defined in Section 2.02)
or a Private Exchange (as defined in the Registration Rights Agreement).
"Fair Market Value" or "fair value" means, with respect to any asset
or property, the price which could be negotiated in an arm's-length transaction,
for cash, between a willing seller and a willing 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 shall be evidenced by a Board Resolution of the Company.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States of America.
"Global Sub" means Global Health Sub, Inc., a California
corporation.
"Group of Persons" has the meaning ascribed to such term in the
definition of "Change of Control" set forth above.
"Guarantees" has the meaning ascribed to such term under Article 10.
"Guarantor Senior Debt" means with respect to any Subsidiary
Guarantor, the principal of, premium, if any, and interest (including any
interest accruing subsequent to the filing of a petition of bankruptcy at the
rate provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all amounts owing in
respect of, all monetary obligations of every nature under the Acquisition
Facility and of any guarantees by the Subsidiary Guarantors of Indebtedness
under the Acquisition Facility, including, without limitation, obligations to
pay principal, premium and interest, reimbursement obligations under letters of
credit, fees, expenses and indemnities, unless the Acquisition Facility
expressly provides that such Indebtedness shall not be senior in right of
payment to the Guarantee of such Subsidiary Guarantor.
<PAGE>
-12-
"Holders" or "Noteholders" means the Persons in whose names the
Notes are registered in the register for the Notes maintained under Section
2.03.
"incur" has the meaning ascribed to such term under Section 4.06.
"Indebtedness" means, with respect to any Person, without
duplication, (i) any liability, contingent or otherwise, of such Person (A) 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 (B) evidenced by a note,
debenture or similar instrument or letters of credit (including a purchase money
obligation or other obligation relating to the deferred purchase price of
property and any Capitalized Lease Obligations); (ii) any liability of others of
the kind described in the preceding clause (i) which such Person has guaranteed
or which is otherwise its legal liability; (iii) any obligation secured by a
Lien to which the property or assets of such Person are subject, whether or not
the obligations secured thereby shall have been assumed by or shall otherwise be
such Person's legal liability; (iv) Capitalized Lease Obligations, Currency
Protection Obligations and Interest Rate Protection Obligations; (v) the
Attributable Debt of any Sale-Leaseback Transaction; (vi) Disqualified Capital
Stock and (vii) any and all deferrals, renewals, extensions and refundings of,
or amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (i), (ii), (iii), (iv), (v) or (vi).
"Indenture" means this Indenture as amended, restated or
supplemented from time to time.
"Independent" when used with respect to any specified Person means
such a Person who (a) is in fact independent, (b) does not have any direct
financial interest or any material indirect financial interest in the Company or
any Affiliate of the Company and (c) is not an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions
for the Company or any of its Affiliates.
"Independent Financial Advisor" means an accounting, appraisal or
investment banking or consulting firm of national recognition within the United
States that is, in the reasonable judgment of the Board of Directors of the
Company, qualified to perform the tasks for which such firm has been engaged and
Independent with respect to the Company and its Affiliates.
<PAGE>
-13-
"Initial Purchaser" means, collectively, Citicorp Securities, Inc.,
Citibank Canada Securities Limited and Citibank International plc.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as the term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Payment Date" means the stated maturity of an installment
of interest on the Notes.
"Interest Rate Protection Obligations" means the obligations of any
Person pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include without limitation, interest rate swaps, caps,
floors, collars and similar agreements and, in each case, entered into for
hedging and not for speculative purposes.
"Investment" has the meaning ascribed to such term under Section
4.11.
"Issue Date" means April 23, 1998.
"Lien" means, with respect to any Person, any mortgage, deed of
trust, pledge, lien, lease, encumbrance, easement, restriction, covenant,
right-of-way, charge or adverse claim affecting title or resulting in an
encumbrance against real or personal (tangible or intangible) property or any
interest therein of such Person, or a security interest of any kind (including,
without limitation, any conditional sale or other title retention agreement, any
lease in the nature thereof, any option, right of first refusal or other similar
agreement to sell, in each case securing obligations of such Person, and any
filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statute or statutes) of any jurisdiction other
than to reflect ownership by a third party of property leased to the referent
Person or any of its Subsidiaries under a lease that is not in the nature of a
conditional sale or title retention agreement).
"Maturity Date" means May 1, 2008.
<PAGE>
-14-
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Asset Sale Proceeds" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents, including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations with respect to
Indebtedness are financed or sold with recourse to the Company or any of its
Subsidiaries) net of (i) brokerage commissions and other reasonable fees and
expenses (including reasonable fees and expenses of counsel and investment
bankers) incurred in connection with such Asset Sale; (ii) provisions for all
taxes payable as a result of such Asset Sale; (iii) payments made to retire
Indebtedness secured by the assets subject to such Asset Sale to the extent
required pursuant to the terms of such Indebtedness; and (iv) appropriate
amounts to be provided by the Company or any of its Subsidiaries, as the case
may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any of its
Subsidiaries, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale.
"Net Income" means, with respect to any Person for any period, the
net income (loss) of such Person determined in accordance with GAAP.
"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, as determined in good faith by the Board of Directors of the Company,
at the time of receipt) and (b) in the case of any exchange, exercise,
conversion or surrender of outstanding securities of any kind of the Company for
or into shares of Capital Stock of the Company which is not Disqualified Capital
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 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).
<PAGE>
-15-
"Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.
"Notes" means the 11% Senior Notes due 2008 of the Company,
including the Exchange Notes and Private Exchange Notes, if any, treated as a
single class of securities under this Indenture.
"Offering Memorandum" means the Confidential Offering Memorandum
dated April 17, 1998 pursuant to which the Notes were offered.
"Officer" means, with respect to any Person, the Chairman of the
Board of Directors, the Chief Executive Officer, the Chief Financial Officer,
the Treasurer or the Controller of such Person.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Officers or by an Officer and either the Secretary or
an Assistant Secretary of such Person.
"Opinion of Counsel" means a written opinion from legal counsel who
and which is reasonably acceptable to the Trustee complying with the
requirements of the Indenture. Such legal counsel shall be outside counsel and
not an employee of or in-house counsel to the Company.
"Permitted Holder" means Richard D. Marconi, any spouse of Mr.
Marconi, any lineal descendants of Mr. Marconi, any trust or estate the sole
beneficiaries of which are Mr. Marconi, any spouses of Mr. Marconi or any lineal
descendants of Mr. Marconi, or any entity owned or controlled by any of the
foregoing.
"Permitted Liens" means (i) Liens in favor of the Company or a
Subsidiary of the Company; (ii) Liens existing on the Issue Date, (iii) Liens
securing Indebtedness and any other obligations related thereto (including
accrued interest, fees and reimbursements and indemnities thereon and other
obligations related thereto) incurred under the Acquisition Facility;
provided, that the incurrence of such Indebtedness is otherwise permitted
under the Indenture; (iv) Liens on assets of a Person when it becomes a
Subsidiary and Liens securing Acquired Indebtedness incurred in accordance
with Section 4.06; provided, that in each case (A) such Liens secured such
assets or Acquired Indebtedness at the time of and prior to such Person
becoming a Subsidiary or the incurrence of such Acquired Indebt-
<PAGE>
-16-
edness by the Company or a Subsidiary of the Company and were not granted in
connection with, or in anticipation of, the incurrence of such Acquired
Indebtedness by the Company or a Subsidiary of the Company and (B) such Liens
do not extend to or cover any property or assets of the Company or of any of
its Subsidiaries other than the property or assets that secured the Acquired
Indebtedness prior to the time such Indebtedness became Acquired Indebtedness
of the Company or a Subsidiary of the Company and are no more favorable to
the lienholders than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by the Company or a Subsidiary of
the Company; (v) leases and subleases of real property which do not interfere
with the ordinary conduct of the business of the Company or any of its
Subsidiaries, and which are made on customary and usual terms applicable to
similar properties; (vi) Liens securing Indebtedness incurred to finance
Indebtedness secured by a Lien permitted under this Indenture and is
permitted to be refinanced under this Indenture, provided that such Liens do
not extend to or cover any property or assets of the Company or any of its
Subsidiaries not securing the Indebtedness so refinanced; (vii) any interest
or title of a lessor or sublessor, or any lien in favor of a landlord,
arising under any real or personal property lease under which the Company or
any of its Subsidiaries is a lessee, sublessee or subtenant (other than any
interest or title and/or any Lien securing any Capitalized Lease Obligation);
(viii) Liens securing Capitalized Lease Obligations, Purchase Money
Indebtedness, purchase money mortgages or pledges or other purchase money
liens upon any property acquired by the Company or any Subsidiary of the
Company after the Issue Date which are acquired or held by such entity in the
ordinary course of business and are securing solely the purchase price or
lease rental of such property or are Indebtedness incurred solely for the
purpose of financing or refinancing the acquisition or lease of such property
(but only to the extent the Indebtedness secured by such liens shall
otherwise be permitted under the covenants set forth herein); (ix) with
respect to any Person, any Lien arising by reason of (a) any judgment, decree
or order of any court, so long as such Lien is being contested in good faith
and is adequately bonded, and any appropriate legal proceedings which may
have been duly initiated for the review of such judgment, decree or order
shall not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired, (b) taxes not yet
delinquent or which are being contested in good faith, (c) security for
payment of workers' compensation or other insurance, (d) security for the
performance of tenders, contracts (other than contracts for the payment of
money) or leases, (e) deposits to secure public or
<PAGE>
-17-
statutory obligations, or in lieu of surety or appeal bonds, (f) operation of
law in favor of carriers, warehouseman, landlords, mechanics, materialman,
laborers, employees or suppliers, incurred in the ordinary course of business
for sums which are not yet delinquent or are being contested in good faith by
negotiations or by appropriate proceedings which suspend the collection thereof,
(g) security for surety or appeal bonds, and (h) easements, rights-of-way,
zoning and similar covenants and restrictions and other similar encumbrances or
title defects which, in the aggregate, are not substantial in amount, and which
do not in any case materially detract from the value of the property subject
thereto or materially interfere with the ordinary conduct of the business of the
Company or any of its Subsidiaries; and (x) other Liens securing Indebtedness if
the Indebtedness secured by the Lien, plus all other Indebtedness secured by
Liens (excluding Indebtedness secured by Liens permitted by (i) through (ix)
above) at the time of determination do not exceed $1,000,000.
"Permitted Payments" has the meaning ascribed to such term under
Section 4.07.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such
Person that has preferential rights to any other class of Capital Stock of such
Person with respect to dividends or redemptions or upon liquidation or
otherwise.
"principal" of a Note means the principal of the Note plus the
premium, if any, payable on the Note which is due or overdue or is to become due
at the relevant time.
"Private Exchange Notes" has the meaning set forth in the
Registration Rights Agreement.
"Private Placement Legend" means the legend initially set forth on
the Notes in the form set forth on Exhibit A.
"Public Equity Offering" means any public offering of Common Stock
(other than Disqualified Capital Stock) of the Company which is undertaken
pursuant to a registration statement filed with and declared effective by the
Commission in accordance with the Securities Act.
<PAGE>
-18-
"Purchase Money Indebtedness" means Indebtedness of the Company or
its Wholly-Owned Subsidiaries incurred for the purpose of financing all or any
part of the purchase price or the cost of installation, construction or
improvement of any property or equipment.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A promulgated under the Securities Act.
"Redemption Date" when used with respect to any Note to be redeemed
means the date fixed for such redemption pursuant to this Indenture.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the Issue Date among the Company, the Subsidiary
Guarantors and the Initial Purchaser and any other registration rights agreement
covering similar matters that may be executed and delivered by the Company and
the Subsidiary Guarantors in connection with the issuance of any Notes after the
Issue Date.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Reorganization Agreement" means the reorganization agreement as in
effect on the Issue Date, among the Company and its Subsidiaries, together with
the documents referred to therein, pursuant to which the Reorganization as
described in the Offering Memorandum will be consummated.
"Representative" means the indenture trustee or other trustee, agent
or representative in respect of any Guarantor Senior Debt; provided that if, and
for so long as, any Guarantor Senior Debt lacks such a representative, then the
Representative for such Guarantor Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Guarantor Senior
Debt in respect of any Guarantor Senior Debt.
"Restricted Payment" means any of the following: (i) the declaration
or payment of any dividend or any other distribution on Capital Stock 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 any Subsidiary of the
Company (other than (x) dividends or distributions payable solely in Capital
Stock (other than Disqualified Capital Stock) or in options, warrants or other
rights to purchase Capital
<PAGE>
-19-
Stock (other than Disqualified Capital Stock), and (y) in the case of
Subsidiaries of the Company, dividends or distributions payable to the Company
or to a Wholly-Owned Subsidiary of the Company), (ii) the purchase, redemption
or other acquisition or retirement for value of any Capital Stock of the
Company, (iii) the making of any principal payment on, purchase, defeasance,
redemption, prepayment, decrease or other acquisition or retiring for value,
prior to any scheduled final maturity, scheduled repayment or scheduled sinking
fund payment, of any Indebtedness of the Company that is subordinate or junior
in right of payment to the Notes; and (iv) the making of any Investment other
than an Investment permitted under clauses (i) through (x) of Section 4.11.
"Restricted Security" has the meaning set forth in Rule 144(a)(3)
promulgated under the Securities Act; provided that the Trustee shall be
entitled to request and conclusively rely upon an Opinion of Counsel with
respect to whether any Note is a Restricted Security.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"S Corporation" means an S corporation for purposes of the Internal
Revenue Code of 1986, as amended.
"Sale-Leaseback Transaction" means any direct or indirect
arrangement, or series of related arrangements, with any Person or to which any
Person is a party, providing for the leasing to the Company or to a Subsidiary
of the Company of any property, whether owned by the Company or by any
Subsidiary of the Company at the Issue Date or later acquired, which has been or
is to be sold or transferred by the Company or such Subsidiary of the Company to
such Person or to any other Person from whom funds have been or are to be
advanced by such Person on the security of such property.
"S&P" means Standard & Poor's Rating Service and its successors.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" shall have the meaning set forth in
the Registration Rights Agreement.
"Subsidiary," with respect to any Person, means (i) any corporation
of which the outstanding Capital Stock hav-
<PAGE>
-20-
ing at least a majority of the votes entitled to be cast in the election of
directors under ordinary circumstances shall at the time be owned, directly or
indirectly, by such Person or (ii) any other Person (other than a corporation)
including a partnership in which the Company or a Subsidiary of the Company or
the Company and a Subsidiary of the Company, directly or indirectly, at the date
of determination thereof, has at least a majority ownership interest.
"Subsidiary Guarantor" means (i) Global Health Sub, Inc., a
California corporation, D&F Industries, Inc., a California corporation, Raven
Industries, a California corporation, Dynamic Products Inc., a California
corporation, and West Coast Sales, a California corporation and (ii) each of the
Company's Subsidiaries that in the future executes a supplemental indenture in
which such Subsidiary agrees to be bound by the terms of the Indenture as a
Subsidiary Guarantor; provided that any Person constituting a Subsidiary
Guarantor as described above shall cease to constitute a Subsidiary Guarantor
when its respective Guarantee is released in accordance with the terms of this
Indenture.
"Surviving Entity" has the meaning ascribed to such term under
Section 5.01.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
(15 U.S. Code sections 77aaa-77bbbb) as in effect on the date of this Indenture
(except as provided in Section 8.03 hereof).
"Trust Officer" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer corporate trust accounts.
"Trustee" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"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
<PAGE>
-21-
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 Capital Stock" means, with respect to any Person, Capital
Stock of any class or kind ordinarily having the power to vote for the election
of directors, managers or other members of the governing body of such Person.
"Wholly-Owned Subsidiary" means, with respect to any Person, any
Subsidiary of such Person of which all the outstanding voting securities (other
than in the case of a foreign Subsidiary, directors' qualifying shares or an
immaterial amount of shares required to be owned by other Persons pursuant to
applicable law) are owned by such Person or any Wholly-Owned Subsidiary of such
Person; provided that a Wholly-Owned Subsidiary of the Company may provide for
earn out or other similar obligations in connection with the acquisition of a
business for the purpose of financing such acquisition, provided that the
Company at all times shall maintain ownership of at least 85% of the Capital
Stock of such Wholly-Owned Subsidiary.
Section 1.02. Other Definitions.
The definitions of the following terms may be found in the sections
indicated as follows:
Term Defined in Section
---- ------------------
"Agent Members".................................. 2.14
"Available Proceeds"............................. 4.08
"Bankruptcy Law"................................. 6.01
"Change of Control Purchase Price"............... 4.13
"Covenant Defeasance"............................ 9.03
"Global Notes"................................... 2.01
"Incur".......................................... 4.06
"Legal Defeasance"............................... 9.02
"Legal Holiday".................................. 11.08
"Offshore Physical Notes"........................ 2.01
<PAGE>
-22-
"Paying Agent"................................... 2.03
"Physical Notes"................................. 2.01
"Registered Exchange"............................ 2.02
"Registrar"...................................... 2.03
"Required Filing Dates".......................... 4.02
"U.S. Physical Notes"............................ 2.01
Section 1.03. Incorporation by Reference of Trust Indenture Act.
This Indenture is subject to the mandatory provisions of the TIA
which are 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 securityholder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor on the indenture securities" means the Company, the
Subsidiary Guarantors or any other obligor on the Notes.
All other 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 therein assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein, whether defined
expressly or by reference;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
<PAGE>
-23-
(5) words used herein implying any gender shall apply to every
gender.
ARTICLE 2
THE NOTES
Section 2.01. Dating; Incorporation of Form in Indenture.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A which is incorporated in and made part of
this Indenture. The Notes may have notations, legends or endorsements required
by law, stock exchange rule or usage. The Company may use "CUSIP" numbers in
issuing the Notes. The Company shall approve the form of the Notes. Each Note
shall be dated the date of its authentication.
The Notes offered and sold (i) in reliance on Rule 144A shall be
issued initially in the form of one or more permanent global notes in registered
form, substantially in the form set forth in Exhibit A (the "Rule 144A Global
Notes") and (ii) pursuant to Regulation S shall be issued initially in the form
of one or more permanent global notes in registered form substantially in the
form set forth in Exhibit A, except that such Note need not bear the Private
Placement Legend (the "Regulation S Global Notes" and, together with the Rule
144A Global Notes, the "Global Notes"), in each case deposited with the Trustee,
as custodian for the Depository, duly executed by the Company and authenticated
by the Trustee as hereinafter provided and shall bear the legend set forth on
Exhibit B. The aggregate principal amount of any Global Note may from time to
time be increased or decreased by adjustments made on the records of the Trustee
as custodian for the Depository, as hereinafter provided and on the Schedule
annexed thereto.
Notes offered and sold in offshore transactions in reliance on
Regulation S may be issued in the form of certificated Notes in registered form,
substantially in the form set forth in Exhibit A (the "Offshore Physical
Notes"). Notes offered and sold in reliance on any other exemption from
registration under the Securities Act other than as described in the preceding
paragraph shall be issued, and Notes offered and sold in reliance on Rule 144A
may be issued, in the form of certificated Notes in registered form in
substantially the form set
<PAGE>
-24-
forth in Exhibit A (the "U.S. Physical Notes"). The Offshore Physical Notes and
the U.S. Physical Notes are sometimes collectively herein referred to as the
"Physical Notes."
Section 2.02. Execution and Authentication.
The Notes shall be executed on behalf of the Company by two Officers
of the Company or an Officer and the Secretary of the Company. Such signature
may be either manual or facsimile.
If an Officer whose signature is on a Note no longer holds that
office at the time the Trustee authenticates the Note, the Note shall be valid
nevertheless.
A Note shall not be valid until the Trustee manually signs the
certificate of authentication on the Note. Such signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee or an authenticating agent shall authenticate Notes for
original issue in the aggregate principal amount not to exceed $325,000,000 upon
a Company Request in one or more series, provided that the aggregate principal
amount of Notes on the Issue Date shall not exceed $225,000,000. The aggregate
principal amount of Notes outstanding at any time may not exceed such amount
except as provided in Section 2.07 hereof. Upon receipt of a Company Request,
the Trustee shall authenticate an additional series of Notes in an aggregate
principal amount not to exceed $325,000,000 for issuance in exchange for all
Notes previously issued pursuant to an exchange offer registered under the
Securities Act (a "Registered Exchange") or pursuant to a Private Exchange (as
defined in the Registration Rights Agreement); provided that the aggregate
principal amount of Exchange Notes issued in exchange for the Notes originally
issued on the Issue Date shall not exceed $225,000,000. Exchange Notes may have
such distinctive series designation and "CUSIP" numbers as and such changes in
the form thereof as are specified in the Company Request referred to in the
preceding sentence. Exchange Notes issued pursuant to a Registered Exchange
shall not bear the Private Placement Legend. The Notes shall be issuable only in
registered form without coupons and only in denominations of $1,000 and integral
multiples thereof.
The Trustee may appoint an authenticating agent to authenticate
Notes. Any such appointment shall be evidenced by an instrument signed by an
authorized officer of the Trustee, a
<PAGE>
-25-
copy of which shall be furnished to the Company. An authenticating agent may
authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same right as an Agent to deal with the
Company or an Affiliate.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar"), an office
or agency located in the Borough of Manhattan, City of New York, State of New
York where Notes may be presented for payment ("Paying Agent") and an office or
agency where notices and demands to or upon the Company in respect of the Notes
and this Indenture may be served. The Registrar shall keep a register of the
Notes and of their transfer and exchange. The Registrar shall provide the
Company a current copy of such register from time to time upon request of the
Company. The Company may have one or more co-registrars and one or more
additional paying agents. Neither the Company nor any Affiliate may act as
Paying Agent. The Company may change any Paying Agent, Registrar or co-registrar
upon notice to the Trustee but without notice to any Noteholder.
The Company shall enter into an appropriate agency agreement with
any Registrar or Paying Agent not a party to this Indenture. 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 Agent. If the
Company fails to maintain a Registrar or Paying Agent, or agent for service of
notices and demands, or fails to give the foregoing notice, the Trustee shall
act as such. The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of notices and demands in connection with the Notes
and this Indenture.
Section 2.04. Paying Agent to Hold Money in Trust.
On or before each due date of the principal of and interest on any
Notes, the Company shall deposit with the Paying Agent a sum sufficient to pay
such principal and interest so becoming due. The Company at any time may require
a Paying Agent to pay all money held by it to the Trustee and the Trustee may at
any time during the continuance of any Default, upon written request to a Paying
Agent, require such Paying Agent to forthwith pay to the Trustee all sums so
held in trust by such Paying Agent together with a complete accounting of such
sums.
<PAGE>
-26-
Upon doing so, the Paying Agent shall have no further liability for the money.
Section 2.05. Noteholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders. If the Trustee is not the Registrar, the Company shall furnish to
the Trustee on or before each February 1 and August 1 in each year, 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
Noteholders.
Section 2.06. Transfer and Exchange.
When a Note is presented to the Registrar with a request to register
the transfer thereof, the Registrar shall register the transfer as requested if
its requirements are met and, when Notes are presented to the Registrar with a
request to exchange them for an equal principal amount of Notes of other
authorized denominations, the Registrar shall 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 attorney duly authorized in writing. To permit
transfers and exchanges, upon surrender of any Note for registration of transfer
at the office or agency maintained pursuant to Section 2.03 hereof, the Company
shall execute and the Trustee shall authenticate Notes at the Registrar's
request. Any exchange or transfer shall be without charge, except that the
Company may require payment by the Holder of a sum sufficient to cover any tax
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
Sections 2.09, 3.06, 4.08, 4.14 or 8.05 hereof. The Trustee shall not be
required to register the transfers of Notes or to exchange Notes for a period of
15 days before selection of any Notes to be redeemed. The Trustee shall not be
required to exchange or register transfers of any Notes called or being called
for redemption in whole or in part, except the unredeemed portion of any Note
being redeemed in part.
Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of 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
<PAGE>
-27-
its agent), and that 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.
Prior to the due presentation for registration of transfer of any
Note, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the Person in whose name a Note is registered as
the absolute owner of such Note for the purpose of receiving payment of
principal of and (subject to paragraph 2 of the Notes) interest, if any, on such
Note and for all other purposes whatsoever, whether or not such Note is overdue,
and none of the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar shall be affected by notice to the contrary.
All Notes issued upon any transfer or exchange pursuant to this
Section 2.06 will evidence the same debt and will be entitled to the same
benefits under this Indenture as the Notes surrendered upon such transfer or
exchange.
Section 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the Holder
of a Note presents evidence to the satisfaction of the Company and the Trustee
that the Note has been lost, destroyed or wrongfully taken, the Company shall
issue and the Trustee shall authenticate a replacement Note. An indemnity bond
may be required by the Company or the Trustee that is sufficient in the judgment
of the Company and the Trustee to protect the Company, the Trustee or any Agent
from any loss which any of them may suffer if a Note is replaced. Each of the
Company and the Trustee may charge for its expenses in replacing a Note. Every
replacement Note is an additional obligation of the Company. In the event any
such mutilated, lost, destroyed or wrongfully taken Note has become due and
payable, the Company in its discretion may pay such Note instead of issuing a
new Note in replacement thereof. The provisions of this Section 2.07 are
exclusive and shall preclude (to the extent lawful) all other rights and
remedies with respect to replacement or payment of mutilated, lost, destroyed or
wrongfully taken Notes.
<PAGE>
-28-
Section 2.08. Outstanding Notes.
Notes outstanding at any time are all Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for
cancellation, and those described in this Section 2.08 as not outstanding.
If a Note is replaced or paid pursuant to Section 2.07, it ceases to
be outstanding until the Company and the Trustee receive proof satisfactory to
each of them that the replaced or paid Note is held by a bona fide purchaser.
If a Paying Agent holds on a Redemption Date or Maturity Date money
sufficient to pay the principal of, premium, if any, and accrued interest on
Notes payable on that date, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
Subject to Section 11.06, a Note does not cease to be outstanding
solely because the Company or an Affiliate holds the Note.
Section 2.09. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form, and shall carry all rights, of definitive
Notes but may have variations that the Company considers appropriate for
temporary Notes. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes upon
surrender of such temporary Notes at the office or agency maintained pursuant to
Section 2.03 hereof.
Section 2.10. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee
shall cancel and retain or, upon written request of the Company, may dispose of
or return to the Company in accordance with its normal practice, all Notes
surrendered for transfer, exchange, payment or cancellation and if such Notes
are disposed of, deliver a certificate of disposition to the Company unless the
Company instructs the Trustee in writing to deliver the Notes to the Company.
Subject to Section 2.07 hereof, the Company may not is-
<PAGE>
-29-
sue new Notes to replace Notes in respect of which it has previously paid all
principal, premium and interest accrued thereon, or delivered to the Trustee for
cancellation.
Section 2.11. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted amounts, plus any interest payable on defaulted amounts
pursuant to Section 4.01 hereof, to the persons who are Noteholders on a
subsequent special record date. The Company shall fix the special record date
and payment date in a manner satisfactory to the Trustee and provide the Trustee
at least 20 days notice of the proposed amount of defaulted interest to be paid
and the special record date and special payment date. At least 15 days before
the special record date, the Company shall mail or cause to be mailed to each
Noteholder at its address as it appears on the Notes register maintained by the
Registrar a notice that states the special record date, the payment date (which
shall be not less than five nor more than 10 days after the special record
date), and the amount to be paid. In lieu of the foregoing procedures, the
Company may pay defaulted interest in any other lawful manner satisfactory to
the Trustee.
Section 2.12. Deposit of Moneys.
Prior to 10:00 a.m., New York City time, on each Interest Payment
Date and Maturity Date, the Company shall have deposited with the Paying Agent
in immediately available funds U.S. legal tender sufficient to make cash
payments, if any, due on such Interest Payment Date or Maturity Date, as the
case may be, in a timely manner which permits the Trustee to remit payment to
the Holders on such Interest Payment Date or 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
Notes in certificated form shall be payable at the office of the Paying Agent.
Section 2.13. CUSIP Number.
The Company in issuing the Notes may use a "CUSIP" number(s), and if
so, the Trustee shall use the CUSIP number(s) 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(s) printed in the notice or on the Notes, and that reli-
<PAGE>
-30-
ance may be placed only on the other identification numbers printed on the
Notes.
Section 2.14. Book-Entry Provisions for Global Notes.
(a) The Global Notes initially shall (i) be registered in the name
of the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Exhibit B.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depository, or the Trustee as its custodian, or under the
Global Note, and the Depository may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of the Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a Holder of any Note.
(b) Transfers of 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 and the provisions of Section 2.15. In addition, Physical Notes shall
be transferred to all beneficial owners in exchange for their beneficial
interests in Global Notes if (i) the Depository notifies the Company that it is
unwilling or unable to continue as Depository for any Global Note and a
successor depositary is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depository to issue Physical
Notes.
(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 and on the Schedule attached to the
Global Note the date and a decrease in the principal amount of the Global Note
in an amount equal to the principal amount of the
<PAGE>
-31-
beneficial interest in the Global Note to be transferred, and the Company shall
execute, and the Trustee shall upon receipt of a Company Request 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, upon Company Request, 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 Physical Note constituting a Restricted Security delivered
in exchange for an interest in a Global Note pursuant to paragraph (b), (c) or
(d) shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of
Section 2.15, bear the Private Placement Legend.
(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 2.15. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors and
Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is subsequent to a
date which is two years after the later of the Issue Date and the last
date on which the Company or any of its Affiliates was the owner of such
Note or (y) (1) in the case of a transfer to an Institutional Accredited
Investor which is not a QIB (excluding Non-U.S. Persons), the proposed
transferee has delivered to the Registrar a certificate substantially in
the form of Exhibit C hereto or (2) in the case of a transfer to a
Non-U.S. Person (including a QIB), the pro-
<PAGE>
-32-
posed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in a Global Note, upon receipt by the Registrar of (x)
the applicable certificate, if any, required by paragraph (i) above and
(y) instructions given in accordance with the Depository's and the
Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records and on the
Schedule annexed to the Global Note the date and (if the transfer does not
involve a transfer of outstanding Physical Notes) a decrease in the principal
amount of a Global Note in an amount equal to the principal amount of the
beneficial interest in a Global Note to be transferred, and (b) the Company
shall execute and the Trustee shall authenticate and make available for delivery
one or more Physical Notes of like tenor and amount or, in the event such
transferee elects to hold such interest in the form of the Regulation S Global
Note, the Registrar shall reflect on its books and records and on the Schedule
annexed to the Regulation S Global Note the date and an increase in the
principal amount of the Regulation S Global Note in an amount equal to the
principal amount of the Physical Notes to be transferred, and the Trustee shall
cancel the Physical Notes so transferred.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for
on the form of Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Note stating, or has otherwise advised the
Company and the Registrar in writing, that it is purchasing the Note for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule
144A or has determined not to request such
<PAGE>
-33-
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from
registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Notes to
be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the Rule 144A Global Note, upon receipt by the
Registrar of instructions given in accordance with the Depository's and
the Registrar's procedures, the Registrar shall reflect on its books and
records and on the Schedule annexed to the Rule 144A Global Note the date
and an increase in the principal amount of the Rule 144A Global Note in an
amount equal to the principal amount of the Physical Notes to be
transferred, and the Trustee shall cancel the Physical Notes so
transferred.
(c) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) the circumstances contemplated by paragraph (a)(i)(x) of this Section
2.15 exist, (ii) there is delivered to the Registrar an Opinion of Counsel
reasonably satisfactory to the Company to the effect that neither such legend
nor the related restrictions on transfer are required in order to maintain
compliance with the provisions of the Securities Act or (iii) such Note has been
sold pursuant to an effective registration statement under the Securities Act.
(d) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
(e) Consent. By acceptance of any Note from the Initial Purchaser,
each Holder will be deemed to have consented to the transactions contemplated by
the Reorganization (as defined in the Purchase Agreement).
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.14 or this Section 2.15.
The Company shall have the
<PAGE>
-34-
right to inspect and make copies of all such letters, notices or other written
communications at any reasonable time upon the giving of reasonable notice to
the Registrar.
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to Section 3.07
hereof, at least 60 days prior to the Redemption Date or during such other
period as the Trustee may agree to, the Company shall notify the Trustee in
writing of the Redemption Date, the principal amount of Notes to be redeemed,
the redemption price and the paragraph of Section 3.07 pursuant to which the
Notes are to be redeemed, and deliver to the Trustee an Officers' Certificate
stating that such redemption will comply with the conditions contained in
Section 3.07 hereof, as appropriate.
Section 3.02. Selection by Trustee of Notes to Be Redeemed.
In the event that less than all of the Notes are to be redeemed at
any time, selection of the Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not listed on a
national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided, that no Notes of $1,000
principal amount or less shall be redeemed in part. The Trustee may select for
redemption portions of the principal of the Notes that have denominations larger
than $1,000. 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 3.03. Notice of Redemption.
Notice of redemption shall be mailed by first class mail at least 30
but not more than 60 calendar days before the Redemption Date to each Holder of
Notes to be redeemed at its
<PAGE>
-35-
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed.
The notice shall identify the Notes to be redeemed (including the
CUSIP number(s) thereof) and shall state:
(1) the Redemption Date;
(2) the redemption price;
(3) 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
principal amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) 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;
(7) the paragraph of Section 3.07 hereof pursuant to which the Notes
called for redemption are being redeemed; and
(8) the aggregate principal amount of Notes that are being redeemed.
Upon a Company Request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's sole expense.
Section 3.04. Effect of Notice of Redemption.
Once the notice of redemption described in Section 3.03 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. Upon surrender to the Paying Agent, such Notes shall be paid at
the redemption price, including any premium, plus interest accrued to the
Redemption Date; provided that if the Redemption Date is after a regular
interest payment record date
<PAGE>
-36-
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.
On and after the redemption date, interest will cease to accrue on Notes or
portions thereof called for redemption.
Section 3.05. Deposit of Redemption Price.
Prior to 10:00 a.m., New York City time, on each Redemption Date,
the Company shall deposit with the Paying Agent in immediately available funds
U.S. legal tender 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.
On and after any Redemption Date, if U.S. legal tender 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, 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 3.04, accrued and unpaid interest
on such Notes to the Redemption Date. If any Note called 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 3.06. 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.
Section 3.07. Redemption.
(a) The Notes are redeemable, in whole or in part, at the option of
the Company, at any time on or after May 1, 2003 at the redemption prices
(expressed as percentages of principal amount), set forth below plus accrued and
unpaid in-
<PAGE>
-37-
terest to the Redemption Date, if redeemed during the twelve-month period
beginning on May 1 of the years indicated below:
Year Percentage
---- ----------
2003...................................... 105.500%
2004...................................... 103.667%
2005...................................... 101.833%
2006 and thereafter....................... 100.000%
(b) At any time, on or prior to May 1, 2001, the Company may, at its
option, use the Net Proceeds of one or more Public Equity Offerings to redeem up
to 35% of the principal amount of the Notes at a redemption price equal to 111%
of the principal amount thereof plus accrued and unpaid interest to the
Redemption Date; provided, however, that at least 65% of the principal amount of
Notes originally issued on the Issue Date remain outstanding immediately after
any such redemption (it being expressly agreed that for purposes of determining
whether this condition is satisfied, Notes owned by the Company or any of its
Affiliates shall be deemed not to be outstanding). In order to effect the
foregoing redemption with the proceeds of any Public Equity Offering, the
Company shall make such redemption not more than 90 days following the
consummation of any Public Equity Offering.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay the principal of and interest (including all
Additional Amounts (as defined in the Registration Rights Agreement) as provided
in the Registration Rights Agreement) on the Notes on the dates and in the
manner provided in the Notes and this Indenture. An installment of principal or
interest shall be considered paid on the date it is due if the Trustee or Paying
Agent holds on that date U.S. legal tender designated for and sufficient to pay
such installment. The Company shall deliver written notice to the Trustee of any
Additional Amounts owed.
The Company shall pay interest on (i) overdue principal (including
post-petition interest in a proceeding under any
<PAGE>
-38-
Bankruptcy Law), and (ii) interest on overdue interest, to the extent lawful, at
the rate specified in the Notes.
Section 4.02. Provision of Financial Statements and Other Information.
(a) Subject to clause (b) hereof, the Company shall deliver to the
Trustee (including sufficient copies to be delivered to the Holders by the
Trustee as promptly as reasonably practicable) and each prospective holder of
Notes within 15 calendar days after the filing of the same with the Commission,
copies of the quarterly and annual reports and other reports, if any, which the
Company is required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act or pursuant to this Section 4.02; provided, however, that
the Company will deliver to the Trustee comparable information with respect to
the fiscal quarter preceding the Issue Date on or prior to June 15, 1998. At all
times when the Company is not subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act, the Company will nonetheless file with the
Commission, to the extent permitted by the Commission, and irregardless of any
such filing provide the Trustee within 15 calendar days of the filing thereof
with the Commission (or within 15 calendar days of when filing would ordinarily
be required if not then permitted) (including sufficient copies to be delivered
to the Holders by the Trustee as promptly as reasonably practicable) with such
quarterly and annual reports and other reports specified in Sections 13 and
15(d) of the Exchange Act. The Company will also make such reports available to
prospective investors, securities analysts and broker-dealers upon their
request. In addition, for so long as any Notes remain outstanding, the Company
will furnish to the holders of Notes and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act, and, to any beneficial holder of
Notes, if not obtainable from the Commission, information of the type that would
be filed with the Commission pursuant to the foregoing provisions upon the
request of any such Holder. Upon qualification of this Indenture under the TIA,
the Company and the Subsidiary Guarantors shall also comply with the provisions
of TIA Section 314(a).
(b) The Company will, upon request, provide to any Holder of Notes
or any prospective transferee of any such Holder any information concerning the
Company (including financial statements) necessary in order to permit such
Holder to sell or transfer Notes in compliance with Rule 144 and Rule 144A under
the Securities Act.
<PAGE>
-39-
Section 4.03. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so)
that it will 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 or other 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 4.04. Compliance Certificate.
(a) Each of the Company and each Subsidiary Guarantor shall deliver
to the Trustee, within 120 days after the end of each fiscal year and on or
before 60 days after the end of the first, second and third quarters of each
fiscal year, an Officers' Certificate (one of the signers of which shall be the
principal executive officer, principal financial officer or principal accounting
officer of the Company or the Subsidiary Guarantor, as the case may be) stating
that a review of the activities of the Company and its Subsidiaries and the
Subsidiary Guarantor during such fiscal year or fiscal quarter, as the case may
be, has been made under the supervision of the signing Officers with a view to
determining whether the Company and the Subsidiary Guarantor, as the case may
be, has kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company and the
Subsidiary Guarantor, as the case may be, has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and, in the case
of Restricted Payments, listing all Restricted Payments for such quarter, and is
not in default in the performance or observance of any of the terms, provisions
and conditions hereof (or, if a Default or Event of Default shall have occurred,
describing all or such Defaults or Events of Default of which he or she may have
knowledge and what action each is taking or proposes to take with respect
thereto) and that to the best of his or her knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal of
or interest,
<PAGE>
-40-
if any, on the Notes are prohibited or if such event has occurred, a description
of the event and what action the Company or the Subsidiary Guarantor, as the
case may be, is taking or proposes to take with respect thereto.
(b) The Company will, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
Section 4.05. Taxes.
The Company shall, and shall cause each of its Subsidiaries to, pay
prior to delinquency all material taxes, assessments, and governmental levies
except as contested in good faith and by appropriate proceedings.
Section 4.06. Limitation on Additional Indebtedness.
The Company will not, and will not permit any of its Subsidiaries
to, create, incur, assume, issue, guarantee or in any manner become, directly or
indirectly, liable for or with respect to the payment of ("incur"), any
Indebtedness, including, without limitation, any Acquired Indebtedness, except
for Indebtedness falling within at least one of the following categories:
(a) Indebtedness under the Notes, the Guarantees and the Indenture,
and Indebtedness and Guarantees of such Indebtedness under the Indenture
properly incurred in clause (d) below;
(b) Indebtedness of the Company and its Subsidiaries outstanding on
the Issue Date after giving effect to the application of the proceeds from the
sale of the Notes;
(c) Indebtedness of the Company and the Subsidiary Guarantors under
one or more Acquisition Facilities in an aggregate principal amount at any one
time outstanding not to exceed $60,000,000;
(d) Indebtedness of the Company or any Subsidiary Guarantor (which
amount may, but need not be, incurred in whole or in part under the Acquisition
Facility), if at the time of incurrence and after giving effect thereto, no
Default or Event
<PAGE>
-41-
of Default exists and the Company's EBITDA Coverage Ratio, would have been at
least 2.0 to 1;
(e) obligations under Interest Rate Protection Obligations and
Currency Protection Obligations incurred in the ordinary course of business to
the extent that such obligations have been entered into for bona fide hedging
purposes and not for speculation or other purposes (which amount may, but need
not be, incurred in whole or in part under the Acquisition Facility); provided
that, with respect to Interest Rate Protection Obligations, the notional
principal amount of such Indebtedness does not exceed, at the time of the
incurrence of such Indebtedness, the principal amount of Indebtedness to which
such Interest Rate Protection Obligations relate;
(f) replacements, renewals, refinancings and extensions of the
Indebtedness incurred under the immediately preceding clauses (b) or (d);
provided that any such replacement, renewal, refinancing or extension (x) is
scheduled to mature either (a) no earlier than the Indebtedness being replaced,
renewed, refinanced or extended, or (b) after the maturity date of the Notes,
(y) the portion, if any, of such replacement, renewal, refinancing or extension
that is scheduled to mature on or prior to the maturity date of the Notes has a
weighted average life to maturity at the time such Indebtedness is incurred that
is equal to or greater than the weighted average life to maturity of the portion
of the Indebtedness being replaced, renewed, refinanced or extended that is
scheduled to mature on or prior to the maturity date of the Notes, and (z) shall
not exceed the principal amount (plus accrued interest and prepayment premium,
if any) of the Indebtedness being replaced, renewed, refinanced or extended;
(g) Purchase Money Indebtedness and Capitalized Lease Obligations of
the Company or any Subsidiary Guarantor in an aggregate amount which does not
exceed $2,500,000 at any time outstanding (which amount may, but need not be,
incurred in whole or in part under the Acquisition Facility);
(h) Indebtedness of the Company owing to and held by any
Wholly-Owned Subsidiary of the Company or Indebtedness of a Wholly-Owned
Subsidiary of the Company owing to and held by the Company or any other
Wholly-Owned Subsidiary of the Company; provided, however, that any subsequent
transfer or event which results in any such Wholly-Owned Subsidiary ceasing to
be a Wholly-Owned Subsidiary of the Company or any subsequent transfer of any
such Indebtedness (except to the Company or another Wholly-Owned Subsidiary of
the Company) would be deemed, in
<PAGE>
-42-
each case, to constitute the incurrence of such Indebtedness by the issuer
thereof;
(i) Indebtedness of the Company or a Wholly-Owned Subsidiary of the
Company in respect of performance bonds, bankers' acceptances, surety or appeal
bonds or similar instruments provided by the Company and its Wholly-Owned
Subsidiaries in the ordinary course of business and which do not secure other
Indebtedness; and
(j) other Indebtedness of the Company or any Subsidiary Guarantor
(which amount may be, but need not be, incurred in whole or in part under the
Acquisition Facility) not to exceed $10,000,000 at any time outstanding.
Section 4.07. Limitation on Restricted Payments.
The Company will not, and will not cause or permit any of its
Subsidiaries to, directly or indirectly, make any Restricted Payment, unless:
(a) no Default or Event of Default will have occurred and be
continuing at the time of or after giving effect to such Restricted
Payment;
(b) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments declared or made after the
Issue Date does not exceed the sum of (1) 50% of (a) the Company's
cumulative Consolidated Net Income (or in the event such cumulative
Consolidated Net Income is a deficit, minus 100% of such deficit) minus
(b) Permitted Payments since the Issue Date made pursuant to (v)(b) below;
provided that Permitted Payments made pursuant to (v)(a) and (v)(c) below
shall not count in this calculation, (2) 100% of the aggregate Net
Proceeds and the fair market value of marketable securities and property
received by the Company from the issue or sale, after the Issue Date, of
Capital Stock (other than Disqualified Capital Stock) of the Company
(excluding any such Net Proceeds received from issuances and sales
financed directly or indirectly using funds borrowed from the Company or
any Subsidiary of the Company, until and to the extent such borrowing is
repaid) or any Indebtedness or other securities of the Company convertible
into or exercisable for Capital Stock (other than Disqualified Capital
Stock) of the Company which has been so converted, exercised or exchanged,
as the case may be, and (3) $1,000,000; and
<PAGE>
-43-
(c) at the time of such Restricted Payment, the Company could incur
$1.00 of additional Indebtedness pursuant to clause (d) of Section 4.06
hereof.
For purposes of determining the amount expended for Restricted
Payments, cash distributed shall be valued at the face amount thereof and
property other than cash shall be valued at its Fair Market Value.
The provisions of this Section 4.07 will not prohibit the following
(each, a "Permitted Payment"): (i) the payment of any dividend within 60
calendar 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 payment, defeasance, purchase, redemption, prepayment, acquisition or
retirement of any Capital Stock of the Company or Indebtedness of the Company
that is subordinate in right of payment to the Notes, by conversion into or by
an exchange for, Capital Stock of the Company that is not Disqualified Capital
Stock or out of the Net Proceeds of the substantially concurrent sale (other
than to a Subsidiary of the Company) of other Capital Stock (other than
Disqualified Capital Stock) of the Company; provided that such net cash proceeds
shall not count for purposes of the calculations in paragraph (b) above; (iii)
the redemption or retirement of Indebtedness of the Company that is subordinate
in right of payment to the Notes in exchange for, by conversion into, or out of
the Net Proceeds of, a substantially concurrent sale of Indebtedness of the
Company (other than to a Subsidiary of the Company) that is contractually
subordinated in right of payment to the Notes and that is permitted to be
incurred in accordance with clause (f) of Section 4.06; (iv) purchases of
Capital Stock deemed to occur upon the exercise of stock options if such Capital
Stock represents a portion of the exercise price thereof; (v) (a) the payment to
shareholders of the Company pursuant to the Reorganization Agreement consistent
with past practices for the purpose of distributing net income generated by the
Company for the period of January 1, 1998 through the Issue Date; (b) so long as
the Company remains an S Corporation, the payment of distributions to
shareholders of the Company to the extent necessary to permit such shareholders
to pay federal and state income tax liabilities arising from income of the
Company allocable to such shareholders and attributable to them solely as a
result of the Company being an S Corporation for federal and state income tax
purposes and (c) the purchase of additional shares from the Company's
shareholders in an amount not to exceed $4,000,000; and (vi) payments to
purchase Capital Stock of the Company from management or employees of the
Company or any
<PAGE>
-44-
of its Subsidiaries, or their authorized representatives, upon the happening of
an event which provides for payment under any applicable plan, or upon the
death, disability or termination of employment of such employees, in aggregate
amounts under this clause (vi) not to exceed $500,000 in any fiscal year of the
Company.
In determining the amount of Restricted Payments permissible under
clause (b) above, amounts expended pursuant to clauses (i), (iv) and (vi) in the
preceding paragraph shall be included as Restricted Payments.
Section 4.08. Disposition of Proceeds of Asset Sales.
(a) The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, consummate any Asset Sale unless (i)
the consideration received in respect of such Asset Sale is at least equal to
the Fair Market Value of the assets subject to such Asset Sale and (ii) at least
75% of the value of the consideration therefrom received by the Company or such
Subsidiary is in the form of (A) cash or Cash Equivalents or (B) the assumption
by the Person acquiring the assets in such Asset Sale of Indebtedness of the
Company or any of its Subsidiaries with the effect that none of the Company or
any of its Subsidiaries will have any obligation with respect to such
Indebtedness. The Company or the applicable Subsidiary, as the case may be, will
either (w) within 360 calendar days of consummation of the Asset Sale apply the
Net Asset Sale Proceeds from such Asset Sale to permanently repay Indebtedness
under the Acquisition Facility (for purposes of this clause, a repayment of any
amount owing under the Acquisition Facility shall be deemed a permanent
repayment to the extent the amount represented by such repayment is not drawn
upon by any Subsidiary of the Company for a period of nine months following such
repayment), or (x) within 360 calendar days of such Asset Sale apply the Net
Asset Sale Proceeds from such Asset Sale to an investment in properties and
assets that replace the properties and assets that were the subject of such
Asset Sale or in properties and assets that will be used in the business of the
Company and its Subsidiaries existing on the Issue Date or in businesses
reasonably related thereto, including reasonably related extensions thereof or
(y) a combination of prepayment and investment permitted by the foregoing
clauses (w) and (x) or (z) apply any Net Asset Sale Proceeds from any Asset Sale
that are not applied pursuant to clause (w), (x) or (y) above (such amounts,
"Excess Proceeds") as provided below.
<PAGE>
-45-
(b) When the aggregate amount of Excess Proceeds equals or exceeds
$5,000,000, the Company will make an offer to purchase (an "Asset Sale Offer")
ratably from all Holders of the Notes, not more than 60 calendar days thereafter
(the "Excess Proceeds Payment Date") that portion of outstanding Notes
purchasable with such Excess Proceeds, at a price in cash equal to 100% of the
principal amount thereof plus accrued and unpaid interest, if any, thereon to
the purchase date. To the extent that the Asset Sale Offer is not fully
subscribed, the Company may use the unutilized portion of such Excess Proceeds
for general corporate purposes. If the aggregate principal amount, plus accrued
and unpaid interest, if any, thereon of Notes validly tendered and not withdrawn
by Holders thereof exceeds the Excess Proceeds, Notes to be purchased will be
selected by the Trustee on a pro rata basis based upon amounts tendered (with
such adjustments as may be deemed appropriate by the Trustee so that only Notes
in denominations of $1,000, or integral multiples thereof, shall be purchased).
Upon completion of such Asset Sale Offer, the amount of Excess Proceeds will be
reset to zero. Notice of an Asset Sale Offer will be mailed to the Holders as
shown on the register of Holders not less than 30 calendar days nor more than 60
calendar days before the Excess Proceeds Payment Date, with a copy to the
Trustee, and will comply with the procedures set forth herein. Upon receiving
notice of the Asset Sale Offer, Holders may elect to tender their Notes in whole
or in part in integral multiples of $1,000 principal amount in exchange for
cash. An Asset Sale Offer shall remain open for a period of 20 Business Days or
such longer period as may be required by law.
(c) If the Company is required to make an Asset Sale Offer, the
Company shall within 30 days cause a notice of the Asset Sale Offer to be sent
at least once to the Dow Jones News Service or similar business news service in
the United States. Notice of an Asset Sale Offer will be mailed by the Company
to the Trustee and the Holders not less than 30 calendar days nor more than 60
calendar days before the Excess Proceeds Payment Date. Such notice shall be sent
by first-class mail, 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, and shall state:
(i) that the Asset Sale Offer is being made pursuant to this Section
4.08 and the length of time the Asset Sale Offer will remain open;
(ii) the purchase price and the Excess Proceeds Payment Date;
<PAGE>
-46-
(iii) that any Note not tendered or accepted for payment will
continue to accrue interest;
(iv) that any Notes accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest after the Excess Proceeds Payment
Date;
(v) that Holders accepting the offer to have their Notes purchased
pursuant to an Asset Sale Offer will be required to surrender the Notes,
with the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Note completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day preceding the
Excess Proceeds Payment Date;
(vi) that Holders will be entitled to withdraw their acceptance of
the Asset Sale Offer if the Paying Agent receives, not later than the
close of business on the third Business Day preceding the Excess Proceeds
Payment Date, a 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;
(vii) that if the aggregate principal amount of Notes surrendered by
Holders exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis (with such adjustments as
may be deemed appropriate by the Trustee so that only Notes in
denominations of $1,000 or integral multiples thereof, shall be
purchased);
(viii) 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;
(ix) any other procedures that a Holder must follow to accept an
Asset Sale Offer or effect withdrawal of such acceptance; and
(x) the name and address of the Paying Agent.
On the Excess Proceeds Payment Date, the Company shall, to the
extent lawful, (i) accept for payment, on a pro rata basis to the extent
necessary, Notes or portions thereof
<PAGE>
-47-
tendered pursuant to the Asset Sale Offer, (ii) deposit with the Paying Agent
money sufficient to pay the purchase price plus accrued and unpaid interest, if
any, on the Notes to be purchased or portions thereof, (iii) deliver or cause to
be delivered to the Trustee Notes so accepted together with 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 4.08. 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 make
available for delivery to such Holder, a new Note equal in principal amount to
any unpurchased portion of the 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. The Company will publicly announce the results
of the Asset Sale Offer on the Excess Proceeds Payment Date.
(d) In the event of the transfer of substantially all (but not all)
of the property and assets of the Company and its Subsidiaries as an entirety to
a Person in a transaction permitted under Section 5.01 of this Indenture, the
Surviving Entity shall be deemed to have sold the properties and assets of the
Company and its Subsidiaries not so transferred for purposes of this Section
4.08 of this Indenture, and will comply with the Asset Sale provisions of this
Indenture with respect to such deemed sale as if it were an Asset Sale. In
addition, the Fair Market Value of such properties and assets of the Company or
its Subsidiaries deemed to be sold pursuant to this paragraph will be deemed to
be Net Asset Sale Proceeds for purposes of the Asset Sale provisions of this
Indenture.
(e) If an offer is made to repurchase the Notes in an Asset Sale
Offer, the Company will comply with any tender offer rules under the Exchange
Act, including, but not limited to, Rule 14e-1 thereunder, and any other
applicable laws, rules and regulations in connection with any such offer.
Section 4.09. Limitation on Transactions with Affiliates.
(a) The Company will not, and will not cause or permit any of its
Subsidiaries to, directly or indirectly, enter into any transaction (including,
without limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service or the lending of any funds) with or for the benefit of
any of its Affiliates (each, an "Affiliate Transac-
<PAGE>
-48-
tion"), other than such transactions as are entered into and conducted in good
faith and which are on terms that are fair to the Company or such Subsidiary and
no less favorable to the Company or such Subsidiary than those that could have
been obtained in a comparable transaction on an arm's-length basis from a Person
that is not an Affiliate. All Affiliate Transactions or series of Affiliate
Transactions involving aggregate payments or other market value in excess of
$1,000,000 must also be approved, prior to the consummation thereof, by a
majority of the disinterested members of the Board of Directors of the Company
and evidenced by a Board Resolution of the Company (or, if there is only one
disinterested director, it must be approved by such member). Any Affiliate
Transaction or series of Affiliate Transactions involving aggregate payments or
other market value in excess of $2,500,000, or as to which there are no
disinterested directors, is also subject to the further requirement that the
Company obtain an opinion of an Independent Financial Advisor with experience in
appraising the terms and conditions of the relevant type of transaction (or
series of transactions) stating that the transaction (or a series of
transactions) is fair, from a financial point of view, to the Company or such
Subsidiary.
(b) The foregoing restrictions will not apply to (i) transactions
between the Company and any of its Wholly-Owned Subsidiaries or among its
Wholly-Owned Subsidiaries; (ii) agreements in effect on the Issue Date and
amendments or renewals thereof that are not more disadvantageous to the Holders
in any material respect than the original agreements as in effect on the Issue
Date; (iii) transactions permitted by, and complying with the provisions of
Section 5.01; (iv) Restricted Payments made in accordance with Section 4.07; (v)
reasonable and customary fees and compensation and indemnification and similar
arrangements with officers, directors and employees of the Company and any of
its Subsidiaries and payments thereunder as determined in good faith by the
Company's Board of Directors; and (vi) transactions with customers, clients,
joint venture partners or purchasers or sellers of goods or services, in each
case, in the ordinary course of business (including, without limitation,
pursuant to joint venture agreements) and otherwise in compliance with the terms
of the Indenture which are fair to the Company or its Subsidiaries, in the
reasonable determination of the Board of Directors of the Company or the senior
management thereof, or are on terms at least as favorable as might reasonably
have been obtained at such time from an unaffiliated party.
<PAGE>
-49-
Section 4.10. Limitations on Liens.
The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien
(other than a Permitted Lien) of any kind upon any of its property or assets now
owned or hereafter acquired by it unless the Notes are equally and ratably
secured by such Lien; provided, that if the Indebtedness secured by such Lien is
subordinate or junior in right of payment to the Notes then the Lien securing
such Indebtedness shall be subordinate or junior in priority to the Lien
securing the Notes at least to the same extent as such Indebtedness is
subordinate or junior to the Notes.
Section 4.11. Limitations on Investments, Loans and Advances.
The Company will not, and will not permit any of its Subsidiaries
to, make any capital contributions, advances or loans to, or investments in
(including by way of guarantee), or purchases of Capital Stock or other
securities of, any Person (collectively, "Investments"), except: (i) Investments
by the Company in or to any Wholly-Owned Subsidiary and Investments or loans in
or to the Company or a Wholly-Owned Subsidiary by any Subsidiary (or a person
who becomes a Wholly-Owned Subsidiary as a result of such Investment or who
merges or consolidates into the Company or a Wholly-Owned Subsidiary of the
Company); (ii) Investments represented by accounts receivable created or
acquired in the ordinary course of business and Investments received in respect
thereof upon the insolvency of the payor; (iii) Investments under or pursuant to
Interest Rate Protection Obligations or Currency Protection Obligations in each
case entered into for hedging and not for speculative purposes; (iv) advances to
employees in the ordinary course of business not in excess of $1,000,000 at any
one time outstanding; (v) Investments, not exceeding $5,000,000 in the
aggregate, in joint ventures, partnerships or persons that are not Wholly-Owned
Subsidiaries, provided that such Investments are made solely for the purpose of
acquiring businesses or property reasonably related to the Company's business as
of the Issue Date, including reasonably related extensions thereof; (vi)
Investments in another Person which were received as consideration for an Asset
Sale in accordance with Section 4.08; (vii) Investments in Cash Equivalents;
(viii) Investments the payment for which consists exclusively of Capital Stock
(excluding Disqualified Capital Stock) of the Company; (ix) any transaction to
the extent it constitutes an Investment that is permitted by and
<PAGE>
-50-
made in accordance with the provisions of the second paragraph of the covenant
described under Section 4.09 and (x) Investments permitted to be made in
accordance with Section 4.07.
Section 4.12. Limitation on Sale-Leaseback Transactions.
The Company will not, and will not permit any of its Subsidiaries
to, enter into, renew or extend any Sale-Leaseback Transaction unless (i)(a)
after giving effect to such Sale-Leaseback Transaction on a pro forma basis, the
Company is in compliance with Section 4.10 hereof and could incur Indebtedness
pursuant to Section 4.06 hereof at least equal in amount to the Attributable
Debt associated with such Sale-Leaseback Transaction, and (b) the sale price in
such Sale-Leaseback Transaction is at least equal to the Fair Market Value of
such property, and the Company or such Wholly-Owned Subsidiary shall apply the
Net Asset Sale Proceeds of such sale in the manner provided under Section 4.08
hereof, or (ii) the lease is between the Company and a Wholly-Owned Subsidiary
of the Company or between Wholly-Owned Subsidiaries of the Company.
Section 4.13. Corporate 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 (i) its
corporate existence, and the corporate, partnership or other existence of each
Subsidiary, in accordance with the respective organizational documents (as the
same may be amended from time to time) of each Subsidiary and the rights
(charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any of its Subsidiaries, if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders.
Section 4.14. Change of Control.
(a) Upon the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company will notify the
Holders in writing of such occurrence and will make an offer to purchase (the
"Change of Control Offer"), on a Business Day (the "Change of Control Payment
<PAGE>
-51-
Date") not later than 60 Business Days following the Change of Control Date, all
Notes then outstanding at a purchase price equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest, if any, thereon to
the Change of Control Payment Date (such purchase price being hereinafter
referred to as the "Change of Control Purchase Price") in accordance with the
procedures set forth in this Section 4.14. All Notes properly tendered pursuant
to such Change of Control Offer and not withdrawn pursuant thereto will be
purchased on the Change of Control Payment Date. The Change of Control Offer
shall remain open for at least 20 Business Days and until the close of business
on the Change of Control Payment Date.
(b) Notice of a Change of Control Offer will be mailed by the
Company to the Trustee and the Holders not less than 30 calendar days nor more
than 60 calendar days before the Change of Control Payment Date. Such notice
shall be sent by first-class mail, 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, and shall state:
(i) that the Change of Control Offer is being made pursuant to this
Section 4.14 and that all Notes tendered will be accepted for payment, and
otherwise subject to the terms and conditions set forth herein;
(ii) the Change of Control Purchase Price and the Change of Control
Payment Date;
(iii) that any Note not tendered will continue to accrue interest;
(iv) 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;
(v) that Holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Note completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the Business Day
preceding the Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their acceptance if
the Paying Agent receives, not later than
<PAGE>
-52-
the close of business on the third Business Day preceding the Change of
Control Payment Date, a 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;
(vii) 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;
(viii) any other procedures that a Holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance; and
(ix) 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 tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent
money sufficient to pay the Change of Control Purchase Price of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee Notes so accepted together with an Officers' Certificate stating the
Notes or portions thereof tendered to the Company. The Paying Agent shall
promptly mail to each Holder of Notes so accepted payment in an amount equal to
the Change of Control Purchase Price for such Notes, and the Company shall
execute and issue, and the Trustee shall promptly authenticate and make
available for delivery to such Holder, a new Note equal in principal amount to
any unpurchased portion of the 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.
The Company will comply with any tender offer rules under the
Exchange Act which may then be applicable, including, but not limited to, Rule
14e-1 thereunder, and any other applicable laws, rules and regulations, in
connection with any Change of Control Offer. To the extent that the provisions
of any United States federal or state securities laws and regulations conflict
with this Section 4.14, the Company will comply with such applicable securities
laws and regulations and will not be deemed to have breached its obligations
under this Section 4.14 by virtue thereof.
<PAGE>
-53-
Section 4.15. 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 presentations, surrenders, notices and demands may be made or
served at the address of the Trustee as set forth in Section 11.02.
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 Corporate Trust Office
of the Trustee set forth in Section 11.02 as such agency of the Company.
Section 4.16. Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries.
The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective or enter into any agreement with any Person that would cause
any consensual encumbrance or restriction of any kind on the ability of any
Subsidiary of the Company to (a) pay dividends, in cash or otherwise, or make
any other distributions on its Capital Stock or any other interest or
participation in, or measured by, its profits owned by the Company or a
Subsidiary of the Company, (b) make any loans or advances to or pay any
Indebtedness owed to, the Company or any Subsidiary of the Company or (c)
transfer any of its properties or assets to the Company or to any Subsidiary of
the Company, except for (i) encumbrances or restrictions existing under or
contemplated by or by reason of the Notes, this Indenture, and the Guarantees,
(ii) encumbrances or restrictions existing under or contemplated by agreements
as in effect on the Issue Date,
<PAGE>
-54-
(iii) encumbrances or restrictions existing under the Acquisition Facility, (iv)
encumbrances or restrictions with respect to a Person that is not a Subsidiary
of the Company on the Issue Date, in existence at the time such Person becomes a
Subsidiary of the Company (but not created in contemplation of such Person
becoming such a Subsidiary), (v) encumbrances or restrictions existing under or
by reason of applicable law, (vi) encumbrances or restrictions existing by
reason of any Lien permitted under Section 4.10 hereof, (vii) encumbrances or
restrictions existing under any agreement for the sale of assets of the Company
or any Subsidiary of the Company, or the Capital Stock of any Subsidiary of the
Company, (viii) customary provisions restricting subletting or assignment of
leases entered into in the ordinary course of business and consistent with past
practices, (ix) Purchase Money Indebtedness, but only to the extent such
purchase money obligation only imposes encumbrances and restrictions on the
property so acquired, and (x) encumbrances or restrictions existing under any
agreement that refinances, replaces, renews or extends an agreement containing a
restriction permitted by clauses (i), (ii), (iii) and (iv) above; provided that
the terms and conditions of any such restrictions are not materially less
favorable to the Holders (other than with respect to clause (iii) above, in the
event the lenders require additional security) than those under or pursuant to
the agreement being replaced or the agreement evidencing the Indebtedness
refinanced as determined by the Board of Directors of the Company in their
reasonable and good faith judgment.
Section 4.17. Ownership of Capital Stock of Wholly-Owned Subsidiaries.
The Company will at all times maintain and cause each Subsidiary to
maintain, record and beneficial ownership of all of the Capital Stock (other
than directors' qualifying shares or an immaterial amount of shares required to
be owned by other Persons pursuant to applicable law) of each Subsidiary of the
Company; provided, that a Wholly-Owned Subsidiary of the Company may provide for
earn out or other similar obligations in connection with the acquisition of a
business for the purpose of financing such acquisition, provided that the
Company at all times shall maintain ownership of at least 85% of the Capital
Stock of such Wholly-Owned Subsidiary. The provisions of this Section 4.17 shall
not apply to the Capital Stock of any such Subsidiary that shall be disposed of
in its entirety or consolidated or merged with or into the Company or a
Subsidiary of the Company, in accordance with Sections 4.08 and 5.01 hereof.
<PAGE>
-55-
Section 4.18. Limitation on Creation of Subsidiaries.
The Company will not create or acquire, and will not permit any of
its Subsidiaries to create or acquire, any Subsidiary other than (i) a
Subsidiary existing as of the Issue Date, or (ii) a Subsidiary that is acquired
or created in connection with the acquisition by the Company of a related
business or asset; provided, however, that each Subsidiary acquired or created
pursuant to clause (ii) shall have executed and delivered a supplemental
indenture in substantially the form of Exhibit F hereto together with such other
documentation relating thereto as the Trustee shall require, including, without
limitation opinions of counsel as to the enforceability of such supplemental
indenture and as required by Section 10.08, pursuant to which such Subsidiary
will become a Subsidiary Guarantor; provided, further, however, subsidiaries
created for the sole purpose of consummating a merger or acquisition and having
total assets with a book value of less than $100,000 shall not be required to
comply with this clause (ii) until the merger or acquisition is consummated and
only to the extent such Subsidiary survives such merger or until such
Subsidiary's total assets exceed the above amount.
Section 4.19. Further Assurances.
Each of the Company and the Subsidiary Guarantors covenants and
agrees to do, execute, acknowledge and deliver or cause to be done, such further
acts as may be necessary to cause the mergers pursuant to the merger agreements
entered into in connection with the reorganization (as described in the Purchase
Agreement) to be in full force and effect, in order for the reorganization to be
consummated in accordance with the Reorganization Agreement.
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger and Sale of Assets.
The Company will not, and will not permit any of its Subsidiaries
to, consolidate with or merge with or into, or sell, assign, convey, lease or
transfer all or substantially all of its properties and assets of the Company or
any of its Subsidiaries as an entirety to any Person in a single transac-
<PAGE>
-56-
tion or through a series of transactions, unless: (a) the Company or such
Subsidiary shall be the continuing Person or the resulting, surviving or
transferee Person (the "Surviving Entity") shall be a corporation, limited
liability company or partnership organized and existing under the laws of the
United States of America or any state thereof or the District of Columbia, (b)
the Surviving Entity shall expressly assume, by a supplemental indenture
executed and delivered to the Trustee, in form reasonably satisfactory to the
Trustee, all of the obligations of the Company or such Subsidiary, as the case
may be, under the Notes, the Guarantees and the Indenture; (c) immediately
before and immediately after giving effect to such transaction, or series of
transactions (including, without limitation, any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such transaction
or series of transactions), no Default or Event of Default shall have occurred
and be continuing; (d) the Company or the Surviving Entity shall immediately
after giving effect to such transaction or series of transactions (including,
without limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of the transaction or series of transactions) have
a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of
the Company immediately prior to such transaction or series of transactions; (e)
immediately after giving effect to such transaction or series of transactions,
the Company or the Surviving Entity could incur $1.00 of additional Indebtedness
pursuant to clause (d) of Section 4.06 hereof; and (f) the Company or such
Surviving Entity shall have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel stating that such consolidation, merger, sale,
assignment, conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction or series of transactions, such
supplemental indenture complies with the applicable provisions herein and that
all conditions precedent herein relating to the transaction or series of
transactions have been satisfied.
Section 5.02. Successor Person Substituted.
Upon any consolidation, merger, sale, assignment, conveyance or any
transfer of all or substantially all of the assets of the Company in accordance
with Section 5.01 above, the successor corporation formed by such consolidation
or into which the Company is merged or to which such sale, assignment,
conveyance or transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor corporation had been named as the Company
herein, and
<PAGE>
-57-
thereafter the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if
(a) there is a Default in the payment of any interest on the Notes
when the same becomes due and the Default continues for a period of 30
calendar days;
(b) there is a Default in the payment of the principal of, or
premium, if any, on the Notes when the same becomes due;
(c) the Company fails to comply with any of the terms in Section
4.14 or 4.08 herein;
(d) the Company Defaults in the performance of, or breaches any
other covenant in this Indenture (other than Defaults specified in Section
6.01(a), (b) or (c) above) and continuance of such Default or breach for a
period of 30 calendar days after written notice specifying the Default to
the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in the aggregate principal amount of the
outstanding Notes;
(e) the Company or any Subsidiary fails (a) to make any payment when
due with respect to any other Indebtedness under one or more classes or
issues of Indebtedness in an aggregate principal amount of $5,000,000 or
more; or (b) to perform any term, covenant, condition, or provision of one
or more classes or issues of Indebtedness in an aggregate principal amount
of $5,000,000 or more, which failure, in the case of this clause (b),
results in an acceleration of maturity thereof;
(f) one or more judgments, orders or decrees for the payment of
money in excess of $5,000,000, either individually or in an aggregate
amount (to the extent not covered by a reputable third-party insurance
company as to which the insurer has acknowledged coverage), shall be
entered
<PAGE>
-58-
against the Company or any Subsidiary of the Company or any of their
respective properties and shall not be discharged and there shall have
been a period of 60 calendar days during which a stay of enforcement of
such judgment or order, by reason of pending appeal or otherwise, shall
not be in effect;
(g) the Company or any Subsidiary pursuant to or within the meaning
of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in
an involuntary case,
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property, or
(D) makes a general assignment for the benefit of its
creditors, or
(E) generally is not able to pay its debts as they become due;
(h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Subsidiary in an
involuntary case,
(B) appoints a Custodian of the Company or any Subsidiary or
for all or substantially all of the property of the Company or any
Subsidiary, or
(C) orders the liquidation of the Company or any Subsidiary,
and the order or decree remains unstayed and in effect for 60 days; and
(i) any of the Guarantees ceases to be in full force and effect or
any of the Guarantees is declared by a court of competent jurisdiction to
be null and void and unenforceable or any of the Guarantees is found by a
court of competent jurisdiction to be invalid or any of the Subsidiary
Guarantors denies its liability under its Guaran-
<PAGE>
-59-
tee (other than by reason of release of a Subsidiary Guarantor in
accordance with the terms herein).
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
Section 6.02. Acceleration.
If an Event of Default (other than an Event of Default arising under
Section 6.01(g) or (h) with respect to the Company) occurs and is continuing,
then the Trustee or the Holders of at least 25% in aggregate principal amount of
the outstanding Notes may, by written notice to the Company and the Trustee (if
given by Holders), which notice shall specify the respective Event of Default,
declare the entire principal amount of all the outstanding Notes to be due and
payable immediately, together with all accrued and unpaid interest and premium,
if any, thereon (such aggregate principal amount, together with accrued and
unpaid interest and premium, if any, thereon, the "Default Amount") provided,
however, that so long as the Acquisition Facility shall be in effect any such
acceleration shall not be effective until the earlier of (x) five (5) business
days after receipt by the Company and the Representatives under the Acquisition
Facility of such acceleration notice and (y) the acceleration of any
Indebtedness under the Acquisition Facility. Upon any such declaration (except
as provided in the preceding sentence), the Default Amount shall become due and
payable immediately. Notwithstanding the foregoing, if an Event of Default
specified in clause (g) or (h) occurs with respect to the Company and is
continuing, then the Default Amount shall ipso facto become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any Holder.
After a declaration of acceleration, the Holders of a majority in
aggregate principal amount of outstanding Notes may, by notice to the Trustee,
rescind such declaration of acceleration if all existing Events of Default have
been cured or waived (other than the nonpayment of the Default Amount that has
become due solely as a result of the acceleration), and if the rescission of
acceleration would not conflict with any judgment or decree.
<PAGE>
-60-
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, or premium, if any, and 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 6.04. Waiver of Past Defaults and Events of Default.
Subject to Sections 6.02, 6.07 and 8.02 hereof, the Holders of a
majority in aggregate principal amount of the outstanding Notes have the right
to waive past Defaults under this Indenture except a Default in the payment of
the principal of, or interest or premium, if any, on any Note, which cannot be
waived without the consent of the Holder of such Note or in respect of a
covenant or a provision which cannot be modified or amended without the consent
of all Holders. 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 Event of Default or impair any right consequent thereto.
Section 6.05. Control by Majority.
The Holders of a majority in principal amount of the outstanding
Notes have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee by this Indenture. The Trustee, however, may
refuse to follow any direction that conflicts with law or this Indenture or 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
<PAGE>
-61-
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 Trust 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.
Section 6.06. Limitation on Suits.
Subject to Section 6.07 below, no Holder has any right to institute
any proceeding with respect to this Indenture or any remedy thereunder unless:
(1) the Holders of at least 25% in aggregate principal amount of the
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(2) such Holder or Holders offer to the Trustee indemnity reasonably
satisfactory to the Trustee against any loss, liability or expense;
(3) the Trustee fails to institute such proceeding within 15
calendar days after receipt of such notice and the indemnity; and
(4) the Trustee has not received directions inconsistent with such
written request during such 15-day period by the Holders of a majority in
aggregate principal amount of the outstanding Notes.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over another
Noteholder.
Section 6.07. 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, or
accrued interest on any Note held by such Holder on or after the respective due
dates expressed in or provided for in such 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.
<PAGE>
-62-
Section 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal, premium or interest
specified in Section 6.01(a), (b) or (c) hereof occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company for the whole amount of unpaid principal and accrued
interest remaining unpaid, together with interest on overdue principal and, to
the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate then borne by 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 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
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, pursuant to Section 6.10, of its charges and expenses to the extent
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 7.07 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.
<PAGE>
-63-
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article 6, it
shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07 hereof;
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 6.07 hereof or a suit by Holders of more than 10% in
principal amount of the Notes then outstanding.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default known to the Trustee has occurred and is
continuing, the Trustee shall, other than with respect to any action taken by
the Trustee as directed by a majority in aggregate principal amount of the
Holders of outstanding Notes, exercise such rights and powers vested in it by
<PAGE>
-64-
this Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Except during the continuance of an Event of Default known to
the Trustee:
(1) 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.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture 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.
(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:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.02, 6.04 and 6.05 hereof.
(4) 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 or powers if it determines in the
exercise of its reasonable discretion that repayment of such funds or
adequate indemnity satisfactory to it against such risk or liability is
not reasonably assured to it.
<PAGE>
-65-
(d) Whether or not therein expressly so provided, paragraphs (a),
(b) and (c) of this Section 7.01 shall govern every provision of this Indenture
that in any way relates to the Trustee.
(e) The Trustee is not under any obligation to exercise any of its
rights or powers at the request or direction of any of the Holders unless such
Holders shall have offered to the Trustee indemnity or security satisfactory to
it in its reasonable discretion against any loss, liability, expense or fee.
(f) 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 7.02. Rights of Trustee.
Subject to Section 7.01 hereof:
(1) 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.
(2) Before the Trustee acts or refrains from acting with respect to
any matters contemplated by this Indenture or the Notes it may require an
Officers' Certificate or an Opinion of Counsel, or both, which shall
conform to the provisions of Section 11.05 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.
(3) The Trustee may act through Agents and shall not be responsible
for the misconduct or negligence of any agent so long as the appointment
of such agent was made with due care.
(4) 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.
(5) The Trustee may consult with counsel of its selection, and the
advice or opinion of such counsel as to
<PAGE>
-66-
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.
(6) Subject to the provisions of Sections 7.01 and 7.02, the Trustee
shall not be charged with notice or knowledge of any Default or Event of
Default unless a Trust Officer shall have actual knowledge thereof or the
Trustee shall have received notice thereof in accordance with Section
11.02 from the Company, any Subsidiary Guarantor, any Holder or any
Representative.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may make loans to, accept deposits from, perform
services for or otherwise deal with 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 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture, the Notes or the Guarantees,
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 the
Guarantees other than its certificate of authentication.
Section 7.05. Notice of Defaults.
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
30 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 of the Trustee, the
executive committee or any trust committee of such board and/or its Trust
Officers in good faith determine(s) that withholding the notice is in the
interests of the Noteholders.
<PAGE>
-67-
Section 7.06. Reports by Trustee to Holders.
If required by TIA Section 313(a), within 60 days after May 15 of
any year, commencing the May 15 following the date of this Indenture, 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 7.06 shall be transmitted by mail:
(1) to all registered Holders of Notes, as the names and addresses
of such Holders appear on the Registrar's books; and
(2) to such Holders 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 stock exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee 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 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 and its officers,
directors, employees and agents and any predecessor Trustee and its officers,
directors, employees and agents for, and hold it harmless against, any and all
loss, damage, claim, liability or expense (including the reasonable fees and
expenses of its counsel), including taxes (other than taxes based on the income
of the Trustee) incurred by it in connec-
<PAGE>
-68-
tion with the acceptance or administration of its trusts and 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, settlement
costs). The Trustee shall notify the Company in writing promptly of any claim
asserted against the Trustee for which it may seek indemnity. However, the
failure by the Trustee to so notify the Company shall not relieve the Company of
its obligations hereunder except to the extent the Company is prejudiced
thereby. The obligations of the Company under this section shall survive the
termination of this Indenture, final payment of the Notes, and resignation or
removal of the Trustee.
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 7.07, 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 Company agrees to pay the reasonable fees and expenses of
Trustee's counsel as promptly as reasonably practicable after the date of the
execution of this Indenture in connection with the review, negotiation,
execution and delivery of this Indenture.
Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses
and the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
For purposes of this Section 7.07, the term "Trustee" shall include
any trustee appointed pursuant to Article 9.
Section 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Company in writing. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee by notifying the removed Trustee 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:
<PAGE>
-69-
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee, except as provided in the preceding paragraph.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in principal amount of the outstanding Notes may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, subject to
Section 6.11 hereof, any Noteholder who has been a bona fide Holder of a Note
for at least six months may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately following
such delivery, the retiring Trustee shall, subject to its rights under Section
7.07 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 7.08, the Company's obligations under Section
7.07 hereof shall continue for the benefit of the retiring Trustee.
<PAGE>
-70-
Section 7.09. Successor Trustee by Consolidation, Merger or Conversion.
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.
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 (or, in the case of a corporation included in a bank holding company
system, the related bank holding company shall have) a combined capital and
surplus of at least $50,000,000 as set forth in its (or its related bank holding
company's) most recent published annual report of condition. The Trustee shall
comply with TIA Section 310(b), including the provision in Section 310(b)(1),
subject to the penultimate paragraph thereof. The provisions of TIA Section 310
shall apply to the Company as obligor of the Notes.
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311 (b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein. The provisions of TIA Section 311 shall apply to the Company as obligor
of the Notes.
Section 7.12. Paying Agents.
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;
<PAGE>
-71-
(B) that it will at any time during the continuance of any
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 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.
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders.
The Company and the Subsidiary Guarantors, when authorized by a
Board Resolution of the Company and the Subsidiary Guarantors, and the Trustee
may amend or supplement this Indenture or the Notes without notice to or consent
of any Noteholder:
(1) to comply with Section 5.01 hereof;
(2) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(3) to comply with any requirements of the Commission under the TIA;
(4) to cure any ambiguity, defect or inconsistency, or to make any
other change that does not adversely affect the rights of any Noteholder;
(5) to add Guarantees with respect to the Notes; or
(6) to release Guarantees when permitted by this Indenture.
The Trustee is hereby authorized to join with the Company and the
Subsidiary Guarantors in the execution of any supplemental indenture authorized
or permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations which may be therein contained, but the Trus-
<PAGE>
-72-
tee shall not be obligated to enter into any such supplemental indenture which
adversely affects its own rights, duties or immunities under this Indenture or
otherwise.
Section 8.02. With Consent of Holders.
The Company, the Subsidiary Guarantors and the Trustee may modify or
supplement this Indenture or the Notes with the written consent of the Holders
of not less than a majority in aggregate principal amount of the outstanding
Notes without notice to any Noteholder. The Holders of not less than a majority
in aggregate principal amount of the outstanding Notes may waive compliance in a
particular instance by the Company or a Subsidiary Guarantor with any provision
of this Indenture or the Notes without notice to any Noteholder. Subject to
Section 8.04, without the consent of each Noteholder affected, an amendment,
supplement or waiver, including a waiver pursuant to Section 6.04, may not:
(1) reduce the percentage in principal amount of outstanding Notes
whose Holders must consent to an amendment, supplement or waiver, or
consent to take any action under this Indenture or Notes;
(2) reduce the rate of or change the time for payment of interest
(including Additional Amounts (as defined in the Registration Rights
Agreement)) on any Note;
(3) reduce the principal of, or premium on, or change the stated
maturity, of any Note;
(4) change the currency in which the principal of any Note or the
accrued interest or premium (if any) thereon is payable;
(5) change the amount or time of any payment required by the Notes
or reduce the premium payable upon any redemption of the Notes in
accordance with Section 3.07 hereof, or change the time at which a Note
may be redeemed;
(6) waive a Default in the payment of the principal of, or interest
or premium on, or any redemption payment with respect to, any Note;
(7) make any changes in Sections 6.04 or 6.07 hereof or this
sentence of Section 8.02;
<PAGE>
-73-
(8) affect the ranking of the Notes or any Guarantee in a manner
adverse to the Holders;
(9) amend, change or modify in any material respect, any obligation
of the Company to make and consummate a Change of Control Offer in the
event of a Change of Control or, make and consummate an Asset Sale Offer
in the event of an Asset Sale or modify any of the material provisions
with respect to such offers;
(10) impair the right set forth in this Indenture to institute suit
for the enforcement of any payment on or with respect to the Notes (other
than any such payment that has become due solely as a result of the
acceleration of the maturity of the Notes); or
(11) release any Subsidiary Guarantor from any of its obligations
under its Guarantee or this Indenture otherwise than in accordance with
the terms of this Indenture.
After an amendment, supplement or waiver under this Section 8.02
becomes effective, the Company shall mail to the Holders a notice briefly
describing the amendment, supplement or waiver.
Upon the request of the Company, accompanied by a Board Resolution
of the Company and the Subsidiary Guarantors authorizing the execution of any
such supplemental indenture, and upon the receipt by the Trustee of evidence
reasonably satisfactory to the Trustee of the consent of the Noteholders as
aforesaid and upon receipt by the Trustee of the documents described in Section
8.06 hereof, the Trustee shall join with the Company and the Subsidiary
Guarantors in the execution of such supplemental indenture unless such
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such supplemental
indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
<PAGE>
-74-
Section 8.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect.
Section 8.04. 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
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 90 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 (11) of Section 8.02 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 8.05. Notation on or Exchange of Notes.
If an amendment, supplement, or waiver changes the terms of a Note,
the Trustee may request the Holder of the Note 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 Com-
<PAGE>
-75-
pany 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 8.06. Trustee to Sign Amendments, etc.
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 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 7.01 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. The Company and each Subsidiary Guarantor may not sign an
amendment or supplement until the Board of Directors of the Company and each
such Subsidiary Guarantor approves it.
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to
surviving rights of registration of transfer or exchange of Notes herein
expressly provided for) and the Trustee, on written demand of and at the expense
of the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when either:
(a) all Notes theretofore authenticated and delivered (other than
(A) Notes which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 2.07 hereof and (B) Notes for
whose payment money has theretofore been deposited in trust and thereafter
repaid to the Company) have been delivered to the Trustee for
cancellation; or
(b) (i) all such Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be
<PAGE>
-76-
deposited with the Trustee in trust for the purpose an amount of U.S.
legal tender sufficient to pay and discharge the entire Indebtedness on
such Notes not theretofore delivered to the Trustee for cancellation, for
the principal of, premium, if any, and interest to the date of such
deposit; (ii) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and (iii) the Company has delivered to
the Trustee (A) irrevocable instructions to apply the deposited money
toward payment of the Notes at the maturity thereof, and (B) an Officers'
Certificate and an Opinion of Counsel each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 7.07 and, if money shall
have been deposited with the Trustee pursuant to subclause (b)(i) of this
Section 9.01, the obligations of the Trustee under Section 9.05, shall survive.
Section 9.02. Legal Defeasance.
The Company may at its option, by Board Resolution, be discharged
from its obligations with respect to the Notes (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 9.06 hereof, execute proper
instruments 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 9.04 hereof and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest on such Notes when
such payments are due, (B) the Company's obligations with respect to such Notes
under Article 2 and Section 4.15 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 7.07 hereof) and (D) this Article 9.
Subject to compliance with this Article 9, the Company may exercise its option
under this Section 9.02 with respect to the Notes notwithstanding the prior
exercise of its option under Section 9.03 below with respect to the Notes.
<PAGE>
-77-
Section 9.03. Covenant Defeasance.
At the option of the Company, pursuant to a Board Resolution, the
Company and the Subsidiary Guarantors shall be released from their respective
obligations under Sections 4.02, 4.04 through 4.12, 4.14 and 4.16 through 4.18
hereof, and clauses (d) and (e) of Section 5.01 hereof with respect to the
outstanding Notes on and after the date the conditions set forth in Section 9.04
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, but the remainder of this Indenture and the Notes shall be unaffected
thereby.
Section 9.04. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of Section 9.02
or Section 9.03 hereof to the outstanding Notes:
(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) U.S.
legal tender 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,
sufficient, in the opinion of a nationally-recognized firm of independent
public accountants expressed in a written certification thereof delivered
to the Trustee, to pay and discharge, and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge, the principal
of, premium, if any, and accrued interest on the outstanding Notes at the
maturity date of such principal, premium, if any, or interest, or on dates
for payment and redemption
<PAGE>
-78-
of such principal, premium, if any, and interest with respect to
outstanding Notes selected for redemption in accordance with the terms of
this Indenture and of the Notes; provided, however, that the Trustee (or
other qualifying trustee) shall have received an irrevocable written order
from the Company instructing the Trustee (or other qualifying trustee) to
apply such money or the proceeds of such U.S. Government Obligations to
said payments with respect to the Notes;
(2) no Event of Default or Default specified in Section 6.01(g) or
(h) shall have occurred and be continuing on the date of such deposit, or
shall have occurred and be continuing at any time during the period ending
on the 91st day after the date of such deposit or, if longer, ending on
the day following the expiration of the longest preference period under
any Bankruptcy Law applicable to the Company in respect of such deposit
(it being understood that this condition shall not be deemed satisfied
until the expiration of such period);
(3) such Legal Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest for purposes of the TIA with
respect to any securities of the Company;
(4) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute default under any other agreement
or instrument to which the Company is a party or by which it is bound;
(5) the Company shall have delivered to the Trustee an Opinion of
Counsel stating that, as a result of such Legal Defeasance or Covenant
Defeasance, neither the trust nor the Trustee will be required to register
as an investment company under the Investment Company Act of 1940, as
amended;
(6) in the case of an election under Section 9.02 above, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that (i)
the Company has received from, or there has been published by, the
Internal Revenue Service a ruling to the effect that or (ii) there has
been a change in any applicable Federal income tax law with the effect
that, and such opinion shall confirm that, the Holders of the outstanding
Notes or persons in their positions will not recognize income, gain or
loss for Federal income tax purposes solely as a result of such Legal
<PAGE>
-79-
Defeasance and will be subject to Federal income tax on the same amounts,
in the same manner, including as a result of prepayment, and at the same
times as would have been the case if such Legal Defeasance had not
occurred;
(7) in the case of an election under Section 9.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Holders of the outstanding Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such
Covenant Defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(8) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the Legal Defeasance under
Section 9.02 above or the Covenant Defeasance under Section 9.03 hereof
(as the case may be) have been complied with;
(9) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit under clause (1) was not made by the
Company with the intent of defeating, hindering, delaying or defrauding
any creditors of the Company or others; and
(10) before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Notes at a future date
in accordance with Section 3.07(a) hereof.
Section 9.05. 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 9.01 or 9.04 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 as the Trustee may
determine, 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.
<PAGE>
-80-
The Company and the Subsidiary Guarantors shall pay and indemnify
the Trustee (on a joint and several basis) against any tax, fee or other charge
imposed on or assessed against the U.S. Government Obligations deposited
pursuant to Section 9.01 or 9.04 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 Company
Request any money or U.S. Government Obligations held by it as provided in
Section 9.01 or 9.04 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 discharge under
Section 9.01, Legal Defeasance or Covenant Defeasance.
Section 9.06. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 9.01, 9.02 or 9.03 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 and each Subsidiary Guarantor's obligations
under this Indenture, the Notes and the Guarantees 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 9.05 hereof; provided,
however, that if the Company or any Subsidiary Guarantor 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 and each such Subsidiary
Guarantor 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 9.07. 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 demand of the Company, be paid to the Trustee, or if sufficient
moneys have been deposited pursuant to Section 9.01 hereof, to the Company (or,
<PAGE>
-81-
if such moneys had been deposited by any Subsidiary Guarantor, to such
Subsidiary Guarantor) and thereupon such Paying Agent shall be released from all
further liability with respect to such moneys.
Section 9.08. Moneys Held by Trustee.
Any moneys deposited with the Trustee or any Paying Agent 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 (or, if appropriate, the applicable Subsidiary Guarantor)
upon Company Request; and the Holder of such Note entitled to receive such
payment shall thereafter, as an unsecured general creditor, look only to the
Company and the Subsidiary Guarantors for the payment thereof, and all liability
of the Trustee or such Paying Agent with respect to such trust money shall
thereupon cease.
Section 9.09. Qualifying Trustee.
Any trustee appointed pursuant to Section 9.04 for the purpose of
holding U.S. Legal Tender and/or U.S. Government Obligations deposited pursuant
to that Section shall be appointed under an agreement in form acceptable to the
Trustee and shall provide to the Trustee a certificate of such trustee, upon
which certificate the Trustee shall be entitled to conclusively rely, that all
conditions precedent provided for herein to the related Legal Defeasance or
Covenant Defeasance have been complied with. In no event shall the Trustee be
liable for any acts or omissions of said trustee.
ARTICLE 10
SUBORDINATED GUARANTEES
SECTION 10.01. Unconditional Guarantees of the Subsidiary Guarantors;
Subordination; etc.
Subject to the provisions of this Article Ten, each Subsidiary
Guarantor hereby unconditionally and irrevocably guarantees, on a subordinated
and on a joint and several basis (such guarantees to be referred to collectively
herein as the
<PAGE>
-82-
"Guarantees") to each Holder of a Note authenticated and delivered by the
Trustee and to the Trustee and its successors and assigns, irrespective of the
validity and enforceability of this Indenture, the Notes or the obligations of
the Company or any Subsidiary Guarantor to the Holders or the Trustee hereunder
or thereunder, that: (a) the principal of, premium, if any, and interest on the
Notes (and any Additional Amount payable thereon) shall be duly and punctually
paid in full when due, whether at maturity, upon redemption, upon repurchase at
the option of Holders pursuant to the provisions of the Notes relating thereto,
by acceleration or otherwise, and interest on the overdue principal and (to the
extent permitted by law) interest, if any, on the Notes and all other
obligations of the Company or the Subsidiary Guarantors to the Holders or the
Trustee hereunder or thereunder (including amounts due the Trustee under Section
7.07 hereof) and all other obligations shall be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (b) in case
of any extension of time of payment or renewal of any Notes or any of such other
obligations, the same shall be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at maturity, by
acceleration or otherwise. Failing payment when due of any amount so guaranteed,
or failing performance of any other obligation of the Company to the Holders
under this Indenture or under the Notes, for whatever reason, the Subsidiary
Guarantors shall, subject to the subordination provisions hereof, be obligated
to pay, or to perform or cause the performance of, the same immediately. An
Event of Default under this Indenture or the Notes shall constitute an event of
default under the Guarantees, and, subject to this Article Ten shall entitle the
Holders of Notes to accelerate the obligations of the Subsidiary Guarantors
hereunder in the same manner and to the same extent as the obligations of the
Company.
Each Subsidiary Guarantor hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, any release of any Subsidiary Guarantor,
the recovery of any judgment against the Company, any action to enforce the
same, whether or not a Guarantee is affixed to any particular Note, or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of the Subsidiary Guarantors. To the fullest extent permitted by law,
each Subsidiary Guarantor hereby waives the benefit of diligence, presentment,
demand of payment, filing of
<PAGE>
-83-
claims with a court in the event of insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company, protest, notice and all
demands whatsoever and covenants that its Guarantee shall not be discharged
except by complete performance of the obligations contained in the Notes, this
Indenture and these Guarantees. The Guarantees are guarantees of payment and not
of collection. If any Holder or the Trustee is required by any court or
otherwise to return to the Company or to the Subsidiary Guarantors, or any
custodian, trustee, liquidator or other similar official acting in relation to
the Company or the Subsidiary Guarantors, any amount paid by the Company or the
Subsidiary Guarantors to the Trustee or such Holder, these Guarantees, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Subsidiary Guarantor further agrees that, as between it, on the one hand,
and the Holders of Notes and the Trustee, on the other hand, (a) subject to this
Article Ten, the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six hereof for the purposes of these
Guarantees, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (b) in
the event of any acceleration of such obligations as provided in Article Six
hereof, such obligations (whether or not due and payable) shall forthwith become
due and payable by the Subsidiary Guarantors for the purpose of the Guarantees.
The payment by the Subsidiary Guarantors of all obligations on these
Guarantees is subordinated, to the extent and in the manner provided in this
Article Ten, in right of payment to the prior payment in full, in cash, of all
obligations on Guarantor Senior Debt, which subordination is for the benefit of
and enforceable by the holders of such Guarantor Senior Debt.
Upon any payment or distribution of assets of the Subsidiary
Guarantors of any kind or character, whether in cash, property or securities, to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the
Subsidiary Guarantors, or in a bankruptcy, reorganization, insolvency,
receivership or other similar proceeding relating to the Subsidiary Guarantors
or their property, whether voluntary or involuntary, all obligations with
respect to all Guarantor Senior Debt shall first be paid in full, in cash,
before any payment or distribution of any kind or character, whether in cash,
property, or securities, is made on account of any Obligations on the Notes or
Guarantees or for the acquisition of all or any
<PAGE>
-84-
part of the Guarantees for cash or property or otherwise; and until all such
Obligations with respect to all Guarantor Senior Debt are paid in full, in cash,
any distribution to which the holders of the Guarantees would be entitled but
for the subordination provisions of this Article 10 will be made to the holders
of Guarantor Senior Debt as their interests may appear.
If (i) any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal of, premium and interest on, unpaid drawings for letters of credit
issued in respect of, or fees with respect to, or any other obligation in
respect of, any Guarantor Senior Debt, or (ii) any other default occurs and is
continuing with respect to any Guarantor Senior Debt resulting in the
acceleration of the maturity of all or any portion of such Guarantor Senior
Debt, then, in the case of either of the foregoing clause (i) and (ii), no
payment shall be made by or on behalf of the Subsidiary Guarantors or any other
person on their behalf with respect to any obligations on the Guarantee or to
acquire all or any part of the obligations covered by the Guarantees for cash or
property or otherwise; provided, however, that, the foregoing provisions shall
not restrict the Company from making payments of principal or interest on or
with respect to the Notes (including, without limitation, by redemption,
repurchase or other acquisition). In addition, if any other event of default
occurs and is continuing (or if such an event of default would occur upon any
payment with respect to the Guarantees) with respect to the Guarantor Senior
Debt, as such event of default is defined in the instrument creating or
evidencing or guaranteeing such Guarantor Senior Debt permitting the holders of
such Guarantor Senior Debt then outstanding, or their Representative, to
accelerate the maturity thereof (or the obligations guaranteed thereby) and if
the respective Representative for the respective Guarantor Senior Debt gives
written notice of the event of default to the Trustee (a "Default Notice"),
then, unless and until the date, if any, on which all Guarantor Senior Debt to
which such event of default relates is paid in full in cash or the
Representative for the respective Guarantor Senior Debt gives notice that all
events of default have been cured or waived or have ceased to exist or the
Trustee receives written notice from the Representative for the respective
Guarantor Senior Debt terminating the Blockage Period (as defined below), during
the 180 days after the delivery of such Default Notice (the "Blockage Period"),
none of the Subsidiary Guarantors or any other person on their behalf shall (x)
make any payment with respect to any obligations evidenced by the Guarantees or
(y) acquire all or any part of the obligations covered by the
<PAGE>
-85-
Guarantees for cash or property or otherwise. Notwithstanding anything herein to
the contrary, in no event will a Blockage Period extend beyond 180 days from the
date of the commencement thereof. Only one such Blockage Period may be commenced
within any period of 360 consecutive days. No event of default which existed or
was continuing on the date of the commencement of any Blockage Period with
respect to the Guarantor Senior Debt shall be, or be made, the basis for the
commencement of a second Blockage Period by the Representative of such Guarantor
Senior Debt whether or not within a period of 360 consecutive days, unless such
event of default shall have been cured by the Subsidiary Guarantors or waived
for a period of not less than 90 consecutive days.
If a payment or other distribution is made to Holders that because
of this Section 10.01 should not have been made to them, the Holders who receive
the payment or other distribution shall hold it in trust for holders of
Guarantor Senior Debt and promptly pay it over to the holders of Guarantor
Senior Debt as their interests may appear.
This Section 10.01 defines the relative rights of the Holders and
the holders of Guarantor Senior Debt. Nothing in this Section 10.01 shall:
(1) impair, as between the Company and the Holders, the obligation
of the Company, which is absolute and unconditional, to pay principal of
and interest on the Notes in accordance with their terms; or
(2) prevent the Trustee or any Holder from exercising its available
remedies upon a Default, subject to the rights of holders of Guarantor
Senior Debt to receive distributions otherwise payable to Holders as and
to the extent provided in this Section 10.01.
No right of any present or future holders of any Guarantor Senior
Debt to enforce the subordination provisions contained in this Section 10.01
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Company, the Subsidiary Guarantors, or by any act or
failure to act in good faith by any such holder, or by any noncompliance by the
Company or the Subsidiary Guarantors with the terms of this Indenture,
regardless of any knowledge thereof which any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Guarantor Senior Debt may,
<PAGE>
-86-
at any time and from time to time, without the consent of or notice to the
holders of any Indebtedness of the Company or the Subsidiary Guarantors, without
incurring responsibility to the holders of any Indebtedness of the Company or
the Subsidiary Guarantors, and without impairing or releasing the subordination
provisions contained in this Section 10.01, or the obligations hereunder of the
holders of the Indebtedness of the Company or the Subsidiary Guarantors, 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, the Guarantor Senior Debt
or any instrument evidencing the same or any agreement under which Guarantor
Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Guarantor Senior Debt or
fail to perfect or delay the perfection of any such lien; (iii) release any
person liable in any manner for the collection of Guarantor Senior Debt; and
(iv) exercise or refrain from exercising any rights against the Company or the
Subsidiary Guarantors or any other Person.
Each Holder of the Notes by such Holder's acceptance thereof
authorizes and expressly directs the Trustee on such Holder's behalf to take
such action as may be necessary or appropriate to effectuate the subordination
provisions contained in this Section 10.01 and to protect the rights of the
Holders pursuant to this Indenture, and appoints the Trustee such Holder's
attorney-in-fact for such purpose, including, in the event of any dissolution,
winding up, liquidation or reorganization of the Subsidiary Guarantors (or any
of them)(whether in bankruptcy, insolvency or receivership proceedings or upon
an assignment for the benefit of creditors or any other marshaling of assets and
liabilities of the Subsidiary Guarantors (or any of them)) tending towards
liquidation of the business and assets of the Subsidiary Guarantors (or any of
them), the immediate filing of a claim for the unpaid balance of the Notes in
the form required in said proceeding and cause said claim to be approved. If the
Trustee does not file a proper claim or proof of debt in the form required in
such proceeding prior to 30 days before the expiration of the time to file such
claim or claims, then the holders of the Guarantor Senior Debt or their
Representative are or is hereby authorized to have the right to file and are or
is hereby authorized to file an appropriate claim for and on behalf of the
Holders of said Notes. Nothing herein contained shall be deemed to authorize the
Trustee or the holders of Guarantor Senior Debt or their Representative to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder
<PAGE>
-87-
thereof, or to authorize the Trustee or the holders of Guarantor Senior Debt or
their Representative to vote in respect of the claim of any Holder in any such
proceeding.
The failure to make a payment on or in respect of the Notes by
reason of any provision in this Section 10.01 shall not be construed as
preventing the occurrence of a Default. Nothing in this Section 10.01 shall have
any effect on the right of the Holders or the Trustee to accelerate the maturity
of the Notes.
Notwithstanding anything contained in this Section 10.01 to the
contrary, payments from money or the proceeds of U.S. Government Obligations
held in trust under Article Nine by the Trustee for the payment of principal of
and interest on the Notes shall not be, so long as such monies (x) were not
directly deposited by the Subsidiary Guarantors or (y) to the extent directly
deposited by the Subsidiary Guarantors, the payment thereof at the time of
deposit did not violate the provisions of this Section 10.01, subordinated to
the prior payment of any Guarantor Senior Debt or subject to the restrictions
set forth in this Section 10.01, and none of the Holders shall be obligated to
pay over any such amount to the Company or any holder of Guarantor Senior Debt
or any other creditor of the Company.
After all Guarantor Senior Debt is paid in full in cash or Cash
Equivalents and until the Notes are paid in full, the Noteholders shall be
subrogated to the rights of holders of such Guarantor Senior Debt to receive
distributions applicable to such Guarantor Senior Debt. A distribution made
under this Article Ten to holders of such Guarantor Senior Debt which otherwise
would have been made to Noteholders is not, as between the Subsidiary Guarantors
and the Noteholders, a payment by the Subsidiary Guarantors on such Guarantor
Senior Debt.
Notwithstanding anything herein to the contrary, the Trustee or
Paying Agent may continue to make payments on the Notes and shall not be charged
with knowledge of the existence of facts that would prohibit the making of any
such payments unless, not less than two business Days prior to the date of such
payment, a Trust Officer receives notice satisfactory to it that payments may
not be made under this Article Ten. The Subsidiary Guarantors, the Company, a
Representative or a holder of Guarantor Senior Debt may give the notice;
provided, however, that, if the holders of Guarantor Senior Debt have a
Representative, only the Representative may give the notice.
<PAGE>
-88-
The Trustee in its individual or any other capacity may hold
Guarantor Senior Debt with the same rights it would have if it were not Trustee.
The Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article Ten with respect to any Guarantor Senior Debt which may at any time to
be held by it, to the same extent as any other holder of such Guarantor Senior
Debt; and nothing in Article 7 shall deprive the Trustee of any of its rights as
such holder. Nothing in this Article Ten shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 7.07.
Upon any payment or distribution pursuant to this Article Ten, the
Trustee and the Noteholders shall be entitled to rely (i) upon any order or
decree of a court of competent jurisdiction in which any proceedings of the
nature referred to in this Section are pending, (ii) upon a certificate of the
liquidating trustee or agent or other Person making such payment or distribution
to the Trustee or to the Noteholders or (iii) upon the Representative for the
holders of Guarantor Senior Debt or if there is no such Representative, upon any
holder of Guarantor Senior Debt, for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of such
Guarantor Senior Debt, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Article Ten. In the event that the Trustee determines, in good faith, that
evidence is required with respect to the right of any Person as a holder of
Guarantor Senior Debt to participate in any payment or distribution pursuant to
this Article Ten, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of such Guarantor Senior
Debt held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and other facts pertinent to the
rights of such person under this Article Ten and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Guarantor Senior Debt and shall not be liable to any such holders if
it shall mistakenly pay over or distribute to Noteholders or any other Person,
money or assets to which any holders of Guarantor Senior Debt shall be entitled
by virtue of this Article Ten or otherwise.
<PAGE>
-89-
Section 10.02. Costs and Expenses.
Each Subsidiary Guarantor agrees to pay any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder in enforcing any rights under this Article 10.
Section 10.03. Limitation on Liability.
Any term or provision of this Indenture to the contrary
notwithstanding, the obligations of each Subsidiary Guarantor are limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Guarantee, result in the obligations of such Subsidiary Guarantor under the
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
federal or state law.
In the event that the Guarantee of any Subsidiary Guarantor shall be
unenforceable in accordance with its terms, such Guarantee shall be deemed to be
modified to the extent and in the manner necessary to remain enforceable to the
maximum extent permitted under applicable law.
Section 10.04. Successors and Assigns.
This Article 10 shall be binding upon each Subsidiary Guarantor and
its successors and assigns and shall enure to the benefit of the holders of
Guarantor Senior Debt and the successors and assigns of the Trustee and the
Holders and, in the event of any transfer or assignment of rights by any Holder
or the Trustee, the rights and privileges conferred upon that party in this
Indenture and in the Notes shall automatically extend to and be vested in such
transferee or assignee, all subject to the terms and conditions of this
Indenture.
Section 10.05. No Waiver.
Neither a failure nor a delay on the part of either the Trustee or
the Holders in exercising any right, power or privilege under this Article 10
shall operate as a waiver thereof, nor shall a single or partial exercise
thereof preclude any other or further exercise of any right, power or privilege.
The rights, remedies and benefits of the Trustee and the Holders herein
expressly specified are cumulative and
<PAGE>
-90-
not exclusive of any other rights, remedies or benefits which either may have
under this Article 10 at law, in equity, by statute or otherwise.
Section 10.06. Modification.
Subject to Article Eight, no modification, amendment or waiver of
any provision of this Article 10, nor the consent to any departure by any
Subsidiary Guarantor therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Trustee, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Subsidiary Guarantor in any case shall
entitle such Subsidiary Guarantor to any other or further notice or demand in
the same, similar or other circumstances.
Section 10.07. Release of Subsidiary Guarantor.
Subject to Section 5.01, a Subsidiary Guarantor shall be released
from all of its obligations under its Guarantee if:
(i) the Subsidiary Guarantor has sold all or substantially all of
its assets or the Company and its Subsidiaries have sold all of the
Capital Stock of the Subsidiary Guarantor owned by them, in each case in a
transaction in compliance with Sections 4.08 and 5.01 hereof; or
(ii) the Subsidiary Guarantor merges with or into or consolidates
with, or transfers all or substantially all of its assets to, the Company
or another Subsidiary Guarantor in a transaction in compliance with
Section 5.01 hereof;
and in each such case, the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to such transactions have been complied
with.
Section 10.08. Execution of Supplemental Indenture for Future Subsidiary
Guarantors.
Each Subsidiary which is required to become a Subsidiary Guarantor
pursuant to Section 4.18 shall, and the Company shall cause each such Subsidiary
to, promptly execute and deliver to the Trustee a supplemental indenture
substantially in the form of Exhibit F hereto pursuant to which such Subsidi-
<PAGE>
-91-
ary shall become a Subsidiary Guarantor under this Section 10 and shall
guarantee the obligations of the Company under the Notes and the Indenture.
Concurrently with the execution and delivery of such supplemental indenture, the
Company shall deliver to the Trustee an Opinion of Counsel to the effect that
such supplemental indenture has been duly authorized, executed and delivered by
such Subsidiary and that, subject to the application of bankruptcy, insolvency,
moratorium, fraudulent conveyance or transfer and other similar laws relating to
creditors' rights generally and to the principles of equity, whether considered
in a proceeding at law or in equity, the Guarantee of such Subsidiary Guarantor
is a legal, valid and binding obligation of such Subsidiary Guarantor,
enforceable against such Subsidiary Guarantor in accordance with its terms.
The supplemental indenture shall be executed by the Subsidiary which
is required to become a Subsidiary Guarantor by an officer of such Subsidiary.
In addition, the Company, all existing Subsidiary Guarantors and the Trustee
shall execute such supplemental indenture.
Section 10.09. Execution and Delivery of Guarantees.
To evidence the Guarantee set forth in this Article 10, each
Subsidiary Guarantor hereby agrees that a notation of such Guarantee
substantially in the form of Exhibit E hereto shall be placed on each Note
authenticated and made available for delivery by the Trustee and that this
Guarantee shall be executed on behalf of each Subsidiary Guarantor by the manual
or facsimile signature of an Officer of each Subsidiary Guarantor.
Each Subsidiary Guarantor hereby agrees that the Guarantee set forth
in Section 10.01 shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Guarantee.
If an Officer of a Subsidiary Guarantor whose signature is on the
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which the Guarantee is endorsed, the Guarantee shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantee set forth in
this Indenture on behalf of each Subsidiary Guarantor.
<PAGE>
-92-
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
Section 11.02. Notices.
Any notice or communication shall be given in writing and delivered
in person against written receipt, sent by facsimile, delivered by commercial
courier service or mailed by first-class mail, postage prepaid, or by a
recognized overnight courier, addressed as follows:
If to the Company or any Subsidiary Guarantor:
Global Health Sciences, Inc.
987 Enterprise Way
Orange, CA 92867
Attention: Richard D. Marconi
Tel: (714) 633-2320
Fax: (714) 771-7487
Copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: Michael E. Lubowitz, Esq.
Tel: (212) 310-8566
Fax: (212) 310-8007
If to the Trustee:
Chase Manhattan Bank and Trust Company,
National Association
101 California Street, Suite 2725
San Francisco, CA 94111-5830
Attention:
Tel: 415-954-9507
Fax: 415-693-8850
<PAGE>
-93-
Such notices or communications shall be effective when received and
shall be sufficiently given if so given within the time prescribed in this
Indenture.
The Company, any Subsidiary Guarantor 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.
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 11.03. 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 Subsidiary Guarantors, the Trustee, the Registrar and
anyone else shall have the protection of TIA Section 312(c).
Section 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company or any Subsidiary
Guarantor to the Trustee to take any action under this Indenture, the Company or
such Subsidiary Guarantor, as the case may be, shall furnish to the Trustee:
(1) an Officers' Certificate (which shall include the statements set
forth in Section 11.05 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
<PAGE>
-94-
(2) an Opinion of Counsel (which shall include the statements set
forth in Section 11.05 below) stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Section 11.05. Statements Required in Certificate and Opinion.
Each certificate and opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 4.04) shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, 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
(4) a statement as to whether or not, in the opinion of such Person,
such covenant or condition has been complied with.
Section 11.06. When Treasury Notes Disregarded.
In determining whether the Holders of the required aggregate
principal amount of Notes have concurred in any direction, waiver or consent,
Notes owned by the Company, any Subsidiary Guarantor or any other obligor on the
Notes or by any Affiliate of any of them shall be disregarded, except that for
the purposes of determining whether the Trustee shall be protected in relying on
any such direction, waiver or consent, only Notes which the Trustee actually
knows 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 to the
satisfaction of the Trustee the pledgee's right so to act with respect to the
Notes and that the pledgee is not the Company, any Subsidiary Guarantor or any
other obligor upon the Notes or any Affiliate of any of them.
<PAGE>
-95-
Section 11.07. 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 11.08. 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 11.09. 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 11.10. 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 11.11. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as such,
of the Company or any Subsidiary Guarantor shall not have any liability for any
obligations of the Company or any Subsidiary Guarantor under the Notes, the
Guarantees or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creations. Each Noteholder by accepting a
Note waives and releases all such liability. Such waiver and release are part of
the consideration for the issuance of the Notes.
<PAGE>
-96-
Section 11.12. Successors.
All agreements of the Company and each Subsidiary Guarantor in this
Indenture and the Notes shall bind their respective successors. All agreements
of the Trustee, any additional trustee, any Paying Agents and the Registrar in
this Indenture shall bind its successor.
Section 11.13. 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 11.14. 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 11.15. 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.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed all as of the date and year first written above.
GLOBAL HEALTH SCIENCES, INC.
By: /s/ Richard D. Marconi
-------------------------------
Name:
Title:
GLOBAL HEALTH SUB, INC.
By: /s/ Richard D. Marconi
-------------------------------
Name:
Title:
D&F INDUSTRIES, INC.
By: /s/ Richard D. Marconi
-------------------------------
Name:
Title:
RAVEN INDUSTRIES
By: /s/ Richard D. Marconi
-------------------------------
Name:
Title:
DYNAMIC PRODUCTS, INC.
By: /s/ Fred E. Siegel
-------------------------------
Name:
Title:
<PAGE>
WEST COAST SALES
By: /s/ Fred E. Siegel
-------------------------------
Name:
Title:
CHASE MANHATTAN BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION, as
Trustee
By: /s/ Frank J. Grippo
-------------------------------
Name:
Title: Vice President
<PAGE>
EXHIBIT A
(FACE OF NOTE)
[FORM OF NOTE]
THESE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH NOTE, PRIOR TO (X) THE DATE WHICH IS TWO YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY
PREDECESSOR NOTE) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY ANY
SUBSEQUENT CHANGE IN APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE"),
ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THE NOTES), (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPH (a)(1), (a)(2), (a)(3) OR (a)(7) OF RULE 501 UNDER
THE SECURITIES ACT THAT IS PURCHASING NOTES WITH AN AGGREGATE PRINCIPAL AMOUNT,
PLUS ACCRUED AND UNPAID INTEREST, IF ANY, OF AT LEAST $250,000 AND THAT IS
ACQUIRING THE NOTE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR", FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE
(D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE
FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING
ON THE OTHER SIDE OF THIS NOTE
A-1
<PAGE>
BE COMPLETED AND DELIVERED BY THE TRANSFEROR TO THEM. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
A-2
<PAGE>
CUSIP
Number $
GLOBAL HEALTH SCIENCES, INC.
11% Senior Note due 2008
Global Health Sciences, Inc., a California corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay to ________________________ or registered assigns the principal
sum [specified in Schedule A hereto]* [of ________ Dollars]** on May 1, 2008.
Interest Payment Dates: May 1 and November 1, commencing November 1,
1998
Record Dates: April 15 and October 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
- ----------
* Insert in Global Notes only.
** Insert in Physical Notes only.
A-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
GLOBAL HEALTH SCIENCES, INC.
By:
---------------------------
By:
---------------------------
Certificate of Authentication:
This is one of the 11% Senior
Notes due 2008 referred to in
the within-mentioned Indenture
Dated:
CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION, as Trustee
By:
------------------------------
Authorized Officer
A-4
<PAGE>
(REVERSE SIDE)
GLOBAL HEALTH SCIENCES, INC.
11% Senior Note due 2008
1. INTEREST.
Global Health Sciences, Inc., a California corporation (the
"Company"), promises to pay interest on the principal amount of this Note
semiannually on May 1 and November 1 of each year (each an "Interest Payment
Date"), commencing on November 1, 1998, at the rate of 11% per annum. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or duly provided for or, if no interest has been paid or duly
provided for, from the date of the original issuance of the Notes.
The Company shall pay interest on overdue principal, and on overdue
premium, if any, and overdue interest, to the extent lawful, at the rate of
interest borne by the Notes.
2. METHOD OF PAYMENT.
The Company will 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 the April 15 or October 15 preceding
the Interest Payment Date (whether or not such day is a Business Day). The
Holder must surrender this Note to a Paying Agent to collect principal payments.
The Company will pay principal, premium, if any, and interest in money of the
United States that at the time of payment is legal tender for payment of public
and private debts; provided, however, that the Company may pay principal,
premium, if any, and interest by check payable in such money. It may mail an
interest check to the Holder's registered address.
3. PAYING AGENT AND REGISTRAR.
Initially, Chase Manhattan Bank and Trust Company, National
Association, a national banking association (the "Trustee"), will act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to the Holders of the Notes. Neither the Company nor any of its
Subsidiaries or Affiliates may act as Paying Agent but may act as Registrar or
co-Registrar.
A-5
<PAGE>
4. INDENTURE; RESTRICTIVE COVENANTS.
The Company issued this Note under an Indenture dated as of April
23, 1998 (the "Indenture") among the Company, the Subsidiary Guarantors 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. Code Sections 77aaa-77bbbb) as in effect on the date of the Indenture. This
Note is subject to all such terms, and the Holder of this Note is referred to
the Indenture and said Trust Indenture Act for a statement of them. All
capitalized terms in this Note, unless otherwise defined, have the meanings
assigned to them by the Indenture.
The Notes are general unsecured senior obligations of the Company
limited (except as otherwise provided in the Indenture) in aggregate principal
amount to $325,000,000 which may be issued under the Indenture; provided the
principal amount of the Notes issued on the Issue Date will not exceed
$225,000,000. The Indenture imposes certain restrictions on, among other things,
the incurrence of indebtedness, the incurrence of liens, the making of certain
investments, mergers and sale of assets, the payments of dividends on or the
repurchase of, capital stock of the Company and its Subsidiaries, certain other
restricted payments by the Company and its Subsidiaries, certain transactions
with, and investments in, its Affiliates, certain sale-leaseback transactions
and a provision regarding change-of-control transactions.
5. REDEMPTION.
The Company may redeem the Notes, in whole or in part, on or after
May 1, 2003 at the redemption prices set forth in Section 3.07(a) of the
Indenture, together, in each case, with accrued and unpaid interest to the
Redemption Date.
In addition, at any time, or from time to time, on or prior to May
1, 2001, the Company may, at its option, use the Net Proceeds of one or more
Public Equity Offerings to redeem up to 35% of the principal amount of the Notes
at a redemption price set forth in Section 3.07(b) of the Indenture, provided,
however, that at least 65% of the principal amount of Notes originally issued on
the Issue Date remains outstanding immediately after any such redemption.
6. NOTICE OF REDEMPTION.
Notice of redemption will be mailed via first class mail at least 30
days but not more than 60 days prior to the Redemption Date to each Holder of
Notes to be redeemed at its
A-6
<PAGE>
registered address as it shall appear on the register of the Notes maintained by
the Registrar. On and after any Redemption Date, interest will cease to accrue
on the Notes or portions thereof called for redemption unless the Company shall
fail to redeem any such Note.
7. OFFERS TO PURCHASE.
The Indenture requires that certain proceeds from Asset Sales be
used, subject to further limitations contained therein, to make an offer to
purchase certain amounts of Notes in accordance with the procedures set forth in
the Indenture. The Company is also required to make an offer to purchase Notes
upon occurrence of a Change of Control in accordance with procedures set forth
in the Indenture.
8. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement among the Company and
Citicorp Securities, Inc., Citibank Canada Securities Limited and Citibank
International plc, as initial purchasers of the Notes, the Company and the
Subsidiary Guarantors will be obligated to consummate an exchange offer pursuant
to which the Holder of this Note shall have the right to exchange this Note for
Notes of a separate series issued under the Indenture (or a trust indenture
substantially identical to the Indenture in accordance with the terms of the
Registration Rights Agreement) which have been registered under the Securities
Act, in like principal amount and having substantially identical terms as the
Notes. The Holders shall be entitled to receive certain Additional Amounts
payments in the event such exchange offer is not consummated and upon certain
other conditions, all pursuant to and in accordance with the terms of the
Registration Rights Agreement.
9. DENOMINATIONS, TRANSFER, EXCHANGE.
The Notes are in registered form without coupons in denominations of
$1,000 and integral multiples thereof. A Holder may register the transfer or
exchange of 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 any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any Note
selected for redemption or register the transfer of or exchange any Note for a
period of 15 days before a selection of Notes to be redeemed or any Note after
it is called for redemption in whole or in part, except the unredeemed portion
of any Note being redeemed in part.
A-7
<PAGE>
10. PERSONS DEEMED OWNERS.
The registered Holder of this Note may be treated as the owner of it
for all purposes.
11. UNCLAIMED MONEY.
If money for the payment of principal, premium or interest on any
Note remains unclaimed for two years, the Trustee or Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to money
must look to the Company for payment as general creditors unless an "abandoned
property" law designates another person.
12. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture or the Notes may be
modified, amended or supplemented by the Company, the Subsidiary Guarantors and
the Trustee with the consent of the Holders of at least a majority in principal
amount of the Notes then outstanding and any existing Default or compliance with
any provision may be waived in a particular instance with the consent of the
Holders of a majority in principal amount of the Notes then outstanding. Without
the consent of Holders, the parties thereto may amend the Indenture or the Notes
or supplement the Indenture for certain specified purposes including providing
for uncertificated Notes in addition to certificated Notes, and curing any
ambiguity, defect or inconsistency, or making any other change that does not
adversely affect the rights of any Holder.
13. SUCCESSOR ENTITY.
When a successor corporation assumes all the obligations of its
predecessor under the Notes and the Indenture and immediately before and
thereafter no Default exists and certain other conditions are satisfied, the
predecessor corporation (except as provided in the Indenture) will be released
from those obligations.
14. DEFAULTS AND REMEDIES.
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Section 6.01(g) or (h) of
the Indenture with respect to the Company) occurs and is continuing, the Trustee
by notice to the Company, 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
plus accrued but unpaid interest to
A-8
<PAGE>
the date of acceleration, subject to Section 6.02 of the Indenture; provided,
however, that after such acceleration but before judgment or decree based on
such acceleration is obtained by the Trustee, the Holders of a majority in
aggregate principal amount of the outstanding Notes may, under certain
circumstances, rescind and annul such acceleration and its consequences if all
existing Events of Default, other than the nonpayment of principal, premium or
interest that has become due solely because of the acceleration, have been cured
or waived and if the rescission would not conflict with any judgment or decree.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto. In case an Event of Default specified in Section 6.01(g) or
(h) of the Indenture with respect to the Company occurs, such principal amount,
together with premium, if any, and 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 the Notes.
15. TRUSTEE DEALINGS WITH THE COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company, and may otherwise deal with the Company, as if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS.
As more fully described in the Indenture, a director, officer,
employee or stockholder, as such, of the Company or any Subsidiary Guarantor
shall not have any liability for any obligations of the Company or the
Subsidiary Guarantors under the Notes, the Guarantees or the Indenture or for
any claim based on, in respect or by reason of, such obligations or their
creation. The Holder of this Note by accepting this Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of this Note.
17. DEFEASANCE AND COVENANT DEFEASANCE.
The Indenture contains provisions for defeasance of the entire
indebtedness on this Note and for defeasance of certain covenants in the
Indenture upon compliance by the Company with certain conditions set forth in
the Indenture.
18. ABBREVIATIONS.
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
A-9
<PAGE>
(joint tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (Uniform Gifts to Minors Act).
19. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Securities Identification Procedures, the Company has caused CUSIP Numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of the Notes. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
20. GOVERNING LAW.
THE 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 TO THE INDENTURE HAS AGREED 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 THE INDENTURE OR THE NOTES.
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:
GLOBAL HEALTH SCIENCES, INC., 987 Enterprise Way, Orange, CA 92867, Attention:
Richard D. Marconi.
A-10
<PAGE>
ASSIGNMENT
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
[Check One]
[ ] (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act provided by Rule 144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.15 of the Indenture shall have been satisfied.
<PAGE>
-2-
Date: Your Signature:
---------------- -----------------
--------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:
--------------------------------
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:
----------------------- ----------------------------
NOTICE: To be executed by
an executive officer
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased
by the Company pursuant to Section 4.08, or Section 4.14 of the Indenture, check
the appropriate box:
|_| Section 4.08 |_| Section 4.14
If you want to have only part of the Note purchased by the Company
pursuant to Section 4.08 or Section 4.14 of the Indenture, state the amount you
elect to have purchased:
$_________________ ($1,000 or an integral multiple thereof)
Date:
------------
Your Signature:
---------------------
(Sign exactly as your name appears on the
face of this Note)
- ------------------------
Signature Guaranteed
<PAGE>
SCHEDULE A*
The initial principal amount of Notes evidenced by this
Global Note is $_________.
Changes in Principal Amount of this Global Note:
- -------------------------------------------------------------------------------
Principal Amount
by which Global Principal Amount
Note is being of Global Note
Increased or after Increase or Notation Made
Date Decreased Decrease by
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ----------
* Insert in Global Notes only.
<PAGE>
EXHIBIT B
FORM OF LEGEND FOR GLOBAL NOTES
Any Global Note authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF 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 IS 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.
B-1
<PAGE>
EXHIBIT C
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
___________, ____
[Address of Registrar]
Re: Global Health Sciences, Inc.
(the "Company") 11%
Senior Notes due 2008
(the "Notes")
----------------------------
Dear Sirs:
In connection with our proposed purchase of $_______ aggregate
principal amount of the Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture
dated as of April 23, 1998 relating to the Notes and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer the
Notes except in compliance with, such restrictions and conditions and the
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the Notes have not been registered under the
Securities Act, and that the Notes may not be offered or sold 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 any Notes within two years after the original issuance
of the Notes, we will do so only (A) to the Company or any subsidiary
thereof, (B) inside the United States in compliance with Rule 144A under
the Securities Act, to a "qualified institutional buyer" (as defined in
Rule 144A), (C) inside the United States to an institutional "accredited
investor" (as defined below) that is purchasing Notes with an aggregate
principal amount, plus accrued and unpaid interest, if any, of at least
$250,000 and that, prior to such transfer, furnishes to you a signed
letter substantially in the form of this letter, (D) outside the United
States to a foreign person in compliance with Rule 904 of Regulation S
under the Securities Act, (E) pursuant to the exemption
C-1
<PAGE>
from registration provided by Rule 144 under the Securities Act (if
available), or (F) pursuant to an effective registration statement under
the Securities Act, and we further agree to provide to any person
purchasing any of the Notes from us a notice advising such purchaser that
resales of the Notes are restricted as stated herein.
3. We understand that, on any proposed resale of any Notes, we will
be required to furnish to you and the Company such certifications, legal
opinions and other information as you and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will
bear a legend to the foregoing effect.
4. We are an "accredited investor" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) and have such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
5. We are acquiring the Notes purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
----------------------------
Authorized Signature
C-2
<PAGE>
EXHIBIT D
Form of Certificate to Be
Delivered in Connection with
Transfers Pursuant to Regulation S
___________, ____
[Address of Registrar]
Re: Global Health Sciences, Inc.
(the "Company") 11%
Senior Notes due 2008
(the "Notes")
----------------------------
Dear Sirs:
In connection with our proposed sale of $___________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act;
(5) we understand that, on any proposed resale of any Notes, we will
be required to furnish to you and the Company such certifications, legal
opinions and other information as you and the Company may reasonably
require to
D-1
<PAGE>
confirm that the proposed sale complies with the foregoing restrictions
and
(6) we have advised the transferee of the transfer restrictions
applicable to the Notes.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
----------------------------
Authorized Signature
D-2
<PAGE>
EXHIBIT E
SUBORDINATED GUARANTEE
For value received, the undersigned hereby unconditionally
guarantees, on a subordinated basis, as principal obligor and not only as a
surety, to the Holder of this Note the cash payments in U.S. dollars of
principal of, premium, if any, and interest on this Note (and including
Additional Amounts payable thereon) in the amounts and at the times when due and
interest on the overdue principal of, premium, if any, and interest, if any, on
this Note, if lawful, and the payment or performance of all other obligations of
the Company under the Indenture (as defined below) or the Notes, to the Holder
of this Note and the Trustee, all in accordance with and subject to the terms
and limitations of this Note, Article Ten of the Indenture and this Guarantee.
This Guarantee will become effective in accordance with Article Ten of the
Indenture and its terms shall be evidenced therein. The validity and
enforceability of any Guarantee shall not be affected by the fact that it is not
affixed to any particular Note. Capitalized terms used but not defined herein
shall have the meanings ascribed to them in the Indenture dated as of April 23,
1998, among Global Health Sciences, Inc., a California corporation, as issuer
(the "Company"), each of the Subsidiary Guarantors named therein and Chase
Manhattan Bank and Trust Company, National Association, as trustee (the
"Trustee"), as amended or supplemented (the "Indenture").
The obligations of the undersigned to the Holders of Notes and to
the Trustee pursuant to this Guarantee and the Indenture are expressly set forth
in Article Ten of the Indenture and such obligations are subordinated to the
prior payment in full in cash of all Guarantor Senior Debt. Reference is hereby
made to the Indenture for the precise terms of the Guarantee and all of the
other provisions of the Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW. Each Subsidiary Guarantor hereby 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 Guarantee.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
E-1
<PAGE>
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused its
Guarantee to be duly executed.
SUBSIDIARY GUARANTORS:
GLOBAL HEALTH SUB, INC.
D&F INDUSTRIES, INC.
RAVEN INDUSTRIES
DYNAMIC PRODUCTS, INC.
WEST COAST SALES
By:
--------------------------
Name:
Title:
<PAGE>
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
_______________, among [ ] (the "NEW SUBSIDIARY GUARANTOR"), a subsidiary of
Global Health Sciences, Inc. (or its successor), a California corporation (the
"Company"), the COMPANY, the SUBSIDIARY GUARANTORS (the "Existing Subsidiary
Guarantors") under the Indenture referred to below, and Chase Manhattan Bank and
Trust Company, National Association, a national banking association, as trustee
under the Indenture referred to below (the "Trustee").
W I T N E S S E T H :
WHEREAS the Company has heretofore executed and delivered to the
Trustee an Indenture (as such may be amended from time to time, the
"Indenture"), dated as of April 23, 1998, providing for the issuance of an
aggregate principal amount of up to $325,000,000 of 11% Senior Notes due 2008
(the "Notes");
WHEREAS Section 4.18 of the Indenture provides that under certain
circumstances the Company is required to cause the New Subsidiary Guarantor to
execute and deliver to the Trustee a supplemental indenture pursuant to which
the New Subsidiary Guarantor shall unconditionally guarantee all of the
Company's obligations under the Notes and the Indenture pursuant to a Guarantee
on the terms and conditions set forth herein; and
WHEREAS pursuant to Section 8.01 of the Indenture, the Trustee, the
Company and Existing Subsidiary Guarantors are authorized to execute and deliver
this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Subsidiary Guarantor, the Company, the Existing Subsidiary Guarantors and the
Trustee mutually covenant and agree for the equal and ratable benefit of the
Holders of the Notes as follows:
1. Definitions. (a) Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
(b) For all purposes of this Supplemental Indenture, except as
otherwise herein expressly provided or unless the
F-1
<PAGE>
context otherwise requires: (i) the terms and expressions used herein shall have
the same meanings as corresponding terms and expressions used in the Indenture;
and (ii) the words "herein," "hereof" and "hereby" and other words of similar
import used in this Supplemental Indenture refer to this Supplemental Indenture
as a whole and not to any particular section hereof.
2. Agreement to Guarantee. The New Subsidiary Guarantor hereby
agrees, jointly and severally with all other Subsidiary Guarantors, to guarantee
the Company's obligations under the Notes and the Indenture on the terms and
subject to the conditions set forth in Article 10 of the Indenture (including,
without limitation, the subordination provisions thereof) and to be bound by all
other applicable provisions of the Indenture. From and after the date hereof,
the New Subsidiary Guarantor shall be a Subsidiary Guarantor for all purposes
under the Indenture and the Notes.
3. Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Notes heretofore or
hereafter authenticated and delivered shall be bound hereby.
4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
5. Trustee Makes No Representation. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental Indenture.
6. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
7. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction thereof.
F-2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
[NEW SUBSIDIARY GUARANTOR]
By:
---------------------
Name:
Title:
GLOBAL HEALTH SCIENCES, INC.
By:
---------------------
Name:
Title:
EXISTING SUBSIDIARY GUARANTORS:
By:
---------------------
Name:
Title:
CHASE MANHATTAN BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION
By:
---------------------
Name:
Title:
F-3
<PAGE>
REGISTRATION RIGHTS AGREEMENT
Dated as of April 23, 1998
by and among
GLOBAL HEALTH SCIENCES, INC.,
THE SUBSIDIARY GUARANTORS named herein
and
CITICORP SECURITIES, INC.,
CITIBANK CANADA SECURITIES LIMITED
and
CITIBANK INTERNATIONAL PLC
as Initial Purchasers
---------------------------------
$225,000,000
11% SENIOR NOTES DUE 2008
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Definitions......................................................1
2. Exchange Offer...................................................5
3. Shelf Registration...............................................9
(a) Shelf Registration..................................9
(b) Subsequent Shelf Registrations.....................10
(c) Supplements and Amendments.........................11
4. Additional Amounts..............................................11
5. Registration Procedures.........................................13
6. Registration Expenses...........................................24
7. Indemnification.................................................25
8. Rules 144 and 144A..............................................29
9. Underwritten Registrations......................................30
10. Miscellaneous..................................................30
(a) Remedies...........................................30
(b) No Inconsistent Agreements.........................31
(c) Adjustments Affecting Registrable Notes............31
(d) Amendments and Waivers.............................31
(e) Notices............................................31
(f) Successors and Assigns.............................33
(g) Counterparts.......................................33
(h) Headings...........................................33
(i) Governing Law......................................33
(j) Severability.......................................33
(k) Notes Held by the Company or Its Affiliates........34
(l) Third Party Beneficiaries..........................34
(m) Entire Agreement...................................34
</TABLE>
-i-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of April 23, 1998, by and among Global Health Sciences, Inc., a
California corporation (the "Company"), the Subsidiary Guarantors (as defined)
and Citicorp Securities, Inc., Citibank Canada Securities Limited and Citibank
International plc (the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated April 17, 1998, by and among the Company, the Subsidiary
Guarantors and the Initial Purchasers (the "Purchase Agreement") relating to the
sale by the Company to the Initial Purchasers of $225,000,000 aggregate
principal amount of the Company's 11% Senior Notes due 2008 (the "Notes") and
the unconditional guarantee thereof by the Subsidiary Guarantors on a joint and
several basis (the "Guarantee"). In order to induce the Initial Purchasers to
enter into the Purchase Agreement, the Issuers (as defined) have agreed to
provide the registration rights set forth in this Agreement for the benefit of
the holders of Registrable Notes (as defined), including, without limitation,
the Initial Purchasers. The execution and delivery of this Agreement is a
condition to the Initial Purchasers' obligation to purchase the Notes 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:
Additional Amounts: See Section 4(a).
Advice: See the last paragraph of Section 5.
Agreement: See the first introductory paragraph to this Agreement.
Applicable Period: See Section 2(b).
Business Day: A day that is not a Saturday, a Sunday, or a day on
which banking institutions in New York, New York are required to be closed.
<PAGE>
-2-
Closing Date: The Closing Date as defined in the Purchase Agreement.
Company: See the first introductory paragraph to this Agreement.
Effectiveness Date: The 150th day after the Issue Date, in the case
of the Exchange Offer Registration Statement, and the 150th day after the
delivery of the Shelf Notice, in the case of the Shelf Registration Statement.
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(b).
Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a).
Exchange Offer: See Section 2(a).
Exchange Offer Registration Statement: See Section 2(a).
Filing Date: The 60th day after the Issue Date.
Guarantee: See the second introductory paragraph to this Agreement.
Holder: Any registered holder of Registrable Notes.
Indemnified Person: See Section 7(c).
Indemnifying Person: See Section 7(c).
Indenture: The Indenture, dated as of April 23, 1998, by and among
the Company, the Subsidiary Guarantors and Chase Manhattan Bank and Trust
Company, National Association, as trustee, pursuant to which the Notes and the
Guarantees are being issued, as amended or supplemented from time to time in
accordance with the terms thereof.
Initial Purchasers: See the first introductory paragraph to this
Agreement.
Inspectors: See Section 5(o).
<PAGE>
-3-
Issue Date: The date on which the original Notes were sold to the
Initial Purchasers pursuant to the Purchase Agreement.
Issuers: The Company and the Subsidiary Guarantors, collectively.
NASD: National Association of Securities Dealers, Inc.
Notes: See the second introductory paragraph to this Agreement.
Participant: See Section 7(a).
Participating Broker-Dealer: See Section 2(b).
Person: An individual, trustee, corporation, partnership, limited
liability company, joint stock company, trust, unincorporated association,
union, business association, firm or other legal entity.
Private Exchange: See Section 2(b).
Private Exchange Notes: 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 Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Notes 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 second introductory paragraph to this
Agreement.
Records: See Section 5(o).
Registrable Notes: Each Note upon original issuance thereof and at
all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv)
hereof is applicable upon original issuance thereof and at all times subsequent
thereto and each
<PAGE>
-4-
Private Exchange Note upon original issuance thereof and at all times subsequent
thereto, until, in the case of any such Note, Exchange Note or Private Exchange
Note, as the case may be, the earliest to occur of (i) a Registration Statement
(other than, with respect to any Exchange Note as to which Section 2(c)(iv)
hereof is applicable) covering such Note, Exchange Note or Private Exchange
Note, as the case may be, has been declared effective by the SEC and such Note,
Exchange Note or Private Exchange Note, as the case may be, has been disposed of
in accordance with such effective Registration Statement, (ii) such Note,
Exchange Note or Private Exchange Note, as the case may be, is sold in
compliance with Rule 144, (iii) in the case of any Note, such Note has been
exchanged pursuant to the Exchange Offer for an Exchange Note or Exchange Notes
which may be resold without restriction under federal securities laws, or (iv)
such Note, Exchange Note or Private Exchange Note, as the case may be, ceases to
be outstanding for purposes of the Indenture.
Registration Statement: Any registration statement of the Issuers,
including, but not limited to, the Exchange Offer Registration Statement and the
Shelf Registration Statement, that covers any of the Registrable Notes pursuant
to the provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
Rule 144: Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC 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: Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
Rule 415: Rule 415 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
SEC: The Securities and Exchange Commission.
<PAGE>
-5-
Securities Act: The Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c).
Shelf Registration: See Section 3(b).
Shelf Registration Statement: See Section 3(a).
Subsequent Shelf Registration: See Section 3(b).
Subsidiary Guarantors: Each of the Company's subsidiaries which is
or is required to become a party to the Indenture.
TIA: The Trust Indenture Act of 1939, as amended.
Transfer Restricted Notes means each outstanding Note until (i) the
date on which such Note has been exchanged for a freely transferable Exchange
Note in the Exchange Offer, (ii) the date on which such Note has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (iii) the date on which such Senior
Note is distributed to the public pursuant to Rule 144 or is salable pursuant to
Rule 144(k).
Trustee: The trustee under the Indenture and, if existent, the
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
Underwritten registration or underwritten offering: A registration
in which securities of the Issuers are sold to an underwriter for reoffering to
the public.
2. Exchange Offer
(a) Each of the Issuers, jointly and severally, agrees to prepare
and file with the SEC no later than the Filing Date, an offer to exchange (the
"Exchange Offer") any and all of the Registrable Notes (other than Private
Exchange Notes, if any) for a like aggregate principal amount of debt securities
of the Company which are identical in all material respects to the Notes,
including the related Guarantees of the Subsidiary Guarantors (the "Exchange
Notes") (and which are entitled to the benefits of the Indenture or a trust
indenture which is identical in all material respects to the Indenture (other
than such changes to the Indenture or any such identical
<PAGE>
-6-
trust indenture as are necessary to comply with any requirements of the SEC to
effect or maintain the qualification thereof under the TIA) and which, in either
case, has been qualified under the TIA), except that the Exchange Notes shall
have been registered pursuant to an effective Registration Statement under the
Securities Act and shall contain no restrictive legend thereon. The Exchange
Offer shall be registered under the Securities Act on the appropriate form (the
"Exchange Offer Registration Statement") and shall comply with all applicable
tender offer rules and regulations under the Exchange Act. Each of the Issuers,
jointly and severally, agrees to use its best efforts to (x) cause the Exchange
Offer Registration Statement to be declared effective under the Securities Act
on or before the Effectiveness Date; (y) keep the Exchange Offer open for not
less than 30 calendar days (or longer if required by applicable law) after the
date that notice of the Exchange Offer is first mailed to Holders; and (z)
consummate the Exchange Offer on or prior to the 30th day following the date on
which the Exchange Offer Registration Statement is declared effective. If after
such Exchange Offer Registration Statement is initially declared effective by
the SEC, the Exchange Offer or the issuance of the Exchange Notes thereunder is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Exchange Offer
Registration Statement shall be deemed not to have become effective for purposes
of this Agreement. Each Holder who participates in the Exchange Offer will be
required to represent that any Exchange Notes 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 Notes, that such
Holder is not an affiliate of any Issuer within the meaning of Rule 405 under
the Securities Act, or if it is an affiliate, it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable and any additional representations that in the written opinion
of counsel to the Company are necessary under then-existing interpretations of
the SEC in order for the Exchange Offer Registration Statement to be declared
effective. In addition, if the Holder is not a Participating Broker-Dealer, it
will be required to represent that it is not engaged in, and does not intend to
engage in, the distribution of the Exchange Notes. If the Holder is a
Participating Broker-Dealer that will receive Exchange Notes for its own account
in exchange for Notes that were acquired as a result of market-making activities
or other trading activities, it will be required to acknowledge that it will
deliver a prospectus in connection with any resale of such Ex-
<PAGE>
-7-
change Notes. 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 Notes that are Private Exchange
Notes and Exchange Notes held by Participating Broker-Dealers, and the Issuers
shall have no further obligation to register Registrable Notes (other than
Private Exchange Notes and other than in respect of any Exchange Notes as to
which clause 2(c)(iv) hereof applies) pursuant to Section 3 of this Agreement.
(b) The Company shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, 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 under the Exchange Act) of Exchange
Notes 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
reasonable judgment of the Initial Purchasers represent the prevailing views of
the staff of the SEC. Such "Plan of Distribution" section shall also allow, to
the extent permitted by applicable policies and regulations of the SEC, the use
of the Prospectus by all Persons subject to the prospectus delivery requirements
of the Securities Act, including, to the extent so permitted, all Participating
Broker-Dealers, and include a statement describing the manner in which
Participating Broker-Dealers may resell the Exchange Notes.
Each of the Issuers shall use its best efforts to keep the Exchange
Offer 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 delivery requirements of the
Securities Act for such period of time as such Persons must comply with such
requirements in connection with offers and sales of the Exchange Notes; provided
that such period shall not exceed 180 calendar days (or such longer period if
extended pursuant to Section 5 hereof) (the "Applicable Period").
If, upon consummation of the Exchange Offer, any Initial Purchaser
holds any Notes acquired by it and having the status of an unsold allotment in
the initial distribution, the Issuers upon the request of any Initial Purchaser
shall, simultaneously with the delivery of the Exchange Notes in the Exchange
Offer, issue and deliver to such Initial Purchaser, in
<PAGE>
-8-
exchange (the "Private Exchange") for the Notes held by such Initial Purchaser,
a like principal amount of debt securities of the Company that are identical in
all material respects to the Exchange Notes, including the related Guarantee of
the Subsidiary Guarantors, except for the existence of restrictions on transfer
thereof under the Securities Act and securities laws of the several states of
the U.S. (the "Private Exchange Notes") (and which are issued pursuant to the
same indenture as the Exchange Notes). The Private Exchange Notes shall bear the
same CUSIP number as the Exchange Notes. Interest on the Exchange Notes and
Private Exchange Notes will accrue from the last interest payment date on which
interest was paid on the Notes surrendered in exchange therefor or, if no
interest has been paid on the Notes, from the Issue Date.
In connection with the Exchange Offer, the Issuers shall:
(1) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York, which may be
the Trustee or an affiliate thereof;
(3) permit Holders to withdraw tendered Registrable Notes 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; and
(4) otherwise comply in all material respects with all applicable
laws.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company shall:
(1) accept for exchange all Registrable Notes validly tendered and
not validly withdrawn pursuant to the Exchange Offer or the Private
Exchange;
(2) deliver to the Trustee for cancellation all Registrable Notes so
accepted for exchange; and
<PAGE>
-9-
(3) cause the Trustee to authenticate and deliver promptly to each
Holder tendering such Registrable Notes, Exchange Notes or Private
Exchange Notes, as the case may be, equal in principal amount to the Notes
of such Holder so accepted for exchange.
The Exchange Notes and the Private Exchange Notes may be issued
under (i) the Indenture or (ii) an indenture identical in all material respects
to the Indenture, which in either event will provide that the Exchange Notes
will not be subject to the transfer restrictions set forth in the Indenture and
that the Exchange Notes, the Private Exchange Notes and the Notes, if any, will
vote and consent together on all matters as one class and that none of the
Exchange Notes, the Private Exchange Notes or the Notes, if any, will have the
right to vote or consent as a separate class on any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Company is not permitted to effect
an Exchange Offer, (ii) the Exchange Offer is not consummated within 180
calendar days after the Issue Date, (iii) any holder of Private Exchange Notes
so requests in writing to the Issuers or (iv) any Holder of Notes notifies the
Company on or by the 20th Business Day following consummation of the Exchange
Offer that (a) it is prohibited by law or SEC policy from participating in the
Exchange Offer, (b) it may not resell the Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a Prospectus and the prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales or (c) it is a broker-dealer and owns Notes acquired
directly from the Company or an affiliate of the Company or (d) it does not
otherwise receive freely tradeable Exchange Notes in the Exchange Offer, then
the Issuers shall promptly deliver to the Holders and the Trustee written notice
thereof (the "Shelf Notice") and shall file a Shelf Registration pursuant to
Section 3.
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by Section 2(c),
then:
(a) Shelf Registration. The Issuers shall as promptly as reasonably
practicable 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 Notes (the "Shelf Registration Statement").
<PAGE>
-10-
If the Issuers shall not have yet filed the Exchange Offer Registration
Statement, each of the Issuers shall use its best efforts to file with the
SEC the Shelf Registration Statement on or prior to the Filing Date and
shall use its best efforts to cause such Shelf Registration Statement to
be declared effective under the Securities Act on or prior to the
Effectiveness Date. Otherwise, each of the Issuers shall use its best
efforts to file with the SEC the Shelf Registration Statement within 30
days of the delivery of the Shelf Notice and shall use its best efforts to
cause such Shelf Registration Statement to be declared effective under the
Securities Act as promptly as practicable thereafter. The Shelf
Registration Statement shall be on Form S-1 or another appropriate form
permitting registration of such Registrable Notes for resale by Holders in
the manner or manners designated by them (including, without limitation,
one or more underwritten offerings). The Issuers shall not permit any
securities other than the Registrable Notes to be included in any Shelf
Registration Statement. Each of the Issuers shall use its best efforts to
keep the Shelf Registration Statement continuously effective under the
Securities Act until two years after the Issue Date (or, if Rule 144(k)
under the Securities Act is amended to permit unlimited resales by
non-affiliates within a lesser period, such lesser period) (subject to
extension pursuant to the last paragraph of Section 5 hereof) (the
"Effectiveness Period") or such shorter period ending when (i) all
Registrable Notes covered by the Shelf Registration Statement have been
sold in the manner set forth and as contemplated in the Shelf Registration
Statement or (ii) a Subsequent Shelf Registration covering all of the
Registrable Notes has been declared effective under the Securities Act.
(b) Subsequent Shelf Registrations. If the Shelf Registration
Statement or any Subsequent Shelf Registration Statement (as defined)
ceases to be effective for any reason at any time during the Effectiveness
Period (other than because of the sale of all of the securities registered
thereunder), each of the Issuers shall use its best efforts to obtain the
prompt withdrawal of any order suspending the effectiveness thereof, and
in any event shall within 30 days of such cessation of effectiveness amend
the Shelf Registration Statement in a manner 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 Notes (a "Subsequent Shelf Registration"). If a Subse-
<PAGE>
-11-
quent Shelf Registration is filed, each of the Issuers shall use its best
efforts to cause the Subsequent Shelf Registration to be declared
effective as soon as practicable after such filing and to keep such
Subsequent Shelf Registration continuously effective for a period equal to
the number of days in the Effectiveness Period less the aggregate number
of days during which the initial Shelf Registration Statement or any
Subsequent Shelf Registrations was previously continuously effective. As
used herein the term "Shelf Registration" means the initial Shelf
Registration Statement and any Subsequent Shelf Registration.
(c) Supplements and Amendments. Each of the Issuers shall promptly
supplement and amend any Shelf Registration Statement and the related
Prospectus and any amendments or supplements thereto if required by the
rules, regulations or instructions applicable to the registration form
used for such Shelf Registration, if required by the Securities Act, or if
reasonably requested by the Holders of a majority in aggregate principal
amount of the Registrable Notes covered by such Shelf Registration or by
any underwriter of such Registrable Notes, in each case, with each
Issuer's consent, which consent shall not be unreasonably withheld or
delayed.
4. Additional Amounts
(a) The Issuers and the Initial Purchasers agree that the Holders of
Registrable Notes will suffer damages if the Issuers fail to fulfill their
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,
each of the Issuers agrees to pay, as liquidated damages, additional amounts in
respect of Transfer Restricted Notes ("Additional Amounts") under the
circumstances and to the extent set forth below (each of which shall be given
independent effect):
(i) if (A) neither the Exchange Offer Registration Statement nor the
Shelf Registration Statement is filed with the SEC on or prior to the
Filing Date, or (B) notwithstanding that the Issuers have consummated or
will consummate an Exchange Offer, the Issuers are required to file a
Shelf Registration Statement and such Shelf Registration Statement is not
filed on or prior to the date required by this Agreement, then commencing
on the day after the Filing Date in the case of
<PAGE>
-12-
clause (A) or commencing on the date such Shelf Registration Statement is
required to be filed, in the case of clause (B), Additional Amounts shall
be payable in respect of the Transfer Restricted Notes over and above any
stated interest at a rate of 0.25% per annum for the first 90 days
immediately following the Filing Date or such other date, as the case may
be, such Additional Amounts payable shall increase by an additional 0.25%
per annum at the beginning of each subsequent 90-day period;
(ii) if (A) neither the Exchange Offer Registration Statement nor
the Shelf Registration Statement is declared effective on or prior to the
Effectiveness Date, or (B) notwithstanding that the Issuers have
consummated or will consummate an Exchange Offer, the Issuers are required
to file a Shelf Registration Statement and such Shelf Registration
Statement is not declared effective by the SEC on or prior to the 150th
day following the date such Shelf Registration Statement was filed, then
commencing on the day after such Effectiveness Date in the case of clause
(A) or such 150th day in the case of clause (B), Additional Amounts shall
be payable in respect of the Transfer Restricted Notes over and above any
stated interest at a rate of 0.25% per annum for the first 90 days
immediately following the day after the Effectiveness Date in the case of
clause (A), or such 90th day in case of clause (B), such Additional
Amounts payable increasing by an additional 0.25% per annum at the
beginning of each subsequent 90-day period; and
(iii) if (A) the Exchange Offer is not consummated within 180 days
of the Issue Date or (B) the Commission shall have issued a stop order
suspending the effectiveness of the Exchange Offer Registration Statement
or any Shelf Registration Statement with respect to the Notes at a time
when such Exchange Offer Registration Statement or Shelf Registration
Statement, as the case may be, is required to be kept effective by the
Issuers, then Additional Amounts shall be payable in respect of the
Transfer Restricted Notes over and above any stated interest at a rate
0.25% per annum for the first 90 days commencing on the (x) 180th day
after such effective date in the case of (A) above or (y) from the date of
the order suspending effectiveness in the case of clause (B) above, such
Additional Amounts payable increasing by an additional 0.25% per
<PAGE>
-13-
annum at the beginning of each such subsequent 90-day period;
provided, however, that the Additional Amounts on the Transfer Restricted Notes
may not exceed in the aggregate 1.0% per annum; provided further that (1) upon
the filing of the Exchange Offer Registration Statement or a Shelf Registration
Statement (in the case of (i) above), (2) upon the effectiveness of the Exchange
Offer Registration Statement or a Shelf Registration Statement, as the case may
be (in the case of (ii) above), or (3)(i) upon the consummation of the Exchange
Offer with respect to the Notes (in the case of (iii)(A) above) or (ii) the
Exchange Offer Registration Statement or Shelf Registration with respect to the
Notes, as the case may be, not being subject to an order suspending the
effectiveness thereof (in the case of (iii)(B) above), Additional Amounts on any
Registrable Notes then accruing Additional Amounts as a result of such clause
(or the relevant subclause thereof), as the case may be, shall cease to accrue.
(b) The Issuers shall notify the Trustee within one Business Day
after each and every date on which an event occurs in respect of which
Additional Amounts are required to be paid (an "Event Date"). Any Additional
Amounts due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be
payable in cash semi-annually on each regular interest payment date specified in
the Indenture (to the Holders of Transfer Restricted Notes of record on the
regular record date therefor (specified in the Indenture) immediately preceding
such dates), commencing with the first such regular interest payment date
occurring after any such Additional Amounts commence to accrue. The amount of
any Additional Amounts will be determined by multiplying the applicable
Additional Amounts rate by the principal amount of the Notes subject thereto,
multiplied by a fraction, the numerator of which is the number of days such
Additional Amounts 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 filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, each Issuer shall effect such registrations to permit
the sale of such securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto and in connection
with any Registration Statement filed by each Issuer hereunder, each Issuer
shall:
<PAGE>
-14-
(a) Prepare and file with the SEC prior to the Filing Date, the
Exchange Offer Registration Statement or if the Exchange Offer
Registration Statement is not filed or is unavailable, a Shelf
Registration as prescribed by Section 2 or 3, and use its best efforts to
cause each such Registration Statement to become effective and remain
effective as provided herein; provided that, if (1) a Shelf Registration
is filed pursuant to Section 3, or (2) a Prospectus contained in an
Exchange Offer Registration Statement filed pursuant to Section 2 is
required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period and who has advised the Company that it is a Participating
Broker-Dealer, before filing any Registration Statement or Prospectus or
any amendments or supplements thereto, the Issuers shall, if requested,
furnish to and afford the Holders of the Registrable Notes to be
registered pursuant to such Shelf Registration or each such Participating
Broker-Dealer, as the case may be, covered by such Registration Statement,
their counsel and the managing underwriters, if any, a 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 (in each case at least five Business Days
prior to such filing). The Issuers shall not file any such Registration
Statement or Prospectus or any amendments or supplements thereto if the
Holders of a majority in aggregate principal amount of the Registrable
Notes covered by such Registration Statement, or any such Participating
Broker-Dealer, as the case may be, their counsel, or the managing
underwriters, if any, shall reasonably object except to the extent that
the Issuers are advised by outside counsel that such amendment or
supplement is required by law.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement, 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 Securities Act; and
comply with the provisions of the Securities Act and the Exchange Act
applicable to it with respect to the disposition of all securities covered
by such Registration Statement as so amended or in such Prospectus as so
supple-
<PAGE>
-15-
mented and with respect to the subsequent resale of any securities being
sold by a Participating Broker-Dealer covered by any such Prospectus. The
Issuers shall be deemed not to have used their best efforts to keep a
Registration Statement effective during the Applicable Period or the
Effectiveness Period if they voluntarily take any action that would result
in selling Holders of the Registrable Notes covered thereby or
Participating Broker-Dealers seeking to sell Exchange Notes not being able
to sell such Registrable Notes or such Exchange Notes during that period
unless such action is required by applicable law, rule or regulation or
unless the Issuers comply with this Agreement, including, without
limitation, the provisions of paragraph 5(k) hereof and the last paragraph
of Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period from whom the Issuers have
received written notice that it will be a Participating Broker-Dealer,
notify the selling Holders of Registrable Notes and each such
Participating Broker-Dealer, their counsel and the managing underwriters,
if any, promptly (but in any event within two Business Days), and confirm
such notice in writing, (i) when a Prospectus or any Prospectus supplement
or post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, 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
such Registration Statement or post-effective amendment 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 Securities Act to be
delivered in connection with sales of the Registrable Notes the
representations and warranties of any Issuer contained in any agreement
(including any underwriting agreement) contemplated by Section 5(n) hereof
cease to be true and correct in any material respect, (iv) of the receipt
by any Issuer of any notifica-
<PAGE>
-16-
tion with respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable Notes
or the Exchange Notes 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, the
existence of any condition or any information becoming known 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 light
of the circumstances under which they were made, not misleading, and (vi)
of the Issuers' 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 Offer Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes 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 Notes or the Exchange Notes 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 date.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriters, if any, or the Holders of a
majority in aggregate principal amount of the Registrable Notes being sold
in connection with an underwritten offering, (i) as promptly as
practicable incorporate in a prospectus supplement or
<PAGE>
-17-
post-effective amendment such information or revisions to information
therein relating to such underwriters or selling Holders as the managing
underwriters, if any, or such Holders or their counsel reasonably request
to be included or made therein, (ii) make all required filings of such
prospectus supplement or such post-effective amendment as soon as
practicable after the Issuers have received notification of the matters to
be incorporated in such prospectus supplement or post-effective amendment,
and (iii) supplement or make amendments to such Registration Statement in
order to permit the sale of the securities covered thereby.
(f) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, furnish to each selling
Holder of Registrable Notes and to each such Participating Broker-Dealer
who so requests and to counsel and each managing underwriter, 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 Offer Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer, deliver to each selling
Holder of Registrable Notes or each such Participating Broker-Dealer, as
the case may be, their respective counsel, and the 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 Issuers hereby consent to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Holders of
Registrable Notes and each Participating Broker-Dealer, and the
underwriters or agents, if any, and dealers (if any), in connection with
the offering and sale of the Registrable Notes covered by, or the sale by
Participating Broker-Dealers of the Exchange Notes pursuant
<PAGE>
-18-
to, such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Offer Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, use its best efforts to register or
qualify, and cooperate with the selling Holders of Registrable Notes and
each such Participating Broker-Dealer, the underwriters, if any, and their
respective counsel in connection with the registration or qualification
(or exemption from such registration or qualification) of such Registrable
Notes or Exchange Notes, as the case may be, 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 Notes held by Participating Broker-Dealers or
Registrable Notes are offered pursuant to an underwritten offering,
counsel to the underwriters shall, at the cost and expense of the Issuers,
(1) perform the Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h); (2)
keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to be
kept effective and (3) do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions of
the Exchange Notes by Participating Broker-Dealers or the Registrable
Notes covered by the applicable Registration Statement; provided, further
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
where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3,
cooperate with the selling Holders of Registrable Notes, any Participating
Broker-Dealer and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates
representing Registrable Notes to be sold, which certificates shall not
bear any restrictive legends and shall be in a form eligible for deposit
with The Depository Trust Company;
<PAGE>
-19-
and enable such Registrable Notes to be in such denominations and
registered in such names as the managing underwriter or underwriters, if
any, or Holders may reasonably request.
(j) Use its best efforts to cause the Registrable Notes covered by
the Registration Statement to be registered with or approved by such
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 Notes, in which case the Issuers will
cooperate in all reasonable respects with the filing of such Registration
Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, upon the occurrence of any
event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as
practicable prepare and (subject to Section 5(a) hereof) file with the
SEC, at the Issuers' sole expense, 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 Notes being sold
thereunder or to the purchasers of the Exchange Notes to whom such
Prospectus will be delivered by a Participating Broker-Dealer, 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 light of the circumstances under which
they were made, not misleading.
(l) Use its best efforts to cause the Registrable Notes covered by a
Registration Statement to be rated with the appropriate rating agencies,
if so requested by the Holders of a majority in aggregate principal amount
of Registrable Notes covered by such Registration Statement or the
managing underwriter or underwriters, if any.
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with printed
certificates for the
<PAGE>
-20-
Registrable Notes in a form eligible for deposit with The Depository Trust
Company and (ii) provide a CUSIP number for the Registrable Notes.
(n) In connection with an Underwritten Offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as
is customary in Underwritten Offerings of debt securities similar to the
Notes and take all such other actions as are reasonably requested by the
managing underwriter or underwriters in order to expedite or facilitate
the registration or the disposition of such Registrable Notes and, in such
connection, (i) make such representations and warranties to the
underwriters, with respect to the business of the Issuers and their
subsidiaries and the Registration Statement, Prospectus and documents, if
any, 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 similar to the Notes, and
confirm the same in writing if and when requested; (ii) obtain the opinion
of counsel to the Issuers and updates thereof in form and substance
reasonably satisfactory to the managing underwriter or underwriters,
addressed to the underwriters covering the matters customarily covered in
opinions requested in underwritten offerings of debt securities similar to
the Notes 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
Issuers (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired
by the Company for which financial statements and financial data are, or
are required to be, included in the Registration Statement), addressed to
each of the underwriters, 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 similar to
the Notes 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 principal amount of Registrable Notes covered by such
Registration Statement and the managing under-
<PAGE>
-21-
writer 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 Offer Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker- Dealer who seeks to sell
Exchange Notes during the Applicable Period, make available for inspection
by any selling Holder of such Registrable Notes being sold, and each
Participating Broker-Dealer, any underwriter participating in any such
disposition of Registrable Notes, if any, and any attorney, accountant or
other agent retained by any such selling Holder, each Participating
Broker-Dealer, as the case may be, or underwriter (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate
documents and properties of each Issuer 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 each Issuer and its subsidiaries
to supply all information reasonably requested by any such Inspector in
connection with such Registration Statement. Records which an Issuer
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 misstatement or omission in such Registration Statement, (ii)
the release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction, (iii) the information in
such Records has been made generally available to the public other than as
a result of a disclosure or failure to safeguard by such Inspector or (iv)
disclosure of such information is, in the opinion of counsel for any
Inspector, necessary or advisable in connection with any action, claim,
suit or proceeding, directly or indirectly, involving or potentially
involving such Inspector and arising out of, based upon, related to, or
involving this Agreement, or any transactions contemplated hereby or
arising hereunder. Each selling Holder of such Registrable Notes and each
Participating Broker-Dealer will be required to agree that information
obtained by it as a result of such
<PAGE>
-22-
inspections shall be deemed confidential and shall not be used by it as
the basis for any market transactions in the securities of any Issuer
unless and until such is made generally available to the public. Each
Inspector, each selling Holder of such Registrable Notes and each
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 pursuant to clauses (ii) or (iv) of the previous
sentence or otherwise, give notice to the Issuers and allow the Issuers to
undertake appropriate action to obtain a protective order or otherwise
prevent disclosure of the Records deemed confidential at its expense.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a), as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange
Offer or the first Registration Statement relating to the Registrable
Notes; and in connection therewith, cooperate with the trustee under any
such indenture and the Holders of the Registrable Notes, to effect such
changes to such indenture as may be required for such indenture to be so
qualified in accordance with the terms of the TIA; and execute, and use
its best efforts to cause such trustee to execute, all documents as may be
required to effect such changes, and all other forms and documents
required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.
(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 Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Notes 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.
<PAGE>
-23-
(r) Upon consummation of the Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Issuers, in a form customary for
underwritten transactions, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the
Private Exchange, as the case may be, that the Exchange Notes or the
Private Exchange Notes, as the case may be, and the related indenture
constitute legally valid and binding obligations of the Issuers,
enforceable against the Issuers in accordance with their respective terms.
(s) If the Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the
Issuers (or to such other Person as directed by the Company) in exchange
for the Exchange Notes or the Private Exchange Notes, as the case may be,
the Issuers shall mark, or caused to be marked, on such Registrable Notes
that such Registrable Notes are being cancelled in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be; in no
event shall such Registrable Notes be marked as paid or otherwise
satisfied.
(t) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in
connection with any filings required to be made with the NASD.
(u) Use its reasonable best efforts to take all other steps
reasonably necessary to effect the registration of the Registrable Notes
covered by a Registration Statement contemplated hereby.
The Issuers may require each seller of Registrable Notes as to which
any registration is being effected to furnish to the Issuers such information
regarding such seller and the distribution of such Registrable Notes as the
Issuers may, from time to time, reasonably request. The Issuers may exclude from
such registration the Registrable Notes of any seller who fails to furnish such
information within a reasonable time after receiving such request. Each seller
as to which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Issuers all information required to be disclosed in order to
make the information previously furnished to the Issuers by such seller not
materially misleading.
<PAGE>
-24-
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes,
respectively, to be sold by such Participating Broker-Dealer, as the case may
be, that, upon receipt of any notice from the Issuers 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 discontinue disposition of such Registrable Notes
covered by such Registration Statement or Prospectus or Exchange Notes to be
sold by such Holder or Participating Broker-Dealer, as the case may be, and, in
each case, dissemination of such Prospectus until such Holder's or Participating
Broker-Dealer'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
Issuers shall give any such notice, each of the Effectiveness Period and the
Applicable Period shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of Registrable Notes covered by such Registration
Statement or Exchange Notes to be sold by such Participating Broker-Dealer, as
the case may be, shall have received (x) the copies of the supplemented or
amended Prospectus contemplated by Section 5(k) or (y) the Advice.
6. Registration Expenses
All fees and expenses incident to the performance of or compliance
with this Agreement by the Issuers shall be borne by the Issuers, jointly and
severally, 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 an 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 Notes or Exchange
Notes and determination of the eligibility of the Registrable Notes or Exchange
Notes for investment under the laws of such jurisdictions (x) where the holders
of Registrable Notes are located, in the case of the Exchange Notes, or (y) as
provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange
Notes to be sold by a Participating Broker-Dealer during the Applicable
Period)), (ii) printing expenses, including, without limitation, expenses
<PAGE>
-25-
of printing certificates for Registrable Notes or Exchange Notes in a form
eligible for deposit with The Depository Trust Company and of printing
prospectuses if the printing of prospectuses is requested by the managing
underwriter or underwriters, if any, or by the Holders of a majority in
aggregate principal amount of the Registrable Notes included in any Registration
Statement or by any Participating Broker-Dealer, as the case may be, (iii)
messenger, telephone and delivery expenses incurred in connection with the
Exchange Offer Registration Statement and any Shelf Registration, (iv) fees and
disbursements of counsel for the Issuers and fees and disbursements of special
counsel for the Initial Purchasers and the sellers of Registrable Notes (except
to the extent fees of such special counsel are incurred in connection with a
customary Exchange Offer in which case the Issuers shall not be responsible
therefor), (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(n)(iii) (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) Securities Act liability
insurance, if any Issuer desires such insurance, (viii) fees and expenses of all
other Persons retained by the Issuers, (ix) internal expenses of the Issuers
(including, without limitation, all salaries and expenses of officers and
employees of the Company performing legal or accounting duties), (x) the expense
of any annual or special audit, (xi) the fees and expenses incurred in
connection with the listing of the securities to be registered on any securities
exchange, if the Company elects, in its sole discretion to list the Securities,
(xii) the fees and disbursements of underwriters, if any (except to the extent
such fees are incurred in connection with a customary Exchange Offer in which
case the Issuers shall not be responsible therefor), 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 the
Registrable Notes which discounts, commissions or taxes shall be paid by Holders
of such Registrable Notes) and (xiii) the expenses relating to printing, word
processing and distributing all Registration Statements, underwriting
agreements, securities sales agreements, indentures and any other documents
necessary in order to comply with this Agreement.
7. Indemnification
(a) Each of the Issuers, jointly and severally, agrees to indemnify
and hold harmless each Holder of Registrable Notes and each Participating
Broker-Dealer, the officers and directors of each such Person, and each Person,
if any, who
<PAGE>
-26-
controls any such Person within the meaning of either Section 15 of the
Securities 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 reasonable expenses
actually 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 Issuers shall have
furnished any amendments or supplements thereto) 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 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
furnished to the Company in writing by or on behalf of such Participant
expressly for use therein; provided, however, that the Issuers shall not be
liable if such untrue statement or omission or alleged untrue statement or
omission was contained or made in any preliminary prospectus and corrected in
the Prospectus or any amendment or supplement thereto and the Prospectus does
not contain any other untrue statement or omission or alleged untrue statement
or omission of a material fact that was the subject matter of the related
proceeding and any such loss, liability, claim, damage or expense suffered or
incurred by the Participants resulted from any action, claim or suit by any
Person who purchased Registrable Notes or Exchange Notes which are the subject
thereof from such Participant and it is established in the related proceeding
that such Participant failed to deliver or provide a copy of the Prospectus (as
amended or supplemented) to such Person with or prior to the confirmation of the
sale of such Registrable Notes or Exchange Notes sold to such Person if required
by applicable law, unless such failure to deliver or provide a copy of the
Prospectus (as amended or supplemented) was a result of noncompliance by the
Issuers with Section 5 of this Agreement.
(b) Each Participant will be required to agree, severally and not
jointly, to indemnify and hold harmless each Issuer, its directors and officers
and each Person who controls each Issuer within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Issuers to each Participant, but only with
reference to information relating to such Participant
<PAGE>
-27-
furnished to the Issuers 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 shall in no event exceed the proceeds received by such Participant
from sales of Registrable Notes or Exchange Notes 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 of the
two preceding paragraphs, 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 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 actually incurred by such counsel related to
such proceeding; provided, however, that the failure to so notify the
Indemnifying Person shall not relieve it of any obligation or liability which it
may have hereunder or otherwise. 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 representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is
understood that, unless there is a conflict among Indemnified Persons, 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 firm (in addition to one local counsel in each jurisdiction)
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 Notes sold by all
such Participants and any such separate firm for the Issuers, their directors,
officers and such control Persons of the Issuers shall be designated in writing
by the
<PAGE>
-28-
Issuers. 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 is a final non-appealable 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 actually 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 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; provided, however, that the Indemnifying
Person shall not be liable for any settlement effected without its consent
pursuant to this sentence if the Indemnifying Person is contesting, in good
faith, the request for reimbursement. 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 and indemnity could have been sought hereunder by
such Indemnified Person, unless such settlement (A) includes an unconditional
release of such Indemnified Person, in form and substance satisfactory to such
Indemnified Person, from all liability on claims that are the subject matter of
such proceeding and (B) does not include any statement as to an admission of
fault, culpability or failure to act by or on behalf of an Indemnified Person.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is unavailable to, or insufficient to hold
harmless, 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 and in
order to provide for just and equitable contribution, 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 Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions (or alleged statements or omissions) that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
<PAGE>
-29-
other relevant equitable considerations. The relative fault of the parties shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuers on the one hand
or by the Participants or such other Indemnified Person, as the case may be, on
the other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission and any other
equitable considerations appropriate under the circumstances.
(e) The parties 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 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 Notes or
Exchange Notes, as the case may be, 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
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
(f) 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
Each of the Issuers covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder in a timely manner and, if at any
time thereafter it is no longer required to file such reports and ceases to
voluntarity file such reports, it will, upon the request of any
<PAGE>
-30-
Holder of Registrable Notes, make publicly available other information so long
as necessary to permit sales pursuant to Rule 144 and Rule 144A under the
Securities Act. Each of the Issuers further covenants, for so long as any
Registrable Notes remain outstanding, to make available to any Holder or
beneficial owner of Registrable Notes in connection with any sale thereof and
any prospective purchaser of such Registrable Notes from such Holder or
beneficial owner, the information required by Rule 144A(d)(4) under the
Securities Act in order to permit resales of such Registrable Notes pursuant to
Rule 144A.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf Registration
are to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Notes included in such offering and reasonably acceptable to the Issuers.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes 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 required under the terms of such
underwriting arrangements.
10. Miscellaneous
(a) Remedies. In the event of a breach by any Issuer of any of its
obligations under this Agreement, each Holder of Registrable Notes and each
Participating Broker-Dealer holding Exchange Notes, in addition to being
entitled to exercise all rights provided herein, in the Indenture or, in the
case of each 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. Each Issuer agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of
any of the provisions of this Agreement and hereby further agrees that, in the
event of any action for specific performance in respect of such breach, it shall
waive the defense that a remedy at law would be adequate.
<PAGE>
-31-
(b) No Inconsistent Agreements. None of the Issuers has entered, as
of the date hereof, and none of the Issuers shall enter, after the date of this
Agreement, into any agreement with respect to any of its securities that is
inconsistent with the rights granted to the Holders of Registrable Notes in this
Agreement or otherwise conflicts with the provisions hereof. None of the Issuers
has entered and none of the Issuers shall enter into any agreement with respect
to any of its securities which will grant to any Person piggy-back rights with
respect to a Registration Statement.
(c) Adjustments Affecting Registrable Notes. None of the Issuers
shall, directly or indirectly, take any action with respect to the Registrable
Notes as a class that would adversely affect the ability of the Holders of
Registrable Notes to include such Registrable Notes in a registration undertaken
pursuant to this Agreement.
(d) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (A) the Holders of not less than a majority in aggregate principal
amount of the then outstanding Registrable Notes and (B) in circumstances that
would adversely affect Participating Broker-Dealers, the Participating
Broker-Dealers holding not less than a majority in aggregate principal amount of
the Exchange Notes held by all Participating Broker-Dealers; provided, however,
that Section 7 and this Section 10(d) may not be amended, modified or
supplemented without the prior written consent of each Holder and each
Participating Broker-Dealer (including any person who was a Holder or
Participating Broker-Dealer of Registrable Notes or Exchange Notes, as the case
may be, disposed of pursuant to any Registration Statement). 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
Notes whose securities are being tendered pursuant to the Exchange Offer or 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
Notes may be given by Holders of at least a majority in aggregate principal
amount of the Registrable Notes being tendered or being sold by such Holders
pursuant to such Registration Statement.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by
<PAGE>
-32-
hand-delivery, registered first-class mail, next-day air courier or telecopier:
1. if to a Holder of Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, with a copy in like manner to the Initial
Purchasers as follows:
Citicorp Securities, Inc.
Citibank Canada Securities Limited
Citibank International plc
c/o Citicorp Securities, Inc.
399 Park Avenue
New York, New York 10043
Facsimile No.: (212) 559-0292
Attention: High-Yield Finance
Department
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Facsimile No.: (212) 269-5420
Attention: James J. Clark, Esq.
2. if to the Initial Purchasers, at the address specified in Section
10(e)(1);
3. if to the Company, as follows:
Global Health Sciences, Inc.
987 Enterprise Way
Orange, CA 92867
Facsimile No.: (714) 728-1520
Attention: Richard D. Marconi
with copies to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Facsimile No.: (212) 310-8007
Attention: Michael E. Lubowitz, Esq.
<PAGE>
-33-
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; five Business Days
after being deposited in the mail, postage prepaid, if mailed; one Business Day
after being timely delivered to a next-day air courier guaranteeing overnight
delivery; and when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto and the Holders; provided, however, that this Agreement shall not inure
to the benefit of or be binding upon a successor or assign of a Holder unless
and to the extent such successor or assign holds Registrable Notes.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) 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.
(j) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would
<PAGE>
-34-
have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
(k) Notes Held by the Company or Its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Company or its affiliates (as
such term is defined in Rule 405 under the Securities Act) shall not be counted
in determining whether such consent or approval was given by the Holders of such
required percentage.
(l) Third Party Beneficiaries. Holders of Registrable Notes and
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
(m) Entire Agreement. This Agreement, together with the Purchase
Agreement and the Indenture, is intended by the parties as a final and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein and any and all prior oral or
written agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda among the Initial Purchasers on the
one hand and the Issuers on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby.
<PAGE>
-35-
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
GLOBAL HEALTH SCIENCES, INC.
By: /s/ Richard D. Marconi
-----------------------------
Name:
Title:
GLOBAL HEALTH SUB, INC.
By: /s/ Richard D. Marconi
-----------------------------
Name:
Title:
D&F INDUSTRIES, INC.
By: /s/ Richard D. Marconi
-----------------------------
Name:
Title:
RAVEN INDUSTRIES
By: /s/ Richard D. Marconi
-----------------------------
Name:
Title:
DYNAMIC PRODUCTS, INC.
By: /s/ Fred E. Siegel
-----------------------------
Name:
Title:
WEST COAST SALES
By: /s/ Richard D. Marconi
-----------------------------
Name:
Title:
<PAGE>
CITICORP SECURITIES, INC.
CITIBANK CANADA SECURITIES LIMITED
CITIBANK INTERNATIONAL PLC
By: CITICORP SECURITIES, INC.
By: /s/ John McCusker
-----------------------------
Name: John McCusker
Title: Vice President
CSI/High Yield Dept.
399 Park Ave./6th Fl./Zn. 7
(212) 559-4560
<PAGE>
Exhibit 4.5
================================================================================
CREDIT AGREEMENT
dated as of
April 23, 1998
among
GLOBAL HEALTH SUB, INC.,
as Borrower,
GLOBAL HEALTH SCIENCES, INC.,
as the Parent Guarantor,
the LENDERS party hereto,
CITICORP USA, INC.,
as Administrative Agent,
CITIBANK, N.A.,
as Issuing Bank,
and
BANK OF AMERICA NT&SA,
as Documentation Agent
---------------------------------------------------------------
CITICORP SECURITIES, INC.,
as Arranger
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS............................................................................................1
Section 1.1. Defined Terms.............................................................................1
Section 1.2. Classification of Loans and Borrowings...................................................25
Section 1.3. Terms Generally..........................................................................25
Section 1.4. Accounting Terms; GAAP...................................................................26
Section 1.5. Terms Defined in the Uniform Commercial Code.............................................26
Section 1.6. Determination of Financial Ratios........................................................26
ARTICLE II. THE CREDITS..........................................................................................27
Section 2.1. Commitments..............................................................................27
Section 2.2. Loans and Borrowings.....................................................................27
Section 2.3. Requests for Borrowings..................................................................28
Section 2.4. Letters of Credit........................................................................28
Section 2.5. Funding of Borrowings....................................................................33
Section 2.6. Interest Elections.......................................................................33
Section 2.7. Termination and Reduction of Commitments; Certain Prepayments............................35
Section 2.8. Repayment of Loans: Evidence of Debt....................................................37
Section 2.9. Prepayment of Loans......................................................................38
Section 2.10. Fees....................................................................................39
Section 2.11. Interest................................................................................40
Section 2.12. Alternate Rate of Interest..............................................................41
Section 2.13. Increased Costs.........................................................................42
Section 2.14. Taxes...................................................................................43
Section 2.15. Payments Generally; Pro Rata Treatment; Sharing of Setoffs..............................45
Section 2.16. Replacement of Lender...................................................................47
ARTICLE III. CONDITIONS..........................................................................................47
Section 3.1. Effective Date...........................................................................47
Section 3.2. Each Credit Event........................................................................52
ARTICLE IV. REPRESENTATIONS AND WARRANTIES.......................................................................53
Section 4.1. Organization; Powers; Capitalization.....................................................53
Section 4.2. Authorization; Enforceability............................................................53
Section 4.3. Governmental Approvals; No Conflicts.....................................................53
Section 4.4. Financial Condition; No Material Adverse Change..........................................54
Section 4.5. Properties...............................................................................55
Section 4.6. Litigation and Environmental Matters.....................................................55
Section 4.7. Compliance with Laws and Agreements......................................................56
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 4.8. Investment and Holding Company Status....................................................56
Section 4.9. Taxes....................................................................................56
Section 4.10. ERISA...................................................................................56
Section 4.11. Disclosure..............................................................................56
Section 4.12. Insurance...............................................................................57
Section 4.13. Labor Matters...........................................................................57
Section 4.14. Solvency................................................................................57
Section 4.15. Security Documents......................................................................57
Section 4.16. Federal Reserve Regulations.............................................................58
Section 4.17. Indebtedness............................................................................59
Section 4.18. Preferred Stock.........................................................................59
Section 4.19. Liens...................................................................................59
Section 4.20. Material Contracts......................................................................59
Section 4.21. Reorganization..........................................................................59
Section 4.22. Year 2000...............................................................................59
ARTICLE V. AFFIRMATIVE COVENANTS.................................................................................59
Section 5.1. Financial Statements and Other Information...............................................60
Section 5.2. Notices of Material Events...............................................................62
Section 5.3. Information Regarding Collateral.........................................................63
Section 5.4. Existence; Conduct of Business...........................................................63
Section 5.5. Payment of Obligations...................................................................64
Section 5.6. Maintenance of Properties................................................................64
Section 5.7. Insurance................................................................................64
Section 5.8. Casualty and Condemnation................................................................65
Section 5.9. Books and Records; Inspection and Audit Rights...........................................65
Section 5.10. Compliance with Laws....................................................................66
Section 5.11. Use of Proceeds and Letters of Credit...................................................66
Section 5.12. Additional Borrower Subsidiaries........................................................66
Section 5.13. Further Assurances......................................................................66
Section 5.14. Material Contracts......................................................................68
Section 5.15. Fiscal Year.............................................................................68
Section 5.16. Year 2000...............................................................................68
ARTICLE VI. NEGATIVE COVENANTS...................................................................................68
Section 6.1. Indebtedness; Preferred Equity Securities................................................68
Section 6.2. Liens....................................................................................70
Section 6.3. Fundamental Changes......................................................................71
Section 6.4. Investments, Loans, Advances, Guarantees and Acquisitions................................71
Section 6.5. Asset Sales..............................................................................72
Section 6.6. Maintenance of Holdings' Subchapter S Status, Capital Stock..............................73
Section 6.7. Restricted Payments; Certain Payments of Indebtedness....................................73
Section 6.8. Transactions with Affiliates.............................................................75
Section 6.9. Restrictive Agreements...................................................................75
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 6.10. Amendment of Material Documents.........................................................76
Section 6.11. Capital Expenditures....................................................................76
Section 6.12. Pro Forma Leverage Ratio................................................................76
Section 6.13. Consolidated EBITDA.....................................................................76
Section 6.14. Cash Interest Coverage Ratio............................................................77
Section 6.15. Fixed Charge Coverage Ratio.............................................................77
Section 6.16. Additional Subsidiaries.................................................................78
ARTICLE VII. EVENTS OF DEFAULT...................................................................................78
Section 7.1. Events of Default........................................................................78
ARTICLE VIII. THE ADMINISTRATIVE AGENT...........................................................................81
Section 8.1. Appointment of Agents....................................................................81
Section 8.2. Same Rights and Powers...................................................................81
Section 8.3. No Duties or Obligations; Not Liable.....................................................81
Section 8.4. Entitled to Rely.........................................................................82
Section 8.5. Sub-Agents; Related Parties..............................................................82
Section 8.6. Resignation of Administrative Agent......................................................82
Section 8.7. Concerning the Collateral................................................................82
Section 8.8. No Reliance..............................................................................83
Section 8.9. Arranger and Documentation Agent.........................................................84
ARTICLE IX. MISCELLANEOUS........................................................................................84
Section 9.1. Notices..................................................................................84
Section 9.2. Waivers; Amendments......................................................................84
Section 9.3. Expenses; Indemnity; Damage Waiver.......................................................85
Section 9.4. Successors and Assigns...................................................................87
Section 9.5. Survival.................................................................................90
Section 9.6. Counterparts; Integration; Effectiveness.................................................90
Section 9.7. Severability.............................................................................91
Section 9.8. Right of Setoff..........................................................................91
Section 9.9. Governing Law; Jurisdiction; Consent to Service of Process...............................91
Section 9.10. WAIVER OF JURY TRIAL....................................................................92
Section 9.11. Headings................................................................................92
Section 9.12. Confidentiality.........................................................................92
Section 9.13. Interest Rate Limitation................................................................93
Section 9.14. Acknowledgments.........................................................................93
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
SCHEDULES:
Schedule 1.1-A -- Effective Date Capitalization Table
Schedule 1.1-B -- Material Leased Real Property
Schedule 1.6 -- Consolidated EBITDA
Schedule 2.1 -- Revolving Commitments
Schedule 3.1(b) -- UCC Filing Jurisdictions
Schedule 4.1(a) -- Corporate Structure/Capitalization Table
Schedule 4.3(a) -- Governmental Approvals
Schedule 4.3(c) -- Conflicts with Agreements
Schedule 4.4(f) -- Material Adverse Changes since December 31, 1997
Schedule 4.5(a) -- Title to Property
Schedule 4.5(c) -- Addresses of Real Property
Schedule 4.5(d) -- Bank Accounts
Schedule 4.6(a) -- Litigation
Schedule 4.6(b) -- Environmental Matters
Schedule 4.7 -- Compliance with Laws and Agreements
Schedule 4.12 -- Insurance
Schedule 4.15(a) -- Certificated Securities; Intercompany Notes; Instruments
Schedule 6.2 -- Existing Liens
Schedule 6.7(a)(vii) -- Permitted Payments
Schedule 6.8 -- Transactions with Affiliates
EXHIBITS:
Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Borrowing Request
Exhibit C -- Form of Revolving Credit Note
Exhibit D -- Form of Guaranty, Indemnity and Subordination Agreement
Exhibit E -- Form of Pledge and Security Agreement
Exhibit F -- Form of Intercompany Note
Exhibit G -- Form of Closing Certificate
Exhibit H -- Form of Compliance Certificate
Exhibit I -- Form of Opinion of Counsel for the Loan Parties
Exhibit J -- Form of Opinion of FDA Counsel for the Loan Parties
Exhibit K -- Form of Perfection Notice
Exhibit L -- Form of Tax Distribution Certificate
</TABLE>
iv
<PAGE>
CREDIT AGREEMENT dated as of April 23, 1998, among GLOBAL
HEALTH SUB, INC., as Borrower, GLOBAL HEALTH SCIENCES, INC., as Parent
Guarantor, the LENDERS party hereto, CITICORP USA, INC., as Administrative
Agent, CITIBANK, N.A., as Issuing Bank, and BANK OF AMERICA NT&SA, as
Documentation Agent.
The Borrower has requested (a) the Lenders to extend credit in
the form of Loans during the Revolving Availability Period in an aggregate
principal amount at any time outstanding (less the amount of LC Exposure, as
hereafter defined, at such time) not in excess of $50,000,000, and (b) the
Issuing Bank to issue Letters of Credit during the LC Availability Period in an
aggregate face amount at any time outstanding not in excess of $10,000,000.
The Lenders are willing to extend such credit to the Borrower
and the Issuing Bank is willing to issue Letters of Credit for the account of
the Borrower on the terms and subject to the conditions set forth herein.
Accordingly, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Defined Terms. As used in this Agreement,
the following terms have the meanings specified below:
"ABR," when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Alternate Base Rate.
"Acquired Indebtedness" means (a) Indebtedness of any Person
that becomes a Borrower Subsidiary after the Effective Date pursuant to a
Permitted Acquisition, if such Indebtedness was outstanding prior to the time
such Person became a Borrower Subsidiary and was not created in contemplation of
or in connection with such Person becoming a Borrower Subsidiary and constitutes
either (i) Capital Lease Obligations or (ii) purchase money or other
Indebtedness incurred to finance or refinance the acquisition of fixed assets,
or (b) unsecured Indebtedness of the Borrower constituting Deferred Acquisition
Consideration.
"Acquisition" means the acquisition, in one transaction or a
series of transactions, by the Borrower or any of its Subsidiaries of all or
substantially all the stock, partnership or other equity interests or assets of
any other Person or all or substantially all of the assets of any division or
business of any other Person.
"Acquisition Consideration" means the purchase consideration
for any Permitted Acquisition and all other payments made and liabilities
incurred by any member of the Holdings Group in exchange for, or as part of, or
in connection with, any Permitted Acquisition, whether paid in cash or by
exchange of assets or otherwise and whether payable at or prior to the
consummation of such Permitted Acquisition or deferred for payment at any future
time, whether or not any such future payment is subject to the occurrence of any
contingency, and includes any and all payments and liabilities representing the
purchase price and any assumptions of
<PAGE>
liabilities, "earn-outs" and other Profit Payment Agreements, consulting
agreements, services agreements and non-competition agreements and other
liabilities of every type and description.
"Adjusted LIBO Rate" means, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means CUSA, in its capacity as
administrative agent for the Lenders hereunder, and any successor of CUSA acting
in such capacity.
"Administrative Questionnaire" means an Administrative
Questionnaire in a form supplied to the Lenders by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Alternate Base Rate" means, as of any date, a fluctuating
interest rate per annum in effect from time to time, which rate per annum shall
at all times be equal to the highest of:
(a) the rate of interest announced publicly by Citibank in New
York, New York, from time to time, as Citibank's base rate;
(b) the sum (adjusted to the nearest 1/16 of 1% or, if there
is no nearest 1/16 of 1%, to the next higher 1/16 of 1%) of (i) 1/2 of
1% per annum, plus (ii) the rate obtained by dividing (A) the latest
three-week moving average of secondary market morning offering rates in
the United States for three-month certificates of deposit of major
United States money market banks, such three-week moving average
(adjusted to the basis of a year of 360 days) being determined weekly
on each Monday (or, if such day is not a Business Day, on the next
succeeding Business Day) for the three-week period ending on the
previous Friday by Citibank on the basis of such rates reported by
certificate of deposit dealers to and published by the Federal Reserve
Bank of New York or, if such publication shall be suspended or
terminated, on the basis of quotations for such rates received by
Citibank from three New York certificate of deposit dealers of
recognized standing selected by Citibank, by (B) a percentage equal to
100% minus the average of the daily percentages specified during such
three-week period by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve
requirement (including, but not limited to, any emergency, supplemental
or other marginal reserve requirement) for Citibank with respect to
liabilities consisting of or including (among other liabilities)
three-month U.S. dollar non-personal time deposits in the United
States, plus (iii) the average during such three-week period of the
annual assessment rates estimated by Citibank for determining the then
current annual assessment payable by Citibank to the Federal Deposit
Insurance
2
<PAGE>
Corporation (or any successor) for insuring U.S. dollar deposits of Citibank in
the United States; and
(c) 1/2 of one percent per annum above the Federal Funds Effective Rate.
Any change in the Alternate Base Rate due to a change in any amount calculated
under clause (a), (b) or (c) above shall be effective from and including the
effective date of such change in amount.
"Applicable Percentage" means, with respect to any Lender, the
percentage of the total Revolving Commitments represented by such Lender's
Revolving Commitment. If the Revolving Commitments have terminated or expired,
the Applicable Percentages shall be determined based upon the Revolving
Commitments most recently in effect, giving effect to any assignments.
"Applicable ABR Margin" and "Applicable Eurodollar Margin"
mean, for any day with respect to any ABR Loan or any Eurodollar Loan,
respectively, the applicable rate per annum set forth below under the caption
"ABR Spread" or "Eurodollar Spread," respectively, based upon the Total Leverage
Ratio as of the most recent determination date, provided that at no time during
the six-month period immediately following the Effective Date shall the
Applicable ABR Margin or Applicable Eurodollar Margin be less than the
applicable rate per annum set forth below in Level II:
<TABLE>
<CAPTION>
<S> <C> <C>
------------------------------------------------ ------------------------------ ------------------------
Total Leverage Ratio: ABR Spread (p.a.) Eurodollar Spread (p.a.)
------------------------------------------------ ------------------------------ ------------------------
------------------------------------------------ ------------------------------ ------------------------
Level I
-------
Greater than 4.50 to 1.00 1.50% 2.75%
------------------------------------------------ ------------------------------ ------------------------
Level II
--------
Greater than 3.50 to 1.00 but less than or 1.25% 2.50%
equal to
4.50 to 1.00
------------------------------------------------ ------------------------------ ------------------------
Level III
---------
Greater than 2.50 to 1.00 but less than or 1.00% 2.25%
equal to
3.50 to 1.00
------------------------------------------------ ------------------------------ ------------------------
Level IV
--------
Less than or equal to 0.75% 2.00%
2.50 to 1.00
------------------------------------------------ ------------------------------ ------------------------
------------------------------------------------ ------------------------------ ------------------------
</TABLE>
For purposes of the foregoing, (a) the Total Leverage Ratio
shall be determined as of the last day of each fiscal quarter in the Borrower's
fiscal year based upon its consolidated financial statements delivered pursuant
to Section 5.1(a) or 5.1(b) (and the Compliance Certificate delivered in
connection therewith) and (b) each change in the Applicable ABR Margin or
Applicable Eurodollar Margin resulting from a change in the Total Leverage Ratio
shall be effective during the period commencing on and including the third
Business Day after the date of delivery to the Administrative Agent of such
consolidated financial statements indicating such change and ending on the date
immediately preceding the effective date of the
3
<PAGE>
next such change, provided that the Total Leverage Ratio shall be deemed to be
in Level I (i) at any time that an Event of Default has occurred and is
continuing or (ii) if the Borrower fails to deliver the consolidated financial
statements and the Compliance Certificate required to be delivered by it
pursuant to Section 5.1(a) or 5.1(b), during the period from the expiration of
the time for delivery thereof until such consolidated financial statements and
Compliance Certificate are delivered.
"Arranger" means CSI.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 9.4), and accepted by the Administrative Agent,
in the form of Exhibit A or any other form approved by the Administrative Agent.
"Bank Hedging Agreement" means any interest rate Hedging
Agreement permitted under Article VI that is entered into by and between the
Borrower and any Hedging Bank with respect to interest rates under this
Agreement.
"Board" means the Board of Governors of the Federal Reserve
System of the United States of America.
"Borrower" means Global Health Sub, Inc., a California corporation.
"Borrower Subsidiary" means any subsidiary of the Borrower.
"Borrowing" means Loans of the same Type, made, converted or
continued on the same date and, in the case of Eurodollar Loans, as to which a
single Interest Period is in effect.
"Borrowing Request" means a request by the Borrower for a
Borrowing in accordance with Section 2.3.
"Business Day" means any day that is not a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to remain closed and, when used in connection with a Eurodollar Loan, the
term "Business Day" shall also exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.
"Capital Expenditures" means, for any period, (a) the additions to
property, plant and equipment and other capital expenditures of the Holdings
Group that are (or would be) set forth in a consolidated statement of cash
flows of the Holdings Group for such period prepared in accordance with GAAP
and (b) Capital Lease Obligations incurred by the Holdings Group during such
period, except any such expenditure made with (or in the amount of) the
proceeds of insurance, condemnation awards (or payment in lieu thereof) or
indemnity payments received from third parties for purposes of replacing or
repairing the assets in respect of which such
4
<PAGE>
proceeds, awards or payments were received, so long as such expenditures are
made within 12 months of the occurrence of the damage to or loss of the assets
being repaired or replaced.
"Capital Lease Obligations" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination
thereof, which obligations are required to be classified and accounted for as
capital leases on a balance sheet of such Person under GAAP, and the amount
of such obligations shall be the capitalized amount thereof determined in
accordance with GAAP.
"Carrying Amount" means, with respect to any Indebtedness which is
issued at an original issue discount, the greater of (y) the amount of such
Indebtedness at any date of determination included on the consolidated
balance sheet of Holdings as determined in accordance with GAAP and (z) the
amount which would be due and payable at any date of determination under any
indenture or agreement under which such Indebtedness was issued if the
maturity date of such Indebtedness were accelerated as of such date.
"Cash Interest Coverage Ratio" means, as of any day, the ratio of (i)
Consolidated EBITDA for the 12-month period then ended (taken as a single
period) to (ii) the cash portion of Consolidated Interest Expense for such
period.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act, 42 U.S.C. ss. 9601 et seq.
"Change of Control" means, at any time, (a) the failure by Richard
Marconi (i) to own, directly or indirectly, beneficially or of record, shares
representing in excess of 50% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of Holdings or (ii)
to perform the functions of the Chairman of the Board of Directors of the
Borrower and Holdings; (b) a majority of the directors of Holdings are
Persons who were neither (i) nominated by the board of directors of Holdings
nor (ii) appointed by directors so nominated; (c) the acquisition of direct
or indirect Control of Holdings by any Person or group other than Richard
Marconi and management (including Paul Buxbaum); (d) failure by Holdings to
own directly or indirectly 100% of the outstanding Equity Interests in the
Borrower, free and clear of all Liens (other than Liens under the Loan
Documents); or (e) any event occurs that constitutes a "Change of Control,"
as such term is defined in the Senior Note Indenture or in any Supply
Agreement.
"Change in Law" means (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any
Governmental Authority after the date of this Agreement or (c) compliance by
any Lender or the Issuing Bank (or, for purposes of Section 2.13(b), by any
lending office of such Lender or by such Lender's or the Issuing Bank's
holding company, if any) with any request, guideline or directive (whether or
not having the force of law) of any Governmental Authority made or issued
after the date of this Agreement.
5
<PAGE>
"Citibank" means Citibank, N.A., a national banking association.
"Citicorp USA" means Citicorp USA, Inc., a Delaware corporation.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral" means any and all property upon which any Lien in
favor of the Administrative Agent is purported to be granted pursuant to any
Security Document.
"Compliance Certificate" means a certificate in substantially the form
of Exhibit H hereto or any other form approved by the Administrative Agent.
"Consolidated EBITDA" means, for any period, EBITDA determined on a
consolidated basis with respect to Holdings, the Borrower and the Borrower
Subsidiaries in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the interest
expense, both expensed and capitalized (including amortization of debt
issuance costs, original issue discount, interest paid in kind and the
interest component in respect of Capital Lease Obligations), accrued or paid
by Holdings and its Subsidiaries during such period, determined on a
consolidated basis in accordance with GAAP and in any event including (a)
interest, fees and costs under or in respect of this Agreement, (b) interest,
amortization of issue discount, fees and costs in respect of the Senior Notes
and (c) costs of interest rate Hedging Agreements.
"Control" of any Person means (a) the ownership, directly, or
indirectly, beneficially or of record, of shares representing 25% or more of
the aggregate ordinary voting power represented by the issued and outstanding
capital stock of such Person, or (b) 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 ability to exercise voting power, by
contract or otherwise. The terms "Controlling" and "Controlled" have meanings
correlative thereto.
"CSI" means Citicorp Securities, Inc., a Delaware corporation.
"D&F" means D&F Industries, Inc., a California corporation, and a
wholly-owned Subsidiary of the Borrower from and after the consummation of
the Reorganization.
"Default" means any event or condition that constitutes an Event of
Default or that upon notice or lapse of time (or both) would become an Event
of Default.
"Deferred Acquisition Consideration" means, as to any Permitted
Acquisition, effective at the consummation thereof, all Acquisition
Consideration for such Permitted Acquisition except Acquisition Consideration
that was paid in cash or by transfer of assets at or prior to the
consummation of such Permitted Acquisition. The amount of any Deferred
Acquisition Consideration (i) shall be determined by reference to the face
amount thereof, without any discount
6
<PAGE>
or allowance or reduction for any imputed interest, original issue discount or
present value discount or for any payment contingency, or (ii) if there is no
face amount, shall be based on management's good faith and reasonable estimate
of the amount payable thereunder discounted at an annual rate of 6%.
"Documentary Letter of Credit" means any letter of credit issued for
the account of the Borrower or any Borrower Subsidiary for the purpose of
providing the principal payment mechanism in connection with the purchase of
goods by the Borrower or such Borrower Subsidiary in the ordinary course of
business.
"Documentation Agent" means Bank of America NT&SA, in its capacity as
documentation agent for the Lenders.
"Dollars" or "$" refers to lawful money of the United States of America.
"Dynamic" means Dynamic Products, Inc., a California corporation, and a
wholly-owned Subsidiary of the Borrower from and after the consummation of
the Reorganization.
"EBITDA" of any Person for any period means (a) net income (or net
loss) for such period, plus (b) without duplication and to the extent
deducted from revenues in determining net income (or net loss), the sum of
(i) the aggregate amount of interest expense for such period, (ii) the
aggregate amount of letter of credit fees paid during such period, (iii) the
aggregate amount of income tax expense for such period, (iv) all amounts
attributable to depreciation and amortization for such period and (v)
non-cash charges during such period which are not expected to result in a
cash impact during the term of this Agreement, minus (c) without duplication
and to the extent added to revenues in determining net income for such
period, non-cash gains during such period, in each case determined in
accordance with GAAP for such Person.
"Effective Date" means the date on which the conditions specified in
Section 3.1 are satisfied (or waived in accordance with Section 9.2).
"Effective Date Capitalization Table" means the information set forth
on Schedule 1.1-A.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations (other than internal reports
prepared by Holdings, the Borrower or any of the Subsidiaries (a) in the
ordinary course of such Person's business or (b) as required in connection
with a financing transaction or an acquisition or disposition of real estate)
or proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law (hereinafter,
"Claims"), including, without limitation, (i) any and all Claims by
governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law and (ii) any and all Claims by any third party seeking
damages, contributions, indemnification, cost recovery,
7
<PAGE>
compensation or injunctive relief resulting from Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment.
"Environmental Laws" means all applicable laws, rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, or binding
agreements issued, promulgated or entered into by or with any Governmental
Authority, relating in any way to the environment, the preservation or
reclamation of natural resources, the generation, use, handling,
transportation, storage, treatment, disposal, exposure to, or Release or
threatened Release of any Hazardous Material, or to employee health and
safety matters.
"Environmental Liability" means any liability, contingent or otherwise
(including any liability for damages, natural resource damage, costs of
environmental remediation, administrative oversight costs, fines, penalties
or indemnities), of any member of the Holdings Group directly or indirectly
resulting from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of
any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the
Release or threatened Release of any Hazardous Materials into the environment
or (e) any contract, agreement or other consensual arrangement pursuant to
which any such liability is assumed or imposed with respect to any of the
foregoing.
"Equity Interests" means, with respect to any Person, any capital stock
of such Person or membership interests, partnership interests (whether
general or limited) or other equity interests in such Person, regardless of
type, class, preference or designation, and all warrants, options, purchase
rights, conversion or exchange rights, voting rights, calls or claims of any
character with respect thereto, in each case whether outstanding on the
Effective Date or issued or granted at any time thereafter.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single
employer under Section 414(b) or (c) of the Code or, solely for purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.
"ERISA Event" means (a) any "reportable event," as defined in Section
4043 of ERISA or the regulations issued thereunder with respect to a Plan
(other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (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 Plan; (d) the incurrence by the Borrower or any
of its ERISA Affiliates of any liability under Title IV of ERISA with respect
to the termination of any Plan; (e) the receipt by the Borrower or any ERISA
Affiliate from the PBGC or a plan administrator of any notice relating to an
intention to terminate any Plan or Plans or to appoint a trustee to
administer any Plan; (f) the incurrence by
8
<PAGE>
the Borrower or any of its ERISA Affiliates of any liability with respect to
the withdrawal or partial withdrawal from any Multiemployer Plan; or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt
by any Multiemployer Plan from the Borrower or any ERISA Affiliate 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.
"Eurodollar," when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in Section 7.1.
"Excess Cash Flow" means, for any period, the sum of (a) Consolidated
EBITDA for such period, minus (b) the sum of (i) the cash portion of
Consolidated Interest Expense for such period, (ii) scheduled principal
repayments of Indebtedness of Holdings and its Subsidiaries on a Consolidated
basis for such period, (iii) the aggregate amount of all Tax Distribution
Amounts and other Restricted Payments permitted under Article VI hereof, in
each case to the extent actually paid, (iv) cash taxes paid by Holdings or
any of its Subsidiaries during such period, (v) cash Capital Expenditures
permitted under Article VI hereof during such period, (vi) mandatory
prepayments pursuant to Section 2.7(b) during such period with respect to the
Net Cash Proceeds from the Transfer of any asset and (vii) any increase in
working capital during such period, plus (c) any decrease in working capital
during such period.
"Excluded Taxes" means, with respect to the Administrative Agent, any
Lender, the Issuing Bank or any other recipient of any payment to be made by
or on account of any obligation of the Borrower hereunder, (a) income or
franchise taxes imposed on (or measured by) its net income by the United
States of America, or by the jurisdiction under the laws of which such
recipient is organized or in which its principal office is located or, in the
case of any Lender, in which its applicable lending office is located, (b)
any branch profits taxes imposed by the United States of America or any
similar tax imposed by any other jurisdiction in which the Borrower is
located and (c) in the case of a Foreign Lender (other than an assignee
pursuant to a request by the Borrower under Section 2.16), any withholding
tax that is imposed on amounts payable to such Foreign Lender at the time
such Foreign Lender becomes a party to this Agreement (or designates a new
lending office) or is attributable to such Foreign Lender's failure to comply
with Section 2.14(e), except to the extent that such Foreign Lender (or its
assignor, if any) was entitled, at the time of designation of a new lending
office (or assignment), to receive additional amounts from the Borrower with
respect to such withholding tax pursuant to Section 2.14(a).
"Federal Funds Effective Rate" means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such day (or, if
such day is not a Business Day, for the next preceding Business
9
<PAGE>
Day) by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Financial Officer" means, with respect to any Loan Party, the chief
financial officer or treasurer of such Loan Party.
"Financing Transactions" means the execution, delivery and performance
by each Loan Party of the Loan Documents to which it is to be a party, the
borrowing of Loans, the use of the proceeds thereof and the issuance of
Letters of Credit hereunder.
"Fixed Charge Coverage Ratio" means for any period, the ratio of (1)
(a) the sum of (i) Consolidated EBITDA for such period and (ii) rental
expense under leases of real or personal property, or mixed property, in each
case of Holdings and its Subsidiaries during such period, minus (b) Capital
Expenditures of Holdings and its Subsidiaries during such period to (2) the
sum of (i) the cash portion of Consolidated Interest Expense, (ii) all
scheduled repayments of principal amounts of Indebtedness (including the
principal portion of rentals accrued under capitalized leases), but excluding
any permanent reductions of the Commitments hereunder pursuant to Sections
2.7(b) through (e) and any other repayments of the Advances pursuant to
Section 2.9, (iii) rental expense under leases of real or personal property,
or mixed property, in each case of Holdings and its Subsidiaries during such
period, and (iv) the aggregate amount of all Tax Distribution Amounts
distributed by Holdings and its Subsidiaries during such period and all cash
taxes payable by Holdings and its Subsidiaries during such period.
"Foreign Lender" means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located. For purposes
of this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governing Documents" means (a) the Certificate of Incorporation of
Holdings, (b) the Certificate of Incorporation of the Borrower, (c) the
By-laws of Holdings, (d) the By-Laws of the Borrower, and (e) the Certificate
or Articles of Incorporation and the By-Laws of each other Loan Party, in
each case, as in effect on the Effective Date (or, if later, in the case of
any Borrower Subsidiary, the date on which such Subsidiary becomes a Loan
Party) and amended from time to time thereafter in accordance with Section
6.10.
"Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state
or local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
10
<PAGE>
"Guarantee" of or by any Person (the "guarantor") means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other
Person (the "primary obligor") in any manner, whether directly or indirectly
(except endorsements for collection or deposit in the ordinary course of
business) and shall include without limitation any obligation of the
guarantor, direct or indirect, (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or other obligation
or to purchase (or to advance or supply funds for the purchase of) any
security for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner of such
Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay
such Indebtedness or other obligation or (d) as an account party in respect
of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation.
"Guarantee Agreement" means the Guaranty, Indemnity and Subordination
Agreement substantially in the form of Exhibit D, made by Holdings and the
Borrower Subsidiaries in favor of the Administrative Agents for the benefit
of the Holders of the Obligations.
"Guarantors" means Holdings and each Borrower Subsidiary that has
executed the Guarantee Agreement.
"Hazardous Materials" means any substance, material or waste which is
regulated by any Governmental Authority of the United States as a "hazardous
waste," "hazardous material," "hazardous substance," "extremely hazardous
waste," "restricted hazardous waste," "contaminant," "toxic waste," "toxic
substance" or words of similar meaning or import under any provision of
Environmental Law, which includes, but is not limited to, petroleum,
petroleum products, asbestos, urea formaldehyde and polychlorinated byphenyls.
"Hedging Agreement" means any interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts, and other similar agreements.
"Hedging Bank" means any Lender or any of its Affiliates in its
capacity as a party to a Bank Hedging Agreement.
"Herbalife Bond" means Performance Bond No. 53-0110-54607-97-5 in the
face amount of $25,000,000 issued by United States Fidelity and Guaranty
Company to D&F and Raven Industries, Inc., d/b/a Omni-Pak Industries, Inc.,
with respect to the obligations of Herbalife International of America, Inc.,
under the Supply Agreements, as the same may be amended, supplemented,
modified or replaced from time to time.
"Holdings" means Global Health Sciences, Inc., a California corporation.
11
<PAGE>
"Holdings Group" means, collectively, Holdings and its
Subsidiaries, including the Borrower.
"Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all Deferred Acquisition Consideration and
all obligations of such Person in respect of the deferred purchase price of
property or services, but excluding current accounts payable incurred in the
ordinary course of business or (if so incurred prior to a Permitted Acquisition
and not in contemplation thereof) assumed in a Permitted Acquisition, (f) all
obligations of such Person or any other Person secured by (or for which the
holder of such obligation has an existing right, contingent or otherwise, to be
secured by) any Lien (except a Permitted Encumbrance) on property then owned or
thereafter to be acquired by such Person, whether or not such Person has assumed
liability for the payment of such obligations, (g) all Guarantees by such Person
of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations of such Person, contingent or otherwise, in respect of letters
of credit (including all LC Exposure), letters of guaranty or bankers
acceptances, (j) all obligations of such Person, contingent or otherwise, in
respect of Hedging Agreements, and (k) all obligations of such Person,
contingent or otherwise, under Profit Payment Agreements or to redeem,
repurchase or exchange any Equity Interests issued by such Person or by any
Affiliate of such Person or to pay dividends or make distributions in respect of
any such Equity Interests.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Information Memorandum" means the Confidential Information
Memorandum dated March 17, 1998, relating to the Borrower and the Transactions
and the related written Bank Meeting Presentation dated March 1998 with respect
thereto delivered to prospective Lenders on March 19, 1998.
"Intercompany Note" means a promissory note of a Loan Party to
another Loan Party in substantially the form of Exhibit F.
"Interest Election Request" means a request by the Borrower to
convert or continue a Borrowing in accordance with Section 2.6.
"Interest Payment Date" means (a) with respect to any ABR
Loan, the last day of each month, and (b) with respect to any Eurodollar Loan,
the last day of the Interest Period applicable to the Borrowing of which such
Loan is a part and, in the case of a Eurodollar Borrowing with an Interest
Period of more than three months' duration, each day prior to the last day of
such Interest Period that occurs at intervals of three months' duration after
the first day of such Interest Period.
12
<PAGE>
"Interest Period" means, with respect to any Eurodollar
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the calendar month that is one, two, three or
six months thereafter, as the Borrower may elect, except that (a) if any
Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless such next
succeeding Business Day would fall in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day, and (b) any
Interest Period that commences on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of
the last calendar month of such Interest Period. For purposes hereof, the date
of a Borrowing initially shall be the date on which such Borrowing is made and
thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.
"Issuing Bank" means Citibank, in its capacity as the issuer
of Letters of Credit hereunder, and its successors in such capacity as provided
in Section 2.4(i). The Issuing Bank may, in its discretion, arrange for one or
more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which
case the term "Issuing Bank" shall include any such Affiliate with respect to
Letters of Credit issued by such Affiliate.
"LC Availability Period" means the period from and including
the Effective Date to but excluding the earlier of (a) the date that is thirty
days prior to the Maturity Date and (b) the date of termination of the Revolving
Commitments.
"LC Disbursement" means a payment made by the Issuing Bank
pursuant to a Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the aggregate
undrawn amount of all outstanding Letters of Credit at such time, plus (b) the
aggregate amount of all LC Disbursements that have not yet been reimbursed by or
on behalf of the Borrower at such time. The LC Exposure of any Lender at any
time shall be its Applicable Percentage of the total LC Exposure at such time.
"LC Sublimit" means $10,000,000, as such amount may be reduced
from time to time pursuant to Section 2.7.
"Lenders" means the Persons listed on the signature pages
hereto as Lenders and any other Person that shall have become a party hereto
pursuant to an Assignment and Acceptance, other than any such Person that ceases
to be a party hereto pursuant to an Assignment and Acceptance.
"Letter of Credit" means any letter of credit issued pursuant
to this Agreement.
"LIBO Rate" means, with respect to any Eurodollar Borrowing
for any Interest Period, the rate appearing on Page 3750 of the Telerate Service
(or on any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations
13
<PAGE>
comparable to those currently provided on such page of such Service, as
determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, as the rate for dollar
deposits with a maturity comparable to such Interest Period. In the event that
such rate is not available at such time for any reason, then the "LIBO Rate"
with respect to such Eurodollar Borrowing for such Interest Period shall be the
rate at which dollar deposits of $5,000,000 and for a maturity comparable to
such Interest Period are offered by the principal London office of Citibank in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, any agreement to give any of the foregoing, any
lien or retained security title of a conditional vendor, any easement, right of
way or other encumbrance on title to real property and, in the case of
securities, any purchase option, call or similar right of a third party with
respect to such securities.
"Loan Documents" means this Agreement, each promissory note
issued pursuant to Section 2.8(e), the Letters of Credit, the Guarantee
Agreement, the Security Documents and each other certificate, instrument or
agreement executed and delivered by any Loan Party in favor of the
Administrative Agent, any Issuing Bank or any Lender pursuant to the provisions
hereof or thereof, as each of the same may be amended, restated, supplemented or
otherwise modified from time to time in accordance with its respective terms.
"Loan Parties" means Holdings and each of its Subsidiaries.
"Loans" means the loans made by the Lenders to the Borrower
pursuant to this Agreement.
"Margin Stock" has the meaning assigned to such term in
Regulation U.
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations, property, assets, prospects or condition
(financial or otherwise), of Holdings, the Borrower and the Borrower
Subsidiaries, taken as a whole, (b) the ability of the Borrower to pay the
Obligations or of any Loan Party to perform its agreements and other obligations
under the Loan Documents, or (c) the validity or enforceability of this
Agreement or any of the other Loan Documents or any of the rights or remedies of
the Administrative Agent, any Issuing Bank or the Lenders hereunder or
thereunder.
"Material Contract" means (a) any Supply Agreement, (b) any
employment contract that provides for annual compensation in excess of $250,000,
(c) any lease of Real Property set forth on Schedule 1.1-B and each other
material lease of Real Property entered into by a Loan Party after the Effective
Date or (d) any other agreement (written or oral) involving
14
<PAGE>
total consideration payable to or by Holdings or any of its Subsidiaries in
excess of $10,000,000 (other than agreements or other arrangements for the
purchase of raw materials in the ordinary course of business).
"Material Indebtedness" means Indebtedness (other than the
Loans and Letters of Credit), or obligations in respect of one or more Hedging
Agreements, of any one or more of Holdings, the Borrower and the Borrower
Subsidiaries in an aggregate principal amount exceeding $2,000,000. For purposes
of determining the amount of Material Indebtedness at any time, the "principal
amount" of the obligations of Holdings, the Borrower or any Subsidiary in
respect of any Hedging Agreement at such time shall be the maximum aggregate
amount (giving effect to any netting agreements) that Holdings, the Borrower or
such Borrower Subsidiary would be required to pay if such Hedging Agreement were
terminated at such time.
"Maturity Date" means April 22, 2003.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA as to which Holdings, the Borrower or any Borrower
Subsidiary has any obligation or liability (contingent or otherwise).
"Net Cash Proceeds" means (a) all cash proceeds received by
Holdings, the Borrower or any Borrower Subsidiary from the issuance and sale of
any Equity Interests at any time after the Effective Date (except Equity
Interests sold to management employees of the Borrower or any Subsidiary and
other Equity Interests issued or sold in accordance with Section 6.7) or from
the incurrence of any Indebtedness (other than Indebtedness described in Section
6.1(a)), in each case net of underwriting discounts, commissions, issuance costs
and other reasonable costs incurred in connection with such transaction, (b) all
cash proceeds received by Holdings, the Borrower or any Borrower Subsidiary from
the Transfer of any assets (except Transfers described in clauses (a) through
(c) of Section 6.5) net of (i) costs of the sale or disposition incurred and
paid by members of the Holdings Group (including all reasonable and customary
fees and expenses with respect to legal, investment banking, brokerage,
accounting and other professional fees, sales commissions and disbursements),
(ii) income or gains taxes paid or estimated to be payable in cash within twelve
months of the consummation of such Transfer by any member of the Holdings Group
by reason of such Transfer, and other tax liabilities directly resulting
therefrom, (iii) any such cash proceeds that are applied to the repayment of any
Indebtedness permitted hereunder and permitted to be secured hereunder by the
property sold in such Transfer, and (iv) appropriate reserves maintained in
accordance with GAAP against any liabilities associated with such Transfer and
retained by the Borrower, Holdings or their respective Subsidiaries following
such Transfer, including without limitation pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Transfer.
"Obligations" means all direct or indirect obligations and
liabilities of the Borrower or any other Loan Party of any and every type and
description at any time arising under
15
<PAGE>
or in connection with this Agreement or any other Loan Document, to the
Administrative Agent, the Arranger, the Documentation Agent, the Issuing Bank,
Citibank, any Lender, any Person entitled to indemnification pursuant to Section
9.3(b), or any of their respective Affiliates, successors, transferees or
assigns, whether or not the right of such Person to payment in respect of such
obligations and liabilities is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured and whether or not such claim is discharged, stayed or
otherwise affected by any bankruptcy case or insolvency or liquidation
proceeding, and shall include (a) all liabilities of the Borrower for principal
of and interest on the Loans, (b) all liabilities of the Borrower in respect of
Letters of Credit, (c) all liabilities of the Borrower under the Loan Documents
for any fees, costs, taxes, expenses, indemnification and other amounts payable
thereunder, (d) all liabilities under the Guarantee Agreement and (e) all other
liabilities of the Borrower or any other Loan Party to any such Person under or
in respect of any of the Loan Documents or the Financing Transactions.
"Omni-Pak" means Raven Industries, Inc., a California
corporation (d/b/a Omni-Pak Industries, Inc.), and a wholly-owned Subsidiary of
the Borrower from and after the consummation of the Reorganization.
"Other Taxes" means any and all current or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made under any Loan Document or from the
execution, delivery or enforcement of, or otherwise with respect to, any Loan
Document.
"Parent Guarantor" means Holdings.
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA and any successor entity performing similar functions.
"Perfection Notice" means a notice to a depositary bank in
substantially the form of Exhibit K or any other form approved by the
Administrative Agent.
"Permitted Acquisition" means any non-hostile Acquisition by
the Borrower or any Borrower Subsidiary if all of the following conditions are
met:
(a) before and immediately after giving effect thereto, (i) no
Default has occurred and is continuing or would result therefrom and
(ii) the representations and warranties of each Loan Party set forth in
the Loan Documents shall be true and correct in all material respects
on and as of the date of such Acquisition, as though made on and as of
such date, other than any such representations or warranties that by
their terms refer to a date other than the date of such Acquisition, in
which case such representations and warranties shall be true and
correct as of such other date,
(b) such Acquisition has not been preceded by an unsolicited
tender offer for such Person by the Borrower or any of its Affiliates,
16
<PAGE>
(c) all transactions related thereto shall be consummated in
accordance with applicable laws,
(d) in the case of any Acquisition of shares or other Equity
Interests in any Person, such Acquisition is an Acquisition of 100% of
the Equity Interests in such Person and, after giving effect to such
Acquisition, such Person becomes a wholly-owned Subsidiary of the
Borrower,
(e) all actions required to be taken, if any, with respect to
any acquired or newly formed Subsidiary under Section 5.12 shall have
been taken,
(f) such assets are used for, or such Person is engaged in, a
line of business permitted under Section 6.3(b),
(g) at least (i) 21 days prior to entering into such
Acquisition, or any agreement therefor, the Borrower delivers notice
thereof to the Administrative Agent and (ii) 15 days prior to the
consummation of such Acquisition, the Borrower delivers to the
Administrative Agent and the Lenders a certificate signed by a
Financial Officer calculating the Total Leverage Ratio, Consolidated
EBITDA, Cash Interest Coverage Ratio, Fixed Charge Coverage Ratio and
the Pro Forma Operating Cash Flow (including, as set forth in
reasonable detail on a schedule thereto, all adjustments to be made in
calculating such Pro Forma Operating Cash Flow), each on a pro forma
basis so as to give effect to such Acquisition and all Deferred
Acquisition Consideration therefor and all other Indebtedness assumed
or incurred by any Loan Party in connection therewith, and attaching
the Borrower's then-current good faith and reasonable financial
projections for the first fiscal quarter ending after the consummation
of such Acquisition and the succeeding three quarters, demonstrating
(to the reasonable satisfaction of the Required Lenders) that, after
giving effect to such Acquisition, (A) the Borrower and Holdings would
have been in compliance with the covenants set forth in Sections 6.12
through 6.15 as of the last day of the Borrower's fiscal quarter most
recently ended prior to the consummation of such Acquisition and (B)
based solely on such projections and without any assurance that such
projections will be achieved, the Borrower can reasonably be expected
to remain in compliance with such covenants for the twelve-month period
following the consummation of such Acquisition, and to have sufficient
cash liquidity to conduct its business, to support working capital
requirements and to make required income tax distributions and pay its
debts and other liabilities as they become due,
(h) neither Holdings, the Borrower nor any Borrower Subsidiary
shall incur, assume or otherwise become liable for or subject to (i)
any Indebtedness in connection with such Acquisition (except for
Indebtedness permitted by Section 6.1), or (ii) any material contingent
liabilities, except for those constituting Indebtedness permitted by
Section 6.1,
(i) the aggregate consideration payable by the Loan Parties in
connection with such Acquisition does not exceed six times the Pro
Forma Operating Cash Flow of the
17
<PAGE>
entity, or attributable to the assets, to be acquired in such Acquisition for
the 12-month period preceding the Acquisition,
(j) consummation of such Acquisition will not utilize or
require aggregate proceeds of Revolving Loans or Letters of Credit in
excess of $20,000,000, and
(k) such business or Person being acquired shall have had a
positive Pro Forma Operating Cash Flow for the twelve-month period
prior to the proposed Acquisition;
provided that if (i) an Acquisition satisfies the conditions set forth a clauses
(a) through (h) and (k) above and (ii) such Acquisition is funded solely from
internally generated cash flow of the Borrower and the Borrower Subsidiaries at
a time when no Revolving Loans or Letters of Credit are outstanding, then such
Acquisition shall be deemed a "Permitted Acquisition" within the meaning hereof.
"Permitted Encumbrances" means any of the following:
(a) Liens for Taxes, assessments or charges of any
Governmental Authority that are not yet due or are being contested in
compliance with Section 5.5;
(b) statutory Liens of landlords and carriers',
warehousemen's, mechanics', materialmen's, repairmen's and other like
Liens imposed by law, arising in the ordinary course of business and
securing obligations that are not overdue by more than 60 days or are
being contested in compliance with Section 5.5;
(c) Liens incurred or pledges and deposits made in the
ordinary course of business in compliance with workers' compensation,
unemployment insurance and other social security laws or regulations;
(d) Liens incurred or deposits made to secure the performance
of bids, tenders, contracts (other than for the repayment of
Indebtedness), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case
in the ordinary course of business;
(e) judgment liens in respect of judgments that do not
constitute an Event of Default under Section 7.1(k);
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do
not materially detract from the value of the affected property or
interfere with the ordinary conduct of business of the Borrower or any
Borrower Subsidiary; and
18
<PAGE>
(g) any interest or title of a lessor or secured by a lessor's
interest under any lease not otherwise prohibited by this Agreement;
provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States
of America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America),
in each case maturing within one year from the date of acquisition
thereof;
(b) investments in commercial paper maturing within 180 days
from the date of acquisition thereof and having, at such date of
acquisition, the highest credit rating obtainable from S&P or from
Moody's;
(c) investments in certificates of deposit, banker's
acceptances and time deposits maturing within 180 days from the date of
acquisition thereof issued or guaranteed by or placed with, and money
market deposit accounts issued or offered by, any domestic office of
any commercial bank organized under the laws of the United States of
America or any State thereof that has a combined capital and surplus
and undivided profits of not less than $500,000,000; and
(d) fully collateralized repurchase agreements with a term of
not more than 30 days for securities described in clause (a) above
(without regard to the limitation on maturity contained in such clause)
and entered into with a financial institution satisfying the criteria
described in clause (c) above.
"Person" means any natural person, corporation, limited
liability company, trust, joint venture, association, company, partnership,
Governmental Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pledge and Security Agreement" means the Pledge and Security
Agreement substantially in the form of Exhibit E, entered into by the Borrower,
each Guarantor and the Administrative Agent for the benefit of the holders of
Obligations.
19
<PAGE>
"Profit Payment Agreement" means any agreement to make any
payment the amount of which is, or the terms of payment of which are, in any
respect subject to or contingent upon the revenues, income, cash flow or profits
(or the like) of any Person or business.
"Pro Forma EBITDA" means, for any period, (a) Consolidated
EBITDA for such period, plus (or, if a negative number, minus) (b) the amount by
which such Consolidated EBITDA would have been increased (or, if a negative
number, decreased) for such period if (i) each Permitted Acquisition that was
consummated in such period had been consummated on the first day thereof, (ii)
Consolidated EBITDA had been computed after giving affect to all revenues,
charges and other items pertinent to the determination of Consolidated EBITDA
that were actually and properly recorded, in accordance with GAAP, in respect of
the assets or Person acquired in such Permitted Acquisition for the period prior
to the consummation of such Permitted Acquisition, minus (c) the amount by which
such Consolidated EBITDA would have been decreased for such period if any and
all revenues, gains, charges, losses and other items attributable to any
business or operations that were sold, discontinued or designated by the
Borrower as held for sale or for discontinuance were excluded in the calculation
thereof, plus (d) if and to the extent the proceeds of any Loan are used in such
period to pay the purchase price or any non-competition payment or other
consideration or costs for any Permitted Acquisition, the amount of interest
that would have accrued hereunder in such period prior to the time such Loan was
funded if such Loan had been outstanding throughout such period.
"Pro Forma Leverage Ratio" means, as of any day, the ratio of
(a) all Indebtedness of Holdings, the Borrower and the Borrower Subsidiaries
outstanding on such day (including without limitation all Indebtedness in
respect of the Senior Notes and the Loans and the aggregate LC Exposure), minus
cash on hand of the Borrower and the Borrower Subsidiaries, to (b) Pro Forma
Operating Cash Flow for Holdings, the Borrower and the Borrower Subsidiaries for
the 12-month period then ended.
"Pro Forma Operating Cash Flow" means, for any business or
Person for any period, EBITDA of such Person or attributable to such business
for such period, plus net cost savings for such period attributable to
termination of non-recurring costs and expenses related to the prior owners of
such business or Person (after giving effect to the costs of replacing services
provided by such prior owners), all such costs and expenses to be satisfactory
to the Administrative Agent and the Required Lenders.
"Real Property" means land, buildings and improvements owned
or leased by Holdings, the Borrower or any of their respective Subsidiaries, but
excluding all operating fixtures and equipment, whether or not incorporated into
such improvements.
"Register" has the meaning set forth in Section 9.4(c).
"Regulation U" means Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
20
<PAGE>
"Regulation X" means Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Related Parties" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"Release" has the meaning set forth in CERCLA Section 101(22)
(42 U.S.C. Section 9601(22)).
"Reorganization" means the following transactions to be
consummated pursuant to the Reorganization Agreement (after the consummation of
which transactions, on the Effective Date, (i) Richard Marconi and Fred E.
Siegel will own 94% and 6%, respectively, of the capital stock of Holdings, (ii)
the Borrower will be a direct, wholly-owned Subsidiary of Holdings and (iii)
D&F, Omni-Pak, Dynamic and West Coast Sales will be direct, wholly-owned
subsidiaries of the Borrower):
(a) the change, prior to the Effective Date, by Holdings of
its name from "D&F Industries, Inc." to "Global Health Sciences, Inc.";
(b) the formation, prior to the Effective Date, by
Holdings of the Borrower;
(c) the formation, prior to the Effective Date, by the
Borrower of D&F, Raven Sub, Inc. ("New Raven"), New West Coast Sales,
Inc. ("New West Coast"), and Dynamic Sub, Inc. ("New Dynamic");
(d) the transfer, on the Effective Date, by Holdings to D&F of
all of its assets and liabilities except for its obligations under the
Senior Notes and the Loan Documents and the capital stock of the
Borrower;
(e) the acquisition, on the Effective Date, by the Borrower,
with proceeds of the issuance of the Senior Notes, of Omni-Pak, West
Coast Sales and Dynamic from their respective shareholders for
approximately $137,900,000 in cash; and
(f) the exchange, on the Effective Date, by the shareholders
of Holdings of approximately 59% of the outstanding capital stock of
Holdings for approximately $57,100,000 in cash, which stock so
exchanged will be cancelled and which cash payment will be made with
proceeds from the issuance of the Senior Notes.
"Reorganization Agreement" means the Agreement and Plan of
Reorganization, dated as of April 23, 1998, among Holdings, the Borrower, D&F,
Omni-Pak, Dynamic and West Coast Sales, and the Agreements and Plans of Merger
referred to (and defined) therein.
21
<PAGE>
"Required Lenders" means, at any time, Lenders having Total
Exposures and unused Revolving Commitments representing more than 50% of the sum
of the Total Exposures and unused Revolving Commitments at such time.
"Restricted Payment" means (a) any payment or distribution,
direct or indirect, on account or in respect of (i) any Equity Interest in the
Borrower or any other Loan Party or (ii) the Senior Notes, other than regularly
scheduled semi-annual payments made by Holdings in respect thereof, all as
required by the terms thereof, (b) any redemption, retirement, sinking fund or
similar payment, purchase or other acquisition for value, direct or indirect, of
(i) any Equity Interest in the Borrower or any other Loan Party or (ii) the
Senior Notes by any Loan Party, other than any such redemption, purchase or
other acquisition for value by Holdings as required by the terms of the Senior
Notes, or (c) any payment or reimbursement, direct or indirect, on account of
any consulting fees, management fees, director fees, expenses, taxes,
indemnification obligations or other costs incurred or payable by or on behalf
of the Borrower or any other Loan Party to or for the benefit of the holder of
any Equity Interest in Holdings or any Affiliate of any such holder.
"Revolving Availability Period" means the period from and
including the Effective Date to but excluding the earlier of the Maturity Date
and the date of termination of the Revolving Commitments.
"Revolving Commitment" means, with respect to each Lender, the
commitment of such Lender to make Revolving Loans and to acquire participations
in Letters of Credit hereunder, expressed as an amount representing the maximum
aggregate amount of such Lender's Total Exposure hereunder, as such commitment
may be (a) reduced from time to time pursuant to Section 2.7 or 7.1 or any other
provision of this Agreement and (b) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 9.4. The
initial amount of each Lender's Revolving Commitment is set forth on Schedule
2.1, or in the Assignment and Acceptance pursuant to which such Lender shall
have assumed its Revolving Commitment, as applicable (and the initial aggregate
amount of the Lenders' Revolving Commitments is $50,000,000).
"Revolving Credit Note" means a promissory note of the
Borrower to a Lender (or to such Lender and its registered assigns), in
substantially the form of Exhibit C, delivered pursuant to Section 2.8(e).
"Revolving Loan" means a Loan made pursuant to Section 2.1.
"S&P" means Standard & Poor's.
"Security Documents" means the Pledge and Security Agreement,
the Intercompany Notes, and each other security agreement or other instrument or
document executed and delivered pursuant to Section 5.12 or 5.13 to secure any
of the Obligations.
22
<PAGE>
"Senior Note Guarantees" means the subordinated guaranty by
the Borrower and the Borrower Subsidiaries of Holdings' obligations in respect
of the Senior Notes, all as set forth in Article 10 of the Senior Note
Indenture.
"Senior Note Indenture" means the Indenture dated as of April
23, 1998, between Holdings and Chase Manhattan Bank & Trust Company, National
Association, as Trustee, as the same may be amended, restated, supplemented or
otherwise modified from time to time.
"Senior Notes" means any and all securities issued or that may
be issued and outstanding under the Senior Note Indenture, and includes the
Notes and the Exchange Notes referred to (and defined) therein.
"Specified Event of Default" means, for the purposes of
Section 6.7(a), the occurrence of (i) any Event of Default specified in Section
7.1(a) or 7.1(b) (including without limitation any such Event of Default
occurring as a result of an acceleration following an Event of Default under
Section 7.1(h) or (i)) or (ii) any failure by the Borrower or Holdings to
observe or perform any covenant, condition or agreement contained in Section
6.11, 6.12, 6.13, 6.14 or 6.15.
"Statutory Reserve Rate" means, at any time, a fraction
(expressed as a decimal), the numerator of which is the number one and the
denominator of which is the number one minus the aggregate (expressed as a
decimal) of the maximum reserve percentages (including any marginal, special,
emergency or supplemental reserves) established by the Board and then in effect
as to any Lender or any other bank that is a member bank of the Federal Reserve
System with respect to the Adjusted LIBO Rate, for eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D of the
Board). Such reserve percentages shall include those imposed pursuant to such
Regulation D. For purposes solely of the compensation required by Section
2.14(e), Eurodollar Loans shall be deemed to constitute eurocurrency funding and
to be subject to such reserve requirements without benefit of or credit for
proration, exemptions or offsets that may be available from time to time to any
Lender under such Regulation D or any comparable regulation and without regard
to whether any Lender actually obtains or maintains eurocurrency funding for its
Eurodollar Loans. The Statutory Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in any reserve percentage.
"subsidiary" means, with respect to any Person (the "parent")
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power or, in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, controlled or held, or (b) that is, as of
such date, otherwise Controlled, by the parent or one or more subsidiaries of
the parent or by the parent and one or more subsidiaries of the parent.
23
<PAGE>
"Subsidiary" means any subsidiary of Holdings or the Borrower.
"Supply Agreements" means, collectively, (a) the Supply
Agreement dated as of September 2, 1997, between D&F and Herbalife International
of America, Inc., a California corporation ("Herbalife"), (b) the Supply
Agreement, dated as of September 2, 1997, between Herbalife and Omni-Pak
Industries, Inc., and (c) the Supply Agreement, dated as of September 2, 1997,
between Herbalife and Dynamic Industries, Inc., a predecessor of D&F, in each
case as the same may be amended, supplemented or otherwise modified from time to
time.
"Tax Distribution Amount" means the sum of:
(a) an amount equal to, for all federal income taxable years
of Holdings ending subsequent to the date hereof during which Holdings
qualified as an S Corporation under Subchapter S of the Code, the
greater of, for each such year, (i) the sum of (A) the product of (1)
all items of income, less all items of deduction, allocable to
Holdings' shareholders for federal income tax purposes for each such
federal taxable year as a result of Holdings' status as an S
Corporation, multiplied by (2) the highest individual federal income
tax rate for each such taxable year, minus (B) all items of credit
allocable to Holdings' shareholders for federal income tax purposes for
each such federal taxable year as a result of Holdings' status as an S
Corporation and (ii) the amount determined under (i) for federal
alternative minimum tax purposes; and
(b) an amount equal to, for all state and local income taxable
years of Holdings ending subsequent to the date hereof, the greater of,
for each such year, (i) the sum of (A) the product of (1) all items of
income, less all items of deduction, allocable to shareholders for
state and local income tax purposes for each such taxable year under
any provision of the relevant revenue and taxation code (the "Local
Code") comparable to Subchapter S of the Code or any comparable term
under the Local Code, multiplied by (2) the highest individual state
and local income tax rate for each such taxable year, minus (B) all
items of credit allocable to Holdings' shareholders for state and local
income tax purposes for each such relevant taxable year and (ii) the
amount determined under (i) for alternative minimum tax purposes under
any such Local Code.
Notwithstanding anything herein to the contrary, the Tax Distribution Amount
shall be reduced by the amount of income tax, if any, which Holdings is required
to withhold and pay over to any state taxing authority by reason of any
shareholder being a nonresident of that state.
"Tax Distribution Certificate" has the meaning specified in
Section 5.1(i).
"Taxes" means any and all current or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Total Exposure" means, with respect to any Lender at any
time, the sum of the outstanding principal amount of such Lender's Revolving
Loans and its Applicable Percentage of the total LC Exposure at such time.
24
<PAGE>
"Total Leverage Ratio" means, as of any day, the ratio of (a)
all Indebtedness of Holdings, the Borrower and the Borrower Subsidiaries
outstanding on such day (including, without limitation, all Indebtedness in
respect of the Senior Notes and the Loans and the aggregate LC Exposure), minus
cash on hand of the Borrower and the Borrower Subsidiaries to (b) Pro Forma
EBITDA for the 12-month period then ended.
"Transfer" has the meaning set forth in Section 6.5.
"Transaction Agreements" means, collectively, the
Reorganization Agreement and each agreement executed or delivered pursuant
thereto or in connection therewith.
"Transaction Parties" means each party to any Transaction
Agreement.
"Transactions" means the Reorganization, the issuance and sale
of the Senior Notes and the
Financing Transactions.
"Type," when used in reference to any Loan or Borrowing,
refers to whether the rate of interest on such Loan, or on the Loans comprising
such Borrowing, is determined by reference to the Adjusted LIBO Rate or the
Alternate Base Rate.
"West Coast Sales" means West Coast Sales, a California
corporation, and a wholly-owned Subsidiary of the Borrower from and after the
consummation of the Reorganization.
"Withdrawal Liability" means 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 I of Subtitle E of Title IV of ERISA.
"Year 2000 Problem" means any significant risk that computer
hardware or software used in Holdings', the Borrower's or any of their
respective Subsidiaries' businesses or operations will not, in the case of dates
or time periods occurring after December 31, 1999, function at least as
effectively as in the case of dates or time periods occurring prior to January
1, 2000.
Section 1.2. Classification of Loans and Borrowings. For
purposes of this Agreement, Loans may be classified and referred to by Type
(e.g., a "Eurodollar Loan" or a "Eurodollar Revolving Loan," versus an "ABR
Loan" or an ABR Revolving Loan"). Borrowings also may be classified and referred
to by Type (e.g., a "Eurodollar Borrowing" versus an "ABR Borrowing").
Section 1.3. Terms Generally. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without limitation."
The word "will" shall be construed to have the same meaning and effect as
25
<PAGE>
the word "shall." Unless the context requires otherwise (a) any definition of
or reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as
from time to time amended, supplemented or otherwise modified, (b) any
reference herein to any Person shall be construed to include such Person's
successors and assigns, (c) the words "herein," "hereof" and "hereunder," and
words of similar import, shall be construed to refer to this Agreement in its
entirety and not to any particular provision hereof, (d) all references
herein to Articles, Sections, Exhibits and Schedules shall be construed to
refer to Articles and Sections of, and Exhibits and Schedules to, this
Agreement and (e) the words "asset" and "property" shall be construed to have
the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
Section 1.4. Accounting Terms; GAAP. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP, as in effect from time to time, provided
that, if the Borrower notifies the Administrative Agent that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
Section 1.5. Terms Defined in the Uniform Commercial Code.
When capitalized, the following terms used in this Agreement or the Security
Documents have the meanings given to them in the Uniform Commercial Code, as in
effect in the State of New York on the date of this Agreement: Accounts;
Certificated Security; Commodity Account; Commodity Contract; Commodity
Intermediary; Documents; Equipment; Financial Asset; Fixtures; General
Intangibles; Goods; Instruments; Inventory; Investment Property; Purchase Money
Security Interest; Securities Account; Securities Intermediary; Security;
Security Certificate; Security Entitlement; and Uncertificated Security.
Section 1.6. Detrmination of Financial Ratios. For purposes
of determining the Total Leverage Ratio, Consolidated EBITDA, the Cash Interest
Coverage Ratio and the Fixed Charge Coverage Ratio as of any day prior to the
first anniversary of the Effective Date, (a) Consolidated EBITDA for any period
occurring prior to the Effective Date shall be conclusively taken as equal to
the amount set forth for such period in Schedule 1.6 and (b) in computing the
Cash Interest Coverage Ratio and the Fixed Charge Coverage Ratio, the components
of the respective denominator of each shall be annualized by multiplying the
amount of each such component incurred in that portion of the relevant 12-month
period that follows the Effective Date by a fraction, the numerator of which is
365 and the denominator of which is the number of days in such portion of the
12-month period.
26
<PAGE>
ARTICLE II.
THE CREDITS
Section 2.1. Commitments. Subject to the terms and conditions
set forth herein, each Lender severally and not jointly agrees to make Revolving
Loans to the Borrower from time to time during the Revolving Availability Period
in an aggregate principal amount that will not result in such Lender's Total
Exposure at any time exceeding such Lender's Revolving Commitment in effect at
such time. Within the foregoing limits and subject to the terms and conditions
set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans.
Section 2.2. Loans and Borrowings.
(a) Each Loan shall be made as part of a Borrowing consisting
of Loans of the same Type made by the Lenders ratably in accordance with their
respective Revolving Commitments. The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder. The Revolving Commitments are several and no Lender shall be
responsible for any other Lender's failure to make Loans as required.
(b) Subject to Sections 2.6(f), 2.6(g) and 2.12, each
Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the
Borrower may request in accordance herewith. Each Lender at its option may make
any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of
such Lender to make such Loan. The exercise of such option shall not affect the
obligation of the Borrower to repay such Loan in accordance with the terms of
this Agreement or such Lender's obligations under Section 2.14.
(c) At the commencement of each Interest Period for any
Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an
integral multiple of $500,000 and not less than $1,000,000. At the time that
each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that
is an integral multiple of $500,000 and not less than $1,000,000, except that an
ABR Borrowing may be in an aggregate amount that is equal to the entire unused
balance of the total Revolving Commitments or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.4(e).
Borrowings of more than one Type may be outstanding at the same time, but there
shall not at any time be more than a total of six Eurodollar Borrowings
outstanding.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto would end
after the Maturity Date.
27
<PAGE>
Section 2.3. Requests for Borrowings. To request a Borrowing,
the Borrower shall notify the Administrative Agent of such request by telephone
(a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York
City time, three Business Days before the date of the proposed Borrowing or (b)
in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time,
one Business Day before the date of the proposed Borrowing, provided that any
such notice of an ABR Borrowing to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.4(e) may be given not later than 10:00
a.m., New York City time, on the date of the proposed Borrowing. Each such
telephonic Borrowing Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Borrowing Request in substantially the form of Exhibit B hereto, specifying
therein, in compliance with Section 2.2:
(i) the aggregate amount of such Borrowing;
(ii) the date of such Borrowing, which shall be
a Business Day;
(iii) subject to Section 2.2(b), whether such
Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;
(iv) in the case of a Eurodollar Borrowing, the
initial Interest Period to be applicable thereto, which shall be a
period contemplated by the definition of the term "Interest Period";
and
(v) the location and number of the Borrower's account
to which funds are to be disbursed, which shall comply with the
requirements of Section 2.5.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month's duration. Promptly following
receipt of a Borrowing Request in accordance with this Section 2.3, the
Administrative Agent shall advise each Lender of the details thereof and of the
amount of such Lender's Loan to be made as part of the requested Borrowing.
Section 2.4. Letters of Credit.
(a) Subject to the terms and conditions set forth herein, the
Borrower may request the issuance of Letters of Credit for its own account, in a
form reasonably acceptable to the Administrative Agent and the Issuing Bank, at
any time and from time to time during the LC Availability Period. In the event
of any inconsistency between the terms and conditions of this Agreement and the
terms and conditions of any form of letter of credit application or other
agreement submitted by the Borrower to, or entered into by the Borrower with,
the Issuing Bank relating to any Letter of Credit, the terms and conditions of
this Agreement shall control.
28
<PAGE>
(b) To request the issuance of a Letter of Credit (or the
amendment, renewal or extension of an outstanding Letter of Credit), the
Borrower shall hand deliver or telecopy (or transmit by electronic
communication, if arrangements for doing so have been approved by the Issuing
Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance of
the requested date of issuance, amendment, renewal or extension) a notice
requesting the issuance of a Letter of Credit, or identifying the Letter of
Credit to be amended, renewed or extended, and specifying the date of issuance,
amendment, renewal or extension (which shall be a Business Day), the date on
which such Letter of Credit is to expire (which shall comply with Section
2.4(c)), the amount of such Letter of Credit, the name and address of the
beneficiary thereof and such other information as shall be necessary to prepare,
amend, renew or extend such Letter of Credit. If requested by the Issuing Bank,
the Borrower also shall submit a letter of credit application on the Issuing
Bank's standard form in connection with any request for a Letter of Credit. A
Letter of Credit shall be issued, amended, renewed or extended only if (and upon
issuance, amendment, renewal or extension of each Letter of Credit the Borrower
shall be deemed to represent and warrant that), after giving effect to such
issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed
the LC Sublimit in effect at such time and (ii) the aggregate Total Exposures
shall not exceed the aggregate Revolving Commitments in effect at such time.
(c) Each Letter of Credit shall expire at or prior to the
close of business on the earlier of (i) the date one year after the date of the
issuance of such Letter of Credit (or, in the case of any renewal or extension
thereof, one year after such renewal or extension) and (ii) the date that is
thirty days prior to the Maturity Date.
(d) By the issuance of a Letter of Credit (or an amendment to
a Letter of Credit increasing the amount thereof) and without any further action
on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants
to each Lender, and each Lender hereby severally and not jointly acquires from
the Issuing Bank, a participation in such Letter of Credit equal to such
Lender's Applicable Percentage of the aggregate amount available to be drawn
under such Letter of Credit. In consideration and in furtherance of the
foregoing, each Lender hereby absolutely and unconditionally agrees to pay to
the Administrative Agent, for the account of the Issuing Bank, such Lender's
Applicable Percentage of each LC Disbursement made by the Issuing Bank and not
reimbursed by the Borrower on the date due as provided in Section 2.4(e), or of
any reimbursement payment required to be refunded to the Borrower for any
reason. Each Lender acknowledges and agrees that its obligation to acquire
participations pursuant to this Section 2.4(d) in respect of Letters of Credit
is absolute and unconditional and shall not be affected by any circumstance
whatsoever, including any amendment, renewal or extension of any Letter of
Credit or the occurrence and continuance of a Default or reduction or
termination of the Revolving Commitments, and that each such payment shall be
made without any offset, abatement, withholding or reduction whatsoever.
29
<PAGE>
(e) If the Issuing Bank shall make any LC Disbursement in
respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement
by paying to the Administrative Agent an amount equal to such LC Disbursement
not later than 12:00 noon, New York City time, on the date that such LC
Disbursement is made, if the Borrower shall have received notice of such LC
Disbursement prior to 10:00 a.m., New York City time, on such date, or, if such
notice has not been received by the Borrower prior to such time on such date,
then not later than 12:00 noon, New York City time, on (i) the Business Day that
the Borrower receives such notice, if such notice is received prior to 10:00
a.m., New York City time, on the day of receipt, or (ii) the Business Day
immediately following the day that the Borrower receives such notice, if such
notice is not received prior to such time on the day of receipt, provided that
the Borrower may, subject to the conditions to borrowing set forth herein,
request in accordance with Section 2.3 that such payment be financed with an ABR
Borrowing in an equivalent amount and, to the extent so financed, the Borrower's
obligation to make such payment shall be discharged and replaced by the
resulting ABR Borrowing. If the Borrower fails to make such payment when due,
the Administrative Agent shall notify each Lender of the applicable LC
Disbursement, the payment then due from the Borrower in respect thereof and such
Lender's Applicable Percentage thereof. Promptly following receipt of such
notice, each Lender severally and not jointly agrees to pay to the
Administrative Agent its Applicable Percentage of the payment then due from the
Borrower, in the same manner as provided in Section 2.5 with respect to Loans
made by such Lender (and Section 2.5 shall apply, mutatis mutandis, to the
payment obligations of the Lenders), and the Administrative Agent shall promptly
pay to the Issuing Bank the amounts so received by it from the Lenders. Promptly
following receipt by the Administrative Agent of any payment from the Borrower
pursuant to this Section 2.4(e), the Administrative Agent shall distribute such
payment to the Issuing Bank or, to the extent that Lenders have made payments
pursuant to this Section 2.4(e) to reimburse the Issuing Bank, then to such
Lenders and the Issuing Bank as their interests may appear. Any payment made by
a Lender pursuant to this Section 2.4(e) to reimburse the Issuing Bank for any
LC Disbursement (other than the funding of an ABR Borrowing as contemplated
above) shall constitute the payment of the purchase price for a participation
pursuant to Section 2.4(d) and, accordingly, shall not constitute a Loan and
shall not relieve the Borrower of its obligation to reimburse such LC
Disbursement.
(f) The Borrower's obligation to reimburse LC Disbursements as
provided in Section 2.4(e) shall be absolute, unconditional and irrevocable, and
shall be performed strictly in accordance with the terms of this Agreement under
any and all circumstances whatsoever and irrespective of (i) any lack of
validity or enforceability of any Letter of Credit or this Agreement, or any
term or provision therein, (ii) any draft or other document presented under a
Letter of Credit proving to be forged, fraudulent or invalid in any respect or
any statement therein being untrue or inaccurate in any respect, (iii) payment
by the Issuing Bank under a Letter of Credit against presentation of a draft or
other document that does not comply with the terms of such Letter of Credit, or
(iv) any other event or circumstance whatsoever, whether or not similar to any
of the
30
<PAGE>
foregoing, that might, but for the provisions of this Section 2.4(f),
constitute a legal or equitable discharge of, or provide a right of setoff
against, the Borrower's obligations hereunder. None of the Administrative Agent,
the Lenders, the Issuing Bank or any of their Related Parties shall have any
liability or responsibility by reason of or in connection with the issuance or
transfer of any Letter of Credit or any payment or failure to make any payment
thereunder (irrespective of any of the circumstances referred to in the
preceding sentence), or any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit (including any document required to make a
drawing thereunder), any error in interpretation of technical terms or any
consequence arising from causes beyond the control of the Issuing Bank. The
foregoing shall not be construed to excuse the Issuing Bank from liability to
the Borrower to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby forever waived by the Borrower)
suffered by the Borrower that are caused by the Issuing Bank's failure to
exercise care when determining whether drafts and other documents presented
under a Letter of Credit comply with the terms thereof. The parties hereto
expressly agree that, in the absence of gross negligence or willful misconduct
on the part of the Issuing Bank (as finally determined by a court of competent
jurisdiction), the Issuing Bank shall be deemed to have exercised care in each
such determination. In furtherance of the foregoing and without limiting the
generality thereof, the parties agree that, with respect to documents presented
that appear on their face to be in compliance with the terms of a Letter of
Credit, the Issuing Bank may, in its sole discretion, either accept and make
payment upon such documents without responsibility for further investigation,
regardless of any notice or information to the contrary, or refuse to accept and
make payment upon such documents if such documents are not in strict compliance
with the terms of such Letter of Credit.
(g) The Issuing Bank shall, promptly following its receipt
thereof, examine all documents purporting to represent a demand for payment
under a Letter of Credit. The Issuing Bank shall promptly notify the
Administrative Agent and the Borrower by telephone (confirmed by telecopy) of
such demand for payment and whether the Issuing Bank has made or will make an LC
Disbursement thereunder, but no failure to give or delay in giving such notice
shall relieve the Borrower of its obligation to reimburse the Issuing Bank and
the Lenders with respect to any such LC Disbursement or put the Issuing Bank
under any resulting liability to any Person or any resulting diminution of its
rights as against any Person.
(h) If the Issuing Bank shall make any LC Disbursement, then,
unless the Borrower shall reimburse such LC Disbursement in full on the date
such LC Disbursement is made, the unpaid amount thereof shall bear interest, for
each day from and including the date such LC Disbursement is made to but
excluding the date that the Borrower reimburses such LC Disbursement, at the
rate per annum (including the Applicable ABR Margin) then applicable to ABR
Revolving Loans, except that if the Borrower fails to reimburse such LC
Disbursement when due pursuant to Section 2.4(e),
31
<PAGE>
then Section 2.11(c) shall apply. Interest accrued pursuant to this Section
2.4(h) shall be for the account of the Issuing Bank and, after the date of
payment by any Lender pursuant to Section 2.4(d) for the purchase of a
participation, for the account of such Lender to the extent of such
participation.
(i) The Issuing Bank may be replaced at any time by written
agreement among the Borrower, the Administrative Agent, the replaced Issuing
Bank and the successor Issuing Bank. The Administrative Agent shall notify the
Lenders of any such replacement of the Issuing Bank. At the time any such
replacement shall become effective, the Borrower shall pay all unpaid fees
accrued for the account of the replaced Issuing Bank pursuant to Section
2.1m(b). From and after the effective date of any such replacement, (i) the
successor Issuing Bank shall have all the rights and obligations of the Issuing
Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all previous Issuing Banks, as the context shall require. After the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain
a party hereto and shall continue to have all the rights and obligations of an
Issuing Bank under this Agreement with respect to Letters of Credit issued by it
prior to such replacement, but shall not be required to issue additional Letters
of Credit.
(j) If any Event of Default shall occur and be continuing, on
the Business Day that the Borrower receives notice from the Administrative Agent
or the Required Lenders (or, if the maturity of the Loans has been accelerated,
Lenders with LC Exposure representing greater than 50% of the total LC Exposure)
demanding the deposit of cash collateral pursuant to this Section 2.4(j), the
Borrower shall deposit in an account with the Administrative Agent, in the name
of the Administrative Agent and for the benefit of the Lenders, an amount in
cash equal to 105% of the LC Exposure as of such date plus any and all accrued
and unpaid interest thereon, except that the obligation to deposit such cash
collateral shall become effective immediately, and such deposit shall become
immediately due and payable, without demand or other notice of any kind, upon
the occurrence of any Event of Default with respect to the Borrower described in
Section 7.1(h) or 7.1(i). Each such deposit shall be held by the Administrative
Agent as collateral for the payment and performance of the obligations of the
Borrower under this Agreement. The Administrative Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal, over such
account. Other than any interest earned on the investment of such deposits,
which investments shall be made at the option and sole discretion of the
Administrative Agent at the request of the Borrower and at the Borrower's risk
and expense, such deposits shall not bear interest. Interest or profits, if any,
on such investments shall accumulate in such account. Moneys in such account
shall be applied by the Administrative Agent to reimburse the Issuing Bank for
LC Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the Borrower for the LC Exposure at such time or, if the maturity of the Loans
has been accelerated (but
32
<PAGE>
subject to the consent of Lenders with LC Exposure representing greater than 50%
of the total LC Exposure), be applied to satisfy other obligations of the
Borrower under this Agreement. If the Borrower is required to provide an amount
of cash collateral hereunder as a result of the occurrence of an Event of
Default, such amount (to the extent not applied as aforesaid) shall be returned
to the Borrower within three Business Days after all Events of Default have been
cured or waived.
Section 2.5. Funding of Borrowings.
(a) Each Lender shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of immediately available
funds by 12:00 noon, New York City time, to the account of the Administrative
Agent most recently designated by it for such purpose by notice to the Lenders.
The Administrative Agent will make such Loans available to the Borrower by
promptly crediting the amounts so received, in like funds, to an account of the
Borrower maintained with Sanwa Bank California in Rosemead, California, and
designated by the Borrower in the applicable Borrowing Request, except that ABR
Revolving Loans made to finance the reimbursement of an LC Disbursement as
provided in Section 2.4(e) shall be remitted by the Administrative Agent to the
Issuing Bank.
(b) Unless the Administrative Agent shall have received notice
from a Lender prior to the proposed date of any Borrowing that such Lender will
not make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with Section 2.5(a) and may, in
reliance upon such assumption, make available to the Borrower a corresponding
amount. In such event, if a Lender has not in fact made its share of the
applicable Borrowing available to the Administrative Agent, then the applicable
Lender and the Borrower severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount with interest thereon, for each
day from and including the date such amount is made available to the Borrower to
but excluding the date of payment to the Administrative Agent, at (i) in the
case of such Lender, the greater of the Federal Funds Effective Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules
on interbank compensation or (ii) in the case of the Borrower, the interest rate
applicable to ABR Loans. If such Lender pays such amount to the Administrative
Agent, then such amount shall constitute such Lender's Loan included in such
Borrowing.
Section 2.6. Interest Elections.
(a) Each Borrowing initially shall be of the Type specified in
the applicable Borrowing Request and, in the case of a Eurodollar Borrowing,
shall have an initial Interest Period as specified in such Borrowing Request.
Thereafter, the Borrower may elect to convert such Borrowing to a different Type
or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may
elect Interest Periods therefor, all as
33
<PAGE>
provided in this Section 2.6. The Borrower may elect different options with
respect to different portions of the affected Borrowing, in which case each such
portion shall be allocated ratably among the Lenders holding the Loans
comprising such Borrowing, and the Loans comprising each such portion shall be
considered a separate Borrowing.
(b) To make an election pursuant to this Section 2.6, the
Borrower shall notify the Administrative Agent of such election by telephone by
the time that a Borrowing Request would be required under Section 2.3 if the
Borrower were requesting a Borrowing of the Type resulting from such election to
be made on the effective date of such election. Each such telephonic Interest
Election Request shall be irrevocable and binding on the Borrower and shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent in a
writing signed by the Borrower and complying with the provisions of Section
2.6(c) below.
(c) Each telephonic and written Interest Election Request
shall, within the restrictions specified in subsections (a) and (b) above,
specify the following information in compliance with Section 2.2:
(i) the Borrowing to which such Interest Election
Request applies and, if different options are being elected with
respect to different portions thereof, the portions thereof to be
allocated to each resulting Borrowing (in which case the information to
be specified pursuant to Section 2.6(c)(iii) and 2.6(c)(iv) shall be
specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant
to such Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR
Borrowing or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar
Borrowing, the Interest Period to be applicable thereto after giving
effect to such election, which shall be a period contemplated by the
definition of the term "Interest Period."
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election
Request, the Administrative Agent shall advise each Lender of the details
thereof and of such Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest
Election Request with respect to a Eurodollar Borrowing prior to the end of the
Interest Period applicable
34
<PAGE>
thereto, then, unless such Borrowing is repaid as provided herein, at the end of
such Interest Period such Borrowing shall be converted to an ABR Borrowing.
(f) If with respect to any Interest Period Lenders holding at
least 50% in principal amount of the then outstanding Loans advise the
Administrative Agent prior to the first day of the relevant Eurodollar Interest
Period that funding is not available to such Lenders in the London interbank
market in Dollars, then the Administrative Agent shall forthwith give notice
thereof to the Borrower, whereupon (until the Administrative Agent notifies the
Borrower that the circumstances giving rise to such suspension no longer exist)
the right of the Borrower to elect to have Loans bear interest as Eurodollar
Borrowings shall be suspended, and each outstanding Eurodollar Borrowing shall
be converted into a ABR Borrowing on the last day of the then current Interest
Period therefor, notwithstanding any prior election by the Borrower to the
contrary.
(g) If at any time any Lender determines (which determination
shall, if made in good faith, be final and conclusive and binding upon all
parties) that the funding or continuation of, or conversion into, a Eurodollar
Borrowing has become unlawful or impermissible by compliance by such Lender in
good faith with any law, governmental rule, regulation or order of any central
bank or other Governmental Authority or quasi-governmental authority (whether or
not having the force of law and whether or not failure to comply therewith would
be unlawful or would result in costs or penalties), then, and in any such event,
such Lender may give notice of that determination, in writing, to the Borrower
and the Administrative Agent, and the Administrative Agent shall promptly
transmit the notice to each other Lender. When such notice is given by a Lender,
(a) the Borrower's right to request from the Lenders, and each Lender's
obligation (if any) to make, Eurodollar Rate Loans shall be immediately
suspended, and (b) if the affected Eurodollar Rate Loan or Loans are then
outstanding, the Borrower shall immediately, or if permitted by applicable law,
no later than the date permitted thereby, convert each such Loan into an ABR
Loan. If, at any time after a Lender gives notice under this Section 2.6(g),
such Lender determines that it may lawfully make Eurodollar Rate Loans of the
type referred to in such notice, such Lender shall promptly give notice of that
determination, in writing, to the Borrower and the Administrative Agent, and the
Administrative Agent shall promptly transmit the notice to each other Lender.
The Borrower's right to request from the Lenders, and each Lender's obligation,
if any, to make, Eurodollar Rate Loans shall thereafter be restored.
(h) Notwithstanding any contrary provision hereof, if an Event
of Default has occurred and is continuing, then, so long as an Event of Default
is continuing, (i) no outstanding Borrowing may be converted to or continued as
a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall
be converted to an ABR Borrowing at the end of the Interest Period applicable
thereto.
Section 2.7. Termination and Reduction of Commitments;
Certain Prepayments.
35
<PAGE>
(a) Unless previously terminated, the Revolving Commitments
shall terminate, and all Obligations will be immediately due and payable, (i) on
the Maturity Date or (ii) upon the occurrence of a Change of Control (unless any
Event of Default arising from such Change of Control has been waived by all
Lenders pursuant to Section 9.2(b)).
(b) If and whenever Holdings or the Borrower or any Borrower
Subsidiary receives any Net Cash Proceeds, such amount shall be applied to
prepay the Revolving Loans (to the extent outstanding on the date of such
prepayment), and the Revolving Commitments shall be reduced, on the first
Business Day after receipt thereof by an amount equal to the Net Cash Proceeds
so received. After prepayment in full of all outstanding Loans, the remainder of
any such prepayment shall be deposited by the Borrower with the Administrative
Agent to be held as cash collateral (in accordance with Section 2.4(j)) up to an
aggregate amount equal to 105% of the LC Exposure at such time.
(c) Commencing with the fiscal year of the Borrower ending
December 31, 2001, the Borrower shall prepay on the 90th day following the last
day of such fiscal year, and annually thereafter, the Revolving Loans (to the
extent outstanding on the date of such prepayment), and the Revolving
Commitments shall be reduced, by an amount equal to 50% of the amount of Excess
Cash Flow for the fiscal year most recently ended. After prepayment in full of
all outstanding Loans, the remainder of any such prepayment shall be deposited
by the Borrower with the Administrative Agent to be held as cash collateral (in
accordance with Section 2.4(j)) up to an aggregate amount equal to 105% of the
LC Exposure at such time.
(d) No less than five Business Days prior to the date that
Holdings is required to make, or otherwise intends to make, an Asset Sale Offer
pursuant to Section 4.08(b) of the Senior Note Indenture (and as defined
therein), the Borrower shall prepay the Revolving Loans (to the extent
outstanding on the date of such prepayment), and the Revolving Commitments shall
be reduced, by an amount equal to the Excess Proceeds (as defined in the Senior
Note Indenture) at such time. After prepayment in full of all outstanding Loans,
the remainder of any such prepayment shall be deposited by the Borrower with the
Administrative Agent to be held as cash collateral (in accordance with Section
2.4(j)) up to an aggregate amount equal to 105% of the LC Exposure at such time.
(e) The Borrower may at any time terminate, or from time to
time reduce, the Revolving Commitments, provided that (i) each reduction of the
Revolving Commitments shall be in an amount that is an integral multiple of
$500,000 and not less than $1,000,000 and (ii) the Borrower shall not terminate
or reduce the Revolving Commitments if and to the extent that, after giving
effect to such termination or reduction and any concurrent prepayment of the
Revolving Loans in accordance with Section 2.9, the sum of the Total Exposures
would exceed the total Revolving Commitments.
36
<PAGE>
(f) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Revolving Commitments under Section 2.7(e)
at least three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly
following receipt of any such notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each notice delivered by the Borrower pursuant
to this Section 2.7(f) shall be irrevocable. Any termination or reduction of the
Revolving Commitments shall be permanent. Each reduction of the Revolving
Commitments shall be made ratably among the Lenders in accordance with their
respective Revolving Commitments.
(g) The LC Sublimit shall be permanently and automatically
reduced on the date of any termination or reduction of the Revolving Commitments
by an amount equal to the amount by which the aggregate Revolving Commitments
(after giving effect to such termination or reduction thereof) are less than
$10,000,000.
(h) Notwithstanding anything herein to the contrary, at any
time that Loans are outstanding the proceeds of which were used in connection
with the funding of a Permitted Acquisition, the Borrower may, in accordance
with Section 2.9, voluntarily prepay such Loans, in whole or in part, and
reborrow, in accordance with Article II and subject to the terms and conditions
hereof, an amount up to the principal amount of such prepayment at a later date;
provided that, concurrently with such reborrowing, the Borrower delivers a
certificate to the Administrative Agent certifying that the proceeds of such
reborrowing will be applied solely to (i) regularly scheduled payments of
interest on the Senior Notes or (ii) the payment of a Tax Distribution Amount
pursuant to Section 6.7, and such proceeds are in fact so applied.
Section 2.8. Repayment of Loans: Evidence of Debt.
(a) The Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of each Lender the then unpaid principal
amount of each Revolving Loan of such Lender on the Maturity Date.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Borrower to
such Lender resulting from each Loan made by such Lender, including the amounts
of principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which
it shall record (i) the amount of each Loan made hereunder, the Type thereof and
the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder for the account of the Lenders and each Lender's share thereof.
37
<PAGE>
(d) The entries made in the accounts maintained pursuant to
Sections 2.8(b) and 2.8(c) shall be prima facie evidence of the existence and
amounts of the obligations recorded therein, but the failure of any Lender or
the Administrative Agent to maintain such accounts or any error therein shall
not in any manner affect the obligation of the Borrower to repay the Loans, and
to pay interest on the Loans, in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans made by it be evidenced
by a promissory note. In such event, the Borrower shall prepare, execute and
deliver to such Lender a Revolving Credit Note payable to the order of such
Lender (or, if requested by such Lender, to such Lender and its registered
assigns). Thereafter, the Loans evidenced by such promissory note and interest
thereon shall at all times (including after assignment pursuant to Section 9.4)
be represented by one or more promissory notes in such form payable to the order
of the payee named therein (or, if such promissory note is a registered note, to
such payee and its registered assigns).
Section 2.9. Prepayment of Loans.
(a) The Borrower shall prepay the Loans on each date
specified, and in the manner specified, in Section 2.7. In addition, (i) if on
any date the Total Exposure exceeds the Revolving Commitments in effect on such
date, the Borrower shall on such date prepay Revolving Loans in an amount equal
to such excess, and (ii) if on any date the LC Exposure exceeds the Revolving LC
Sublimit in effect on such date, the Borrower shall on such date deposit cash
collateral in an amount equal to 105% of such excess in the manner and on the
terms set forth in Section 2.4(j).
(b) The Borrower shall have the right at any time and from
time to time to prepay any Borrowing in whole or in part, subject to the
requirements of this Section 2.9.
(c) In the event of any termination of all the Revolving
Commitments, the Borrower shall repay or prepay all outstanding Borrowings on
the date of such termination. In the event of any partial reduction of the
Revolving Commitments, then (i) at or prior to the effective date of such
reduction or termination, the Administrative Agent shall notify the Borrower and
the Lenders of the aggregate Total Exposure after giving effect thereto and (ii)
if the aggregate Total Exposure would exceed the aggregate Revolving Commitments
after giving effect to such reduction or termination, then the Borrower shall,
on the date of such reduction or termination, prepay Borrowings in an amount
sufficient to eliminate such excess.
(d) Prior to any optional or mandatory prepayment of
Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to
be prepaid and shall specify such selection in the notice of such prepayment
pursuant to Section 2.9(e), but, in any event, each prepayment of Borrowings
shall be applied to prepay ABR Borrowings before any other Borrowings.
38
<PAGE>
(e) The Borrower shall notify the Administrative Agent by
telephone (confirmed by telecopy) of any optional prepayment hereunder (i) in
the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New
York City time, three Business Days before the date of prepayment, or (ii) in
the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York
City time, one Business Day before the date of prepayment. Each such notice
shall be irrevocable and shall specify the prepayment date, the principal amount
of each Borrowing or portion thereof to be prepaid and, in the case of a
mandatory prepayment, a reasonably detailed calculation of the amount of such
prepayment. Promptly following receipt of any such notice, the Administrative
Agent shall advise the Lenders of the contents thereof. Each partial prepayment
of any Borrowing shall be in an amount that would be permitted in the case of an
advance of a Borrowing of the same Type as provided in Section 2.2, except as
necessary to apply fully the required amount of a mandatory prepayment. Each
prepayment of a Borrowing shall be applied ratably to the Loans included in the
prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the
extent required by Section 2.11, and if any prepayment of a Eurodollar Loan is
made on a date other than the last day of the Interest Period applicable to such
Loan, the Borrower shall also pay all amounts owing pursuant to Section 2.13(e).
(f) Any provision hereof to the contrary notwithstanding, from
and after the date any Borrowing has been made in respect of a Permitted
Acquisition, each prepayment of Revolving Loans hereunder shall be deemed to be
applied, first, to Borrowings the proceeds of which were used for working
capital purposes, until all such Borrowings have been repaid in full, and,
second, to Borrowings made in respect of Permitted Acquisitions.
Section 2.10. Fees.
(a) The Borrower agrees to pay to the Administrative Agent for
the account of each Lender a commitment fee, which shall accrue at the rate of
0.50% per annum on the average daily unused amount of the Revolving Commitment
of such Lender during the period from and including the date of this Agreement
to but excluding the date on which the Revolving Commitments are terminated.
Accrued commitment fees shall be payable in arrears on the last day of March,
June, September and December of each year and on the date on which the Revolving
Commitments terminate, commencing on the first such date to occur after the date
hereof. All commitment fees shall be computed on the basis of a year of 360 days
and shall be payable for the actual number of days elapsed (including the first
day but excluding the last day). For purposes of computing commitment fees with
respect to Revolving Commitments, a Revolving Commitment of a Lender shall be
deemed to be used to the extent of the outstanding Revolving Loans and LC
Exposure of such Lender.
(b) The Borrower agrees to pay to the Administrative Agent for
the account of each Lender a participation fee with respect to its
participations in Letters of
39
<PAGE>
Credit, which shall accrue at a rate equal to (i) with respect to all Letters of
Credit other than Documentary Letters of Credit, the Applicable Eurodollar
Margin (as in effect from day to day as such participation fee accrues) less 1/4
of 1% per annum, and (ii) with respect to Documentary Letters of Credit,
fifty-percent (50%) of the Applicable Eurodollar Margin (as in effect from day
to day as such participation fee accrues), in each case on the average daily
amount of such Lender's LC Exposure (excluding any portion thereof attributable
to unreimbursed LC Disbursements), during the period from and including the date
of this Agreement to but excluding the later of the date on which such Lender's
Revolving Commitment terminates and the date on which such Lender ceases to have
any LC Exposure. The Borrower also agrees to pay to the Issuing Bank, solely for
the Issuing Bank's own account, a fronting fee which shall accrue at the rate of
1/4 of 1% per annum on the average daily amount of the LC Exposure relating to
all Letters of Credit during the period from and including the date of this
Agreement to but excluding the later of the date of termination of the Revolving
Commitments and the date on which there ceases to be any LC Exposure, as well as
the Issuing Bank's standard fees with respect to the issuance, amendment,
renewal or extension of any Letter of Credit or processing of drawings
thereunder. Participation fees and fronting fees accrued through and including
the last day of March, June, September and December of each year shall be
payable in arrears on the third Business Day following such last day, commencing
on the first such date to occur after the Effective Date, and, in addition, all
such fees shall be payable on the date on which the Revolving Commitments
terminate and any such fees accruing after the date on which the Revolving
Commitments terminate shall be payable on demand. Any other fees payable to the
Issuing Bank pursuant to this Section 2.10(b) shall be payable within 10 days
after demand. All participation fees and fronting fees shall be computed on the
basis of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).
(c) The Borrower agrees to pay to the Administrative Agent,
for its own account and for account of the Arranger, fees payable in the amounts
and at the times separately agreed upon between or among the Borrower, the
Administrative Agent and the Arranger.
(d) All fees payable hereunder shall be paid on the dates due,
in immediately available funds, to the Administrative Agent (or to the Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
commitment fees and participation fees, to the Lenders entitled thereto. Fees
paid shall not be refundable under any circumstances.
Section 2.11. Interest.
(a) The Loans comprising each Eurodollar Borrowing shall bear
interest for each day of each Interest Period selected for such Borrowing in
conformity with the provisions of this Agreement at the Adjusted LIBO Rate
determined for such Interest Period plus the Applicable Eurodollar Margin
determined as of such day.
40
<PAGE>
(b) The Loans comprising each ABR Borrowing and, except to the
extent interest accrues thereon as set forth in Section 2.11(a), all other
Loans, reimbursement liabilities for LC Disbursements and other Obligations at
any time outstanding shall bear interest for each day at the Alternate Base Rate
in effect for such day plus the Applicable ABR Margin determined as of such day.
(c) Notwithstanding the provisions of Sections 2.11(a) and
2.11(b), if and for as long as any amount due for principal of or interest on
any Loan or any reimbursement liability for LC Disbursements remains unpaid and,
in addition, for each day on which any Event of Default has occurred and is
continuing, any and all outstanding Loans, reimbursement liabilities for LC
Disbursements and other Obligations (whether or not then due and payable) shall
bear interest, after as well as before judgment, at a rate per annum equal to
(i) in the case of any Eurodollar Borrowing for which the Interest Period has
not then expired, 2 % per annum plus the rate (including the Applicable
Eurodollar Margin) otherwise applicable to such Eurodollar Borrowing as provided
in Section 2.11(a) and (ii) in the case of any other Loan, reimbursement
liability or other Obligation then outstanding, 2 % per annum plus the rate
(including Applicable ABR Margin) then applicable to ABR Revolving Loans as
provided in Section 2.11(b).
(d) Accrued interest on each Loan shall be payable in arrears
on each Interest Payment Date for such Loan and, in the case of Revolving Loans,
upon termination of the Revolving Commitments, except that, in any event, (i)
interest accrued pursuant to Section 2.11(c) shall be payable on demand, (ii) in
the event of any repayment or prepayment of any Loan (other than a prepayment of
an ABR Revolving Loan prior to the end of the Revolving Availability Period),
accrued interest on the principal amount repaid or prepaid shall be payable on
the date of such repayment or prepayment and (iii) in the event of any
conversion of any Eurodollar Loan prior to the end of the current Interest
Period therefor, accrued interest on such Loan shall be payable on the effective
date of such conversion.
(e) All interest hereunder shall be computed on the basis of a
year of 360 days, except that interest computed by reference to clause (a) of
the definition of Alternate Base Rate shall be computed on the basis of a year
of 365 days (or 366 days in a leap year), and in each case shall be payable for
the actual number of days elapsed (including the first day but excluding the
last day). The applicable Alternate Base Rate or Adjusted LIBO Rate shall be
determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error.
Section 2.12. Alternate Rate of Interest.
If prior to the commencement of any Interest Period for a
Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination
shall be conclusive absent manifest error) that adequate and reasonable means do
not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or
41
<PAGE>
(b) the Administrative Agent is advised by the Required
Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately
and fairly reflect the cost to such Lenders (or Lender) of making or maintaining
their Loans (or its Loan) included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.
Section 2.13. Increased Costs.
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by, any Lender or any holding
company of any Lender (except any such reserve requirement reflected in
the Adjusted LIBO Rate) or the Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the
London interbank market any other condition affecting this Agreement or
Eurodollar Loans made by such Lender or any Letter of Credit or
participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any
Change in Law regarding capital requirements increases or would have the effect
of increasing the amount or cost of capital required or expected to be
maintained by such Lender or any corporation controlling such Lender or Issuing
Bank, or reduces or would have the effect of reducing the rate of return on such
capital, and such Lender or Issuing Bank reasonably determines that the amount
or cost of such capital is increased, or the rate of return thereon is reduced,
by or based upon the existence or funding of such Lender's or Issuing Bank's
commitment to make loans and issue or participate in letters of credit under
this Agreement and other commitments of this type, to a level below that which
such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding
company could have
42
<PAGE>
achieved but for such Change in Law (taking into consideration such Lender's or
the Issuing Bank's policies and the policies of such Lender's or the Issuing
Bank's holding company with respect to capital adequacy),then, within three
Business Days after demand by such Lender or Issuing Bank, the Borrower shall
pay to such Lender or Issuing Bank, from time to time as specified by such
Lender or Issuing Bank, additional amounts sufficient to compensate such Lender
or Issuing Bank in the light of such circumstances, to the extent that such
Lender or Issuing Bank in good faith determines such increase in capital, or
reduction in the rate of return, to be allocable to the existence or funding of
its commitment.
(c) A certificate of a Lender or the Issuing Bank setting
forth the amount or amounts necessary to compensate such Lender or the Issuing
Bank or its holding company, as the case may be, as specified in Section 2.13(a)
or 2.13(b) shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender or the Issuing Bank, as the
case may be, the amount shown as due on any such certificate within 10 days
after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing
Bank to demand compensation pursuant to this Section 2.13 shall not constitute a
waiver of such Lender's or the Issuing Bank's right to demand such compensation.
(e) In the event of (i) the payment of any principal of any
Eurodollar Loan other than on the last day of an Interest Period applicable
thereto (including as a result of an Event of Default), (ii) the conversion of
any Eurodollar Loan other than on the last day of the Interest Period applicable
thereto, (iii) the failure to borrow, convert, continue or prepay any Revolving
Loan on the date specified in any notice delivered pursuant hereto, or (iv) the
assignment of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Borrower pursuant to
Section 2.16, then, in any such event, the Borrower shall compensate each Lender
for the loss, cost and expense attributable to such event. A certificate of any
Lender setting forth any amount or amounts that such Lender is entitled to
receive pursuant to this Section 2.13 shall be delivered to the Borrower and
shall be conclusive absent manifest error. The Borrower shall pay such Lender
the amount shown as due on any such certificate within 10 days after receipt
thereof.
Section 2.14. Taxes.
(a) Any and all payments by or on account of any obligation of
the Borrower hereunder or under any other Loan Document shall be made free and
clear of and without deduction for any Indemnified Taxes or Other Taxes. If,
nevertheless, the Borrower shall be required to deduct any Indemnified Taxes or
Other Taxes from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.14) the
Administrative Agent, Lender or Issuing Bank (as the case may be)
43
<PAGE>
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent,
each Lender and the Issuing Bank, within 10 days after written demand therefor,
for the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or
with respect to any payment by or on account of any obligation of the Borrower
hereunder or under any other Loan Document (including Indemnified Taxes or Other
Taxes imposed or asserted on or attributable to amounts payable under this
Section 2.14) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrower by a Lender or the Issuing Bank, or by the
Administrative Agent on its own behalf or on behalf of a Lender or the Issuing
Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower
shall deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Each Foreign Lender shall deliver to the Borrower and the
Administrative Agent two copies of either United States Internal Revenue Service
Form 1001 or Form 4224, or, in the case of a Foreign Lender's claiming exemption
from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of "portfolio interest," a Form W-8, or any subsequent
versions thereof or successors thereto (and, if such Foreign Lender delivers a
Form W-8, a certificate representing that such Foreign Lender is not a bank for
purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within
the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is not a
controlled foreign corporation related to the Borrower (within the meaning of
Section 864(d)(4) of the Code)), properly completed and duly executed by such
Foreign Lender claiming complete exemption from or reduced rate of, U.S. Federal
withholding tax on payments by the Borrower under this Agreement and the other
Loan Documents. Such forms shall be delivered by each Foreign Lender on or
before the date it becomes a party to this Agreement and on or before the date,
if any, such Foreign Lender changes its applicable lending office by designating
a different
44
<PAGE>
lending office (a "New Lending Office"). In addition, each Foreign
Lender shall deliver such forms promptly upon the obsolescence or invalidity of
any form previously delivered by such Foreign Lender. Notwithstanding any other
provision of this Section 2.14(e), a Foreign Lender shall not be required to
deliver any form pursuant to this 2.14(e) that such Foreign Lender is not
legally able to deliver.
(f) The Borrower shall not be required to indemnify any
Foreign Lender or to pay any additional amounts to any Foreign Lender in respect
of U.S. Federal withholding tax pursuant to Section 2.14(a) or 2.14(c) to the
extent that the obligation to pay such additional amounts would not have arisen
but for a failure by such Foreign Lender to comply with the provisions of
Section 2.14(e). Should a Lender become subject to Taxes because of its failure
to deliver a form required hereunder, Borrower shall, at Lender's expense, take
such steps as such Lender shall reasonably request to assist such Lender to
recover such Taxes.
Section 2.15. Payments Generally; Pro Rata Treatment;
Sharing of Setoffs.
(a) The Borrower shall make each payment required to be made
by it hereunder or under any other Loan Document (whether of principal,
interest, fees or reimbursement of LC Disbursements, or of amounts payable under
Section 2.13, 2.14 or 2.16 or otherwise) prior to 12:00 noon, New York City
time, on the date when due, in immediately available funds, without setoff or
counterclaim. Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on the
next succeeding Business Day for purposes of calculating interest thereon. All
such payments shall be made to the Administrative Agent at the offices of
Citibank at 399 Park Avenue, New York, New York, except payments to be made
directly to the Issuing Bank as expressly provided herein and except that
payments pursuant to Sections 2.13, 2.14, 2.16 and 9.3 shall be made directly to
the Persons entitled thereto and payments pursuant to other Loan Documents shall
be made to the Persons specified therein. The Administrative Agent shall
distribute any such payments received by it for the account of any other Person
to the appropriate recipient promptly following receipt thereof. If any payment
under any Loan Document shall be due on a day that is not a Business Day, the
date for payment shall be extended to the next succeeding Business Day, and, in
the case of any payment accruing interest, interest thereon shall be payable for
the period of such extension. All payments under each Loan Document shall be
made in dollars.
(b) If at any time insufficient funds are received by and
available to the Administrative Agent to pay fully all amounts of principal,
unreimbursed LC Disbursements, interest and fees then due hereunder, such funds
shall be applied (i) first, towards payment of interest and fees then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of interest and fees then due to such parties, and (ii) second, towards
payment of principal and unreimbursed LC
45
<PAGE>
Disbursements then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of principal and unreimbursed LC Disbursements then
due to such parties.
(c) If any Lender shall, by exercising any right of setoff or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans, LC Disbursements, or participations in
LC Disbursements resulting in such Lender receiving payment of a greater
proportion of the aggregate amount of its Revolving Loans, LC Disbursements and
participations in LC Disbursements and accrued interest thereon than the
proportion received by any other Lender, then the Lender receiving such greater
proportion shall purchase (for cash at face value) participations in the
Revolving Loans, LC Disbursements and participations in LC Disbursements of
other Lenders to the extent necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Revolving Loans, LC
Disbursements and participations in LC Disbursements. If any such participations
are purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest. The provisions of
this Section 2.15(c) shall not be construed to apply to any payment made by the
Borrower pursuant to and in accordance with the express terms of this Agreement
or any payment obtained by a Lender as consideration for the assignment of or
sale of a participation in any of its Loans, LC Disbursements or participations
in LC Disbursements to any assignee or participant, other than to Holdings, the
Borrower or any Borrower Subsidiary or Affiliate thereof (as to which the
provisions of this Section 2.15(c) shall apply). The Borrower consents to the
foregoing and agrees, to the extent it may effectively do so under applicable
law, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against the Borrower rights of setoff and counterclaim
with respect to such participation as fully as if such Lender were a direct
creditor of the Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or the Issuing Bank
hereunder that the Borrower will not make such payment, the Administrative Agent
may assume that the Borrower has made such payment on such date in accordance
herewith and may, in reliance upon such assumption, distribute to the Lenders or
the Issuing Bank, as the case may be, the amount due. In such event, if the
Borrower has not in fact made such payment, then each of the Lenders or the
Issuing Bank, as the case may be, severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender or Issuing Bank with interest thereon, for each day from and including
the date such amount is distributed to it to but excluding the date of payment
to the Administrative Agent, at the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation.
46
<PAGE>
(e) If any Lender shall fail to make any payment required to
be made by it pursuant to Section 2.4(d), 2.4(e), 2.5(b), 2.15(d) or 9.3(c),
then the Administrative Agent may, in its discretion (notwithstanding any
contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender's
obligations under such Sections until all such unsatisfied obligations are fully
paid.
Section 2.16. Replacement of Lender. If any Lender gives
notice of illegality pursuant to Section 2.6(g) or requests compensation under
Section 2.13, or if the Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender pursuant to
Section 2.14, then the Borrower may, at its sole expense and effort, upon notice
to such Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in Section 9.4, provided that the Borrower shall be obligated to pay
the processing and recordation fee referred to therein), all its interests,
rights and obligations under this Agreement to an assignee that shall assume
such obligations (which assignee may be another Lender, if a Lender accepts such
assignment), but (in each case) only if (i) the Borrower has received the prior
written consent of the Administrative Agent and the Issuing Bank, which consent
shall not unreasonably be withheld, (ii) such Lender has received payment of an
amount equal to the outstanding principal of its Revolving Loans, LC
Disbursements and participations in LC Disbursements, accrued interest thereon,
accrued fees and all other amounts payable to it hereunder (including without
limitation all amounts owing to such replaced Lender pursuant to Sections 2.13,
2.14 and 2.15, including with limitation any amounts owing under Section 2.13(e)
as a result of such replacement), from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrower (in the
case of all other amounts) and (iii) in the case of any such assignment
resulting from a claim for compensation under Section 2.13 or payments required
to be made pursuant to Section 2.14, such assignment will result in a reduction
in such compensation or payments. A Lender shall not be required to make any
such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and delegation cease to apply.
ARTICLE III.
CONDITIONS
Section 3.1. Effective Date. The obligations of the
Lenders to make the initial Loans and of the Issuing Bank to issue the initial
Letters of Credit hereunder shall not become effective until the date on which
each of the following conditions is satisfied (or waived in accordance with
Section 9.2):
(a) The Administrative Agent (or its counsel) shall have
received from each party hereto either (i) a counterpart of this Agreement
signed on behalf of such party or (ii) written evidence satisfactory to the
Administrative Agent (which may include
47
<PAGE>
telecopy transmission of a signed signature page of this Agreement) that such
party has signed a counterpart of this Agreement.
(b) The Administrative Agent shall have received counterparts
of the Pledge and Security Agreement signed on behalf of each Loan Party party
thereto, and:
(i) the Administrative Agent shall have received
delivery, in pledge, of (A) stock certificates representing all
outstanding shares of capital stock of each member of the Holdings
Group owned by or on behalf of any Loan Party as of the Effective Date,
after giving effect to the Transactions, and (B) Intercompany Notes
signed by each Loan Party evidencing all Indebtedness owed to another
Loan Party as of, and to be owing to such Loan Party at any time after,
the Effective Date after giving effect to the Transactions, together
(in each case) with stock powers and instruments of transfer, endorsed
in blank,
(ii) the Administrative Agent shall have received
evidence of all documents and instruments, including Uniform Commercial
Code financing statements, required by law or reasonably requested by
the Administrative Agent to be filed, registered or recorded to create
or perfect the Liens intended to be created under the Pledge and
Security Agreement signed on behalf of each Loan Party, and evidence
that such financing statements have been filed (or are in appropriate
form for filing) in the filing offices listed on Schedule 3.1(b),
(iii) the Administrative Agent shall have received
evidence of all consents (including without limitation consent under
the Supply Agreements) that may be required for the creation or
enforcement of the Administrative Agent's security interests created
under the Security Documents in any rights or claims of any Loan Party
under the Reorganization Agreement and each other Transaction
Agreement,
(iv) the Administrative Agent shall have received (A)
the results of a search of the Uniform Commercial Code (or equivalent)
filings made with respect to the Loan Parties in the jurisdictions
listed on Schedule 3.1(b), (B) copies of the financing statements (or
similar documents) disclosed by such search and evidence reasonably
satisfactory to the Administrative Agent that the Liens indicated by
such financing statements (or similar documents) are permitted by
Section 6.2 or have been released or will be released upon or promptly
following the Effective Date, and (C) Perfection Notices duly executed
by the Loan Party that is a depositor on each deposit account as to
which a Perfection Notice is required under Section 5.13(c).
(c) The Administrative Agent shall have received counterparts
of the Guarantee Agreement signed on behalf of each party thereto other than the
Administrative Agent.
(d) The Administrative Agent shall have received a favorable
written opinion (addressed to the Administrative Agent, the Issuing Bank and the
Lenders and
48
<PAGE>
dated the Effective Date) of each of (i) Weil, Gotshal & Manges LLP, counsel for
the Loan Parties, substantially in the form of Exhibit I, and (ii) Sidley &
Austin, special FDA counsel to the Loan Parties, substantially in the form of
Exhibit J, in each case covering such other matters relating to the Loan
Parties, the Loan Documents or the Transactions as the Required Lenders shall
reasonably request. The Borrower and Holdings hereby request such counsel to
deliver such opinions.
(e) The Administrative Agent shall have received a favorable
written opinion (addressed to the Administrative Agent, the Issuing Bank and the
Lenders and dated the Effective Date) of Latham & Watkins, counsel for the
Administrative Agent in form and substance satisfactory to the Administrative
Agent.
(f) The Administrative Agent shall have received such
documents and certificates as the Administrative Agent or its counsel may
reasonably request relating to the organization, existence and good standing of
each Loan Party, the authorization of the Transactions and any other legal
matters relating to the Loan Parties, the Loan Documents or the Transactions,
all in form and substance satisfactory to the Administrative Agent and its
counsel.
(g) The Administrative Agent shall have received a certificate
in substantially the form of Exhibit G, dated the Effective Date and signed by
the President, a Vice President or a Financial Officer of the Borrower,
confirming compliance with the conditions set forth in this Article III and
confirming the other matters set forth in Exhibit G;
(h) The Administrative Agent shall have received all fees and
other amounts due and payable on or prior to the Effective Date, including, to
the extent invoiced, reimbursement or payment of all expenses required to be
reimbursed or paid by any Loan Party hereunder or under any other Loan Document.
(i) The Administrative Agent shall have received evidence
satisfactory to it that the insurance required by Section 5.7 is in effect.
(j) (i) All consents and approvals required to be obtained
from any Governmental Authority in connection with the Transactions and (ii) all
material consents and approvals of any other Person in connection with the
Transactions, including without limitation the consent of Herbalife
International of America, Inc., to the pledge of the Herbalife Bond shall have
been obtained, all applicable waiting periods and appeal periods shall have
expired, in each case without the imposition of any burdensome conditions and
there shall be no action by any Governmental Authority or other Person, actual
or threatened, that has a reasonable likelihood of restraining, preventing or
imposing burdensome conditions on the Transactions or the other transactions
contemplated hereby.
49
<PAGE>
(k) The Lenders shall have received (i) audited consolidated
financial statements for D&F Industries, Inc., and Omni-Pak Industries, Inc.,
for the fiscal year ended December 31, 1997 (without giving effect to the
Transactions), and (ii) an unaudited pro forma condensed combined balance sheet
of Holdings, the Borrower and its Subsidiaries as of December 31, 1997,
reflecting all pro forma adjustments as if the Transactions had been consummated
on such date, and such unaudited pro forma condensed combined balance sheet
shall be consistent in all material respects with the forecasts and other
information previously provided to the Lenders. The aggregate amount of fees and
expenses (including underwriting discounts and commissions) payable or otherwise
borne by the Holdings Group in connection with the Transactions shall not exceed
$10,000,000.
(l) Except as otherwise approved in writing by the
Administrative Agent and Required Lenders, in each case acting in its sole and
individual discretion, (i) the Transaction Agreements shall not have been in any
respect modified or amended; (ii) no breach of any provision of any of the
Transaction Agreements shall have occurred, and (iii) no condition set forth in
any of the Transaction Agreements relating to the obligation of any party
thereunder or the consummation of the transactions contemplated thereby shall
have been waived.
(m) Holdings shall have received not less than $218,300,000 in
gross proceeds (less customary fees and commissions) from the issuance and sale
of the Senior Notes on the terms set forth in the Senior Note Indenture (which,
together with all documents, instruments or other agreements executed in
connection therewith, shall be satisfactory to the Administrative Agent and the
Lenders, and any Guarantees made in connection therewith shall be subordinated
to the Obligations on terms satisfactory to the Administrative Agent, the
Lenders and CSI) and shall have applied approximately $194,000,000 of such
proceeds for the consummation of the Reorganization.
(n) The Closing under (and as defined in) the Reorganization
Agreement shall have been consummated in accordance with the terms and
conditions therein set forth (which, together with all documents, instruments or
other agreements executed in connection therewith, shall be satisfactory to the
Administrative Agent and the Lenders), and applicable law, including without
limitation the consummation of the Reorganization, and all fees, costs and
expenses relating to the Transactions that are chargeable to or payable or
reimbursable by any member of the Holdings Group shall have been paid. The
Administrative Agent shall have received copies of the Transaction Agreements
and all instruments, agreements, certificates, opinions and other documents
delivered thereunder, certified by a Financial Officer of Holdings as complete
and correct.
(o) After giving effect to any Loans or Letters of Credit
requested on the Effective Date and the Borrower's disbursement of funds to pay
all amounts payable
50
<PAGE>
by the Holdings Group as contemplated in Sections 3.1(h) and
3.1(m), the aggregate Total Exposure shall not exceed $1,500,000.
(p) The Administrative Agent shall be satisfied that, prior to
or concurrent with the closing of the Financing Transactions, the Holdings Group
shall have outstanding no Indebtedness other than (i) Indebtedness created and
outstanding under the Loan Documents and (ii) the Senior Notes.
(q) Each Supply Agreement and other Material Contract shall be
in full force and effect and each Loan Party party thereto shall be in
compliance with all of the terms and conditions thereof.
(r) There shall be no litigation or administrative or
investigative proceeding pending or threatened that could reasonably be expected
to have a Material Adverse Effect or which seeks to restrain, prevent or impose
materially adverse conditions upon the Transactions.
(s) The consummation of the Transactions and the other
transactions contemplated hereby shall not (a) violate any applicable law,
statute, rule or regulation or (b) conflict with, or result in a default or
event of default under, any material agreement of any member of the Holdings
Group (including the Transaction Documents).
(t) The Lenders shall have received financial projections for
the Holdings Group on a consolidated basis for fiscal years 1998 through 2003,
in each case, showing no material variance from the projections previously
provided to the Administrative Agent and in form and substance reasonably
satisfactory to the Administrative Agent.
(u) There shall have been no material adverse change in the
assets, business, properties, condition (financial or otherwise), prospects or
material agreements of Holdings and its Subsidiaries, taken individually or as a
whole, since December 31, 1997 (it being understood that the issuance of the
Senior Notes and the application of the proceeds thereof to consummate the
Reorganization in accordance with the terms of the Reorganization Agreement
shall not constitute such a material adverse change).
(v) The Administrative Agent shall have received a copy of an
executed written lease with respect to the Borrower's lease of the North
Enterprise Way property in Orange, California, such lease to be in form and
substance satisfactory to the Administrative Agent.
(w) The Administrative Agent shall have received landlord
waivers with respect to each of the properties identified on Schedule 1.1-B
hereof, each in form and substance satisfactory to the Administrative Agent.
51
<PAGE>
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless each
of the foregoing conditions is satisfied (or waived pursuant to Section 9.2) at
or prior to 3:00 p.m., New York City time, on April 23, 1998 (and, in the event
such conditions are not so satisfied or waived, the Revolving Commitments shall
terminate at such time).
Section 3.2. Each Credit Event. The obligation of each Lender
to make a Loan on the occasion of any Borrowing, and of the Issuing Bank to
issue, amend, renew or extend any Letter of Credit, is subject to the
satisfaction of the following conditions:
(a) The representations and warranties of each Loan Party set
forth in the Loan Documents shall be true and correct in all material respects
on and as of the date of such Borrowing or the date of issuance, amendment,
renewal or extension of such Letter of Credit, as applicable, as though made on
and as of such date, other than any such representations or warranties that by
their terms refer to a date other than the date of such Borrowing, issuance,
amendment, renewal or extension, in which case such representations and
warranties shall be true and correct as of such other date.
(b) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter of
Credit, as applicable, no Default shall have occurred and be continuing.
(c) No event shall have occurred that has had, or could
reasonably be expected to have, a Material Adverse Effect.
(d) After giving effect to such Borrowing or issuance,
amendment or renewal, the aggregate amount of all Revolving Loans outstanding at
such time, plus the aggregate undrawn amount of all outstanding Letters of
Credit at such time (plus the aggregate amount of all LC Disbursements that have
not yet been reimbursed by or on behalf of the Borrower at such time), in each
case the proceeds of which were or are to be used for any purpose other than the
funding of Permitted Acquisitions, shall not exceed $10,000,000 at any one time
(excluding any reborrowings permitted pursuant to Section 2.7(h)).
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower and Holdings on the date thereof as to the matters specified in this
Section 3.2.
52
<PAGE>
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Each of the Borrower, Holdings and each Borrower Subsidiary
represents and warrants to the Administrative Agent, the Lenders and Issuing
Bank that:
Section 4.1. Organization; Powers; Capitalization. Each
member of the Holdings Group is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, has all
requisite power and authority to carry on its business as now conducted and,
except where the failure to do so, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect, is
qualified to do business in, and is in good standing in, every jurisdiction
where such qualification is required. All of the outstanding capital stock of
Holdings has been validly issued, is fully paid and non-assessable and is
owned, as of the date hereof, as set forth in Schedule 4.1(a). Set forth on
Schedule 4.1(a) hereto is a complete and accurate list of all Subsidiaries of
each Loan Party, showing as of the date hereof (as to each such Subsidiary),
after giving effect to the Reorganization, the jurisdiction of its
incorporation, the number of shares of each class of capital stock
authorized, and the number outstanding, on the date hereof and the percentage
of the outstanding shares of each such class owned (directly or indirectly)
by such Loan Party and the number of shares covered by all outstanding
options, warrants, rights of conversion or purchase and similar rights at the
date hereof. All of the outstanding capital stock of all of such Subsidiaries
has been validly issued, is fully paid and non-assessable and is owned by
such Loan Party or one or more of its Subsidiaries free and clear of all
Liens, except those created by the Security Documents.
Section 4.2. Authorization; Enforceability. The Transactions
to be entered into by each Loan Party are within such Loan Party's corporate
powers and have been duly authorized by all necessary corporate and, if
required, stockholder action. This Agreement has been duly executed and
delivered by each Loan Party that is a party hereto and constitutes, and each
other Loan Document to which any Loan Party is to be a party, when executed and
delivered by such Loan Party, will constitute, a legal, valid and binding
obligation of such Loan Party, enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law.
Section 4.3. Governmental Approvals; No Conflicts. The
Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except such as
have been obtained or made, are set forth on Schedule 4.3(a) and are in full
force and effect and except filings necessary to perfect Liens created under the
Loan Documents, (b) will not violate any applicable law or regulation or the
charter, by-laws or other organizational documents of any member of the Holdings
Group or any order of any Governmental Authority, (c) except as set forth in
Schedule 4.3(c), will not violate or result in a default under any indenture,
agreement or other instrument binding upon any member of the Holdings Group or
its assets, or give rise to a right thereunder to require any payment to be made
by any member of the Holdings Group, and (d) will not result in the creation
53
<PAGE>
or imposition of any Lien on any asset of any member of the Holdings Group,
except Liens created under the Loan Documents.
Section 4.4. Financial Condition; No Material Adverse Change.
(a) Holdings and the Borrower have heretofore furnished to the
Lenders combined financial statements as of December 31, 1997 and 1996, audited
by Deloitte & Touche LLP. Such financial statements are free of material
misstatement and present fairly, in all material respects, the combined net
assets of the Holdings Group as of December 31, 1997 and December 31, 1996, and
the results of their operations and cash flows for the years ended December 31,
1997 and 1996 in conformity with GAAP.
(b) The financial projections included in the Information
Memorandum and the financial projections delivered to any of the Lenders prior
to date hereof were, as of the time of preparation thereof and as of the date
hereof, based on the best information available to Holdings and the Borrower
after due inquiry at the date thereof and on good faith estimates and
assumptions believed by Holdings and the Borrower to be reasonable, subject to
the uncertainties inherent in projections.
(c) Holdings and the Borrower have heretofore furnished to the
Lenders the pro forma consolidated balance sheets of Holdings and of the
Borrower as of the Effective Date, prepared giving effect to the Transactions as
if the Transactions had occurred on such date. Such pro forma consolidated
balance sheets (i) were prepared in good faith based on the same assumptions
used to prepare the pro forma financial statements included in the Information
Memorandum (which assumptions were, at the time of preparation of the
Information Memorandum, and are, as of the date hereof, believed by Holdings and
the Borrower to be reasonable), (ii) were based on the best information
available to Holdings and the Borrower after due inquiry at the date thereof,
(iii) reflect all adjustments necessary to give effect to the Transactions and
(iv) present fairly, in all material respects, the pro forma financial position
of Holdings and its consolidated subsidiaries and the Borrower and its
consolidated subsidiaries as of the Effective Date, as if the Transactions had
occurred on such date.
(d) Except as disclosed in the financial statements referred
to above or the notes thereto or in the Information Memorandum, after giving
effect to the Transactions, no member of the Holdings Group has, as of the
Effective Date, any material contingent liabilities, unusual long-term
commitments or unrealized losses.
(e) Each financial statement delivered by any member of
Holdings Group at any time after the Effective Date pursuant to Section 5.1 will
be free of material misstatement and presents fairly, in all material respects,
the assets of the Person or consolidated group that is the subject thereof as of
the date thereof and the results of operations and cash flows of such Person or
group for the period therein described ended such date, in conformity with GAAP
but subject (except in the case of audited year-end financial statements) to
year-end adjustments.
54
<PAGE>
(f) Except as disclosed in Schedule 4.4(f), since December 31,
1997, there has been no material adverse change in the business, assets,
operations, material agreements, prospects or condition (financial or
otherwise), of (i) the assets and business described in the Offering Memorandum
relating to the Senior Notes (as such terms are defined therein), or (ii) the
Borrower and the Borrower Subsidiaries, taken as a whole, or (iii) Holdings and
the Subsidiaries, taken as a whole, or (iv) the ability of any Loan Party to
perform its obligations under the Loan Documents (it being understood, in each
case, that the issuance of the Senior Notes and the application of the proceeds
thereof to consummate the Reorganization in accordance with the terms of the
Reorganization Agreement shall not constitute such a material adverse change).
Section 4.5. Properties; Bank Accounts.
(a) Except as disclosed in Schedule 4.5(a), each member of the
Holdings Group has good title to, or valid leasehold interests in, all its real
and personal property material to its business, except for minor defects in
title that do not interfere with its ability to conduct its business as
currently conducted or to utilize such properties for their intended purposes.
(b) Each member of the Holdings Group owns, or is licensed to
use, all trademarks, trade names, copyrights, patents and other intellectual
property material to its business, and the use thereof by the Holdings Group
does not infringe upon the rights of any other Person, except for any such
infringements that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
(c) Schedule 4.5(c) sets forth the address of each real
property that is owned or leased by the Holdings Group as of the Effective Date
after giving effect to the Transactions.
(d) Schedule 4.5(d) sets forth the account numbers and
locations of all bank accounts of Holdings, the Borrower and their respective
Subsidiaries.
Section 4.6. Litigation and Environmental Matters.
(a) Except as set forth on Schedule 4.6(a), there are no
actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of any Loan Party, threatened
against or affecting any member of the Holdings Group (i) as to which there is a
reasonable possibility of an adverse determination and that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect or (ii) that involve any of the Loan
Documents or the Transactions.
(b) Except with respect to any matters that, individually or
in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect or as set forth on Schedule 4.6(b), no member of the Holdings
Group (i) has failed to comply
55
<PAGE>
with any Environmental Law or to obtain, maintain or comply with any permit,
license or other approval required under any Environmental Law, (ii) has become
subject to any Environmental Liability, (iii) has received notice of any
Environmental Claim or any other claim with respect to any Environmental
Liability or (iv) knows of any basis for any Environmental Liability.
Section 4.7. Compliance with Laws and Agreements.
Except as set forth in Schedule 4.7, each member of the Holdings Group is in
compliance with all laws, regulations and orders of any Governmental
Authority (including without limitation all Environmental Laws) applicable to
it or its property and all indentures, agreements and other instruments
binding upon it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result
in a Material Adverse Effect. No Default has occurred and is continuing.
Section 4.8. Investment and Holding Company Status. No
member of the Holdings Group is (a) an "investment company" as defined in, or
subject to regulation under, the Investment Company Act of 1940 or (b) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935.
Section 4.9. Taxes. Each member of the Holdings
Group has timely filed or caused to be filed all tax returns and reports
required to have been filed and has paid or caused to be paid all Taxes
required to have been paid by it, except Taxes that are being contested in
good faith by appropriate proceedings and for which each member, as
applicable, has set aside on its books adequate reserves. On May 1, 1983,
Holdings validly elected to be treated as an S Corporation under Section 1362
of the Code (or any predecessor Code provision) and under the corresponding
provisions of applicable state and local laws where Holdings files income tax
returns. Holdings' election to be treated as an S Corporation has never been
terminated or revoked and is currently in effect.
Section 4.10. 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 under each Plan (based on the assumptions used
for purposes of Statement of Financial Accounting Standards No. 87) are
reflected in the most recent financial statements in accordance with GAAP. The
present value of all accumulated benefit obligations of all underfunded 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 $1,000,000 the fair
market value of the assets of all such underfunded Plans.
Section 4.11. Disclosure. The Borrower and Holdings have
disclosed to the Lenders all agreements, instruments and corporate or other
restrictions to which any member of the Holdings Group is subject, and all other
matters known to any of them, that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect. Neither
56
<PAGE>
the Information Memorandum nor any of the other reports, financial statements,
certificates or other information furnished in writing by or on behalf of any
Loan Party to the Administrative Agent or any Lender in connection with the
negotiation of this Agreement or any other Loan Document or delivered hereunder
or thereunder (as modified or supplemented by other information so furnished)
contains any material misstatement of fact or omits to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
Section 4.12. Insurance. Schedule 4.12 sets forth a
description of all insurance maintained by or on behalf of Holdings and the
Subsidiaries as of the Effective Date. As of the Effective Date, all premiums in
respect of such insurance that are due and payable have been paid. All insurance
required to be maintained pursuant to Section 5.7, including without limitation
the key man life insurance policy with respect to Richard Marconi, has been
obtained and is in full force and effect.
Section 4.13. Labor Matters. The hours worked by and
payments made to employees of the Holdings Group have not been in violation of
the Fair Labor Standards Act or any other applicable Federal, state, local or
foreign law dealing with such matters. All payments due from any member of the
Holdings Group, or for which any claim may be made against any member of the
Holdings Group, on account of wages and employee health and welfare insurance
and other benefits, have been paid or accrued as a liability on the books of
such member. The consummation of the Transactions does not give rise to any
right of termination or right of renegotiation on the part of any union under
any collective bargaining agreement to which any member of the Holdings Group is
bound. As of the Effective Date, there are no strikes, lockouts or slowdowns
pending against any member of the Holdings Group or, to the knowledge of any
Loan Party, threatened.
Section 4.14. Solvency. Immediately after the
consummation of the Transactions on the Effective Date, immediately following
the making of each Loan made on the Effective Date and after giving effect to
the application of the proceeds of such Loans, and immediately following the
making of each Loan and the issuance, amendment or renewal of each Letter of
Credit at any time after the Effective Date, (a) the fair value of the assets
of each Loan Party, at a fair valuation, will exceed its debts and
liabilities, subordinated, contingent or otherwise; (b) the present fair
saleable value of the property of each Loan Party will be greater than the
amount that will be required to pay the probable liability of its debts and
other liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured; (c) each Loan Party will be
able to pay its debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured; and (d) no Loan
Party will have unreasonably small capital with which to conduct the business
in which it is engaged as such business is now conducted and is proposed to
be conducted following the Effective Date and following the making of each
Loan and the issuance, amendment or renewal of each Letter of Credit.
Section 4.15. Security Documents.
57
<PAGE>
(a) The Pledge and Security Agreement is effective to create
in favor of the Administrative Agent, for the ratable benefit of the holders of
Obligations, a legal, valid and enforceable security interest in the property
therein described as collateral. All Securities in which any Loan Party owns any
interest are Certificated Securities. All such Certificated Securities, all
Intercompany Notes and all Instruments in which any Loan Party owns any interest
have been delivered to the Administrative Agent, in pledge as security for the
Obligations. The Administrative Agent's security interest therein constitutes a
fully perfected first priority and sole Lien on, and security interest in, all
right, title and interest of each Loan Party in all such Certificated
Securities, Intercompany Notes and Instruments, in each case free from any
adverse claim and prior and superior in right to any other Person. Schedule
4.15(a) sets forth all Certificated Securities, Intercompany Notes and
Instruments that have been delivered to, and are held in pledge by, the
Administrative Agent.
(b) Financing statements in appropriate form are filed in the
offices specified on Schedule 3.1(b), which constitute all offices in which a
financing statement is required to be filed or can be filed in order to perfect
a security interest in any such property. The Pledge and Security Agreement
constitutes a fully perfected Lien on, and security interest in, all right,
title and interest of the grantors thereunder in such Collateral in each case
prior and superior in right to any other Person, other than with respect to any
Lien that both (i) is expressly permitted by Section 6.2 and (ii) is imposed by
law and is entitled, as a matter of law, to priority over a security interest
that was duly perfected before such Lien attached.
(c) The Pledge and Security Agreement (and any supplement
thereto reflecting the addition of property acquired by any Loan Party after the
Effective Date) is in form sufficient for filing in the United States Patent and
Trademark Office and the United States Copyright Office and will constitute a
fully perfected Lien on, and security interest in, all right, title and interest
of the Loan Parties in all property in which any Loan Party has any interest as
to which a security interest may be perfected by filing, recording or
registering a security agreement, financing statement or analogous-document in
the United States Patent and Trademark Office or the United States Copyright
Office, as applicable, in each case prior and superior in right to any other
person.
Section 4.16. Federal Reserve Regulations.
(a) No member of the Holdings Group is engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of buying or carrying Margin Stock.
(b) No part of the proceeds of any Loan or any Letter of
Credit will be used, whether directly or indirectly, and whether immediately,
incidentally or ultimately, (i) to buy or carry Margin Stock or to extend credit
to others for the purpose of buying or carrying Margin Stock or to refund
indebtedness originally incurred for such purpose or
58
<PAGE>
(ii) for any purpose that entails a violation of, or that is inconsistent with,
the provisions of the Regulations of the Board, including Regulation U or X.
(c) Less than 25% of the assets of each member of the Holdings
Group subject to Section 6.2 or 6.5, on a consolidated basis, consists of Margin
Stock.
Section 4.17. Indebtedness. Neither Holdings nor the
Borrower nor any Borrower Subsidiary has any outstanding Indebtedness other
than (i) Indebtedness created and outstanding under the Loan Documents, (ii)
the Senior Notes issued by Holdings and guaranteed by the Borrower
Subsidiaries and outstanding on the terms set forth in the Senior Note
Indenture, and (iii) Indebtedness incurred after the Effective Date and
permitted to be incurred, and to remain outstanding, under Section 6.1.
Section 4.18. Preferred Stock. No member of the Holdings
Group has any outstanding preferred stock.
Section 4.19. Liens. None of the property or assets of
Holdings or the Borrower or any Borrower Subsidiary is subject to any Lien
except Liens permitted under Section 6.2.
Section 4.20. Material Contracts. Each Material Contract
is in full force and effect and each Loan Party party thereto is in material
compliance with all of the terms and conditions thereof.
Section 4.21. Reorganization. The Reorganization has
been consummated in accordance with the Reorganization Agreement.
Section 4.22. Year 2000. Each of Holdings and the
Borrower has reviewed its operations and those of its respective Subsidiaries
and Herbalife International of America, Inc., with a view to assessing
whether Holdings', the Borrower's or their respective Subsidiaries'
respective businesses will, in the receipt, transmission, processing,
manipulation, storage, retrieval, retransmission or other utilization of
data, be vulnerable to a Year 2000 Problem. Based on such review, each of
Holdings and the Borrower has no reason to believe that a Material Adverse
Effect will occur, or could reasonably be expected to occur, with respect to
its or its Subsidiaries' businesses or operations resulting from a Year 2000
Problem.
ARTICLE V.
AFFIRMATIVE COVENANTS
Until the Revolving Commitments have expired or been
terminated and the principal of and interest on each Loan and all fees payable
hereunder shall have been paid in full and all Letters of Credit shall have
expired or terminated and all LC Disbursements shall have been reimbursed, each
of the Borrower and Holdings covenants and agrees with the Lenders that:
59
<PAGE>
Section 5.1. Financial Statements and Other Information.
The Borrower and Holdings will furnish to the Administrative Agent (with enough
copies for each Lender):
(a) commencing with the fiscal year of Holdings ending
December 31, 1998, within 90 days after the end of each fiscal year of Holdings,
its audited consolidated and unaudited consolidating balance sheet and related
statements of operations, stockholders' equity and cash flows as of the end of
and for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, all audited (in the case of such consolidated
statements) and reported on by independent public accountants of recognized
national standing (without a "going concern" or like qualification or exception
and without any qualification or exception as to the scope of such audit) to the
effect that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of Holdings
and its consolidated Subsidiaries on a consolidated basis in accordance with
GAAP consistently applied;
(b) commencing with the fiscal quarter of Holdings ending June
30, 1998, within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of Holdings, its consolidated and consolidating
balance sheet and related statements of operations, stockholders' equity and
cash flows as of the end of and for such fiscal quarter and the then elapsed
portion of the fiscal year, setting forth in each case in comparative form the
figures for the corresponding period or periods of (or, in the case of the
balance sheet, as of the end of) the previous fiscal year, all certified by one
of its Financial Officers as presenting fairly in all material respects the
financial condition and results of operations of Holdings and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied, subject to normal year-end audit adjustments and the absence of
footnotes;
(c) commencing with the first full fiscal month of Holdings
following the Effective Date through and including the fiscal month ending
October 31, 1998, within 30 days after the end of each fiscal month and the then
elapsed portion of the fiscal year, a consolidated balance sheet and related
statements of operations for D&F and Omni-Pak, and thereafter, as of the end of
each fiscal month for such fiscal month and the then elapsed portion of the
fiscal year of Holdings and each of the Borrower Subsidiaries, a consolidated
balance sheet and related statements of operations, stockholders' equity and
cash flows for each Borrower Subsidiary all certified by one of Holdings'
Financial Officers as presenting in all material respects the financial
condition and results of operations of Holdings and the Borrower Subsidiaries on
a consolidated or combined basis (as applicable) in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes;
(d) concurrently with any delivery of financial statements
under Section 5.1(a) or 5.1(b), a Compliance Certificate of a Financial Officer
of Holdings (i) certifying as to whether a Default has occurred and,
if a Default has occurred,
60
<PAGE>
specifying the details thereof and any action taken or proposed to be taken with
respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Sections 6.1, 6.4, 6.5, 6.7, 6.11, 6.12, 6.13,
6.14 and 6.15, and (iii) stating whether any change in GAAP or in the
application thereof has occurred since the date of Holdings' audited financial
statements referred to in Section 4.4(a) and, if any such change has occurred,
specifying the effect of such change on the financial statements accompanying
such certificate;
(e) concurrently with any delivery of financial statements
under Section 5.1(a), a certificate of the accounting firm that reported on such
financial statements stating whether they obtained knowledge during the course
of their examination of such financial statements of any Event of Default (which
certificate may be limited to the extent required by accounting rules or
guidelines);
(f) within 15 days prior to the commencement of each fiscal
year of Holdings and the Borrower, a detailed consolidated budget for such
fiscal year (including a projected consolidated balance sheet and related
statements of projected operations and cash flow as of the end of and for such
fiscal year) and, promptly when available, any significant revisions of such
budget;
(g) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other materials filed by
any member of the Holdings Group with the Securities and Exchange Commission, or
any Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange, as the case may be;
(h) promptly upon receipt thereof, copies of all reports
submitted to Holdings or the Borrower by independent certified public
accountants in connection with each annual, interim or special audit of the
books of Holdings or any of its Subsidiaries made by such accountants, including
any management letter commenting on the Borrower's internal controls submitted
by such accountants to management in connection with their annual audit;
(i) prior to the payment of any Tax Distribution Amount, a
certificate (a "Tax Distribution Certificate") signed by the President or the
Chief Financial Officer of Holdings, certifying as to each Tax Distribution
Amount to be paid pursuant to Section 6.7 in a level of detail satisfactory to
the Administrative Agent and the Required Lenders, in substantially the form
attached hereto as Exhibit L;
(j) promptly upon any significant change in accounting
policies or reporting practices, notice and a description in reasonable detail
of such changes;
(k) promptly upon the adoption by any member of the Holdings
Group or any Affiliate thereof, or the creation of any obligation of any member
of the Holdings
61
<PAGE>
Group or any Affiliate thereof to contribute to, any Multiemployer Plan, notice
and description in reasonably detail of such event;
(l) promptly upon the giving or receipt thereof, copies of all
notices, statements or reports given pursuant to or in connection with the
Senior Note Indenture and not otherwise then required to be furnished to the
Administrative Agent and each Lender pursuant to this Section 5.1; and
(m) promptly following any request therefor, such other
information regarding the operations, business affairs and financial condition
of any member of the Holdings Group, or compliance with the terms of any Loan
Document, as any Agent or Lender may reasonably request.
Section 5.2. Notices of Material Events.
The Borrower and Holdings will furnish to the Administrative
Agent (with enough copies for each Lender) prompt written notice of the
following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Governmental Authority against or
affecting any member of the Holdings Group or any Affiliate thereof that, if
adversely determined, could reasonably be expected to result in a Material
Adverse Effect;
(c) 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 a Material Adverse Effect;
(d) promptly after obtaining knowledge of any one or
more of the following environmental matters, unless such environmental
matters would not, individually or when aggregated with all other such
matters, be reasonably expected to result in a Material Adverse Effect:
(i) any pending or threatened Environmental
Claim against Holdings, the Borrower or any of the Subsidiaries or any
Real Property;
(ii) any condition or occurrence on any Real
Property that (A) results in noncompliance by Holdings, the Borrower
or any of the Subsidiaries with any applicable Environmental Law or
(B) could reasonably be anticipated to form the basis of an
Environmental Claim against Holdings, the Borrower or any of the
Subsidiaries or any Real Property;
(iii) the taking of any removal or remedial action
in response to the actual or alleged presence of any Hazardous Material
on any Real Property; or
62
<PAGE>
(iv) any event which makes any of the
representations contained in Sections 4.6(b) or 4.7 inaccurate in any
material respect;
(e) the occurrence of any Default or Event of Default under
and as defined in the Senior Note Indenture or any other Transaction Document;
(f) promptly upon receipt thereof, copies of any material
notices delivered under or any amendment to any Supply Agreement or other
Material Contract; and
(g) any other development that results in, or could reasonably
be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section 5.2 shall be accompanied by a statement
of a Financial Officer or other executive officer of Holdings and the Borrower
setting forth the details of the event or development requiring such notice and
any action taken or proposed to be taken with respect thereto.
Section 5.3. Information Regarding Collateral. The
Borrower and Holdings will furnish to the Administrative Agent prompt written
notice of any change (a) in any Loan Party's corporate name or in any trade
name used to identify it in the conduct of its business or in the ownership
of its properties, (b) in the location of any Loan Party's chief executive
office, its principal place of business, any office in which it maintains
books or records relating to Collateral owned by it or any office or facility
at which Collateral owned by it is located (including the establishment of
any such new office or facility), (c) in any Loan Party's identity or
corporate structure, (d) resulting in any tangible Collateral being located
in or moved to, after the Effective Date, (i) any jurisdiction in which a
financing statement must be, but has not been, filed in order to perfect the
Administrative Agent's liens or (ii) any Real Property for which the
Administrative Agent has not received a landlord waiver in form and substance
satisfactory to the Administrative Agent (where the aggregate fair market
value of such Collateral being moved, together with the Collateral already
located at such property, exceeds $250,000), (e) in respect of any patents,
trademarks copyrights or applications therefor owned by or licensed to any
Loan Party, or (f) in any Loan Party's Federal Taxpayer Identification
Number. The Borrower and Holdings will not effect or permit any change
referred to in the preceding sentence unless, as applicable, a satisfactory
landlord waiver has been delivered to the Administrative Agent and all
filings have been made under the Uniform Commercial Code or otherwise that
are required in order for the Administrative Agent to continue at all times
following such change to have a valid, legal and perfected security interest
in all the Collateral and will promptly notify the Administrative Agent if
any material portion of the Collateral is damaged or destroyed.
Section 5.4. Existence; Conduct of Business. The Borrower
and Holdings will, and will cause each of their respective Subsidiaries to, do
or cause to be done all things necessary to preserve, renew and keep in full
force and effect its legal existence and the
63
<PAGE>
rights, licenses, permits, privileges, franchises, patents, copyrights,
trademarks and trade names material to the conduct of its business.
Section 5.5. Payment of Obligations. Each of the Borrower
and Holdings will, and will cause each of their respective Subsidiaries to, pay
their respective Indebtedness and other obligations, including their respective
Tax liabilities, before the same shall become delinquent or in default, except
where (a) the validity or amount thereof is being contested in good faith by
appropriate proceedings, (b) it has set aside on its books adequate reserves
with respect thereto in accordance with GAAP, (c) such contest effectively
suspends collection of the contested obligation and no Lien arises or is created
to secure such obligation (except, in the case only of an ad valorem tax on real
or personal property, a Lien on the property that is the subject of the tax if
the enforcement of such Lien is suspended or stayed) and (d) the failure to make
payment pending such contest could not reasonably be expected to result in a
Material Adverse Effect.
Section 5.6. Maintenance of Properties. The Borrower and
Holdings will, and will cause each of their respective Subsidiaries to, keep and
maintain all property material to the conduct of its business in good working
order and condition, ordinary wear and tear excepted.
Section 5.7. Insurance.
(a) Each of the Borrower and Holdings will, and will cause
each of their respective Subsidiaries to, (i) maintain insurance with (A)
financially sound and reputable insurers with an A.M. Best rating of A- or
better (or, with respect to earthquake or flood insurance relating to Real
Property, Collateral or operations of the Borrower and the Borrower Subsidiaries
located in California only, an A.M. Best rating of B+ or better) or (B) Lloyd's
of London, in each case on such of its property and in at least such amounts and
against at least such risks as is customary with companies engaged in the same
or similar businesses operating in the same or similar locations, including
without limitation products liability insurance and public liability insurance
against claims for personal injury or death occurring upon, in or about or in
connection with the use of any properties owned, occupied or controlled by it
(including the insurance required pursuant to the Security Documents), each of
said policies of insurance to be satisfactory to the Required Lenders as to
form, amount and insurer; (ii) maintain such other insurance as may be required
by law; and (iii) furnish to the Administrative Agent certificates of insurance
and, upon written request, full information as to the insurance carried.
(b) Each of the Borrower and Holdings will, and will cause
each of their respective Subsidiaries to, cause the Administrative Agent to be
named as loss payee on all insurance policies relating to any Collateral
(including fire and extended coverage policies) or business interruption
insurance and as additional insured (but without any liability for any premiums)
on all liability policies maintained pursuant to Section 5.7(a), in each case
pursuant to appropriate endorsements in form and substance satisfactory to
64
<PAGE>
the Administrative Agent. Each policy referred to in this Section 5.7(b) also
shall provide that it shall not be canceled, modified or not renewed (i) by
reason of nonpayment of premium except upon not less than 10 days' prior written
notice thereof by the insurer to the Administrative Agent (giving the
Administrative Agent the right to cure defaults in the payment of premiums) or
(ii) for any other reason except upon not less than 30 days' prior written
notice thereof by the insurer to the Administrative Agent. The Borrower shall
deliver to the Administrative Agent, prior to the cancellation, modification or
nonrenewal of any such policy of insurance, a copy of a renewal or replacement
policy (or other evidence of renewal of a policy previously delivered to the
Administrative Agent) together with evidence satisfactory to the Administrative
Agent of payment of the premium therefor.
(c) The Borrower shall maintain at all times a key man life
insurance policy with respect to Richard Marconi in an amount of no less than
$4,500,000, which insurance shall comply with the requirements of Sections
5.7(a) and 5.7(b) and shall be assigned to the Administrative Agent for the
benefit of the Lenders pursuant to the Security Documents.
Section 5.8. Casualty and Condemnation. Each of the
Borrower and Holdings will furnish to the Administrative Agent and the Lenders
prompt written notice of any casualty or other insured damage to any material
portion of any Collateral or the commencement of any action or proceeding for
the taking of any material portion of the Collateral or any part thereof or
interest therein under power of eminent domain or by condemnation or similar
proceeding.
Section 5.9. Books and Records; Inspection and Audit
Rights.
(a) Each of the Borrower and Holdings will, and will cause
each of the Borrower Subsidiaries to, (i) keep proper books of record and
account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities, and (ii) permit any
representatives designated by the Administrative Agent or any Lender, upon
reasonable prior notice, to visit and inspect its properties, to examine and
make extracts from its books and records, and to discuss its affairs, finances
and condition with its officers and independent accountants, all at such
reasonable times and as often as reasonably requested.
(b) Each of the Borrower and Holdings will, and will cause
each of the Subsidiaries to, (i) from time to time upon the request of the
Required Lenders through the Administrative Agent, permit the Administrative
Agent or a single designated group of professionals (including investment
bankers, consultants, accountants, lawyers and appraisers) retained by the
Administrative Agent or the Lenders to conduct an audit, evaluation or appraisal
of the Collateral and (ii) pay the fees and expenses of the Administrative
Agent, the Lenders or such professionals with respect to such audit, evaluation
or appraisals.
65
<PAGE>
Section 5.10. Compliance with Laws. Each of the Borrower
and Holdings will, and will cause each of the Subsidiaries to, comply with all
laws, rules, regulations and orders of any Governmental Authority applicable to
it or its property (including without limitation ERISA and applicable
Environmental Laws), except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
Section 5.11. Use of Proceeds and Letters of Credit. The
proceeds of all credit extended to the Borrower hereunder will be used only for
lawful corporate purposes of the Borrower that are permitted under this
Agreement; provided that the aggregate amount of all Revolving Loans outstanding
at any time, plus the aggregate undrawn amount of all outstanding Letters of
Credit at such time (plus the aggregate amount of all LC Disbursements that have
not yet been reimbursed by or on behalf of the Borrower at such time), in each
case the proceeds of which were or are to be used for any purpose other than the
funding of Permitted Acquisitions, shall not exceed $10,000,000 at any one time
(excluding reborrowings permitted pursuant to Section 2.7(h)); provided further
that, with respect to any Borrowing related to Permitted Acquisitions, (a) no
more than $20,000,000 of the proceeds of Revolving Loans or Letters of Credit
may be used to finance any single Permitted Acquisition, (b) on or after the
fourth anniversary of the Effective Date, the Borrower may no longer borrow
Revolving Loans or request the issuance of Letters of Credit to fund a Permitted
Acquisition, and (c) no such Borrowing may be made if (i) the remaining term of
the Supply Agreements is six months or less and (ii) Consolidated EBITDA
generated under the Supply Agreements in the twelve-month period preceding the
date of such proposed Borrowing accounts for more than 50% of Consolidated
EBITDA for such period. No part of the proceeds of any Loan will be used,
whether directly or indirectly, for any purpose that entails a violation of any
of the Regulations of the Board, including Regulations U and X.
Section 5.12. Additional Borrower Subsidiaries. If any
additional Borrower Subsidiary is formed or acquired after the Effective Date,
each of Holdings and the Borrower will (a) notify the Administrative Agent and
the Lenders thereof, (b) cause such Borrower Subsidiary (i) to become a party to
the Subsidiary Guarantee Agreement, and each applicable Security Document in the
manner provided therein and (ii) to execute and deliver to the Administrative
Agent, in pledge, an Intercompany Note in an amount equal to all Investments in
such Borrower Subsidiary made or maintained, or contemplated to be made or
maintained, by any member of the Holdings Group, in each case within three
Business Days after such Borrower Subsidiary is formed or acquired, (c) promptly
take such actions to create and perfect Liens on such Borrower Subsidiary's
assets to secure the Obligations as the Administrative Agent or the Required
Lenders may reasonably request, and (d) if any shares of capital stock or
Indebtedness of such Borrower Subsidiary are owned by or on behalf of any Loan
Party, Holdings and the Borrower will cause such shares and promissory notes
evidencing such Indebtedness to be pledged pursuant to the Pledge and Security
Agreement within three Business Days after such Borrower Subsidiary is formed or
acquired.
Section 5.13. Further Assurances.
66
<PAGE>
(a) Each of the Borrower and Holdings will, and will cause
each of the Subsidiaries to, from time to time upon the request of the
Administrative Agent or the Required Lenders through the Administrative Agent,
at the expense of the Loan Parties, execute, deliver and acknowledge all
instruments, assignments, mortgages, deeds of trust, security agreements,
financing statements or other documents and take all other actions as the
Administrative Agent or such Required Lenders may in good faith deem necessary
or appropriate to create, perfect, ensure the priority of, protect or (if an
Event of Default is continuing at the time) lawfully enforce a Lien in favor of
the Administrative Agent for the ratable benefit of the holders of the
Obligations upon any property (whether now owned or hereafter acquired, whether
tangible or intangible, whether real, personal or mixed, and wherever located)
in which Holdings or the Borrower or any of their respective Subsidiaries has or
may have any interest.
(b) If at any time the aggregate fair value of any and all
assets owned by the Borrower or Holdings or any of their respective Subsidiaries
upon which the Administrative Agent does not hold a duly created, enforceable
and perfected Lien as security for the Obligations exceeds $1,000,000, the
Borrower and Holdings will notify the Administrative Agent and the Lenders
thereof and, if requested by the Administrative Agent or the Required Lenders,
will cause such assets to be subjected to a Lien in favor of the Administrative
Agent securing the Obligations and will take, and cause each Loan Party to take,
such actions as shall be necessary or reasonably requested by the Administrative
Agent to grant and perfect such Liens, including actions described in Section
5.13(a), all at the expense of the Loan Parties.
(c) Each of the Borrower and Holdings will, and will cause
each Loan Party to, (i) maintain any and all of its bank deposits and bank
deposit accounts (except for collection accounts that are automatically cleared
to a concentration account on a daily basis and disbursement accounts that are
funded on a daily zero balance basis) at a bank selected by it that is located
in a state under the laws of which a security interest in bank deposits and
deposit accounts may be created under the Uniform Commercial Code and perfected
by the giving of a Perfection Notice to the depositary bank, without any
requirement of acknowledgment or agreement on the part of the depositary bank
and without any requirement that the holder of such security interest maintain
dominion or control over such bank deposits and deposit accounts, (ii) give
notice to such depositary bank of the existence of the Administrative Agent's
security interest in each such deposit account and any and all present and
future deposits therein, by delivery of a Perfection Notice or as otherwise
required under such laws to perfect the Administrative Agent's security interest
therein, at or within 30 days after the opening of such deposit account, and
(iii) grant and permit no other Lien on any such bank deposits or deposit
accounts.
(d) Each of the Borrower and Holdings will, and will cause
each Loan Party to, maintain any and all Permitted Investments in such manner as
may be required to ensure that the Administrative Agent at all times holds a
duly perfected first and sole security interest therein as security for the
Obligations.
67
<PAGE>
(e) Each of the Borrower and Holdings will, and will cause
each Loan Party to, deliver to the Administrative Agent a landlord waiver, in
form and substance satisfactory to the Administrative Agent, for each location
acquired or leased by a Loan Party after the Effective Date where the aggregate
fair market value of all inventory, equipment and other personal property
located at such property exceeds $250,000.
Section 5.14. Material Contracts. Each of the Borrower and
Holdings will, and will cause each Subsidiary to, comply in all material
respects with each Material Contract to which it is a party, including without
limitation the Supply Agreements, and shall maintain each such Material Contract
in full force and effect, exercising all renewals and extensions thereof in
accordance with its terms and on substantially the same terms (and in no event
on terms materially less favorable to the Loan Parties).
Section 5.15. Fiscal Year. Each of the Borrower and
Holdings will, and will cause each Subsidiary to, maintain a fiscal year that
ends on December 31.
Section 5.16. Year 2000. Each of Holdings and the Borrower
shall review and monitor, and shall cause each of its respective Subsidiaries to
review and monitor, its operations and those of its respective Subsidiaries with
a view to assessing whether its businesses, or the businesses of any of its
respective Subsidiaries, will be vulnerable to a Year 2000 Problem or will be
vulnerable to the effect of a Year 2000 Problem suffered by any of Holdings, the
Borrower, any of their respective Subsidiaries or Herbalife International of
America, Inc. Each of Holdings and the Borrower shall take, and shall cause each
of its respective Subsidiaries to take, all actions necessary and commit
adequate resources to assure that its computer-based and other systems are able
to effectively process data, including dates before, on and after January 1,
2000, without experiencing any Year 2000 Problem that results in, or could
reasonably be expected to result in, a Material Adverse Effect. At the request
of the Administrative Agent, the Borrower will provide the Administrative Agent
with reasonable assurances and substantiations (including without limitation the
results of internal or external audit reports) reasonably acceptable to the
Administrative Agent as to the capability of Holdings, the Borrower and their
respective Subsidiaries to conduct its and their businesses and operations
before, on and after January 1, 2000, without experiencing a Year 2000 Problem
that results in, or could reasonably be expected to result in, a Material
Adverse Effect.
ARTICLE VI.
NEGATIVE COVENANTS
Until the Revolving Commitments have expired or terminated and
the principal of and interest on each Loan and all fees payable hereunder have
been paid in full and all Letters of Credit have expired or terminated and all
LC Disbursements shall have been reimbursed, each of the Borrower and Holdings
covenants and agrees with the Lenders that:
Section 6.1. Indebtedness; Preferred Equity Securities.
68
<PAGE>
(a) Each of the Borrower and Holdings will not, and will not
permit any Subsidiary to, create, incur, assume or permit to exist any
Indebtedness, except:
(i) Indebtedness created under the Loan
Documents;
(ii) Indebtedness of Holdings under the Senior Notes
not to exceed $225,000,000 in aggregate principal amount or Carrying
Amount and Indebtedness of the Borrower and the Borrower Subsidiaries
under the Senior Note Guarantees (provided that a Borrower Subsidiary
may be a party to the Senior Note Guarantee only if such Borrower
Subsidiary has, prior to or concurrently with becoming a party thereto,
become a party to the Guarantee Agreement), all on the terms set forth
in the Senior Note Indenture;
(iii) Indebtedness of (A) any Borrower Subsidiary to
the Borrower, (B) Holdings to the Borrower consisting of loans made by
the Borrower to Holdings in place of, and in an amount not in excess
of, any dividend permitted (at the time such loan is made) to be paid
by the Borrower to Holdings under Section 6.7 so long as the proceeds
of such loan are applied by Holdings as required under Section 6.7 as
if such loan had been paid as a dividend, or (C) the Borrower to any
Borrower Subsidiary, which Indebtedness is, in each case, evidenced by
an Intercompany Note held by the Administrative Agent in pledge
pursuant to the Pledge and Security Agreement; provided that the
Indebtedness described in clause (C) above shall be subordinated in
right of payment to the final payment in full in cash of all
Obligations under the Loan Documents;
(iv) Acquired Indebtedness, Capital Lease Obligations
and purchase money and other Indebtedness incurred by the Borrower or a
Borrower Subsidiary to finance or refinance the acquisition,
construction or improvement of tangible fixed assets, if the aggregate
principal amount of all such Acquired Indebtedness, Capital Lease
Obligations and purchase money and other Indebtedness at any time
outstanding does not exceed $8,000,000, and Guarantees by the Borrower
of such Indebtedness;
(v) Indebtedness under Hedging Agreements entered
into in the ordinary course of business to hedge or mitigate risks to
which the Borrower or any Borrower Subsidiary is exposed in the conduct
of its business or the management of its liabilities and, in any event,
not entered into for speculative purposes, and interest rate Hedging
Agreements in conjunction with Indebtedness under this Agreement;
provided that, with respect to interest rate protection obligations,
the aggregate notional principal amount thereof does not exceed the
principal amount of the Indebtedness to which such interest rate
obligation relates;
(vi) other unsecured Indebtedness in an aggregate
principal amount not exceeding $1,000,000 at any time outstanding.
69
<PAGE>
(b) The Borrower and Holdings will not, and will not permit
any Subsidiary to, (i) issue any preferred stock or (ii) be or become liable in
respect of any obligation (contingent or otherwise) to purchase, redeem, retire,
acquire or make any other payment in respect of any Equity Interest in any
member of the Holdings Group, except as permitted by Section 6.7.
Section 6.2. Liens. Each of the Borrower and Holdings
will not, and will not permit any Subsidiary to, create, incur, assume or permit
to exist any Lien on any property or asset now owned or hereafter acquired by
it, or assign or sell any income or revenues (including accounts receivable) or
rights in respect of any thereof, except:
(a) Liens created under the Loan Documents;
(b) Permitted Encumbrances;
(c) any Lien on any property or asset of any Loan Party
existing on the date hereof and set forth in Schedule 6.2, but only so long as
(i) such Lien is not enforceable against any other property or asset and (ii)
such Lien secures only those obligations that it secures on the date hereof;
(d) any Lien on any property or asset owned by the Borrower or
a Borrower Subsidiary that was existing on such property or asset prior to the
acquisition thereof by the Borrower or such Borrower Subsidiary or that was
owned by any Person that becomes a Borrower Subsidiary after the date hereof
prior to the time such Person became a Borrower Subsidiary, in each case if (i)
such Lien was not created in contemplation of or in connection with such
acquisition or such Person becoming a Borrower Subsidiary, as the case may be,
(ii) such Lien is not enforceable against any other property or assets of the
Borrower or any Borrower Subsidiary and (iii) such Lien secures only those
obligations (including Acquired Indebtedness other than Acquisition
Consideration) that it secures on the date of such acquisition or the date such
Person becomes a Borrower Subsidiary, as the case may be;
(e) Liens on tangible fixed assets acquired, constructed or
improved by the Borrower or any Borrower Subsidiary securing Indebtedness
permitted by Section 6.1(a)(iv), if (i) the Indebtedness secured by any such
purchase money Lien does not exceed 100% of the cost of acquiring, constructing
or improving such tangible fixed assets and (ii) such security interests are not
enforceable against any other property or assets of the Borrower or any Borrower
Subsidiary;
(f) leases or subleases of Real Property granted by any Loan
Party to any other Person in the ordinary course of business;
(g) Liens in the nature of trustees' Liens granted pursuant to
any indenture governing any Indebtedness otherwise permitted hereunder, in each
case in favor of the trustee under such indenture and securing only obligations
to pay
70
<PAGE>
compensation to such trustee, to reimburse its expenses and to indemnify
it under the terms thereof; and
(h) renewals or extensions of any Liens otherwise
permitted pursuant to clauses (a) - (g) hereof.
Section 6.3. Fundamental Changes.
(a) Each of the Borrower and Holdings will not, and will not
permit any Subsidiary to, merge into or consolidate with any other Person, or
permit any other Person to merge into or consolidate with it, or liquidate or
dissolve, except that, if at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be continuing, (i) any solvent
Borrower Subsidiary may merge into the Borrower in a transaction in which the
Borrower is the surviving corporation, and (ii) any solvent Borrower Subsidiary
may merge with any other solvent Borrower Subsidiary in a transaction in which
the surviving entity is a Borrower Subsidiary and a Loan Party, and (iii) a
newly-formed wholly-owned Subsidiary of the Borrower that has no assets except
the purchase consideration and purchase rights for a Permitted Acquisition may
merge with any Person that is being acquired in a Permitted Acquisition, if the
surviving entity is a solvent Borrower Subsidiary and a Loan Party, and (iv) a
Person acquired in a Permitted Acquisition may merge with and into a Borrower
Subsidiary, if the Borrower Subsidiary is the surviving entity.
(b) The Borrower will not, and will not permit any of the
Borrower Subsidiaries to, engage in any business other than businesses of the
type engaged in by the Borrower and such Borrower Subsidiaries on the date
hereof and businesses reasonably related thereto, including without limitation
businesses associated with the vertical integration of any such otherwise
permitted business; provided that nothing herein shall be deemed to permit
Holdings, the Borrower or any of their respective Subsidiaries to engage in the
opening, management or operation of retail establishments.
(c) Holdings will not own any assets other than all
outstanding common stock of the Borrower or conduct any business or activity
other than activities reasonably incidental to the ownership of such common
stock and to the issuance of the Senior Notes.
Section 6.4. Investments, Loans, Advances, Guarantees and
Acquisitions. The Borrower and Holdings will not, and will not permit any
Subsidiary to, purchase, hold or acquire (including pursuant to any merger with
any Person that was not a wholly owned Subsidiary prior to such merger) any
Equity Interest in, Indebtedness of, or other securities (including any option,
warrant or other right to acquire any of the foregoing) issued by, or make or
permit to exist any loans or advances to, or Guarantee any obligations of, or
make or permit to exist any investment or any other interest in, any other
Person, or purchase or otherwise acquire (in one transaction or a series of
transactions) any assets of any other Person constituting a business unit,
except:
71
<PAGE>
(a) as contemplated by the Reorganization;
(b) Permitted Acquisitions;
(c) Permitted Investments and investments in Subsidiaries in
which the Administrative Agent has a duly perfected first priority security
interest for the benefit of the holders of the Obligations;
(d) investments by Holdings in all outstanding common stock of
the Borrower, if all outstanding common stock of the Borrower is held by the
Administrative Agent in pledge pursuant to the Pledge and Security Agreement;
and investments by the Borrower in common stock of, or an Intercompany Note
issued by, any Borrower Subsidiary, if (i) such Borrower Subsidiary is a
wholly-owned Subsidiary, (ii) such Borrower Subsidiary has become party to the
Subsidiary Guarantee Agreement and the Security Documents and (iii) such
investments are represented by Certificated Securities or Intercompany Notes
that are held by the Administrative Agent in pledge pursuant to the Pledge and
Security Agreement;
(e) investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes with,
customers and suppliers, in each case in the ordinary course of business;
(f) Hedging Agreements permitted under Section 6.1;
(g) loans or advances to employees (i) for the purpose of (i)
travel, entertainment or relocation in the ordinary course of business and (ii)
enabling such employees to buy stock of Holdings in an aggregate and cumulative
amount not exceeding $750,000 at any time outstanding during the term of this
Agreement;
(h) Indebtedness permitted by Section 6.1 and Guarantees
thereof;
(i) operating deposit accounts maintained with banks in the
ordinary course of business and in conformity with Section 5.13(c); and
(j) other investments in an aggregate amount not to
exceed $2,000,000 at any time outstanding.
Section 6.5. Asset Sales. The Borrower and Holdings
will not, and will not permit any Subsidiary to, sell, transfer, exchange,
lease or otherwise dispose of (collectively, "Transfer") any property or
asset, or issue or permit to remain outstanding any Equity Interest in any
Subsidiary other than common stock of the Borrower owned by Holdings and
common stock of any Borrower Subsidiary owned by the Borrower or another
Borrower Subsidiary, except:
(a) sales of inventory, used or surplus equipment and
Permitted Investments in the ordinary course of business and trade-ins or
trade-ups of equipment;
72
<PAGE>
(b) Transfers to the Borrower or a Borrower Subsidiary that is
a wholly-owned Subsidiary and that has become a party to the Subsidiary
Guarantee Agreement and the Security Documents;
(c) sales of assets acquired in connection with a Permitted
Acquisition and identified on a schedule submitted to and approved by the
Required Lenders prior to the consummation of such Permitted Acquisition; and
(d) other Transfers of assets, if (i) the aggregate fair
market value of all assets sold, transferred or otherwise disposed of in
reliance upon this Section 6.5(d) does not exceed $5,000,000 in the aggregate
during the term of this Agreement and (ii) such sale, transfer or other
disposition is made for fair market value and solely for cash consideration;
provided that, if such Transfer involves a sale transfer or disposition of
Equity Interests in a Borrower Subsidiary, such sale, transfer or other
disposition does not constitute a sale of less than all outstanding Equity
Interests in a Borrower Subsidiary; provided further that the Net Cash Proceeds
of any Transfer pursuant to this Section 6.5(d) are applied pursuant to Section
2.7(b).
Section 6.6. Maintenance of Holdings' Subchapter S
Status, Capital Stock.
Each of the Borrower and Holdings will not, and will not
permit any of the Subsidiaries to, do or suffer to exist any act which could (a)
cause Holdings' election to be treated as an S Corporation pursuant to the
provisions of Subchapter S of the Code to be terminated or revoked or (b) result
in the creation of a Lien on or otherwise encumber, or constitute a pledge or
hypothecation of, any capital stock issued by Holdings.
Section 6.7. Restricted Payments; Certain Payments of
Indebtedness.
(a) Each of the Borrower and Holdings will not, and will not
permit any Subsidiary to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment, except that (i) Holdings may declare and pay
dividends with respect to its capital stock payable solely in additional shares
of like capital stock, (ii) a Borrower Subsidiary may declare and pay dividends
to the Borrower or another Borrower Subsidiary, (iii) Holdings may exchange the
Notes for the Exchange Notes (each as defined in the Senior Note Indenture),
provided that the aggregate principal amount of such Exchange Notes shall not
exceed the aggregate principal amount of such Notes outstanding as of the date
of such exchange and such Exchange Notes are on substantially identical terms
with such Notes, (iv) Holdings may pay reasonable and customary directors' fees,
indemnifications and similar payments and arrangements in connection therewith,
(v) Holdings may grant options to executive management to acquire capital stock
and other stock equivalents of Holdings pursuant to a share incentive plan and
may issue such capital stock and stock equivalents to such Persons in accordance
with such plan, (vi) Holdings may pay, and the Borrower may declare and pay to
Holdings cash dividends in amounts sufficient to enable Holdings to pay,
California income taxes imposed on corporations organized under Subchapter S of
the Code, payable by
73
<PAGE>
Holdings, franchise or other taxes, payable by Holdings, to maintain its
corporate existence and fees, indemnities and other amounts referred to in
clause (iv) above, (vii) Holdings may pay or distribute, and the Borrower may
declare and pay to Holdings cash dividends in amounts sufficient to enable
Holdings to pay or distribute, (A) payments to shareholders of Holdings pursuant
to the Reorganization Agreement and consistent with past practices of Holdings
for the purpose of distributing net income generated by Holdings for the period
from January 1, 1998, through the Effective Date, less $2,000,000, (B) payments
to Richard D. Marconi and Fred E. Siegel in an amount not exceeding $4,000,000
in connection with the transactions contemplated by the Reorganization
Agreement, and (C) the payments described on Schedule 6.7(a)(vii), (viii) so
long as Holdings has delivered a Tax Distribution Certificate as required by
Section 5.1(i), Holdings may declare and pay cash dividends in any fiscal year
(and the Borrower and the Borrower Subsidiaries may pay dividends in order to
permit Holdings to declare and pay such cash dividends) in an aggregate amount
not to exceed the Tax Distribution Amount for such fiscal year or, to the extent
not previously distributed, the Tax Distribution Amount for a prior fiscal year,
(ix) so long as no Specified Event of Default has occurred and is continuing or
would result therefrom, the Borrower may declare and pay cash dividends to
Holdings in amounts sufficient to permit Holdings to make payment of regularly
scheduled interest payments as and when due in respect of the Senior Notes, and
(x) so long as no Event of Default has occurred and is continuing or would
result therefrom, Holdings may, and the Borrower may declare and pay cash
dividends to Holdings in amounts sufficient to permit Holdings to, repurchase
its capital stock from employees of Holdings or its Subsidiaries following the
death or termination of employment of each such employee, all in an aggregate
amount not to exceed $1,000,000 during any fiscal year;
provided, however, that all cash dividends received by Holdings shall be
promptly applied by Holdings for the purposes, and only for the purposes, for
which such dividends were permitted to be made hereunder.
(b) Each of the Borrower and Holdings will not, and will not
permit any Subsidiary to, make or agree to pay or make, directly or indirectly,
any payment or other distribution (whether in cash securities or other property)
of or in respect of principal of or interest on any Indebtedness, or any payment
or other distribution (whether in cash, securities or other property), including
any sinking fund or similar deposit, on account of the purchase, redemption,
retirement, acquisition, cancellation or termination of any Indebtedness,
except:
(i) payments in respect of the Obligations and
payments of regularly scheduled interest and principal payments as and
when due in respect of any other Indebtedness permitted hereunder
(except that neither the Borrower nor any Borrower Subsidiary shall
make any such payment on the Senior Notes in violation of the
subordination provisions of the Senior Note Guarantees); and
74
<PAGE>
(ii) in the case of Holdings, payment of regularly
scheduled interest payments and principal payments required to be made
under the Senior Note Indenture as and when due in respect of the
Senior Notes and the consummation of the Exchange Offer referred to in
the Senior Note Indenture.
Section 6.8. Transactions with Affiliates. Each of the
Borrower and Holdings will not, and will not permit any Subsidiary to, sell,
lease or otherwise transfer any property or assets to, or purchase, lease or
otherwise acquire any property or assets from, or otherwise engage in any other
transactions with, any of their respective Affiliates, except (a) transactions
in the ordinary course of business that are at prices and on terms and
conditions not less favorable to the Borrower or such Subsidiary than could be
obtained on an arm's-length basis from unrelated third parties, (b) transactions
between or among the Borrower and Borrower Subsidiaries that are wholly-owned
Subsidiaries and are party to the Subsidiary Guarantee Agreement and the
Security Documents, (c) payments by the Borrower and the Borrower Subsidiaries
in respect of Taxes attributable to the Borrower and the Borrower Subsidiaries,
if such payments (i) are made directly to the taxing authority to which such
Taxes are due, (ii) are made when such Taxes (or estimated tax payments in
respect thereof) are due, and (iii) do not exceed the difference between (A) the
amount of such Taxes that the Borrower and the Borrower Subsidiaries would be
required to pay under a separate return, less (B) any and all deductions,
credits and refunds in respect of such Taxes that are attributable to the
accrual or payment of interest on the Senior Notes or any other charges or
losses of Holdings or that otherwise are claimed, taken or received by Holdings,
(d) payments and transactions permitted by Section 6.7, and (e) transactions
pursuant to the agreements listed on Schedule 6.8, each as in effect on the date
hereof.
Section 6.9. Restrictive Agreements. Each of the Borrower
and Holdings will not and will not permit any Subsidiary to, directly or
indirectly, enter into, incur or permit to exist any agreement or other
arrangement that prohibits, restricts or imposes any condition upon (a) the
ability of any member of Holdings Group to create, incur or permit to exist any
Lien upon any of its property or assets or (b) the ability of any Subsidiary to
pay dividends or other distributions with respect to any shares of its capital
stock or to make or repay loans or advances to the Borrower or any Borrower
Subsidiary or to Guarantee Indebtedness of the Borrower or any Borrower
Subsidiary or to transfer assets to or engage in any other transaction with the
Borrower or any Borrower Subsidiary, except (i) restrictions and conditions
imposed by law or by any Loan Document, (ii) restrictions and conditions imposed
under the Senior Note Indenture, (iii) customary restrictions and conditions
contained in agreements relating to the sale of a Borrower Subsidiary pending
such sale, if such restrictions and conditions apply only to the Subsidiary that
is to be sold and such sale is permitted hereunder, (iv) restrictions or
conditions upon the creation, incurrence or existence of a Lien that are imposed
by any agreement relating to secured Indebtedness permitted by this Agreement if
such restrictions or conditions apply only to the property or assets securing
such Indebtedness and (v) customary provisions in leases restricting the
assignment or subleasing thereof.
75
<PAGE>
Section 6.10. Amendment of Material Documents. Each of the
Borrower and Holdings will not, and will not permit any Subsidiary to, amend,
modify or waive any of its rights, in each case in any way that could be adverse
to Holdings, the Borrower, their respective Subsidiaries, or the Administrative
Agent, the Issuing Bank or any Lender, under (a) any of the Governing Documents,
except changes in the certificate of incorporation or by-laws or similar
governing articles or agreements of any Loan Party that do not relate to or
affect any of the Transactions and are implemented after 30 days prior written
notice to the Administrative Agent and the Lenders, unless within such 30-day
period the Borrower is advised by Required Lenders that, in the opinion of
Required Lenders, such change would be adverse to the interests of the Lenders,
(b) the Transaction Agreements, (c) the Senior Note Indenture or (d) the Supply
Agreements or any other Material Contract.
Section 6.11. Capital Expenditures. The Borrower and
Holdings will not make any Capital Expenditures except (a) Permitted
Acquisitions and (b) other Capital Expenditures made by the Borrower or a
Borrower Subsidiary in an amount which, in the aggregate for all such other
Capital Expenditures made by the Borrower and the Borrower Subsidiaries, does
not in any period of four fiscal quarters ending on the last day of any fiscal
quarter, commencing with the fiscal quarter ending December 31, 1998, exceed 3%
of revenues of the Borrower and the Borrower Subsidiaries for such four-quarter
period determined on a consolidated basis in accordance with GAAP.
Section 6.12. Pro Forma Leverage Ratio. Each of the
Borrower and Holdings will not permit the Pro Forma Leverage Ratio to exceed, as
of the last day of any fiscal quarter ending during any period set forth below,
the ratio set forth opposite such period:
<TABLE>
<CAPTION>
Period Total Leverage Ratio
------ --------------------
<S> <C>
First fiscal quarter 1998 to and
including third fiscal quarter 1999 5.0 to 1.0
Fourth fiscal quarter 1999 to and
including third fiscal quarter 2000 4.25 to 1.0
Fourth fiscal quarter 2000 and
thereafter 4.0 to 1.0
</TABLE>
Section 6.13. Consolidated EBITDA. The Borrower and
Holdings will not permit Consolidated EBITDA for any period of four fiscal
quarters ending as of the last day of any fiscal quarter ending during any
period set forth below to be less than the amount set forth opposite such
period:
<TABLE>
<CAPTION>
Minimum Consolidated
--------------------
Period EBITDA
------ -------
<S> <C>
First fiscal quarter 1998 to and $40,000,000
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
including third fiscal quarter 1999
Fourth fiscal quarter 1999 to and 50,000,000
including third fiscal quarter 2000
Fourth fiscal quarter 2000 to and 60,000,000
including third fiscal quarter 2001
Fourth fiscal quarter 2001 to and 70,000,000
including third fiscal quarter 2002
Fourth fiscal quarter 2002 and thereafter 80,000,000
including
</TABLE>
Section 6.14. Cash Interest Coverage Ratio. The Borrower
and Holdings will not permit the Cash Interest Coverage Ratio, determined as of
the last day of any fiscal quarter ending during any period set forth below, to
be less than the ratio set forth opposite such period below:
<TABLE>
<CAPTION>
Period Minimum Ratio
------ -------------
<S> <C>
First fiscal quarter 1998 to and including
third fiscal quarter 1999 1.75 to 1.0
Fourth fiscal quarter 1999 to and 2.00 to 1.0
including third fiscal quarter 2000
Fourth fiscal quarter 2000 to and 2.50 to 1.0
including third fiscal quarter 2001
Fourth fiscal quarter 2001 and thereafter 2.75 to 1.0
</TABLE>
Section 6.15. Fixed Charge Coverage Ratio. The Borrower
and Holdings will not permit the Fixed Charge Coverage Ratio, determined as of
the last day of any fiscal quarter ending during any period set forth below, to
be less than the ratio set forth opposite such period:
<TABLE>
<CAPTION>
Period Minimum Ratio
------ -------------
<S> <C>
First fiscal quarter 1998 to and including
third fiscal quarter 1999 1.05 to 1.0
Fourth fiscal quarter 1999 to and 1.25 to 1.0
including third fiscal quarter 2000
Fourth fiscal quarter 2000 to and 1.35 to 1.0
including third fiscal quarter 2001
</TABLE>
77
<PAGE>
<TABLE>
<CAPTION>
Period Minimum Ratio
------ -------------
<S> <C>
Fourth fiscal quarter 2001 to and 1.45 to 1.0
including third fiscal quarter 2002
Fourth fiscal quarter 2002 and thereafter 1.50 to 1.0
</TABLE>
Section 6.16. Additional Subsidiaries. The Borrower and
Holdings will not, and will not permit any Subsidiary to, create any additional
Subsidiary, unless such Subsidiary is a Borrower Subsidiary.
ARTICLE VII.
EVENTS OF DEFAULT
Section 7.1. Events of Default. If any of the following events
("Events of Default") shall occur:
(a) the Borrower shall fail to pay any principal of any Loan
or any reimbursement obligation in respect of any LC Disbursement when and as
the same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or
any fee or any other amount (other than an amount referred to in Section 7.1(a))
payable under this Agreement or any other Loan Document, when and as the same
shall become due and payable, and such failure shall continue unremedied for a
period of three Business Days;
(c) any representation or warranty made or deemed made by or
on behalf of any member of the Holdings Group in or in connection with any Loan
Document or any amendment or modification thereof or waiver thereunder, or in
any report, certificate, financial statement or other document furnished
pursuant to or in connection with any Loan Document or any amendment or
modification thereof or waiver thereunder, shall prove to have been incorrect in
any material respect when made or deemed made;
(d) the Borrower or Holdings shall fail to observe or perform
any covenant, condition or agreement contained in Section 5.2, 5.4, 5.11 or 5.15
or in Article VI;
(e) any Loan Party shall fail to observe or perform any
covenant, condition or agreement contained in any Loan Document (other than
those specified in Sections 7.1(a), 7.1(b) or 7.1(d), and such failure shall
continue unremedied for a period of 10 days after (i) notice thereof is given to
the Borrower by any Agent or Lender or (ii) any Loan Party acknowledges such
failure in writing;
78
<PAGE>
(f) any member of the Holdings Group shall fail to make any
payment (whether of principal or interest and regardless of amount) in respect
of any Material Indebtedness, when and as the same shall become due and payable
(after giving effect to the expiration of any grace or cure period set forth
therein);
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of any Material Indebtedness or any trustee or agent on its or
their behalf to cause any Material Indebtedness to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled
maturity;
(h) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation, reorganization or
other relief in respect of any member of the Holdings Group or its debts, or of
a substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect
or (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for any member of the Holdings Group or for a
substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 60 days or an order or decree approving
or ordering any of the foregoing shall be entered or such member of the Holdings
Group shall consent to such proceeding or petition or the entry of any such
order or decree;
(i) any member of the Holdings Group shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization
or other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in Section 7.1(h), (iii) apply for or consent
to the appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for any member of the Holdings Group or for a substantial
part of any of their assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;
(j) any member of the Holdings Group shall become unable,
admit in writing its inability or fail generally to pay its debts as they become
due;
(k) one or more judgments for the payment of money in an
aggregate amount in excess of $2,000,000 not fully covered by insurance (other
than normal deductibles and where coverage has been confirmed in writing by the
applicable insurer) shall be rendered against any member or members of the
Holdings Group and the same shall remain undischarged for a period of 30
consecutive days during which execution shall not be effectively stayed, or any
action shall be legally taken by a judgment creditor
79
<PAGE>
to attach or levy upon any assets of any member of the Holdings Group to enforce
any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of
the Required Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in liability of any member or
members of the Holdings Group in an aggregate amount exceeding $2,000,000;
(m) any Loan Party shall repudiate, disavow or purport to
revoke any of its obligations under any Loan Document or shall commence or
overtly threaten or join or acquiesce in any litigation seeking to invalidate or
annul, or seeking any other relief from or as to, any of the provisions of any
Loan Document on any ground; or any such litigation shall be commenced by any
Person other than a Loan Party and shall not be dismissed within 60 days
thereof;
(n) any Lien purported to be created under any Security
Document shall cease to be, or shall be asserted by any Loan Party not to be, a
valid and perfected Lien on any Collateral, with the priority required by the
applicable Security Document, except as a result of the sale or other
disposition of the applicable Collateral in a transaction permitted under the
Loan Documents;
(o) any Supply Agreement shall have been terminated, or a
notice of termination shall have been delivered thereunder, or a material
default shall have occurred and be continuing thereunder; or
(p) any Change of Control shall occur;
then, and in every such event (other than an event with respect to the Borrower
or Holdings described in Section 7.1(h) or 7.1(i)), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either or
both of the following actions, at the same or different times: (i) terminate the
Revolving Commitments, and thereupon the Revolving Commitments shall terminate
immediately, and (ii) declare the Loans then outstanding to be due and payable
in whole (or in part, in which case any principal not so declared to be due and
payable may thereafter be declared to be due and payable), and thereupon the
principal of the Loans so declared to be due and payable, together with accrued
interest thereon and all fees and other obligations of the Borrower accrued
hereunder, shall become due and payable immediately, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower; and in case of any event with respect to the Borrower or Holdings
described in Section 7.1(h) or 7.1(i), the Revolving Commitments shall
automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and all fees and other obligations of the
Borrower accrued hereunder, shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower.
80
<PAGE>
ARTICLE VIII.
THE ADMINISTRATIVE AGENT
Section 8.1. Appointment of Agents. Each of the Lenders
and the Issuing Bank hereby (a) irrevocably appoints CUSA as the Administrative
Agent and (b) authorizes the Administrative Agent to take such actions on its
behalf and to exercise such powers as are delegated to the Administrative Agent
by the terms of the Loan Documents, together with such actions and powers as are
reasonably incidental thereto.
Section 8.2. Same Rights and Powers. The Administrative
Agent hereunder shall have the same rights and powers in its capacity as a
Lender as any other Lender and may exercise the same as though it were not the
Administrative Agent, and the Administrative Agent and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
any Transaction Party or any Subsidiary or other Affiliate thereof or any other
Person as if it were not the Administrative Agent hereunder.
Section 8.3. No Duties or Obligations; Not Liable. The
Administrative Agent shall not have any duties or obligations except those
expressly set forth in the Loan Documents. Without limiting the generality of
the foregoing, (a) the Administrative Agent shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default has occurred
and is continuing, (b) the Administrative Agent shall not have any duty to take
any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated by the Loan Documents
that the Administrative Agent is required to exercise in writing by the Required
Lenders (or such other number or percentage of the Lenders as shall be necessary
under the circumstances as provided in Section 9.2), and (c) except as expressly
set forth in the Loan Documents, the Administrative Agent shall not have any
duty to disclose, and shall not be liable for the failure to disclose, any
information relating to the Borrower or Holdings or any of their respective
Subsidiaries that is communicated to or obtained by the Administrative Agent or
any of its Affiliates in any capacity. The Administrative Agent shall not be
liable for any action taken or not taken by it with the consent or at the
request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section
9.02) or in the absence of the Administrative Agent's own gross negligence or
willful misconduct. The Administrative Agent shall not be deemed to have
knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and the Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire into (i)
any statement, warranty or representation made in or in connection with any Loan
Document, (ii) the contents of any certificate, report or other document
delivered thereunder or in connection therewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth in any Loan Document, (iv) the validity, enforceability, effectiveness or
genuineness of any Loan Document or any other agreement, instrument or document,
(v) the creation, enforceability, perfection, priority or sufficiency of any
Lien, or (vi) the satisfaction of any condition set forth in Article III or
elsewhere in any Loan Document, other than to confirm receipt of items expressly
required to be delivered to the Administrative Agent.
81
<PAGE>
Section 8.4. Entitled to Rely. The Administrative Agent
shall be entitled to rely upon, and shall not incur any liability for relying
upon, any notice, request, certificate, consent, statement, instrument, document
or other writing believed by it to be genuine and to have been signed or sent by
the proper Person. The Administrative Agent also may rely upon any statement
made to it orally or by telephone and believed by it to be made by the proper
Person, and shall not incur any liability for relying thereon. The
Administrative Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.
Section 8.5. Sub-Agents; Related Parties. The
Administrative Agent may perform any and all its duties and exercise its rights
and powers by or through any one or more sub-agents appointed by the
Administrative Agent. The Administrative Agent and any such sub-agent may
perform any and all its duties and exercise its rights and powers through their
respective Related Parties. The exculpatory provisions of this Article VIII
shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as the Administrative Agent.
Section 8.6. Resignation of Administrative Agent. Subject
to the appointment and acceptance of a successor to the Administrative Agent as
provided in this Section 8.6, the Administrative Agent may resign at any time by
notifying the Lenders, the Issuing Bank and the Borrower. Upon any such
resignation, the Required Lenders shall have the right, in consultation with the
Borrower, to appoint a successor. If no successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agent may, on behalf of the Lenders and the Issuing
Bank, appoint a successor Administrative Agent that shall be a bank with an
office in New York, New York, or an Affiliate of any such bank. Upon the
acceptance of its appointment as Administrative Agent hereunder by a successor,
such successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. The fees payable by the Borrower to a successor Administrative Agent
shall be the same as those payable to its predecessor unless otherwise agreed
upon between the Borrower and such successor. After the Administrative Agent's
resignation hereunder, the provisions of this Article VIII and Section 9.3 shall
continue in effect for the benefit of such retiring Administrative Agent, its
sub-agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by any of them while it was acting as Administrative
Agent. In connection with such resignation, the retiring Administrative Agent
shall execute such financing statements and other documents and instruments of
transfer necessary to maintain the perfection of all security interests securing
the Obligations and to effect the transfer in connection therewith to the
succeeding Administrative Agent.
Section 8.7. Concerning the Collateral.
82
<PAGE>
(a) The Administrative Agent and the Lenders authorizes and
directs the Administrative Agent to enter into the Security Documents for the
benefit of the Lenders and to perform all obligations of the Administrative
Agent thereunder, including (without limitation) obligations to release
Collateral. Each Lender and each Issuing Bank agrees that any action taken by
the Required Lenders (or, where required by the express terms of this Agreement,
a greater or lesser proportion of the Lenders) in accordance with the provisions
of this Agreement or the Security Documents, and the exercise by the Required
Lenders (or, where so required, such greater or lesser proportion) of the powers
set forth herein or therein, together with such other powers as are reasonably
incidental thereto, shall be authorized and binding upon each Lender and Issuing
Bank.
(b) Each Lender and each Issuing Bank hereby agrees that it
will, upon request of the Borrower or the Administrative Agent, confirm the
Administrative Agent's authority to release, or direct the Administrative Agent
to release, any Lien held by the Administrative Agent:
(i) against all of the Collateral, upon payment in
full of the Obligations and expiration or termination of the
obligations of each Lender and Issuing Bank under this Agreement;
(ii) against any part of the Collateral sold or
disposed of by the Borrower or any Borrower Subsidiary, if such sale or
disposition is permitted by and is made in accordance with this
Agreement; and
(iii) against any Collateral which the Administrative
Agent is required to release pursuant to the Security Documents.
(c) The Administrative Agent shall not be accountable or
liable for any release of Collateral which (i) the Administrative Agent in good
faith believes is required under the Security Documents or any other Loan
Document, or (ii) results from any failure to give, or delay in giving, any
notice of termination of any rights of the Borrower pursuant to the Security
Documents or any other Loan Document.
Section 8.8. No Reliance. Each Lender acknowledges that
it has, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any other Loan Document or related agreement or any
document furnished hereunder or thereunder.
83
<PAGE>
Section 8.9. Arranger and Documentation Agent. The
Arranger and the Documentation Agent shall have no duties or obligations under
this Agreement or the other Loan Documents in their respective capacities as
Arranger and Documentation Agent.
ARTICLE IX.
MISCELLANEOUS
-------------
Section 9.1. Notices. Except in the case of notices and
other communications expressly permitted to be given by telephone, all notices
and other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to any member of the Holdings Group, to it at 987
North Enterprise Way, Orange, California 92867, Attention of Chief Financial
Officer (Telecopy No. 714-771-7487);
(b) if to the Administrative Agent, to Citicorp USA, Inc., c/o
Citibank Delaware, 2 Penn's Way, Suite 200, New Castle, Delaware 19720,
Attention of Michael Whitman (Telecopy No. 302-894-6120/1), with a copy to
Citicorp Securities, Inc., Citibank Center, 787 West Fifth Street, 29th Floor,
Los Angeles, CA 90071, Attention of Shamsara Ahmed (Telecopy No. 213-624-3743);
(c) if to the Issuing Bank, to Citibank, N.A., 399 Park
Avenue, New York, New York 10043, Attention of Michael Whitman (Telecopy No.
302-894-6120/1), with a copy to the Administrative Agent; and
(d) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
Section 9.2. Waivers; Amendments.
(a) No failure or delay by the Administrative Agent, the
Issuing Bank or any Lender in exercising any right or power hereunder or under
any other Loan Document shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Administrative Agent, the Issuing Bank and the Lenders
hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of any Loan Document or consent to any departure by any Loan Party
84
<PAGE>
therefrom shall in any event be effective unless the same shall be permitted by
Section 9.2(b), and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. Without limiting the
generality of the foregoing, the making of a Loan or issuance of a Letter of
Credit shall not be construed as a waiver of any Default, regardless of whether
the Administrative Agent, any Lender or the Issuing Bank may have had notice or
knowledge of such Default at the time.
(b) Neither this Agreement nor any other Loan Document nor any
provision hereof or thereof may be waived, amended or modified except, in the
case of this Agreement, pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Lenders or, in the case of any
other Loan Document, pursuant to an agreement or agreements in writing entered
into by the Administrative Agent and the Loan Party or Loan Parties that are
parties thereto, in each case with the consent of the Required Lenders, except
that (i) no such agreement shall (A) increase the Revolving Commitment of any
Lender without the written consent of such Lender, (B) reduce the principal
amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or
reduce any fees payable hereunder, without the written consent of each Lender
affected thereby, (C) postpone the scheduled date of payment of the principal
amount of any Loan or LC Disbursement, or any interest thereon, or any fees
payable hereunder, or reduce the amount of, waive or excuse any such payment, or
postpone the scheduled date of expiration of the Revolving Commitments, without
the written consent of each Lender affected thereby, (D) change Section 2.15(b)
or 2.15(c) in a manner that would alter the pro rata sharing of payments
required thereby, without the written consent of each Lender, (E) change any of
the provisions of this Section 9.2 or the definition of the term "Required
Lenders" or any other provision of any Loan Document specifying the number or
percentage of Lenders required to waive, amend or modify any rights thereunder
or make any determination or grant any consent thereunder, without the written
consent of each Lender, (F) release any Guarantor from its Guarantee under the
Guarantee Agreement (except as expressly provided in the Guarantee Agreement or
on a sale of such Guarantor permitted hereby), or decrease its liability in
respect of such Guarantee, without the written consent of each Lender, (G)
release all or any substantial part of the Collateral from the Liens of the
Security Documents, without the written consent of each Lender or (H) waive an
Event of Default resulting from a Change of Control without the written consent
of each Lender; or (ii) amend, modify or otherwise affect the rights or duties
of the Administrative Agent or the Issuing Bank without the prior written
consent of the Administrative Agent or the Issuing Bank, as the case may be.
Section 9.3. Expenses; Indemnity; Damage Waiver.
(a) Each of the Borrower and Holdings jointly and severally
agree to pay (i) all out-of-pocket expenses incurred by the Administrative
Agent, the Arranger and their respective Affiliates, including the reasonable
fees, charges and disbursements of counsel for the Administrative Agent and the
Arranger, in connection with the negotiation and syndication of the credit
facilities provided for herein, the preparation and
85
<PAGE>
administration of the Loan Documents or any amendments, modifications or waivers
of the provisions thereof (whether or not the transactions contemplated hereby
or thereby shall be consummated), (ii) all out-of-pocket expenses incurred by
the Issuing Bank in connection with the issuance, amendment, renewal or
extension of any Letter of Credit or any demand for payment thereunder, and
(iii) all out-of-pocket expenses incurred by the Administrative Agent, the
Arranger, the Issuing Bank or any Lender, including the reasonable fees, charges
and disbursements of any counsel for the Administrative Agent, the Issuing Bank
or any Lender and any advisors, appraisers, consultants, or other professional
engaged by them or by such counsel (provided that, with respect to any audit,
evaluation or appraisal of the Collateral pursuant to Section 5.9(b), such
expenses shall be limited to the single designated group of professionals
retained by the Administrative Agent or the Lenders to perform such audit,
evaluation or appraisal), in connection with the enforcement or protection of
its rights in connection with the Loan Documents, including its rights under
this Section 9.3, or in connection with the Loans made or Letters of Credit
issued hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans or Letters of
Credit or during the pendency of any bankruptcy or insolvency proceeding.
(b) Each of the Borrower and Holdings agree jointly and
severally to defend and indemnify the Administrative Agent, the Arranger, the
Issuing Bank and each Lender, and each Related Party of any of the foregoing
Persons (all, collectively, "Indemnitees"), against, and to hold each Indemnitee
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including the reasonable fees, charges and disbursements of any
counsel for any Indemnitee, incurred by or asserted against any Indemnitee
arising out of, in connection with, or as a result of (i) the execution or
delivery of any Loan Document or any other agreement or instrument contemplated
hereby, the performance by the parties to the Loan Documents of their respective
obligations thereunder or the consummation of the Transactions or any other
transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use
of the proceeds therefrom (including any refusal by the Issuing Bank to honor a
demand for payment under a Letter of Credit if the documents presented in
connection with such demand do not strictly comply with the terms of such Letter
of Credit), (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property currently or formerly owned or operated by any
Transaction Party or any of their Subsidiaries, or any Environmental Liability
related in any way to any Transaction Party or any of the Subsidiaries, or (iv)
any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other
theory and regardless of whether any Indemnitee is a party thereto, except only
that no Indemnitee shall be indemnified hereunder if and to the extent that any
such losses, claims, damages, liabilities or related expenses incurred or
sustained by it are determined by final judgment of a court of competent
jurisdiction to have resulted directly and primarily from the gross negligence
or willful misconduct of such Indemnitee; provided that Holdings and the
Borrower shall have no obligation under this Section 9.3(b) to any Indemnitee
with respect to any and all losses, claims, damages, liabilities and related
86
<PAGE>
expenses arising out of the presence or release of any Hazardous Material that
is first used, manufactured, emitted, generated, treated, located, released,
stored or disposed of on any Real Property after such Real Property is
transferred to any Indemnitee or its successors by foreclosure sale, deed in
lieu of foreclosure or similar transfer, except to the extent such manufacture,
emission, generation, treatment, location, release, storage, disposal or
violation is related to any action taken, or the failure to take any action, by
Holdings, the Borrower or their respective Subsidiaries.
(c) To the extent that any Loan Party fails to pay any amount
required to be paid by it to the Administrative Agent or the Issuing Bank under
Section 9.3(a) or 9.3(b), each Lender severally agrees to pay to the
Administrative Agent or the Issuing Bank, as the case may be, such Lender's pro
rata share (determined as of the time that the applicable unreimbursed expense
or indemnity payment is sought) of such unpaid amount, but (in each case) only
if and to the extent that the unreimbursed expense or indemnified loss, claim,
damage, liability or related expense, as the case may be, was incurred by or
asserted against the Administrative Agent or the Issuing Bank in its capacity as
such. For purposes hereof, a Lender's "pro rata share" shall be determined based
upon its share of the sum of the Total Exposures and unused Revolving
Commitments at the time.
(d) Each of the Borrower and Holdings will not assert, will
cause each of their respective Subsidiaries never to assert, and for themselves
and each of their respective present and future Subsidiaries and their
respective Related Parties hereby forever waives, releases and agrees not to sue
upon, any claim against any Indemnitee, on any theory of liability (whether
based upon contract, or founded upon tort or any legal duty or otherwise), for
any special, indirect, consequential damages and, to the fullest extent a claim
for punitive damages is permitted to be waived by law, for punitive damages
arising out of, in connection with, or as a result of, this Agreement or any
agreement or instrument contemplated hereby, the Transactions, any Loan or
Letter of Credit or the use of the proceeds thereof or any act, omission, claim,
breach, wrongful conduct, or other occurrence or event in any respect relating
hereto.
(e) All amounts due under this Section 9.3 shall be
payable promptly after written demand therefor.
Section 9.4. Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby (including any Affiliate of the Issuing Bank that
issues any Letter of Credit), except that neither the Borrower nor Holdings may
assign or otherwise transfer any of its rights or obligations hereunder without
the prior written consent of each Lender (and any such attempted assignment or
transfer without such consent shall be null and void). Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any
87
<PAGE>
Person (other than the parties hereto, their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit) and, to the extent expressly contemplated hereby, the Related
Parties of each of the Administrative Agent, the Issuing Bank and the Lenders)
any legal or equitable right, remedy or claim under or by reason of this
Agreement.
(b) Any Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Revolving Commitment and the Loans at the time owing to it), if
(i) except in the case of an assignment to a Lender or an Affiliate of a Lender,
each of the Borrower and the Administrative Agent and the Issuing Bank give
their prior written consent to such assignment (which consent shall not be
unreasonably withheld), (ii) except in the case of an assignment to a Lender or
an Affiliate of a Lender or an assignment of the entire remaining amount of the
assigning Lender's Revolving Commitment or Loans, the amount of the Revolving
Commitment or Loans of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Acceptance with respect to such
assignment is delivered to the Administrative Agent) shall be an integral
multiple of $1,000,000 and not less than $5,000,000 unless each of the Borrower
and the Administrative Agent otherwise consent, (iii) each partial assignment
shall be made as an assignment of a proportionate part of all the assigning
Lender's rights and obligations under this Agreement, (iv) the parties to each
assignment shall execute and deliver to the Administrative Agent an Assignment
and Acceptance, together with a processing and recordation fee of $3,500, and
(v) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire; provided, however, that
any consent of the Borrower otherwise required under this Section 9.4 shall not
be required if an Event of Default has occurred and is continuing. Subject to
acceptance and recording thereof pursuant to Section 9.4(d), from and after the
effective date specified in each Assignment and Acceptance the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned
by such Assignment and Acceptance, have the rights and obligations of a Lender
under this Agreement, and the assigning Lender thereunder shall, to the extent
of the interest assigned by such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 2.13, 2.14, 2.15 and 9.3). Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this Section 9.4(b) shall be treated for purposes of
this Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with Section 9.4(e).
(c) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at one of its offices in the city of New
York a copy of each Assignment and Acceptance delivered to it and a register for
the recordation of the names and addresses of the Lenders, and the Revolving
Commitment of, and principal amount of the Loans and LC Disbursements owing to,
each Lender pursuant to the terms hereof
88
<PAGE>
from time to time (the "Register"). The entries in the Register shall be
conclusive, and the Loan Parties, the Administrative Agent, the Issuing Bank and
the Lenders may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower, the Issuing Bank and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee, the assignee's
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in Section
9.4(b) and any written consent to such assignment required by Section 9.4(b),
the Administrative Agent shall accept such Assignment and Acceptance and record
the information contained therein in the Register. No assignment shall be
effective for purposes of this Agreement unless it has been recorded in the
Register as provided in this Section 9.4(d).
(e) Any Lender may, without the consent of the Borrower, the
Administrative Agent or the Issuing Bank, sell participations to one or more
banks or other entities (a "Participant") in all or a portion of such Lender's
rights and obligations under this Agreement (including all or a portion of its
Revolving Commitment and the Loans owing to it), but in such event (i) such
Lender's obligations under this Agreement shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) the Loan Parties, the Administrative
Agent, the Issuing Bank and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce the Loan Documents and to approve any amendment,
modification or waiver of any provision of the Loan Documents, except that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the first proviso to Section 9.2(b) that affects such Participant.
Subject to Section 9.4(f), the Borrower agrees that each Participant shall be
entitled to the benefits of Sections 2.13, 2.14 and 2.15 to the same extent as
if it were a Lender and had acquired its interest by assignment pursuant to
Section 9.4(b). To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 9.8 as though it were a Lender, if such
Participant agrees to be subject to Section 2.15(c) as though it were a Lender.
(f) A Participant shall not be entitled to receive any greater
payment under Section 2.13 or 2.14 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Borrower's prior written consent. A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the
89
<PAGE>
benefits of Section 2.14 unless (i) the Borrower is notified of the
participation sold to such Participant and such Participant agrees, for the
benefit of the Borrower, to comply with Section 2.14(e) as though it were a
Lender and (ii) such Participant is eligible for exemption from the withholding
tax referred to therein, following compliance with Section 2.14(e).
(g) Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest. No such pledge or assignment
of a security interest shall release a Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for such Lender as a party
hereto.
Section 9.5. Survival. All covenants, agreements,
representations and warranties made by the Loan Parties in the Loan Documents
and in the certificates or other instruments delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the other parties hereto and shall survive the
execution and delivery of the Loan Documents and the making of any Loans and
issuance of any Letters of Credit, regardless of any investigation made by any
such other party or on its behalf and notwithstanding that the Administrative
Agent, the Issuing Bank or any Lender may have had notice or knowledge of any
Default or incorrect representation or warranty at the time any credit is
extended hereunder unless the same is waived in writing, and shall continue in
full force and effect as long as the principal of or any accrued interest on any
Loan or any fee or any other amount payable under this Agreement is outstanding
and unpaid or any Letter of Credit is outstanding and so long as the Revolving
Commitments have not expired or terminated. The provisions of Sections 2.13,
2.14, 2.15 and 9.3 and Article VIII shall survive and remain in full force and
effect regardless of the consummation of the transactions contemplated hereby,
the repayment of the Loans, the expiration or termination of the Letters of
Credit and the Revolving Commitments or the termination of this Agreement or any
provision hereof.
Section 9.6. Counterparts; Integration; Effectiveness.
This Agreement may be executed in counterparts (and by different parties hereto
on different counterparts), each of which shall constitute an original, but all
of which when taken together shall constitute a single contract. This Agreement,
the other Loan Document and any separate letter agreements with respect to fees
payable to the Administrative Agent constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof, except any and all agreements relating to the fees and compensation
payable to CUSA or CSI in connection with the Transactions. Except as provided
in Section 3.1, this Agreement shall become effective when it shall have been
executed by the Administrative Agent and when the Administrative Agent shall
have received counterparts hereof that, when taken together, bear the signatures
of each of the other parties hereto, and thereafter shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. Delivery of an executed
90
<PAGE>
counterpart of a signature page of this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.
Section 9.7. Severability. Any provision of this
Agreement held to be invalid, illegal or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without affecting the validity, legality and
enforceability of the remaining provisions hereof; and the invalidity of a
particular provision in a particular jurisdiction shall not invalidate such
provision in any other jurisdiction.
Section 9.8. Right of Setoff. If an Event of Default
shall have occurred and be continuing, each Lender and each of its Affiliates is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other obligations at
any time owing by such Lender or such Affiliate to or for the credit or the
account of the Borrower against any of and all the obligations of the Borrower
now or hereafter existing under this Agreement held by such Lender, irrespective
of whether or not such Lender shall have made any demand under this Agreement
and although such obligations may be unmatured. Each Lender agrees promptly to
notify the Borrower after any such set-off and application; provided, however,
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of each Lender and its respective Affiliates
under this Section 9.8 are in addition to other rights and remedies (including
other rights of setoff) that such Lender may have.
Section 9.9. Governing Law; Jurisdiction; Consent to
Service of Process.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(b) Each of the Borrower and Holdings hereby irrevocably and
unconditionally submits, for itself and its property and for each other Loan
Party and its property, to the nonexclusive jurisdiction of the Supreme Court of
the State of New York sitting in New York County and of the United States
District Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to any
Loan Document, or for recognition or enforcement of any judgment, and each of
the parties hereto hereby irrevocably and unconditionally agrees that all claims
in respect of any such action or proceeding may be heard and determined in such
New York State or, to the extent permitted by law, in such Federal court. Each
of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement or any other Loan Document shall affect any right that the
Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring
any action or proceeding relating to this
91
<PAGE>
Agreement or any other Loan Document against any Loan Party or their properties
in the courts of any jurisdiction.
(c) Each of the Borrower and Holdings hereby irrevocably and
unconditionally waives, for itself and each other Loan Party, to the fullest
extent it may legally and effectively do so, any objection that it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or any other Loan Document in any court
referred to in Section 9.9(b). Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(d) Each of the Borrower and Holdings hereby irrevocably and
unconditionally consents, for itself and each other Loan Party, to service of
process in the manner provided for notices in Section 9.1. Nothing in this
Agreement or any other Loan Document will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
Section 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO
HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 9.10.
Section 9.11. Headings. Article and Section headings and
the Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and shall not affect the construction of, or be taken
into consideration in interpreting, this Agreement.
Section 9.12. Confidentiality. Each of the Administrative
Agent, the Issuing Bank, the Documentation Agent, the Arranger and the Lenders
agrees to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed (a) to its Affiliates and to its and
its Affiliates' directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement, (e) in
connection with
92
<PAGE>
the exercise of any remedies hereunder or any suit, action or proceeding
relating to this Agreement or any other Loan Document or the enforcement of
rights hereunder or thereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section 9.12, to any assignee
of or Participant in, or any prospective assignee of or Participant in, any of
its rights or obligations under this Agreement, (g) with the consent of the
Borrower or (h) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section 9.12 or (ii) becomes
available to the Administrative Agent, the Issuing Bank or any Lender on a
nonconfidential basis from a source other than the Holdings. For the purposes of
this Section 9.12, the term "Information" means all information received from
the Holdings Group relating to the or its business, other than any such
information that is available to the Administrative Agent, the Issuing Bank or
any Lender on a nonconfidential basis prior to disclosure by the Holdings Group,
but, in the case of information received from the Holdings Group after the date
hereof, only if such information is clearly identified at the time of delivery
as confidential. Any Person required to maintain the confidentiality of
Information as provided in this Section 9.12 shall be considered to have
complied with its obligation to do so if such Person has exercised the same
degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.
Section 9.13. Interest Rate Limitation. Notwithstanding
anything herein to the contrary, if at any time the interest rate applicable to
any Loan, together with all fees, charges and other amounts that are treated as
interest on such Loan under applicable law (collectively the "Charges"), shall
exceed the maximum lawful rate (the "Maximum Rate") that may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in respect of such
Loan hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section 9.13 shall be cumulated and the interest
and Charges payable to such Lender in respect of other Loans or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated amount,
together with interest thereon at the Federal Funds Effective Rate to the date
of repayment, shall have been received by such Lender.
Section 9.14. Acknowledgments. Each of Holdings and the
Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery ofthis Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or fiduciary duty to Holdings or the Borrower or any
of their respective Subsidiaries arising out of or in connection with this
Agreement or any of the other Loan Documents, and the relationship between the
Administrative Agent and the Lenders, on the one hand, and Holdings and the
Borrower and their respective Subsidiaries, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor; and
93
<PAGE>
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated hereby
among (i) the Lenders, or (ii) among Holdings and the Borrower and their
respective Subsidiaries, on the one hand, and the Lenders, on the other hand, or
(iii) among Holdings and the Borrower and their respective Subsidiaries, on the
one hand, and the Administrative Agent, on the other hand.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
GLOBAL HEALTH SUB, INC.,
as Borrower
By:
---------------------------
Name:
Title:
GLOBAL HEALTH SCIENCES, INC.,
as Parent Guarantor
By:
---------------------------
Name:
Title:
CITICORP USA, INC.,
as Administrative Agent
By:
---------------------------
Name:
Title:
CITIBANK, N.A.,
as Issuing Bank
By:
---------------------------
Name:
Title:
S-1
<PAGE>
BANK OF AMERICA NT&SA,
as Documentation Agent
By:
---------------------------
Name:
Title:
S-2
<PAGE>
CITICORP USA, INC.,
as Lender
By:
---------------------------
Name:
Title:
S-3
<PAGE>
BANK OF AMERICA NT&SA,
as Lender
By:
---------------------------
Name:
Title:
S-4
<PAGE>
SANWA BANK CALIFORNIA,
as Lender
By:
---------------------------
Name:
Title:
S-5
<PAGE>
WELLS FARGO BANK, N.A.,
as Lender
By:
---------------------------
Name:
Title:
S-6
<PAGE>
DRESDNER BANK AG,
New York and Grand Cayman Branches,
as Lender
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
S-7
<PAGE>
Exhibit 4.6
- --------------------------------------------------------------------------------
GUARANTY, INDEMNITY AND SUBORDINATION AGREEMENT
dated as of
April 23, 1998
GLOBAL HEALTH SCIENCES, INC.,
and the
Subsidiary Guarantors
- --------------------------------------------------------------------------------
CITICORP USA, INC.,
as Administrative Agent
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. DEFINITIONS............................................................................................2
Section 1.1. Certain Terms.....................................................................2
Section 1.2. Terms defined in Credit Agreement.................................................3
Section 1.3. Terms Generally...................................................................3
ARTICLE II. GUARANTY AND INDEMNITY................................................................................4
Section 2.1. Guaranty..........................................................................4
Section 2.2. Joint and Several Indemnity.......................................................4
Section 2.3. Acceleration of Payment...........................................................5
Section 2.4. Guaranty of Payment, Independently Enforceable....................................5
Section 2.5. Fraudulent Transfer Limitation....................................................5
ARTICLE III. SUBORDINATION........................................................................................6
Section 3.1. Subordinated Liabilities..........................................................6
Section 3.2. Prohibited Payments...............................................................6
Section 3.3. Prohibited Liens..................................................................6
Section 3.4. Prohibited Actions................................................................6
Section 3.5. Bankruptcy and Insolvency Proceedings.............................................7
Section 3.6. Held in Trust.....................................................................8
ARTICLE IV. REIMBURSEMENT AND CONTRIBUTION RIGHTS.................................................................8
Section 4.1. Reimbursement and Contribution Rights.............................................8
Section 4.2. Release of all other Reimbursement, Subrogation, and Contribution Rights.........10
Section 4.3. No Claims........................................................................10
Section 4.4. Subordination of Section 4.1 Rights..............................................10
ARTICLE V. GENERAL PROVISIONS....................................................................................10
Section 5.1. The Liability of each Guarantor..................................................10
Section 5.2. Certain Waivers by Guarantors....................................................13
Section 5.3. Waiver of Benefit of Anti-Deficiency Laws........................................14
Section 5.4. Reinstatement....................................................................15
Section 5.5. Authority of Guarantors or Borrower..............................................15
Section 5.6. Condition of the Borrower........................................................15
Section 5.7. Acceptance and Notice............................................................16
Section 5.8. Rights Cumulative................................................................16
Section 5.9. Expenses.........................................................................16
Section 5.10. Notice of Events................................................................16
Section 5.11. Set Off.........................................................................16
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 5.12. Representations and Warranties..................................................16
Section 5.13. Survival of Warranties..........................................................18
Section 5.14. Notices.........................................................................18
Section 5.15. Severability....................................................................18
Section 5.16. Amendments and Waivers..........................................................18
Section 5.17. Headings........................................................................18
Section 5.18. Applicable Law..................................................................18
Section 5.19. Successors and Assigns..........................................................18
Section 5.20. Consent to Jurisdiction and Service of Process..................................19
Section 5.21. Waiver of Trial by Jury.........................................................19
Section 5.22. No Other Writing................................................................20
Section 5.23. Further Assurances..............................................................20
Section 5.24. Additional Guarantors...........................................................20
Section 5.25. Counterparts; Effectiveness.....................................................20
</TABLE>
ii
<PAGE>
GUARANTY,
INDEMNITY
AND
SUBORDINATION AGREEMENT
This Guaranty, Indemnity and Subordination Agreement dated
as of April 23, 1998, is entered into by GLOBAL HEALTH SCIENCES, INC., a
California corporation ("Holdings"), by each of the Persons identified as
Initial Subsidiary Guarantors on the signature pages hereof (each, an
"Initial Subsidiary Guarantor") and by each other Person that at any time
agrees in writing to be bound as a Subsidiary Guarantor hereunder (the
Initial Subsidiary Guarantors and each such other Person, the "Subsidiary
Guarantors" and, together with Holdings, the "Guarantors") for the benefit of
the Persons that now are or at any time hereafter become party as a Lender to
the Credit Agreement described herein (the "Lenders"), CITICORP USA, INC., as
Administrative Agent for the Lenders (in such capacity, the "Administrative
Agent"), CITIBANK, N.A., as Issuing Bank, BANK OF AMERICA NT&SA, as
Documentation Agent, and all other present and future Holders of any of the
Guaranteed Obligations described herein (all, collectively, including the
Lenders, the Administrative Agent, the Issuing Bank and the Documentation
Agent, the "Beneficiaries").
Recitals
Global Health Sub, Inc., a California corporation (the
"Borrower"), is a Subsidiary of Holdings. Each Initial Subsidiary Guarantor
is a Subsidiary of the Borrower, and each Person that hereafter agrees to
become bound hereby as a Subsidiary Guarantor is, on the date it becomes
bound hereby, a Subsidiary of the Borrower.
The Borrower has requested that credit be extended to the
Borrower on terms and conditions set forth in the Credit Agreement.
To induce the Lenders, the Administrative Agent, the
Issuing Bank and the Documentation Agent to enter into the Credit Agreement,
and in consideration thereof and of any and all credit at any time extended
thereunder, (a) Holdings and the Initial Subsidiary Guarantors have offered
to issue the guaranties and indemnities and enter into the agreements set
forth herein and (b) Holdings and the Borrower have agreed in the Credit
Agreement to cause each Person that hereafter becomes a Subsidiary of the
Borrower to become bound by the provisions hereof as a Subsidiary Guarantor
hereunder.
Accordingly, in consideration of the foregoing and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, each Guarantor
<PAGE>
hereby agrees for the direct and enforceable benefit of each and all of the
Beneficiaries as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Certain Terms. As used in this Agreement, the
following terms have the meanings specified below:
"Bankruptcy Code" means Title 11 of the United States Code,
as from time to time amended.
"Credit Agreement" means the Credit Agreement dated as of
April 23, 1998, by and among the Borrower, Holdings, the Lenders party
thereto, the Administrative Agent, the Issuing Bank and the Documentation
Agent, as such agreement from time to time may be modified, amended,
restated, extended, refinanced or replaced in any manner or in any respect
(including so as to reduce or increase the amount or cost of credit extended
thereunder or to shorten or extend the time of payment thereunder or in any
other manner change the amount or terms of credit extended to the Borrower or
the identity, rights or obligations of any party thereto).
"Discharge of the Credit Agreement" means that all
obligations of the Lenders to extend credit under the Credit Agreement and
all letters of credit at any time issued under the Credit Agreement have
expired or been terminated and have been absolutely, unconditionally and
irrevocably discharged and all Obligations at any time created, incurred or
outstanding (except Obligations for indemnification which are then contingent
and in respect of which no claim or demand has then been made) have been
fully, finally and indefeasibly paid in cash.
"Guaranteed Obligations" has the meaning set forth in
Section 2.1.
"Holder" means, in respect of any Guaranteed Obligation,
the Person entitled to enforce payment thereof and specifically includes each
Lender, the Administrative Agent, the Issuing Bank, the Documentation Agent
and the Arranger.
"Loan Parties" means the Borrower and the Guarantors.
"Obligations" means all direct or indirect debts,
liabilities and obligations of the Borrower or any other Loan Party of any
and every type and description at any time arising under or in connection
with the Credit Agreement or any other Loan Document to any Lender or to the
Administrative Agent, the Arranger, the Documentation Agent, the Issuing
Bank, Citibank, any Person entitled to indemnification pursuant to the Credit
Agreement or any other Loan Document, in each case whether now outstanding or
hereafter created or
2
<PAGE>
incurred, whether or not the right of such Person to payment in respect of
any such debts, liabilities or obligations is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured and whether or not such
claim is discharged, stayed or otherwise affected by any bankruptcy case or
insolvency, reorganization, receivership, dissolution or liquidation
proceeding, and shall include (a) all liabilities of the Borrower for
principal of and interest on any and all loans at any time outstanding under
the Credit Agreement, (b) all liabilities of the Borrower in respect of
letters of credit at any time issued pursuant to the Credit Agreement, (c)
all liabilities of the Borrower under the Loan Documents for any fees, costs,
taxes, expenses, indemnification and other amounts payable thereunder, (d)
all liabilities of any Loan Party under any Intercompany Note, and (e) all
other liabilities of the Borrower or any other Loan Party under or in respect
of any of the Loan Documents or any of the transactions contemplated thereby
and specifically includes (i) any and all present and future "Obligations" as
such term is defined in the Credit Agreement and (ii) any and all
Post-Petition Interest and Expense Claims.
"Permitted Payment" means any payment on account of
Subordinated Liabilities made in cash in conformity with the Borrower's
ordinary cash management practices for the businesses conducted by the
Borrower and the Borrower Subsidiaries and Restricted Payments permitted
under the Credit Agreement, if no Default or Event of Default has occurred
and is continuing at the time such payment is made or would result therefrom.
"Post-Petition Interest and Expense Claims" means any and
all claims of any Holder of Guaranteed Obligations (a) for interest on any
Obligations determined for any period of time occurring after the
commencement of any case under the Bankruptcy Code or any other insolvency,
reorganization, receivership, dissolution or liquidation proceeding at the
contract rate (including any applicable post-default increase therein) set
forth in the Credit Agreement or any other Loan Document or (b) for cost and
expense reimbursements or indemnification on the terms set forth in the
Credit Agreement or any other Loan Document relating to costs and expenses
incurred and indemnification rights accrued at any time after the
commencement of any such case or proceeding, in each case to the extent such
claim accrues or becomes payable in accordance with the provisions of the
Credit Agreement or other Loan Documents (or would have accrued or become
payable if enforceable or allowable in such case or proceeding), whether or
not such claim is enforceable, allowable or allowed in such case or
proceeding and even if such claim is disallowed therein.
"Subordinated Liabilities" has the meaning set forth in
Section 3.1.
Section 1.2. Terms defined in Credit Agreement. Unless the
context otherwise requires, capitalized terms used and not otherwise defined
herein shall have the meanings given in the Credit Agreement.
Section 1.3. Terms Generally. The definitions of terms
herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may
3
<PAGE>
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include," "includes" and "including" shall be deemed
to be followed by the phrase "without limitation." The word "will" shall be
construed to have the same meaning and effect as the word "shall." Unless the
context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as
referring to such agreement, instrument or other document as from time to
time amended, supplemented or otherwise modified (subject to any restrictions
on such amendments, supplements or modifications set forth herein or in any
other Loan Document), (b) any reference herein to any Person shall be
construed to include such Person's successors, transferees and assigns, (c)
the words "herein," "hereof" and "hereunder," and words of similar import,
shall be construed to refer to this Agreement in its entirety and not to any
particular provision hereof, (d) all references herein to Articles, Sections,
Exhibits and Schedules shall be construed to refer to Articles and Sections
of, and Exhibits and Schedules to, this Agreement and (e) the words "asset"
and "property" shall be construed to have the same meaning and effect and to
refer to any and all tangible and intangible assets and properties, whether
real, personal or mixed and of every type and description.
ARTICLE II.
GUARANTY AND INDEMNITY
Section 2.1. Guaranty. Each Guarantor hereby absolutely
and unconditionally guarantees the punctual payment when due, whether at
stated maturity, by acceleration or otherwise, of (a) all Obligations now
outstanding or hereafter arising under or in connection with the Credit
Agreement or any other Loan Document, whether for principal of or interest on
any loan or for reimbursement for payments made under letters of credit or
the interest thereon or for the principal of or interest on any other credit
extended by any Lender or the Issuing Bank or any of their respective
successors, assigns or participants to the Borrower or to any other Person
for the account of the Borrower or for fees, taxes, additional compensation,
expense reimbursements, indemnification or otherwise, (b) each other debt,
liability or obligation of the Borrower or any Guarantor now outstanding or
hereafter arising under any of the Loan Documents and (c) any and all
Post-Petition Interest and Expense Claims arising in respect of any of the
foregoing (such Obligations, other debts, liabilities and obligations, and
Post-Petition Interest and Expense Claims, collectively, are the "Guaranteed
Obligations").
Section 2.2. Joint and Several Indemnity. Without
limitation on any other obligations of any Guarantor or remedies of any
Holder Guaranteed Obligations under this Guaranty, each Guarantor shall, to
the fullest extent permitted by law, indemnify, defend and save and hold
harmless each Holder of Guaranteed Obligations from and against, and shall
pay on demand, any and all losses, liabilities, damages, costs, expenses and
charges (including the fees and disbursements of such Holder's legal counsel)
suffered or incurred by such Holder of Guaranteed Obligations as a result of
any failure of any Guaranteed
4
<PAGE>
Obligations to be the legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their terms.
Section 2.3. Acceleration of Payment. If (a) any
Guarantor fails to make any payment due and demanded of such Guarantor
hereunder, (b) any Guarantor fails upon demand to perform and observe any
obligation of such Guarantor set forth herein, (c) any Guarantor fails to pay
when due, or there occurs any default or event of default in respect of, any
Material Indebtedness, (d) any Guarantor becomes a debtor in any bankruptcy
case or the subject of any insolvency, reorganization, receivership,
dissolution or liquidation proceeding commenced voluntarily by such Guarantor
or (if it remains pending for more than 60 days or such Guarantor consents to
entry of an order for relief therein) commenced involuntarily against such
Guarantor, or (e) payment of any of the Obligations becomes due or is
demanded from the Borrower after the occurrence of any Change of Control or
Event of Default, then (in each such event) all liability of such Guarantor
under this Agreement that is not then due and payable shall thereupon become
and be immediately due and payable, without notice or demand.
Section 2.4. Guaranty of Payment, Independently
Enforceable. Each Guarantor (a) guarantees that the Guaranteed Obligations
will be paid in accordance with the terms of the Credit Agreement and the
other Loan Documents, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights and claims of any Holder of Guaranteed Obligations against the
Borrower or any other Guarantor with respect thereto and even if any such
rights or claims are modified, reduced or discharged in any bankruptcy case
or insolvency or liquidation proceeding or otherwise and (b) agrees that such
guaranty is a guaranty of payment when due and not of collectibility. The
obligations of each Guarantor under this Agreement are independent of the
Guaranteed Obligations, and a separate action or actions may be brought and
prosecuted against each Guarantor to enforce this Agreement, whether or not
any action is brought against the Borrower or any other Guarantor and whether
or not the Borrower or any other Guarantor is joined in any such action or
actions.
Section 2.5. Fraudulent Transfer Limitation. Each
Guarantor represents and warrants that, on the date it becomes bound as a
Guarantor hereunder and after giving effect to the liability incurred by it
under this Agreement and the rights granted to it in Article IV, (a) the fair
value of the assets of each Loan Party, at a fair valuation, will exceed its
debts and liabilities, subordinated, contingent or otherwise; (b) the present
fair saleable value of the property of each Loan Party will be greater than
the amount that will be required to pay the probable liability of its debts
and other liabilities, subordinated, contingent or otherwise, as such debts
and other liabilities become absolute and matured; (c) each Loan Party will
be able to pay its debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured; and (d)
each Loan Party will not have unreasonably small capital with which to
conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted following such date. If,
5
<PAGE>
notwithstanding the foregoing, enforcement of the liability of any Guarantor
under this Agreement for the full amount of the Guaranteed Obligations would
be an unlawful or voidable transfer under any applicable fraudulent
conveyance or fraudulent transfer law or any comparable law, then the
liability of such Guarantor hereunder shall be reduced to the highest amount
for which such liability may then be enforced without giving rise to an
unlawful or voidable transfer under any such law.
ARTICLE III.
SUBORDINATION
Section 3.1. Subordinated Liabilities. Each Guarantor
hereby agrees that any and all present and future debts, liabilities and
obligations of every type and description (whether for money borrowed, on
intercompany accounts, for provision of goods or services, under cash
management arrangements or tax sharing, management or contribution
agreements, for reimbursement, contribution or otherwise on account of this
Agreement or any other agreement of such Guarantor by which any Indebtedness
or other liability is Guaranteed or on account of any payment made under this
Agreement or any such other agreement, or on account of any other
transaction, agreement, occurrence or event and whether absolute or
contingent, direct or indirect, matured or unmatured, liquidated or
unliquidated, created directly or acquired from another, or sole, joint,
several or joint and several) now outstanding or hereafter incurred, arising
or owed to such Guarantor by Holdings, by the Borrower, or by any Borrower
Subsidiary (collectively, the "Subordinated Liabilities") shall be, and
hereby are, postponed and subordinated to the prior final payment of all
Guaranteed Obligations in full and in cash.
Section 3.2. Prohibited Payments. Until Discharge of the
Credit Agreement, no Guarantor will demand, sue for, accept or receive, or
cause or permit any other Person to make, any payment on or transfer of
property on account of any Subordinated Liabilities, except a Permitted
Payment.
Section 3.3. Prohibited Liens. Until Discharge of the
Credit Agreement, no Guarantor will demand, accept or hold any Lien upon any
property of Holdings, the Borrower or any Borrower Subsidiary as security for
any of the Subordinated Liabilities, and any such Lien shall be void.
Section 3.4. Prohibited Actions. Until Discharge of the
Credit Agreement, no Guarantor will, without the prior written consent of the
Required Lenders, commence or join with any other Person in commencing any
bankruptcy case or insolvency, reorganization, receivership, dissolution or
liquidation proceeding of or against Holdings, the Borrower or any Borrower
Subsidiary.
6
<PAGE>
Section 3.5. Bankruptcy and Insolvency Proceedings. In any
case under the Bankruptcy Code (or any other insolvency, reorganization,
receivership, dissolution or liquidation proceeding) in which Holdings or the
Borrower or any Borrower Subsidiary is a debtor:
(a) Priority of Payment. The Holders of Guaranteed
Obligations shall be entitled to receive payment of all amounts due or to
become due on or in respect of the Guaranteed Obligations (including all
Post-Petition Interest and Expense Claims), in full and in cash, before any
Guarantor is entitled to receive any payment or distribution of any kind or
character, whether in cash, property or securities or otherwise, on account
of any of the Subordinated Liabilities; and
(b) Turnover of Payments and Distributions. The Holders of
Guaranteed Obligations (including Post-Petition Interest and Expense Claims)
shall be entitled to receive, for application to the payment thereof, all
payments and distributions of any kind or character, whether in cash,
property or securities or otherwise (including any such payment or
distribution which may be payable or deliverable by reason of the payment of
any other debt or liability of the Borrower or any Borrower Subsidiary or any
Guarantor being subordinated to the payment of the Subordinated Liabilities),
which may be payable or deliverable in respect of the Subordinated
Liabilities in any such case or proceeding.
(c) Disallowed Post-Petition Interest and Expense Claims.
Each Guarantor expressly acknowledges and agrees that, pursuant to the
provisions of Section 3.5(b), any such payment or distribution payable or
deliverable in respect of Subordinated Liabilities will be turned over to,
and will become the property of, the Holders of Guaranteed Obligations until
the Holders of Guaranteed Obligations have received final payment in full and
in cash of all Guaranteed Obligations, including any and all Post-Petition
Interest and Expense Claims that are not enforceable, allowable or allowed in
such case or proceeding and as to which, as a consequence, such Guarantor
will not have any subrogation claim in such case or proceeding. Each
Guarantor acknowledges and agrees that all such Post-Petition Interest and
Expense Claims shall be included in the Guaranteed Obligations and shall be
paid from any such payment or distribution because it is the intention of the
Guarantors and Beneficiaries that the Guaranteed Obligations shall be
determined and shall be guaranteed and paid by each Guarantor without regard
to any rule of law or order which may relieve Borrower or any other obligor,
or the estate in any such case or proceeding, of liability therefor.
(d) Claims in Bankruptcy. Each Guarantor will file all
claims against the Borrower or any Borrower Subsidiary or any Guarantor in
any case under the Bankruptcy Code and in each other insolvency,
reorganization, receivership, dissolution or liquidation proceeding in which
the filing of claims is required or permitted by law upon any of the
Subordinated Liabilities and will assign to the Administrative Agent, for the
benefit of the Holders of Guaranteed Obligations, all rights of such
Guarantor thereunder. If any Guarantor does not file any such claim at least
30 days prior to any applicable claims bar date, each
7
<PAGE>
Holder of Guaranteed Obligations is hereby authorized (but shall not be
obligated), as attorney-in-fact for such Guarantor with full power of
substitution, either to file such claim or proof thereof in the name of such
Guarantor or, at the option of such Holder upon consent by the Administrative
Agent, to assign such claim to the Administrative Agent, in trust for the
benefit of the Holders of Guaranteed Obligations, or its nominee, and cause
such claim or proof thereof to be filed by such Holder's agent in the name of
the Administrative Agent or its nominee, as such trustee.
Section 3.6. Held in Trust. If any payment, transfer or
distribution is made to any Guarantor upon any Subordinated Liabilities that
is not permitted to be made under this Article III or that the Holders of
Guaranteed Obligations are entitled to receive under this Article III, such
Guarantor shall receive and hold the same in trust, as trustee for the
benefit of the Holders of Guaranteed Obligations, and shall forthwith
transfer and deliver the same to the Administrative Agent, for account of the
Holders of Guaranteed Obligations, in precisely the form received (except for
any required endorsement), for application to the payment of Guaranteed
Obligations.
ARTICLE IV.
REIMBURSEMENT AND CONTRIBUTION RIGHTS
Section 4.1. Reimbursement and Contribution Rights. The
Guarantors desire to agree upon and allocate among themselves, in a fair and
equitable manner, their rights of reimbursement and contribution when any
payment is made by one of the Guarantors under this Agreement. Accordingly:
(a) Subsidiary Reimbursement Claims against the Borrower.
Each Subsidiary Guarantor reserves the right to claim reimbursement from the
Borrower for the entire amount of any payment made by such Subsidiary
Guarantor on account of Guaranteed Obligations pursuant to this Agreement,
but each Subsidiary Guarantor agrees that its Claim for such reimbursement
shall not arise until, and is subject in all respects to, Discharge of the
Credit Agreement and the prior final payment of all Guaranteed Obligations in
full and in cash. Accordingly, each Subsidiary Guarantor agrees not to
assert, sue upon, collect or otherwise enforce against the Borrower (by
set-off or otherwise) any Claim for reimbursement on account of any payment
made by such Subsidiary Guarantor hereunder, until Discharge of the Credit
Agreement and the prior final payment of all Guaranteed Obligations in full
and in cash.
(b) Payments by Holdings are Capital Contributions.
Holdings agrees that each payment made by Holdings on account of Guaranteed
Obligations pursuant to this Agreement shall constitute a contribution by
Holdings to the common equity capital of the Borrower. Accordingly, Holdings
hereby waives, releases and discharges, absolutely, unconditionally,
irrevocably and forever, all rights of recourse, reimbursement, contribution
8
<PAGE>
or indemnity and all other claims that Holdings might otherwise have or
acquire against the Borrower or any Guarantor or any other Person liable for
the payment of any of the Guaranteed Obligations (including, without
limitation, the owner of any interest in collateral subject to a Lien
securing any of the Guaranteed Obligations) and all rights of subrogation
that Holdings might otherwise have or acquire against any Beneficiary by
reason of any such payment or otherwise as a result of or in connection with
this Agreement, whether such rights or claims are conferred by agreement,
implied or created by law or otherwise.
(c) Contribution among Subsidiary Guarantors. The
Subsidiary Guarantors agree that if the Borrower at any time fails to pay any
reimbursement due to any Subsidiary Guarantor as contemplated in Section
4.1(a) and such failure continues for a period of 60 days after Discharge of
the Credit Agreement and final payment of all outstanding Guaranteed
Obligations in full and in cash, then if and to the extent any such
unreimbursed payment due to such Subsidiary Guarantor under this Agreement is
such that the Aggregate Unreimbursed Payments of such Subsidiary Guarantor
are greater than its Fair Share of the Aggregate Unreimbursed Payments of all
Subsidiary Guarantors, such Subsidiary Guarantor shall be entitled to a
contribution from each other Subsidiary Guarantor in the amount necessary to
cause each Subsidiary Guarantor's Aggregate Unreimbursed Payments to equal
its Fair Share. For these purposes:
(i) "Fair Share" means, with respect to a Subsidiary
Guarantor as of any date of determination, an amount equal to (i) the
ratio of (x) the Adjusted Maximum Amount of such Subsidiary Guarantor
to (y) the Adjusted Maximum Amounts of all Subsidiary Guarantors,
multiplied by (ii) the Aggregate Unreimbursed Payments of all
Subsidiary Guarantors.
(ii) "Adjusted Maximum Amount" means, with respect to
a Subsidiary Guarantor as of any date of determination, the maximum
aggregate amount of the liability of such Subsidiary Guarantor under
this Agreement limited to the extent required under Section 2.5 (except
that, for purposes solely of this calculation, any assets or
liabilities arising by virtue of any rights to or obligations of
reimbursement or contribution under this Section 4.1 shall not be
counted as assets or liabilities of such Subsidiary Guarantor).
(iii) "Aggregate Unreimbursed Payments" means, with
respect to a Subsidiary Guarantor as of any date of determination, the
aggregate net amount of all payments made on or before such date by
such Subsidiary Guarantor under this Agreement for which reimbursement
by the Borrower to such Subsidiary Guarantor is then due and payable as
contemplated in Section 4.1(a) but has not been paid to such Subsidiary
Guarantor.
The allocation and right of contribution among the Guarantors set forth in this
Section 4.1(c) shall not in any respect limit the Guarantors' liability under
this Agreement to the Holders of the Guaranteed Obligations.
9
<PAGE>
(d) Reimbursement and Contribution Rights Unsecured. All
rights of reimbursement reserved in Section 4.1(a) shall be unsecured
obligations of the Borrower, and all contribution rights arising under
Section 4.1(c) shall be unsecured obligations of the Subsidiary Guarantors.
Section 4.2. Release of all other Reimbursement,
Subrogation, and Contribution Rights. Until the final payment of all
Guaranteed Obligations in full and in cash, each Subsidiary Guarantor hereby
waives, releases and discharges, absolutely, unconditionally, irrevocably and
forever, all rights of recourse, reimbursement, contribution or indemnity and
all other claims that such Subsidiary Guarantor might otherwise have or
acquire against Holdings, the Borrower or any Guarantor or any other Person
liable for the payment of any of the Guaranteed Obligations (including,
without limitation, the owner of any interest in collateral subject to a Lien
securing any of the Guaranteed Obligations) and all rights of subrogation
that such Subsidiary Guarantor might otherwise have or acquire against any
Beneficiary by reason of any payment made by such Subsidiary Guarantor under
this Agreement or otherwise as a result of or in connection with this
Agreement, whether such rights or claims are conferred by agreement, implied
or created by law or otherwise, except only the reimbursement rights reserved
by such Subsidiary Guarantor in Section 4.1(a) and the contribution rights
granted to such Subsidiary Guarantor under Section 4.1(c).
Section 4.3. No Claims. Neither the execution and delivery
of this Agreement by any Guarantor nor any payment by any Guarantor under
this Agreement shall give rise to any claim (as that term is defined in the
Bankruptcy Code) in favor of such Guarantor against Holdings or the Borrower
or any Borrower Subsidiary, except as set forth in Section 4.1
Section 4.4. Subordination of Section 4.1 Rights. All
rights and claims reserved in or arising under Section 4.1 shall be included
among the Subordinated Liabilities. Until Discharge of the Credit Agreement,
no Guarantor will assert, exercise or enforce against any other Guarantor any
right or claim arising under Section 4.1.
ARTICLE V.
GENERAL PROVISIONS
Section 5.1. The Liability of each Guarantor.
(a) Liability Absolute and Unconditional. The
liability of each Guarantor under this Agreement shall be absolute and
unconditional.
(b) Liability not Limited. Subject only to Section 2.5, the
liability of each Guarantor under this Agreement shall be unlimited in amount.
10
<PAGE>
(c) Liability Irrevocable and Continuing. The liability of
each Guarantor under this Agreement shall constitute an irrevocable and
continuing offer and agreement guaranteeing payment of any and all Guaranteed
Obligations and granting indemnification and subordination as herein set
forth and shall extend to all Guaranteed Obligations and indemnified matters
and Subordinated Liabilities whether now outstanding or created or incurred
at any future time, whether or not created or incurred pursuant to any
agreement presently in effect or hereafter made, until Discharge of the
Credit Agreement. To the extent any contingent Obligation survives the
expiration or termination of the Loan Documents and the repayment of the
Obligations that are then due, each Guarantor's liability under this
Agreement shall likewise survive.
(d) Liability Joint and Several. The liability of each
Guarantor under this Agreement shall be the joint and several obligation of
each Guarantor and may be freely enforced against each Guarantor, for the
full amount of the Guaranteed Obligations and all other liabilities of such
Guarantor hereunder, without regard to whether enforcement is sought or
available against any other Guarantor.
(e) Liability not Affected or Impaired. The liability of
each Guarantor under this Agreement shall not be affected or impaired in any
manner by, (i) the failure of any Person to become or remain a Guarantor
hereunder or the failure of any Holder of Guaranteed Obligations to preserve,
protect or enforce any right to require any Person to become or remain a
Guarantor hereunder, (ii) any lack of validity or enforceability of the
Credit Agreement or any other Loan Document or any other agreement,
instrument or document relating thereto, (iii) any change in the time, manner
or place of payment of, or in any other term of, any of the Guaranteed
Obligations, or any other amendment or waiver of or any consent to departure
from the terms of any Loan Document, including any extension or renewal of
the Guaranteed Obligations (whether or not for longer than the original
period) and any increase in the Guaranteed Obligations resulting from the
extension of additional credit to the Borrower or otherwise, (iv) any taking,
failure to take, failure to create, perfect or ensure the priority of, or
exchange, release or termination or lapse of any Lien securing any Guaranteed
Obligations, or any taking, failure to take, release or amendment or waiver
of or consent to departure from any other guaranty of, any of the Guaranteed
Obligations, (v) any manner or order of sale or other enforcement of any Lien
securing any of the Guaranteed Obligations or any manner or order of
application of the proceeds of any such Lien to the payment of the Guaranteed
Obligations or any failure to enforce any Lien or to apply any proceeds
thereof, (vi) any change, restructuring or termination of the corporate
structure or existence of the Borrower or any of its Subsidiaries or
Affiliates, any Guarantor, or any other Person, or (vii) any other
circumstance which might otherwise constitute a defense (except the defense
of payment) available to, or a discharge of, a surety or guarantor.
(f) Liability Remains Valid and Enforceable. The liability
of each Guarantor under this Agreement shall remain valid and enforceable and
shall not be subject to any reduction, limitation, impairment, discharge or
termination for any reason (other than
11
<PAGE>
indefeasible payment in full of the Guaranteed Obligations), including the
occurrence of any of the following, whether or not any Guarantor shall have
had notice or knowledge of any of them: (i) any failure or omission to assert
or enforce or agreement or election not to assert or enforce, or the stay or
enjoining, by order of court, by operation of law or otherwise, of the
exercise or enforcement of, any claim or demand or any right, power or remedy
(whether arising under the Loan Documents, at law, in equity or otherwise)
with respect to the Guaranteed Obligations or any agreement relating thereto,
or with respect to any other guaranty of or security for the payment of the
Guaranteed Obligations; (ii) any rescission, waiver, amendment or
modification of, or any consent to departure from, any of the terms or
provisions (including provisions relating to events of default) of the Credit
Agreement, any of the other Loan Documents or any agreement or instrument
executed pursuant thereto, or of any other guaranty or security for the
Guaranteed Obligations, in each case whether or not in accordance with the
terms of the Credit Agreement, such Loan Document or any agreement relating
to such other guaranty or security; (iii) the Guaranteed Obligations, or any
agreement relating thereto, at any time being found to be illegal, invalid or
unenforceable in any respect; (iv) the application of payments received from
any source to the payment of any liability other than the Guaranteed
Obligations, even though any Beneficiary might have elected to apply such
payment to any part or all of the Guaranteed Obligations; (v) any
Beneficiary's consent to the change, reorganization or termination of the
corporate structure or existence of Holdings or the Borrower or any of its
Subsidiaries and to any corresponding restructuring of the Guaranteed
Obligations; (vi) any failure to perfect or continue perfection of a security
interest in any collateral which secures any of the Guaranteed Obligations;
(vii) any defenses, set-offs or counterclaims which the Borrower or any other
Loan Party or any other Guarantor may allege or assert against any
Beneficiary in respect of the Guaranteed Obligations, including, for example,
failure of consideration, breach of warranty, payment, statute of frauds,
statute of limitations, accord and satisfaction and usury; and (viii) any
other act or thing or omission, or delay to do any other act or thing, which
may or might in any manner or to any extent vary the risk of any Guarantor as
an obligor in respect of the Guaranteed Obligations.
(g) Liability Released only by a Signed Writing. The
liability of each Guarantor under this Agreement and each right, remedy,
interest or power granted herein or arising hereunder may be released only by
a writing signed by the Beneficiary against which enforcement of such release
is sought.
(h) Discharge of Liability Upon Sale of Guarantor. If (i)
all outstanding Equity Interests issued by any Guarantor are at any time
Transferred to any Person not an Affiliate of the Borrower (including by
merger or consolidation) in any transaction which is either (A) not
prohibited by Section 6.6 of the Credit Agreement or (B) otherwise consented
to by the Required Lenders, and (ii) at the time such transaction is
consummated any and all liabilities of such Guarantor under any and all
guaranties of any other Indebtedness of any Loan Party are discharged and
released, then the liability of such Guarantor under this
12
<PAGE>
Agreement shall automatically be discharged and released without any further
action by any Beneficiary or any other Person effective as of the time such
transaction is consummated.
Section 5.2. Certain Waivers by Guarantors. Each
Guarantor hereby waives and agrees not to assert or take advantage of
(a) Prior Resort to any Other Person, Property or Right.
Any right to require any Holder of Guaranteed Obligations to proceed against
or exhaust its recourse against the Borrower, any other Guarantor or any
other Person liable for any of the Guaranteed Obligations or against any Lien
securing any of the Guaranteed Obligations or against any other Person or
property, before demanding and enforcing payment of the Guaranteed
Obligations from any Guarantor under this Agreement;
(b) Certain Defenses. Any defense that may arise by reason
of (i) the incapacity, lack of authority, death or disability of the
Borrower, any other Guarantor or any other Person, (ii) the revocation or
repudiation of any of the Loan Documents by the Borrower, any other Guarantor
or any other Person, (iii) the unenforceability in whole or in part of the
Loan Documents or any other instrument, document or agreement, (iv) the
failure of any Holder of Guaranteed Obligations to file or enforce a claim
against any Person liable for any of the Obligations or in any bankruptcy
case or insolvency, receivership, dissolution or liquidation proceeding, (v)
any election made by any Holder of Guaranteed Obligations as to any right or
remedy granted or available to it under the Bankruptcy Code, or (vi) any
other borrowing or grant of a security interest under Section 364 of the
Bankruptcy Code;
(c) Notices and Demands. Presentment, demand for payment,
protest, notice of discharge, notice of acceptance of this Agreement, notice
of the incurrence of, or any default in respect of, any Guaranteed
Obligation, and all other indulgences and notices of every type or nature,
including, to the maximum extent permitted by law, notice of the disposition
of any collateral security;
(d) Election of Remedies. Any defense based upon an
election of remedies (including, if available, an election to proceed by
non-judicial foreclosure) or any other act or omission of any Holder of
Guaranteed Obligations or any other Person which destroys or otherwise
impairs any right that any Guarantor might otherwise have for subrogation,
recourse, reimbursement, indemnity, exoneration, contribution or otherwise
against the Borrower, any other Guarantor or any other Person;
(e) Collateral Security. Any defense based upon any grant
of, any failure to demand, take, perfect, protect or enforce, or any
modification or release of any Lien securing, or guaranty of, any or all of
the Guaranteed Obligations, or any failure to create or perfect or ensure the
priority or enforceability of any security interest in any collateral for any
of the Guaranteed Obligations or any act or omission related thereto;
13
<PAGE>
(f) Recoupment and Setoff. Any right to recoup from or
offset against any of the Guaranteed Obligations any claim that may be held
or asserted by or available to (i) the Borrower or any other Guarantor or any
other Person liable for any of the Guaranteed Obligations against any Holder
of Guaranteed Obligations or (ii) any Guarantor against the Borrower, any
other Guarantor, any other Holder of Guaranteed Obligations or any other
Person; and
(g) Other Matters. Any other claim, right or defense
(including, by way of illustration and without limitation, such matters as
failure or insufficiency of consideration, statute of limitations, breach of
contract, tortious conduct, accord and satisfaction, and discharge by
agreement or conduct or in any bankruptcy case or other insolvency or
liquidation proceeding), except the defense of payment, that may be held or
asserted by or available to (i) the Borrower or any other Guarantor or any
other Person liable for any of the Guaranteed Obligations against any Holder
of Guaranteed Obligations or (ii) any Guarantor against the Borrower, any
other Guarantor, any other Holder of Guaranteed Obligations or any other
Person.
Section 5.3. Waiver of Benefit of Anti-Deficiency Laws.
If, in the exercise of any rights and remedies, any Holder of Guaranteed
Obligations shall forfeit any of its rights or remedies, including its right
to obtain a deficiency judgment against the Borrower or any other Guarantor
or any other Person, whether because of any applicable laws pertaining to
recourse to collateral security or election of remedies or barring claims for
a deficiency following foreclosure of any Lien or the like, each Guarantor
hereby consents to such action by such Holder and, to the maximum extent
permitted by applicable law, waives any claim or defense based upon such
recourse to collateral security, election of remedies, loss of claims for a
deficiency or the like, even if such action by such Holder shall result in a
full or partial loss of any rights of subrogation, recourse, reimbursement,
contribution or indemnification which such Guarantor might otherwise have had
but for such action by such Holder or but for the provisions of this Section
5.3. Furthermore, each Guarantor waives all rights and defenses arising out
of any recourse to collateral security or election of remedies by any Holder
of Guaranteed Obligations, even though such recourse to collateral security
or election of remedies, such as a nonjudicial foreclosure with respect to
security for any Guaranteed Obligation, has destroyed such Guarantor's rights
of subrogation, recourse, reimbursement, contribution or indemnification
against the Borrower or any other Guarantor or any other Person by the
operation of applicable law or otherwise. Any election of remedies which
results in the denial or impairment of the right of any Holder of Guaranteed
Obligations to seek a deficiency judgment against the Borrower or any
Guarantor shall not, to the maximum extent permitted by applicable law,
impair any other Guarantor's obligation to pay the full amount of the
Guaranteed Obligations. In the event any Holder of Guaranteed Obligations
shall bid at any foreclosure or trustee's sale or at any private sale
permitted by law or the Loan Documents, such Holder may bid all or less than
the amount of the Guaranteed Obligations held by such Holder and (if approved
in writing by the Administrative Agent and Required Lenders) the amount of
such bid need not be paid by such Holder but shall be credited against
14
<PAGE>
the Guaranteed Obligations held by such Holder. To the extent permitted by
applicable law, the amount of the successful bid at any such sale, whether
any Holder of Guaranteed Obligations or any other Person is the successful
bidder, shall be conclusively deemed to be the fair market value of the
property being sold and the difference between such bid amount and the
remaining balance of the Guaranteed Obligations shall be conclusively deemed
to be the amount of the Guaranteed Obligations guaranteed under this
Agreement, notwithstanding that any present or future law or court decision
or ruling may have the effect of reducing the amount of any deficiency claim
to which any Holder of Guaranteed Obligations might otherwise be entitled if
no Holder had bid at any such sale.
Section 5.4. Reinstatement. If at any time any payment on
any Guaranteed Obligation is set aside, avoided or rescinded or must
otherwise be restored or returned, this Agreement and the liability of each
Guarantor under this Agreement and the indemnification and subordination
granted hereby and all other liabilities of each Guarantor hereunder shall
remain in full force and effect and, if previously released or terminated,
shall be automatically and fully reinstated, without any necessity for any
act, consent or agreement of any Guarantor, as fully as if such payment had
never been made and as fully as if any such release or termination had never
become effective.
Section 5.5. Authority of Guarantors or Borrower. It is
not necessary for any Beneficiary to inquire into the capacity or powers of
any Guarantor or Borrower or the officers, directors or any agents acting or
purporting to act on behalf of any of them.
Section 5.6. Condition of the Borrower. Each Guarantor is
fully aware of the financial condition of the Borrower and each other
Guarantor and is executing and delivering this Agreement based solely upon
such Guarantor's own independent investigation of all matters pertinent
hereto and is not relying in any manner upon any representation or statement
by any Holder of Guaranteed Obligations. Each Guarantor represents and
warrants that it is in a position to obtain, and each Guarantor hereby
assumes full responsibility for obtaining, any additional information
concerning the financial condition of the Borrower or any other Guarantor or
their respective properties, financial condition and prospects and any other
matter pertinent hereto as such Guarantor may desire, and such Guarantor is
not relying upon or expecting any Holder of Guaranteed Obligations to furnish
to such Guarantor any information now or hereafter in the possession of any
Holder of Guaranteed Obligations concerning the same or any other matter. By
executing this Agreement, each Guarantor knowingly accepts the full range of
risks encompassed within a contract of this type, which risks each Guarantor
acknowledges. No Guarantor shall have the right to require any Holder of
Guaranteed Obligations to obtain or disclose any information with respect to
the Guaranteed Obligations, the financial condition or prospects of the
Borrower or any Borrower Subsidiary the ability of the Borrower to pay or
perform the Guaranteed Obligations, the existence, perfection, priority or
enforceability of any collateral security for any or all of the Guaranteed
Obligations, the existence or enforceability of any other guaranties of all
or any part of the Guaranteed Obligations, any action or non-action on the
part of any Holder of
15
<PAGE>
Guaranteed Obligations, the Borrower, any Borrower Subsidiary, any other
Guarantor or any other Person, or any other event, occurrence, condition or
circumstance whatsoever.
Section 5.7. Acceptance and Notice. Each Guarantor
acknowledges acceptance hereof and reliance hereon by the Lender and each
other holder of Obligations and waives, irrevocably and forever, all notice
thereof.
Section 5.8. Rights Cumulative. The rights, powers and
remedies given to the Beneficiaries by this Agreement are cumulative and
shall be in addition to and independent of all rights, powers and remedies
given to any Beneficiary by virtue of any statute or rule of law or in any of
the other Loan Documents or any agreement between any Guarantor and one or
more of the Beneficiaries or between Borrower and one or more of the
Beneficiaries. Any forbearance or failure to exercise, and any delay by any
Beneficiary in exercising, any right, power or remedy hereunder shall not
impair any such right, power or remedy or be construed to be a waiver
thereof, nor shall it preclude the further exercise of any such right, power
or remedy.
Section 5.9. Expenses. Each Guarantor jointly and
severally agrees to pay, or cause to be paid, on demand, and to save each
Beneficiary harmless against costs of and liability for, any and all
reasonable costs and expenses (including fees and disbursements of counsel)
incurred or expended by any Beneficiary in connection with the enforcement of
or preservation of any rights under this Agreement.
Section 5.10. Notice of Events. As soon as any Guarantor
obtains knowledge thereof, unless Borrower has given the Administrative Agent
written notice thereof, such Guarantor shall give the Administrative Agent
written notice of any condition or event which has resulted in (a) a material
adverse change in the financial condition of any Guarantor or Borrower or (b)
any Default or Event of Default.
Section 5.11. Set Off. In addition to all other rights any
Beneficiary may have under law or in equity, if any amount shall at any time
be due and payable by any Guarantor to any Beneficiary under this Agreement,
such Beneficiary is authorized at any time or from time to time, without
notice (any such notice being hereby expressly waived), to set off and to
appropriate and to apply any and all deposits (general or special, including
but not limited to indebtedness evidenced by certificates of deposit, whether
matured or unmatured) and any other indebtedness of any such Beneficiary
owing to such Guarantor and any other property of such Guarantor held by any
Beneficiary to or for the credit or the account of such Guarantor against and
on account of the Guaranteed Obligations and liabilities of such Guarantor to
any Beneficiary under this Agreement.
Section 5.12. Representations and Warranties. In order to
induce Beneficiaries to accept this Agreement and to enter into the Credit
Agreement and to make and maintain the loans and other extensions of credit
thereunder, as the case may be, each
16
<PAGE>
Guarantor hereby represents and warrants to the Beneficiaries that the following
statements are true and correct:
(a) Corporate Existence. Such Guarantor is duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, has the corporate power to own its assets and to transact the
business in which it is now engaged and is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where
its ownership or lease of property or the conduct of its business requires
such qualification, except for failures to be so qualified, authorized or
licensed that in the aggregate do not, and could not reasonably be expected
to, have a Material Adverse Effect.
(b) Corporate Power; Authorization; Enforceable
Obligations. Such Guarantor has the corporate power, authority and legal
right to execute, deliver and perform this Agreement and all Security
Documents and other Loan Documents to which it is a party and to undertake
and pay and perform all of its liabilities and obligations hereunder and has
taken all necessary corporate action to authorize the execution, delivery,
payment and performance hereof and thereof on the terms and conditions set
forth herein and therein. No consent of any other Person including, without
limitation, stockholders, licensors or creditors of such Guarantor, and no
license, permit, approval or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any governmental authority
is required by such Guarantor in connection herewith or therewith. This
Agreement and each such Security Document and other Loan Document has been
duly executed and delivered by a duly authorized officer of such Guarantor
and constitutes the legally valid and binding obligation of such Guarantor,
enforceable against such Guarantor in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws or equitable principles
relating to or limiting creditors' rights generally.
(c) No Legal Bar. The execution, delivery and performance
of this Agreement and all Security Documents and other Loan Documents to
which such Guarantor is a party, and the use of the proceeds of the
borrowings and other extensions of credit under the Credit Agreement, will
not violate any provision of any existing law or regulation binding on such
Guarantor, or any order, judgment, award or decree of any court, arbitrator
or governmental authority binding on such Guarantor, or the certificate of
incorporation or bylaws of such Guarantor or any securities issued by such
Guarantor, or any mortgage, indenture, debt agreement or other material
agreement, instrument or undertaking to which such Guarantor is a party or by
which such Guarantor or any of its assets may be bound and will not result
in, or require, the creation or imposition of any Lien on any of its
property, assets or revenues.
(d) Senior Indebtedness. All liability of each Guarantor
hereunder (other than Holdings) (i) is and shall be (and is hereby designated
as) "Guarantor Senior Debt" within the meaning of and for the purposes of the
Indenture dated as of April 23, 1998, by and among Holdings and Chase
Manhattan Bank & Trust Company, National Association, as
17
<PAGE>
trustee, and (ii) is and shall be (and is hereby made) senior in right of
payment, on the terms set forth in said Indenture, to the Senior Note
Guarantees.
Section 5.13. Survival of Warranties. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the other Loan Documents and any increase in
the amount of credit that is or may be extended under the Credit Agreement.
Section 5.14. Notices. Any and all notices and
communications to be given to any Guarantor or Beneficiary may be given by
courier service, personal service, mailing the same, postage prepaid, or by
telex, facsimile transmission or cable to each such party at its address set
forth in the Credit Agreement, on the signature pages hereof or to such other
addresses as each such party may in writing hereafter indicate, and such
communication shall be deemed to have been given when delivered in person or
by courier service, upon receipt of telefacsimile or telex, or three Business
Days after depositing it in the United States mail with postage prepaid and
properly addressed; provided, that notice to any Beneficiary shall not be
effective until received by such Beneficiary and by the Administrative Agent.
Section 5.15. Severability. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
Section 5.16. Amendments and Waivers. No amendment,
modification, termination or waiver of any provision of this Agreement, or
consent to any departure by any Guarantor therefrom, shall in any event be
effective without the written concurrence of the Required Lenders. Any waiver
or consent shall be effective only in the specific instance and for the
specific purpose for which it was given.
Section 5.17. Headings. Section and subsection headings in
this Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose or be
given any substantive effect.
Section 5.18. Applicable Law. THIS AGREEMENT SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.
Section 5.19. Successors and Assigns. This Agreement is
binding upon each Guarantor and its successors and assigns and shall inure to
the benefit of, and be enforceable by, the Beneficiaries and their respective
successors and assigns. No Guarantor shall assign this Agreement or any of
the rights or obligations of such Guarantor hereunder without the prior
written consent of all Lenders. Any Lender may, without notice or consent,
assign its interest in this Agreement in whole or in part in connection with
an assignment permitted under Section 9.4 of the Credit Agreement. The terms
and provisions of this Agreement shall
18
<PAGE>
inure to the benefit of any transferee or assignee in any such assignment and
the rights and privileges herein conferred upon such Beneficiary shall
automatically extend to and be vested in any assignee therein and all other
successors, transferees and assigns of each Beneficiary, subject to the terms
and conditions hereof.
Section 5.20. Consent to Jurisdiction and Service of
Process. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR ARISING OUT
OF OR RELATING TO THIS AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT
OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK. BY EXECUTION AND DELIVERY
OF THIS AGREEMENT EACH GUARANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH
ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION
OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS AGREEMENT. Each Guarantor hereby agrees that service of all process
in any such proceeding in any such court may be made by registered or
certified mail, return receipt requested, to such Guarantor at its address
provided in Section 5.14, such service being hereby acknowledged by such
Guarantor to be sufficient for personal jurisdiction in any action against
such Guarantor in any such court and to be otherwise effective and binding
service in every respect. Nothing herein shall affect the right to serve
process in any other manner permitted by law or shall limit the right of any
Beneficiary to bring proceedings against any Guarantor in the courts of any
other jurisdiction.
Section 5.21. Waiver of Trial by Jury. EACH GUARANTOR AND,
BY ITS ACCEPTANCE OF THE BENEFITS HEREOF, EACH BENEFICIARY HEREBY AGREES TO
WAIVE ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to be
all encompassing of any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction, including contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each Guarantor and, by its acceptance of the benefits
hereof, each Beneficiary (i) acknowledges that this waiver is a material
inducement for each Guarantor and the Beneficiaries to enter into a business
relationship, that the Guarantors and Beneficiaries have already relied on
this waiver in entering into this Agreement or accepting the benefits
thereof, as the case may be, and that each will continue to rely on this
waiver in its related future dealings and (ii) further warrant and represent
that it has reviewed this waiver with its legal counsel and that it knowingly
and voluntarily waives its jury trial rights following consultation with
legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
19
<PAGE>
Section 5.22. No Other Writing. This writing is intended
by the Guarantors and Beneficiaries as the final expression of this Agreement
and is also intended as a complete and exclusive statement of the terms of
their agreement with respect to the matters covered hereby. No course of
dealing, course of performance or trade usage, and no parole evidence of any
nature, shall be used to supplement or modify any terms of this Agreement.
There are no conditions to the full effectiveness of this Agreement.
Section 5.23. Further Assurances. At any time or from time
to time, upon the request of the Required Lenders, each Guarantor shall
execute and deliver such further documents and do such other acts and things
as the Required Lenders may reasonably request in order to effect fully the
purposes of this Agreement.
Section 5.24. Additional Guarantors.
(a) The initial Guarantors hereunder shall be Holdings and
such of the Subsidiaries of the Borrower as are signatories hereto on the
date hereof. From time to time subsequent to the date hereof, additional
Subsidiaries of the Borrower may become party hereto, as additional
Guarantors (each an "Additional Guarantor"), by executing a counterpart of
this Agreement. Upon delivery of any such counterpart to the Administrative
Agent, notice of which is hereby waived by each Guarantor, each such
Additional Guarantor shall be a Guarantor and shall be as fully a party
hereto as if such Additional Guarantor were an original signatory hereof.
Each Guarantor expressly agrees that its obligations arising hereunder shall
not be affected or diminished by the addition or release of any other
Guarantor hereunder, nor by any election of any Beneficiary not to cause any
Subsidiary of Borrower to become an Additional Guarantor hereunder. This
Agreement shall be fully effective as to any Guarantor that is or becomes a
party hereto regardless of whether any other Person becomes or fails to
become or ceases to be a Guarantor hereunder.
Section 5.25. Counterparts; Effectiveness. This Agreement
may be executed in any number of counterparts and by the different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed to be an original for all purposes; but all such counterparts
together shall constitute but one and the same instrument. This Agreement
shall become effective as to each Guarantor upon the execution of a
counterpart hereof by such Guarantor (whether or not a counterpart hereof
shall have been executed by any other Guarantor) and delivery of such
counterpart to the Administrative Agent.
[Remainder of page intentionally left blank]
20
<PAGE>
IN WITNESS WHEREOF, each of the undersigned Guarantors has caused this Guaranty,
Indemnity and Subordination Agreement to be duly executed and delivered by its
officer thereunto duly authorized as of the date first written above.
GLOBAL HEALTH SCIENCES, INC.,
as Guarantor
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
D&F INDUSTRIES, INC.,
as Guarantor
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
RAVEN INDUSTRIES, INC.,
as Guarantor
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
S-1
<PAGE>
DYNAMIC PRODUCTS, INC.,
as Guarantor
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
WEST COAST SALES,
as Guarantor
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
S-2
<PAGE>
Exhibit 4.7
================================================================================
PLEDGE AND SECURITY AGREEMENT
dated as of
April 23, 1998
GLOBAL HEALTH SUB, INC.,
GLOBAL HEALTH SCIENCES, INC.,
and
the Subsidiary Grantors,
as Grantors,
and
CITICORP USA, INC.,
as Administrative Agent,
as Secured Party
------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS...............................................................................2
Section 1.1. Certain Terms.....................................................................2
Section 1.2. Terms Defined in Credit Agreement.................................................4
Section 1.3. Terms Defined in the Uniform Commercial Code......................................4
Section 1.4. Terms Generally...................................................................4
ARTICLE II. THE SECURITY INTERESTS...................................................................4
Section 2.1. Grant of Security Interests.......................................................5
Section 2.2. Delivery of Instruments and Securities............................................7
Section 2.3. Investment Property...............................................................7
Section 2.4. Registration of Pledge............................................................7
Section 2.5. Financing Statements..............................................................8
Section 2.6. Secured Party Filing..............................................................8
Section 2.7. Further Assurances................................................................8
Section 2.8. Power of Attorney.................................................................8
Section 2.9. Survival of Security Interests...................................................10
Section 2.10. Reinstatement of Security Interests.............................................10
Section 2.11. Each Grantor Remains Liable.....................................................10
Section 2.12. Application of Guaranty Provisions..............................................11
Section 2.13. Liability Joint and Several.....................................................11
ARTICLE III. REPRESENTATIONS, WARRANTIES AND COVENANTS..............................................11
Section 3.1. The Collateral...................................................................11
Section 3.2. Maintenance of Perfection........................................................13
Section 3.3. Defense of Collateral............................................................14
Section 3.4. Transfer or Encumbrance..........................................................14
Section 3.5. Payments, Dividends and Distributions............................................14
Section 3.6. Voting Rights....................................................................14
Section 3.7. Maintenance of Collateral........................................................15
Section 3.8. Concerning Equipment and Inventory...............................................15
Section 3.9. Concerning Accounts, Instruments and other Claims................................16
Section 3.10. Substituted Performance.........................................................17
ARTICLE IV. DEFAULT; REMEDIES.......................................................................17
Section 4.1. Default..........................................................................17
Section 4.2. Remedies upon Default............................................................17
Section 4.3. Waivers by Grantors..............................................................19
Section 4.4. Standard of Care.................................................................19
Section 4.5. Application of Proceeds..........................................................19
Section 4.6. Indemnity and Expenses...........................................................20
Section 4.7. Surplus, Deficiency..............................................................20
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 4.8. Information Related to the Collateral............................................21
Section 4.9. Sale Exempt from Registration....................................................21
Section 4.10. Rights and Remedies Cumulative..................................................21
Section 4.11. No Direct Enforcement by Beneficiaries..........................................21
ARTICLE V. CONCERNING THE SECURED PARTY.............................................................22
Section 5.1. Agent for Holders................................................................22
Section 5.2. Administrative Agent shall be the Secured Party..................................22
Section 5.3. No Assurances or Liability.......................................................22
Section 5.4. Holders Bound....................................................................23
ARTICLE VI. MISCELLANEOUS PROVISIONS................................................................23
Section 6.1. Continuing Security Interests; Release...........................................23
Section 6.2. Senior Indebtedness..............................................................23
Section 6.3. Amendments; Etc..................................................................23
Section 6.4. Failure or Indulgence Not Waiver; Remedies Cumulative............................24
Section 6.5. Notices..........................................................................24
Section 6.6. Severability.....................................................................24
Section 6.7. Headings.........................................................................24
Section 6.8. Governing Law; Terms.............................................................24
Section 6.9. Consent to Jurisdiction and Service of Process...................................24
Section 6.10. Waiver of Jury Trial............................................................25
Section 6.11. Additional Grantors.............................................................25
Section 6.12. Counterparts....................................................................26
</TABLE>
ii
<PAGE>
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT (this "Agreement") is dated as of
April 23, 1998, and entered into by and among GLOBAL HEALTH SUB, INC., a
California corporation (the "Borrower"), GLOBAL HEALTH SCIENCES, INC., a
California corporation ("Holdings"), each of the Persons identified as
Initial Subsidiary Grantors on the signature pages hereof (each, an "Initial
Subsidiary Grantor") and each other Person that at any time agrees in writing
to be bound as a Subsidiary Grantor hereunder (the Initial Subsidiary
Grantors and each such other Person, the "Subsidiary Grantors" and, together
with the Borrower and Holdings, the "Grantors"), and CITICORP USA, INC., a
Delaware corporation, in its capacity as Administrative Agent under the
Credit Agreement referred to below ("Secured Party"), for the benefit of the
Persons that now are or at any time hereafter become party as a Lender to the
Credit Agreement described herein (the "Lenders"), CITICORP USA, INC., in its
individual capacity and as Administrative Agent, CITIBANK, N.A., as Issuing
Bank, BANK OF AMERICA NT&SA, as Documentation Agent, and all other present
and future Holders of any of the Secured Obligations described herein (all,
collectively, including the Lenders, the Administrative Agent, the Issuing
Bank and the Documentation Agent, the "Beneficiaries").
Recitals
The Borrower is a Subsidiary of Holdings. Each Initial Subsidiary
Grantor is a Subsidiary of the Borrower, and each Person that hereafter
agrees to become bound hereby as a Subsidiary Grantor is, on the date it
becomes bound hereby, a Subsidiary of the Borrower.
The Borrower has requested that credit be extended to the Borrower
on terms and conditions set forth in the Credit Agreement.
To induce the Lenders, the Administrative Agent, the Issuing Bank
and the Documentation Agent to enter into the Credit Agreement, and in
consideration thereof and of any and all credit at any time extended
thereunder, (a) Holdings and the Initial Subsidiary Grantors have offered to
issue the guaranties and indemnities and enter into the agreements set forth
in Guaranty, Indemnity and Subordination Agreement dated as of April 23, 1998
(the "Guaranty, Indemnity and Subordination Agreement"), and to grant to the
Administrative Agent, for the benefit of the Beneficiaries, the collateral
security described herein as security for the payment of the Secured
Obligations on the terms herein set forth, and (b) Holdings and the Borrower
have agreed in the Credit Agreement to cause each Person that hereafter
becomes a Subsidiary of the Borrower to become bound by the provisions of the
Guaranty, Indemnity and Subordination
<PAGE>
Agreement as a Subsidiary Guarantor thereunder and to become bound by the
provisions hereof as a Subsidiary Grantor hereunder.
Accordingly, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each Grantor hereby agrees with Secured Party for the benefit
of the Beneficiaries as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Certain Terms. As used in this Agreement, the
following terms have the meanings specified below:
"Bankruptcy Code" means Title 11 of the United States Code, as from
time to time amended.
"Claim" has the meaning set forth in the Bankruptcy Code.
"Collateral" has the meaning set forth in Section 2.1.
"Credit Agreement" means the Credit Agreement dated as of April 23,
1998, by and among Global Health Sub, Inc., a California corporation, Global
Health Sciences, Inc., a California corporation, the Lenders party thereto,
the Administrative Agent, the Issuing Bank and the Documentation Agent, as
such agreement from time to time may be modified, amended, restated,
extended, refinanced or replaced in any manner or in any respect (including
so as to reduce or increase the amount or cost of credit extended thereunder
or to shorten or extend the time of payment thereunder or in any other manner
change the amount or terms of credit extended to the Borrower or the
identity, rights or obligations of any party thereto).
"Discharge of the Credit Agreement" means that all obligations of
the Lenders to extend credit under the Credit Agreement and all letters of
credit at any time issued under the Credit Agreement have expired or been
terminated and have been absolutely, unconditionally and irrevocably
discharged and all Obligations at any time created, incurred or outstanding
(except Obligations for indemnification which are then contingent and in
respect of which no claim or demand has then been made) have been fully and
finally paid in cash.
"Equity Interests" means, with respect to any Person, any capital
stock of such Person or membership interests, partnership interests (whether
general or limited) or other equity interests in such Person, regardless of
type, class, preference or designation, and all warrants, options, purchase
rights, conversion or exchange rights, voting rights, calls or claims of any
character with respect thereto, in each case whether outstanding on the date
of this Agreement or issued or granted at any time thereafter.
2
<PAGE>
"Holder" means, in respect of any Secured Obligation, the Person
entitled to enforce payment thereof and specifically includes each Lender,
the Administrative Agent, the Issuing Bank, the Documentation Agent and the
Arranger.
"Obligations" means all direct or indirect debts, liabilities and
obligations of the Borrower or any other Grantor of any and every type and
description at any time arising under or in connection with the Credit
Agreement or any other Loan Document, to the Administrative Agent, the
Arranger, the Documentation Agent, the Issuing Bank, Citibank, any Lender,
any Person entitled to indemnification pursuant to the Credit Agreement or
any other Loan Document or to any other Person, in each case whether now
outstanding or hereafter created or incurred, whether or not the right of
such Person to payment in respect of any such debts, liabilities or
obligations is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured and whether or not such claim is discharged, stayed or
otherwise affected by any bankruptcy case or insolvency, reorganization,
receivership, dissolution or liquidation proceeding, and shall include (a)
all liabilities of the Borrower for principal of and interest on any and all
Loans at any time outstanding under the Credit Agreement, (b) all liabilities
of the Borrower in respect of letters of credit at any time issued pursuant
to the Credit Agreement, (c) all liabilities of the Borrower under the Loan
Documents for any fees, costs, taxes, expenses, indemnification and other
amounts payable thereunder, (d) all liabilities of any Grantor under any
Intercompany Note, (e) all liabilities of any Guarantor under the Guaranty,
Indemnity and Subordination Agreement, and (f) all other liabilities of the
Borrower or any other Grantor under or in respect of any of the Loan
Documents or any of the transactions contemplated thereby and specifically
includes (i) any and all present and future "Obligations" as such term is
defined in the Credit Agreement and (ii) any and all Post-Petition Interest
and Expense Claims.
"Perfected" means, as to the security interests granted to Secured
Party in Section 2.1, that (a) a creditor on a simple contract cannot acquire
a judicial lien that is superior to such security interests and (b) if a case
were pending under the Bankruptcy Code in which any Grantor is the debtor,
such security interests would be a Lien that is perfected in such bankruptcy
case.
"Post-Petition Interest and Expense Claims" means any and all claims
of any Holder of Secured Obligations (a) for interest on any Obligations
determined for any period of time occurring after the commencement of any
case under the Bankruptcy Code or any other insolvency, reorganization,
receivership, dissolution or liquidation proceeding at the contract rate
(including any applicable post-default increase therein) set forth in the
Credit Agreement or any other Loan Document or (b) for cost and expense
reimbursements or indemnification on the terms set forth in the Credit
Agreement or any other Loan Document relating to costs and expenses incurred
and indemnification rights accrued at any time after the commencement of any
such case or proceeding, in each case to the extent such claim accrues or
becomes payable in accordance with the provisions of the Credit Agreement or
other Loan Documents (or would
3
<PAGE>
have accrued or become payable if enforceable or allowable in such case or
proceeding), whether or not such claim is enforceable, allowable or allowed
in such case or proceeding and even if such claim is disallowed therein.
"Secured Obligations" is defined in Section 2.1.
Section 1.2. Terms Defined in Credit Agreement. Unless the context
otherwise requires, capitalized terms used and not otherwise defined herein
shall have the meanings given in the Credit Agreement.
Section 1.3. Terms Defined in the Uniform Commercial Code. When
capitalized, the following terms used in this Agreement or the Security
Documents have the meanings given to them in the Uniform Commercial Code, as
in effect in the State of New York on the date of this Agreement: Accounts;
Certificated Security; Chattel Paper; Commodity Account; Commodity Contract;
Commodity Intermediary; Control; Documents; Equipment; Financial Asset;
Fixtures; General Intangibles; Goods; Instruments; Inventory; Investment
Property; Securities Account; Securities Intermediary; Security; Security
Certificate; Security Entitlement; and Uncertificated Security.
Section 1.4. Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without
limitation." The word "will" shall be construed to have the same meaning and
effect as the word "shall." Unless the context requires otherwise, (a) any
definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other
document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (b) any reference herein to any Person shall be construed
to include such Person's successors, transferees and assigns, (c) the words
"herein," "hereof" and "hereunder," and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any
particular provision hereof, (d) all references herein to Articles, Sections,
Exhibits and Schedules shall be construed to refer to Articles and Sections
of, and Exhibits and Schedules to, this Agreement, and (e) the words "asset"
and "property" shall be construed to have the same meaning and effect and to
refer to any and all tangible and intangible assets and properties, whether
real, personal or mixed and of every type and description.
ARTICLE II.
THE SECURITY INTERESTS
4
<PAGE>
Section 2.1. Grant of Security Interests. As security for the
payment of the Obligations and all Post-Petition Interest and Expense Claims
(collectively, the "Secured Obligations"), each Grantor hereby assigns to
Secured Party for the benefit of the Beneficiaries, and grants Secured Party
for the benefit of the Beneficiaries security interests in, all of such
Grantor's right, title and interest in and to the following types or items of
property, in each case whether now or hereafter existing or owned by such
Grantor or in which such Grantor now owns or hereafter acquires an interest
and wherever the same may be located (collectively, the "Collateral"):
(i) all Inventory, including specifically all raw
materials, work-in-process, finished goods, supplies, materials, spare parts,
Goods held for sale or on lease or for lease or furnished or to be furnished
under contracts of service, merchandise inventory, rental inventory, and
returned or repossessed Goods and all rights to enforce return or
repossession by reclamation, stoppage in transit or otherwise,
(ii) all Equipment, including specifically all
manufacturing, printing, distribution, delivery, retailing, vending, data
processing, communications, office and other equipment in all of its forms,
all vehicles, all tools, dies, and molds, all Fixtures, all other Goods used
or bought for use primarily in a business and all other Goods except
Inventory,
(iii) all Accounts,
(iv) all Chattel Paper,
(v) all Documents,
(vi) all Instruments and all other Claims that are in any
respect evidenced or represented by any writing, including specifically the
Intercompany Notes described in Schedule 3.1(b), all other Intercompany Notes
and all other writings evidencing or representing a Claim against the
Borrower, Holdings or any Borrower Subsidiary or any other Person,
(vii) all Securities, whether constituting Certificated
Securities or Uncertificated Securities, all Financial Assets, all Security
Entitlements, all Securities Accounts, all Commodity Contracts, all Commodity
Accounts, and all other Investment Property, including specifically the
Security Certificates described in Schedule 3.1(b) and all other Equity
Interests and all Permitted Investments,
(viii) all money, cash and cash equivalents, including
specifically all deposit accounts and all certificates of deposit,
5
<PAGE>
(ix) all General Intangibles, including specifically (a) the
property described on Schedule 3.1(c), (b) all registered and unregistered
trademarks and servicemarks and all trademark and service mark license
agreements to which any Grantor is a party (whether as licensor or licensee)
and all Claims (including infringement claims) relating thereto, (c) all
patents and patent applications and all patent license agreements to which
any Grantor is a party (whether as licensor or licensee) and all Claims
(including infringement claims) relating thereto, (d) all registered and
unregistered copyrights and all copyright license agreements to which any
Grantor is a party (whether as licensor or licensee) and Claims (including
infringement claims) relating thereto, (e) all other intellectual property in
which any Grantor has an interest, including proprietary research and
development, know-how, trade secrets, trade names, trade styles, license
agreements and user rights and Claims (including infringement claims)
relating thereto, (f) all customer lists and agreements, (g) all supplier
lists and agreements, (h) all employee and consultant lists, rights, and
agreements, (i) all computing, data and information processing and
communications programs, discs, designs, and information and the data and
other entries thereon, (j) all books, records, catalogs, back issues, library
rights and all manifestations and embodyments thereof, (k) all rights and
Claims arising under or in respect of the Reorganization Agreement or the
other Transaction Agreements, including all indemnification rights and
indemnification payments thereunder, (l) all rights and Claims arising under
or in respect of the Credit Agreement or any Loan Document, including rights
and Claims against Secured Party or any other Beneficiary, (m) all rights and
Claims arising in respect of the Transactions, (n) all Net Cash Proceeds, (o)
all tax refunds, (p) all policies of insurance and condemnation awards of
every type and description and the proceeds thereof, (q) all loans
receivable, letters of credit, bonds and undertakings (including without
limitation the Herbalife Bond), deferred purchase price or deferred purchase
consideration, consulting or non-competition payments and other Indebtedness,
liabilities and obligations receivable not constituting an Account and not
evidenced or represented by any Instrument, Chattel Paper or Security, (r)
all rights of recoupment, recourse, reimbursement, subrogation, indemnity or
contribution (including those arising under the Guaranty, Indemnity and
Subordination Agreement, those arising in respect of any Guarantee of the
Senior Notes or any other Guarantee or any payment thereon, and those arising
on account of any other agreement, transaction or event), (s) all other
causes of action and Claims of every type and description, whether fixed or
contingent, liquidated or not liquidated, accrued or not accrued, and all
judgments, orders and recoveries thereon, (t) all other agreements and
contract rights of every type and description and Claims thereon or relating
in any manner thereto, (u) all other rights, privileges, benefits,
entitlements, franchises, licenses and expectancies of every type and
description, (v) all other intangible property of every type and description,
and (w) all goodwill associated with any of the foregoing,
6
<PAGE>
(x) all property that is at any time delivered to, or that
is is at any time in the Control of, Secured Party,
together, in each case, with (a) all accessions thereto and
products and replacements thereof, (b) all guaranties, Liens and other forms
of collateral security therefor, (c) all dividends, distributions, and
payments received thereon or in exchange or substitution therefor or upon
Transfer thereof, and (d) all other proceeds thereof.
Section 2.2. Delivery of Instruments and Securities. On the date
hereof or, if hereafter acquired, immediately upon acquisition thereof,
without any notice from or demand by Secured Party, (a) each Grantor shall
deliver to Secured Party the Intercompany Notes and the Security Certificates
described in Schedule 3.1(b) as owned by it and all other Instruments (except
checks received and collected in the ordinary course of business) and
Security Certificates at any time owned by it and constituting Collateral, in
each case in suitable form for transfer by delivery or accompanied by duly
executed instruments of transfer, assignments in blank or with appropriate
endorsements, in form and substance satisfactory to Secured Party, and (b)
each Grantor shall cause the issuer of each Uncertificated Security owned by
it and constituting Collateral to register Secured Party as the registered
owner thereof, either upon original issuance or by registration of transfer
and shall execute and deliver all writings necessary to cause such issuer to
do so.
Section 2.3. Investment Property. Each Grantor will cause Secured
Party's security interests in Investment Property owned by such Grantor to be
and remain continuously Perfected by Control and, in addition, will cause
such security interests to be Perfected by filing. No Grantor will grant or
permit any other security interest or Lien upon any Investment Property
constituting Collateral. If so requested at any time by Secured Party or the
Required Lenders as to any Security Entitlement or Securities Account or any
Commodity Contract or Commodity Account that is owned by any Grantor, such
Grantor will promptly cause each Person who is a Securities Intermediary as
to any such Security Entitlement or Securities Account and each Person who is
a Commodity Intermediary as to any such Commodity Contract or Commodity
Account to deliver a written agreement enforceable by Secured Party for the
benefit of the Beneficiaries waiving and releasing, and agreeing not to
create, grant, accept or hold, any priority, pari passu or junior security
interest or Lien therein. No Grantor will cause or permit any Equity Interest
in any Subsidiary to be outstanding as an Uncertificated Security or to
constitute a Security Entitlement or be held in a Securities Account.
Section 2.4. Registration of Pledge. Secured Party may at any time
when any Event of Default is continuing and without any notice to any Grantor
or any other Person, transfer to and register in Secured Party's name, as
pledgee, any and all Instruments and Investment Property constituting
Collateral. Such transfer and registration shall not foreclose or otherwise
affect any rights or interests of any Grantor and shall not increase,
restrict or reduce any of Secured Party's rights and remedies. If after any
such transfer and registration
7
<PAGE>
any Grantor remains entitled under Section 3.6 to exercise voting rights with
respect to Equity Interests included in such Investment Property, Secured
Party shall, at the written request of such Grantor, deliver to such Grantor
a revocable proxy or other instrument sufficient to permit such Grantor to
exercise such voting rights to the extent permitted under Section 3.6.
Section 2.5. Financing Statements. Each Grantor will duly execute,
deliver and (subject to execution by Secured Party, where required by law)
file duly completed financing statements naming such Grantor as debtor,
naming Secured Party as secured party, and covering the property described in
Section 2.1, in the proper filing office in each jurisdiction in which a
financing statement is required from time to time to be filed in order to
ensure that the security interests granted to Secured Party in Section 2.1
are at all times continuously Perfected, to the extent that, under applicable
law, such security interests can be Perfected by the filing of a financing
statement.
Section 2.6. Secured Party Filing. Secured Party is hereby
authorized to file one or more financing statements and continuations thereof
and amendments thereto, relative to all or any part of the Collateral,
without the signature of any Grantor where permitted by law.
Section 2.7. Further Assurances. Each Grantor will promptly (and in
any event within five Business Days after request by Secured Party or the
Required Lenders) execute and deliver, and use its reasonable and diligent
best efforts to obtain from other Persons, all instruments and documents
(including security agreements, security assignments, Lien releases, Lien
waivers, transfer documents and transfer notices, financing statements and
other lien notices), in form and substance satisfactory to Secured Party or
the Required Lenders, and take all other actions which are necessary or, in
the good faith judgment of Secured Party or the Required Lenders, desirable
or appropriate in order to create, maintain, perfect, ensure the agreed
priority of, protect or enforce Secured Party's security interests in the
Collateral, to enable Secured Party to exercise and enforce its rights and
remedies hereunder with respect to any Collateral, to protect the Collateral
against the rights, claims or interests of third persons, or to effect or to
assure further the purposes and provisions of this Agreement, and each
Grantor agrees to pay all costs related thereto and all reasonable expenses
incurred by Secured Party in connection therewith.
Section 2.8. Power of Attorney. Each Grantor hereby irrevocably
constitutes and appoints Secured Party and any officer, agent or nominee of
Secured Party, with full power of substitution, as its true and lawful
attorney-in-fact with full power and authority, in the name of such Grantor
or in its own name, if and whenever any Grantor is in default under this
Agreement as set forth in Section 4.1 to take any and all actions and to
execute and deliver any and all agreements, documents, notices, instruments
and writings that Secured Party or the Required Lenders may determine to be
necessary or desirable to create, perfect or ensure the agreed priority of
the security interests granted in Section 2.1 or to enforce such security
interests in any lawful and commercial reasonable manner or otherwise to
protect Secured Party's interest in the
8
<PAGE>
Collateral in any lawful and commercially reasonable manner, including the
power and right on behalf of any Grantor, without notice to or assent by any
Grantor:
(i) to ask for, demand, sue for, collect, settle and give
acquittance for any and all moneys due or to become due with respect to any
or all of the Collateral and otherwise to demand and enforce payment and
collection of any and all Claims constituting Collateral,
(ii) to sign and file in any office in any jurisdiction
financing statements, lien notices, collateral assignments and any other
instruments or writings that may be required or, in the opinion of Secured
Party or the Required Lenders, appropriate to create or Perfect a security
interest in or Lien upon any of the Collateral as security for the Secured
Obligations,
(iii) to accept, hold, collect, endorse, transfer and deliver
any and all checks, notes, drafts, acceptances, documents and other
negotiable and nonnegotiable Instruments, Securities, Documents and Chattel
Paper constituting Collateral that may be delivered to Secured Party in
accordance with the provisions of this Agreement, whether made payable to a
Grantor or otherwise,
(iv) to commence, file, prosecute, defend, settle,
compromise or adjust any claim, suit, action or proceeding with respect to
any or all of the Collateral or otherwise to enforce the rights of Secured
Party with respect to any of the Collateral,
(v) to obtain, contest, enforce, adjust and settle Claims
for insurance proceeds or condemnation awards constituting proceeds of
Collateral or required to be paid to Secured Party pursuant to this Agreement
or the Credit Agreement,
(vi) to do, at its option and at the expense and for the
account of any Grantor, at any time and from time to time, all lawful and
commercially reasonable acts and things that Secured Party or the Required
Lenders may deem necessary or desirable to protect or preserve the Collateral
or to realize upon the Collateral,
(vii) to contest, settle, pay or discharge taxes or Liens
(other than Liens permitted under this Agreement or the Credit Agreement)
levied or placed upon or threatened against any of the Collateral, and for
such purposes (A) the legality or validity thereof and amounts necessary to
settle or discharge the same may be determined by Secured Party or the
Required Lenders in its or their commercially reasonable discretion and (B)
each Grantor agrees immediately upon demand to reimburse Secured Party for
any payments made by Secured Party on account of any such taxes or Liens, as
part of the Obligations secured hereby,
9
<PAGE>
(viii) to sign and endorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications and notices in connection with the
Accounts and other documents relating to the Collateral, and
(ix) generally to sell, Transfer, pledge, make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as though Secured Party were the absolute owner thereof for all
purposes, and to do, at Secured Party's option and at Grantors' expense, at
any time or from time to time, all acts and things that Secured Party or the
Required Lenders reasonably deem necessary to protect, preserve or realize
upon the Collateral and Secured Party's security interests therein in order
to effect the intent of this Agreement, all as fully and effectively as any
Grantor might do.
The power granted in this Section 2.8 is a power coupled with an interest, is
irrevocable and shall be discharged upon Discharge of the Credit Agreement.
Section 2.9. Survival of Security Interests. The security interests
granted hereby shall, unless released in writing by Secured Party, (a) remain
enforceable as security for all Secured Obligations now outstanding or
created or incurred at any future time (whether or not created or incurred
pursuant to any agreement presently in effect or hereafter made and
notwithstanding any subsequent repayment of any of the Secured Obligations or
any other act, occurrence or event), until Discharge of the Credit Agreement,
(b) survive the Discharge of the Credit Agreement to the same extent that any
contingent Obligation survives, and (c) survive any sale or other Transfer of
any Collateral and remain enforceable against each transferee and subsequent
owner thereof, even if such sale or other Transfer is permitted at the time
under the Credit Agreement, except in the case of inventory sold in the
ordinary course of business and any other Collateral that is expressly and
specifically released from the security interests created hereby pursuant to
a written release signed by Secured Party.
Section 2.10. Reinstatement of Security Interests. If at any time
any payment on any Secured Obligation is set aside, avoided or rescinded or
must otherwise be restored or returned, this Agreement and the security
interests granted to Secured Party herein and all other obligations of each
Grantor hereunder shall remain in full force and effect and, if previously
released or terminated, shall be automatically and fully reinstated, without
any necessity for any act, consent or agreement of any Grantor, as fully as
if such payment had never been made and as fully as if any such release or
termination had never become effective.
Section 2.11. Each Grantor Remains Liable. Anything contained
herein to the contrary notwithstanding, (a) each Grantor shall remain liable
under all contracts and agreements included in the Collateral, to the extent
set forth therein, to perform all of its duties and obligations thereunder to
the same extent as if this Agreement had not been executed, (b) the exercise
by Secured Party of any of its rights hereunder shall not release any Grantor
from any of
10
<PAGE>
its duties or obligations under any contract or agreement included in the
Collateral, (c) Secured Party shall not have any obligation or liability
under any contract or agreement included in the Collateral by reason of this
Agreement or the grant to Secured Party of any security interest in such
contract or agreement, and (d) Secured Party shall not be obligated to
perform any of the obligations or duties of any Grantor under any contract or
agreement included in the Collateral or to take any action to collect or
enforce any claim for payment assigned hereunder.
Section 2.12. Application of Guaranty Provisions. Each and all of
the provisions set forth in the Guaranty, Indemnity and Subordination
Agreement that govern or in any respect relate to any Guarantor's guarantee
of payment of the Guaranteed Obligations (as defined therein) or the
liability of any Guarantor thereunder or any recourse, reimbursement,
contribution, indemnity or subrogation rights related thereto and the
subordination of claims arising therefrom (including specifically each and
all of the provisions in Section 2.5, Article III, Article IV and Sections
5.1, 5.2, 5.3, 5.4, 5.5, 5.6 and 5.7 thereof) shall apply with like force and
effect to the security interest granted by such Guarantor as Grantor under
this Agreement and to the liability of such Guarantor as Grantor under this
Agreement, mutatis mutandis, to the end and with the effect that (a) such
security interest and liability hereunder shall be as equally absolute,
unconditional, continuing, unlimited (except to the extent provided in
Section 2.5 of the Guaranty, Indemnity and Subordination Agreement),
enduring, assured and protected as such Guaranteed Obligations and the
liability of such Guarantor under the Guaranty, Indemnity and Subordination
Agreement are absolute, unconditional, continuing, unlimited, enduring,
assured and protected and (b) all recourse, reimbursement, contribution,
indemnity or subrogation rights are forever waived, released and discharged
with respect to such security interest or any enforcement of such security
interest or the liability of any Grantor hereunder on the same terms as those
set forth in Article IV of the Guaranty, Indemnity and Subordination
Agreement, with the exceptions therein set forth.
Section 2.13. Liability Joint and Several. The security interest
granted by each Grantor herein and all liability of each Grantor hereunder
shall be the joint and several obligation of each Grantor and may be freely
enforced against each Grantor, for the full amount of the Secured Obligations
and all other liabilities of such Grantor hereunder, without regard to
whether enforcement is sought or available against any other Grantor.
ARTICLE III.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Grantor represents and warrants to Secured Party and agrees
with Secured Party that:
Section 3.1. The Collateral.
11
<PAGE>
(a) Ownership. Except as otherwise expressly permitted under the
Credit Agreement, (i) each Grantor owns its interest in the Collateral free
and clear of any and all Liens and (ii) no effective financing statement or
other instrument similar in effect covering all or any part of the Collateral
is on file in any filing or recording office, except those in favor of
Secured Party.
(b) Interests in and Claims against Subsidiaries. Schedule 3.1(b)
sets forth accurately and exhaustively all Equity Interests owned by any
Grantor in any Subsidiary of any Grantor, all other Equity Interests owned by
any Grantor and all Intercompany Notes issued to any Grantor by any other
Grantor. All such Equity Interests are represented by Security Certificates
that have been duly authorized and validly issued, are fully paid and
non-assessable and were not issued in breach or derogation of preemptive
rights of any Person.
Each Grantor is lawfully indebted as issuer under each respective
Intercompany Note described in Schedule 3.1(b) in the amount of the initial
loan set forth in such Intercompany Note. Such indebtedness (i) constitutes a
legally valid and binding obligation of each such Grantor, enforceable
against it in accordance with its terms, (ii) is evidenced by and due and
payable on the terms set forth in such Intercompany Note and (iii) is secured
by the security interests granted by such Grantor to the Administrative
Agent, for the benefit of the Beneficiaries, as set forth herein. Each
Intercompany Note and the indebtedness from time to time evidenced thereby
and any and all collateral security therefor are enforceable solely by the
Administrative Agent for the benefit of the Beneficiaries, as security for
the payment of the Secured Obligations.
(c) Intellectual Property. Schedule 3.1(c) sets forth accurately
and exhaustively (a) all registered and unregistered trademarks and
servicemarks owned by any Grantor, all trademark and service mark license
agreements to which any Grantor is a party (whether as licensor or licensee),
and all pending or overtly threatened infringement claims by or against any
Grantor and other litigation relating to any such trademarks, servicemarks or
trademark or servicemark license agreements, (b) all patents and patent
applications owned by any Grantor, all patent license agreements to which any
Grantor is a party (whether as licensor or licensee), and all pending or
overtly threatened infringement claims by or against any Grantor and other
litigation relating to any such patents, patent applications or patent
license agreements, (c) all registered and unregistered copyrights owned by
any Grantor, all copyright license agreements to which any Grantor is a party
(whether as licensor or licensee) and all pending or overtly threatened
infringement claims by or against any Grantor or other litigation relating to
any such copyrights or copyright license agreements, (d) all other General
Intangibles in which any Grantor has an interest, including proprietary
research and development, know-how, trade secrets, trade names, license
agreements and user rights and other intellectual property of every type and
description, all pending or overtly threatened infringement claims by or
against any Grantor and other litigation relating thereto, and all other
intangible property.
12
<PAGE>
(d) Other Investment Property. Schedule 3.1(d) sets forth
accurately and exhaustively all other Investment Property of any Grantor,
except Investment Property constituting Permitted Investments.
(e) Location of Equipment and Inventory. All Equipment and
Inventory are located and intended to be kept at one of the collateral
locations specified on Schedule 3.1(e).
(f) No Consumer Goods or Farm Products. No Grantor owns any assets
that are, as to it, consumer goods or farm products.
(g) Location of Grantors. Each Grantor's chief place of business,
chief executive office and office or offices where such Grantor keeps its
records regarding its Accounts and all originals of its Chattel Paper are
located, and during the preceding four months were located, at the Grantor
locations specified on Schedule 3.1(g).
(h) Names. The correct legal name of each Grantor is set forth in
the preamble to this Agreement. No Grantor conducts business or hold itself
out under, and in the past five years has not conducted business or held
itself out under, any other name (including any trade-name or fictitious
business name) except any name listed on Schedule 3.1(h).
(i) Taxpayer ID Number. The proper taxpayer identification number
for each Grantor is accurately set forth on Schedule 3.1(i).
(j) Perfection. The security interests granted to Secured Party in
Section 2.1 are lawful, valid and enforceable security interests that at all
times have been, and remain, duly and continuously Perfected.
(k) Amendment of Schedule 3.1. Any Grantor may at any time
unilaterally amend any schedule delivered under Section 3.1 in any respect
required by the occurrence of any event that does not constitute or give rise
to a Default, by giving written notice thereof to Secured Party. To be
effective, such notice must state conspicuously that it constitutes an
amendment to certain factual matters relating to the Collateral set forth in
Section 3.1 of this Agreement.
Section 3.2. Maintenance of Perfection. No Grantor will (a) cause,
permit or suffer any voluntary or involuntary change in its name, identity or
corporate structure, or in the location of its chief executive office, or (b)
keep any records relating to its Accounts or any tangible Collateral (other
than mobile goods) at any location other than a location set forth in
Schedule 3.1(g), unless (in each case) (i) Schedule 3.1(g) has first been
appropriately supplemented with respect thereto, and (ii) an appropriate
financing statement has been filed in the proper office and in the proper
form, and all other requisite actions have been taken, to Perfect and
continue the Perfection (without loss of priority) of Secured Party's
security interests in the Collateral.
13
<PAGE>
Section 3.3. Defense of Collateral. Each Grantor will defend the
Collateral against all claims and demands of all Persons at any time claiming
any interest therein.
Section 3.4. Transfer or Encumbrance. No Grantor will encumber or
Transfer any item of Collateral or any interest therein, or permit or suffer
any item of Collateral to be encumbered or Transferred, unless (a) such
action is permitted at the time under the Credit Agreement and (b) each
Grantor makes all payments on account of the Secured Obligations required to
be made therefrom and takes all other actions required to be taken in
connection therewith under the Credit Agreement or any other Loan Document.
Section 3.5. Payments, Dividends and Distributions. Each Grantor
shall be entitled to receive all payments on Accounts, Instruments and Claims
owned by it and all dividends and distributions on Equity Interests and other
Investment Property owned by it, so long as (a) no Event of Default has
occurred and is continuing or would result therefrom, (b) such Grantor
ensures that Secured Party's security interests in any and all such payments,
dividends and distributions remain continuously Perfected and (c) each
Grantor makes all payments on account of the Secured Obligations required to
be made therefrom and takes all other actions required to be taken in
connection therewith under the Credit Agreement or any other Loan Document.
Section 3.6. Voting Rights. So long as no Event of Default has
occurred or would result therefrom, each Grantor shall have and may exercise
all voting rights with respect to any and all Equity Interests constituting
Collateral, except that:
(a) No Breach. No Grantor shall act or vote in favor of any action
that would constitute or cause a breach of any obligations of any Grantor
under the Credit Agreement or under any other Loan Document;
(b) No Capital Structure Changes. No Grantor shall act or vote in
favor of (i) the authorization or issuance of any options, warrants, voting
rights, or preference shares or additional shares, or (ii) any
reclassification, readjustment, reorganization, merger, consolidation, sale
or disposition of assets, or dissolution, without giving Secured Party at
least 15 days' prior written notice thereof;
(c) Material Adverse Changes. No Grantor shall act or vote in favor
of any action that has or is reasonably likely to have a material adverse
effect on the value of any of the Collateral or that has, or would reasonably
be expected to result in, a Material Adverse Effect; and
(d) Termination of Voting Rights. At any time when any Grantor is
in default under this Agreement as set forth in Section 4.1, Secured Party
may terminate any or all of each Grantor's voting rights with respect to any
or all Equity Interests constituting Collateral, either by giving written
notice of such termination to the Borrower or by
14
<PAGE>
transferring such Equity Interests into Secured Party's name, and Secured
Party shall thereupon have the sole right and power to exercise such voting
rights.
Section 3.7. Maintenance of Collateral. Each Grantor shall:
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any other Loan Document or
any applicable statute, regulation or ordinance or any policy of insurance
covering any such Collateral;
(b) notify Secured Party of any change in such Grantor's name,
identity or corporate structure within 30 days after such change;
(c) give Secured Party 30 days' prior written notice of any change
in such Grantor's chief place of business, chief executive office, places of
business, collateral locations or federal taxpayer ID number or the office
where such Grantor keeps its Chattel Paper and its records regarding any
Accounts;
(d) if the Lenders give value to enable such Grantor to acquire
rights in or the use of any Collateral, use such value for such purposes; and
(e) pay promptly when due all material property and other taxes,
assessments and governmental charges or levies imposed upon any Collateral
and all Claims that are or might become secured by any Lien upon any
Collateral, except to the extent the same is being contested as permitted
under the Credit Agreement; provided, that, notwithstanding any other
provision in the Loan Documents, each Grantor shall in any event pay such
taxes, assessments, charges, levies and Claims not later than five days prior
to the date of any proposed sale under any judgment, writ or warrant of
attachment or other legal process entered or filed against any Grantor or any
Collateral as a result of the failure to make such payment.
Section 3.8. Concerning Equipment and Inventory. Each Grantor will:
(a) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new (ordinary wear and tear and
worn-out and surplus equipment excepted) and in accordance with such
Grantor's past practices and make or cause to be made all repairs,
replacements and other improvements in connection therewith that are
necessary or desirable to such end;
(b) notify Secured Party of any loss or damage to any Equipment in
an amount exceeding $500,000;
(c) keep correct and accurate records of the Inventory, itemizing
and describing the kind, type and quantity of Inventory, such Grantor's cost
therefor and (where applicable) the current list prices for the Inventory, in
the ordinary course of such Grantor's business;
15
<PAGE>
(d) if any Inventory is in possession or control of any agent,
carrier, warehouseman, bailee, consignee or processor, upon the occurrence of
an Event of Default instruct such Person to hold all such Inventory for the
account of Secured Party and subject to the instructions of Secured Party; and
(e) if so requested at any time by Secured Party or the Required
Lenders, promptly endorse and deliver to Secured Party each and all
negotiable Documents constituting Collateral.
Section 3.9. Concerning Accounts, Instruments and other Claims.
Each Grantor will:
(a) maintain accurate and complete records concerning the Accounts,
Instruments and all other Claims and the identity, name and address of each
account debtor or obligor thereon, hold and preserve such records in
safekeeping, permit representatives of Secured Party at any time during
normal business hours to inspect, copy and make abstracts from such records,
and render to Secured Party, at such Grantor's cost and expense, such
clerical and other assistance as may be reasonably requested with regard
thereto,
(b) if so requested at any time by Secured Party or the Required
Lenders, such Grantor will certify and deliver to Secured Party complete and
correct copies of each contract or agreement constituting Collateral,
(c) continue to collect, at such Grantor's expense, all amounts due
or to become due to such Grantor under Accounts, Instruments and other Claims
and, in connection therewith take such action as such Grantor (or, whenever
any Grantor is in default under this Agreement as set forth in Section 4.1,
as Secured Party or the Required Lenders) may reasonably deem necessary or
advisable to enforce collection of amounts due or to become due to
thereunder; provided, that Secured Party shall have the right at any time
when any Grantor is in default under this Agreement as set forth in Section
4.1 (A) to notify the account debtors or obligors under any or all Accounts,
Instruments or other Claims of the assignment of such Accounts, Instruments
or Claims to Secured Party and to direct such account debtors or obligors to
make payment of all amounts due or to become due to any Grantor thereunder
directly to Secured Party, (B) to notify each Person maintaining a lockbox or
similar arrangement to which account debtors or obligors under any Accounts,
Instruments or other Claims have been directed to make payment to remit all
amounts representing collections on checks and other payment items from time
to time sent to or deposited in such lockbox or other arrangement directly to
Secured Party and (C) at the expense of Grantors, to demand payment of any
Accounts, Instruments and Claims and enforce collection thereof by legal
proceedings in any lawful manner and to extend, renew adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as any Grantor might have done, and
15
<PAGE>
(d) if Secured Party at any time exercises any of the rights
described in the proviso in Section 3.9(iii), (A) segregate from all other
funds and hold in trust for Secured Party and immediately deliver to Secured
Party (in the identical form received) all amounts and proceeds (including
checks and other instruments) received by any Grantor in respect of any and
all Accounts, Instruments and other Claims, and (B) not adjust, settle or
compromise the amount or payment of any Account or Claim, or release wholly
or partly any account debtor or obligor thereon, or allow any credit or
discount thereon.
Section 3.10. Substituted Performance. Secured Party may at any
time (but shall not be obligated to) (a) perform any of the obligations of
any Grantor under this Agreement if such Grantor fails to perform such
obligation within three Business Days (or, in the case of insurance, within
one Business Day) after written demand by Secured Party and (b) make any
payments and do any other acts which Secured Party or the Required Lenders
may deem necessary or desirable to protect Secured Party's security interests
in the Collateral, including the right to pay, purchase, contest or
compromise any Lien that attaches or is asserted against any Collateral, to
procure insurance, and to appear in and defend any action or proceeding
relating to any Collateral, and each Grantor agrees promptly to reimburse
Secured Party for all payments made by Secured Party in doing so, together
with interest thereon at the rate then applicable to ABR Loans, all
reasonable attorneys' fees and disbursements incurred by Secured Party in
connection therewith, whether or not suit is brought, and all other costs and
expenses related thereto.
ARTICLE IV.
DEFAULT; REMEDIES
Section 4.1. Default. Grantors shall be in default under this
Agreement (a) whenever any Event of Default has occurred and is continuing
(and each of the Grantors shall thereupon be in default hereunder without
regard to whether or to what degree any Grantor individually may have caused,
participated in, or had any knowledge of the occurrence of such Event of
Default) and (b) at all times after the Loans have become due and payable,
whether at maturity, upon acceleration pursuant to Section 7.1 of the Credit
Agreement or otherwise.
Section 4.2. Remedies upon Default. At any time when any Grantor is
in default under this Agreement as set forth in Section 4.1, Secured Party
may exercise and enforce, in any order, (a) each and all of the rights and
remedies available to a secured party upon default under the Uniform
Commercial Code or other applicable law, (b) each and all of the rights and
remedies available to it under the Credit Agreement or any other Loan
Document and (c) each and all of the following rights and remedies:
(a) Collection Rights. Without notice to any Grantor, Secured Party
may notify any or all account debtors and obligors on any Accounts,
Instruments or other Claims
17
<PAGE>
constituting Collateral of Secured Party's security interests therein and may
direct, demand and enforce payment thereof directly to Secured Party.
(b) Taking Possession. Secured Party may (i) enter upon any and all
premises owned or leased by any Grantor where Collateral is located (or
believed by Secured Party to be located), with or without judicial process
and without any obligation to pay rent, (ii) prior to the disposition of the
Collateral, store, process, repair or recondition the Collateral or otherwise
prepare the Collateral for disposition in any manner to the extent Secured
Party deems appropriate, (iii) take possession of any Grantor's premises or
place custodians in exclusive control thereof, remain on such premises and
use the same and any Grantor's equipment for the purpose of completing any
work in process or otherwise preparing the Collateral for sale or selling or
otherwise Transferring the Collateral, (iv) take possession of all items of
Collateral that are not then in its possession, either upon such premises or
by removal from such premises, and (v) require any Grantor or the Person in
possession thereof to deliver such Collateral to Secured Party at one or more
locations designated by Secured Party and reasonably convenient to it and
each Grantor owning an interest therein.
(c) Foreclosure. Secured Party may sell, lease, license or
otherwise dispose of or Transfer any or all of the Collateral or any part
thereof in one or more parcels at public sale or in private sale or
transaction, on any exchange or market or at Secured Party's offices or on
any Grantor's premises or at any other location, for cash, on credit or for
future delivery, and may enter into all contracts necessary or appropriate in
connection therewith, without any notice whatsoever unless required by law.
Where permitted by law, one or more of the Beneficiaries may be the
purchasers at any such sale and in such event, if such bid is made by all of
the Lenders or by all of the Holders of Secured Obligations or otherwise
whenever a credit bid is expressly permitted under the Credit Agreement or
approved in writing by the Administrative Agent and the Required Lenders, the
Beneficiaries bidding at such sale may bid part or all of the Obligations
owing to them without necessity of any cash payment on account of the
purchase price, even though any other purchaser at such sale is required to
bid a purchase price payable in cash. Each Grantor agrees that at least 10
calendar days' written notice to such Grantor of the time and place of any
public sale of Collateral owned by it (or, to the extent such Grantor is
entitled by law to notice thereof, the public sale of any other Collateral),
or the time after which any private sale of Collateral owned by it (or, to
the extent such Grantor is entitled by law to notice thereof, the private
sale of any other Collateral) is to be made, shall be commercially
reasonable. For purposes of such notice, to the fullest extent permitted by
law (i) each Grantor waives notice of any sale of Collateral owned by any
other Grantor and (ii) each Grantor agrees that notice given to the Borrower
shall constitute notice given to such Grantor. The giving of notice of any
such sale or other disposition shall not obligate Secured Party to proceed
with the sale or disposition, and any such sale or disposition may be
postponed or adjourned from time to time, without further notice.
18
<PAGE>
(d) Use of Intellectual Property. Secured Party may, on a
royalty-free basis, use and license use of any trademark, trade name, trade
style, copyright, patent or technical knowledge or process owned, held or
used by any Grantor in respect of any Collateral as to which any right or
remedy of Secured Party is exercised or enforced.
In addition, each Holder of any Secured Obligation may exercise and enforce
such rights and remedies for the collection of such Secured Obligation as may
be available to it by law or agreement.
Section 4.3. Waivers by Grantors. Each Grantor hereby irrevocably
waives (a) all rights of redemption from any foreclosure sale, (b) the
benefit of all valuation, appraisal, exemption and moratorium laws, (c) to
the fullest extent permitted by law, all rights to notice or a hearing prior
to the exercise by Secured Party of its right to take possession of any
Collateral, whether by self-help or by legal process and any right to object
to the Secured Party taking possession of any Collateral by self-help, (d) if
Secured Party seeks to obtain possession of any Collateral by replevin, claim
and delivery, attachment, levy or other legal process, (i) any notice or
demand for possession prior to the commencement of legal proceedings, (ii)
the posting of any bond or security in any such proceedings and (iii) any
requirement that Secured Party retain possession and not dispose of any
Collateral until after a trial or final judgment in such proceedings.
Section 4.4. Standard of Care. The powers conferred on Secured
Party hereunder are solely to protect its interest in the Collateral and
shall not impose any duty upon it to exercise any such powers. Except for the
exercise of reasonable care in the custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder,
Secured Party shall have no duty as to any Collateral or as to the taking of
any necessary steps to preserve rights against prior parties or to protect,
preserve, vote or exercise any rights pertaining to any Collateral. Secured
Party shall be deemed to have exercised reasonable care in the custody and
preservation of Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which Secured Party accords its own
property or if it selects, with reasonable care, a custodian to hold such
Collateral on its behalf.
Section 4.5. Application of Proceeds. Except as expressly provided
elsewhere in this Agreement, all proceeds received by Secured Party in
respect of any sale of, collection from, or other realization upon all or any
part of the Collateral may, in the discretion of Secured Party, be held by
Secured Party as Collateral for, or then, or at any other time thereafter,
applied in full or in part by Secured Party against, the Secured Obligations
in the following order of priority:
FIRST: To the payment of all reasonable costs and expenses of such
sale, collection or other realization, including reasonable compensation to
Secured Party and its agents and counsel, and all other reasonable expenses,
liabilities and advances made or incurred by Secured Party in connection
therewith, and all amounts for which Secured Party is entitled to
indemnification hereunder and all reasonable advances made by
19
<PAGE>
Secured Party hereunder for the account of any Grantor, and to the payment
of all reasonable costs and expenses paid or incurred by Secured Party in
connection with the exercise of any right or remedy hereunder, all in
accordance with Section 4.6;
SECOND: To the payment of all other Secured Obligations (for the
ratable benefit of the holders thereof) then due and payable; and
THIRD: To the payment to or upon the order of the Grantor entitled
thereto, or to whomsoever may be lawfully entitled to receive the same or
as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
Section 4.6. Indemnity and Expenses.
(a) Indemnity. Each Grantor will defend, indemnify and hold
harmless Secured Party and each Beneficiary from and against any and all
claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including enforcement of any interest, right or remedy created hereby),
except to the extent such claims, losses or liabilities are directly
attributable to Secured Party's or such Beneficiary's gross negligence or
willful misconduct as finally determined by a court of competent jurisdiction.
(b) Expenses. Each Grantor will pay to Secured Party upon demand
the amount of any and all reasonable costs and expenses, including the
reasonable fees and expenses of its counsel and of any advisors, consultants,
experts and agents, that Secured Party may incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
of the Collateral, (iii) the exercise or enforcement of any of the interests,
rights or remedies of Secured Party hereunder, (iv) the failure by any
Grantor to perform or observe any of the provisions hereof, or (v) the proof,
allowance, protection, administration, treatment, discharge, collection or
enforcement of any of the Secured Obligations or any of the Collateral in any
bankruptcy case or insolvency, reorganization, receivership, dissolution or
liquidation proceeding of or affecting any Grantor.
Section 4.7. Surplus, Deficiency. Any surplus proceeds of any sale
or other disposition by Secured Party of any Collateral remaining after
Discharge of the Credit Agreement and after all Secured Obligations are paid
in full and in cash shall be paid over to the Grantor entitled thereto, or to
whomever may be lawfully entitled to receive such surplus or as a court of
competent jurisdiction may direct, but prior to Discharge of the Credit
Agreement, such surplus proceeds may be retained by Secured Party and held as
Collateral until Discharge of the Credit Agreement. The Borrower and each
Guarantor shall be and remain liable for any deficiency.
20
<PAGE>
Section 4.8. Information Related to the Collateral. If Secured
Party determines to sell or otherwise Transfer any Collateral, each Grantor
shall, and shall cause any Person controlled by it to, furnish to Secured
Party all information Secured Party may request that pertains or could
pertain to the value or condition of the Collateral or that would or might
facilitate such sale or Transfer. Secured Party shall have the right,
notwithstanding any confidentiality obligation or agreement otherwise binding
upon it, freely to disclose such information, and any and all other
information (including confidential information) pertaining in any manner to
the Collateral or the assets, liabilities, results of operations, business or
prospects of any Grantor, freely to any Person that Secured Party in good
faith believes to be a potential or prospective purchaser in such sale or
Transfer, without liability for any disclosure, dissemination or use that may
be made as to such information by any such Person.
Section 4.9. Sale Exempt from Registration. Secured Party shall be
entitled at any such sale or other Transfer, if it deems it advisable to do
so, to restrict the prospective bidders or purchasers to Persons who will
provide assurances satisfactory to Secured Party that the Collateral may be
offered and sold to them without registration under the Securities Act of
1933, as amended, and without registration or qualification under any other
applicable state or federal law. Upon the consummation of any such sale,
Secured Party shall have the right to assign, transfer and deliver to the
purchaser or purchasers thereof the Collateral so sold. Secured Party may
solicit offers to buy the Collateral, or any part of it, from a limited
number of investors deemed by Secured Party, in its good faith judgment or in
good faith reliance upon advice of its counsel, to meet the requirements to
purchase securities under Regulation D promulgated under the Securities Act
of 1933 as then in effect (or any other regulation of similar import). If
Secured Party solicits such offers from such investors, then the acceptance
by Secured Party of the highest offer obtained from any of them shall be
deemed to be a commercially reasonable method of disposition of the
Collateral.
Section 4.10. Rights and Remedies Cumulative. The rights provided
for in this Agreement and the other Loan Documents are cumulative and are not
exclusive of any other rights, powers or privileges or remedies provided by
law or in equity, or under any other instrument, document or agreement.
Secured Party may exercise and enforce each right and remedy available to it
either before or concurrently with or after, and independently of, any
exercise or enforcement of any other right or remedy of Secured Party or any
Holder of any Secured Obligation against any Person or property. All such
rights and remedies shall be cumulative, and no one of them shall exclude or
preclude any other.
Section 4.11. No Direct Enforcement by Beneficiaries. Secured Party
may freely exercise and enforce any and all of its rights and remedies
hereunder, for the benefit of the Beneficiaries. No Beneficiary, other than
Secured Party, shall have any independent right to collect, take possession
of, foreclose against or otherwise enforce the security interests granted
hereby.
21
<PAGE>
ARTICLE V.
CONCERNING THE SECURED PARTY
Section 5.1. Agent for Holders. Secured Party is executing and
delivering this Agreement, and accepting the security interests, rights,
remedies, powers and benefits conferred upon Secured Party hereby, both for
its own benefit and as agent for all present and future Holders of Secured
Obligations. The provisions of the Credit Agreement and all rights, powers,
immunities and indemnities granted to Secured Party under the Credit
Agreement or any other Loan Document, or under any separate agreement made by
or otherwise binding upon any Holder of Secured Obligations, shall apply in
respect of such execution, delivery and acceptance and in respect of any and
all actions taken or omitted by Secured Party under, in connection with or in
respect of this Agreement.
Section 5.2. Administrative Agent shall be the Secured Party .
Secured Party shall at all times be the same Person that is the
Administrative Agent under the Credit Agreement. Written notice of
resignation by the Administrative Agent pursuant to Section 8.6 of the Credit
Agreement shall also constitute notice of resignation as Secured Party under
this Agreement; and appointment of a successor Administrative Agent pursuant
to Section 8.6 of the Credit Agreement shall also constitute appointment of a
successor Secured Party under this Agreement. Upon the acceptance of any
appointment as Administrative Agent under Section 8.6 of the Credit Agreement
by a successor Administrative Agent, the successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Secured Party under this Agreement, and
the retiring Secured Party under this Agreement shall promptly (a) transfer
to such successor Secured Party all sums, securities and other items of
Collateral held hereunder, together with all records and other documents
necessary or appropriate in connection with the performance of the duties of
the successor Secured Party under this Agreement, and (b) execute and deliver
to such successor Secured Party such amendments to financing statements, and
take such other actions, as may be necessary or appropriate in connection
with the assignment to such successor Secured Party of the security interests
created hereunder, whereupon such retiring Secured Party shall be discharged
from its duties and obligations under this Agreement. After any retiring
Administrative Agent's resignation hereunder as Secured Party, the provisions
of this Agreement shall inure to its benefit as to any actions taken or
omitted to be taken by it under this Agreement while it was Secured Party
hereunder.
Section 5.3. No Assurances or Liability. Secured Party makes no
statement, promise, representation or warranty whatsoever, and shall have no
liability whatsoever, to any Holder of any Secured Obligations as to the
authorization, execution, delivery, legality, enforceability or sufficiency
of this Agreement or as to the creation, perfection, priority, or
enforceability of any security interests granted hereunder or as to
existence, ownership, quality, condition, value or sufficiency of any
Collateral or as to any other matter whatsoever.
22
<PAGE>
Section 5.4. Holders Bound. Except where the consent of others may
be required pursuant to the express provisions of Section 9.2 of the Credit
Agreement, any modification, amendment, waiver, release, termination or
discharge of any security interest, right, remedy, power or benefit conferred
upon Secured Party that is effectuated in a writing signed by Secured Party
shall be binding upon all Holders of Secured Obligations if it is (a)
authorized pursuant to any provision of the Credit Agreement or any other
Loan Document, (b) required by law or (c) authorized or ratified either (i)
by the Required Holders or (ii) by the Holders of at least a majority in
outstanding principal amount of the Secured Obligations (other than
contingent or unliquidated Secured Obligations).
ARTICLE VI.
MISCELLANEOUS PROVISIONS
Section 6.1. Continuing Security Interests; Release. This Agreement
creates continuing security interests in the Collateral and shall (a) remain
in full force and effect until the Discharge of the Credit Agreement, (b) be
binding upon each Grantor and its successors and assigns, and (c) inure,
together with the rights and remedies of Secured Party hereunder, to the
benefit of and be enforceable by Secured Party and its successors,
transferees and assigns acting in the capacity of Administrative Agent under
the Credit Agreement. Subject to and upon Discharge of the Credit Agreement,
Secured Party shall (within a reasonable time after it receives from Grantors
a written request for release of the Collateral) execute and deliver to
Grantors an instrument in form and substance satisfactory to Secured Party
releasing (on a quitclaim basis, without recourse, without warranty, and
without any liability whatsoever) any security interest Secured Party may
then hold in the Collateral and thereupon Secured Party shall, at Grantors'
expense, execute and deliver to Grantors such UCC termination statements and
other like documents as Grantors may reasonably request to evidence such
release.
Section 6.2. Senior Indebtedness. All liability of each Grantor
hereunder (other than Holdings) (a) is and shall be (and is hereby designated
as) Guarantor Senior Debt within the meaning of and for the purposes of the
Indenture dated as of April 23, 1998, by and among Holdings and Chase
Manhattan Bank & Trust Company, National Association, as trustee, and (b) is
and shall be (and is hereby made) senior in right of payment, on the terms
set forth in said Indenture, to the Senior Note Guarantees.
Section 6.3. Amendments; Etc. No amendment or waiver of any
provision of this Agreement, or consent to any departure by any Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by Secured Party, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which it was given.
23
<PAGE>
Section 6.4. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of any
power, right or privilege hereunder shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude any other or further exercise thereof or of any other
power, right or privilege. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
Section 6.5. Notices. Any and all notices and communications to be
given to any Grantor or Secured Party may be given by courier service,
personal service, mailing the same, postage prepaid, or by telex, facsimile
transmission or cable to each such party at the address of the Borrower set
forth in the Credit Agreement, on the signature pages hereof or to any other
address as any party hereto may specify by written notice to the other
parties, and such communication shall be deemed to have been given when
delivered in person or by courier service, upon receipt of telefacsimile or
telex, or three Business Days after depositing it in the United States mail
with postage prepaid and properly addressed.
Section 6.6. Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
Section 6.7. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
Section 6.8. Governing Law; Terms. THIS AGREEMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS
OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE NEW YORK UNIFORM
COMMERCIAL CODE PROVIDES THAT THE PERFECTION OF THE SECURITY INTERESTS
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
Notwithstanding the foregoing, the creation, perfection, priority
and enforcement of a security interest in any deposit account shall be
governed by the laws of the state in which the depository bank, or branch
bank, maintaining such deposit account is located.
Section 6.9. Consent to Jurisdiction and Service of Process. ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GRANTOR ARISING OUT OF OR RELATING
TO THIS AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE OF NEW
24
<PAGE>
YORK. BY EXECUTION AND DELIVERY OF THIS AGREEMENT EACH GRANTOR ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE
OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. Each Grantor hereby
agrees that service of all process in any such proceeding in any such court
may be made by registered or certified mail, return receipt requested, to
such Grantor at its address provided in Section 6.5, such service being
hereby acknowledged by such Grantor to be sufficient for personal
jurisdiction in any action against such Grantor in any such court and to be
otherwise effective and binding service in every respect. Nothing herein
shall affect the right to serve process in any other manner permitted by law
or shall limit the right of Secured Party to bring proceedings against such
Grantor in the courts of any other jurisdiction.
Section 6.10. Waiver of Jury Trial. EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY AGREES TO WAIVE ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of
this waiver is intended to be all-encompassing of any and all disputes that
may be filed in any court and that relate to the subject matter of this
transaction, including without limitation contract claims, tort claims,
breach of duty claims, and all other common law and statutory claims.
Grantors and Secured Party each acknowledge that this waiver is a material
inducement for Grantors and Secured Party to enter into a business
relationship, that Grantors and Secured Party have already relied on this
waiver in entering into this Agreement and that each will continue to rely on
this waiver in their related future dealings. Each party hereto further
warrants and represents that it has reviewed this waiver with its legal
counsel and that it knowingly and voluntarily waives its jury trial rights
following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement
may be filed as a written consent to a trial by the court.
Section 6.11. Additional Grantors. The initial Grantors hereunder
shall be the Borrower, Holdings and such of the Subsidiaries of the Borrower
as are signatories hereto on the date hereof. From time to time subsequent to
the date hereof, additional Subsidiaries of the Borrower may become party
hereto, as additional Grantors (each an "Additional Grantor"), by executing a
counterpart of this Agreement. Upon delivery of any such counterpart to the
Administrative Agent, notice of which is hereby waived by each Grantor, each
such Additional Grantor shall be a Grantor and shall be as fully a party
hereto as if such Additional Grantor were an original signatory hereof. Each
Grantor expressly agrees that its obligations arising hereunder shall not be
affected or diminished by the addition or release of any other Grantor
hereunder, nor by any election of any Beneficiary not to cause any Subsidiary
of Borrower to become an
25
<PAGE>
Additional Grantor hereunder. This Agreement shall be fully effective as to
any Grantor that is or becomes a party hereto regardless of whether any other
Person becomes or fails to become or ceases to be a Grantor hereunder.
Section 6.12. Counterparts. This Agreement may be executed in one
or more 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; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document.
[Remainder of page intentionally left blank]
26
<PAGE>
IN WITNESS WHEREOF, Grantors and Secured Party have executed this
Pledge and Security Agreement as of the date first written above.
GLOBAL HEALTH SUB, INC.,
as Grantor
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
GLOBAL HEALTH SCIENCES, INC.,
as Grantor
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
D&F INDUSTRIES, INC.,
as Grantor
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
RAVEN INDUSTRIES, INC.,
as Grantor
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
S-1
<PAGE>
DYNAMIC PRODUCTS, INC.,
as Grantor
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
WEST COAST SALES,
as Grantor
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
S-2
<PAGE>
Accepted as of the 23rd day
of April, 1998
CITICORP USA, INC.,
as Administrative Agent
By:
- -------------------------------
Name:
- -------------------------------
Title:
- -------------------------------
S-3
<PAGE>
Exhibit 8
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NY 10153
July 7, 1998
Global Health Sciences, Inc.
987 N. Enterprise Street
Orange, California 92867
Ladies and Gentlemen:
We have acted as counsel to Global Health Sciences, Inc., a California
corporation (the "Company"), in connection with the preparation and filing by
the Company of a registration Statement on Form S-4 (Registration No. 333-52539)
(as amended to date, the "Registration Statement") with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, relating to
the Offer to Exchange Old Notes for New Notes. Except as otherwise defined in
this letter, all capitalized terms used in this letter have the same meanings
given to those terms in the Registration Statement.
In acting as counsel to the Company as described above, we have
examined originals or copies, certified or otherwise identified to our
satisfaction, of such corporate records, agreements, documents and other
instruments, and such certificates or comparable documents of public officials
and of officers and representatives of the Company, and have made such inquiries
of such officers and representatives, as we have deemed relevant and necessary
as a basis for the opinion hereinafter set forth. In such examination, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of documents
submitted to us as certified or photostatic copies and the authenticity of the
originals of such latter documents. As to all questions of fact material to
this opinion that have not been independently established, we have relied upon
certificates or comparable documents of officers and representatives of the
Company and upon the factual information set forth in the Registration
Statement.
Except as noted otherwise and to the extent relating to legal
conclusions and matters of law, the discussion appearing under "Material United
States Federal
<PAGE>
Income Tax Consequences" in the Preliminary Prospectus included in the
Registration Statement is the opinion of Weil, Gotshal & Manges LLP as to the
material United States federal income tax consequences of the purchase,
ownership and disposition of Notes as well as the exchange of Old Notes for New
Notes pursuant to the Exchange Offer.
The foregoing opinion is based on the Code, Treasury Regulations,
Internal Revenue Service rulings and pronouncements, and judicial decisions now
in effect, any one of which may be changed, possibly with retroactive effect.
No opinion is expressed on any matters other than those specifically referred to
herein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Weil, Gotshal & Manges LLP
-------------------------------
WEIL, GOTSHAL & MANGES LLP
2
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement"), dated as of April 23, 1998,
between GLOBAL HEALTH SCIENCES, INC., a Delaware corporation (the "Company"),
and RICHARD D. MARCONI (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company is engaged in the business of manufacturing
dietary and nutritional supplements in the United States and throughout the
world (the "Business"); and
WHEREAS, the Company desires to retain the services of the Executive
in the capacity of Chairman of the Board of Directors and President of the
Company, and the Executive desires to provide such services in such capacity to
the Company, on the terms and subject to the conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and obligations hereinafter set forth, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. Employment and Term.
(a) The Company hereby employs the Executive, and the Executive
hereby accepts employment by the Company, in the capacities and on the terms and
subject to the conditions set forth herein from April 23, 1998 until April 23,
2003 (the "Term of Employment"). At least ninety (90) days prior to the
expiration of the Term of Employment, the Company shall notify the Executive if,
and under what terms and conditions, the Company will offer to extend the Term
of Employment.
<PAGE>
2. Duties. During the Term of Employment, the Executive shall serve
as the Company's Chairman of the Board of Directors and President. In addition,
while it is understood that the right to elect directors of the Company is by
law vested in the shareholders of the Company, it is nevertheless contemplated,
subject to such right, that the Executive shall, at all times during the Term of
Employment, be a member of the Board of Directors of the Company (and act as
Chairman thereof). The Executive shall serve the Company faithfully and to the
best of his ability in such capacities and shall devote substantially all of his
business time, attention, knowledge, energy and skills to such employment. If
elected, the Executive also shall serve during any part of the Term of
Employment as any other officer of the Company or as an officer or director of
any of the Company's subsidiaries without any additional compensation other than
as specified in this Agreement.
3. Compensation and Benefits. As full and complete compensation to
the Executive for his execution and delivery of this Agreement and performance
of the services required hereunder, the Company shall pay, grant or provide the
Executive, and the Executive agrees to accept, the following salary and other
compensation and benefits:
(a) an annual base salary, payable in accordance with the Company's
standard payroll practices for senior executive officers, of $2,000,000 per
annum ("Base Salary");
2
<PAGE>
(b) an annual bonus, determined by the Board of Directors of the
Company, payable with respect to each full fiscal year of the Company during the
Term of Employment in which the total EBITDA (i.e., net income before interest
income (expense), income taxes and depreciation and amortization) of the Company
(on a consolidated basis) exceeds $50,000,000, provided, however, that the
amount of such annual bonus shall not exceed 15% of the amount by which the
Company's EBITDA in such fiscal year exceeds $50,000,000;
(c) an annual automobile allowance to allow Executive to maintain an
automobile comparable to his present automobile during the Term of Employment;
(d) the right to participate in any savings and stock option plans
or programs and in any medical, dental, disability, retirement, insurance,
savings, vacation, holiday, paid sick leave or other plans as in effect from
time to time for the benefit of the Company's senior executive officers;
(e) the right to participate in any long-term incentive program as
in effect from time to time for the benefit of senior executive officers
implemented by the Company or any of its subsidiaries;
(f) prompt reimbursement for all reasonable business-related
expenses incurred by the Executive, in accordance with the policies and
procedures of the Company as in effect from time to time for senior executive
officers; and
3
<PAGE>
(g) paid vacation in accordance with the policies and procedures of
the Company as in effect from time to time for senior executive officers.
4. Termination.
(a) Death. In the event of the death of the Executive during the
Term of Employment, this Agreement shall automatically terminate and the Company
shall have no further obligations hereunder, except to pay the Executive's
beneficiary or legal representative the Base Salary prorated to the date of
death.
(b) Cause. The Company shall have the right, upon written notice to
the Executive, to terminate the Executive's employment under this Agreement for
Cause (as hereinafter defined), effective upon the giving of such notice (or
such later date as shall be specified in such notice), and the Company shall
have no further obligations hereunder, except to pay the Executive his Base
Salary prorated to the effective date of termination, and the Executive shall
continue to have the obligations provided for in Sections 6 and 7 hereof.
For purposes of this Agreement, "Cause" means:
(i) fraud, embezzlement, gross insubordination on the part of
the Executive or any act of moral turpitude or misconduct by the Executive;
(ii) conviction of or the entry of a plea of nolo contendere
by the Executive for any felony; or
4
<PAGE>
(iii) a material breach of, or the willful failure or refusal
by the Executive to perform and discharge, his duties, responsibilities or
obligations under this Agreement.
(c) Change of Control. The Executive shall have the right to
terminate his employment under this Agreement upon a Change of Control (as
hereinafter defined) upon at least three months' prior written notice thereof to
the Company given within 30 days of the first occurrence of any event
constituting a Change of Control, in which case the Executive's employment under
this Agreement shall terminate on the date specified in such notice. In the
event of any termination of employment by the Executive upon a Change of
Control, the Executive shall have no further obligations under this Agreement
other than the obligations provided for in Sections 6 and 7 hereof. The failure
by the Executive to give such written notice in such 30-day period shall
preclude the Executive from terminating his employment upon a Change of Control
with respect to such occurrence. In the event of any termination of employment
by the Executive upon a Change of Control, the Company shall have no further
obligations hereunder, except to pay the Executive (i) his Base Salary prorated
to the effective date of termination, (ii) one year severance pay equal to his
annual Base Salary and (iii) if such termination occurs after Executive has
received an annual bonus pursuant to the terms hereof, an additional payment
equal to his most recently received annual bonus prorated to the effective date
of termination. It is understood and agreed that, during the three-month period
following the
5
<PAGE>
Executive's delivery of notice of termination to the Company upon a Change of
Control, the Executive shall cooperate fully with the Company to effect the
orderly transfer of the Executive's duties to another person or persons.
Notwithstanding anything to the contrary contained herein, upon receipt of the
Executive's notice of termination upon a Change of Control, the Company shall
have the right to cause the Executive's termination to become effective prior to
the end of the three-month period or the date specified in the notice therefor
by giving at least two business days' notice thereof to the Executive.
For purposes of this Agreement, a "Change of Control" means the
occurrence of any one of the following events: (a) a change in control of the
direction and administration of the Company's business of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as in effect on the date hereof and any successor provision of
the regulations under the Exchange Act, (b) the approval by the Board of
Directors of a sale of all or substantially all of the assets of the Company to
any unrelated third party and the consummation of such transaction or (c) the
consummation of any merger, consolidation, or like business combination or
reorganization of the Company, approved by the Board of Directors of the
Company, which would result in the occurrence of an event described in clause
(a) above or a change in the Board of Directors so that during any period of two
(2) consecutive years, the individuals who at the beginning of such
6
<PAGE>
period constitute the Board of Directors or any individuals who would be
"Continuing Directors" (as hereinafter defined) cease for any reason to
constitute at least a majority thereof.
For purposes of this Agreement, "Continuing Directors" shall mean
the directors of the Company in office on the date hereof and any successor to
any such director and any additional director who, after the date hereof (i) was
nominated or selected by a majority of the Continuing Directors in office at the
time of his nomination or selection and (ii) is not an "affiliate" or
"associate" (as defined in Regulation 12B under the Exchange Act) at the time of
his nomination or selection of any person who is the beneficial owner, directly
or indirectly, of securities representing ten percent (10%) or more of the
combined voting power of the Company's outstanding securities then entitled
ordinarily to vote for the election of directors.
5. Resignation upon Termination. Upon the termination of the
Executive's employment hereunder for any reason the Executive agrees that he
shall immediately resign from all offices and directorships held by him in the
Company or any of its subsidiaries or affiliates and agrees to execute any and
all documents reasonably necessary to effect such resignations as requested by
the Company.
6. Confidentiality; Ownership of Developments.
(a) During the Term of Employment and for any time thereafter, the
Executive shall keep secret and retain in strictest confidence and not divulge,
disclose,
7
<PAGE>
discuss, copy or otherwise use or suffer to be used in any manner, except in
connection with the Business of the Company and of any of the subsidiaries or
affiliates of the Company, any trade secrets, confidential or proprietary
information and all other knowledge, know-how, information, documents or
materials owned, developed or possessed by the Company or any of the
subsidiaries or affiliates of the Company, whether in tangible or intangible
form, pertaining to the Business of the Company or any of the subsidiaries or
affiliates of the Company, or authorize or assist in the taking of any such
actions by any third party.
(b) The Executive acknowledges that all developments, including,
without limitation, formulas, inventions (patentable or otherwise), discoveries,
improvements, patents, trade secrets, designs, reports, computer software, flow
charts and diagrams, procedures, data, documentation, ideas and writings and
applications thereof relating to the Business or planned business of the Company
or any of the subsidiaries or affiliates of the Company that, alone or jointly
with others, the Executive may conceive, create, make, develop, reduce to
practice or acquire during the Term of Employment (collectively, the
"Developments") are works made for hire and shall remain the sole and exclusive
property of the Company and the Executive hereby assigns to the Company all of
his right, title and interest in and to all such Developments.
8
<PAGE>
(c) The provisions of this Section 6 shall, without any limitation
as to time, survive the expiration or termination of the Executive's employment
hereunder, irrespective of the reason for any termination.
7. Covenant Not to Compete. The Executive agrees that during the
Term of Employment and for a period of one year commencing upon the expiration
or termination of the Executive's employment hereunder, the Executive shall not,
directly or indirectly, without the prior written consent of the Company:
(a) solicit, entice, persuade or induce any employee, consultant,
agent or independent contractor of the Company or of any of the subsidiaries or
affiliates of the Company to terminate his or her employment or engagement with
the Company or such subsidiary or affiliate, to become employed by any person,
firm or corporation other than the Company or such subsidiary or affiliate or
approach any such employee, consultant, agent or independent contractor for any
of the foregoing purposes; or
(b) directly or indirectly own, manage, control, invest or
participate in any way in, consult with, be employed by, or render services for
(whether as a director, consultant or otherwise) any person or entity (other
than the Company or any of the subsidiaries or affiliates of the Company)
engaged in the business of manufacturing or distributing dietary and nutritional
supplements; provided, however, that nothing in this Section 7(b) shall prevent
Executive from engaging in any such activity that exists as of the date hereof
with such person or entity or otherwise
9
<PAGE>
investing in, consulting with or rendering services for any person or entity in
the ordinary course of the Company's business.
8. Specific Performance. The Executive acknowledges that the
services to be rendered by the Executive are of a special, unique and
extraordinary character and, in connection with such services, the Executive
will have access to confidential information vital to the Company's Business and
the subsidiaries and affiliates of the Company. By reason of this, the Executive
consents and agrees that if the Executive violates any of the provisions of
Sections 6 or 7 hereof, the Company and the subsidiaries and affiliates of the
Company would sustain irreparable injury and that monetary damages will not
provide adequate remedy to the Company and that the Company shall be entitled to
have Sections 6 or 7 specifically enforced by any court having equity
jurisdiction. Nothing contained herein shall be construed as prohibiting the
Company or any of the subsidiaries or affiliates of the Company from pursuing
any other remedies available to it for such breach or threatened breach,
including the recovery of damages from the Executive.
9. Entire Agreement. This Agreement embodies the entire agreement of
the parties with respect to the Executive's employment and supersedes any other
prior oral or written agreements, arrangements or understandings between the
Executive and the Company. This Agreement may not be changed or terminated
orally but only by an agreement in writing signed by the parties hereto.
10
<PAGE>
10. Governing Law; Jurisdiction. (a) This Agreement shall be subject
to, and governed by, the laws of the State of California applicable to contracts
made and to be performed therein.
(b) Any action to enforce any of the provisions of this Agreement
shall be brought in a court of the State of California located in Los Angeles
County or in a Federal court located in Los Angeles, California. The parties
consent to the jurisdiction of such courts and to the service of process in any
manner provided by Ohio law. Each party irrevocably waives any objection which
it may now or hereafter have to the venue of any such suit, action or proceeding
brought in such court.
(c) The prevailing party in any action to enforce any of the
provisions of this Agreement shall be entitled to reimbursement from the other
party for its or his costs and expenses (including attorneys fees and expenses)
incurred in connection with such action.
11. Assignability. The obligations of the Executive may not be
delegated and the Executive may not, without the Company's written consent
thereto, assign, transfer, convey, pledge, encumber, hypothecate or otherwise
dispose of this Agreement or any interest herein. Any such attempted delegation
or disposition shall be null and void and without effect. The Company and the
Executive agree that this Agreement and all of the Company's rights and
obligations hereunder may be
11
<PAGE>
assigned or transferred by the Company to any subsidiary or successor to the
Company.
12. Severability. If any provision of this Agreement or any part
thereof, including, without limitation, Sections 6 and 7, as applied to either
party or to any circumstances shall be adjudged by a court of competent
jurisdiction to be void or unenforceable, the same shall in no way affect any
other provision of this Agreement or remaining part thereof, which shall be
given full effect without regard to the invalid or unenforceable part thereof,
or the validity or enforceability of this Agreement.
If any court construes any of the provisions of Section 6 or 7, or
any part thereof, to be unreasonable because of the duration of such provision
or the geographic scope thereof, such court may reduce the duration or restrict
or redefine the geographic scope of such provision and enforce such provision as
so reduced, restricted or redefined.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
GLOBAL HEALTH SCIENCES, INC.
By: /s/ Richard D. Marconi
---------------------------------
Name: Richard D. Marconi
Title: President
/s/ Richard D. Marconi
-------------------------------------
RICHARD D. MARCONI
13
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement"), dated as of April 23, 1998,
between GLOBAL HEALTH SCIENCES, INC., a Delaware corporation (the "Company"),
and PAUL BUXBAUM (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company is engaged in the business of manufacturing
dietary and nutritional supplements in the United States and throughout the
world (the "Business"); and
WHEREAS, the Company desires to retain the services of the Executive
in the capacity of Chief Executive Officer of the Company, and the Executive
desires to provide such services in such capacity to the Company, on the terms
and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and obligations hereinafter set forth, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. Employment and Term.
(a) The Company hereby employs the Executive, and the Executive
hereby accepts employment by the Company, in the capacities and on the terms and
subject to the conditions set forth herein from April 20, 1998 until April 19,
2001 (the "Term of Employment"). At least ninety (90) days prior to the
expiration of the
<PAGE>
Term of Employment, the Company shall notify the Executive if, and under what
terms and conditions, the Company will offer to extend the Term of Employment.
2. Duties. During the Term of Employment, the Executive shall serve
as the Company's Chief Executive Officer. In addition, while it is understood
that the right to elect directors of the Company is by law vested in the
shareholders of the Company, it is nevertheless contemplated, subject to such
right, that the Executive shall, at all times during the Term of Employment, be
a member of the Board of Directors of the Company; provided that the failure of
the Executive to be elected a director or to retain a directorship of the
Company shall not constitute a breach of this Agreement by the Company. As Chief
Executive Officer, the Executive shall be the most senior officer of the
Company, with all supervisory authority and power over the other senior officers
of the Company, including principal responsibility for recommendations to the
Board of Directors of the Company regarding the hiring and termination of other
senior officers and with such other powers, duties and responsibilities with
respect to the business of the Company as are customary to his offices and
positions or as the Board of Directors of the Company may reasonably request
consistent therewith.
The Executive shall serve the Company faithfully and to the best of
his ability in such capacities and shall devote substantially all of his
business time, attention, knowledge, energy and skills to such employment.
2
<PAGE>
If elected, the Executive also shall serve during any part of the
Term of Employment as any other officer of the Company or as an officer or
director of any of the Company's subsidiaries without any additional
compensation other than as specified in this Agreement.
3. Compensation and Benefits. As full and complete compensation to
the Executive for his execution and delivery of this Agreement and performance
of the services required hereunder, the Company shall pay, grant or provide the
Executive, and the Executive agrees to accept, the following salary and other
compensation and benefits:
(a) an annual base salary, payable in accordance with the Company's
standard payroll practices for senior executive officers, of $450,000 per annum
("Base Salary");
(b) an annual bonus, payable with respect to each full fiscal year
of the Company during the Term of Employment, or pro rata portion thereof, in
each case based upon the performance of the Company for each applicable full
fiscal year of the Company and otherwise as determined by the Board of Directors
of the Company, in effect from time to time;
(c) an annual automobile allowance, payable in equal monthly
installments during the Term of Employment of $850 per month;
(d) the right to participate in any savings and stock option plans
or programs and in any medical, dental, disability, retirement, insurance,
savings,
3
<PAGE>
vacation, holiday, paid sick leave or other plans as in effect from time to time
for the benefit of the Company's senior executive officers;
(e) the right to participate in any long-term incentive program as
in effect from time to time for the benefit of senior executive officers
implemented by the Company or any of its subsidiaries;
(f) prompt reimbursement for all reasonable business-related
expenses incurred by the Executive, in accordance with the policies and
procedures of the Company as in effect from time to time for senior executive
officers; and
(g) paid vacation in accordance with the policies and procedures of
the Company as in effect from time to time for senior executive officers.
4. Termination.
(a) Disability. In the event of any physical or mental disability
during the Term of Employment which renders the Executive incapable of
performing the services required of him for any period or periods aggregating
three months during any twelve-month period, the Company shall have the right,
upon written notice to the Executive, to terminate the Executive's employment
hereunder, effective upon the giving of such notice (or such later date as shall
be specified in such notice). Upon such termination, the Company shall have no
further obligations hereunder, except to pay the Executive his Base Salary
prorated to the effective date of termination or provide the Executive any
benefits to which the Executive may otherwise have been entitled but for the
Executive's disability prorated to the effective date of termination.
4
<PAGE>
(b) Death. In the event of the death of the Executive during the
Term of Employment, this Agreement shall automatically terminate and the Company
shall have no further obligations hereunder, except to pay the Executive's
beneficiary or legal representative the Base Salary prorated to the date of
death.
(c) Cause. The Company shall have the right, upon written notice to
the Executive, to terminate the Executive's employment under this Agreement for
Cause (as hereinafter defined), effective upon the giving of such notice (or
such later date as shall be specified in such notice), and the Company shall
have no further obligations hereunder, except to pay the Executive his Base
Salary prorated to the effective date of termination, and the Executive shall
continue to have the obligations provided for in Sections 6 and 7 hereof.
For purposes of this Agreement, "Cause" means:
(i) fraud, embezzlement, gross insubordination on the part of
the Executive or any act of moral turpitude or misconduct by the Executive;
(ii) conviction of or the entry of a plea of nolo contendere
by the Executive for any felony; or
(iii) a material breach of, or the willful failure or refusal
by the Executive to perform and discharge, his duties, responsibilities or
obligations under this Agreement.
5
<PAGE>
(d) Change of Control. The Executive shall have the right to
terminate his employment under this Agreement upon a Change of Control (as
hereinafter defined) upon at least three months' prior written notice thereof to
the Company given within 30 days of the first occurrence of any event
constituting a Change of Control, in which case the Executive's employment under
this Agreement shall terminate on the date specified in such notice. In the
event of any termination of employment by the Executive upon a Change of
Control, the Executive shall have no further obligations under this Agreement
other than the obligations provided for in Sections 6 and 7 hereof. The failure
by the Executive to give such written notice in such 30-day period shall
preclude the Executive from terminating his employment upon a Change of Control
with respect to such occurrence. In the event of any termination of employment
by the Executive upon a Change of Control, the Company shall have no further
obligations hereunder, except to pay the Executive (i) his Base Salary prorated
to the effective date of termination, (ii) one year severance pay equal to his
annual Base Salary and (iii) if such termination occurs after Executive has
received an annual bonus pursuant to the terms hereof, an additional payment
equal to his most recently received annual bonus prorated to the effective date
of termination. It is understood and agreed that, during the three-month period
following the Executive's delivery of notice of termination to the Company upon
a Change of Control, the Executive shall cooperate fully with the Company to
effect the orderly transfer of the Executive's duties to another person or
persons. Notwithstanding
6
<PAGE>
anything to the contrary contained herein, upon receipt of the Executive's
notice of termination upon a Change of Control, the Company shall have the right
to cause the Executive's termination to become effective prior to the end of the
three-month period or the date specified in the notice therefor by giving at
least two business days' notice thereof to the Executive.
For purposes of this Agreement, a "Change of Control" means the
occurrence of any one of the following events: (a) a change in control of the
direction and administration of the Company's business of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as in effect on the date hereof and any successor provision of
the regulations under the Exchange Act, (b) the approval by the Board of
Directors of a sale of all or substantially all of the assets of the Company to
any unrelated third party and the consummation of such transaction or (c) the
consummation of any merger, consolidation, or like business combination or
reorganization of the Company, approved by the Board of Directors of the
Company, which would result in the occurrence of an event described in clause
(a) above or a change in the Board of Directors so that during any period of two
(2) consecutive years, the individuals who at the beginning of such period
constitute the Board of Directors or any individuals who would be "Continuing
Directors" (as hereinafter defined) cease for any reason to constitute at least
a majority thereof.
7
<PAGE>
For purposes of this Agreement, "Continuing Directors" shall mean
the directors of the Company in office on the date hereof and any successor to
any such director and any additional director who, after the date hereof (i) was
nominated or selected by a majority of the Continuing Directors in office at the
time of his nomination or selection and (ii) is not an "affiliate" or
"associate" (as defined in Regulation 12B under the Exchange Act) at the time of
his nomination or selection of any person who is the beneficial owner, directly
or indirectly, of securities representing ten percent (10%) or more of the
combined voting power of the Company's outstanding securities then entitled
ordinarily to vote for the election of directors.
5. Resignation upon Termination. Upon the termination of the
Executive's employment hereunder for any reason the Executive agrees that he
shall immediately resign from all offices and directorships held by him in the
Company or any of its subsidiaries or affiliates and agrees to execute any and
all documents reasonably necessary to effect such resignations as requested by
the Company.
6. Confidentiality; Ownership of Developments.
(a) During the Term of Employment and for any time thereafter, the
Executive shall keep secret and retain in strictest confidence and not divulge,
disclose, discuss, copy or otherwise use or suffer to be used in any manner,
except in connection with the Business of the Company and of any of the
subsidiaries or affiliates of the Company, any trade secrets, confidential or
proprietary information
8
<PAGE>
and all other knowledge, know-how, information, documents or materials owned,
developed or possessed by the Company or any of the subsidiaries or affiliates
of the Company, whether in tangible or intangible form, pertaining to the
Business of the Company or any of the subsidiaries or affiliates of the Company,
or authorize or assist in the taking of any such actions by any third party.
(b) The Executive acknowledges that all developments, including,
without limitation, formulas, inventions (patentable or otherwise), discoveries,
improvements, patents, trade secrets, designs, reports, computer software, flow
charts and diagrams, procedures, data, documentation, ideas and writings and
applications thereof relating to the Business or planned business of the Company
or any of the subsidiaries or affiliates of the Company that, alone or jointly
with others, the Executive may conceive, create, make, develop, reduce to
practice or acquire during the Term of Employment (collectively, the
"Developments") are works made for hire and shall remain the sole and exclusive
property of the Company and the Executive hereby assigns to the Company all of
his right, title and interest in and to all such Developments.
(c) The provisions of this Section 6 shall, without any limitation
as to time, survive the expiration or termination of the Executive's employment
hereunder, irrespective of the reason for any termination.
7. Covenant Not to Compete. The Executive agrees that during the
Term of Employment and for a period of one year commencing upon the expiration
9
<PAGE>
or termination of the Executive's employment hereunder, the Executive shall not,
directly or indirectly, without the prior written consent of the Company:
(a) solicit, entice, persuade or induce any employee, consultant,
agent or independent contractor of the Company or of any of the subsidiaries or
affiliates of the Company to terminate his or her employment or engagement with
the Company or such subsidiary or affiliate, to become employed by any person,
firm or corporation other than the Company or such subsidiary or affiliate or
approach any such employee, consultant, agent or independent contractor for any
of the foregoing purposes; or
(b) directly or indirectly own, manage, control, invest or
participate in any way in, consult with, be employed by, or render services for
(whether as a director, consultant or otherwise) any person or entity (other
than the Company or any of the subsidiaries or affiliates of the Company)
engaged in the business of manufacturing or distributing dietary and nutritional
supplements.
8. Specific Performance. The Executive acknowledges that the
services to be rendered by the Executive are of a special, unique and
extraordinary character and, in connection with such services, the Executive
will have access to confidential information vital to the Company's Business and
the subsidiaries and affiliates of the Company. By reason of this, the Executive
consents and agrees that if the Executive violates any of the provisions of
Sections 6 or 7 hereof, the Company and the subsidiaries and affiliates of the
Company would sustain irreparable injury and
10
<PAGE>
that monetary damages will not provide adequate remedy to the Company and that
the Company shall be entitled to have Sections 6 or 7 specifically enforced by
any court having equity jurisdiction. Nothing contained herein shall be
construed as prohibiting the Company or any of the subsidiaries or affiliates of
the Company from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of damages from the Executive.
9. Entire Agreement. This Agreement embodies the entire agreement of
the parties with respect to the Executive's employment and supersedes any other
prior oral or written agreements, arrangements or understandings between the
Executive and the Company. This Agreement may not be changed or terminated
orally but only by an agreement in writing signed by the parties hereto.
10. Governing Law; Jurisdiction. (a) This Agreement shall be subject
to, and governed by, the laws of the State of California applicable to contracts
made and to be performed therein.
(b) Any action to enforce any of the provisions of this Agreement
shall be brought in a court of the State of California located in Los Angeles
County or in a Federal court located in Los Angeles, California. The parties
consent to the jurisdiction of such courts and to the service of process in any
manner provided by Ohio law. Each party irrevocably waives any objection which
it may now or hereafter have to the venue of any such suit, action or proceeding
brought in such court.
11
<PAGE>
(c) The prevailing party in any action to enforce any of the
provisions of this Agreement shall be entitled to reimbursement from the other
party for its or his costs and expenses (including attorneys fees and expenses)
incurred in connection with such action.
11. Assignability. The obligations of the Executive may not be
delegated and the Executive may not, without the Company's written consent
thereto, assign, transfer, convey, pledge, encumber, hypothecate or otherwise
dispose of this Agreement or any interest herein. Any such attempted delegation
or disposition shall be null and void and without effect. The Company and the
Executive agree that this Agreement and all of the Company's rights and
obligations hereunder may be assigned or transferred by the Company to any
subsidiary or successor to the Company.
12. Severability. If any provision of this Agreement or any part
thereof, including, without limitation, Sections 6 and 7, as applied to either
party or to any circumstances shall be adjudged by a court of competent
jurisdiction to be void or unenforceable, the same shall in no way affect any
other provision of this Agreement or remaining part thereof, which shall be
given full effect without regard to the invalid or unenforceable part thereof,
or the validity or enforceability of this Agreement.
If any court construes any of the provisions of Section 6 or 7, or
any part thereof, to be unreasonable because of the duration of such provision
or the
12
<PAGE>
geographic scope thereof, such court may reduce the duration or restrict or
redefine the geographic scope of such provision and enforce such provision as so
reduced, restricted or redefined.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
GLOBAL HEALTH SCIENCES, INC.
By: /s/ Richard D. Marconi
------------------------------------
Name: Richard D. Marconi
Title: President
/s/ Paul Buxbaum
---------------------------------------
PAUL BUXBAUM
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement"), dated as of April 23, 1998,
between GLOBAL HEALTH SCIENCES, INC., a Delaware corporation (the "Company"),
and Donald J. Lewis (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company is engaged in the business of manufacturing
dietary and nutritional supplements in the United States and throughout the
world (the "Business"); and
WHEREAS, the Company desires to retain the services of the Executive
in the capacity of Senior Vice President and Chief Financial Officer of the
Company, and the Executive desires to provide such services in such capacity to
the Company, on the terms and subject to the conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and obligations hereinafter set forth, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. Employment and Term.
(a) The Company hereby employs the Executive, and the Executive
hereby accepts employment by the Company, in the capacities and on the terms and
subject to the conditions set forth herein from April 20, 1998 until April 19,
2001 unless terminated earlier as provided herein (the "Term of Employment"). At
least
<PAGE>
ninety (90) days prior to the expiration of the Term of Employment, the Company
shall notify the Executive if, and under what terms and conditions, the Company
will offer to extend the Term of Employment.
2. Duties. During the Term of Employment, the Executive shall serve
as the Company's Senior Vice President and Chief Financial Officer. The
Executive shall report to the Chief Executive Officer of the Company. In
addition, while it is understood that the right to elect directors of the
Company is by law vested in the shareholders of the Company, it is nevertheless
contemplated, subject to such right, that the Executive shall, at all times
during the Term of Employment, be a member of the Board of Directors of the
Company; provided that the failure of the Executive to be elected a director or
to retain a directorship of the Company shall not constitute a breach of this
Agreement by the Company. The Executive shall serve the Company faithfully and
to the best of his ability in such capacities and shall devote substantially all
of his business time, attention, knowledge, energy and skills to such
employment. If elected, the Executive also shall serve during any part of the
Term of Employment as any other officer of the Company or as an officer or
director of any of the Company's subsidiaries without any additional
compensation other than as specified in this Agreement.
3. Compensation and Benefits. As full and complete compensation to
the Executive for his execution and delivery of this Agreement and performance
of the services required hereunder, the Company shall pay, grant or provide the
2
<PAGE>
Executive, and the Executive agrees to accept, the following salary and other
compensation and benefits:
(a) an annual base salary, payable in accordance with the Company's
standard payroll practices for senior executive officers, of $225,000 per annum
("Base Salary");
(b) an annual bonus, payable with respect to each full fiscal year
of the Company during the Term of Employment, or pro rata portion thereof, in
each case based upon the performance of the Company for each applicable full
fiscal year of the Company and otherwise as determined by the Board of Directors
of the Company, in effect from time to time;
(c) reimbursement to the Executive for (i) his actual closing costs
for the sale of Executive's home in Atlanta, Georgia, including any fees and
commissions paid to real estate agents and attorneys in connection with such
sale, (ii) rental costs relating to temporary housing in California until the
earlier of (a) the purchase of a residence in California and (b) September 30,
1998 and (iii) travel to Atlanta, Georgia at reasonable intervals until the
earlier of (a) the relocation of Executive's family to California and (b)
September 30, 1998;
(d) a relocation allowance of $20,000 to cover reasonable
out-of-pocket expenses incurred in connection with moving household effects,
transportation costs in moving the Executive's family and a decorating allowance
for a new residence in California;
3
<PAGE>
(e) the right to participate in any medical, dental, disability,
retirement, insurance, savings, vacation, holiday, paid sick leave or other
plans as in effect from time to time for the benefit of the Company's senior
executive officers;
(f) an annual automobile allowance, payable in equal monthly
installments during the Term of Employment, of $850 per month;
(g) prompt reimbursement for all reasonable business-related
expenses incurred by the Executive, in accordance with the policies and
procedures of the Company as in effect from time to time for senior executive
officers; and
(h) paid vacation in accordance with the policies and procedures of
the Company as in effect from time to time for senior executive officers.
4. Termination.
(a) Disability. In the event of any physical or mental disability
during the Term of Employment which renders the Executive incapable of
performing the services required of him for any period or periods aggregating
three months during any twelve-month period, the Company shall have the right,
upon written notice to the Executive, to terminate the Executive's employment
hereunder, effective upon the giving of such notice (or such later date as shall
be specified in such notice). Upon such termination, the Company shall have no
further obligations hereunder, except to pay the Executive his Base Salary
prorated to the effective date of termination or provide the Executive any
benefits to which the Executive may
4
<PAGE>
otherwise have been entitled but for the Executive's disability prorated to the
effective date of termination.
(b) Death. In the event of the death of the Executive during the
Term of Employment, this Agreement shall automatically terminate and the Company
shall have no further obligations hereunder, except to pay the Executive's
beneficiary or legal representative the Base Salary prorated to the date of
death.
(c) Cause. The Company shall have the right, upon written notice to
the Executive, to terminate the Executive's employment under this Agreement for
Cause (as hereinafter defined), effective upon the giving of such notice (or
such later date as shall be specified in such notice), and the Company shall
have no further obligations hereunder, except to pay the Executive his Base
Salary prorated to the effective date of termination, and the Executive shall
continue to have the obligations provided for in Sections 6 and 7 hereof.
For purposes of this Agreement, "Cause" means:
(i) fraud, embezzlement, gross insubordination on the part of
the Executive or any act of moral turpitude or misconduct by the Executive;
(ii) conviction of or the entry of a plea of nolo contendere
by the Executive for any felony; or
(iii) a material breach of, or the willful failure or refusal
by the Executive to perform and discharge, his duties, responsibilities or
obligations under this Agreement.
5
<PAGE>
(d) Without Cause. The Company shall have the right to terminate the
Executive's employment under this Agreement without Cause and upon written
notice, in which case the Executive's employment under this Agreement shall
terminate on the date specified in such notice (except that the Executive shall
continue to have the obligations provided for in Sections 6 and 7) and the
Company shall have no further obligations hereunder, except to pay the Executive
(i) his Base Salary prorated to the effective date of termination and (ii) one
year severance pay equal to his annual Base Salary at the time of termination.
(e) Change of Control. The Executive shall have the right to
terminate his employment under this Agreement upon a Change of Control (as
hereinafter defined) upon at least three months' prior written notice thereof to
the Company given within 30 days of the first occurrence of any event
constituting a Change of Control, in which case the Executive's employment under
this Agreement shall terminate on the date specified in such notice. In the
event of any termination of employment by the Executive upon a Change of
Control, the Executive shall have no further obligations under this Agreement
other than the obligations provided for in Sections 6 and 7 hereof. The failure
by the Executive to give such written notice in such 30-day period shall
preclude the Executive from terminating his employment upon a Change of Control
with respect to such occurrence. In the event of any termination of employment
by the Executive upon a Change of Control, the Company shall have no further
obligations hereunder, except to pay the Executive (i) his Base
6
<PAGE>
Salary prorated to the effective date of termination, (ii) one year severance
pay equal to his annual Base Salary at the time of termination and (iii) if such
termination occurs after Executive has received an annual bonus pursuant to the
terms hereof, an additional payment equal to his most recently received annual
bonus prorated to the effective date of termination. It is understood and agreed
that, during the three-month period following the Executive's delivery of notice
of termination to the Company upon a Change of Control, the Executive shall
cooperate fully with the Company to effect the orderly transfer of the
Executive's duties to another person or persons. Notwithstanding anything to the
contrary contained herein, upon receipt of the Executive's notice of termination
upon a Change of Control, the Company shall have the right to cause the
Executive's termination to become effective prior to the end of the three-month
period or the date specified in the notice therefor by giving at least two
business days' notice thereof to the Executive.
For purposes of this Agreement, a "Change of Control" means the
occurrence of any one of the following events: (a) a change in control of the
direction and administration of the Company's business of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as in effect on the date hereof and any successor provision of
the regulations under the Exchange Act, (b) the approval by the Board of
Directors of a sale of all or substantially all of the assets of the Company to
any unrelated third party and the
7
<PAGE>
consummation of such transaction or (c) the consummation of any merger,
consolidation, or like business combination or reorganization of the Company,
approved by the Board of Directors of the Company, which would result in the
occurrence of an event described in clause (a) above or a change in the Board of
Directors so that during any period of two (2) consecutive years, the
individuals who at the beginning of such period constitute the Board of
Directors or any individuals who would be "Continuing Directors" (as hereinafter
defined) cease for any reason to constitute at least a majority thereof.
For purposes of this Agreement, "Continuing Directors" shall mean
the directors of the Company in office on the date hereof and any successor to
any such director and any additional director who, after the date hereof (i) was
nominated or selected by a majority of the Continuing Directors in office at the
time of his nomination or selection and (ii) is not an "affiliate" or
"associate" (as defined in Regulation 12B under the Exchange Act) at the time of
his nomination or selection of any person who is the beneficial owner, directly
or indirectly, of securities representing ten percent (10%) or more of the
combined voting power of the Company's outstanding securities then entitled
ordinarily to vote for the election of directors.
5. Resignation upon Termination. Upon the termination of the
Executive's employment hereunder for any reason the Executive agrees that he
shall immediately resign from all offices and directorships held by him in the
Company or
8
<PAGE>
any of its subsidiaries or affiliates and agrees to execute any and all
documents reasonably necessary to effect such resignations as requested by the
Company.
6. Confidentiality; Ownership of Developments.
(a) During the Term of Employment and for any time thereafter, the
Executive shall keep secret and retain in strictest confidence and not divulge,
disclose, discuss, copy or otherwise use or suffer to be used in any manner,
except in connection with the Business of the Company and of any of the
subsidiaries or affiliates of the Company, any trade secrets, confidential or
proprietary information and all other knowledge, know-how, information,
documents or materials owned, developed or possessed by the Company or any of
the subsidiaries or affiliates of the Company, whether in tangible or intangible
form, pertaining to the Business of the Company or any of the subsidiaries or
affiliates of the Company.
(b) The Executive acknowledges that all developments, including,
without limitation, formulas, inventions (patentable or otherwise), discoveries,
improvements, patents, trade secrets, designs, reports, computer software, flow
charts and diagrams, procedures, data, documentation, ideas and writings and
applications thereof relating to the Business or planned business of the Company
or any of the subsidiaries or affiliates of the Company that, alone or jointly
with others, the Executive may conceive, create, make, develop, reduce to
practice or acquire during the Term of Employment (collectively, the
"Developments") are works made for hire and shall remain the sole and exclusive
property of the Company and the Executive
9
<PAGE>
hereby assigns to the Company all of his right, title and interest in and to all
such Developments.
(c) The provisions of this Section 6 shall, without any limitation
as to time, survive the expiration or termination of the Executive's employment
hereunder, irrespective of the reason for any termination.
7. Covenant Not to Compete. The Executive agrees that during the
Term of Employment and for a period of one year commencing upon the expiration
or termination of the Executive's employment hereunder, the Executive shall not,
directly or indirectly, without the prior written consent of the Company:
(a) solicit, entice, persuade or induce any employee, consultant,
agent or independent contractor of the Company or of any of the subsidiaries or
affiliates of the Company to terminate his or her employment or engagement with
the Company or such subsidiary or affiliate, to become employed by any person,
firm or corporation other than the Company or such subsidiary or affiliate or
approach any such employee, consultant, agent or independent contractor for any
of the foregoing purposes, or authorize or assist in the taking of any such
actions by any third party; or
(b) directly or indirectly own, manage, control, invest or
participate in any way in, consult with, be employed by, or render services for
(whether as a director, consultant or otherwise) any person or entity (other
than the Company or
10
<PAGE>
any of the subsidiaries or affiliates of the Company) engaged in the business of
manufacturing or distributing dietary and nutritional supplements.
8. Specific Performance. The Executive acknowledges that the
services to be rendered by the Executive are of a special, unique and
extraordinary character and, in connection with such services, the Executive
will have access to confidential information vital to the Company's Business and
the subsidiaries and affiliates of the Company. By reason of this, the Executive
consents and agrees that if the Executive violates any of the provisions of
Sections 6 or 7 hereof, the Company and the subsidiaries and affiliates of the
Company would sustain irreparable injury and that monetary damages will not
provide adequate remedy to the Company and that the Company shall be entitled to
have Sections 6 or 7 specifically enforced by any court having equity
jurisdiction. Nothing contained herein shall be construed as prohibiting the
Company or any of the subsidiaries or affiliates of the Company from pursuing
any other remedies available to it for such breach or threatened breach,
including the recovery of damages from the Executive.
9. Entire Agreement. This Agreement embodies the entire agreement of
the parties with respect to the Executive's employment and supersedes any other
prior oral or written agreements, arrangements or understandings between the
Executive and the Company. This Agreement may not be changed or terminated
orally but only by an agreement in writing signed by the parties hereto.
11
<PAGE>
10. Governing Law; Jurisdiction. (a) This Agreement shall be subject
to, and governed by, the laws of the State of California applicable to contracts
made and to be performed therein.
(b) Any action to enforce any of the provisions of this Agreement
shall be brought in a court of the State of California located in Los Angeles
County or in a Federal court located in Los Angeles, California. The parties
consent to the jurisdiction of such courts and to the service of process in any
manner provided by Ohio law. Each party irrevocably waives any objection which
it may now or hereafter have to the venue of any such suit, action or proceeding
brought in such court.
(c) The prevailing party in any action to enforce any of the
provisions of this Agreement shall be entitled to reimbursement from the other
party for its or his costs and expenses (including attorneys fees and expenses)
incurred in connection with such action.
11. Assignability. The obligations of the Executive may not be
delegated and the Executive may not, without the Company's written consent
thereto, assign, transfer, convey, pledge, encumber, hypothecate or otherwise
dispose of this Agreement or any interest herein. Any such attempted delegation
or disposition shall be null and void and without effect. The Company and the
Executive agree that this Agreement and all of the Company's rights and
obligations hereunder may be
12
<PAGE>
assigned or transferred by the Company to any subsidiary or successor to the
Company.
12. Severability. If any provision of this Agreement or any part
thereof, including, without limitation, Sections 6 and 7, as applied to either
party or to any circumstances shall be adjudged by a court of competent
jurisdiction to be void or unenforceable, the same shall in no way affect any
other provision of this Agreement or remaining part thereof, which shall be
given full effect without regard to the invalid or unenforceable part thereof,
or the validity or enforceability of this Agreement.
If any court construes any of the provisions of Section 6 or 7, or
any part thereof, to be unreasonable because of the duration of such provision
or the geographic scope thereof, such court may reduce the duration or restrict
or redefine the geographic scope of such provision and enforce such provision as
so reduced, restricted or redefined.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
GLOBAL HEALTH SCIENCES, INC.
By: /s/ Richard D. Marconi
-----------------------------------
Name: Richard D. Marconi
Title: President
/s/ Donald J. Lewis
--------------------------------------
Donald J. Lewis
14
<PAGE>
CONSULTING AGREEMENT
CONSULTING AGREEMENT (this "Agreement"), dated as of April 23, 1998,
between Global Health Sciences, Inc., a California corporation (the "Company"),
and BGA Consulting ("Consultant").
W I T N E S S E T H :
WHEREAS, simultaneously herewith the Company has entered into an
Agreement and Plan of Reorganization providing for, among other things, the
reorganization (the "Reorganization") of the Company's current business
structure; and
WHEREAS, the Company desires to retain the Consultant to provide the
consulting services described herein to facilitate the operations of the Company
following the Reorganization, and the Consultant desires to provide such
services in such capacity to the Company, on the terms and subject to the
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and obligations hereinafter set forth, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. Engagement. Upon the terms and subject to the conditions set
forth in this Agreement, the Company hereby engages Consultant to serve as a
consultant to the Company, and Consultant hereby accepts such engagement.
2. Term.
(a) The term of this Agreement shall commence on April 23, 1998 and
shall continue until April 22, 2001 (the "Term"), unless otherwise terminated as
provided in Section 9 herein.
(b) Any due but unpaid Consulting Fee (as hereinafter defined) and
any reimbursement for expenses permitted under Section 5 hereof shall be paid by
the Company to Consultant within ten (10) business days after any such
termination.
3. Duties of Consultant. During the term of this Agreement,
Consultant shall furnish to the Company and its subsidiaries such advisory and
consulting services or undertake such special assignments within the area of its
<PAGE>
experience as may be requested from time to time by the Chairman of the Board of
Directors of the Company or the Chief Executive Officer, including, without
limitation, advice on matters relating to the Company and its operations,
post-Reorganization transition matters, acquisition strategies and other
projects.
4. Compensation. During the term of this Agreement, on a monthly
basis, as compensation for the services rendered by Consultant hereunder, the
Company shall pay to Consultant an annual consulting fee (the "Consulting Fee")
in an amount equal to four hundred thousand dollars ($400,000).
5. Expenses. The Company will reimburse Consultant for all
reasonable documented business expenses actually incurred by Consultant in the
course of Consultant's performance of its duties hereunder.
6. Assignment.
(a) The rights and obligations of the Company under this Agreement
shall inure to the benefit of, and shall be binding upon, the successors and
assigns of the Company.
(b) In view of the personal nature of the services to be performed
by Consultant under this Agreement, the rights and obligations of Consultant
under this Agreement may not be assigned by Consultant unless the Company gives
its express written consent to such assignment.
7. Independent Contractor.
(a) In performing its duties under this Agreement, Consultant shall
be an independent contractor. Consultant accepts exclusive and sole
responsibility for payment of any and all taxes and insurance (including but not
limited to unemployment insurance and/or disability insurance) it may owe to any
governmental authority, with respect to or on account of any payments made or
actions taken by the Company under this Agreement. Company shall not withhold
any federal, state or local taxes (or insurance) of any nature on behalf of
Consultant from the compensation to be received by Consultant hereunder.
Consultant shall indemnify and hold harmless the Company and its subsidiaries
from any liability, claims and demands for payment of taxes, penalties or
interest, social security, disability benefits and other withholdings,
deductions and/or payments that may be imposed by any governmental authority, or
otherwise authorized, based upon or required by reason of the payments made to
Consultant as provided in this Agreement.
2
<PAGE>
(b) The parties acknowledge and agree that Consultant is not
entitled to any employee benefits provided by the Company to its employees and
is not entitled to participate in any employee benefit plan or arrangement
sponsored by the Company for the benefit of its employees.
(c) Consultant shall have no authority to enter into contracts on
behalf of the Company or otherwise to bind or commit the Company to agreements
of any kind.
8. Confidential Information.
(a) The parties acknowledge and agree that, in connection with the
services to be provided under this Agreement, Consultant will have access to
Confidential Information (as hereinafter defined).
(b) "Confidential Information" shall mean (i) certain confidential
and proprietary information relating to the designing, development and
manufacturing of dietary and nutritional supplements and (ii) any and all
information relating to the business and affairs of the Company or any of its
subsidiaries, customers or suppliers which is acquired by Consultant in
connection with the performance of his duties hereunder. However, the term
"Confidential Information" shall not include any information or documents that
(x) are or become publicly available without breach by the Consultant of Section
8(c) hereof, (y) Consultant receives from any third party who, to the best of
Consultant's knowledge upon reasonable inquiry, is not in breach of an
obligation of confidence with the Company or any of its affiliates, or (z) is
required to be disclosed by law, statute, governmental or judicial proceeding;
provided, however, that in the event Consultant is requested by any governmental
or judicial authority to disclose any Confidential Information, Consultant shall
give the Company prompt notice of such request, such that the Company may seek a
protective order or other appropriate relief, and in any such proceeding
Consultant shall disclose only so much of the Confidential Information as is
required to be disclosed.
(c) Consultant agrees (i) to hold the Confidential Information in
strict confidence and shall not disclose such Confidential Information to any
person, firm, partnership, association, corporation or other entity, during and
after the term of this Agreement and (ii) not to make use of any Confidential
Information of the Company other than as necessary in the performance of this
Agreement.
3
<PAGE>
(d) Upon termination of this Agreement by either party, or upon the
request of the Company during the term of this Agreement, Consultant will return
to the Company all property, lists, information, memoranda, and documents
containing Confidential Information of the type described in Section 8(b)(ii)
hereof and all property belonging to the Company in Consultant's possession or
subject to Consultant's control, and Consultant shall not retain any copies,
abstracts, formulae, diagrams or other physical embodiment of any Confidential
Information of the type described in Section 8(b)(ii) hereof.
9. Termination. This Agreement will be terminated in the event that
the employment by the Company of Mr. Paul Buxbaum is terminated pursuant to the
terms and conditions of that certain Employment Agreement dated as of April 23,
1998 by and between Mr. Buxbaum and the Company.
10. Complete Understanding; Amendment. This Agreement constitutes
the entire agreement and understanding of the parties hereto in respect of the
matters set forth herein. This Agreement may not be altered, modified, amended
or rescinded except in writing, signed by the parties hereto.
11. Severability. In case any one or more of the provisions shall be
invalid, illegal or unenforceable in any respect, such provisions shall be
ineffective to the extent of such invalidity, illegality or unenforceability and
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected thereby.
12. Notices. All notices to the Company or the Consultant permitted
or required hereunder shall be in writing and shall be delivered personally, by
facsimile transmission or by courier service providing for next-day delivery or
sent by registered or certified mail, return receipt requested, to the following
addresses:
The Company:
Global Health Sciences, Inc.
987 Enterprise Way
Orange, California 92867
Tel: (714) 633-2320
Attn: Richard D. Marconi
4
<PAGE>
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Tel: (212) 310-8566
Fax: (212) 735-4781
Attn: Michael E. Lubowitz, Esq.
The Consultant:
BGA Consulting
with a copy to:
____________________________________
____________________________________
____________________________________
____________________________________
Either party may change the address to which notices shall be sent by sending
written notice of such change of address to the other party. Any such notice
shall be deemed given, if delivered personally, upon receipt; if sent by
facsimile, when transmitted; if sent by courier service providing for next-day
delivery, the next business day following deposit with such courier service; and
if sent by certified or registered mail, 3 days after deposit (postage prepaid)
with the U.S. mail service.
13. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
14. Governing Law. This Agreement shall be subject to, and governed
by, the laws of the State of California applicable to contracts made and to be
performed in the State of California.
(signature page follows)
5
<PAGE>
IN WITNESS WHEREOF, the Company and Consultant have executed this
Agreement as of the date first above written.
GLOBAL HEALTH SCIENCES, INC.
By: /s/ Richard D. Marconi
------------------------------
Name: Richard D. Marconi
Title: President
BGA CONSULTING
By: /s/ Paul Buxbaum
------------------------------
Name: Paul Buxbaum
Title: President
6
<PAGE>
Exhibit 10.8
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT ("Agreement"), dated as of June 1, 1998, between
GLOBAL HEALTH SCIENCES, INC., a Delaware corporation (the "Company"), and Howard
Simon (the "Executive").
WITNESSETH:
-----------
WHEREAS, The Company is engaged in the business of manufacturing dietary
and nutritional supplements in the United States and throughout the world (the
"Business"); and
WHEREAS, The Company desires to retain the services of the Executive in the
capacity of Chief Operating Officer of the Company, and Executive desires to
provide such Company, and Execute such services in such capacity to the Company,
on the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and obligations hereinafter set forth, the parties, hereto, intending
to be legally bound, hereby agree as follows:
1. EMPLOYMENT AND TERM.
(a) The Company hereby employs the Executive, and the Executive
hereby accepts employment by the Company, in the capacities and on the terms and
subject to the conditions set forth herein from June 1, 1998, until May 31,
2001 unless terminated earlier as
<PAGE>
provided herein (the "Term of Employment"). At least ninety (90) days prior to
the expiration of the Term of Employment, the Company shall notify the
Executive if, and under what terms and conditions, the Company will offer to
extend the Term of Employment.
2. DUTIES. During the Term of Employment, the Executive shall serve as
the Company's Chief Operating Officer. The Executive shall report to the Chief
Executive Officer of the Company.
3. COMPENSATION AND BENEFITS. As full and complete compensation to the
Executive for his execution and delivery of this Agreement and performance of
the services required hereunder, the Company shall pay, grant or provide the
Executive, and the Executive agrees to accept, the following salary and other
compensation and benefit:
(a) an annual base salary, payable in accordance with the Company's
standard payroll practices for senior executive officers of $225,000.00
per annum ("Base Salary");
(b) an annual bonus, payable with respect to each full fiscal year of the
Company during the Term of Employment, or PRO RATA portion thereof, in each case
based upon the performance of the Company for each applicable full fiscal year
of the Company and otherwise as determined by the Board of Directors of the
Company, in effect from time to time;
(c) a key man life insurance policy with a face amount of $500,000 for the
benefit of the estate of the Executive;
(d) the right to participate in any medical, dental, disability,
retirement, insurance, savings, vacation, holiday, paid sick leave or other
plans as in effect from time to time for the benefit of the company's senior
executive officers;
(e) an annual automobile allowance, payable in equal monthly installments
during the
2
<PAGE>
Term of Employment, of $850.00 per month;
(f) prompt reimbursement for all reasonable business-related expenses
incurred by the Executive, in accordance with the policies and procedures of the
Company as in effect from time to time for senior executive officers; and
(g) paid vacation in accordance with the policies and procedures of the
Company as in effect from time to time for senior executive officers.
4. TERMINATION.
(a) Disability. In the event of any physical or mental disability
during the Term of Employment which renders the Executive incapable of
performing the services required of him for any period or periods aggregating
three months during any twelve-month period, the Company shall have the right,
upon written notice to Executive, to terminate the Executive's employment
hereunder, effective upon the giving of such notice (or such later date as
shall be specified in such notice). Upon such termination, the Company
shall have no further obligations hereunder, except to pay the Executive his
Base Salary prorated to the effective date of termination or provide the
Executive any benefits to which the Executive may otherwise have been
entitled but for the Executive's disability prorated to the effective date of
termination.
(b) Death. In the event of the death of the Executive during the Term
of Employment, this Agreement shall automatically terminate and the Company
shall have no further obligations hereunder, except to pay the Executive's
beneficiary or legal representative the Base Salary prorated to the date of
death.
(c) Cause. The Company shall have the right, upon written notice to the
Executive, to terminate the Executive's employment under this Agreement for
Cause (as hereinafter defined),
3
<PAGE>
effective upon the giving of such notice (or such later date as shall be
specified in such notice), and the Company shall have no further obligations
hereunder, except to pay the Executive his Base Salary prorated to the
effective date of termination, and the Executive shall continue to have the
obligations provided for in Sections 6 and 7 hereof.
For purposes of this Agreement, "Cause" means:
(i) fraud, embezzlement, gross insubordination on the part of
the Executive or any act of moral turpitude or misconduct by the Executive.
(ii) conviction of or the entry of a plea of NOLO CONTENDERE by
the Executive for any felony; or
(iii) a material breach of, or the willful failure or refusal by
the Executive to perform and discharge, his duties, responsibilities or
obligations under this Agreement.
(d) WITHOUT CAUSE. The Company shall have the right to terminate the
Executive's employment under this Agreement without Cause and upon written
notice, in which case the Executive's employment under this Agreement shall
terminate on the date specified in such notice (except that the Executive shall
continue to have the obligations provided for in Sections 6 and 7) and the
Company shall have no further obligations hereunder, except to pay the Executive
(i) his Base Salary prorated to the effective date of termination and (ii) one
year severance pay equal to his annual Base Salary at the time of termination.
(e) CHANGE OF CONTROL. The Executive shall have the right to terminate
his employment under this Agreement upon a Change of Control (as hereinafter
defined) upon at least three months' prior written notice thereof to the Company
given within 30 days of the first occurrence
4
<PAGE>
of any event constituting a Change of Control, in which case the Executive's
employment under this Agreement shall terminate on the date specified in such
notice. In the event of any termination of employment by the Executive upon a
Change of Control, the Executive shall have no further obligations under this
Agreement other than the obligations provided for in Sections 6 and 7 hereof.
The failure by the Executive to give such written notice in such 30-day period
shall preclude the Executive from terminating his employment upon a Change of
Control with respect to such occurrence. In the event of any termination of
employment by the Executive upon a Change of Control, the Company shall have no
further obligations hereunder, except to pay the Executive (i) his Base Salary
prorated to the effective date of termination, (ii) one year severance pay equal
to his annual Base Salary at the time of termination and (iii) if such
termination occurs after Executive has received an annual bonus pursuant to
the terms hereof, and additional payment equal to his most recently received
annual bonus prorated to the effective date of termination. It is understood
and agreed that, during the three month period following the Executive's
delivery of notice of termination to the Company upon a Change of Control, the
Executive shall cooperate fully with the Company to effect the orderly transfer
of the Executive's duties to another person or persons. Notwithstanding
anything to the contrary contained herein, upon receipt of the Executive's
notice of termination upon a Change of Control, the Company shall have the right
to cause the Executive's termination to become effective prior to the end of the
three-month period or the date specified in the notice therefor by giving at
least two business days' notice thereof to the Executive.
For purposes of this Agreement, a "Change of Control" means the
occurrence of any one of the following events: (a) a change in control of the
direction and administration of the
5
<PAGE>
Company's business of a nature that would be required to be reported in response
to Item 6(c) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date
hereof and any successor provision of the regulations under the Exchange Act,
(b) the approval by the Board of Directors of a sale of all or substantially all
of the assets of the Company to any unrelated third party and the consummation
of such transaction or (c) the consummation of any merger, consolidation, or
like business combination or reorganization of the Company, approved by the
Board of Directors of the Company, which would result in the occurrence of an
event described in clause (a) above or a change in the Board of Directors so
that during any period of two (2) consecutive years, the individuals who at the
beginning of such period constitute the Board of Directors or any individuals
who would be "Continuing Directors" (as hereinafter defined) cease for any
reason to constitute at least a majority thereof.
For purposes of this Agreement, "Continuing Directors" shall mean the
directors of the Company in office on the date hereof and any successor to any
such director and any additional director, who after the date hereof (i) was
nominated or selected by a majority of the Continuing Directors in office at the
time of his nomination or selection and (ii) is not an "affiliate" or
"associate" (as defined in Regulation 12B under the Exchange Act) at the time of
his nomination or selection of any person who is the beneficial owner, directly
or indirectly, of securities representing ten percent (10%) or more of the
combined voting power of the Company's outstanding securities then entitled
ordinarily to vote for the election of directors.
5. RESIGNATION UPON TERMINATION. Upon the termination of the
Executive's employment hereunder for any reason the Executive agrees that he
shall immediately resign from
6
<PAGE>
all offices and directorships held by him in the Company or any of its
subsidiaries or affiliates and agrees to execute any and all documents
reasonably necessary to effect such resignations as requested by the Company.
6. CONFIDENTIALITY; OWNERSHIP OF DEVELOPMENTS.
(a) During the Term of Employment and for any time thereafter, the
Executive shall keep secret and retain in strictest confidence and not divulge,
disclose, discuss, copy or otherwise use or suffer to be used in any manner,
except in connection with the Business of the Company and of any of the
subsidiaries or affiliates of the Company, any trade secrets, confidential or
proprietary information and all other knowledge, know-how, information,
documents or materials owned, developed or possessed by the Company or any of
the subsidiaries or affiliates of the Company, whether in tangible or intangible
form, pertaining to the Business of the Company or any of the subsidiaries or
affiliates of the Company.
(b) The Executive acknowledges that all developments, including, without
limitation, formulas, inventions (patentable or otherwise), discoveries,
improvements, patents, trade secrets, designs, reports, computer software, flow
charts and diagrams, procedures, data, documentation, ideas and writings and
applications thereof relating to the Business or planned business of the Company
or any of the subsidiaries or affiliates of the Company that, alone or jointly
with others, the Executive may conceive, create, make, develop, reduce to
practice or acquire during the Term of Employment (collectively, the
"Developments") are works made for hire and shall remain the sole and exclusive
property of the Company and the Executive hereby assigns to the Company all of
his right, title, and interest in and to all such Developments.
(c) The provisions of the Section 6 shall, without any limitation as to
time, survive
7
<PAGE>
the expiration or termination of the Executive's employment hereunder,
irrespective of the reason for any termination.
7. COVENANT NOT TO COMPETE. The Executive agrees that during the Term of
Employment and for a period of one year commencing upon the expiration of
termination of the Executive's employment hereunder, the Executive shall not,
directly or indirectly, without the prior written consent of the Company:
(a) solicit, entice, persuade or induce any employee, consultant, agent or
independent contractor of the Company or any of the subsidiaries or affiliates
of the Company to terminate his or her employment or engagement with the Company
or such subsidiary or affiliate, to become employed by any person, firm or
corporation other than the Company or such subsidiary or affiliate or approach
any such employee, consultant, agent, or independent contractor for any of the
foregoing purposes, or authorize or assist in the taking of any such actions by
any third party; or
(b) directly or indirectly own, manage, control, invest or participate in
any way in, consult with, be employed by, or render services for (whether as a
director, consultant or otherwise) any person or entity (other than the Company
or any of the subsidiaries or affiliates of the Company) engaged in the business
of manufacturing or distributing dietary and nutritional supplements.
8. SPECIFIC PERFORMANCE. The Executive acknowledges that the services to
be rendered by the Executive are of a special, unique and extraordinary
character and, in connection with such services, the Executive will have access
to confidential information vital to the Company's Business and the subsidiaries
and affiliates of the Company. By reason of this, the
8
<PAGE>
Executive consents and agrees that if the Executive violates any of the
provisions of Sections 6 or 7 hereof, the Company and the subsidiaries and
affiliates of the Company would sustain irreparable injury and that monetary
damages will not provide adequate remedy to the Company and that the Company
shall be entitled to have Sections 6 or 7 specifically enforced by any court
having equity jurisdiction. Nothing contained herein shall be construed as
prohibiting the Company or any of the subsidiaries or affiliates of the Company
from pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of damages from the Executive.
9. ENTIRE AGREEMENT. This Agreement embodies the entire agreement of the
parties with respect to the Executive's employment and supersedes any other
prior oral or written agreements, arrangements or understandings between the
Executive and the Company. This Agreement may not be changed or terminated
orally but only by an agreement in writing signed by the parties hereto.
10. GOVERNING LAW: JURISDICTION.
(a) This Agreement shall be subject to, and governed by, the laws of the
State of California applicable to contracts made and to be performed therein.
(b) Any action to enforce any of the provisions of this Agreement shall be
brought in a court of the State of California located in Los Angeles County or
in a Federal court located in Los Angeles, California. The parties consent to
the jurisdiction of such courts and to the service of process in any manner
provided by California law. Each party irrevocably waives any objection which
it may now or hereafter have to the venue of any such suit, action or proceeding
brought in such court.
(c) The prevailing party in any action to enforce any of the provisions of
this
9
<PAGE>
Agreement shall be entitled to reimbursement from the other party for its or his
costs and expenses (including attorneys fees and expenses) incurred in
connection with such action.
11. ASSIGNABILITY. The obligations of the Executive may not be delegated
and the Executive may not, without the Company's written consent thereto,
assign, transfer, convey, pledge, encumber, hypothecate or otherwise dispose of
this Agreement or any interest herein. Any such attempted delegation or
disposition shall be null and void and without effect. The Company and the
Executive agree that this Agreement and all of the Company's rights and
obligations hereunder may be assigned or transferred by the Company to any
subsidiary or successor to the Company.
12. SEVERABILITY. If any provision of this Agreement or any part thereof,
including, without limitation, Sections 6 and 7, as applied to either party or
to any circumstances shall be adjudged by a court of competent jurisdiction to
be void or unenforceable, the same shall in no way affect any other provision of
this Agreement or remaining part thereof, which shall be given full effect
without regard to the invalid or unenforceable part thereof, or the validity or
enforceability of this Agreement.
If any court construes any of the provisions of Section 6 or 7, or any part
thereof, to be unreasonable because of the duration of such provision or the
geographic scope thereof, such court may reduce the duration or restrict or
redefine the geographic scope of such provision enforce such provision as so
reduced, restricted or redefined.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first written above.
10
<PAGE>
GLOBAL HEALTH SCIENCES, INC.
By: /s/ Paul M. Buxbaum
--------------------------------
Name: Paul M. Buxbaum
Title: Chief Executive Officer
/s/ HOWARD SIMON
-----------------------------------
Howard Simon
11
<PAGE>
EXHIBIT 21
SUBSIDIARIES
------------
Subsidiaries of Global Health Sciences, Inc.
Global Health Sub, Inc. (100% owned by Global Health Sciences, Inc.)
D&F Industries, Inc. (100% owned by Global Health Sub, Inc.)
Raven Industries, Inc. (100% owned by Global Health Sub, Inc.)
Dynamic Products Inc. (100% owned by Global Health Sub, Inc.)
West Coast Sales (100% owned by Global Health Sub, Inc.)
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-52539 of Global Health Sciences, Inc. on Form S-4 of our reports on the
financial statements of D&F Industries, the combined financial statements of
Raven Industries d/b/a Omni-Pak Industries and Affiliates and the combined
financial statements of D&F Industries, Raven Industries d/b/a Omni-Pak
Industries and Affiliates dated February 25, 1998, appearing in the Prospectus,
which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected
Historical and Pro Forma Financial Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
/s/ Deloitte & Touche LLP
Los Angeles, CA
July 9, 1998
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM T-1
Statement of Eligibility and Qualification 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)____
-------------------------
CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
95-4655078
(I.R.S. Employer Identification No.)
101 California Street, San Francisco, California
(Address of principal executive offices)
94111
(Zip Code)
------------------
Global Health Sciences, Inc.
(Exact name of Obligor as specified in its charter)
California
(State or other jurisdiction of incorporation or organization)
95-3267801
(I.R.S. Employer Identification No.)
987 N. Enterprise St.
Orange, California
(Address of principal executive offices)
92867
(Zip Code)
--------------------------------
11% Senior Notes due 2008
(Title of Indenture securities)
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Comptroller of the Currency, Washington, D.C.
Board of Governors of the Federal Reserve System, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
None.
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility.
Exhibit 1. Articles of Association of the Trustee as Now in Effect
(see Exhibit 1 to Form T-1 filed in connection with
Registration Statement No. 333-41329 which is incorporated
by reference).
Exhibit 2. Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection
with Registration Statement No. 333-41329, which is
incorporated by reference).
Exhibit 3. Authorization of the Trustee to Exercise Corporate
Trust Powers (contained in Exhibit 2).
Exhibit 4. Existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No.
333-41329, which is incorporated by reference).
Exhibit 5. Not Applicable
Exhibit 6. The consent of the Trustee required by Section 321 (b)
of the Act (see Exhibit 6 to Form T-1 filed in connection
with Registration Statement No. 333-41329, which is
incorporated by reference).
Exhibit 7. A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its
supervising or examining authority.
Exhibit 8. Not Applicable
Exhibit 9. Not Applicable
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, Chase Manhattan Bank and Trust Company, National Association, has duly
caused this statement of eligibility and qualification to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of San
Francisco, and State of California, on the 21st day of May, 1998.
CHASE MANHATTAN BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION
By /s/ James Nagy
--------------------
James Nagy
Assistant Vice President
<PAGE>
Exhibit 7. Report of Condition of the Trustee.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Consolidated Report of Condition of Chase Manhattan Bank and Trust Company, N.A.
--------------------------------------------
(Legal Title)
Located at 1800 Century Park East, Ste. 400 Los Angeles, CA 94111
---------------------------------------------------------------------
(Street) (City) (State) (Zip)
as of close of business on December 31, 1997
-------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS DOLLAR AMOUNTs IN THOUSANDS
<S> <C> <C>
1. Cash and balances due from
a. Noninterest-bearing balances and currency and coin (1,2) 550
b. Interest bearing balances (3) 0
2. Securities
a. Held-to-maturity securities (from Schedule RC-B, column A) 0
b. Available-for-sale securities (from Schedule RC-B, column D) 1,053
3. Federal Funds sold (4) and securities purchased agreements to resell 54,210
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule RC-C) 23
b. LESS: Allowance for loan and lease losses 0
c. LESS: Allocated transfer risk reserve 0
d. Loans and leases, net of unearned income, allowance, and reserve (item
4.a minus 4.b and 4.c) 23
5. Trading assets 0
6. Premises and fixed assets (including capitalized leases) 180
7. Other real estate owned (from Schedule RC-M) 0
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M) 0
9. Customers liability to this bank on acceptances outstanding 0
10. Intangible assets (from Schedule RC-M) 1,737
11. Other assets (from Schedule RC-F) 2,904
12 a. TOTAL ASSETS 60,657
b. Losses deferred pursuant to 12 U.S.C. 1823 (j) 0
c. Total assets and losses deferred pursuant to 12 U.S.C. 1823 (j)
(sum of items 12.a and 12.b) 60,657
(1) Includes cash items in process of collection and unposted debits.
(2) The amount reported in this item must be greater than or equal to the sum of
Schedule RC-M, items 3.a and 3.b
(3) Includes time certificates of deposit not held for trading.
(4) Report "term federal funds sold" in Schedule RC, item 4.a "Loans and leases,
net of unearned income" and in Schedule RC-C, part 1.
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from from
Schedule RC-E) 31,177
(1) Noninterest-bearing 6,718
(2) Interest-bearing 24,459
b.In foreign offices, Edge and Agreement subsidiaries, and IBF
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(1) Noninterest-bearing
(2) Interest-bearing
14. Federal funds purchased (2) and securities sold under agreements to
repurchase 0
15. a. Demand notes isssued to the U.S. Treasury 0
b. Trading liabilities 0
16. Other borrowed money (includes mortgage indebtedness and obligations
under capitalized leases):
a. With a remaining maturity of one year or less 0
b. With a remaining maturity of more than one year through three years 0
c. With a remaining maturity of more than three years 0
17. Not applicable
18. Bank's liability on acceptances executed and outstanding 0
19. Subordinated notes and Debentures (3) 0
20. Other liabilities (from Schedule RC-G) 4,975
21. Total liabilities (sum of items 13 through 20) 36,152
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus 0
24. Common stock 600
25. Surplus (exclude all surplus related to preferred stock) 12,590
26. a. Undivided profits and capital reserves 11,315
b. Net unrealized holding gains (losses) on available-for-sale securities 0
27. Cumulative foreign currency translation adjustments
28. a. Total equity capital (sum of items 23 through 27) 24,505
b. Losses deferred pursuant to 12 U.S.C. 1823 (j) 0
c. Total equity capital and losses deferred pursuant to 12 U.S.C. 1823 (j)
(sum of items 28.a and 28.b) 24,505
29. Total liabilities, equity capital, and losses deferred pursuant to 12 U.S.C.
1823 (j) (sum of items 21 and 28.c) 60,657
</TABLE>
<PAGE>
LETTER OF TRANSMITTAL
GLOBAL HEALTH SCIENCES, INC.
OFFER FOR ALL OUTSTANDING
11% SENIOR NOTES DUE 2008
IN EXCHANGE FOR
11% SENIOR NOTES DUE 2008 WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
PURSUANT TO THE PROSPECTUS, DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., SAN FRANCISCO TIME, ON ,
1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO
5:00 P.M., SAN FRANCISCO TIME, ON THE EXPIRATION DATE.
BY REGISTERED OR CERTIFIED MAIL, BY HAND
OR BY OVERNIGHT COURIER:
Chase Manhattan Bank and Trust Company, National Association
101 California Street, Suite 2725
San Francisco, California 94111
By Facsimile: By Telephone:
(415) 693-8850 (415) 954-9507
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus, dated ,
1998 (the "Prospectus"), of Global Health Sciences, Inc., a California
corporation (the "Company"), and this Letter of Transmittal (the "Letter"),
which together constitute the Company's offer (the "Exchange Offer") to exchange
an aggregate principal amount at maturity of up to $225,000,000 of 11% Senior
Notes due 2008 which have been registered under the Securities Act of 1933, as
amended (the "Securities Act") (the "New Notes"), of the Company for a like
principal amount at maturity of the issued and outstanding 11% Senior Notes due
2008 (the "Old Notes") of the Company from the holders thereof.
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount at maturity equal to that of the
surrendered Old Note. Holders whose Old Notes are accepted for exchange will
receive accrued interest thereon to, but not including, the date of issuance of
such New Notes, such interest to be payable with the first interest payment on
the New Notes. Interest on the New Notes will accrue from their respective dates
of issuance. Holders of Old Notes accepted for exchange will be deemed to have
waived the right to receive any other payments or interest on the Old Notes. The
Company reserves the right, at any time, to extend the Exchange Offer at its
discretion, in which event the term "Expiration Date" shall mean the latest time
and date to which the Exchange Offer is extended. The Company shall notify the
holders of the Old Notes of any extension by means of a press release or other
public announcement prior to 9:00 A.M., New York City time, on the next business
day after the previously scheduled Expiration Date.
<PAGE>
This Letter (or an Agent's Message in lieu thereof) is to be completed by a
holder of Old Notes either if certificates are to be forwarded herewith or if a
tender of certificates for Old Notes, if available, is to be made by book-entry
transfer to the account maintained by Chase Manhattan Bank and Trust Company,
National Association (the "Exchange Agent") at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in "The
Exchange Offer--Book Entry Transfer" section of the Prospectus. Holders of Old
Notes whose certificates are not immediately available, or who are unable to
deliver their certificates or confirmation of the book-entry tender of their Old
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a
"Book-Entry Confirmation") and all other documents required by this Letter to
the Exchange Agent on or prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus. See
Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent. In lieu of delivering this
Letter, an Agent's Message will constitute valid delivery. The term "Agent's
Message" means a message, transmitted by the Book-Entry Transfer Facility and
received by the Exchange Agent and forming a part of a Book-Entry Confirmation,
which states that the Book-Entry Transfer Facility has received an express
acknowledgment from a participant tendering Old Notes that are the subject of
such Book-Entry Confirmation that such participant has received and agrees to be
bound by the Letter of Transmittal and that the Company may enforce such
agreement against such participant.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
List below the Old Notes to which this Letter relates. If the space provided
below is inadequate, the certificate numbers and principal amount at maturity of
Old Notes should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
DESCRIPTION OF OLD NOTES 1 2 3
<S> <C> <C> <C>
Aggregate
Principal Principal
Amount at Amount at
Name(s) and Address(es) of Registered Holder(s) Certificate Maturity of Maturity
(Please fill in, if blank) Number(s)* Old Notes(s) Tendered**
Total
* Need not be completed if Old Notes are being tendered by book-entry transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old
Notes represented by the Old Notes indicated in column 2. See Instruction 2. Old Notes tendered
hereby must be in denominations of principal amount at maturity of $1,000 and any integral
multiple thereof. See Instruction 1.
</TABLE>
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
Account Number _________________ Transaction Code Number ________________
2
<PAGE>
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s) ____________________________________________
Window Ticket Number (if any) ______________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which guaranteed delivery ______________________________
If Delivered by Book-Entry Transfer, complete the following:
Account Number _________________ Transaction Code Number ________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
3
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
1. Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount at
maturity of Old Notes indicated above. Subject to, and effective upon, the
acceptance for exchange of the Old Notes tendered hereby, the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Company all right,
title and interest in and to such Old Notes as are being tendered hereby.
2. The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are accepted by the Company. The
undersigned hereby further represents that any New Notes acquired in exchange
for Old Notes tendered hereby will have been acquired in the ordinary course of
business of the person receiving such New Notes, whether or not such person is
the undersigned, that neither the holder of such Old Notes nor any such other
person is engaging in or intends to engage in a distribution of such New Notes,
that neither the holder of such Old Notes nor any such other person has an
arrangement or understanding with any person to participate in the distribution
of such New Notes and that neither the holder of such Old Notes nor any such
other person is an "affiliate," as defined in Rule 405 under the Securities Act
of the Company.
3. The undersigned also acknowledges that the Exchange Offer is being made
in reliance on an interpretation, made to third parties, by the staff of the
Securities and Exchange Commission (the "SEC") that the New Notes issued in
exchange for the Old Notes pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by holders thereof (other than any such
holder that is an "affiliate" of the Company 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 such New
Notes are acquired in the ordinary course of such holders' business, such
holders are not engaging in and do not intend to engage in the distribution of
such New Notes and such holders have no arrangements or understandings with any
person to participate in the distribution of such New Notes. If the undersigned
is not a broker-dealer, the undersigned represents that it is not engaged in,
and does not intend to engage in, a distribution of New Notes. If the
undersigned is a broker-dealer that will receive New Notes for its own account
in exchange for Old Notes that were acquired as a result of market-making
activities or other trading activities, it acknowledges that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resales of such New Notes. However, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
4. The undersigned may, if, and only if, it would not receive freely
tradeable New Notes in the Exchange Offer or is not eligible to participate in
the Exchange Offer, elect to have its Old Notes registered in the shelf
registration described in the Registration Rights Agreement, dated as of April
23, 1998, among the Company, the Subsidiary Guarantors, Citicorp Securities,
Inc., Citibank Canada Securities Limited and Citibank International plc (the
"Registration Rights Agreement") in the form filed as Exhibit 4.3 to the
Registration Statement of the Company, Registration No. 333-52539. Capitalized
terms used in this paragraph 4 and not otherwise defined herein shall have the
meanings given them in the Registration Rights Agreement. Such election may be
made by checking the box under "Special Registration Instructions" below. By
making such election, the undersigned agrees, as a holder of Old Notes
participating in a Shelf Registration, to comply with the Registration Rights
Agreement and to indemnify and hold harmless each Initial Purchaser and each
person, if any, who controls any Initial Purchaser within the meaning of either
Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the Company and the Subsidiary
Guarantors, each director and officer of the Company and the Subsidiary
Guarantors and each person, if any, who controls the Company and the Subsidiary
Guarantors within the meaning of either such Section, from and against any
losses, claims, damages and liabilities or any actions in respect thereof, to
which such Initial Purchaser or any controlling person of such Initial
Purchaser, and the Company and the Subsidiary Guarantors or any of its
directors, officers or controlling persons may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration
4
<PAGE>
Statement or prospectus or in any amendment or supplement thereto or in any
preliminary prospectus relating to a Shelf Registration, or arise out of or are
based upon any omission or alleged omission to state therein a material fact
necessary to make the statements therein not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company and the Subsidiary Guarantors by or on
behalf of the undersigned specifically for inclusion therein; and shall
reimburse, as incurred, the Company and the Subsidiary Guarantors for any legal
or other expenses reasonably incurred by the Company, the Subsidiary Guarantors
or any director, officer or controlling person thereof in connection with the
investigation or defending or preparing to defend against or appearing as a
third-party witness in connection with any loss, claim, damage, liability or
action in respect thereof. Any such indemnification shall be governed by the
terms and subject to the conditions set forth in the Registration Rights
Agreement, including, without limitation, the provisions regarding notice,
retention of counsel, contribution and payment of expenses set forth therein.
The above summary of the indemnification provisions of the Registration Rights
Agreement is not intended to be exhaustive and is qualified in its entirety by
the Registration Rights Agreement.
5. The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer--Withdrawal Rights" section
of the Prospectus. See Instruction 9.
6. Unless otherwise indicated in the box entitled "Special Issuance
Instructions" below, please issue the New Notes (and, if applicable, substitute
certificates representing Old Notes for any Old Notes not exchanged) in the name
of the undersigned or, in the case of a book-entry delivery of Old Notes, please
credit the account indicated above maintained at the Book-Entry Transfer
Facility. Similarly, unless otherwise indicated under the box entitled "Special
Delivery Instructions" below, please send the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
to the undersigned at the address shown above in the box entitled "Description
of Old Notes."
5
<PAGE>
THE UNDERSIGNED ACKNOWLEDGES THAT THE EXCHANGE OFFER IS SUBJECT TO THE MORE
DETAILED TERMS SET FORTH IN THE PROSPECTUS AND, IN CASE OF ANY CONFLICT BETWEEN
THE TERMS OF THE PROSPECTUS AND THIS LETTER, THE PROSPECTUS SHALL PREVAIL.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX ABOVE.
- ------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY IF certificates for Old Notes not exchanged and/or
New Notes are to be issued in the name of someone other than the person or
persons whose signature(s) appear(s) on this Letter below, or if Old Notes
delivered by book-entry transfer which are not accepted for exchange are to
be returned by credit to an account maintained at the Book-Entry Transfer
Facility other than the account indicated above.
Issue: New Notes and/or Old Notes to:
Name(s) ____________________________________________________________________
(PLEASE TYPE OR PRINT)
__________________________________________________________________________
(PLEASE TYPE OR PRINT)
Address ____________________________________________________________________
____________________________________________________________________________
(ZIP CODE)
(COMPLETE SUBSTITUTE FORM W-9)
CREDIT UNEXCHANGED OLD NOTES DELIVERED BY BOOK-ENTRY TRANSFER TO THE
BOOK-ENTRY TRANSFER FACILITY ACCOUNT SET FORTH BELOW.
__________________________________________________________________________
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
- ------------------------------------------------------------
- ------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes not exchanged and/or
New Notes are to be sent to someone other than the person or persons whose
signature(s) appear(s) on this Letter below or to such person or persons at
an address other
than shown in the box entitled "Description of Old Notes" on this Letter
above.
Mail: New Notes and/or Old Notes to:
Name(s) ____________________________________________________________________
(PLEASE TYPE OR PRINT)
__________________________________________________________________________
(PLEASE TYPE OR PRINT)
Address ____________________________________________________________________
____________________________________________________________________________
(ZIP CODE)
-----------------------------------------------------------
6
<PAGE>
SPECIAL REGISTRATION INSTRUCTIONS
(SEE PARAGRAPH 4 ABOVE)
To be completed ONLY IF (i) the undersigned satisfies the conditions set
forth in paragraph 4 above, (ii) the undersigned elects to register its Old
Notes in the shelf registration described in the Registration Rights Agreement,
and (iii) the undersigned agrees to comply with the Registration Rights
Agreement and to indemnify certain entities and individuals as set forth in
paragraph 4 above.
[ ] By checking this box the undersigned hereby (i) represents that it is
entitled to have its Old Notes registered in a shelf registration in accordance
with the Registration Rights Agreement, (ii) elects to have its Old Notes
registered pursuant to the shelf registration described in the Registration
Rights Agreement, and (iii) agrees to comply with the Registration Rights
Agreement and to indemnify certain entities and individuals identified in, and
to the extent provided in, paragraph 4 above.
IMPORTANT: THIS LETTER (OR AN AGENT'S MESSAGE IN LIEU THEREOF) OR A
FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY
CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED
DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., SAN
FRANCISCO TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
x 1998
x 1998
x 1998
SIGNATURE(S) OF
OWNER DATE
Area Code and Telephone Number
If a holder is tendering any Old Notes, this Letter must be signed by
the registered holder(s) exactly as the name(s) appear(s) on the
certificate(s) for the Old Notes or, if tendered by a participant in the
Book-Entry Transfer Facility, exactly as such name appears on a security
position listing as the owner of the Old Notes, or by any person(s)
authorized to become registered holder(s) by endorsements and documents
transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, please set forth full title. See Instruction 3.
Name(s):
(PLEASE TYPE OR PRINT)
Capacity:
Address:
(INCLUDING ZIP CODE)
Employer Identification or Social Security Number:
(PLEASE COMPLETE SUBSTITUTE
FORM W-9, IF APPLICABLE.
SEE "IMPORTANT TAX
INFORMATION" BELOW.)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution:
(AUTHORIZED SIGNATURE)
(TITLE)
(NAME AND FIRM)
7
<PAGE>
INSTRUCTIONS
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES.
This Letter (or an Agent's Message in lieu thereof) is to be completed by
holders of Old Notes either if certificates are to be forwarded herewith or if
tenders are to be made pursuant to the procedures for delivery by book-entry
transfer set forth in "The Exchange Offer--Book-Entry Transfer" section of the
Prospectus. Certificates for all physically tendered Old Notes, or Book-Entry
Confirmation, as the case may be, as well as a properly completed and duly
executed Letter (or manually signed facsimile thereof), with any required
signature guarantees (unless an Agent's Message is transmitted in lieu thereof),
and any other documents required by this Letter, must be received by the
Exchange Agent at the address set forth herein on or prior to the Expiration
Date, or the tendering holder must comply with the guaranteed delivery
procedures set forth below. Old Notes tendered hereby must be in denominations
of principal amount at maturity of $1,000 or any integral multiple thereof.
Noteholders whose certificates for Old Notes are not immediately available
or who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old Notes
pursuant to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to
such procedures, (i) such tender must be made through an Eligible Institution
(as defined below), (ii) on or prior to 5:00 p.m., San Francisco time, on the
Expiration Date, the Exchange Agent must receive from such Eligible Institution
a properly completed and duly executed Letter (or a facsimile thereof) and
Notice of Guaranteed Delivery (or an Agent's Message with respect to guaranteed
delivery in lieu thereof), substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that within three New
York Stock Exchange ("NYSE") trading days after the date of execution of the
Notice of Guaranteed Delivery, the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation (including by
means of an Agent's Message), as the case may be, and any other documents
required by this Letter will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or Book-Entry Confirmation, as the case may
be, and all other documents required by this Letter, must be received by the
Exchange Agent within three NYSE trading days after the date of execution of the
Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF THIS LETTER, THE OLD NOTES AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDERS, BUT THE DELIVERY
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE
AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIMES SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT PRIOR TO 5:00 P.M., SAN
FRANCISCO TIME, ON THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES
SHOULD BE SENT TO THE COMPANY.
See "The Exchange Offer" section in the Prospectus.
2. PARTIAL TENDERS.
If less than all of the Old Notes evidenced by a submitted certificate are
to be tendered, the tendering holder(s) should fill in the aggregate principal
amount at maturity of Old Notes to be tendered in the box above entitled
"Description of Old Notes--Principal Amount at Maturity Tendered." A reissued
certificate representing the balance of nontendered Old Notes of a tendering
holder who physically delivered Old Notes will be sent to such tendering holder,
unless otherwise provided in the appropriate box on this Letter, promptly after
the Expiration Date. All of the Old Notes delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated.
3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the registered holder of the Old Notes tendered
hereby, the signature must correspond exactly with the name as written on the
face of the certificates without any change whatsoever.
8
<PAGE>
If any tendered Old Notes are owned of record by two or more joint owners,
all such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder or holders of the Old
Notes specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required. If, however, the New Notes are to be issued,
or any untendered Old Notes are to be reissued, to a person other than the
registered holder, then endorsements of any certificates transmitted hereby or
separate bond powers are required. Signatures on such certificate(s) or bond
powers must be guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificates must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) or bond powers must be
guaranteed by an Eligible Institution.
If this letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted with this Letter.
Endorsements on certificates for Old Notes or signatures on bond powers
required by this Instruction 3 must be guaranteed by a financial institution
(including most banks, savings and loan associations and brokerage houses) that
is a participant in the Securities Transfer Agents Medallion Program, the New
York Stock Exchange Medallion Program or the Stock Exchanges Medallion Program
(each an "Eligible Institution" and collectively, "Eligible Institutions").
Signatures on the Letter need not be guaranteed by an Eligible Institution
if (A) the Old Notes are tendered (i) by a registered holder of Old Notes (which
term, for purposes of the Exchange Offer, includes any participant in the
Book-Entry Transfer Facility system whose name appears on a security position
listing as the holder of such Old Notes) who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on this
Letter, or (ii) for the account of an Eligible Institution and (B) the box
entitled "Special Registration Instructions" on this Letter has not been
completed.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Old Notes should indicate in the applicable box the
name and address to which New Notes issued pursuant to the Exchange Offer and/or
substitute certificates evidencing Old Notes not exchanged are to be issued or
sent, if different from the name or address of the person signing this Letter.
In the case of issuance in a different name, the employer identification or
social security number of the person named must also be indicated. Noteholders
tendering Old Notes by book-entry transfer may request that Old Notes not
exchanged be credited to such account maintained at the Book-Entry Transfer
Facility as such noteholder may designate hereon. If no such instructions are
given, such Old Notes not exchanged will be returned to the name and address of
the person signing this Letter.
5. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New
Notes and/or substitute Old Notes not exchanged 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 Old Notes tendered hereby, or if tendered Old Notes are registered
in the name of any person other than the person signing this Letter, or if a
transfer tax is imposed for any reason other than the transfer of Old Notes to
the Company or its order pursuant to the Exchange Offer, the amount of any such
transfer taxes (whether imposed on the registered holder or any other
9
<PAGE>
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted herewith, the
amount of such transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes specified in this letter.
6. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waiver satisfaction of any or all
conditions enumerated in the Prospectus.
7. NO CONDITIONAL TENDERS
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter, shall
waive any right to receive notice of the acceptance of their Old Notes for
exchange.
Although the Company intends to notify holders of defects or irregularities
with respect to tenders of Old Notes, neither the Company, the Exchange Agent
nor any other person shall incur any liability for failure to give any such
notice.
8. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
9. WITHDRAWAL OF TENDERS.
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., San
Francisco time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth above prior to 5:00 p.m., San Francisco time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes, (iii) be signed by the holder in
the same manner as the original signature on this Letter by which such Old Notes
were tendered, or, in the case of Old Notes transferred by book-entry transfer,
the name and number of the account at the Book-Entry Transfer Facility to be
credited (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the trustee under the Indenture
pursuant to which the Old Notes were issued register the transfer of such Old
Notes into the name of the person withdrawing the tender, and (iv) specify the
name in which any such Old Notes are to be registered, if different from that of
the Depositor. Any Old Notes so properly withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Exchange Offer. Any Old
Notes which have been tendered for exchange but which are not exchanged for any
reason will be returned to the holder thereof without cost to such holder as
soon as practicable after withdrawal, rejection of tender, or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following the
procedures described above at any time on or prior to 5:00 p.m., San Francisco
time, on the Expiration Date.
All questions as to the validity, form, eligibility (including time or
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities, or conditions of tender
as to particular Old Notes. The Company's interpretation of terms and conditions
of the Exchange Offer (including the instructions of this Letter) will be final
and binding on all parties.
10
<PAGE>
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES
Questions relating to the procedures for tendering, as well as requests for
additional copies of the Prospectus, this Letter and other related documents may
be directed to the Exchange Agent, at the address and telephone number indicated
above.
IMPORTANT TAX INFORMATION
Under current federal income tax law to prevent backup withholding on any
New Notes delivered pursuant to the Exchange Offer and any payments made in
respect of the New Notes, a holder of New Notes generally is required to provide
the Company (as payor) with such holder's correct taxpayer identification number
("TIN") on Substitute Form W-9 or otherwise to establish a basis for exemption
from backup withholding. If a holder of New Notes is an individual, the TIN is
such holder's social security number. If a holder required to do so fails to
provide the Company with the correct taxpayer identification number, the holder
may be subject to a $50 penalty imposed by the Internal Revenue Service.
Accordingly, each prospective holder of New Notes to be issued pursuant to
Special Issuance Instructions should complete the attached Substitute Form W-9.
The Substitute Form W-9 need not be completed if the box entitled Special
Issuance Instructions has not been completed.
Certain holders of New Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. Prospective holders of New Notes who are exempt should
indicate their exempt status on Substitute Form W-9. A foreign individual may
qualify as an exempt recipient by submitting to the Company, through the
Exchange Agent, a properly completed Internal Revenue Service Form W-8 (which
the Exchange Agent will provide upon request) signed under penalties of perjury,
attesting to the holder's exempt status. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Company is required to withhold 31% of
any payment made to the holder of New Notes or other payee (or other payees).
Backup withholding is not an additional federal income tax. Rather, the federal
income tax liability of persons subject to backup withholding will be reduced by
the amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on any New Notes delivered pursuant to the
Exchange Offer and on any payments made to holders in respect of the New Notes,
each prospective holder of New Notes to be issued pursuant to Special Issuance
Instructions should provide the Company, through the Exchange Agent, with
either: (i) such prospective holder's correct TIN by completing the form below,
certifying that the TIN provided on Substitute Form W-9 is correct (or that such
prospective holder is awaiting a TIN) and that either (A) such prospective
holder has not been notified by the Internal Revenue Service that he or she is
subject to backup withholding as a result of a failure to report all interest or
dividends or (B) the Internal Revenue Service has notified such prospective
holder that he or she is no longer subject to backup withholding; or (ii) an
adequate basis for exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The prospective holder of New Notes to be issued pursuant to Special
Issuance Instructions is required to give the Exchange Agent the TIN (e.g.,
social security number or employer identification number) of the prospective
record owner of the New Notes. If the New Notes will be held in more than one
name or are not held in the name of the actual owner, consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional guidance regarding which number to report.
11
<PAGE>
<TABLE>
<CAPTION>
PAYER'S NAME: CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION
<S> <C> <C>
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX ------------------------------
FORM W-9 AT RIGHT AND CERTIFY BY SIGNING AND DATING Social Security Number(s)
BELOW OR
------------------------------
Employer Identification Number(s)
</TABLE>
<TABLE>
<S> <C> <C>
PART 2--Certification--Under Penalties of PART 3 / /
Perjury, I certify that:
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE (1) The number shown on this form is my AWAITING TIN
correct Taxpayer Identification Number (or
I am waiting for a number to be issued to
me) and
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER (TIN) (2) I am not subject to backup withholding
because (A) I am an exempt holder, (B) I
have not been notified by the Internal
Revenue Service (the "IRS") that I am
subject to backup withholding as a result
of failure to report all interest or
dividends, or (C) the IRS has notified me
that I am no longer subject to backup
withholding.
</TABLE>
<TABLE>
<S> <C>
CERTIFICATE INSTRUCTIONS--You must cross out item (2) in Part 2 above if you
have been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you are subject to backup withholding you
received another notification from the IRS stating that you are no longer
subject to backup withholding, do not cross out item (2).
SIGNATURE ------------------------------------------ DATE --------------
</TABLE>
NOTE: FAILURE BY A PROSPECTIVE HOLDER OF NEW NOTES TO BE ISSUED PURSUANT TO THE
SPECIAL ISSUANCE INSTRUCTIONS ABOVE TO COMPLETE AND RETURN THIS FORM MAY
RESULT IN BACKUP WITHHOLDING OF 31% OF THE NEW NOTES DELIVERABLE TO YOU
PURSUANT TO THE EXCHANGE OFFER AND ANY PAYMENTS RECEIVED BY YOU IN RESPECT
OF THE NEW NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or (b)
I intend to mail or deliver such an application in the near future. I understand
that if I do not provide a taxpayer identification number within 60 days, 31% of
all reportable payments made to me thereafter will be withheld until I provide
such a number.
- --------------------------------------------------------
- ------------------------, 1998
Signature Date
12
<PAGE>
NOTICE OF GUARANTEED DELIVERY
for Tender of
11% Senior Notes due 2008
(including those in book-entry form)
of
GLOBAL HEALTH SCIENCES, INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer relating to the tender of 11% Senior Notes due 2008 (the "Old
Notes") of Global Health Sciences, Inc. (the "Company") made pursuant to the
Prospectus, dated , 1998 (the "Prospectus"), if certificates for
Old Notes of the Company are not immediately available or if the procedure for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Exchange Agent prior to 5:00 p.m.,
San Francisco time, on , 1998 (the "Expiration Date"). Such form
may be delivered or transmitted by facsimile transmission, mail or hand delivery
to Chase Manhattan Bank and Trust Company, National Association (the "Exchange
Agent") as set forth below. In addition, in order to utilize the guaranteed
delivery procedure to tender Old Notes pursuant to the Exchange Offer, the
Exchange Agent must receive from an Eligible Institution prior to 5:00 p.m., San
Francisco time, on the Expiration Date, a completed, signed and dated Letter of
Transmittal relating to the Old Notes (or facsimile thereof or an Agent's
Message in lieu thereof). Capitalized terms used herein and not defined herein
are used as so defined in the Prospectus.
CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION
BY REGISTERED OR CERTIFIED MAIL
BY HAND OR BY OVERNIGHT COURIER:
Chase Manhattan Bank and Trust Company,
National Association
101 California Street
Suite 2725
San Francisco, California 94111
BY FACSIMILE: BY TELEPHONE:
(415) 693-8850 (415) 954-9507
DELIVERY OF THIS NOTICE TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF THIS NOTICE VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Global Health Sciences, Inc., a California
corporation (the "Company"), in accordance with the Company's offer, upon the
terms and subject to the conditions set forth in the Prospectus dated
, 1998 (the "Prospectus"), and in the accompanying Letter of
Transmittal, receipt of which is hereby acknowledged, $ in aggregate
principal amount of Old Notes pursuant to the guaranteed delivery procedures
described in the Prospectus.
Name(s) of Record Holder(s) ____________________________________________________
(Please Type or Print)
Address ________________________________________________________________________
________________________________________________________________________
Area Code & Telephone No. ______________________________________________________
Certificate Number(s) for
Old Notes (if available) _________________________________
Total Principal Amount
Represented by Certificate(s): $ _________________________________
________________________________________________________________________________
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
________________________________________________________________________________
PLEASE SIGN HERE
Signature(s) of Holders(s) ____________________________________ Dated: ______
____________________________________ Dated: ______
Must be signed by the holder(s) of Old Notes as their name(s) appear(s) on
certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
2
<PAGE>
PLEASE PRINT NAME(S) AND ADDRESS(ES)
<TABLE>
<S> <C>
Name(s):
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Capacity:
--------------------------------------------------------------------------------------
Address(es):
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>
/ / The Depository Trust Company
(Check if Old Notes will be tendered
by book-entry transfer)
Account Number
- ---------------------------------
THE GUARANTEE ON THE FOLLOWING PAGE MUST BE COMPLETED.
3
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a financial institution (including most banks, savings and
loan associations and brokerage houses) that is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchanges Medallion Program, hereby guarantees
that the undersigned will deliver to the Exchange Agent the certificates
representing the Old Notes being tendered hereby or confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at The Depository
Trust Company, in proper form for transfer, together with any other documents
required by the Letter of Transmittal within three New York Stock Exchange
trading days after the Expiration Date.
Name of Firm ___________________________________________________________
Address _____________________________________________________________
_____________________________________________________________
Zip Code
Area Code & Telephone No. ______________________________________________
Authorized Signature ___________________________________________________
Name ___________________________________________________________________
(PLEASE TYPE OR PRINT)
Title __________________________________________________________________
Dated
------------------------------------------
NOTE: DO NOT SEND CERTIFICATES OF OLD NOTES WITH THIS FORM. CERTIFICATES OF
OLD NOTES SHOULD BE SENT ONLY WITH A COPY OF THE PREVIOUSLY EXECUTED
LETTER OF TRANSMITTAL.
4
