<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 14, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ISSUER OF SENIOR SUBORDINATED NOTES REGISTERED HEREBY
INDESCO INTERNATIONAL , INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 3089 13-3987915
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
SUBSIDIARY GUARANTORS OF SENIOR SUBORDINATED NOTES REGISTERED HEREBY
CONTINENTAL SPRAYERS INTERNATIONAL , INC.
AFA PRODUCTS, INC.
(EXACT NAMES OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 3089 43-1803508
DELAWARE 3089 95-4642099
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
950 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 593-2009
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
ARIEL GRATCH, PRESIDENT
INDESCO INTERNATIONAL, INC.
950 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 593-2009
(NAME AND ADDRESS, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES OF COMMUNICATIONS TO:
STEPHEN H. COOPER, 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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED BE REGISTERED PER UNIT(2) OFFERING PRICE(1) REGISTRATION FEE(2)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 3/4% Senior Subordinated Notes Due
2008................................... $145,000,000 100% $145,000,000 $42,775
- -------------------------------------------------------------------------------------------------------------------------------
Guarantees of Senior Subordinated
Notes(3)............................... -- -- -- None
===============================================================================================================================
</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(f)(2).
(2) Calculated pursuant to Rule 457(f)(2).
(3) No separate consideration will be received for the Guarantees and no
registration fee is payable pursuant to Rule 457(n).
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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 14, 1998
PROSPECTUS
INDESCO INTERNATIONAL, INC.
OFFER TO EXCHANGE ITS 9 3/4% SENIOR SUBORDINATED NOTES DUE 2008, WHICH ARE FULLY
AND UNCONDITIONALLY GUARANTEED ON AN UNSECURED SENIOR SUBORDINATED BASIS BY
CERTAIN OF ITS SUBSIDIARIES (THE "SUBSIDIARY GUARANTORS") AND HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, FOR ITS 9 3/4% SENIOR SUBORDINATED
NOTES DUE 2008, WHICH ARE FULLY AND UNCONDITIONALLY GUARANTEED ON AN UNSECURED
SENIOR SUBORDINATED BASIS BY THE SUBSIDIARY GUARANTORS BUT HAVE NOT BEEN SO
REGISTERED.
------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998 UNLESS EXTENDED.
------------------------
Indesco International, Inc. (the "Company") hereby offers, upon the terms
and subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (which together constitute the "Exchange Offer"), to
exchange up to $145,000,000 aggregate principal amount of its new 9 3/4% Senior
Subordinated Notes due 2008 (the "New Notes"), which are fully and
unconditionally guaranteed on an unsecured senior subordinated basis by the
Subsidiary Guarantors and have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), for a like principal amount of its
outstanding 9 3/4% Senior Notes due 2008 (the "Old Notes"), which have been
similarly guaranteed by the Subsidiary Guarantors but have not been so
registered. The terms of the New Notes are identical in all material respects to
those of the Old Notes, except for certain transfer restrictions and
registration rights (including provision for payment of Liquidated Damages in
certain events) relating to the Old Notes. The New Notes will evidence the same
indebtedness as the Old Notes and will be issued pursuant to, and entitled to
the benefits of, the same Indenture that governs the Old Notes (the
"Indenture"). As used herein, the term "Notes" means the Old Notes and the New
Notes, treated as a single class.
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City 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
not conditioned upon any minimum principal amount of Old Notes being tendered
for exchange but is subject to certain other customary conditions. See "The
Exchange Offer."
The New Notes will be, and the Old Notes currently are, unsecured senior
subordinated obligations of the Company and will be subordinated in right of
payment to all existing and future Senior Indebtedness (as defined herein) of
the Company, including indebtedness under its Revolving Credit Facility (as
defined herein). The New Notes will rank pari passu with all existing and future
senior subordinated indebtedness of the Company and will rank senior to all
other existing and future Subordinated Indebtedness (as defined herein) of the
Company. The New Notes also will be, and the Old Notes currently are,
effectively subordinated to all existing and future Senior Indebtedness of the
Company's subsidiaries. At May 8, 1998, there was outstanding an aggregate of
$17.9 million of indebtedness that effectively ranked senior to the Old Notes
and would effectively rank senior to the New Notes. See "Description of the
Notes -- Subordination."
The holder of each Old Note accepted for exchange will receive a New Note
having a principal amount equal to that of the surrendered Old Note. The New
Notes will bear interest from the most recent date to which interest has been
paid on the Old Notes or, if no interest has been paid on the Old Notes, from
April 23, 1998. Old Notes accepted for exchange will cease to accrue interest
from and after the date of consummation of the Exchange Offer. Holders of Old
Notes accepted for exchange will not receive any payment in respect of accrued
interest on such Old Notes. Old Notes not tendered or not accepted for exchange
will continue to accrue interest from and after the date of consummation of the
Exchange Offer.
(continued on following page)
SEE "RISK FACTORS", BEGINNING ON PAGE 12 FOR A DESCRIPTION OF CERTAIN
RISKS THAT SHOULD BE CONSIDERED BY HOLDERS BEFORE DECIDING TO TENDER THEIR OLD
NOTES IN THE EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1998
<PAGE> 3
(continued from front cover)
The Old Notes were issued and sold on April 23, 1998 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 New Notes are being offered
hereunder in order to satisfy certain obligations of the Company and the
Subsidiary Guarantors contained in the Registration Rights Agreement (as
defined). Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") as set forth in no-action letters issued to third
parties, the Company believes that New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than a 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 holder's business and such holder has no arrangement or understanding
with any person to participate in a distribution of such New Notes. However, the
Company has not sought a no-action letter with respect to the Exchange Offer and
there can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer. Each holder of Old Notes,
other than a broker-dealer, must acknowledge that it is not engaged in, and does
not intend to engage or participate in, a distribution of New Notes and has no
arrangement or understanding to participate in a distribution of New Notes. Each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. The Company
has agreed that, starting on the Expiration Date (as defined herein) and ending
on the close of business one year after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. Tenders of Old
Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. In the event the Company terminates the Exchange Offer and does
not accept any Old Notes for exchange, the Company will promptly return the Old
Notes to the holders thereof. See "The Exchange Offer."
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the rights and preferences and will be
subject to the limitations applicable thereto under the Indenture. Following
consummation of the Exchange Offer, the Old Notes will continue to be subject to
restrictions upon transfer and the Company will have no further obligation to
holders of the Old Notes to provide for the registration of their Old Notes
under the Securities Act. To the extent that Old Notes are tendered and accepted
in the Exchange Offer, a holder's ability to sell untendered Old Notes could be
adversely affected.
No broker-dealer, salesperson or other individual has been authorized to
give any information or to make any representation in connection with the
Exchange Offer other than those contained in this Prospectus and Letter of
Transmittal and, if given or made, such information or representation must not
be relied upon as having been authorized by the Company or the Guarantor. The
delivery of this Prospectus shall not, under any circumstances, create any
implication that the information herein is correct at any time subsequent to its
date.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
TENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
(ii)
<PAGE> 4
AVAILABLE INFORMATION
The Company and the Subsidiary Guarantors have filed with the Securities
and Exchange Commission (the "Commission") a Registration Statement on Form S-4
(together with all amendments, exhibits, schedules and supplements thereto, the
"Registration Statement") under the Securities Act with respect to the New Notes
being offered hereby. This Prospectus, which forms a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement. For further information with respect to the Company, the Subsidiary
Guarantors and the New Notes, reference is made to the Registration Statement.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete, and, where such contract or other
document is an exhibit to the Registration Statement, each such statement is
qualified in all respects by the provisions in such exhibit, to which reference
is hereby made. Copies of the Registration Statement may be examined without
charge at the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the web site
(http://www.sec.gov.) maintained by the Commission and at the Commission's
Regional Offices located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and Citicorp Center, 500 West Madison Avenue, Suite 1400, Chicago,
Illinois 60661. Copies of all or any portion of the Registration Statement can
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of certain fees prescribed by
the Commission.
The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Upon
completion of the Exchange Offer, the Company will be subject to the
informational requirements of the Exchange Act, and, in accordance therewith,
will file periodic reports and other information with the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Copies of any material so filed can
be obtained from the Public Reference Section of the Commission, upon payment of
certain fees prescribed by the Commission. In addition, pursuant to the
Indenture covering the Old Notes and the New Notes, the Company has agreed to
file with the Commission and provide to the Noteholders the annual reports and
the information, documents and other reports otherwise required pursuant to
Section 13 of the Exchange Act. Such requirements may be satisfied through the
filing and provision of such documents and reports which would otherwise be
required pursuant to Section 13 in respect of the Company.
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of management as well as
assumptions made by, and information currently available to, management. Such
forward-looking statements are principally contained in the sections "Offering
Memorandum Summary," "Risk Factors," "Unaudited Pro Forma Combined Financial
Statements," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" and include, without limitation, the
Company's expectations and estimates as to the Company's business operations,
including the introduction of new products and future financial performance,
including growth in net sales and earnings and cash flows from operations. In
addition, in those and other portions of this Prospectus, the words
"anticipates," "believes," "estimates," "expects," "projects," "plans,"
"intends" and similar expressions, as they relate to the Company or its
management, are intended to identify forward-looking statements. Such statements
reflect the current views of the Company with respect to future events and are
subject to certain risks, uncertainties and assumptions, including the risk
factors described in this Prospectus. In addition to the factors that may be
described elsewhere in this Prospectus, the Company specifically wishes to
advise readers that the factors listed under the caption "Risk Factors" could
cause actual results to differ
(iii)
<PAGE> 5
materially from those expressed in any forward-looking statement. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect (including the assumptions used in connection with
the preparation of the unaudited pro forma combined financial statements),
actual results may vary materially from those described herein as anticipated,
believed, estimated or expected. The Company does not intend to update these
forward-looking statements.
------------------------
(iv)
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information, including financial
statements, included elsewhere in this Prospectus. Unless the context otherwise
requires, (i) "CSI" refers to Continental Sprayers International, Inc., a
Delaware corporation, including its predecessor, the Continental Sprayers
International division of Contico International, Inc., the business of which was
acquired by the Company on February 4, 1998 (the "CSI Acquisition"), (ii) "AFA"
refers to AFA Products, Inc., a Delaware corporation, (iii) "Polytek" refers to
AFA Polytek B.V., a Netherlands corporation, (iv) the "Company" refers to
Indesco International, Inc., a Delaware corporation ("Indesco"), together with
its subsidiaries, including CSI, AFA and Polytek, (v) all information regarding
the Company and its business gives effect to the CSI Acquisition and (vi) all
pro forma financial information assumes that the acquisitions of CSI, AFA and
Polytek occurred on December 31, 1997 for balance sheet purposes and January 1,
1997 for statement of operations purposes. Market share data contained in this
Prospectus are based on management estimates of unit sales within the trigger
sprayer and pump dispenser industries. There are no publicly available sources
of such data and, therefore, no assurance can be given as to the accuracy of
such management estimates.
THE COMPANY
The Company, created by the combination of CSI, AFA and Polytek, is a
global leader in the design, manufacture and sale of liquid dispensing products,
primarily plastic trigger sprayers, used in household consumer product
applications, such as hard surface cleaning, laundry and lawn and garden
products, as well as industrial applications, such as products for the
automotive, janitorial and sanitation markets. Management believes the Company
is the largest producer of trigger sprayers in the world, with an estimated
market share of approximately 48% in North America and 24% in Europe. The
Company's products are sold to (i) multinational, national and regional
manufacturers of brand name and private label consumer products and (ii)
independent distributors of containers and packaging products. The Company is
the only trigger sprayer manufacturer with a leading presence in both of these
market segments. For the twelve months ended December 31, 1997, on a pro forma
combined basis, the Company generated net sales of approximately $114.5 million
and Adjusted EBITDA (as defined below) of approximately $32.5 million.
North America is the principal market for trigger sprayers, accounting for
approximately 60% of the estimated 1.1 billion units sold worldwide during 1997.
The North American market includes large multinational and national
manufacturers of brand name consumer products, smaller manufacturers of brand
name, private label and specialty products for consumer and industrial use and
marketers of general purpose liquid spray containers that are sold in empty
form. The large consumer products manufacturers are served directly by a limited
number of trigger sprayer producers that can meet their high volume, product
innovation and consistent quality requirements. Other customers are served both
directly by trigger sprayer manufacturers and indirectly by independent
distributors that can process smaller volume orders and provide more
personalized service support. Outside North America, the principal market for
trigger sprayers is in Western Europe, where unit sales, although less on a per
capita basis than in North America, have been growing at a greater rate than
that in the United States. The Western European market, which consists primarily
of large manufacturers of consumer products, is served by brokers and agents.
Eastern Europe, Central and South America and the Pacific Rim do not yet
represent significant markets, but are expected to grow in the next several
years as per capita consumption increases and local economies in these regions
mature.
CSI is the world's largest supplier of trigger sprayers to large national
and multinational consumer products manufacturers, such as Clorox,
Monsanto/Solaris and Proctor & Gamble. CSI's reputation for quality, design
innovation, high volume production capability and competitive pricing has
enabled it to establish long-term relationships with leading multinational
consumer products companies. CSI also manufactures and sells finger-actuated
plastic pumps for nationally branded soaps and lotions. AFA is focused on
serving independent container and packaging distributors as well as smaller
manufacturers of brand name and private label consumer products. AFA is the
nation's largest supplier of trigger sprayers to independent distributors, which
typically purchase in smaller volumes but at higher margins than large
multinational
1
<PAGE> 7
consumer products companies. Polytek is a major producer and supplier of trigger
sprayers to the European market and performs custom injection molding services
for European manufacturers of plastic packaging, consumer and industrial
products.
CSI's ability to meet the increasingly global requirements of its large
U.S.-based multinational customers that are seeking to expand their sales
outside North America will be enhanced by Polytek's established technological
expertise and manufacturing base in The Netherlands. CSI's El Paso manufacturing
operations will augment those at AFA's Forest City facility, which currently is
operating at full capacity, increasing the Company's ability to meet the needs
of AFA's client base and providing additional product lines to AFA's customers.
Management believes that these synergies will enable the Company to provide
enhanced customer service and product availability and will increase sales and
provide substantial cost savings.
The combination of CSI, AFA and Polytek provides the Company with a unique
blend of competitive strengths, principal among which are the following:
- The Company is the only trigger sprayer manufacturer with a leading
presence in the two principal market segments it serves. In 1997, the
Company accounted for approximately 48% of the trigger sprayers produced
in the United States, providing approximately 45% of the units shipped to
consumer products manufacturers and 67% of the units shipped to the
distributor market. In addition, the Company accounted for approximately
24% of European shipments of trigger sprayers during 1997. The Company's
market presence is supported by strong customer relationships, a well
established marketing organization and channels of distribution and a
strong reputation for customer service and responsiveness.
- CSI and Polytek are recognized as technological and product design
innovators within the trigger sprayer industry and, together with AFA
(which introduced the world's first trigger sprayer in 1959), hold a
combined portfolio of more than 200 active patents. Recent product
innovations -- such as CSI's "Quick Twist"(TM) closure system and
Polytek's precompression sprayer technology -- are expected to result in
quality enhancements for the Company's customers and potential margin
improvements for the Company as a result of reduced manufacturing costs.
- The Company has invested approximately $54.3 million over the past five
years to increase the productive capacity and quality and reduce the
operating costs of its manufacturing facilities. CSI's facilities in St.
Peters, Missouri, augmented by Polytek's facilities in The Netherlands,
can serve the requirements of the Company's largest multinational
customers without the need for the capital investment that would be
required for a start-up facility. CSI's El Paso plant and AFA's Forest
City facilities have the capacity required to serve the increasing
product demands of independent distributors and smaller manufacturers.
BUSINESS STRATEGY
The Company intends to capitalize on its competitive strengths to increase
revenues and cash flow through a business strategy that includes the following
key elements:
FOCUS ON GLOBAL SOURCING NEEDS OF MULTINATIONAL CONSUMER PRODUCTS
MANUFACTURERS
By combining CSI's multinational customer relationships with Polytek's
European-based capacity and manufacturing expertise, the Company has positioned
itself to capitalize on the global expansion plans of its multinational consumer
products customers and will seek to serve their sourcing needs on a worldwide
basis. Management also intends to leverage these capabilities to increase
revenues by developing new business opportunities with those multinational
consumer products companies that are not currently being served by the Company.
2
<PAGE> 8
EXPAND PRODUCT OFFERINGS TO DISTRIBUTOR NETWORK
The acquisition of CSI will allow the Company to offer to AFA's distributor
network an expanded product line of trigger sprayers, as well as lotion pumps,
enabling the Company to further strengthen its position in this market segment
without incremental manufacturing or selling expense, while extending the life
cycle of certain CSI products that, to date, have been marketed principally to
large multinational consumer products manufacturers.
ENHANCE UTILIZATION OF PRODUCTION CAPACITY
The Company anticipates moving its U.K.-based production equipment to
Polytek's facility in The Netherlands and utilizing CSI's El Paso plant to
alleviate capacity constraints currently being experienced at AFA's Forest City
facility. These steps will enable the Company to optimize its consolidated
manufacturing capabilities and to efficiently increase its total production
volume.
REALIZE SIGNIFICANT COST SAVINGS
The Company expects to achieve significant cost savings through the
rationalization of certain manufacturing operations and more efficient
utilization of its production capacity. Significant cost savings also are
expected to result from combining and centralizing various administrative
operations, adopting on a Company-wide basis the manufacturing "best" practices
from the operations of each of CSI, AFA and Polytek and combining their raw
materials requirements to achieve increased purchasing leverage. The Company
also will be introducing a new generation of products that are simpler to
manufacture, such as the T-1000(TM) trigger sprayer and the Luxor(TM) lotion
pump. These products are expected to significantly reduce production costs,
resulting in improved margins.
PURSUE SELECTIVE ACQUISITIONS
The Company intends to pursue selective acquisitions of businesses or
product lines that meet the complementary needs of its multinational and
distributor customer base in order to increase sales volume, achieve further
production efficiencies and enhance customer penetration.
THE TRANSACTIONS
On February 4, 1998, the Company consummated the CSI Acquisition for a
total cash purchase price of approximately $92.9 million. Concurrently
therewith, the Company acquired direct ownership of Polytek (which previously
was an affiliate of the Company), entered into new revolving credit and term
loan agreements and refinanced its then existing domestic credit facilities.
Funds used for the CSI Acquisition and the refinancing of the Company's existing
indebtedness were provided in the form of term loans aggregating $135.0 million
(the "Term Loans") and borrowings of approximately $2.5 million under a $30.0
million revolving credit facility (the "Revolving Credit Facility"). See
"Management's Discussion of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." Those transactions, together
with the sale of the Old Notes, are referred to collectively as the
"Transactions." The net proceeds from the sale of the Old Notes were used, in
principal part, to repay and retire all of the Term Loans.
------------------------
The Company's principal executive offices are located at 950 Third Avenue,
New York, New York 10022, and its telephone number is (212) 593-2009.
3
<PAGE> 9
THE EXCHANGE OFFER
The Exchange Offer......... The Company is offering to exchange up to
$145,000,000 aggregate principal amount of the New
Notes for a like principal amount of the Old Notes.
The issuance of the New Notes is intended to
satisfy obligations of the Company contained in a
Registration Rights Agreement, dated April 23, 1998
(the "Registration Rights Agreement"), among the
Company, the Subsidiary Guarantors and NationsBanc
Montgomery Securities LLC, the initial purchaser of
the Old Notes (the "Initial Purchaser"). For
procedures for tendering Old Notes pursuant to the
Exchange Offer, see "The Exchange Offer."
Tenders, Expiration Date;
Withdrawal............... The Exchange Offer will expire at 5:00 P.M., New
York City time, on , 1998, or such
later date and time to which it may be extended (as
so extended, the "Expiration Date"). A tender of
Old Notes pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date.
Any Old Note not accepted for exchange for any
reason will be returned without expense to the
tendering holder thereof as promptly as practicable
after the expiration or termination of the Exchange
Offer.
Federal Income Tax
Consequences............. The exchange of New Notes for Old Notes pursuant to
the Exchange Offer should not result in any income,
gain or loss to the holders of the Old Notes or the
Company for federal income tax purposes. See
"Certain Federal Income Tax Consequences."
Use of Proceeds............ There will be no proceeds to the Company from the
Exchange Offer. The net proceeds from the sale of
the Old Notes for which the New Notes will be
exchanged were used, in principal part, to repay
and retire $135.0 million aggregate principal
amount of Term Loans. See "Use of Proceeds."
Exchange Agent............. Norwest Bank Minnesota, National Association is
serving as the Exchange Agent in connection with
the Exchange Offer.
Shelf Registration
Statement.................. Under certain circumstances, certain holders of
Notes (including holders of Old Notes who are not
permitted to participate in the Exchange Offer and
holders of New Notes who may not freely resell New
Notes received in the Exchange Offer) may require
the Company to file, and use its best efforts to
cause to become effective, a shelf registration
statement under the Securities Act that would cover
reoffers and resales of Notes by such holders. See
"Description of the Notes -- Registration Rights."
Conditions to the Exchange
Offer.................... The Exchange Offer is not conditioned on any
minimum principal amount of Notes being tendered
for exchange. The Exchange Offer is subject to
certain other customary conditions, each of which
may be waived by the Company. See "The Exchange
Offer -- Certain Conditions to the Exchange Offer."
Consequences of Failure to
Exchange................. Holders of Old Notes who do not exchange their Old
Notes for New Notes pursuant to the Exchange Offer
will continue to be subject to the restrictions on
transfer of such Old Notes as set forth in the
legend thereon as a consequence of the offer and
sale of the Old Notes pursuant
4
<PAGE> 10
to exemptions from, or in transactions not subject
to, the registration requirements of the Securities
Act. In general, the Old Notes may not be offered
or sold unless registered under the Securities Act,
except pursuant to an available exemption from, or
in a transaction not subject to, the Securities Act
and applicable state securities laws. The Company
does not currently anticipate that it will register
Old Notes under the Securities Act. Based on
interpretations by the staff of the Commission, as
set forth in no-action letters issued to third
parties, the Company believes that New Notes issued
pursuant to the Exchange Offer in exchange for Old
Notes may be offered for resale, resold or
otherwise transferred by holders thereof (other
than a 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 holder's business and
that such holder, other than a broker-dealer, has
no arrangement with any person to participate in
the distribution of such New Notes. However, the
Commission has not considered the Exchange Offer in
the context of a no-action letter and there can be
no assurance that the staff of the Commission would
make a similar determination with respect to the
Exchange Offer as in such other circumstances. Each
holder of Old Notes, other than a broker-dealer,
must acknowledge that it is not engaged in, and
does not intend to engage in, a distribution of
such New Notes and has no arrangement or
understanding to participate in a distribution of
Exchange Notes. Each broker-dealer that receives
New Notes for its own account in exchange for Old
Notes must acknowledge that such Old Notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities and that it will deliver a prospectus in
connection with any resale of such New Notes. See
"Plan of Distribution."
THE NEW NOTES
Issuer..................... Indesco International, Inc.
Securities Offered......... $145,000,000 aggregate principal amount of 9 3/4%
Senior Subordinated Notes due 2008, which are fully
and unconditionally guaranteed, jointly and
severally, on an unsecured senior subordinated
basis, by the Subsidiary Guarantors and have been
registered under the Securities Act (the "New
Notes").
Maturity Date.............. April 15, 2008.
Interest Payment Dates..... April 15 and October 15, commencing October 15,
1998.
Subsidiary Guarantors...... The New Notes will be fully and unconditionally
guaranteed, jointly and severally, on an unsecured
senior subordinated basis (the "Subsidiary
Guarantees") by each of the Company's existing and
future domestic subsidiaries that are Restricted
Subsidiaries (as defined in the New Notes)
(collectively, the "Subsidiary Guarantors"). At the
date of issuance of the New Notes, the Subsidiary
Guarantors will be Continental Sprayers
International, Inc. and AFA Products, Inc. Each
Subsidiary Guarantee will be a guarantee of payment
and not of collection. See "Description of the
Notes -- Subsidiary Guarantees."
5
<PAGE> 11
Subordination.............. The New Notes will be general unsecured obligations
of the Company, subordinated in right of payment to
all existing and future Senior Indebtedness (as
defined herein) of the Company, which will include
borrowings under the Revolving Credit Facility. The
New Notes will also be effectively subordinated to
all existing and future Senior Indebtedness of the
Subsidiary Guarantors. At December 31, 1997, on a
pro forma basis after giving effect to the
Transactions, the aggregate amount of indebtedness
(excluding intercompany indebtedness) that would
have effectively ranked senior to the New Notes and
the Subsidiary Guarantees would have been
approximately $8.5 million, and the Company would
have had additional availability of $23.1 million
for borrowings under the Credit Facilities, all of
which would be Senior Indebtedness. At May 8, 1998,
there was outstanding approximately $17.9 million
of indebtedness that would have effectively ranked
senior to the New Notes. The Subsidiary Guarantees
will be subordinated in right of payment to all
existing and future Senior Indebtedness of the
relevant Subsidiary Guarantor. See "Description of
the Notes -- Subordination."
Optional Redemption........ On or after April 15, 2003, the Company may redeem
the New Notes, in whole or in part, at the
redemption prices set forth herein, plus accrued
and unpaid interest, if any, to the date of
redemption. Notwithstanding the foregoing, at any
time or from time to time prior to April 15, 2001,
the Company may redeem, on one or more occasions,
up to 35% of the initial aggregate principal amount
of the Notes with the net proceeds of one or more
Equity Offerings (as defined herein) at a
redemption price equal to 109.75% of the principal
amount thereof, plus accrued interest, if any, to
the redemption date (subject to the right of
holders of record on the relevant record date to
receive interest due on an interest payment date);
provided that, immediately after giving effect to
such redemption, at least 65% of the initial
aggregate principal amount of Notes remain
outstanding; provided further that any such
redemption shall occur within 60 days after the
date of closing of the immediately preceding Equity
Offering. See "Description of the Notes -- Optional
Redemption."
Mandatory Redemption....... None, except at maturity on April 15, 2008.
Change of Control.......... Upon a Change of Control (as defined herein), the
Company will be required to make an offer to
purchase all outstanding Notes at 101% of the
principal amount thereof plus accrued and unpaid
interest thereon to the date of purchase. See
"Description of the Notes -- Repurchase at Option
of Holders -- Change of Control."
Covenants.................. The Indenture (as defined herein) restricts, among
other things, the Company's ability to incur
additional Indebtedness, pay dividends or make
certain other restricted payments, incur liens,
sell stock of subsidiaries, apply net proceeds from
certain asset sales, merge or consolidate with any
other person, sell, assign, transfer, lease, convey
or otherwise dispose of substantially all of the
assets of the Company and enter into certain
transactions with affiliates. See "Description of
the Notes -- Certain Covenants."
Exchange Offer;
Registration Rights........ Holders of New Notes (other than as set forth
below) will not be entitled to any registration
rights with respect to the New Notes.
6
<PAGE> 12
Pursuant to the Registration Rights Agreement, the
Company has agreed, for the benefit of the holders
of Old Notes, to file a registration statement
under the Securities Act with respect to an
exchange offer for the Old Notes. The Registration
Statement of which this Prospectus is a part
constitutes the exchange offer registration
statement referred to in the Registration Rights
Agreement. Under certain circumstances described in
the Registration Rights Agreement, certain holders
of Notes (including holders of Old Notes who may
not participate in the Exchange Offer and holders
of New Notes who may not freely resell New Notes
received in the Exchange Offer) may require the
Company to file, and use best efforts to cause to
become effective, a shelf registration statement
under the Securities Act that would cover resales
of Notes by such holders. See "Description of the
Notes -- Exchange Offer; Registration Rights."
RISK FACTORS
Holders of Old Notes should carefully consider the information set forth in
this Prospectus and, in particular, should evaluate the specific factors set
forth under "Risk Factors" before tendering their Old Notes in exchange for New
Notes.
7
<PAGE> 13
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth certain summary unaudited pro forma combined
financial data of the Company for the twelve-month period ended December 31,
1997 and are derived from the Unaudited Pro Forma Combined Financial Statements
included elsewhere in this Offering Memorandum. The summary unaudited pro forma
combined statement of operations data give effect to the Company's acquisitions
of AFA, Polytek and CSI as well as the sale of the Notes and the application of
the proceeds therefrom as if such transactions had occurred as of January 1,
1997. The summary unaudited pro forma combined balance sheet data give effect to
such acquisitions as well as the sale of the Notes and the application of the
proceeds therefrom, as if the same had occurred on December 31, 1997 and should
be read in conjunction with the historical financial statements and notes
thereto included elsewhere in this Offering Memorandum.
<TABLE>
<CAPTION>
YEAR
ENDED
DECEMBER
31,
1997
--------
(DOLLARS IN
THOUSANDS)
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................. $114,531
Gross profit(1)........................................... 30,926
Operating income.......................................... 16,589
OTHER DATA:
EBITDA(2)................................................. $ 28,643
Adjusted EBITDA(3)........................................ 32,466
Cash interest expense(4).................................. 14,605
Depreciation and amortization............................. 9,356
Capital expenditures...................................... 5,436
Ratios:
Adjusted EBITDA to cash interest expense(4)............ 2.2x
Pro forma ratio of earnings to fixed charges(5)........ 1.2x
Total debt to Adjusted EBITDA(6)....................... 4.7x
Margins:
Gross margin(1)(7)..................................... 27.0%
EBITDA margin(8)....................................... 25.0%
Adjusted EBITDA margin(8).............................. 28.3%
BALANCE SHEET DATA AT DECEMBER 31, 1997:
Working capital........................................... $ 12,878
Fixed assets, net......................................... 55,798
Total assets.............................................. 159,117
Total debt(6)............................................. 153,491
</TABLE>
- ---------------
(Footnotes appear on page 9)
8
<PAGE> 14
Footnotes:
(1) Gross profit for AFA and Polytek reflects a one-time increase in cost of
sales resulting from a step-up in the value of inventory of $1,713, as
required by Accounting Principles Board Opinion No. 16, ("APB 16"), in
connection with the acquisition of AFA and Polytek. AFA, Polytek and CSI
gross profit and gross margin, on a pro forma combined basis, excluding the
non-cash effect of the increase in cost of sales, were $32,639 and 28.5%,
respectively.
(2) EBITDA represents income before interest, income taxes, depreciation and
amortization plus, for AFA and Polytek, the elimination of the increase in
cost of sales resulting from the step-up in inventory value of $1,713.
Management believes that EBITDA is a measure commonly used by analysts and
investors to determine a company's ability to incur and service its debt.
EBITDA should not be considered as an alternative to, or more meaningful
than, net income, cash flows from operating activities or other income or
cash flow statement data prepared in accordance with generally accepted
accounting principles ("GAAP"), or as a measure of profitability or
liquidity.
(3) Adjusted EBITDA represents EBITDA as defined above plus management's
estimate of savings of $3,823 derived primarily from facility consolidation,
elimination of duplicate functions and completed renegotiation of purchase
and insurance contracts. (See Note 7 to the Unaudited Pro Forma Combined
Financial Statements.)
(4) Cash interest expense excludes amortization of deferred financing costs of
$515.
(5) For purposes of this ratio, earnings consist of income before provision for
income taxes plus fixed charges. Fixed charges consist of interest expense
(including capitalized interest) on all indebtedness, amortization of
deferred financing costs and one-third of rental expense.
(6) Total debt includes long-term debt (including current maturities) and
capital lease obligations.
(7) Gross margin is calculated by dividing gross profit by net sales.
(8) EBITDA margin and Adjusted EBITDA margin are calculated by dividing those
respective amounts by net sales.
9
<PAGE> 15
SUMMARY HISTORICAL FINANCIAL DATA
The following table sets forth summary historical financial data of AFA and
Polytek on a combined basis as of December 31, 1996 and 1997 and for each of the
years in the three-year period ended December 31, 1997. The statement of
operations and balance sheet data for AFA and Polytek, as set forth below, are
derived from the audited historical financial statements of AFA Holdings Co.
(the Company's parent) as of and for the five months ended December 31, 1997 and
WTI, Inc. and Subsidiaries (the predecessor of AFA Holdings Co.) as of December
31, 1996 and July 31, 1997 and for the seven-month period ended July 31, 1997
and for the twelve months ended December 31, 1995 and 1996 included elsewhere in
this Offering Memorandum. The following table also sets forth summary financial
data of CSI as of May 31, 1996 and 1997 and for each of the years in the
three-year period ended May 31, 1997, which data are derived from CSI's audited
historical financial statements included elsewhere in this Offering Memorandum.
The balance sheet and statement of operations data for CSI as of December 31,
1997 and for the seven-month periods ended December 31, 1996 and 1997 have been
derived from the unaudited historical financial statements of CSI included
elsewhere in this Offering Memorandum. The following table for CSI includes data
relating to assets and liabilities of, and results of operations attributable
to, certain business operations that were not purchased in the CSI Acquisition,
none of which was material. In the opinion of management, the unaudited data
includes all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the data for such periods. The data below should be
read in conjunction with the Selected Historical Financial Data, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical financial statements and notes thereto included elsewhere in this
Offering Memorandum.
AFA AND POLYTEK
<TABLE>
<CAPTION>
WTI, INC AND
WTI, INC. AND SUBSIDIARIES AFA HOLDINGS CO.
SUBSIDIARIES FOR THE FOR THE COMBINED
YEAR ENDED SEVEN FIVE MONTHS YEAR
DECEMBER 31, MONTHS ENDED ENDED
----------------- ENDED DECEMBER 31, DECEMBER 31,
1995 1996 JULY 31, 1997 1997 1997
------- ------- ------------- ---------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................... $55,238 $54,133 $32,988 $20,108 $53,096
Gross profit(1)................. 13,267 14,265 9,124 3,513 12,637
Operating income................ 5,390 6,876 4,919 651 5,570
OTHER DATA:
EBITDA(2)....................... $10,077 $11,621 $ 8,242 $ 4,279 $12,521
Interest expense................ 4,489 4,275 2,295 2,231 4,526
Depreciation and amortization... 4,436 4,470 2,520 1,861 4,381
Capital expenditures............ 3,604 2,218 2,498 661 3,159
Margins:
Gross margin(1)(3)........... 24.0% 26.4% 27.7% 17.5% 23.8%
EBITDA margin(4)............. 18.2% 21.5% 25.0% 21.3% 23.6%
BALANCE SHEET DATA AT PERIOD END:
Working capital................. $ 945 -- -- $ 5,510
Fixed assets, net............... 16,004 -- -- 28,009
Total assets.................... 44.801 -- -- 60,887
Total debt(5)................... 24,111 -- -- 51,295
</TABLE>
10
<PAGE> 16
CSI
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED
FISCAL YEAR ENDED MAY 31, DECEMBER 31,
----------------------------- ------------------
1995 1996 1997 1996 1997
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................. $58,320 $57,104 $62,249 $33,934 $35,484
Gross profit........................... 15,829 12,490 13,348 6,653 9,607
Operating income....................... 9,615 6,155 7,062 3,058 6,216
OTHER DATA:
EBITDA(2).............................. $15,358 $12,186 $13,560 $ 7,028 $ 9,892
Interest expense....................... 1,355 983 616 377 157
Depreciation........................... 5,562 6,173 6,526 4,030 3,733
Capital expenditures................... 5,301 3,337 4,477 3,115 915
Margins:
Gross margin(3)..................... 27.1% 21.9% 21.4% 19.6% 27.1%
EBITDA margin(4).................... 26.3% 21.3% 21.8% 20.7% 27.9%
BALANCE SHEET DATA AT PERIOD END:
Working capital........................ -- $ 8,024 $ 8,937 -- $ 9,729
Fixed assets, net...................... -- 32,464 30,588 -- 27,850
Total assets........................... -- 48,631 45,928 -- 42,122
Total debt(5).......................... -- 8,813 5,712 -- 1,647
</TABLE>
- ---------------
(1) Gross profit for AFA and Polytek in 1997 reflects a one-time increase in
cost of sales resulting from a step-up in the value of inventory of $1,713,
as required by APB 16 in connection with the acquisition of AFA and Polytek.
AFA and Polytek gross profit and gross margin in 1997, excluding the effect
of the increase in cost of sales were $14,350 and 27.0%, respectively.
(2) EBITDA represents income before interest, income taxes, depreciation and
amortization plus, for AFA and Polytek, the elimination of the increase in
cost of sales resulting from the step-up in inventory value of $1,713 in
1997. Management believes that EBITDA is a measure commonly used by analysts
and investors to determine a company's ability to incur and service its
debt. EBITDA should not be considered as an alternative to, or more
meaningful than, net income, cash flows from operating activities or other
income or cash flow statement data prepared in accordance with GAAP, or as a
measure of profitability or liquidity.
(3) Gross margin is calculated by dividing gross profit by net sales.
(4) EBITDA margin is calculated by dividing EBITDA by net sales.
(5) Total debt includes long-term debt (including current maturities) and
capital lease obligations.
11
<PAGE> 17
RISK FACTORS
Holders of the Old Notes should carefully consider the following factors,
as well as the other information and financial data contained in this
Prospectus, before tendering their Old Notes in exchange for the New Notes
offered hereby. The risk factors set forth below (other than those under the
caption "Resales of Old Notes") are generally applicable to the Old Notes as
well as the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer of the Old Notes, including the restrictions on
transfer of such Old Notes as set forth in the legend thereon, as a consequence
of the offer and sale of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities
Act. In general, the Old Notes may not be offered or sold unless registered
under the Securities Act, except pursuant to an available exemption from, or in
a transaction that is otherwise not subject to, the Securities Act. Upon
consummation of the Exchange Offer, the Company's principal obligations under
the Registration Rights Agreement will terminate and the Company does not
currently anticipate that it will register the Old Notes under the Securities
Act. To the extent that Old Notes are tendered and accepted for exchange
pursuant to the Exchange Offer, any trading market for those Old Notes that are
not so tendered and remain outstanding could be adversely affected. See "The
Exchange Offer -- Consequences of Failure to Exchange."
RESALES OF NEW NOTES
The Company is making the Exchange Offer in reliance upon interpretations
by the staff of the Commission, as set forth in no-action letters issued to
third parties. Based on such interpretations, the Company believes that New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold or otherwise transferred by holders thereof (other
than a 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 requirements of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business and that
such holder, other than a broker-dealer, has no arrangement or understanding
with any person to engage or participate in a distribution of such New Notes.
However, the Company has not sought its own no-action letter and there can be no
assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer as in such other circumstances. Each holder
of Old Notes, other than a broker-dealer, must acknowledge that it is not
engaged in, and does not intend to engage or participate in, a distribution of
the New Notes and has no arrangement or understanding to engage or participate
in a distribution of the New Notes. If any holder is an affiliate of the Company
or is engaged in or intends to engage in or has any arrangement or understanding
with respect to the distribution of the New Notes to be acquired pursuant to the
Exchange Offer, such holder (i) may not rely on the applicable interpretations
of the staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives New Notes for its own
account in exchange for Old Notes pursuant to the Exchange Offer must
acknowledge that such New Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities and that it will deliver
a prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes that were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that for a period of one year after the
Expiration Date, it will make this Prospectus available to broker-dealers for
use in connection with any such resale. See "The Exchange Offer -- Resales of
New Notes."
12
<PAGE> 18
SUBSTANTIAL LEVERAGE
The Company incurred substantial indebtedness to finance the CSI
Acquisition and to refinance outstanding indebtedness, and has remained highly
leveraged and has significant debt service obligations. As of December 31, 1997,
after giving pro forma effect to the sale of the Old Notes and the related
Transactions, the Company would have had approximately $153.5 million of
indebtedness outstanding. Immediately following the sale of the Old Notes and
application of the proceeds therefrom there was outstanding approximately $10.9
million of Senior Indebtedness, representing outstanding borrowings under the
Revolving Credit Facility, and approximately $7.6 million of indebtedness under
credit facilities of Polytek (the "Polytek Facilities") that effectively ranked
senior to the Old Notes and would effectively rank senior to the New Notes. The
Revolving Credit Facility and the Polytek Facilities are referred to
collectively as the "Credit Facilities." See "Pro Forma Capitalization." Subject
to certain limitations, the Indenture and the Credit Facilities permit the
Company and its subsidiaries to incur additional indebtedness.
The degree to which the Company continues to be leveraged could have
important consequences to holders of the New Notes, including the following: (i)
the Company's ability to obtain additional financing in the future for capital
expenditures, acquisitions or general corporate purposes, including working
capital, may be limited; (ii) a substantial portion of the Company's cash flow
from operations will be required for debt service, thereby reducing the funds
available to the Company for its operations, capital expenditures, acquisitions
or other purposes; (iii) the Company's borrowings under the Revolving Credit
Facility will bear interest at variable rates, which could result in higher
interest expense if interest rates rise; (iv) the Company's level of
indebtedness could limit its flexibility in planning for and reacting to, and
make it more vulnerable to, competitive pressures and changes in industry and
economic conditions generally; and (v) indebtedness incurred under the Credit
Facilities is scheduled to become due prior to the time any principal payments
are required in respect of the New Notes and, therefore, the Company may need to
refinance such indebtedness. The Company's ability to refinance the Credit
Facilities, if necessary, will depend on, among other things, its financial
condition at the time, the restrictions in the instruments governing its then
outstanding indebtedness and other factors, including general economic and
market conditions, that are beyond the control of the Company. In addition, the
Company's operating flexibility with respect to certain business matters will be
limited by financial and restrictive covenants contained in the Indenture and
the Credit Facilities and the failure to comply with those covenants could have
a material adverse effect on the Company. There can be no assurance that those
covenants will not adversely affect the Company's ability to finance its future
operations or capital needs or to engage in business activities that may be in
its interest. See "Description of the Notes" and "Description of Other
Indebtedness."
The ability of the Company to service its indebtedness, and to comply with
the financial and restrictive covenants contained in the Indenture and the
Credit Facilities, will depend upon the Company's future performance and ability
to generate cash, which are subject to financial, economic, competitive and
other factors, many of which are beyond the Company's control. Based on the
Company's current expectations with respect to its existing business, the
Company does not expect to generate cash sufficient to repay the New Notes at
maturity and, accordingly, will have to refinance the New Notes at their
maturity. In addition, there can be no assurance that the Company will be able
to generate sufficient cash to meet its other debt service obligations. If the
Company is unable to generate sufficient funds to meet its debt service
obligations, it may be required to refinance some of its indebtedness, to sell
assets or to raise additional equity. No assurance can be given that such
refinancings, asset sales or equity sales could be accomplished or, if
accomplished, would raise sufficient funds to meet the Company's debt service
obligations. The Company's high degree of leverage and related financial
covenants could have a material adverse effect on its ability to withstand
competitive pressures or adverse economic conditions, to make acquisitions, to
obtain future financing or to take advantage of business opportunities that may
arise.
HOLDING COMPANY STRUCTURE
The Company is a holding company and, accordingly, its cash flow and
ability to service its debt, including the New Notes, is dependent upon the
earnings of its subsidiaries and the payments of funds by those subsidiaries to
the Company in the form of dividends or other distributions or pursuant to a
Subsidiary
13
<PAGE> 19
Guarantor's guarantee of the New Notes. Although the Indenture generally
prohibits the Company from permitting its Restricted Subsidiaries (including
CSI, AFA and Polytek) to allow restrictions on their ability to pay dividends
and other amounts to the Company, any such restrictions could materially and
adversely affect the Company's ability to service and repay its debts, including
the New Notes. For example, the Polytek Facilities contain a restriction on
payment of dividends in certain circumstances. See "Description of Other
Indebtedness." Creditors of those subsidiaries, including trade creditors, will
have a prior claim on the earnings and funds of those subsidiaries. Moreover,
while the Old Notes are, and the New Notes will be, guaranteed on an unsecured
senior subordinated basis by the Subsidiary Guarantors, the existing Subsidiary
Guarantors are obligors with respect to substantial indebtedness, including as
guarantors of indebtedness under the Revolving Credit Facility, and the capital
stock of those Subsidiary Guarantors has been pledged by the Company to secure
amounts borrowed under the Revolving Credit Facility. In addition, the Company's
parent corporation, Indesco Holdings Co. (the "Parent"), has guaranteed the
Company's obligations under the Revolving Credit Facility and, as security for
such guarantee, has pledged its holdings of the capital stock of the Company.
See also "-- Fraudulent Conveyance Statutes."
SUBORDINATION OF NOTES AND SUBSIDIARY GUARANTEES; ASSET ENCUMBRANCES
The Old Notes are, and the New Notes will be, general unsecured obligations
of the Company, subordinated in right of payment to all of the Company's
existing and future Senior Indebtedness (as defined in the Indenture), including
borrowings under the Revolving Credit Facility. In addition, each Subsidiary
Guarantee will be a general unsecured obligation of the relevant Subsidiary
Guarantor, and similarly subordinated in right of payment to all existing and
future Senior Indebtedness of that Subsidiary Guarantor, including its
obligations under the Revolving Credit Facility. At December 31, 1997, on a pro
forma basis after giving effect to the Transactions, the aggregate amount of
indebtedness that would have effectively ranked senior to the New Notes and the
Subsidiary Guarantees would have been approximately $8.5 million, and the
Company would have had additional availability of $23.1 million for borrowings
under the Credit Facilities, all of which would be Senior Indebtedness, if
borrowed. At May 8, 1998, there was outstanding approximately $17.9 million of
indebtedness that would effectively rank senior to the New Notes. Additional
Senior Indebtedness may be incurred by the Company and the Subsidiary Guarantors
from time to time, subject to certain restrictions.
In the event of the bankruptcy, liquidation or reorganization of the
Company or any Subsidiary Guarantor, the assets of the Company and the
Subsidiary Guarantors will be available to pay obligations on the New Notes only
after all Senior Indebtedness of those entities has been paid in full, following
which there may not be sufficient assets remaining to pay amounts due in respect
of New Notes then outstanding. In addition, under certain circumstances the
Company will not be permitted to pay its obligations under the Notes in the
event of a default under certain Senior Indebtedness. See "Description of the
Notes -- Subordination" and "Description of the Notes -- Subordination of
Subsidiary Guarantees."
In addition, the New Notes and each Subsidiary Guarantee will be
effectively subordinated to all secured obligations of the Company and such
Subsidiary Guarantor, respectively, to the extent of the assets securing those
obligations. The Revolving Credit Facility is secured by all of the capital
stock of the Company's domestic subsidiaries, 66% of the capital stock of the
Company's foreign subsidiaries and substantially all of the domestic assets of
the Company and its domestic subsidiaries.
The New Notes also will be effectively subordinated to all existing and
future indebtedness and other liabilities of the Company's non-U.S. Subsidiaries
that are not Subsidiary Guarantors (including indebtedness of Polytek under the
Polytek Facilities), and would be so subordinated to all existing and future
indebtedness of the Subsidiary Guarantors if the Subsidiary Guarantees were
avoided or subordinated in favor of the Subsidiary Guarantors' other creditors.
See "-- Fraudulent Conveyance Statutes."
ABILITY TO SUCCESSFULLY COMBINE OPERATIONS
The integration of CSI's operations with those of AFA and Polytek will
require substantial management, engineering and other resources. Although the
Company believes that it has sufficient resources to accomplish
14
<PAGE> 20
this integration, there can be no assurance that the Company will not experience
difficulties with manufacturing processes, tooling, manufacturing personnel or
other matters. In addition, although management believes that combining the
resources and businesses of CSI, AFA and Polytek will enhance the Company's
competitive position and business prospects, there can be no assurance that
those benefits will be realized or that the combination of the operations of CSI
with those of AFA and Polytek will be successful.
As the Company proceeds to integrate the operations of CSI, AFA and
Polytek, it will consolidate the human resources, purchasing, accounting and
management information activities of these three entities. There can be no
assurance, however, as to the timing or amount of any cost savings that may be
realized as a result of those changes, which may result in a disruption of the
Company's operations and could have a material adverse effect on its business.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
DEPENDENCE ON KEY CUSTOMERS
AFA sells its products through a network of more than 40 distributors to a
large and diversified customer base. CSI and Polytek market their trigger
sprayers directly to a small number of large consumer products manufacturers.
The Company's ten largest customers accounted for an aggregate of approximately
41.6% of its net sales on a combined pro forma basis during the twelve months
ended December 31, 1997. A substantial reduction in the Company's sales to, or
the loss of, any of these customers could have a material adverse effect on the
Company's results of operations and financial condition. In 1993, one of CSI's
largest customers, which at the time accounted for approximately 22.0% of its
total unit volume, was acquired by S.C. Johnson and in late 1994 ceased
purchasing products from CSI. The loss of this customer's business adversely
impacted CSI's results of operations in fiscal 1995 and fiscal 1996. In January
1998, Dow Brands, CSI's largest customer, sold certain of its product lines to
S.C. Johnson and subsequently notified CSI that it would be terminating its
contract with CSI effective April 23, 1998. Dow Brands' purchases from CSI
during the twelve months ended December 31, 1997 accounted for approximately
10.0% of the Company's net sales on a pro forma combined basis for that period.
No assurance can be given as to the extent, if any, to which the Company will be
able to retain all or a portion of this business. The total loss of the Dow
Brands business and the failure to replace such business would have a material
adverse effect upon the Company's future results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Marketing and Distribution; Principal Customers."
COMPETITION
The Company operates in highly competitive markets with a number of
companies of varying sizes. There can be no assurance that the Company can
continue to compete successfully with such other companies. Competitive
pressures or other factors could cause the Company's products to lose market
share or could result in significant price erosion, which would have a material
adverse effect on the Company. See "Business -- Competition."
PRICING AND AVAILABILITY OF RAW MATERIALS
The Company's results of operations may be affected by the pricing and
availability of raw materials. Sudden increases in demand or decreases in supply
can greatly increase the cost of raw materials used by the Company in the
manufacture of its products. Plastic resin (particularly polypropylene) is the
principal raw material purchased by the Company. Approximately 9.0% of the
Company's cost of sales on a pro forma combined basis in 1997 was attributable
to purchases of polypropylene. The cost of plastic resin fluctuates, based on
supply and demand, and rose significantly from 1994 to mid-1996. In the second
half of 1996, market prices for resin decreased as new capacity came on line and
such prices have continued to decline since that date. There can be no assurance
that resin prices may not rise significantly in the future. To date, the Company
has been able to obtain sufficient quantities of plastic resin for its
requirements. The Company has long-standing relationships with its major
suppliers and believes that adequate alternative sources of supply exist for all
of its major material requirements. See "Business -- Raw Materials."
15
<PAGE> 21
IMPACT OF EXCHANGE RATE FLUCTUATIONS ON FOREIGN SALES
Sales outside of North America (including export sales) accounted for
approximately 21.9% of the Company's pro forma net sales for the twelve months
ended December 31, 1997. The Company's business strategy contemplates expanding
its sales in non-U.S. markets. The U.S. dollar value of revenues derived from
products sold outside the United States (excluding U.S. export sales) varies
with currency exchange rate fluctuations, and the Company's revenues have been
and may continue to be unfavorably impacted for financial reporting purposes by
significant increases in the value of the U.S. dollar relative to certain
foreign currencies. In addition, with respect to product sales that are
denominated in a currency other than the functional currency of the country in
which the products are manufactured, the Company's margins have been and may
continue to be adversely affected by fluctuations in exchange rates. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
DEPENDENCE ON KEY PERSONNEL
The Company's operations are dependent on the efforts, ability and
experience of its key executive officers and those of its principal
subsidiaries: CSI, AFA and Polytek. The Company's continued growth and success
will depend on its ability to attract and retain skilled executive personnel and
on the ability of those personnel to successfully manage its operations. The
loss of some or all of the Company's key executive personnel could have a
material adverse effect on its results of operations.
ENVIRONMENTAL MATTERS
The Company is subject to a wide range of federal, state and local
environmental and health and safety laws and regulations, including those
governing the use, handling, discharge, disposal and emissions of hazardous
materials and wastes. Some of these environmental laws impose strict, joint and
several liability on the owner or operator of a contaminated site, as well as
any person who disposes or who arranges for the disposal of hazardous materials
at a contaminated site, whether or not the owner or operator of the property
knew of, or was responsible for, the presence of such hazardous or toxic
substances or wastes. Past and present business operations of the Company
subject to such laws, ordinances and regulations include the use, handling and
arranging for recycling or disposal of hazardous materials or wastes, including
new and waste resins, paints, lacquers, solvents, lubricants, degreasing agents
and fuels. The violation of these laws and regulations can result in civil and
criminal penalties being levied or in a cease and desist order against
operations that are not in compliance. The Company believes that its
subsidiaries are in substantial compliance with applicable environmental laws
and regulations relating to their operations and that, currently, no material
capital expenditures are necessary to maintain compliance with existing laws.
However, future laws and regulations may be more stringent and may require the
Company to incur significant additional costs. See "Business -- Environmental
Compliance."
CONTROL BY EXISTING SHAREHOLDERS
All of the outstanding capital stock of the Company is owned by the Parent.
Ariel Gratch and Yehochai Schneider, together with their affiliates,
beneficially own and, upon completion of the Transactions, will continue to
beneficially own, directly or through intermediaries, shares representing 100%
of the aggregate voting power of the Parent's outstanding capital stock (on a
fully diluted basis). As a result, Messrs. Gratch and Schneider effectively
control the Company's affairs and business and have the voting power to
determine the outcome of all matters requiring action by the Company's
stockholders, including the election of directors. Although the Company intends,
within a short period of time following consummation of the Exchange Offer, to
add two directors who are neither officers nor employees of the Company or any
of its affiliates nor members of the families of its principal shareholders, the
Board of Directors is expected to continue to be comprised substantially, if not
entirely, of persons designated or approved by Messrs. Gratch and Schneider.
16
<PAGE> 22
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of New Notes will
be entitled to require the Company to purchase any or all of the New Notes held
by such holder at 101% of the principal amount thereof, plus accrued and unpaid
interest to the date of purchase. However, the Company's ability to purchase New
Notes upon a Change of Control may be limited by the terms of the Company's then
existing contractual obligations. In addition, the Company may not have adequate
financial resources to effect such a purchase, and there can be no assurance
that the Company would be able to obtain such resources through a refinancing of
the New Notes to be purchased or otherwise. The Company's failure to purchase
all New Notes that are tendered for purchase upon the occurrence of a Change of
Control would constitute an Event of Default under the Indenture.
The Change of Control provision may not necessarily afford the holders of
the New Notes protection in the event of a highly leveraged transaction,
including a reorganization, restructuring, merger or similar transaction
involving the Company that may adversely affect the holders, because such
transactions may not involve a shift in voting power or beneficial ownership or,
even if they do, may not involve a shift of the magnitude required under the
definition of Change of Control to trigger such provisions.
FRAUDULENT CONVEYANCE STATUTES
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if, among other things, the
Company, at the time it incurred the indebtedness evidenced by the Old Notes (or
the New Notes issued in exchange therefor), or any Subsidiary Guarantor, at the
time it executed its Subsidiary Guarantee, (i)(a) was or is insolvent or
rendered insolvent by reason of such occurrence, (b) was or is engaged in a
business or transaction for which the assets remaining with the Company or such
Subsidiary Guarantor constituted unreasonably small capital or (c) intended or
intends to incur, or believed or believes that it would incur, debts beyond its
ability to pay those debts as they mature, and (ii) the Company or such
Subsidiary Guarantor received or receives less than reasonably equivalent value
or fair consideration for the incurrence of that indebtedness, the New Notes and
the Subsidiary Guarantees could be voided, or claims in respect of the New Notes
or the Subsidiary Guarantees could be subordinated to other debts of the Company
or such Guarantor in addition to Senior Indebtedness. For similar reasons, other
indebtedness of the Company or any Subsidiary Guarantor, including indebtedness
under the Revolving Credit Facility and any pledge or other security interest
securing that indebtedness, could be voided or subordinated. The voiding or
subordination of any such pledges or other security interests or of any such
other indebtedness, could result in an event of default with respect to that
indebtedness, which could result in acceleration thereof. In addition, the
Company's payment of interest on and principal of the New Notes or a Subsidiary
Guarantor's payment of amounts pursuant to a Subsidiary Guarantee could be
voided and required to be returned to the person making such payment, or to a
fund for the benefit of the creditors of the Company or such Subsidiary
Guarantor, as the case may be.
The measures of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company or a Subsidiary Guarantor would be
considered insolvent if (i) the sum of its debts, including contingent
liabilities, were greater than the fair saleable value of all of its assets at a
fair valuation or if the present fair saleable value of its assets were less
than the amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they become absolute and
mature or (ii) it could not pay its debts as they become due.
On the basis of their historical financial information, recent operating
history as discussed elsewhere herein under the headings "Selected Historical
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations," as well as other factors, the Company and each
Subsidiary Guarantor believes that, after giving effect to the indebtedness
incurred in connection with the Transactions, it (i) will not be insolvent, will
not have unreasonably small capital for the business in which it is engaged and
will not incur debts beyond its ability to pay such debts as they mature and
(ii) will have sufficient assets to satisfy any probable money judgment against
it in any pending action. There can be no assurance, however, as to what
standard a court would apply in making such determinations.
17
<PAGE> 23
ABSENCE OF PUBLIC MARKET
The Old Notes were issued on April 23, 1998 to a limited number of
institutional investors and are eligible for trading in the Private Offerings,
Resale and Trading through Automated Linkages (PORTAL) Market, the National
Association of Securities Dealers' screenbased, automated market for trading of
securities eligible for resale under Rule 144A under the Securities Act. To the
extent that Notes are tendered and accepted in the Exchange Offer, the trading
market for the remaining untendered Notes could be adversely affected. The New
Notes are a new issue of securities that will initially be owned by holders of
the Old Notes that elect to participate in the Exchange Offer and, therefore,
will not be widely distributed. There is no existing trading market for the New
Notes, and there can be no assurance regarding the future development of a
market for the New Notes, or the ability of holders of the New Notes to sell
their New Notes or the price at which such holders might be able to sell their
New Notes. If such a market were to develop, the Notes could trade at prices
that may be higher or lower than their principal amount, depending on many
factors, including prevailing interest rates, the Company's operating results
and the market for similar securities. The Initial Purchaser has advised the
Company that it currently intends to make a market in the New Notes. However,
the Initial Purchaser is not obligated to do so, however, and any such market
making may be discontinued at any time without notice. The Company does not
intend to apply for listing or quotation of the New Notes on any securities
exchange or market.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the New Notes will not
be subject to similar disruptions. Any such disruptions may have an adverse
effect on holders of the New Notes.
USE OF PROCEEDS
There will be no cash proceeds to the Company from the issuance of the New
Notes. As consideration for the New Notes that are issued, the Company will
receive Old Notes in a like principal amount, which Old Notes will be retired
and cancelled and may not be reissued. Accordingly, the issuance of the New
Notes will not result in any change in the Company's outstanding indebtedness.
The net proceeds from the sale of the Old Notes, after deduction of the
discount to the Initial Purchaser and related fees and expenses, were
approximately $140.0 million. Those proceeds were used primarily to repay and
retire the entire $135.0 million outstanding principal amount of the Term Loans.
The Term Loans were incurred under a facility provided by NationsBridge L.L.C.,
an affiliate of the Initial Purchaser, to finance the CSI Acquisition in
February 1998 (approximately $92.9 million) and to refinance previously
outstanding indebtedness incurred in connection with the acquisition of AFA in
July 1997 (approximately $39.6 million). For further information regarding the
Term Loans, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources." In addition, a
portion of the net proceeds were used to fund payment of (i) a deferred fee of
$573,000 to NationsCredit Commercial Corporation ("NationsCredit") arising out
of the prepayment in February 1998 of indebtedness incurred in July 1997 to
finance the acquisition of AFA and (ii) a $2.5 million distribution from the
Company to the Parent, which, together with an equal amount advanced to the
Parent by certain of its stockholders, was used by the Parent to repurchase
outstanding common stock purchase warrants held by NationsCredit. See "Certain
Transactions." The balance of the net proceeds (approximately $1,518,000) were
applied to reduce outstanding borrowings under the Revolving Credit Facility.
18
<PAGE> 24
PRO FORMA CAPITALIZATION
The following table sets forth the unaudited pro forma capitalization of
the Company at December 31, 1997 (i) after giving pro forma effect to the
acquisitions of CSI, AFA and Polytek, the incurrence of the Term Loans and
borrowings under the Revolving Credit Facility and the application of the
proceeds of the Term Loans to refinance previously outstanding indebtedness as
if the same had occurred on December 31, 1997 and (ii) as adjusted to give
effect to the sale of the Old Notes and application of the proceeds therefrom as
described under "Use of Proceeds." The information contained in this table
should be read in conjunction with the unaudited pro forma combined financial
statements and the historical audited financial statements, each with the
related notes thereto, included elsewhere herein.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
--------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
TOTAL DEBT (INCLUDING CURRENT MATURITIES OF LONG-TERM DEBT)
Revolving Credit Facility(1).............................. $ 2,538 $ 738
Term Loans................................................ 135,000 --
Other debt(2)............................................. 7,753 7,753
9 3/4% Senior Subordinated Notes due 2008.............. -- 145,000
-------- --------
Total debt........................................ 145,291 153,491
-------- --------
SHAREHOLDERS' EQUITY
Common Stock (200 shares outstanding, $.01 par value)..... -- --
Additional paid-in capital................................ 7,294 4,794
Accumulated deficit(3).................................... (2,734) (8,264)
Cumulative translation adjustment......................... 28 28
-------- --------
Total shareholders' equity (deficit).............. 4,588 (3,442)
-------- --------
Total capitalization............................ $149,879 $150,049
======== ========
</TABLE>
- ---------------
(1) At May 8, 1998, outstanding borrowings under the Revolving Credit Facility
totalled approximately $9.7 million and there was additional availability
thereunder of approximately $10.8 million.
(2) Represents outstanding debt of Polytek under the Polytek Facilities, which
was incurred in The Netherlands in Dutch guilders, stated in U.S. dollars
based on the rate of exchange in effect at December 31, 1997. At May 8,
1998, there was outstanding approximately $8.2 million of indebtedness under
the Polytek Facilities and additional availability thereunder of
approximately $2.5 million.
(3) Pro forma and pro forma as adjusted gives effect to a write-off of $1.4
million and $5.5 million, respectively, of deferred financing costs as a
result of the refinancing of previously outstanding indebtedness.
19
<PAGE> 25
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements reflect (i)
the acquisition from WTI, Inc. (the predecessor of AFA Holdings Co.) in July
1997 of substantially all of the assets and businesses of AFA and all of the
outstanding capital stock of Polytek; and (ii) the acquisition from Contico
International, Inc. in February 1998 of substantially all the assets and
business of its Continental Sprayers International ("CSI") division, as if such
acquisitions had occurred on January 1, 1997 for statement of operations
purposes and at December 31, 1997 for balance sheet purposes; and (iii) the
consummation of the sale of the Old Notes and application of the net proceeds
therefrom as if the same had occurred on December 31, 1997 for purposes of the
unaudited pro forma combined balance sheet, on January 1, 1997, for purposes of
the unaudited pro forma combined statement of operations and assumes such Old
Notes remained outstanding through December 31, 1997 for purposes of the
unaudited pro forma combined statements of operations. The unaudited pro forma
statement of operations for the year ended December 31, 1997 presents the
results of operations of WTI, Inc. and its subsidiaries for the seven months
ended July 31, 1997, the results of operations of AFA Holdings Co. and its
subsidiaries from August 1, 1997 to December 31, 1997, and the results of
operations of CSI for the twelve months ended December 31, 1997. The audited
historical statements of operations of CSI included in this Prospectus include
the results of operations of CSI for the years ended May 31, 1997, 1996 and
1995. The results of operations of CSI for the twelve months ended December 31,
1997 included in the pro forma statement of operations are derived from the
financial records of CSI. Prior to its acquisition by the Company, each of these
acquired businesses operated as a separate entity. The information presented may
not be indicative of the results that would have actually been obtained had such
acquisitions been completed on the dates indicated, nor is such information
intended to be predictive of the Company's future results of operations or
financial position. These unaudited pro forma combined financial statements
should be read in conjunction with the historical financial statements and the
related notes thereto of the respective entities appearing elsewhere in this
Prospectus.
20
<PAGE> 26
INDESCO INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-----------------------------------------------------------------------------------------
AFA LESS: CSI CSI
HOLDINGS ASSETS AND ACQUISITION OFFERING THE
CO. AND OPERATIONS PRO FORMA PRO FORMA COMPANY
SUBSIDIARIES CSI NOT ACQUIRED(2) ADJUSTMENTS(1)(3) ADJUSTMENTS(1) PRO FORMA
------------ ------- --------------- ----------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash
equivalents............. $ 1,051 $ 19 $ (1) $ (931) $ $ 138
Accounts receivable....... 6,821 7,447 (6,698) 7,570
Inventories............... 9,918.... 5,973 (1,514) 850 15,227
Prepaid expenses and
other................... 605 321 302 1,228
------- ------- ------- -------- --------- --------
Total current
assets........... 18,395 13,760 (8,213) 221 24,163
Property, plant and
equipment, net............ 28,009 27,850 (61) -- 55,798
Goodwill.................... 6,365 60,639 67,004
Patents and other
intangibles............... 5,834 -- 5,834
Deferred financing costs.... 1,628 3,352 170 5,150
Other assets................ 656 512 1,168
------- ------- ------- -------- --------- --------
Total assets....... $60,887 $42,122 $(8,274) $ 64,212 $ 170 $159,117
======= ======= ======= ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Current portion of
long-term debt.......... $ 2,379 $ $ $ (1,750) $ $ 629
Revolving credit
facility................ 4,762 (2,542) 2,220
Accounts payable.......... 2,410 2,313 (75) 4,648
Other accrued expenses.... 3,334 1,718 (1,264) 3,788
------- ------- ------- -------- --------- --------
Total current
liabilities...... 12,885 4,031 (1,339) (4,292) 11,285
Long term debt:
Revolving Credit
Facility................ 2,538 (1,800) 738
Term Loans................ 135,000 (135,000)
Other debt................ 41,154 1,764 (1,764) (36,250) 4,904
9 3/4% Senior Subordinated
Notes due 2008.......... 145,000 145,000
Subordinated debt......... 3,000 (3,000)
------- ------- ------- -------- --------- --------
Total long term
debt............. 44,154 1,764 (1,764) 98,288 8,200 150,642
Deferred income taxes....... 632 632
------- ------- ------- -------- --------- --------
Total
liabilities...... 57,671 5,795 (3,103) 93,996 8,200 162,559
------- ------- ------- -------- --------- --------
Stockholder's equity
(deficit)
Common stock.............. 242 (242)
Paid-in capital........... 4,320 36,327 (5,171) (28,182) (2,500) 4,794
Accumulated deficit....... (1,374) (1,360) (5,530) (8,264)
Cumulative translation
adjustment.............. 28 28
------- ------- ------- -------- --------- --------
Total stockholders'
equity
(deficit)........ 3,216 36,327 (5,171) (29,784) (8,030) (3,442)
------- ------- ------- -------- --------- --------
Total liabilities
and stockholders'
equity
(deficit)........ $60,887 $42,122 $(8,274) $ 64,212 $ 170 $159,117
======= ======= ======= ======== ========= ========
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma combined
financial statements.
21
<PAGE> 27
INDESCO INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
AFA HOLDINGS ----------------------------------------------
WTI INC. AND CO. AND CSI
SUBSIDIARIES SUBSIDIARIES FOR THE
FOR THE SEVEN FOR THE FIVE AFA HOLDINGS TWELVE MONTHS
MONTHS ENDED MONTHS ENDED CO. AND ENDED
JULY 31, DECEMBER 31, PRO FORMA SUBSIDIARIES DECEMBER 31,
1997 1997 ADJUSTMENTS(4) PRO FORMA 1997
------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales................ $32,988 $20,108 $ $53,096 $63,799
Cost of sales............ 23,864 16,595 148 40,607 47,497
------- ------- ----- ------- -------
Gross profit..... 9,124 3,513 (148) 12,489 16,302
Selling, general and
administrative
expenses............... 4,205 2,862 (236) 6,831 6,235
------- ------- ----- ------- -------
Income from
operations..... 4,919 651 88 5,658 10,067
Other expense (income):
Interest............... 2,295 2,231 563 5,089 396
Other, net............. (803) (54) (857) (128)
------- ------- ----- ------- -------
Total other
expense........ 1,492 2,177 563 4,232 268
------- ------- ----- ------- -------
Income (loss) before
provision for income
taxes.................. 3,427 (1,526) (475) 1,426 9,799
Income tax provision
(benefit).............. 354 (152) 202 456
------- ------- ----- ------- -------
Net income
(loss)......... $ 3,073 $(1,374) $(475) $ 1,224 $ 9,343
======= ======= ===== ======= =======
OTHER DATA:
EBITDA(6)..............
Adjusted EBITDA(7).....
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
----------------------------------------
LESS: CSI
OPERATIONS THE
NOT PRO FORMA COMPANY
ACQUIRED(2) ADJUSTMENTS(5) PRO FORMA
----------- -------------- ---------
<S> <C> <C> <C>
Net sales................ $2,364 $ $114,531
Cost of sales............ 1,431 (3,068) 83,605
------ ------- --------
Gross profit..... 933 3,068 30,926
Selling, general and
administrative
expenses............... 597 1,868 14,337
------ ------- --------
Income from
operations..... 336 1,200 16,589
Other expense (income):
Interest............... 9,635 15,120
Other, net............. (985)
------ ------- --------
Total other
expense........ 9,635 14,135
------ ------- --------
Income (loss) before
provision for income
taxes.................. 336 (8,435) 2,454
Income tax provision
(benefit).............. 125 497 1,030
------ ------- --------
Net income
(loss)......... $ 211 $(8,932) $ 1,424
====== ======= ========
OTHER DATA:
EBITDA(6).............. $ 28,643
Adjusted EBITDA(7)..... $ 32,466
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma combined
financial statements.
22
<PAGE> 28
INDESCO INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) Acquisition and Related Financing
Effective February 1, 1998, the Company consummated the CSI Acquisition,
refinanced outstanding debt, and paid certain transaction fees. The pro
forma balance sheet as of December 31, 1997 has been adjusted to record the
acquisition of CSI as if it had occurred on such date as follows:
<TABLE>
<S> <C>
CSI Acquisition......................................... $ 92,947
Retirement of long-term debt............................ 36,250
Retirement of short-term borrowings..................... 4,292
Financing costs......................................... 4,980
--------
Total......................................... $138,469
========
</TABLE>
The amounts above were funded by the proceeds of $135,000 of Term Loans,
$2,538 of borrowings under the Revolving Credit Facility and existing cash
of $931.
Proceeds of $145,000 received from the sale of the Old Notes were applied as
follows:
<TABLE>
<S> <C>
Repayment of Term Loans................................. $135,000
Financing costs......................................... 5,700
Return of capital to the Parent......................... 2,500
Reduction of revolving credit borrowings................ 1,800
--------
Total......................................... $145,000
========
</TABLE>
The pro forma balance sheet reflects the write-off of $1,360 of financing
fees in connection with the July 1997 acquisition of AFA and $5,530 of
financing fees in connection with the CSI Acquisition in February 1998.
(2) The Company did not acquire certain low volume operations of CSI in the
United Kingdom that relate to the production and sale of specialty items.
(3) The Company has increased the value of inventory by $850 in accordance with
APB 16 and has recorded fixed assets and identifiable intangibles at their
net historical book value, pending completion of appraisals. Differences, if
any, between these amounts and the amounts resulting from appraisals and
valuations of these assets, which have not yet been completed, will be
reflected as adjustments to goodwill, which may increase or decrease related
depreciation and amortization charges.
(4) Pro forma adjustments to reflect the results of the acquisitions of AFA and
Polytek as if the same had occurred on January 1, 1997 are as follows:
<TABLE>
<CAPTION>
1997
-------
<S> <C>
(a) Additional fixed asset depreciation.................. $ 289
(b) Amortization of intangibles.......................... (232)
Elimination of lease payments for assets purchased... (145)
Predecessor interest elimination..................... (2,295)
(c) Interest on July 1997 financing...................... 2,858
-------
$ 475
=======
</TABLE>
(a) Reflects the depreciation of the increase in fair market value of fixed
assets acquired and the effects of new service lives.
(b) Amortization of intangibles, including patents and goodwill of
approximately $6,000 and $6,500, respectively, with lives ranging from
15 to 30 years, net of predecessor amortization.
23
<PAGE> 29
INDESCO INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(c) Debt incurred as a result of the acquisition of AFA and Polytek
consisted of $38,000 of long-term borrowings at an average interest
rate of 10.14% and a revolving line of credit of $7,000 at floating
rates.
(5) Pro forma adjustments to reflect the CSI Acquisition and the consummation of
the sale of the Old Notes as if the same had occurred on January 1, 1997 are
as follows:
<TABLE>
<CAPTION>
1997
-------
<S> <C>
(a) Fixed asset depreciation............................. $(3,068)
(b) Amortization of intangibles.......................... 1,868
(c) Increase in interest expense......................... 9,635
(d) Income taxes......................................... 497
-------
$ 8,932
=======
</TABLE>
(a) Reflects the adoption of AFA depreciation methods and the effect of new
service lives (see Note 3 above).
(b) Reflects amortization of estimated values of identifiable intangibles
and goodwill of approximately $61,000 with an amortization life of 30
years (see Note 3 above).
(c) Reflects elimination of interest charges and related amortization of
debt financing costs related primarily to the financing of the
acquisitions of AFA and CSI. Includes interest on the Notes at a rate
of 9.75% per annum and amortization of estimated deferred financing
charges, resulting in pro forma interest expense of approximately
$14,725. Interest on certain foreign debt outstanding at a rate of 5.5%
per annum resulted in additional pro forma interest expense of $395.
(d) The pro forma adjustment for income taxes reflects the tax effect of
the pro forma adjustments and the tax effect of S corporation earnings
of CSI treated as C corporation earnings.
(6) EBITDA represents income before interest, income taxes, depreciation and
amortization plus, in the case of AFA and Polytek, the elimination of the
increase in cost of sales resulting from the step-up in inventory value of
$1,713. Management believes that EBITDA is a measure commonly used by
analysts and investors to determine a company's ability to incur and service
its debt. EBITDA should not be considered as an alternative to, or more
meaningful than, net income, cash flows from operating activities or other
income or cash flow statement data prepared in accordance with GAAP or as a
measure of profitability or liquidity.
(7) Adjusted EBITDA represents EBITDA, as defined above, plus the effect of the
following:
<TABLE>
<S> <C>
(a)Elimination of U.K. facility and related freight
savings................................................. $1,160
(b)Procurement savings.................................... 1,400
(c)Insurance savings...................................... 563
(d)Research and development, patent filing and facilities'
rationalization........................................ 1,450
(e)Additional officer and corporate overhead costs........ (750)
------
$3,823
======
</TABLE>
(a) Elimination of U.K. facility and related freight savings -- Management
is in the process of consolidating the U.K.-based assembly operations
of CSI into The Netherlands-based manufacturing operations of Polytek.
The consolidation is expected to eliminate duplicative overhead
expenses including rent and other administrative and certain fixed
expenses estimated to be approximately $560. In addition, the Company
is expected to eliminate the freight and duty expenses previously
incurred by CSI in shipping domestically-molded parts to its U.K.
facility since the Company plans
24
<PAGE> 30
INDESCO INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
to produce those parts in Polytek's facility. Such freight and duty
expenses incurred by CSI during 1997 were approximately $600.
(b) Procurement savings -- The Company has renegotiated its purchase
contract for springs used in the manufacture of trigger sprayers. Based
on pro forma combined trigger sprayer production volumes in 1997,
management estimates that savings as a result of such contract will be
in excess of $430. Management estimates that the Company can obtain
savings on resin purchases over CSI's historical costs of $300 based on
CSI's historical fiscal 1997 purchases. Currently AFA manufactures
certain parts used in the production of trigger sprayers that CSI
purchases from a third party. Management estimates that the Company can
save approximately $400 by having AFA manufacture such parts. Adoption
of other materials savings procedures are estimated to save
approximately $270.
(c) Insurance savings -- The Company has obtained a consolidated property
and casualty insurance policy that will result in annual savings of
approximately $563 over aggregate premiums paid for the separate
policies of AFA, Polytek and CSI. The new consolidated policy does not
change the Company's coverage or deductible amounts.
(d) Research and development, patent filing and facilities
rationalization -- The Company will consolidate the research and
development departments of its subsidiaries into one department capable
of addressing continued product improvements and manufacturing
efficiency requirements. Savings associated with such consolidation and
the elimination of patent filing redundancies are estimated to be in
excess of $750. Management has also estimated annual savings of $700
based on planned facilities' rationalization.
(e) Additional officer and corporate overhead costs -- Management estimates
that the costs in excess of management fees, executive salaries and
parent service charges previously incurred by the Company will be
approximately $750.
25
<PAGE> 31
SELECTED HISTORICAL FINANCIAL DATA
AFA AND POLYTEK
The following table sets forth selected historical financial data of AFA
and Polytek on a combined basis as of and for each of the years in the five-year
period ended December 31, 1997. The statement of operations and balance sheet
data as of December 31, 1996 and 1997 and for each of the years in the
three-year period ended December 31, 1997, as set forth below, are derived from
the audited historical financial statements of AFA Holdings Co. (the Company's
parent) and WTI, Inc. and Subsidiaries (the predecessor of AFA Holdings Co.)
included elsewhere in this Prospectus. The statement of operations and balance
sheet data as of December 31, 1993, 1994 and 1995 and for each of the years in
the two-year period ended December 31, 1994 have been derived from the financial
records of WTI, Inc. and Subsidiaries. The data below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the historical financial statements and notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
COMBINED
WTI, INC AND --------
SUBSIDIARIES AFA HOLDINGS CO. YEAR
WTI, INC. AND SUBSIDIARIES FOR THE FOR THE ENDED
YEAR ENDED DECEMBER 31, SEVEN MONTHS FIVE MONTHS ENDED DECEMBER
------------------------------------- ENDED DECEMBER 31, 31,
1993 1994 1995 1996 JULY 31, 1997 1997 1997
------- ------- ------- ------- ------------- ----------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................... $45,679 $48,572 $55,238 $54,133 $32,988 $20,108 $53,096
Cost of sales................ 32,918 34,418 41,971 39,868 23,864 16,595 40,459
------- ------- ------- ------- ------- ------- -------
Gross profit(1).............. 12,761 14,154 13,267 14,265 9,124 3,513 12,637
Selling, general and
administrative expenses.... 7,741 7,751 7,877 7,389 4,205 2,862 7,067
------- ------- ------- ------- ------- ------- -------
Income from operations....... 5,020 6,403 5,390 6,876 4,919 651 5,570
Interest expense............. 4,178 4,289 4,489 4,275 2,295 2,231 4,526
Other income, net............ (464) (163) (251) (275) (803) (54) (857)
------- ------- ------- ------- ------- ------- -------
Income (loss) before
provision (benefit) for
taxes...................... 1,306 2,277 1,152 2,876 3,427 (1,526) 1,901
Income taxes (benefit)....... 917 761 880 354 354 (152) 202
------- ------- ------- ------- ------- ------- -------
Net income (loss)............ $ 389 $ 1,516 $ 272 $ 2,522 $ 3,073 $(1,374) $ 1,699
======= ======= ======= ======= ======= ======= =======
OTHER DATA:
EBITDA(2).................... $ 9,387 $10,710 $10,077 $11,621 $ 8,242 $ 4,279 $12,521
Depreciation and
amortization............... 3,903 4,144 4,436 4,470 2,520 1,861 4,381
Capital expenditures......... 5,407 3,003 3,604 2,218 2,498 661 3,159
Ratio of earnings to fixed
charges(3)................. 1.3x 1.5x 1.3x 1.6x -- -- 1.4x
Gross margin(4).............. 27.9% 29.1% 24.0% 26.4% 27.7% 17.5% 23.8%
EBITDA margin(5)............. 20.5% 22.0% 18.2% 21.5% 25.0% 21.3% 23.6%
BALANCE SHEET DATA AT PERIOD
END:
Working capital.............. $ 672 $ 5,428 $ 3,166 $ 945 -- -- $ 5,510
Fixed assets, net............ 15,558 16,931 18,149 16,004 -- -- 28,009
Total assets................. 42,504 46,459 47,956 44,801 -- -- 60,887
Total debt(6)................ 34,282 32,394 30,827 24,111 -- -- 51,295
Stockholders' equity......... (2,654) (240) 762 2,413 -- -- 3,216
</TABLE>
- ---------------
(Footnotes appear on page 29)
26
<PAGE> 32
CSI
The following table sets forth selected historical financial data of CSI as
of and for each of the years in the five-year period ended May 31, 1997, and as
of December 31, 1997 and for the seven-month periods ended December 31, 1996 and
1997. The statement of operations and balance sheet data as of May 31, 1996 and
1997 and for each of the years in the three-year period ended May 31, 1997, as
set forth below, are derived from the audited historical financial statements of
CSI included elsewhere in this Prospectus. The statement of operations and
balance sheet data as of May 31, 1993, 1994 and 1995 and for each of the years
in the two-year period ended May 31, 1994 have been derived from the financial
records of CSI. The balance sheet and statement of operations data of CSI as of
December 31, 1997 and for the seven-month periods ended December 31, 1996 and
1997 have been derived from the unaudited historical financial statements of CSI
included elsewhere in this Prospectus. In the opinion of management, the
unaudited financial statements of CSI include all adjustments (consisting only
of normal recurring adjustments) necessary to present fairly the data for such
periods. Interim results for the seven-month periods presented are not
necessarily indicative of results that can be expected in the future. The table
includes data relating to assets and liabilities of, and results of operations
attributable to, certain business operations that were not purchased in the CSI
Acquisition, none of which was material. The data below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the historical financial statements and notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED
YEAR ENDED MAY 31, DECEMBER 31,
----------------------------------------------- -----------------
1993 1994 1995 1996 1997 1996 1997
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................ $50,672 $58,133 $58,320 $57,104 $62,249 $33,934 $35,484
Cost of sales............................ 32,612 41,969 42,491 44,614 48,901 27,281 25,877
------- ------- ------- ------- ------- ------- -------
Gross profit............................. 18,060 16,164 15,829 12,490 13,348 6,653 9,607
Selling, general and administrative
expenses............................... 5,515 5,174 6,214 6,335 6,286 3,595 3,391
------- ------- ------- ------- ------- ------- -------
Income from operations................... 12,545 10,990 9,615 6,155 7,062 3,058 6,216
Interest expense......................... 651 984 1,355 983 616 377 157
Other expense, net....................... 84 (84) (181) 142 28 60 57
------- ------- ------- ------- ------- ------- -------
Income before provision for taxes........ 11,810 10,090 8,441 5,030 6,418 2,621 6,002
Income taxes............................. 267 175 260 258 361 157 252
------- ------- ------- ------- ------- ------- -------
Net income............................... $11,543 $ 9,915 $ 8,181 $ 4,772 $ 6,057 $ 2,464 $ 5,750
======= ======= ======= ======= ======= ======= =======
OTHER DATA:
EBITDA(2)................................ $15,988 $15,720 $15,358 $12,186 $13,560 $ 7,028 $ 9,892
Depreciation............................. 3,527 4,646 5,562 6,173 6,526 4,030 3,733
Capital expenditures..................... 8,910 14,408 5,301 3,337 4,477 3,115 915
Ratio of earnings to fixed charges(3).... 19.1x 11.3x 7.2x 6.1x 11.4x 8.0x 39.2x
Gross margin(4).......................... 35.6% 27.8% 27.1% 21.9% 21.4% 19.6% 27.1%
EBITDA margin(5)......................... 31.6% 27.0% 26.3% 21.3% 21.8% 20.7% 27.9%
BALANCE SHEET DATA AT PERIOD END:
Working capital.......................... $ 7,821 $10,002 $10,170 $ 8,024 $ 8,937 -- $ 9,729
Fixed assets, net........................ 25,678 35,432 35,206 32,464 30,588 -- 27,850
Total assets............................. 40,265 51,456 50,655 48,631 45,928 -- 42,122
Total debt(6)............................ 10,860 18,548 15,329 8,813 5,712 -- 1,647
Divisional equity........................ 23,206 27,068 30,203 31,940 34,178 -- 36,327
</TABLE>
- ---------------
(Footnotes appear on page 29)
27
<PAGE> 33
Footnotes:
(1) Gross profit for AFA and Polytek in 1997 reflects a one-time increase in
cost of sales resulting from a step-up in the value of inventory of $1,713,
as required by APB 16, in connection with the acquisition of AFA and
Polytek. AFA and Polytek gross profit and gross margin in 1997, excluding
the effect of the increase in cost of sales were $14,350 and 27.0%,
respectively.
(2) EBITDA represents income before interest, income taxes, depreciation and
amortization plus, for AFA and Polytek, the elimination of the increase in
cost of sales resulting from the step-up in inventory value of $1,713 in
1997. Management believes that EBITDA is a measure commonly used by analysts
and investors to determine a company's ability to incur and service its
debt. EBITDA should not be considered as an alternative to, or more
meaningful than, net income, cash flows from operating activities or other
income or cash flow statement data prepared in accordance with GAAP, or as a
measure of profitability or liquidity.
(3) For purposes of this ratio, earnings consist of income before provision for
income taxes plus fixed charges. Fixed charges consist of interest expense
(including capitalized interest) on all indebtedness, amortization of
deferred financing costs and one-third of rental expense.
(4) Gross margin is calculated by dividing gross profit by net sales.
(5) EBITDA margin is calculated by dividing EBITDA by net sales.
(6) Total debt includes long-term debt (including current maturities) and
capital lease obligations.
28
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the pro forma
historical financial statements and the notes thereto included elsewhere in this
Prospectus.
OVERVIEW
The Company acquired the assets and business of AFA in July 1997. The
acquisition was financed with revolving credit borrowings and term loans
aggregating approximately $40.8 million (the "AFA Debt") and equity
contributions and subordinated loans from stockholders of the Parent and their
affiliates. In August 1997, through an intermediate holding company, a
stockholder of the Parent and an affiliate of another stockholder of the Parent
acquired all of the outstanding capital stock of Polytek. This acquisition was
financed with term loans and revolving credit facilities, aggregating
approximately $7.9 million, under the Polytek Facilities and equity
contributions. Effective February 1, 1998, the Company consummated the CSI
Acquisition, refinanced the AFA Debt in its entirety and acquired all the
capital stock of Polytek.
As a result of the combination of the business of CSI, AFA and Polytek, the
Company expects to achieve significant cost savings, certain of which have
already been realized. Completed cost savings include those associated with
renegotiated purchase contracts and insurance coverage. Additional business
synergies are expected to be attained through the rationalization of certain
manufacturing operations and more efficient utilization of production capacity.
Savings also are expected from the combination and centralization of various
administrative operations and adoption on a Company-wide basis of the
manufacturing "best" practices from the operations of each of CSI, AFA and
Polytek. Management estimates the total amount of such annual cost savings to be
approximately $3.8 million. See Note 7 to the Unaudited Pro Forma Combined
Financial Statements.
The Company also will be introducing a new generation of products that are
simpler to manufacture, such as the T-1000(TM) trigger sprayer and the Luxor(TM)
lotion pump. These products are expected to significantly reduce production
costs, resulting in improved margins.
As a result of the CSI Acquisition, the Company incurred, in accordance
with APB 16, step-ups in the valuation of CSI's inventories and certain fixed
assets as well as an overall increase in goodwill. The increase in the value of
the inventories will result in a non-cash increase in cost of goods sold of
$850,000 during 1998.
RESULTS OF OPERATIONS
AFA HOLDINGS CO.
The following discussion compares the combined results of operations of AFA
Holdings Co. and WTI for the years ended December 31, 1997, 1996 and 1995. The
combined results of operations for the year ended December 31, 1997 are derived
from the financial statements of WTI for the seven-month period ended July 31,
1997 and the financial statements of AFA Holdings Co. for the five-month period
ended December 31, 1997. As required by APB 16, upon the acquisition of AFA and
Polytek, certain of the acquired assets were revalued and new service lives for
depreciable assets were established. Accordingly, results for the twelve months
ended December 31, 1997 are not directly comparable to those for prior periods.
Prior to their acquisition by the Company, AFA and Polytek were
subsidiaries of WTI, and, accordingly, their historical results are presented in
the financial statements on a combined basis. The financial statements do not
show the separate contributions of each of AFA and Polytek to the combined
results. During the periods covered by the financial statements, AFA experienced
net sales and EBITDA growth at compound annual rates of 13.3% and 34.6%,
respectively, due primarily to new product introductions and the addition of a
specialty product application for a major multinational customer.
Since 1995, results of operations at Polytek were adversely impacted by
increased competition in the European market for trigger sprayers. Polytek did
not quickly respond to those competitive pressures and experienced a 9.5%
decline in unit shipments in 1996. In late 1996, Polytek's management took
actions to increase sales volume, including new pricing strategies, resulting in
a 20.7% increase in trigger sprayer unit
29
<PAGE> 35
sales in 1997. Polytek's gross margin declined from 25.9% in 1995 to 21.9% in
1997 on a local currency denominated basis.
Polytek is based in The Netherlands and reports its results in Dutch
guilders. The value of the Dutch guilder declined relative to the U.S. dollar by
5% in 1996 and 16% in 1997. These declines negatively impacted the combined
results of AFA and Polytek when translating Polytek's results to U.S. dollars
for financial reporting purposes.
AFA's net sales include revenues solely from trigger sprayer sales, while
Polytek's net sales include revenues from sales of trigger sprayers and custom
molding services. Cost of sales in each case includes the cost of materials,
labor and manufacturing overhead.
Selling, general and administrative expenses consist primarily of salaries
and benefits paid to sales and administrative personnel and travel, marketing,
advertising and research and development expenses and amortization of
intangibles.
<TABLE>
<CAPTION>
WTI AND AFA HOLDINGS CO.
SUBSIDIARIES AND SUBSIDIARIES
SEVEN MONTHS FIVE MONTHS COMBINED
ENDED ENDED YEAR ENDED
JULY 31, DECEMBER 31, DECEMBER 31,
1995 1996 1997 1997 1997
------- ------- ------------ ---------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales.......................... $55,238 $54,133 $32,988 $20,108 $53,096
Cost of sales...................... 41,971 39,868 23,864 16,595 40,459
------- ------- ------- ------- -------
Gross profit..................... 13,267 14,265 9,124 3,513 12,637
Selling, general and
administrative expense........ 7,877 7,389 4,205 2,862 7,067
------- ------- ------- ------- -------
Operating income................... 5,390 6,876 4,919 651 5,570
Interest expense................... 4,489 4,275 2,295 2,231 4,526
Other income....................... (251) (275) (803) (54) (857)
------- ------- ------- ------- -------
Income before income taxes
(benefit)..................... 1,152 2,876 3,427 (1,526) 1,901
Income taxes (benefit)............. 880 354 354 (152) 202
------- ------- ------- ------- -------
Net income (loss).................. $ 272 $ 2,522 $ 3,073 $(1,374) $ 1,699
======= ======= ======= ======= =======
</TABLE>
1997 COMPARED TO 1996
Net sales. Net sales decreased from $54.1 million in 1996 to $53.1 million
in 1997, or 1.9%. Net sales by AFA increased from $30.4 million in 1996 to $31.5
million in 1997. AFA's unit sales increased by 5%, but by only 2.9% in net
sales. The increase in volume was partially offset by competitive pricing
concessions. Unit sales at Polytek increased by 20% in 1997 as management
recaptured much of the business lost in 1996. However, price concessions
necessary to restore that volume resulted in only a 5% increase in net sales on
a local currency basis. The decline in the value of the Dutch guilder relative
to the U.S. dollar continued and on a daily composite basis declined 16% in 1997
over 1996, which resulted in a decline of approximately 13.6% in net sales when
translating Polytek's results to U.S. dollars for financial reporting purposes.
Gross margins. Gross margin as a percent of sales decreased from 26.4% in
1996 to 23.8% in 1997. These decreases in margin were principally the result of
a one-time write-up of inventory pursuant to APB 16 of approximately $1.7
million which was charged to cost of sales in the five months ended December 31,
1997. Without the effect of the write-up, 1997 gross margin would have been
27.0%, compared to 26.4% in 1996. Gross margins at AFA continued to improve from
reductions in raw material and purchased parts costs and greater absorption of
fixed costs as production levels increased. At Polytek the gross margin
percentage decreased from 23.5% in 1996 to 21.9% in 1997, due to selling price
reductions and higher labor costs, including those associated with the hiring of
temporary personnel to meet additional production demands during 1997. Polytek
also incurred some raw material purchase price increases in 1997.
30
<PAGE> 36
Selling, general and administrative expenses. Selling, general and
administrative expenses remained relatively unchanged from 1996 to 1997.
Amortization decreased $467,000 from $1.3 million in 1996 to $850,000 in 1997.
This was a result of new values and lives assigned to intangible assets that
have reduced the annual amortization charge and the effect of the decrease in
the guilder/dollar exchange rate.
Interest expense. Interest expense increased $251,000 from $4.3 million in
1996 to $4.5 million in 1997 as a result of debt incurred to finance the
acquisition of AFA and Polytek.
Other income. The increase in other income from 1996 to 1997 was
principally due to the decline in the value of the Dutch guilder in relation to
the U.S. dollar.
Income tax. The income tax provision of $202,000 in 1997 reflected a tax
provision of $883,000 (46% effective rate) offset by a decrease in the valuation
allowance of $681,000. The income tax provision in 1996 of $354,000 reflects a
tax provision of $1.2 million (42% effective rate) offset by a decrease in the
valuation allowance of $848,000.
1996 COMPARED TO 1995
Net sales. AFA's net sales increased 24.1% from $24.5 million in 1995 to
$30.4 million in 1996. The increase was primarily attributable to the inclusion
in 1996 of sales of two new trigger sprayer models introduced in late 1995. This
increase was offset by a 22.8% decrease in Polytek's net sales from $30.7
million in 1995 to $23.7 million in 1996. Polytek's net sales were adversely
impacted by a 5% reduction in the value of the Dutch guilder relative to the
U.S. dollar. Unit sales of trigger sprayers by Polytek declined 9.4% as Polytek
attempted to resist price competition in Europe. Sales of custom molding
services decreased by approximately 18.7% (on a guilder-denominated basis) in
1996 compared to 1995, when sales were favorably impacted by the accelerated
introduction of two new products by a major customer.
Gross margin. As a percentage of net sales, gross margin increased from
24.0% to 26.4%, due to an increase in gross margin at AFA as a percentage of
sales from 21.9% in 1995 to 29.2% in 1996. This increase resulted from reduced
raw material and purchased parts costs and increased manufacturing efficiencies,
together with absorption of a greater percentage of fixed manufacturing costs on
increased production levels and higher price margin on one of the new product
introductions. As a percentage of net sales, Polytek's gross margin decreased
from 25.9% in 1995 to 23.7% in 1996, due to reduced absorption of fixed
manufacturing costs associated with substantially lower production levels,
partially offset by reductions in the cost of certain materials.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased from $7.9 million in 1995 to $7.4 million in
1996. The decrease in selling, general and administrative expenses relates
primarily to a $300,000 termination payment in 1995 to a former employee. Other
costs remained relatively unchanged between the periods.
Income taxes. The provision for income taxes of $354,000 in 1996 reflects
a tax provision of $1.2 million (42% effective rate) offset by a decrease in a
valuation allowance of $848,000. The provision for income taxes in 1995 reflects
a tax provision of $525,000 (45.5%) before an increase in the valuation
allowance of $355,000. This effective rate in 1995 is affected by a pre-tax loss
for U.S. tax purposes of $1.0 million and a gain in foreign countries of $2.2
million, which affected the overall effective tax rate.
CSI
The historical financial statements of CSI represent the combined financial
statements of certain divisions of Contico. During the periods covered by those
financial statements, CSI experienced net sales growth at a compound annual rate
of 5.2% and experienced a reduction in EBITDA attributable primarily to the loss
of its largest customer in 1994, as discussed below. These financial statements
include the assets and liabilities of, and the results of operations
attributable to, certain business operations of CSI that were not purchased in
the CSI Acquisition, none of which was material.
31
<PAGE> 37
Net sales for CSI include revenues from trigger sprayer and dispenser pump
sales. Cost of sales includes materials, labor and manufacturing overhead.
Selling, general and administrative expenses consist primarily of salaries and
benefits paid to sales and administrative personnel, travel, marketing,
advertising and research and development expenses and distribution expenses.
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED
YEAR ENDED MAY 31, DECEMBER 31,
----------------------------- ------------------
1995 1996 1997 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales........................................... $58,320 $57,104 $62,249 $33,934 $35,484
Cost of sales....................................... 42,491 44,614 48,901 27,281 25,877
------- ------- ------- ------- -------
Gross profit........................................ 15,829 12,490 13,348 6,653 9,607
Selling, general and administrative expenses........ 6,214 6,335 6,286 3,595 3,391
------- ------- ------- ------- -------
Income from operations.............................. 9,615 6,155 7,062 3,058 6,216
Interest expense.................................... 1,355 983 616 377 157
Other expense (income).............................. (181) 142 28 60 57
------- ------- ------- ------- -------
Income before provision for taxes................... 8,441 5,030 6,418 2,621 6,002
Income taxes........................................ 260 258 361 157 252
------- ------- ------- ------- -------
Net income.......................................... $ 8,181 $ 4,772 $ 6,057 $ 2,464 $ 5,750
======= ======= ======= ======= =======
</TABLE>
In 1993, one of CSI's largest customers, which accounted for approximately
22% of its total unit volume at that time, was acquired by S.C. Johnson and in
late 1994 ceased purchasing products from CSI. The loss of this customer's
business adversely impacted CSI's results of operations in fiscal 1995 and
fiscal 1996. In January 1998, following the sale of certain of its product lines
to S.C. Johnson, Dow Brands, CSI's largest customer, notified CSI that it would
be terminating its contract with CSI effective April 23, 1998. Dow Brands
purchases from CSI during the twelve months ended December 31, 1997 accounted
for approximately 18.0% of CSI's net sales for that period. The loss of the Dow
Brands business could adversely impact the Company's future results of
operations. Following its acquisition of the Dow Brands product lines, S.C.
Johnson resold certain of the acquired product lines to a third party.
Management believes that the Company will continue through the end of 1998 to
supply trigger sprayers for those product lines, which accounted for
approximately one-half of CSI's unit sales to Dow Brands in the twelve months
ended December 31, 1997, as well as for certain of the product lines retained by
S.C. Johnson. However, there can be no assurance of the extent to which the
Company will continue to supply trigger sprayers for any of these product lines
or the length of time it will continue to supply them.
SEVEN MONTHS ENDED DECEMBER 31, 1997 COMPARED TO SEVEN MONTHS ENDED DECEMBER
31, 1996
Net sales. Net sales for the seven months ended December 31, 1997 (the
"1997 Interim Period") increased $1.6 million to $35.5 million from $33.9
million for the seven months ended December 31, 1996 (the "1996 Interim
Period"), or 4.6%. This increase was mainly attributable to increased sales in
Europe to a multinational U.S. consumer products manufacturer.
Cost of sales. Costs of sales for the 1997 Interim Period decreased $1.4
million to $25.9 million from $27.3 million for the 1996 Interim Period or 5.1%.
Resin price declines reduced costs by about $230,000. Indirect labor savings
from transitioning to a five-day schedule at CSI's two U.S. manufacturing
facilities were over $600,000 and scrap and inventory losses were reduced by
more than $600,000.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $200,000 to $3.4 million for the 1997 Interim
Period from $3.6 million for the 1996 Interim Period, or 5.6%. This decrease
resulted principally from a reduction in sales staff and lower fees paid for
professional services.
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<PAGE> 38
YEAR ENDED MAY 31, 1997 COMPARED TO YEAR ENDED MAY 31, 1996
Net sales. Net sales increased $5.1 million to $62.2 million for fiscal
1997 from $57.1 million for fiscal 1996, or 9.0%. This increase was primarily
due to increased sales in Europe and the United States to three multinational
consumer products manufacturers and sales to two new customers.
Cost of sales. Cost of sales increased $4.3 million to $48.9 million in
fiscal 1997 from $44.6 million in fiscal 1996, or 9.6%. The increase was
primarily due to increased sales volume as discussed above.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $6.3 million in both fiscal 1997 and fiscal 1996.
Administrative expenses decreased as a result of the elimination of an executive
position and a general reduction in administrative personnel, which were offset
by an increase in distribution costs in connection with the commencement of
operations at the United Kingdom facility.
YEAR ENDED MAY 31, 1996 COMPARED TO YEAR ENDED MAY 31, 1995
Net sales. Net sales decreased $1.2 million to $57.1 million for fiscal
1996 from $58.3 million for fiscal 1995, or 2.1%. This decrease was primarily
due to the impact of the loss of business of a major customer, offset in part by
increased sales of lower priced trigger sprayers to two domestic manufacturers
and new sales in Europe to a multinational consumer products manufacturer.
Cost of sales. Cost of sales increased $2.1 million to $44.6 million in
fiscal 1996 from $42.5 in fiscal 1995, or 5.0%. This increase was primarily
attributable to the loss of manufacturing efficiencies associated with
production of products for a major customer that terminated its relationship
with CSI.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.1 million to $6.3 million in fiscal 1996
from $6.2 million in fiscal 1995, or 1.6%.
LIQUIDITY AND CAPITAL RESOURCES
The Company acquired the assets and business of AFA in July 1997. The
acquisition was financed with the AFA Debt, aggregating approximately $40.8
million, and equity contributions and subordinated loans from stockholders of
the Parent and their affiliates. In August 1997, through an intermediate holding
company, a stockholder of the Parent and an affiliate of another stockholder of
the Parent acquired all of the outstanding capital stock of Polytek. This
acquisition was financed with term loans and revolving credit facilities
aggregating approximately $7.9 million under the Polytek Facilities and equity
contributions.
Effective February 1, 1998, the Company consummated the CSI Acquisition,
refinanced the AFA Debt in its entirety and acquired all of the capital stock of
Polytek. Funds used for the CSI Acquisition and the refinancing of the AFA Debt
were provided by (a) the Term Loans, which consisted of (i) a $70.0 million
principal amount tranche A term loan bearing interest at LIBOR plus 3.75%; and
(ii) a $65.0 million tranche B term loan bearing interest at LIBOR plus 5.5%,
and (b) $2.5 million of advances under the Revolving Credit Facility bearing
interest at LIBOR plus 3.0%. The tranche A and tranche B loans required
quarterly principal amortization payments beginning in June 1998 and were
scheduled to mature on December 31, 2003 and February 4, 2005, respectively. The
net proceeds from the sale of the Notes will be used to principally repay and
retire, without premium, the entire $135.0 million principal amount of the Term
Loans.
AFA's Forest City facility, which operated at near capacity during 1997,
historically has not been capital intensive, with capital expenditures
aggregating $2.1 million, $0.7 million, and $1.9 million in 1995, 1996 and 1997,
respectively. Management believes that the availability of CSI's El Paso
manufacturing facility to augment AFA's Forest City facility will increase the
total production capacity available to service AFA's customer base as well as
provide additional product lines to market to AFA's customers.
Like AFA, Polytek has not historically been a capital intensive business,
with annual capital expenditures aggregating approximately $1.2 million, $1.5
million and $1.5 million in 1995, 1996 and 1997, respectively.
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<PAGE> 39
Throughout the 1990s, CSI invested in modern manufacturing equipment,
including injection molding presses, automated assembly machines and tooling, to
increase capacity, improve quality, reduce costs and improve manufacturing
flexibility in order to provide the high level of service required by large
consumer products manufacturers. During the six-year period ending May 1997, CSI
invested approximately $43.0 million in capital improvements, adding 37 new
injection molding presses and ten new assembly lines. CSI anticipates additional
capital investment for the introduction of the T-1000(TM) trigger sprayer and
Luxor(TM) pump, which are expected to further reduce manufacturing costs and
improve operating margins.
During the twelve months ended December 31, 1997, AFA, Polytek and CSI
generated cash from operations of $4.7 million, $2.6 million and $15.7 million,
respectively. Capital expenditures for AFA, Polytek and CSI during this period
were $1.9 million, $1.3 million and $2.3 million, respectively. Working capital
and capital expenditure requirements of AFA and Polytek during the twelve months
ended December 31, 1997, were financed with cash from operations and revolving
credit borrowings. CSI's working capital and capital expenditure requirements
during the twelve months ended December 31, 1997 were financed with cash flow
from operations and borrowings from its then parent, Contico International, Inc.
A portion of the net proceeds will be used to fund payment of (i) a
deferred fee of $573,000 to NationsCredit arising out of the prepayment in
February 1998 of indebtedness incurred in July 1997 to finance the acquisition
of AFA and (ii) a $2.5 million distribution from the Company to the Parent to be
used by the Parent, together with an equal amount advanced to the Parent by
certain of its stockholders, to redeem outstanding common stock purchase
warrants held by NationsCredit. See "Certain Transactions."
The Revolving Credit Facility, which matures on February 4, 2003, provides
for borrowings from time to time in an aggregate amount not to exceed $30.0
million, subject to a Borrowing Base (as defined). From the date of consummation
of the Offering through April 30, 1999, the Revolving Credit Facility will allow
for additional availability of $5.0 million in excess of the Borrowing Base (but
in no event in excess of $30.0 million).
Immediately after giving effect to the sale of the Old Notes and the
application of the proceeds therefrom, (i) there was approximately $9.5 million
outstanding under the Revolving Credit Facility and additional borrowing
availability thereunder of approximately $14.1 million and (ii) Polytek had
outstanding under the Polytek Facilities term loans of $4.8 million, and
revolving credit borrowings of approximately $2.8 million, and there was
additional borrowing availability thereunder of approximately $2.8 million. See
"Description of Other Indebtedness."
The Company anticipates that its principal uses of cash will be to finance
working capital and capital expenditures and to pay interest on the Revolving
Credit Facility and the Notes and, in the case of Polytek, to pay interest and
principal on its outstanding borrowings under the Polytek Facilities. The
Company's anticipated capital expenditures for 1998 and 1999 are approximately
$14.0 million and $13.7 million, respectively. These expenditures will include
continued investments in the T-1000(TM) and Luxor(TM) manufacturing platforms,
modifying the Polytek facility to accommodate additional CSI sales volumes and
ongoing maintenance capital expenditures.
The Company expects to fund its domestic cash requirements with cash flow
from operations and borrowings under the Revolving Credit Facility. The Company
expects that Polytek will fund its cash requirements with cash flow from its own
operations and borrowings under the Polytek Facilities.
The Company believes that net cash from operations, together with amounts
available under the Revolving Credit Facility and the Polytek Facilities, will
be adequate to fund the payment of interest on its outstanding indebtedness
(including the Notes) as well as its capital expenditure plans and working
capital needs. The Company's future operating performance and ability to service
or refinance the Notes and to service and extend or refinance the Revolving
Credit Facility and the Polytek Facilities will depend on various factors,
including market and general economic conditions, that are beyond the Company's
control. See "Risk Factors."
The Revolving Credit Facility and the Indenture impose certain restrictions
on the Company's ability to make capital expenditures and limit the Company's
ability to incur additional indebtedness. Such restrictions
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<PAGE> 40
could limit the Company's ability to respond to market conditions, to provide
for unanticipated capital investments or to take advantage of business or
acquisition opportunities. The covenants contained in the Credit Facilities and
the Notes also will restrict, among other things, the Company's ability to incur
additional indebtedness, pay dividends or make certain other restricted
payments, incur liens, sell stock of subsidiaries, apply net proceeds from
certain asset sales, merge or consolidate with any other person, sell, assign,
transfer, lease, convey or otherwise dispose of substantially all of the assets
of the Company and enter into certain transactions with affiliates. See
"Description of the Notes" and "Description of Other Indebtedness".
HEDGING
The Company has not historically entered into and does not expect in the
future to enter into, currency or raw materials hedging transactions.
BACKLOG
The Company's customers typically provide the Company with quarterly or
annual estimates of their product requirements and confirm specific orders on a
monthly basis. The Company's backlog of orders believed to be firm, as of
December 31, 1997 was approximately $10.6 million. The Company expects that
substantially all of its backlog will be filled within the next 12 months.
EFFECTS OF INFLATION
Inflation has not had a significant impact on the Company's operations.
However, there can be no assurance that inflation will not have a material
effect on the Company's operations in the future.
SEASONALITY
Sales of trigger sprayers for use in lawn and garden applications are
generally stronger in the second quarter of the year. All other customer
requirements are fairly consistent throughout the year.
ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income, is effective for years beginning after December 15, 1997.
This statement requires that an enterprise classify items of comprehensive
income by their nature in the financial statements and display the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of the statement of position.
Statement of Financial Accounting Standards No. 131, Disclosure About
Segments of an Enterprise and Related Information, is effective for years
beginning after December 15, 1997. This statement requires that a public
business enterprise report financial and descriptive information about its
reportable business segments.
Management of the Company believes that the future adoption of these
statements will not have a significant impact on the Company's combined
financial position, results of operations or cash flows, but will result in
additional disclosure.
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<PAGE> 41
BUSINESS
GENERAL
The Company, created by the combination of CSI, AFA and Polytek, is a
global leader in the design, manufacture and sale of liquid dispensing products,
primarily plastic trigger sprayers, used in household consumer product
applications, such as hard surface cleaning, laundry and lawn and garden
products, as well as industrial applications, such as products for the
automotive, janitorial and sanitation markets. Management believes the Company
is the largest producer of trigger sprayers in the world, with an estimated
market share of approximately 48% in North America and 24% in Europe. The
Company's products are sold to (i) multinational, national and regional
manufacturers of brand name and private label consumer products and (ii)
independent distributors of containers and packaging products. The Company is
the only trigger sprayer manufacturer with a leading presence in both of these
market segments. For the twelve months ended December 31, 1997, on a pro forma
combined basis, the Company had generated net sales of approximately $114.5
million and Adjusted EBITDA of approximately $32.5 million.
INDUSTRY OVERVIEW
TRIGGER SPRAYERS
Trigger sprayers are essential components of commonly used products in
household and industrial applications throughout the world. Shipments in the
world-wide trigger sprayer industry are expected to reach nearly 1.1 billion
units in 1997, which represents compound annual growth of approximately 3% since
1992. This growth is primarily due to the application of trigger sprayers to an
increasing number of end uses as well as heightened awareness of the efficiency
and aesthetics of trigger sprayers on the part of manufacturers of liquid
products. Management projects that total industry shipments will grow at an
increased compounded rate of 5%, reaching nearly 1.3 billion units by 2000. This
accelerated growth will be driven by opportunities in foreign markets,
particularly Europe and South America.
North America is the principal market for trigger sprayers, accounting for
approximately 60% of the estimated 1.1 billion units sold worldwide during 1997.
The North American market includes large multinational and national
manufacturers of brand name consumer products, smaller manufacturers of brand
name, private label and specialty products for consumer and industrial use and
marketers of general purpose liquid spray containers that are sold in empty
form. The large consumer products manufacturers are served directly by a limited
number of trigger sprayer producers that can meet their high volume, product
innovation and consistent quality requirements. Other customers are served both
directly by trigger sprayer manufacturers and indirectly by independent
distributors that can process smaller volume orders and provide more
personalized service support. Outside North America, the principal market for
trigger sprayers is in Western Europe, where unit sales, although less on a per
capita basis than in North America, have been growing at a greater rate than
that in the United States. The Western European market which consists primarily
of large manufacturers of consumer products, is served by brokers and agents.
Eastern Europe, Central and South America and the Pacific Rim do not yet
represent significant markets, but are expected to grow in the next several
years as per capita consumption increases and local economies in these regions
mature.
DISPENSING PUMPS
Finger actuated pump dispensers have long been utilized in commercial
applications, such as the food service industry, and gained popularity in
consumer applications with the introduction of liquid soap in the 1980s. Pump
dispenser usage has grown considerably in recent years, as new applications have
been developed, most notably in the markets for hair and skin care products.
Domestic sales of pump dispensers has grown at a compound annual rate of
approximately 2.0% from 1992 through 1996 totaling approximately 600.0 million
units in 1996. Management estimates that domestic growth will continue at this
pace for the remainder of the decade. The U.S. market is more mature than the
global market, which is expected to grow at a substantially faster rate.
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COMPETITIVE STRENGTHS
CSI is the world's largest supplier of trigger sprayers to large national
and multinational consumer products manufacturers, such as Clorox,
Monsanto/Solaris and Proctor & Gamble. CSI's reputation for quality, design
innovation, high volume production capability and competitive pricing has
enabled it to establish long-term relationships with leading multinational
consumer products companies. CSI also manufactures and sells finger-actuated
plastic pumps for nationally branded soaps and lotions. AFA is focused on
serving independent container and packaging distributors as well as smaller
manufacturers of brand name and private label consumer products. AFA is the
nation's largest supplier of trigger sprayers to independent distributors, which
typically purchase in smaller volumes but at higher margins than large
multinational consumer products companies. Polytek is a major producer and
supplier of trigger sprayers to the European market and performs custom
injection molding services for European manufacturers of plastic packaging,
consumer and industrial products.
CSI's ability to meet the increasingly global requirements of its large
U.S.-based multinational customers that are seeking to expand their sales
outside North America will be enhanced by Polytek's established technological
expertise and manufacturing base in The Netherlands. CSI's El Paso manufacturing
operations will augment those at AFA's Forest City facility, which currently is
operating at full capacity, increasing the Company's ability to meet the needs
of AFA's client base and providing additional product lines to AFA's customers.
Management believes that these synergies will enable the Company to provide
enhanced customer service and product availability and will increase sales and
provide substantial cost savings.
The combination of CSI, AFA and Polytek provides the Company with a unique
blend of competitive strengths, principal among which are the following:
- The Company is the only trigger sprayer manufacturer with a leading
presence in the two principal market segments it serves. In 1997, the
Company accounted for approximately 48% of the trigger sprayers produced
in the United States, providing approximately 45% of the units shipped to
consumer products manufacturers and 67% of the units shipped to the
distributor market. In addition, the Company accounted for approximately
24% of European shipments of trigger sprayers during 1997. The Company's
market presence is supported by strong customer relationships, a well
established marketing organization and channels of distribution and a
strong reputation for customer service and responsiveness.
- CSI and Polytek are recognized as technological and product design
innovators within the trigger sprayer industry and, together with AFA
(which introduced the world's first trigger sprayer in 1959), hold a
combined portfolio of more than 200 active patents. Recent product
innovations -- such as CSI's "Quick Twist"(TM) closure system and
Polytek's precompression sprayer technology -- are expected to result in
quality enhancements for the Company's customers and potential margin
improvements for the Company as a result of reduced manufacturing costs.
- The Company has invested approximately $54.3 million over the past five
years to increase the productive capacity and quality and reduce the
operating costs of its manufacturing facilities. CSI's facilities in St.
Peters, Missouri, augmented by Polytek's facilities in The Netherlands,
can serve the requirements of the Company's largest multinational
customers without the need for the capital investment that would be
required for a start-up facility. CSI's El Paso plant and AFA's Forest
City facilities have the capacity required to serve the increasing
product demands of independent distributors and smaller manufacturers.
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BUSINESS STRATEGY
The Company intends to capitalize on its competitive strengths to increase
revenues and cash flow through a business strategy that includes the following
key elements:
FOCUS ON GLOBAL SOURCING NEEDS OF MULTINATIONAL CONSUMER PRODUCTS
MANUFACTURERS
By combining CSI's multinational customer relationships with Polytek's
European-based capacity and manufacturing expertise, the Company has positioned
itself to capitalize on the global expansion plans of its multinational consumer
products customers and will seek to serve their sourcing needs on a worldwide
basis. Management also intends to leverage these capabilities to increase
revenues by developing new business opportunities with those multinational
consumer products companies that are not currently being served by the Company.
EXPAND PRODUCT OFFERINGS TO DISTRIBUTOR NETWORK
The acquisition of CSI will allow the Company to offer to AFA's distributor
network an expanded product line of trigger sprayers, as well as lotion pumps,
enabling the Company to further strengthen its position in this market segment
without incremental manufacturing or selling expense, while extending the life
cycle of certain CSI products that, to date, have been marketed principally to
large multinational consumer products manufacturers.
ENHANCE UTILIZATION OF PRODUCTION CAPACITY
The Company anticipates moving its U.K.-based production equipment to
Polytek's facility in The Netherlands facilities and utilizing CSI's El Paso
plant to alleviate capacity constraints currently being experienced at AFA's
Forest City facility. These steps will enable the Company to optimize its
consolidated manufacturing capabilities and to efficiently increase its total
production volume.
REALIZE SIGNIFICANT COST SAVINGS
The Company expects to achieve significant cost savings through the
rationalization of certain manufacturing operations and more efficient
utilization of its production capacity. Significant cost savings are expected to
result from combining and centralizing various administrative operations,
adopting on a Company-wide basis the manufacturing "best" practices from the
operations of each of CSI, AFA and Polytek and combining their raw materials
requirements to achieve increased purchasing leverage. The Company also will be
introducing a new generation of products that are simpler to manufacture, such
as the T-1000(TM) trigger sprayer and the Luxor(TM) lotion pump. These new
products are expected to significantly reduce production costs, resulting in
improved margins.
PURSUE SELECTIVE ACQUISITIONS
The Company intends to pursue selective acquisitions of businesses or
product lines that meet the complementary needs of its multinational and
distributor customer base in order to increase sales, achieve further production
efficiencies and enhance customer penetration.
PRODUCTS
All of CSI's trigger sprayer products have external vents and low actuation
force. In addition, these sprayers are available in custom colors and with three
nozzle options: standard spray, fully adjustable spray or stream and foamer.
CSI's newest trigger sprayer model, the T-1000(TM), is designed to further
reduce manufacturing costs, incorporates a patented "Quick Twist"(TM) closure
system that improves customer fill line efficiency and eliminates leakage during
shipment of the customer's products. Certain of CSI's products can be outfitted
with customized shrouds that enable customers to create a distinctive look for
their packaging and while permitting CSI to employ a standard sprayer
manufacturing platform to enhance manufacturing cost effectiveness. CSI also has
developed two basic models of sprayers for use in chemical, janitorial, beauty
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supply, plant and garden and other commercial applications. Both models are
highly reliable and have excellent longevity and chemical compatibility.
AFA introduced the first trigger sprayer in 1959. Today, AFA's product line
includes seven basic sprayer models and over ten product line extensions. Its
trigger sprayers can be supplied with a variety of features, including
adjustable nozzles, turreted nozzles, a three way nozzle configuration, foaming
capabilities, high output, quick priming, a high torque cap, and non-leakage
protection during shipping. AFA also offers its customers a choice of over 150
different colors. Polytek manufactures three of the seven basic trigger sprayer
models offered by AFA, which is consistent with market demand in Europe.
PUMP DISPENSERS
CSI currently offers two types of liquid pump dispensers: one for consumer
applications and one for industrial applications.
The consumer dispenser unit provides accurate quantity dispensing and is
compatible with most liquids. This product is sold to several large customers in
the high-end segment of the liquid soap and hand lotion markets. The Company's
Luxor(TM) pump dispenser is a new lightweight unit with improved valve
technology, includes the Company's new proprietary "Quick Twist"(TM) closure
system and is designed to permit greater manufacturing and assembly efficiency.
CSI's industrial pump dispenser is a versatile pump that can handle
high-viscosity liquids. It has an adjustable output and is constructed of
polypropylene and stainless steel for maximum chemical compatibility. This
product is currently used for cleaners, waxes, solvents and germicidal
detergents.
CUSTOM MOLDING SERVICES
Polytek provides custom molding services to European manufacturers of a
variety of plastic components for both consumer and industrial products. Polytek
satisfies its customers' demands by offering design and technological support,
high volume capacity, ISO 9001 designation and competitive pricing. By providing
a "complete package" of custom molding capabilities, Polytek has developed
strong relationships with a number of large multinational companies.
MARKETING AND DISTRIBUTION; PRINCIPAL CUSTOMERS
In North America, sales to major national and multinational consumer
products manufacturers are made on a direct basis through the Company's own
sales organization. Sales to smaller manufacturers and certain end users are
made directly and through AFA's network of more than 40 independent container
and packaging distributors, with over 100 sales offices throughout the United
States. AFA has maintained long-standing non-exclusive relationships with its
North American distributors, most of which have been doing business with AFA for
over ten years. In Europe, a majority of Polytek's trigger sprayers are sold to
and through distributors and commission paid agents.
The Company's products also are sold in the Pacific Rim market through
licensing arrangements under which it receives royalties. In 1997, the amount of
such royalties was immaterial. Most of the Company's business in this market is
in Japan, Thailand, Australia and New Zealand.
The Company has over 200 customers. Approximately 41.6% of the Company's
pro forma combined net sales for the twelve months ended December 31, 1997 were
to its ten largest customers, eight of which are major national and
multinational consumer products manufacturers. In January 1998, Dow Brands,
CSI's largest customer, sold certain of its product lines to S.C. Johnson and
subsequently notified CSI that it would be terminating its contract with CSI
effective April 23, 1998. See "Risk Factors -- Dependence on Key Customers." Dow
Brands' purchases from CSI during the twelve months ended December 31, 1997
accounted for approximately 10% of the Company's net sales on a pro forma
combined basis for that period. The total loss of the Dow Brands' business and
the Company's failure to replace such business could have a material adverse
effect upon its future results of operations. Following its acquisition of the
Dow Brands product lines, S.C. Johnson resold certain of the acquired product
lines to a third party. Management believes
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that the Company will continue to supply trigger sprayers for those product
lines through the end of 1998 and may continue to supply trigger sprayers for
some of the Dow Brands product lines retained by S.C. Johnson, although it
cannot predict the extent to which or the length of time during which it will
continue to supply such trigger sprayers.
COMPETITION
The markets for the Company's products are highly competitive. In North
America, the Company competes primarily with Calmar Inc. and the Specialty
Products division of Owens-Illinois, Inc. The European markets for the Company's
products are highly fragmented. In addition to the presence of North American
competitors in Europe, most notably Calmar Inc., there are a number of local
competitors, including Spraysol, Canyon Corporation and Guala. In the Pacific
Rim (where the Company operates primarily through licensees), and Central and
South America, the Company typically competes with other multinational companies
as well as local producers.
The Company believes that it competes on the basis of its strong customer
relationships, its reputation for quality, reliability, performance and prompt
delivery, and the price of its products. In addition, many of the Company's
major customers are multinational companies that compete on a global basis with
worldwide brands and place increased emphasis on global sourcing of input
materials and components. Management believes that the Company's ability to
serve these customers globally from its North American and European production
bases will continue to be an important competitive factor.
RESEARCH AND DEVELOPMENT; INTELLECTUAL PROPERTY; PATENTS
Management believes that the Company is a leader in the technological
development and innovation of products in the industry. The focus of the
Company's research, development and engineering efforts is to: (i) develop
products that will increase the size of the available market, (ii) provide the
highest level of quality, (iii) develop unique value-added product features,
(iv) customize products for specific customer applications and (v) continue to
simplify the design/production process to reduce costs. Many development
projects are conducted jointly with customers and, in some instances, are
partially or fully funded by these customers.
The Company has developed and is currently producing a pre-compression
sprayer that releases the spray in a very controlled intensity and pattern. This
provides a finer, more consistent spray and eliminates dripping. The Company
also has developed several technologies that are owned but not yet in
production. For example, the Company has developed a dual-chamber sprayer that
can mix two cleaning products at the spray head for certain formulations that
would degenerate if stored in combination.
The Company's technology effort often includes cost sharing agreements with
its customers regarding the purchase of manufacturing equipment for new products
and/or additional capacity. These arrangements help the Company to share some of
the risk in both product development and product sales associated with
introducing a new product or a modified product into the market.
The Company has over 300 patents, of which 217 are active. Many of the
Company's products are protected by patents and the Company is continually
exploring opportunities for new patentable products through research and
development. While the Company believes that its patents are important to its
business and enhance its competitive position, the Company does not believe that
the loss of any one particular patent would have a material adverse effect on
its business.
RAW MATERIALS
The principal raw material used by the Company is polypropylene.
Polypropylene is available from a number of suppliers in the United States and
in Europe. Approximately 9.0% of the Company's cost of sales on a pro forma
combined basis in 1997 was attributable to purchases of polypropylene. To date,
the Company has been able to obtain sufficient quantities of polypropylene for
its requirements. The Company has long-standing relationships with its major
suppliers. See "Risk Factors -- Pricing and Availability of Raw Materials."
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FACILITIES AND MANUFACTURING
The Company manufactures products at plants located in Forest City, North
Carolina, St. Peters, Missouri, El Paso, Texas and Helmond, The Netherlands. The
Company has additional assembly operations in Costa Rica, Mexico and the United
Kingdom.
The following table sets forth information with respect to the Company's
facilities:
<TABLE>
<CAPTION>
LOCATION SQUARE FOOTAGE OWNERSHIP FUNCTION
-------- -------------- --------- --------
<S> <C> <C> <C>
Forest City, North Carolina.... 146,000 Owned Injection molding, automated
assembly, distribution
St. Peters, Missouri........... 124,000 Owned Injection molding, automated
assembly, distribution
Helmond, The Netherlands....... 110,000 Owned Injection molding, automated
assembly, distribution
El Paso, Texas................. 101,000 Owned Injection molding, automated
Land lease assembly, distribution
Cartago, Costa Rica............ 39,615 Owned Manual assembly, distribution
Juarez, Mexico................. 35,000 Owned Manual assembly, distribution
Redruth, United Kingdom*....... 15,000 Leased Automated assembly
St. Louis, Missouri............ 9,500 Owned Mold and die construction
</TABLE>
- ---------------
* This facility is operated under a short-term lease. The Company intends to
consolidate the Redruth operations into its Helmond, The Netherlands,
facility.
Management believes that the Company's facilities are in good condition and
adequate for its present operating needs. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" for information with respect to planned capital investments
in certain of those facilities.
Plastic components are produced at the Company's own manufacturing
facilities. In addition, the Company manufactures certain other components used
in its products; the remaining components are purchased from outside suppliers.
The Company's products are assembled automatically on assembly machines
built to the Company's specifications and, at its facilities in Costa Rica and
Mexico, by hand.
EMPLOYEES
At March 31, 1998, the Company had approximately 1,571 employees, of whom
approximately 1,046 were engaged in manufacturing and manufacturing support, 42
were engaged in product sales and the balance were employed in various
administrative capacities. The 289 employees at the Company's Juarez, Mexico,
assembly facility are covered by a collective bargaining agreement that will
expire in June 1998 but is expected to be renegotiated on acceptable terms.
Seven employees at the Company's St. Louis, Missouri, facility are represented
by a union. Management considers the Company's relationships with its employees
to be satisfactory.
ENVIRONMENTAL COMPLIANCE
The Company is subject to various evolving federal, state and local
environmental laws and regulations governing, among other things, the emission,
discharge, generation, handling, storage, transportation, treatment and disposal
of hazardous and non-hazardous substances and wastes. Failure to comply with
these laws could result in substantial fines and penalties. Moreover, it is
possible that the Company could be required to remediate a site to meet
applicable legal requirements. The Company believes, although there can be no
assurance, that liabilities relating to environmental matters will not have a
material adverse effect on its future financial position or results of
operations.
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<PAGE> 47
LEGAL PROCEEDINGS
The Company has from time to time been involved in legal proceedings
related to the ordinary course of its business, none of which has had a material
adverse effect on the Company. The Company is not currently involved in any such
proceedings and maintains property, general liability and product liability
insurance in amounts that it believes are consistent with industry practices and
adequate for its operations.
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 dates for 2000 and later years.
The Company does not expect the cost of its year 2000 compliance program to be
material to its financial condition or results of operations. The Company does
not currently have any information concerning the year 2000 compliance status of
its suppliers and customers.
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<PAGE> 48
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information with respect to each of the
Company's directors and executive officers. All directors hold office until the
next annual meeting of stockholders and until their successors have been elected
and qualified. All of the Company's officers are elected by the Board of
Directors and serve at the discretion of the Board of Directors. The Company
intends, shortly following completion of the Exchange Offer, to add two
additional directors, neither of whom will be affiliated with the Company's
existing stockholders or management.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Yehochai Schneider............... 64 Chairman of the Board of Directors
Ariel Gratch..................... 46 President, Chief Executive Officer and Vice
Chairman of the Board of Directors
Louis H. Dixey, Jr............... 61 Vice President, Treasurer, Chief Financial
Officer, Secretary and Director
</TABLE>
MR. SCHNEIDER has been the Chairman of the Board of Directors of the
Company since February 2, 1998. He also is the Chairman of the Board of the
Parent. Mr. Schneider has over 40 years experience in manufacturing, management
and corporate transactions. Since 1981, he has been involved in the acquisition
and operation of several businesses, including AFA, various divisions of J.P.
Stevens, and Waynesboro Textiles, Inc. Mr. Schneider is a shareholder of WTI and
served as its Chairman until the Company's acquisition of AFA and Polytek. Prior
to 1981, he served as Chief Executive Officer of A & E Plastik Pak Co., a
plastic container business that he co-founded in 1956.
MR. GRATCH has been the President, Chief Executive Officer and a Director
of the Company since February 2, 1998. He also is the President and a Director
of the Company's parent corporation and the Vice Chairman of AFA. Mr. Gratch has
fifteen years of experience in structuring and financing the acquisition of
companies in the United States and Europe. Since 1980, Mr. Gratch has been a
senior member of the New York law firm, Gratch Jacobs & Brozman, P.C.,
specializing in mergers and acquisitions of mid-sized industrial companies.
Since 1992, he has acted as principal in the acquisition and management of
various manufacturing businesses and commercial real estate operations. From
1985 through 1996, Mr. Gratch served on the Board of Directors of Tyco Toys, the
third largest toy company in the United States prior to its purchase by Mattel.
Mr. Gratch has also served on the Board of Directors of several private
companies, including Glenoit Mills, Inc., a textile and consumer goods company
(from 1989 to 1995).
MR. DIXEY has been the Vice President, Treasurer, Chief Financial Officer,
Secretary and a Director of the Company since February 2, 1998. From 1988
through 1991, Mr. Dixey served as Executive Vice President and Chief Financial
Officer of JPS Textile Group ("JPS"). From 1979 to 1988 he was a director and
Chief Financial Officer of Waynesboro Textiles, Inc. and Executive Vice
President, Chief Financial Officer and Director of AFA and Polytek. From 1990
until 1997, he was a Managing Partner of Concord Capital, a residential real
estate leasing company. In addition, from 1984 through 1994, Mr. Dixey was a
Managing Partner of Afton Capital, a commercial leasing corporation.
OTHER KEY MANAGEMENT PERSONNEL
PETER D. MANCUSO has served as President of AFA since June 1992, having
also served as President of AFA's Marketing Division from March 1991 through
June 1992. For five years prior thereto, Mr. Mancuso was the President and Chief
Executive Officer of the plastics division of Packaging Corporation of America.
He also served as a consultant for Proudfoot Company, an international
management consulting firm.
WILLIAM DRIGGERS has served as President of CSI since July 1995. From 1979
to July 1995, he was employed by Tredegar Industries, serving from 1991 to 1995
as President/General Manager of its Molded Products Division.
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<PAGE> 49
JAN HERPS was appointed Managing Director of Polytek in July 1997. From
1992 to July 1997, he was General Manager of Fico Tooling B.V. Brunssum, a
designer and manufacturer of encapsulation molds for the semiconductor industry.
JAMES A. WANTUCH has served as AFA's Vice President of Operations since May
1992. For more than six years prior thereto, he served in various manufacturing
capacities at AFA, including Production Control Manager.
BENJAMIN HOLDER has served since March 1996 as Plant Manager of CSI's
manufacturing facility in St. Peters, Missouri. For ten years prior thereto, he
was a Plant Manager in the injection molding division of Tredegar Industries.
TOM WILCOX has served as CSI's Vice President of Sales and Marketing since
June 1990, having also served as President of CSI from January 1993 through July
1995. From 1986 until joining CSI, he was Director of Sales Administration of
the Non-Foods Division of Miles Consumer Household Products.
DONALD FOSTER has served as CSI's Vice President of Research and
Development since February 1989. For more than ten years prior thereto, he was
Director of Research and Development for Realex Corporation.
COMMITTEES OF THE BOARD OF DIRECTORS
It is expected that the Board of Directors will establish an Audit
Committee and a compensation Committee. The membership of these committees has
not yet been determined. The Compensation Committee will make recommendations
concerning the salaries and incentive compensation of employees of and
consultants to the Company and its subsidiaries. The Audit Committee will be
responsible for reviewing the results and scope of audits and other services
provided by the Company's independent auditors.
EXECUTIVE COMPENSATION
The Company paid no direct remuneration to its executive officers for the
year ended December 31, 1997. Payments were made in 1997 under a management
agreement to certain affiliates of Messrs. Gratch and Schneider. See "Certain
Transactions."
COMPENSATION OF DIRECTORS
None of the directors who are officers of the Company has received or will
receive any compensation for their service on the Company's Board of Directors.
EMPLOYMENT ARRANGEMENTS
Mr. Gratch has entered into a five-year employment agreement with the
Company, dated as of February 4, 1998, which contains customary employment
terms. The agreement provides for a base annual salary of $500,000, a minimum
guaranteed bonus of $200,000 and additional incentive compensation based on
performance criteria. The agreement is automatically renewable for two
additional five-year terms unless otherwise terminated by the Company or Mr.
Gratch.
MANAGEMENT INCENTIVE PLAN
The Parent intends to propose to its stockholders the adoption of an equity
incentive plan for management and certain other employees of the Company and its
subsidiaries (other than Messrs. Gratch or Schneider). The plan would authorize
grants of stock options and stock appreciation rights with respect to
approximately 10% of the Parent's outstanding common stock on a fully-diluted
basis. Of the aggregate options or stock appreciation rights, approximately 90%
would be allocated to senior management personnel.
44
<PAGE> 50
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company is a direct wholly owned subsidiary of the Parent. The
following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Parent, as of April 30, 1998, by (i) each
director of the Company, (ii) each of the executive officers of the Company,
(iii) all executive officers and directors of the Company as a group and (iv)
each person who is the beneficial owner of more than 5% of the outstanding
Common Stock of the Parent. Except as indicated in the footnotes to the table,
the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them and
the address of each such person is in care of the Company's offices at 950 Third
Avenue, New York, New York 10022.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER PERCENTAGE OF SHARES
OF INDIVIDUAL OR ENTITY OF SHARES OUTSTANDING
- ----------------------- --------- --------------------
<S> <C> <C>
Ariel Gratch(1)(3).......................................... 7,155,000 86.7%
Yehochai Schneider.......................................... 1,095,000 15.0
AFA International Limited(2)(3)............................. 5,110,000 70.0
Waldock Limited(1)(4)....................................... 950,000 11.5
All directors and executive officers of the Company as a
group (3 persons)......................................... 8,250,000 100.0%
</TABLE>
- ---------------
(1) Includes 1,095,000 shares of Common Stock held by Mr. Gratch, 5,110,000
shares of Common Stock held by AFA International Limited and 950,000 shares
of Common Stock issuable upon exercise of the warrants held by Waldock
Limited. Mr. Gratch has voting control over the shares of Common Stock held
by AFA International Limited and the 950,000 shares of Common Stock issuable
upon the exercise of the warrants held by Waldock Limited. Mr. Gratch
disclaims beneficial ownership of the shares of Common Stock held by AFA
International Limited and by Waldock Limited.
(2) The outstanding capital stock of AFA International Limited is owned by a
trust for the benefit of members of the family of Mr. Gratch.
(3) As noted under "Certain Transactions," concurrently with consummation of the
sale of the Old Notes, AFA International Limited and Ariel Gratch advanced
to the Parent an aggregate of $2.5 million to fund the repurchase by the
Parent from NationsCredit of outstanding warrants to purchase 875,000 shares
of its Common Stock. The Parent has the option to repay the amount so
advanced by delivery to AFA International Limited and Mr. Gratch of the
repurchased warrants.
(4) Waldock Limited owns currently exercisable warrants to purchase an aggregate
of 950,000 shares of Class A Common Stock. The warrants were granted on July
29, 1997 and, unless sooner redeemed, expire July 29, 2007. The outstanding
capital stock of Waldock Limited is owned by a trust for the benefit of
members of the family of Mr. Schneider.
The Parent also has authorized a class of Preferred Stock, having a
liquidation and redemption value of $10.00 per share, that provides for payment
of dividends, out of funds legally available therefor, at an annual rate of 7%
of the liquidation value thereof. Concurrently with the consummation of the sale
of the Old Notes, an aggregate of 1,094,000 shares of such Preferred Stock were
issued to AFA International Limited and Warcop Investments Ltd., the former
stockholders of Polytek, as consideration for the acquisition by the Company of
the outstanding capital stock of Polytek. Of such shares, 820,500 were issued to
AFA International Limited and 273,500 shares were issued to Warcop Investments
Ltd. Warcop Investments Ltd. is an affiliate of Mr. Schneider. See "Certain
Transactions."
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<PAGE> 51
CERTAIN TRANSACTIONS
On July 29, 1997, Messrs. Gratch and Schneider entered into a management
agreement with AFA, providing for annual aggregate payments of $500,000 to
Messrs. Gratch and Schneider, or their respective affiliates, in consideration
of strategic and financial planning advisory services. Affiliates of Messrs.
Gratch and Schneider received an aggregate of $250,000 in 1997 pursuant to this
agreement. Effective February 4, 1998, the agreement was terminated and the
Company entered into a new management agreement with an affiliate of Mr.
Schneider that provides for annual payments of $300,000 and expires on July 29,
2008, subject to renewal for successive five-year periods.
From time to time, AFA purchases certain metal springs for use in trigger
sprayers from Spring & Wire Designs LLC ("S&W"), a company affiliated with
Messrs. Gratch and Schneider. In 1997, AFA purchased for an aggregate of $90,000
approximately 6.0% of its metal springs requirements from S&W at competitive
prices. Currently, S&W is supplying approximately 80% of AFA's requirements for
metal springs. The Company anticipates that S&W will continue to supply these
components at competitive prices to AFA and that S&W will begin supplying these
components to CSI at prices and on terms comparable to those offered to AFA.
The law firm of Gratch, Jacobs & Brozman, P.C., of which Mr. Gratch is a
senior member, provides legal services on an ongoing basis to the Company and
its subsidiaries. During fiscal 1997, the Company paid fees of approximately
$364,000 to Gratch, Jacobs & Brozman, P.C.
In connection with the acquisition of AFA, AFA International Limited and
Waldock Limited made loans to AFA in the principal amounts of $1,000,000 and
$2,000,000, respectively. On February 4, 1998, Parent assumed AFA's obligations
in connection with said loans, and as evidence thereof, issued unsecured
subordinated notes (the "Subordinated Notes") to AFA International Limited and
Waldock Limited in the original principal amounts of $1,000,000 and $2,000,000
(plus interest on such principal amounts accrued from July 29, 1997 through
February 4, 1998), respectively. The Subordinated Notes bear interest at 11.5%
per annum, are prepayable at any time at the option of the Parent and, unless
sooner prepaid, will mature on May 15, 2008.
In connection with the acquisition of the capital stock of Polytek, the
Parent agreed to pay to the transferors, AFA International Limited and Warcop
Investments Ltd. (a company affiliated with Mr. Schneider), as consideration for
such capital stock, an aggregate of $10.8 million plus interest thereon at the
rate of 7% per annum, from the date of acquisition. Payment of such amount was
made concurrently with the consummation of the sale of the Old Notes by the
issuance to AFA International Limited and Warcop Investments Ltd. of 820,500
shares and 273,500 shares, respectively, of a new class of Preferred Stock of
the Parent having a liquidation and redemption value of $10.00 per share and
providing for dividends at an annual rate of 7% of the liquidation value
thereof. See "Security Ownership of Certain Beneficial Owners and Management."
In July 1997, the Company entered into a credit facility with NationsCredit
to finance the acquisition of AFA. As an inducement to NationsCredit to provide
that credit facility, the Parent issued to NationsCredit warrants to purchase,
for a nominal sum, up to an aggregate of 1,750,000 shares of Common Stock of the
Parent (equivalent to 17.5% of its outstanding Common Stock on a fully-diluted
basis), at any time up to July 29, 2007. Concurrently with consummation of the
sale of the Old Notes, the Parent repurchased all of those warrants for a cash
payment of $5.0 million. Funding for such repurchase was provided by (i)
distribution to the Parent by the Company of $2.5 million and (ii) the advance
to the Parent by AFA International Limited and Mr. Gratch of a like amount in
cash. The advance of those funds was evidenced by unsecured promissory notes of
the Parent bearing interest at the rate of 11.5% per annum. The notes are
prepayable at any time at the option of the Parent, either in cash or by
delivery of half of the warrants so repurchased from NationsCredit, and, unless
sooner prepaid, will mature on May 15, 2008.
The Parent and its U.S. subsidiaries (including Indesco) have entered into
a tax sharing agreement providing (among other things) that Parent shall pay the
federal income tax liability of the consolidated federal income tax group that
includes Indesco and such subsidiaries and that Indesco and each such
subsidiary, subject to certain limitations, will make payments to Parent on
account of income taxes, in an amount determined as if Indesco and the
subsidiaries filed a consolidated federal income tax return that did not include
the Parent.
46
<PAGE> 52
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Notes that are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New
York City time, on , 1998; provided, however, that if the Company,
in its sole discretion, has extended the period of time during which the
Exchange Offer is open, the term "Expiration Date" means the latest time and
date to which the Exchange Offer is extended.
As of the date of this Prospectus, $145,000,000 aggregate principal amount
of Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1998, to all holders
of Old Notes known to the Company. The Company's obligation to accept Old Notes
for exchange pursuant to the Exchange Offer is subject to certain customary
conditions as set forth below under "-- Certain Conditions to the Exchange
Offer."
The Company expressly reserves the right, at any time and from time to
time, to extend the period of time during which the Exchange Offer is open, and
thereby to delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the holders of the Notes as described below.
During any such extension, all Old Notes previously tendered will remain subject
to the Exchange Offer and may be accepted for exchange by the Company. Any Old
Notes not accepted for exchange for any reason will be returned without expense
to the tendering holders thereof as promptly as practicable after the expiration
or termination of the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of $1,000
or any integral multiple thereof.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions to the Exchange Offer
specified below under "-- Certain Conditions to the Exchange Offer." The Company
will give oral or written notice of any extension, amendment, non-acceptance or
termination to the holders of Old Notes as promptly as practicable, such notice
in the case of any extension to be issued by means of a press release or other
public announcement no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING NOTES
Only a registered holder of Old Notes may tender such Notes in the Exchange
Offer. The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
Old Notes for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to The Bank of New York (the "Exchange
Agent") at one of the addresses set forth below under "Exchange Agent" on or
prior to the Expiration Date. In addition, either (i) certificates for such Old
Notes must be received by the Exchange Agent along with the Letter of
Transmittal, (ii) a timely confirmation of a book-entry transfer ("a Book-Entry
Confirmation") of such Old Notes, if such procedure is available, into the
Exchange Agent's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedure for book-entry transfer described
below, must be received by the Exchange Agent prior to the Expiration Date, or
(iii) the holder must comply with the guaranteed delivery procedures described
below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY
IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, BE USED. IN
47
<PAGE> 53
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO
LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
Any beneficial owner of Old Notes whose Old Notes are registered in the
name of a broker, dealer, commercial bank, trust company, or other nominee and
who wishes to tender such Old Notes in the Exchange Offer 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 its own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such beneficial owner's Old Notes, either make
appropriate arrangements to register ownership of such 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 described
below (see "-- Withdrawal Rights"), as the case may be, must be guaranteed (see
"-- Guaranteed Delivery Procedures") unless the Old Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of those Old
Notes who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution (as defined below). In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guaranties 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 (collectively, "Eligible Institutions"). If Notes are
registered in the name of a person other than a signer of the Letter of
Transmittal, the Notes surrendered for exchange must be endorsed by or be
accompanied by a written instrument or instruments of transfer or exchange, in
satisfactory form as determined by the Company in its sole discretion, duly
executed by the registered holder exactly as the name or names of the registered
holder or holders appear on the Old Notes with the signature thereon guaranteed
by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or not to accept any
particular Old Notes not properly tendered or the acceptance of which might, in
the judgment of the Company or its counsel, be unlawful. The Company also
reserves the absolute right to waive any defects or irregularities or conditions
of the Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the right to waive the ineligibility of any holder
who seeks to tender Old Notes in the Exchange Offer). The interpretation by the
Company of the terms and conditions of the Exchange Offer as to any particular
Old Notes either before or after the Expiration Date (including the Letter of
Transmittal and the instructions thereto) shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes for exchange must be cured within such reasonable period of time as
the Company shall determine. None of the Company, the Exchange Agent or any
other person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Old Notes for exchange, nor shall any
of them incur any liability for failure to give such notification.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such person should so indicate when signing, and, unless waived by the
Company, proper evidence satisfactory to the Company of their authority to so
act must be submitted with the Letter of Transmittal.
By tendering Old Notes for exchange, each holder will represent to the
Company that, among other things, the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
person receiving such New Notes, whether or not such person is the holder, and
that neither the holder nor such other person has any arrangement or
understanding with any person to engage or participate in a distribution of the
New Notes. If any holder or any such other person is an "affiliate", as defined
under Rule 405 of the Securities Act, of the Company or is engaged in or intends
to engage in, or has
48
<PAGE> 54
an arrangement or understanding with any person to participate in, a
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such holder or any such other person (i) may not rely on the applicable
interpretation of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes that were acquired by such
broker-dealer as a result of market-making or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. See "Plan of Distribution." The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
ACCEPTANCE OF NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of the
Old Notes. See "-- Certain Conditions to the Exchange Offer" below. For purposes
of the Exchange Offer, the Company will be deemed to have accepted properly
tendered Old Notes for exchange when, as and if the Company has given oral or
written notice thereof to the Exchange Agent.
For each Old Note accepted for exchange, the holder of such Old Note will
receive as set forth below under "Description of the Notes -- Book-Entry,
Delivery and Form" a New Note having a principal amount equal to that of the
surrendered Old Note. Accordingly, registered holders of New Notes on the
relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid on the Old Notes or, if no interest
has been paid, from April 23, 1998. Old Notes accepted for exchange will cease
to accrue interest from and after the date of consummation of the Exchange
Offer. Holders whose Old Notes are accepted for exchange will not receive any
payment in respect of accrued interest on such Old Notes otherwise payable on
any interest payment date for which the record date occurs on or after
consummation of the Exchange Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry procedures described
below, such non-exchanged Old Notes will be credited to an account maintained
with such Book-Entry Transfer Facility) as promptly as practicable after the
expiration or termination of the Exchange Offer.
BOOK-ENTRY 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 the date 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, the Letter of Transmittal or a 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 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.
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<PAGE> 55
GUARANTEED DELIVERY PROCEDURES
If a registered holder of 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., New York City
time, on the Expiration Date, the Exchange Agent receives from such Eligible
Institution a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form
provided by the Company (by telegram, telex, facsimile transmission, mail or
hand delivery), setting forth the name and address of the holder of such Old
Notes and the amount of such Old Notes that are being 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, and
any other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent, and (iii) the certificates for
all physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the Letter
of Transmittal are deposited by the Eligible Institution 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., New
York City time, on the Expiration Date. For a withdrawal to be effective, a
written notice of withdrawal must be received by the Exchange Agent at one of
the addresses set forth below under "-- Exchange Agent." Any such notice of
withdrawal must specify the name of the person having tendered the Old Notes to
be withdrawn, identify the Old Notes to be withdrawn (including the principal
amount of such Old Notes), and (where certificate for such Old Notes have been
transmitted) specify the name in which such Old Notes are registered, if
different from that of the withdrawing holder. If certificates for Old Notes
have been delivered or otherwise identified to the Exchange Agent, then, prior
to the release of such certificates the withdrawing holder must also submit the
serial numbers of the particular certificates to be withdrawn and a signed
notice of withdrawal with signatures guaranteed by an Eligible Institution
unless such holder is an Eligible Institution in which case such guarantee will
not be required. If Old Notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Old Notes and otherwise comply with the procedures
of such facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
whose determination will be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not have been validly tendered for exchange purposes of
the Exchange Offer. Any Old Notes that have been tendered for exchange but that
are not exchanged for any reason will be returned to the holder thereof without
cost to such holder (or, in the case of Old Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described above, such Old Notes
will be credited to an account maintained with such Book-Entry Transfer Facility
for the Old Notes) as soon as practicable after withdrawal, rejection of tender
or termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered at any time on or prior to the Expiration Date by following one of
the procedures described above under "-- Procedures for Tendering Old Notes."
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions 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
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<PAGE> 56
Notes in exchange for, any Old Notes, and may terminate or amend the Exchange
Offer, if, at any time before the acceptance of such Old Notes for exchange, any
of the following events shall occur:
(i) 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
(ii) the Exchange Offer will violate any applicable law or any
applicable interpretation of the staff or the Commission.
The foregoing conditions are for the sole benefit of the Company and may be
asserted 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 is threatened by the Commission or 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
Notes being tendered for exchange.
EXCHANGE AGENT
Norwest Bank Minnesota, National Association has been appointed as the
Exchange Agent for the Exchange Offer. All executed Letters of Transmittal
should be directed to the Exchange Agent at one of the addresses set forth
below. Questions and requests for assistance, requests for additional copies of
this Prospectus or the Letter of Transmittal and requests or Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Overnight Delivery: By Hand Delivery:
Norwest Bank Minnesota, N.A. Norwest Bank Minnesota, Norwest Bank Minnesota,
Corporate Trust Operations N.A. N.A.
P.O. Box 1517 Corporate Trust Services Northstar East Building
Minneapolis, MN 55480-1517 Sixth and Marquette Avenue 608 Second Avenue South,
Minneapolis, MN 55479-0113 12th Floor
Corporate Trust Services
Minneapolis, MN
</TABLE>
Facsimile Transmission
Number:
(For Eligible Institutions Only)
(612) 667-4927
Confirm Receipt of Facsimile
by Telephone:
(612) 667-9764
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer.
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<PAGE> 57
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated to be approximately $ .
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.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer of the Old Notes, including the restrictions on
transfer of such Old Notes as set forth in the legend thereon, as a consequence
of the issuance of the Old Notes pursuant to exemptions from, or in transactions
not subject to, the registration requirements of the Securities Act. In general,
the Old Notes may not be offered or sold, unless registered under the Securities
Act, except pursuant to an available exemption from, or in a transaction that is
otherwise not subject to, the Securities Act. Upon consummation of the Exchange
Offer, the Company's principal obligations under the Registration Rights
Agreement will terminate and the Company does not currently anticipate that it
will register the Old Notes under the Securities Act. To the extent that Old
Notes are tendered and accepted for exchange pursuant to the Exchange Offer, any
trading market for those Old Notes that are not so tendered and remain
outstanding could be adversely affected.
RESALES OF NEW NOTES
The Company is making the Exchange Offer in reliance upon interpretations
by the staff of the Commission, as set forth in no-action letters issued to
third parties. Based upon those interpretations, the Company believes that New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold or otherwise transferred by a holder thereof (other
than a 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 holder's business and such
holder, other than a broker-dealer, has no arrangement or understanding with any
person to engage or participate in a distribution of such New Notes. However,
the Company has not sought its own no-action letter and there can be no
assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer as in such other circumstances. Each holder
of Old Notes, other than a broker-dealer, must acknowledge in the Letter of
Transmittal that it is not engaged in, and does not intend to engage in, a
distribution of the New Notes and has no arrangement or understanding to
participate in a distribution of the New Notes. If any holder is an affiliate of
the Company or is engaged in or intends to engage in or has any arrangement or
understanding with respect to a distribution of the New Notes to be acquired
pursuant to the Exchange Offer, such holder (i) may not rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes pursuant to the Exchange Offer must acknowledge that such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities and that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes that were acquired by a broker-dealer as a
result of market-making activities or other trading activities. The Company has
agreed that starting on the Expiration Date and ending on the close of business
one year after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to broker-dealers for use in connection with any such
resale. In addition, until , 1998, all dealers effecting transactions
in the New Notes may be required to deliver a Prospectus.
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<PAGE> 58
DESCRIPTION OF THE NOTES
The Old Notes were issued and the New Notes will be issued under an
indenture dated as of April 23, 1998 (the "Indenture") among the Company, the
Subsidiary Guarantors and Norwest Bank Minnesota, National Association, as
trustee (the "Trustee"). A copy of the Indenture, including the forms of the Old
Notes and the New Notes, has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. For each Old Note accepted for
exchange, the holder of such Old Note will receive a New Note having a principal
amount equal to that of the surrendered Old Note. Old Notes that remain
outstanding after the consummation of the Exchange Offer and New Notes issued in
connection with the Exchange Offer will be treated as a single class of
securities under the Indenture. The Indenture is subject to and governed by the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
following summary of the material provisions of the Indenture does not purport
to be complete and is subject to, and qualified in its entirety by, reference to
the provisions of the Indenture, including the definitions of certain terms
contained therein and those terms made part of the Indenture by reference to the
Trust Indenture Act. For definitions of certain capitalized terms used in the
following summary, see "Certain Definitions" below. As used in this section, the
term "Notes" means the Old Notes and the New Notes, treated as a single class.
PRINCIPAL, MATURITY AND INTEREST
The Notes will mature on April 15, 2008, are limited in aggregate principal
amount to $145.0 million and are senior subordinated unsecured obligations of
the Company. The Indenture provides for the issuance of up to $75.0 million
aggregate principal amount of additional Notes (the "Additional Notes") having
identical terms and conditions to the outstanding Notes, subject to compliance
with the covenants contained in the Indenture. Any Additional Notes will be part
of the same issue as the outstanding Notes and will vote on all matters with the
outstanding Notes. For purposes of this "Description of the Notes," reference to
the Notes does not include Additional Notes. No offering of any such Additional
Notes is being or shall in any manner be deemed to be made by this Prospectus.
In addition, there can be no assurance as to when or whether the Company will
issue any such Additional Notes or as to the aggregate principal amount of such
Additional Notes.
Interest on the Notes will accrue at the rate of 9.75% per annum and will
be payable semi-annually on each April 15 and October 15 (each an "Interest
Payment Date"), commencing October 15, 1998, to the Holders of record on the
immediately preceding April 1 and October 1. Interest on the Notes will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from the original date of issuance (the "Issue Date"). Accordingly,
registered holders of New Notes on the relevant record date for the first
Interest Payment Date following the consummation of the Exchange Offer will
receive interest from the most recent Interest Payment Date to which interest
has been paid on the Old Notes, or if no interest has been paid, from April 23,
1998 (the date of original issuance of the Old Notes). Old Notes accepted for
exchange will cease to accrue interest from and after the date of the
consummation of the Exchange Offer. Holders whose Old Notes are accepted for
exchange will not receive any payment in respect of interest on such Old Notes
otherwise payable on any Interest Payment Date for which the record date occurs
on or after the consummation of the Exchange Offer. Interest will be computed on
the basis of a 360-day year comprising twelve 30-day months.
The principal of and premium, if any, and interest on the Notes will be
payable and the Notes will be exchangeable and transferable, at the office or
agency of the Company in The City of New York maintained for such purposes
(which initially will be the office of the Trustee located in care of The
Depository Trust Company, at 55 Water Street, New York, New York 10041) or, at
the option of the Company, payment of interest may be paid by check mailed to
the address of the person entitled thereto as such address appears in the
security register. The Notes will be issued only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
No service charge will be made for any registration of transfer or exchange or
redemption of Notes, but the Company may require payment in certain
circumstances of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection therewith.
The Notes will not be entitled to the benefit of any sinking fund.
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<PAGE> 59
SUBORDINATION
The Old Notes are and the New Notes will be unsecured senior subordinated
obligations of the Company. The payment of principal of, premium, if any, and
interest on the Notes will be subordinated in right of payment, as set forth in
the Indenture, to the prior payment in full in cash or cash equivalents of all
amounts payable under the Senior Indebtedness.
Upon any distribution to creditors of the Company in a total or partial
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, whether voluntary or involuntary, an assignment for the benefit of
creditors or any marshaling of the Company's assets and liabilities, the holders
of Senior Indebtedness will be entitled to receive payment in full in cash or
cash equivalents of all Obligations due on or in respect of such Senior
Indebtedness (including interest after the commencement of any such proceeding
at the rate specified in the applicable Senior Indebtedness) before the Holders
of Notes will be entitled to receive any payment with respect to the Notes, and
until all Obligations with respect to Senior Indebtedness are paid in full in
cash or cash equivalents, any distribution to which the Holders of Notes (or the
Trustee on their behalf) would be entitled shall be made to the holders of
Senior Indebtedness (except that Holders of Notes may receive securities that
are subordinated at least to the same extent as the Notes to Senior Indebtedness
and any securities issued in exchange for Senior Indebtedness and Holders of
Notes may recover payments made from the trust described under the caption
"Legal Defeasance and Covenant Defeasance").
The Company also may not make any direct or indirect payment upon or in
respect of the Notes (except in such subordinated securities or from the trust
described under the caption "Legal Defeasance and Covenant Defeasance") if (i) a
default in the payment when due of all or any portion of the principal of,
premium, if any, or interest on or any other obligations under or in respect of
any Designated Senior Indebtedness exists, whether at maturity, on account of
mandatory redemption or prepayment, acceleration or otherwise and such default
shall not have been cured or waived or (ii) any other default occurs and is
continuing with respect to Designated Senior Indebtedness which permits holders
of the Designated Senior Indebtedness as to which such default relates to
accelerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the Agent Bank or the holders or the
representative of the holders of any Designated Senior Indebtedness. Payments on
the Notes may and shall be resumed (a) in the case of a payment default, upon
the date on which such default is cured or waived and (b) in case of a
nonpayment default, the earlier of the date on which such nonpayment default is
cured or waived or 179 days after the date on which the applicable Payment
Blockage Notice is received. No new period of payment blockage may be commenced
by a Payment Blockage Notice unless and until 360 days have elapsed since the
first day of the effectiveness of the immediately prior Payment Blockage Notice.
No nonpayment default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice, unless such default has been cured or waived
for a period of not less than 90 days.
The Indenture will further require that the Company promptly notify holders
of Senior Indebtedness if payment of the Notes is accelerated because of any
Event of Default.
As a result of the subordination provisions described above, in the event
of insolvency, bankruptcy, reorganization or liquidation of the Company,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes, and assets which would otherwise
be available to pay obligations in respect of the Notes will be available only
after all Senior Indebtedness has been paid in full, and there may not be
sufficient assets remaining to pay amounts due on any or all of the Notes. See
"Risk Factors -- Subordination of Notes and Subsidiary Guarantees; Asset
Encumbrances." On a pro forma basis, after giving effect to the Transactions,
the principal amount of indebtedness outstanding at December 31, 1997 that would
have effectively ranked senior to the Notes would have been approximately $8.5
million and the Company would have had additional availability of $23.1 million
for borrowings under the Credit Agreement, all of which would be secured Senior
Indebtedness, if borrowed. The terms of the Indenture will permit the Company
and its Restricted Subsidiaries to incur additional Senior Indebtedness, subject
to certain limitations, including Indebtedness that may be secured by Liens on
property of the Company and its Restricted Subsidiaries. See the discussion
below under the captions "Certain Covenants --
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<PAGE> 60
Incurrence of Indebtedness and Issuance of Disqualified Stock" and "Certain
Covenants -- Liens." In addition, the Notes will be effectively subordinated to
all existing and future liabilities (including trade payables) of the Company's
subsidiaries that will not guarantee the Notes (the "Non-Guarantor
Subsidiaries"). On a pro forma basis, after giving effect to the Transactions,
as of December 31, 1997, the Company's Non-Guarantor Subsidiaries would have had
$7.8 million of indebtedness outstanding. See "Risk Factors -- Subordination of
Notes and Subsidiary Guarantees; Asset Encumbrances."
SUBSIDIARY GUARANTEES
Payment of the principal of (and premium, if any) and interest on the
Notes, when and as the same become due and payable, will be guaranteed, jointly
and severally, on a senior subordinated and unsecured basis (the "Subsidiary
Guarantees") by each of the Company's Restricted Subsidiaries organized within
the United States (collectively, the "Subsidiary Guarantors"). At the date of
this Prospectus, the Subsidiary Guarantors are CSI and AFA. In addition, if the
Company or any of its Restricted Subsidiaries acquires or creates another
Restricted Subsidiary (other than any Foreign Subsidiary), then such
newly-acquired or created Restricted Subsidiary shall be required to execute a
Subsidiary Guarantee, in accordance with the terms of the Indenture. See
"Certain Covenants -- Guarantees of Indebtedness by Restricted Subsidiaries."
The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee is
limited in a manner that is intended to cause it not to constitute a fraudulent
conveyance or fraudulent transfer under applicable law. See "Risk
Factors -- Fraudulent Conveyance Statutes."
Each Subsidiary Guarantee is subordinated in right of payment, as set forth
in the Indenture, to the prior payment in full in cash or cash equivalents of
all amounts payable under the Senior Indebtedness of the relevant Subsidiary
Guarantor.
Upon any distribution to creditors of a Subsidiary Guarantor in a total or
partial liquidation or dissolution of such Subsidiary Guarantor or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to such Subsidiary Guarantor or its property, whether voluntary or
involuntary, an assignment for the benefit of creditors or any marshaling of
such Subsidiary Guarantor's assets and liabilities, the holders of Senior
Indebtedness of such Subsidiary Guarantor will be entitled to receive payment in
full in cash or cash equivalents of all Obligations due on or in respect of such
Senior Indebtedness (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Indebtedness of such
Subsidiary Guarantor) before the Holders of Notes, or the Trustee on their
behalf, will be entitled to receive any payment with respect to the relevant
Subsidiary Guarantee, and until all Obligations with respect to Senior
Indebtedness of such Subsidiary Guarantor are paid in full in cash or cash
equivalents, any payment that would have been made under such Subsidiary
Guarantee shall be made to the holders of Senior Indebtedness of such Subsidiary
Guarantor (except that Holders of Notes may receive (i) Capital Stock of such
Subsidiary Guarantor (other than Disqualified Stock) and (ii) securities that
are subordinated at least to the same extent as such Subsidiary Guarantee to
Senior Indebtedness of such Subsidiary Guarantor and to any securities issued in
exchange for Senior Indebtedness of such Subsidiary Guarantor).
Such Subsidiary Guarantor also may not make any direct or indirect payment
upon or in respect of its Subsidiary Guarantee (except in such subordinated
securities of such Subsidiary Guarantor) if (i) a default in the payment when
due of all or any portion of the principal of, premium, if any, or interest on
or any other obligations under or in respect of any Designated Senior
Indebtedness of the relevant Subsidiary Guarantor exists, whether at maturity,
on account of mandatory redemption or prepayment, acceleration or otherwise and
such default shall not have been cured or waived or (ii) any other default
occurs and is continuing with respect to Designated Senior Indebtedness of such
Subsidiary Guarantor which permits holders of the Designated Senior Indebtedness
of such Subsidiary Guarantor as to which such default relates to accelerate its
maturity and the Trustee receives a Payment Blockage Notice from the holders or
the representative of the holders of any Designated Senior Indebtedness of such
Subsidiary Guarantor. Any payments under any Subsidiary Guarantee may and shall
be resumed (a) in the case of a payment default, upon the date on which such
default is cured or waived and (b) in the case of a nonpayment default, the
earlier of the date on which such nonpayment default is cured or waived or 179
days after the date on which the applicable Payment Blockage Notice is received.
No new period of payment blockage may be commenced by a Payment Blockage Notice
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<PAGE> 61
unless and until 360 days have elapsed since the effectiveness of the
immediately prior Payment Blockage Notice. No nonpayment default that existed or
was continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice.
As a result of the subordination provisions described above, in the event
of an insolvency, bankruptcy, reorganization or liquidation of a Subsidiary
Guarantor, creditors of the relevant Subsidiary Guarantor who are holders of
Senior Indebtedness of such Subsidiary Guarantor may recover more, ratably, than
the holders of the Notes, and assets which would otherwise be available to pay
obligations in respect of the Notes will be available only after all Senior
Indebtedness of such Subsidiary Guarantor has been paid in full, and there may
not be sufficient assets remaining to pay amounts due on any or all of the
Notes. As of December 31, 1997, on a pro forma basis after giving effect to the
Transactions, the Subsidiary Guarantors would have had $0.7 million in the
aggregate of outstanding Senior Indebtedness, all of which would have consisted
of guarantees of the Credit Agreement. The terms of the Indenture will permit
Restricted Subsidiaries of the Company to incur additional Senior Indebtedness,
subject to certain limitations, including Indebtedness that may be secured by
Liens on property of the Restricted Subsidiaries. See the discussion below under
the captions "Certain Covenants -- Incurrence of Indebtedness and Issuance of
Disqualified Stock" and "Certain Covenants -- Liens."
The Indenture provides that upon a sale or other disposition to a Person
not an Affiliate of the Company of all or substantially all of the assets of any
Subsidiary Guarantor, whether by way of merger, consolidation or otherwise, or a
sale or other disposition to a Person not an Affiliate of the Company of all of
the Capital Stock of any Subsidiary Guarantor, whether by way of merger,
consolidation or otherwise, which transaction is carried out in accordance with
the covenants described below under the captions "Repurchase at the Option of
Holders -- Asset Sales" or "Certain Covenants -- Merger, Consolidation or Sale
of Assets," so long as (a) no Default or Event of Default shall have occurred
and be continuing at the time of, or would occur after giving effect on a pro
forma basis to, such release and, (b) the Company could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
first paragraph of "Certain Covenants -- Incurrence of Indebtedness and Issuance
of Disqualified Stock" on the date on which such release occurs, such Subsidiary
Guarantor will be deemed automatically and unconditionally released and
discharged from all of its obligations under its Subsidiary Guarantee without
any further action on the part of the Trustee or any holder of the Notes;
provided that any such termination shall occur only to the extent that all
obligations of such Subsidiary Guarantor under all of its guarantees of, and
under all of its pledges of assets or other security interests which secure any,
Indebtedness of the Company shall also terminate upon such sale, disposition or
release.
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to April 15,
2003. Thereafter, the Notes will be redeemable, at the option of the Company, at
any time as a whole or from time to time in part, on not less than 30 nor more
than 60 days' prior notice to the Holders at the following Redemption Prices
(expressed as percentages of principal amount) together with accrued interest,
if any, to the redemption date (subject to the right of holders of record in the
relevant record date to receive interest due on an interest payment date), if
redeemed during the 12-month period beginning on April 15, of the years
indicated below.
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2003...................................................... 104.875%
2004...................................................... 103.250
2005...................................................... 101.625
2006 and thereafter....................................... 100.000
</TABLE>
Notwithstanding the foregoing, at any time or from time to time prior to
April 15, 2001, the Company may redeem, on one or more occasions, up to 35% of
the sum of (i) the initial aggregate principal amount of the Notes and (ii) the
initial aggregate principal amount of any Additional Notes with the net proceeds
of one or more Equity Offerings at a redemption price equal to 109.75% of the
principal amount thereof, plus accrued
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<PAGE> 62
interest, if any, to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on an interest
payment date); provided that, immediately after giving effect to such
redemption, at least 65% of the initial aggregate principal amount of the Notes
(excluding the Additional Notes) remains outstanding; provided further that such
redemptions shall occur within 60 days of the date of closing of each Equity
Offering.
If less than all the Notes or Additional Notes, if any, are to be redeemed,
the particular Notes to be redeemed will be selected not more than 60 days prior
to the redemption date by the Trustee by such method as the Trustee deems fair
and appropriate, provided that no Note of $1,000 in principal amount at maturity
or less shall be redeemed in part.
MANDATORY REDEMPTION
Except as set forth below under "Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs at any time, then each Holder will have the
right to require that the Company purchase such Holder's Notes and Additional
Notes, if any, in whole or in part in integral multiples of $1,000, at a
purchase price in cash equal to 101% of the principal amount of such Notes, plus
accrued and unpaid interest, if any, to the date of purchase, pursuant to the
offer described below (the "Change of Control Offer") and the other procedures
set forth in the Indenture.
Within 30 days following any Change of Control, the Company will notify the
Trustee thereof and give written notice of such Change of Control to each Holder
of Notes and Additional Notes by first-class mail, postage prepaid, at its
address appearing in the security register, stating, among other things: (i) the
purchase price and the purchase date, which will be a Business Day no earlier
than 30 days nor later than 60 days from the date such notice is mailed or such
later date as is necessary to comply with requirements under the Exchange Act;
(ii) that any Note or Additional Note not tendered will continue to accrue
interest; (iii) that, unless the Company defaults in the payment of the purchase
price, any Notes or Additional Notes accepted for payment pursuant to the Change
of Control Offer will cease to accrue interest after the Change of Control
purchase date; and (iv) certain other procedures that a Holder must follow to
accept a Change of Control Offer or to withdraw such acceptance.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the Notes and Additional Notes that might be tendered by Holders of Notes and
Additional Notes seeking to accept the Change of Control Offer. The failure of
the Company to make or consummate the Change of Control Offer or pay the
applicable Change of Control purchase price when due would result in an Event of
Default and would give the Trustee and the Holders of Notes and Additional Notes
the rights described under "Events of Default and Remedies."
The Credit Agreement provides that certain change of control events with
respect to the Company would constitute a default thereunder. Any future credit
agreements or other agreements relating to Senior Indebtedness to which the
Company becomes a party may contain similar restrictions and provisions. In the
event a Change of Control occurs at a time when the Company is prohibited from
purchasing Notes and Additional Notes, if any, the Company could seek the
consent of its lenders to the purchase of Notes and Additional Notes or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
will remain prohibited from purchasing Notes and Additional Notes, if any. In
such case, the Company's failure to purchase tendered Notes and Additional Notes
would constitute an Event of Default under the Indenture which would, in turn,
constitute a default under the Credit Agreement. In such circumstances, the
subordination provisions in the Indenture would likely restrict payments to the
Holders of Notes and Additional Notes.
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One of the events that constitutes a Change of Control under the Indenture
is the disposition of "all or substantially all" of the Company's assets. This
term has not been interpreted under New York law (which is the governing law of
the Indenture) to represent a specific quantitative test. As a consequence, in
the event Holders of Notes and Additional Notes elect to require the Company to
purchase the Notes and Additional Notes and the Company elects to contest such
election, there can be no assurance as to how a court interpreting New York law
would interpret the phrase in many circumstances.
The existence of a Holder's right to require the Company to purchase such
Holder's Notes or Additional Notes upon a Change of Control may deter a third
party from acquiring the Company in a transaction that constitutes a Change of
Control.
The definition of "Change of Control" in the Indenture is limited in scope.
The provisions of the Indenture may not afford Holders of Notes or Additional
Notes the right to require the Company to repurchase such Notes or Additional
Notes in the event of a highly leveraged transaction or certain transactions
with the Company's management or its affiliates, including a reorganization,
restructuring, merger or similar transaction involving the Company (including,
in certain circumstances, an acquisition of the Company by management or its
affiliates) that may adversely affect Holders, if such transaction is not a
transaction defined as a Change of Control. See "Certain Definitions" below for
the definition of "Change of Control." A transaction involving the Company's
management or its affiliates, or a transaction involving a recapitalization of
the Company, would result in a Change of Control if it is the type of
transaction specified in such definition.
The Company will comply with the applicable tender offer rules including
Rule 14e-1 under the Exchange Act, and any other applicable securities laws and
regulations in connection with a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
the covenant described hereunder, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the covenant described hereunder by virtue thereof.
The Company will not, and will not permit any Restricted Subsidiary to,
create any restriction (other than restrictions (i) existing under Indebtedness
as in effect on the Closing Date or (ii) in refinancings of such Indebtedness or
in other Senior Indebtedness hereafter incurred so long as such restrictions on
indebtedness referred to in this clause (ii) are no more restrictive than the
restrictions in Indebtedness in existence on the Closing Date) that would
materially impair the ability of the Company to make a Change of Control Offer
to purchase the Notes or Additional Notes tendered for purchase.
Restrictions in the Indenture described herein on the ability of the
Company and its Restricted Subsidiaries to incur additional Indebtedness, to
grant Liens on its or their property, to make Restricted Payments and to make
Asset Sales may also make more difficult or discourage a takeover of the
Company, whether favored or opposed by the management of the Company.
Consummation of any such transaction in certain circumstances may require
redemption or repurchase of the Notes and Additional Notes, if any, and there
can be no assurance that the Company or the acquiring party will have sufficient
financial resources to effect such redemption or repurchase. In certain
circumstances, such restrictions and the restrictions on transactions with
Affiliates may make more difficult or discourage any leveraged buyout of the
Company or any of its Restricted Subsidiaries. While such restrictions cover a
variety of arrangements which have traditionally been used to effect highly
leveraged transactions, the Indenture may not afford the Holders of Notes and
Additional Notes, if any, protection in all circumstances from the adverse
aspects of a highly leveraged transaction, reorganization, restructuring, merger
or similar transaction.
ASSET SALES
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any Asset Sale unless (i) the consideration received by the Company or
such Restricted Subsidiary for such Asset Sale is not less than the fair market
value of the assets sold evidenced by a resolution of the Board of Directors of
such entity set forth in an officers' certificate delivered to the Trustee and
(ii) the consideration received by the Company or the relevant Restricted
Subsidiary in respect of such Asset Sale consists of at least 75% cash or cash
equivalents (for purposes of this clause (ii), cash and cash equivalents
includes (a) the principal amount of
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any Indebtedness for money borrowed (as reflected in the Company's consolidated
balance sheet) of the Company or any Restricted Subsidiary that is assumed by
any transferee of any such assets or other property in such Asset Sale and (b)
any securities, notes or other obligations received by the Company or such
Restricted Subsidiary from such transferee that are converted within 30 days of
consummation of such Asset Sale by the Company or such Restricted Subsidiary
into cash and cash equivalents (to the extent of the cash and cash equivalents
received)).
If the Company or any Restricted Subsidiary engages in an Asset Sale, the
Company may, at its option, within 12 months after such Asset Sale, (i) apply
all or a portion of the Net Cash Proceeds to the permanent reduction of amounts
outstanding under the Credit Agreement or to the permanent repayment of other
senior Indebtedness of the Company or a Restricted Subsidiary or (ii) invest (or
enter into a legally binding agreement to invest) all or a portion of such Net
Cash Proceeds in properties and assets to replace the properties and assets that
were the subject of the Asset Sale or in properties and assets that will be used
in the business of the Company or its Restricted Subsidiaries, as the case may
be. If any such legally binding agreement to invest such Net Cash Proceeds is
terminated, the Company may, within 90 days of such termination or within 12
months of such Asset Sale, whichever is later, invest such Net Cash Proceeds as
provided in clause (i) or (ii) (without regard to the parenthetical contained in
such clause (ii)) above. The amount of such Net Cash Proceeds not so used as set
forth above in this paragraph shall constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $5 million, the
Company will, within 30 days thereafter, make an offer to purchase (an "Excess
Proceeds Offer") from all Holders of Notes and Additional Notes, if any, on a
pro rata basis, in accordance with the procedures set forth in the Indenture,
the maximum principal amount (expressed as a multiple of $1,000) of Notes and
Additional Notes, if any, that may be purchased with the Excess Proceeds, at a
purchase price in cash equal to 100% of the principal amount thereof, plus
accrued interest, if any, to the date such offer to purchase is consummated. To
the extent that the aggregate principal amount of Notes and Additional Notes, if
any, tendered pursuant to such offer to purchase is less than the Excess
Proceeds, the Company may use such deficiency for general corporate purposes. If
the aggregate principal amount of Notes and Additional Notes, if any, validly
tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, the
Notes and Additional Notes, if any, to be purchased will be selected on a pro
rata basis. Upon completion of such offer to purchase, the amount of Excess
Proceeds will be reset to zero.
The Company will comply with the applicable tender offer rules including
Rule 14e-1 under the Exchange Act, and any other applicable securities laws and
regulations in connection with the repurchase of Notes as a result of an Asset
Sale. To the extent that the provisions of any securities laws or regulations
conflict with the provisions of the covenant described hereunder, the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under the covenant described
hereunder by virtue thereof.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, take any of the following actions:
(a) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Capital Stock of the Company or any
Restricted Subsidiary, other than (i) dividends or distributions payable
solely in Qualified Equity Interests or (ii) dividends or distributions by
a Restricted Subsidiary payable to the Company or another Restricted
Subsidiary;
(b) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of Capital Stock, or any options,
warrants or other rights to acquire such shares of Capital Stock, of the
Company, any Restricted Subsidiary or any Affiliate of the Company (other
than, in either case, any such Capital Stock owned by the Company or any of
its Restricted Subsidiaries);
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(c) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Pari Passu Indebtedness or
Subordinated Indebtedness; and
(d) make any Investment (other than a Permitted Investment) in any
Person;
(such payments or other actions described in (but not excluded from) clauses (a)
through (d) being referred to as "Restricted Payments"), unless at the time of,
and immediately after giving effect to, the proposed Restricted Payment:
(i) no Default or Event of Default has occurred and is continuing,
(ii) the Company could incur at least $1.00 of additional Indebtedness
pursuant to the first paragraph of the covenant described under the caption
"-- Incurrence of Indebtedness and Issuance of Disqualified Stock," and
(iii) the aggregate amount of all Restricted Payments made after the
Closing Date does not exceed the sum of:
(A) 50% of the aggregate Consolidated Net Income of the Company
during the period (taken as one accounting period) from the first day of
the Company's fiscal quarter during which the Closing Date occurs to the
last day of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such proposed
Restricted Payment (or, if such aggregate cumulative Consolidated Net
Income is a loss, minus 100% of such amount); plus
(B) the aggregate net cash proceeds received by the Company after
the Closing Date from the issuance or sale (other than to a Subsidiary)
of either (1) Qualified Equity Interests of the Company or (2) debt
securities or Disqualified Stock that have been converted into or
exchanged for Qualified Equity Interests of the Company, together with
the aggregate net cash proceeds received by the Company at the time of
such conversion or exchange.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may take the following actions, so long as no Default or Event of Default has
occurred and is continuing or would occur:
(a) the payment of any dividend in cash or Qualified Equity Interests
of the Company within 60 days after the date of declaration thereof, if at
the declaration date such payment would not have been prohibited by the
foregoing provisions;
(b) the repurchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Company, in exchange for, or
out of the net cash proceeds of a substantially concurrent issuance and
sale (other than to a Subsidiary) of, Qualified Equity Interests of the
Company;
(c) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Pari Passu Indebtedness or Subordinated
Indebtedness in exchange for, or out of the net cash proceeds of a
substantially concurrent issuance and sale (other than to a Subsidiary) of,
shares of Qualified Equity Interests of the Company;
(d) the purchase, redemption, defeasance or other acquisition or
retirement for value of Pari Passu Indebtedness or Subordinated
Indebtedness in exchange for, or out of the net cash proceeds of a
substantially concurrent issuance or sale (other than to a Subsidiary) of,
Pari Passu Indebtedness or Subordinated Indebtedness, respectively, so long
as the Company or a Restricted Subsidiary would be permitted to refinance
such original Pari Passu Indebtedness or Subordinated Indebtedness with
such new Pari Passu Indebtedness or Subordinated Indebtedness pursuant to
clause (iv) of the definition of Permitted Indebtedness;
(e) the repurchase of any Subordinated Indebtedness at a purchase
price not greater than 101% of the principal amount of such Subordinated
Indebtedness in the event of a Change of Control in accordance with
provisions similar to the "Change of Control" covenant; provided that,
prior to or simultaneously with such repurchase, the Company has made the
Change of Control Offer as provided in
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such covenant with respect to the Notes and has repurchased all Notes
validly tendered for payment in connection with such Change of Control
Offer;
(f) the purchase, redemption, acquisition, cancellation or other
retirement for value of shares of Capital Stock of the Company or the
Parent, options on any such shares or related stock appreciation rights or
similar securities held by officers or employees or former officers or
employees of the Company or of any Restricted Subsidiary (or their estates
or beneficiaries under their estates) or by any employee benefit plan, upon
death, disability, retirement or termination of employment or pursuant to
the terms of any employee benefit plan or any other agreement under which
such shares of stock or related rights were issued; provided that the
aggregate cash consideration paid for such purchase, redemption,
acquisition, cancellation or other retirement of such shares of Capital
Stock after the Closing Date does not exceed in any fiscal year the sum of
(i) $500,000 and (ii) amounts referred to in clause (i) that remains unused
from the two immediately preceding fiscal years;
(g) the payment of any dividend or distribution by the Company to the
Parent pursuant to the terms of the tax sharing agreement in existence on
the Closing Date among the Company, the Parent and other members of the
consolidated group of corporations of which the Company is a member, and
any amendments to such agreement, provided that the tax sharing agreement
as so amended is no less favorable in any material respect to the Company
than the tax sharing agreement in effect on the Closing Date;
(h) the payment of dividends or distributions to the Parent to pay its
franchise taxes and other fees required to maintain its legal existence and
to provide for operating expenses of up to $150,000 in any fiscal year of
the Company;
(i) the payment of a distribution to the Parent that does not exceed
$2,500,000 on the Closing Date for the Parent's repurchase from
NationsCredit of warrants to purchase the Parent's common stock; and
(j) other Restricted Payments that do not exceed $1,000,000.
The actions described in clauses (b), (c), (e) and (j) of this paragraph
will be Restricted Payments that will be permitted to be taken in accordance
with this paragraph but will reduce the amount that would otherwise be available
for Restricted Payments under clause (iii) of the first paragraph of this
covenant and the actions described in clauses (a), (d), (f), (g), (h) and (i) of
this paragraph will be Restricted Payments that will be permitted to be taken in
accordance with this paragraph and will not reduce the amount that would
otherwise be available for Restricted Payments under clause (iii) of the first
paragraph of this covenant.
For the purpose of making any calculations under the Indenture (i) if a
Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company will
be deemed to have made an Investment in an amount equal to the greater of the
fair market value or net book value of the net assets of such Restricted
Subsidiary at the time of such designation as determined by the Board of
Directors of the Company, and (ii) any property transferred to or from an
Unrestricted Subsidiary will be valued at fair market value at the time of such
transfer, as determined by the Board of Directors of the Company. The amount of
all Restricted Payments (other than cash) shall be the fair market value on the
date of the Restricted Payment of the asset(s) or securities proposed to be
transferred or issued by the Company or such Restricted Subsidiary, as the case
may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $5 million. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an officers' certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required under "Certain Covenants -- Restricted
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
If the aggregate amount of all Restricted Payments calculated under the
foregoing provision includes an Investment in an Unrestricted Subsidiary or
other Person that thereafter becomes a Restricted Subsidiary, the aggregate
amount of all Restricted Payments calculated under the foregoing provision will
be reduced by the
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lesser of (x) the net asset value of such Subsidiary at the time it becomes a
Restricted Subsidiary and (y) the initial amount of such Investment.
If an Investment resulted in the making of a Restricted Payment, the
aggregate amount of all Restricted Payments calculated under the foregoing
provision will be reduced by the amount of any net reduction in such Investment
(resulting from the payment of interest or dividends, loan repayment, transfer
of assets or otherwise, other than the redesignation of an Unrestricted
Subsidiary or other Person as a Restricted Subsidiary), to the extent such net
reduction is not included in the Company's Consolidated Net Income; provided
that the total amount by which the aggregate amount of all Restricted Payments
may be reduced may not exceed the lesser of (x) the cash proceeds received by
the Company and its Restricted Subsidiaries in connection with such net
reduction and (y) the initial amount of such Investment.
In computing the Consolidated Net Income of the Company for purposes of the
foregoing clause (iii)(A) of the first paragraph of this covenant, (i) the
Company may use audited financial statements for the portions of the relevant
period for which audited financial statements are available on the date of
determination and unaudited financial statements and other current financial
data based on the books and records of the Company for the remaining portion of
such period and (ii) the Company will be permitted to rely in good faith on the
financial statements and other financial data derived from its books and records
that are available on the date of determination. If the Company makes a
Restricted Payment that, at the time of the making of such Restricted Payment,
would in the good faith determination of the Company be permitted under the
requirements of the Indenture, such Restricted Payment will be deemed to have
been made in compliance with the Indenture notwithstanding any subsequent
adjustments made in good faith to the Company's financial statements affecting
Consolidated Net Income of the Company for any period.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK
The Company will not, and will not permit any Restricted Subsidiary to,
create, issue, assume, guarantee or in any manner become directly or indirectly
liable for the payment of, or otherwise incur (collectively, "incur"), any
Indebtedness (including Acquired Indebtedness and the issuance of Disqualified
Stock), except that the Company or any Subsidiary Guarantor may incur
Indebtedness if, at the time of such event, the Fixed Charge Coverage Ratio for
the immediately preceding four full fiscal quarters for which internal financial
statements are available, taken as one accounting period, would have been equal
to at least 2.0 to 1.0.
In making the foregoing calculation for any four-quarter period that
includes the Closing Date, pro forma effect will be given to the Offering, as if
such transactions had occurred at the beginning of such four-quarter period. In
addition (but without duplication), in making the foregoing calculation, pro
forma effect will be given to: (i) the incurrence of such Indebtedness and (if
applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness, as if such Indebtedness was incurred and the
application of such proceeds occurred at the beginning of such four-quarter
period; (ii) the incurrence, repayment or retirement of any other Indebtedness
by the Company or its Restricted Subsidiaries since the first day of such
four-quarter period as if such Indebtedness was incurred, repaid or retired at
the beginning of such four-quarter period; and (iii) the acquisition (whether by
purchase, merger or otherwise) or disposition (whether by sale, merger or
otherwise) of any company, entity or business acquired or disposed of by the
Company or its Restricted Subsidiaries, as the case may be, since the first day
of such four-quarter period, as if such acquisition or disposition occurred at
the beginning of such four-quarter period. In making a computation under the
foregoing clause (i) or (ii), (A) the amount of Indebtedness under a revolving
credit facility will be computed based on the average daily balance of such
Indebtedness during such four-quarter period, (B) if such Indebtedness bears, at
the option of the Company, a fixed or floating rate of interest, interest
thereon will be computed by applying, at the option of the Company, either the
fixed or floating rate, and (C) the amount of any Indebtedness that bears
interest at a floating rate will be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire period (taking
into account any Hedging Obligations applicable to such Indebtedness if such
Hedging Obligations have a remaining term at the date of determination in excess
of 12 months).
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Notwithstanding the foregoing, the Company may, and may permit its
Restricted Subsidiaries to, incur the following Indebtedness ("Permitted
Indebtedness"):
(i) Indebtedness of the Company or any Subsidiary Guarantor under the
Credit Agreement (and the incurrence by any Subsidiary Guarantor of
guarantees thereof) in an aggregate principal amount at any one time
outstanding not to exceed the greater of (x) $30 million or (y) the amount
of the Borrowing Base of the Company, less any amounts applied to the
permanent reduction of such credit facilities pursuant to the provisions of
the covenant described under the caption "-- Repurchase at the Option of
Holders -- Asset Sales;"
(ii) Indebtedness represented by the Notes (other than the Additional
Notes) and the Subsidiary Guarantees;
(iii) Existing Indebtedness (other than the Polytek Credit Agreement);
(iv) the incurrence by the Company of Permitted Refinancing
Indebtedness in exchange for, or the net proceeds of which are used to
refund, refinance or replace, any Indebtedness that is permitted to be
incurred under clause (ii) or (iii) above;
(v) Indebtedness owed by the Company to any Wholly Owned Restricted
Subsidiary or owed by any Restricted Subsidiary to the Company or a Wholly
Owned Restricted Subsidiary (provided that such Indebtedness is held by the
Company or such Restricted Subsidiary); provided, however, that any
Indebtedness of the Company owing to any such Restricted Subsidiary is
unsecured and subordinated in right of payment from and after such time as
the Notes shall become due and payable (whether at Stated Maturity,
acceleration, or otherwise) to the payment and performance of the Company's
obligations under the Notes;
(vi) Indebtedness of the Company or any Restricted Subsidiary under
Hedging Obligations incurred in the ordinary course of business;
(vii) Indebtedness of the Company or any Restricted Subsidiary
consisting of guarantees, indemnities or obligations in respect of purchase
price adjustments in connection with the acquisition or disposition of
assets, including, without limitation, shares of Capital Stock;
(viii) either (A) Capitalized Lease Obligations of the Company or any
Restricted Subsidiary or (B) Indebtedness under purchase money mortgages or
secured by purchase money security interests, in each case, incurred to
finance the purchase, lease or improvement of real or personal property so
long as (x) such Indebtedness is not secured by any property or assets of
the Company or any Restricted Subsidiary other than the property and assets
so acquired and (y) such Indebtedness is created within 90 days of the
acquisition of the related property; provided that the aggregate amount of
Indebtedness under clauses (A) and (B) does not exceed $10 million at any
one time outstanding;
(ix) Guarantees by any Restricted Subsidiary made in accordance with
the provisions of the covenant described under the caption "-- Guarantees
of Indebtedness by Restricted Subsidiaries;"
(x) Indebtedness under the Polytek Credit Agreement in an aggregate
principal amount at any one time outstanding not to exceed the greater of
(A) $11 million or (B) the amount of the Borrowing Base of Polytek;
(xi) Indebtedness of the Company or any Subsidiary Guarantor not
permitted by any other clause of this definition, in an aggregate principal
amount not to exceed $10 million at any one time outstanding; and
(xii) Indebtedness in respect of surety or performance bonds, worker's
compensation claims, payment obligations in connection with self-insurance
and other similar requirements arising in the ordinary course of business.
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LIENS
(a) The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, create, incur, assume or suffer to exist any Lien
securing Pari Passu Indebtedness or Subordinated Indebtedness of the Company on
or with respect to any of its property or assets, including any shares of stock
or indebtedness of any Restricted Subsidiary, whether owned at the Closing Date
or thereafter acquired, or any income, profits or proceeds therefrom, or assign
or otherwise convey any right to receive income thereon, unless (i) in the case
of any Lien securing Subordinated Indebtedness, the Notes are secured by a Lien
on such property, assets or proceeds that is senior in priority to such Lien and
(ii) in the case of any Lien securing Pari Passu Indebtedness, the Notes are
secured by a Lien on such property, assets or proceeds that is senior in
priority to or pari passu with such Lien.
(b) The Company will not permit any Subsidiary Guarantor to, directly or
indirectly, create, incur, assume or suffer to exist any Lien securing Pari
Passu Indebtedness or Subordinated Indebtedness of such Subsidiary Guarantor on
or with respect to such Subsidiary Guarantor's properties or assets, including
any shares of stock or Indebtedness of any other Restricted Subsidiary, whether
owned at the date of the Indentures or thereafter acquired, or any income,
profits or proceeds therefrom, or assign or otherwise convey any right to
receive income thereon, unless (i) in the case of any Lien securing Pari Passu
Indebtedness of such Subsidiary Guarantor, each Subsidiary Guarantee of such
Subsidiary Guarantor is secured by a Lien on such property, assets or proceeds
that is senior in priority to or pari passu with such Lien and (ii) in the case
of any Lien securing Subordinated Indebtedness of such Subsidiary Guarantor,
each Subsidiary Guarantee of such Subsidiary Guarantor is secured by a Lien on
such property, assets or proceeds that is senior in priority to such Lien.
DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or consensual restriction of any kind on
the ability of any Restricted Subsidiary to (a) pay dividends, in cash or
otherwise, or make any other distributions on or in respect of its Capital
Stock, (b) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (c) make loans or advances to the Company or any other Restricted
Subsidiary or (d) transfer any of its properties or assets to the Company or any
other Restricted Subsidiary, except for such encumbrances or restrictions
imposed under or by reason of:
(i) any agreement existing on the Closing Date;
(ii) customary non-assignment provisions of any lease governing a
leasehold interest of the Company or any Restricted Subsidiary;
(iii) the refinancing or successive refinancing of Indebtedness
incurred under the agreements in effect on the Closing Date, so long as
such encumbrances or restrictions are no more restrictive than those
contained in such original agreement;
(iv) any agreement or other instrument of a Person acquired by the
Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance
or restriction is not applicable to any Person, or the properties or assets
of any Person, other than the Person, or the property or assets of the
Person, so acquired; or
(v) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition.
LIMITATION ON LAYERING DEBT
The Company and each Subsidiary Guarantor will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness or guarantee,
as applicable, that is subordinate or junior in right
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of payment to any Senior Indebtedness and senior in any respect in right of
payment to the Notes or such Subsidiary Guarantor's Subsidiary Guarantee,
respectively.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Company may not, in a single transaction or series of related
transactions, consolidate or merge with or into (whether or not the Company is
the surviving corporation), or directly and/or indirectly through its
Subsidiaries, sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of its properties or assets (determined on a consolidated
basis for the Company and its Subsidiaries taken as a whole) in one or more
related transactions to, another corporation, Person or entity unless:
(a) either (i) the Company is the surviving corporation or (ii) in the
case of a transaction involving the Company, the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (the "Surviving Entity") is a
corporation organized or existing under the laws of the United States, any
state thereof or the District of Columbia and assumes all the obligations
of the Company under the Notes and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee;
(b) immediately after giving effect to such transaction and treating
any obligation of the Company in connection with or as a result of such
transaction as having been incurred as of the time of such transaction, no
Default or Event of Default has occurred and is continuing;
(c) the Company (or the Surviving Entity if the Company is not the
continuing obligor under the Indenture) could, at the time of such
transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the first paragraph of "-- Incurrence
of Indebtedness and Issuance of Disqualified Stock;"
(d) each Subsidiary Guarantor, unless it is the other party to the
transaction described above, has by supplemental indenture confirmed that
its Subsidiary Guarantee applies to the Surviving Entity's obligations
under the Indenture and the Notes;
(e) if any of the property or assets of the Company or any of its
Restricted Subsidiaries would thereupon become subject to any Lien, the
provisions of the covenant described above under the caption "-- Liens" are
complied with;
(f) immediately after giving effect to such transaction on a pro forma
basis, the Consolidated Net Worth of the Company (or of the Surviving
Entity if the Company is not the continuing obligor under the Indenture) is
equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such transaction; and
(g) the Company delivers, or causes to be delivered, to the Trustee,
in form and substance reasonably satisfactory to the Trustee, an officers'
certificate and an opinion of counsel, each stating that such transaction
complies with the requirements of the Indenture.
The Indenture will provide that no Subsidiary Guarantor may consolidate
with or merge with or into any other Person or convey, sell, assign, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety to any other Person (other than the Company or another Subsidiary
Guarantor) unless: (a) subject to the provisions of the following paragraph, the
Person formed by or surviving such consolidation or merger (if other than such
Subsidiary Guarantor) or to which such properties and assets are transferred
assumes all of the obligations of such Subsidiary Guarantor under the Indenture
and its Subsidiary Guarantee, pursuant to a supplemental indenture in form and
substance satisfactory to the Trustee, (b) immediately after giving effect to
such transaction, no Default or Event of Default has occurred and is continuing
and (c) the Subsidiary Guarantor delivers, or causes to be delivered, to the
Trustee, in form and substance reasonably satisfactory to the Trustee, an
officers' certificate and an opinion of counsel, each stating that such
transaction complies with the requirements of the Indenture.
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For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries, the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
In the event of any transaction described in and complying with the
conditions listed in the first paragraph of this covenant in which the Company
is not the continuing obligor under the Indenture, the Surviving Entity will
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, and thereafter the Company will, except in the
case of a lease, be discharged from all its obligations and covenants under the
Indenture and Notes.
TRANSACTIONS WITH AFFILIATES
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into or suffer to exist any transaction with, or
for the benefit of, any Affiliate of the Company ("Interested Persons"), unless
(a) such transaction is on terms that are no less favorable to the Company or
such Restricted Subsidiary, as the case may be, than those that could have been
obtained in an arm's-length transaction with third parties who are not
Interested Persons and (b) the Company delivers to the Trustee (i) with respect
to any transaction or series of related transactions entered into after the
Closing Date involving aggregate payments in excess of $1.0 million, a
resolution of the Board of Directors of the Company set forth in an officers'
certificate certifying that such transaction or transactions complies with
clause (a) above and that such transaction or transactions have been approved by
the Board of Directors (including a majority of the Disinterested Directors) of
the Company and (ii) with respect to a transaction or series of related
transactions involving aggregate payments equal to or greater than $5 million, a
written opinion as to the fairness to the Company or such Restricted Subsidiary
of such transaction or series of transactions from a financial point of view
issued by an accounting, appraisal or investment banking firm, in each case of
national standing.
The foregoing covenant will not restrict:
(A) transactions among the Company and/or its Restricted Subsidiaries;
(B) the Company from paying reasonable and customary regular
compensation and fees to directors of the Company or any Restricted
Subsidiary who are not employees of the Company or any Restricted
Subsidiary;
(C) maintenance in the ordinary course of business of benefit programs
or arrangements for employees, officers or directors of the Company or any
Subsidiary, including vacation plans, health and life insurance plans,
deferred compensation plans and retirement or savings plans and similar
plans;
(D) payment of management, consulting and advisory fees and related
expenses to the Permitted Holders or their Affiliates not subject to
employment agreements not to exceed $300,000 in any fiscal year of the
Company;
(E) transactions permitted by the provisions of the covenant described
under the caption "Certain Covenants -- Restricted Payments"; or
(F) payment of any amounts under a supply agreement effective as of
February 4, 1998, between the Company and Springs & Wire Design LLC, and
the employment agreement effective as of February 4, 1998 between the
Company and Ariel Gratch, and any amendments to such agreements, provided
that such agreements as so amended are no less favorable in any material
respect to the Company than the agreements in effect on the Closing Date.
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES
The Company (a) will not permit any Restricted Subsidiary to issue any
Capital Stock (other than to the Company or a Wholly Owned Restricted
Subsidiary) and (b) will not, and will not permit any Restricted
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Subsidiary to, transfer, convey, sell, lease or otherwise dispose of any Capital
Stock of any Restricted Subsidiary to any Person (other than the Company or a
Wholly Owned Restricted Subsidiary); provided, however, that this covenant will
not prohibit (i) the sale or other disposition of all, but not less than all, of
the issued and outstanding Capital Stock of a Restricted Subsidiary owned by the
Company and its Restricted Subsidiaries in compliance with the other provisions
of the Indenture, or (ii) the ownership by directors of director's qualifying
shares or the ownership by foreign nationals of Capital Stock of any Restricted
Subsidiary, to the extent mandated by applicable law.
The Company will not permit any Restricted Subsidiary to issue any
Preferred Stock.
PAYMENTS FOR CONSENT
The Indenture will provide that neither the Company nor any of its
Restricted Subsidiaries will, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of the Indenture or the Notes unless such consideration is offered
to be paid or is paid to all Holders that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
GUARANTEES OF INDEBTEDNESS BY RESTRICTED SUBSIDIARIES
The Company will not permit any Restricted Subsidiary that is not a
Subsidiary Guarantor, directly or indirectly, to guarantee, assume or in any
other manner become liable for the payment of any Indebtedness of the Company or
any Indebtedness of any other Restricted Subsidiary, unless (a) such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture
providing for a guarantee of payment of the Notes by such Restricted Subsidiary
and (b) with respect to any guarantee of Subordinated Indebtedness by a
Restricted Subsidiary, any such guarantee is subordinated to such Restricted
Subsidiary's guarantee with respect to the Notes at least to the same extent as
such Subordinated Indebtedness is subordinated to the Notes, provided that the
foregoing provision will not be applicable to any guarantee by any Restricted
Subsidiary that existed at the time such Person became a Restricted Subsidiary
and was not incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary.
Any guarantee by a Restricted Subsidiary of the Notes pursuant to the
preceding paragraph may provide by its terms that it will be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer
to any Person not an Affiliate of the Company of all of the Company's and the
Restricted Subsidiaries' Capital Stock in, or all or substantially all the
assets of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by the Indenture) or (ii) the release or discharge of the guarantee
that resulted in the creation of such guarantee of the Notes, except a discharge
or release by or as a result of payment under such guarantee.
ISSUANCES OF GUARANTEES BY NEW RESTRICTED SUBSIDIARIES
The Company will provide to the Trustee, on the date that any Person (other
than a Foreign Subsidiary) becomes a Restricted Subsidiary, a supplemental
indenture to the Indenture, executed by such new Restricted Subsidiary,
providing for a full and unconditional guarantee on a senior subordinated basis
by such new Restricted Subsidiary of the Company's obligations under the Notes
and the Indenture to the same extent as that set forth in the Indenture.
UNRESTRICTED SUBSIDIARIES
(a) The Board of Directors of the Company may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary so long as (i) neither the Company nor any Restricted Subsidiary is
directly or indirectly liable for any Indebtedness of such Subsidiary, (ii) no
default with respect to any Indebtedness of such Subsidiary would permit (upon
notice, lapse of time or otherwise) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its
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stated maturity, (iii) any Investment in such Subsidiary made as a result of
designating such Subsidiary an Unrestricted Subsidiary will not violate the
provisions of the covenant described under the caption "-- Restricted Payments,"
(iv) neither the Company nor any Restricted Subsidiary has a contract,
agreement, arrangement, understanding or obligation of any kind, whether written
or oral, with such Subsidiary other than those that might be obtained at the
time from Persons who are not Affiliates of the Company, (v) neither the Company
nor any Restricted Subsidiary has any obligation to subscribe for additional
shares of Capital Stock or other equity interest in such Subsidiary, or to
maintain or preserve such Subsidiary's financial condition or to cause such
Subsidiary to achieve certain levels of operating results, and (vi) such
Unrestricted Subsidiary has at least one director on its Board of Directors that
is not a director or executive officer of the Company or any of its Restricted
Subsidiaries and has at least one executive officer of the Company or any of its
Restricted Subsidiaries. Notwithstanding the foregoing, the Company may not
designate any of its Subsidiaries existing as of the Closing Date or any
successor to any of them as an Unrestricted Subsidiary and may not sell,
transfer or otherwise dispose of any properties or assets of any such Subsidiary
to an Unrestricted Subsidiary, other than in the ordinary course of business.
(b) The Board of Directors of the Company may designate any Unrestricted
Subsidiary as a Restricted Subsidiary; provided that (i) no Default or Event of
Default has occurred and is continuing following such designation and (ii) the
Company could incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the first paragraph of the covenant
described under the caption "-- Incurrence of Indebtedness and Issuance of
Disqualified Stock" (treating any Indebtedness of such Unrestricted Subsidiary
as the incurrence of Indebtedness by a Restricted Subsidiary).
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of the Company and its consolidated Subsidiaries (showing in
reasonable detail, either on the face of the financial statements or in the
footnotes thereto and in Management's Discussion and Analysis of Financial
Condition and Results of Operations, the financial condition and results of
operations of the Company and its Restricted Subsidiaries separate from the
financial condition and results of operation of the Unrestricted Subsidiaries of
the Company) and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all current reports
that would be required to be filed with the Commission on Form 8-K if the
Company were required to file such reports, in each case within the time periods
specified in the Commission's rules and regulations. In addition, following the
consummation of the Exchange Offer contemplated by the Registration Rights
Agreement, whether or not required by the rules and regulations of the
Commission, the Company will file a copy of all such information and reports
with the Commission for public availability within the time periods specified in
the Commission's rules and regulations (unless the Commission will not accept
such a filing) and make such information available to securities analysts and
prospective investors upon request. In addition, the Company and the Guarantors
have agreed that, for so long as any Notes remain outstanding, they will furnish
to the Holders and to prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act
other than during any period in which the Company is subject to Section 13 or
15(d) of the Exchange Act and in compliance with the requirements thereof.
EVENTS OF DEFAULT AND REMEDIES
The following will be "Events of Default" under the Indenture:
(a) default in the payment of any interest on any Note when it becomes
due and payable, and continuance of such default for a period of 30 days
(whether or not prohibited by the subordination provisions of the
Indenture);
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(b) default in the payment of the principal of (or premium, if any,
on) any Note when due (whether or not prohibited by the subordination
provisions of the Indenture);
(c) failure to perform or comply with the Indenture provisions
described under the captions "-- Repurchase at the Option of
Holders -- Change of Control," "-- Repurchase at the Option of
Holders -- Asset Sales," or "-- Merger, Consolidation or Sale of Assets";
(d) failure to perform or comply with the Indenture provisions
described under the captions "-- Certain Covenants -- Restricted Payments"
or "-- Incurrence of Indebtedness and Issuance of Disqualified Stock" and
continuance of such default or breach for a period of 30 days after written
notice has been given 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 Notes then outstanding;
(e) default in the performance, or breach, of any covenant or
agreement of the Company or any Subsidiary Guarantor contained in the
Indenture or in any Note or Subsidiary Guarantee (other than a default in
the performance, or breach, of a covenant or agreement that is specifically
dealt with elsewhere herein), and continuance of such default or breach for
a period of 60 days after written notice has been given 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 Notes then outstanding;
(f) (i) an event of default has occurred under any mortgage, bond,
indenture, loan agreement or other document evidencing an issue of
Indebtedness of the Company or any Restricted Subsidiary, which issue
individually or in the aggregate has an aggregate outstanding principal
amount of not less than $5 million, and such default has resulted in such
Indebtedness becoming, whether by declaration or otherwise, due and payable
prior to the date on which it would otherwise become due and payable or
(ii) a default in any payment when due at final maturity of any such
Indebtedness;
(g) failure by the Company or any of its Restricted Subsidiaries to
pay one or more final judgments (not subject to appeal) the uninsured
portion of which exceeds in the aggregate $5 million, which judgment or
judgments are not paid, discharged or stayed for a period of 60 days;
(h) any Subsidiary Guarantee ceases to be in full force and effect or
is declared null and void or any such Subsidiary Guarantor denies that it
has any further liability under any Subsidiary Guarantee, or gives notice
to such effect (other than by reason of the termination of the Indenture or
the release of any such Subsidiary Guarantee in accordance with the
Indenture); or
(i) the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant Subsidiary.
If an Event of Default (other than as specified in clause (i) above) occurs
and is continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may, and the Trustee at the
request of such Holders will, declare the principal of, and accrued interest on,
all of the outstanding Notes immediately due and payable and, upon any such
declaration, such principal and such interest will become due and payable
immediately provided, however, that the Notes shall not become due and payable
until the earlier to occur of (i) the acceleration of the maturity of any
Indebtedness under the Credit Agreement or (ii) five business days following
written notice of such declaration to the agent under the Credit Agreement.
If an Event of Default specified in clause (i) above occurs and is
continuing, then the principal of and accrued interest on all of the outstanding
Notes will ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration under the Indenture, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may rescind
such declaration and its consequences if: (i) the Company has paid or deposited
with the Trustee a sum sufficient to pay (A) all overdue interest on all Notes,
(B) all unpaid principal of (and premium, if any, on) any outstanding Notes that
has become due otherwise than by such declaration of acceleration and interest
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thereon at the rate borne by the Notes, (C) to the extent that payment of such
interest is lawful, interest upon overdue interest and overdue principal at the
rate borne by the Notes and (D) all sums paid or advanced by the Trustee under
the Indenture and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel; and (ii) all Events of Default,
other than the non-payment of amounts of principal of (or premium, if any, on)
or interest on the Notes that have become due solely by such declaration of
acceleration, have been cured or waived. No such rescission will affect any
subsequent default or impair any right consequent thereon.
No Holder has any right to institute any proceeding with respect to the
Indenture or any remedy thereunder, unless 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
within 60 days after receipt of such notice and the Trustee, within such 60-day
period, has not 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 interest on
such Note on or after the respective due dates expressed in such Note.
The Holders of not less than a majority in aggregate principal amount of
the outstanding Notes may, on behalf of the Holders of all of the Notes, waive
any past defaults under the Indenture, except a default in the payment of the
principal of (and premium, if any) or interest on any Note, or in respect of a
covenant or provision that under the Indenture cannot be modified or amended
without the consent of the holder of each Note outstanding.
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee will mail to each Holder notice of the Default or
Event of Default within 90 days after the occurrence thereof. Except in the case
of a Default or an Event of Default in payment of principal of (and premium, if
any, on) or interest on any Notes, the Trustee may withhold the notice to the
Holders if a committee of its trust officers in good faith determines that
withholding such notice is in the interests of the Holders.
The Company is required to furnish to the Trustee annual statements as to
the performance by the Company and the Subsidiary Guarantors of their
obligations under the Indenture and as to any default in such performance. The
Company is also required to notify the Trustee within five days of any Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No past, present or future director, officer, employee, incorporator or
stockholder of the Company or any Subsidiary, as such, shall have any liability
for any obligations of the Company or the Subsidiary Guarantors under the Notes,
the Indenture or the Subsidiary Guarantees, as applicable, or any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes. Such waiver
may not be effective to waive liabilities under the federal securities laws and
it is the view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, terminate the obligations
of the Company and the Subsidiary Guarantors with respect to the outstanding
Notes ("legal defeasance"). Such legal defeasance means that the Company will be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of (and premium, if any, on) and
interest on such Notes when such payments are due, (ii) the Company's
obligations to issue temporary Notes, register the transfer or exchange of any
Notes, replace mutilated, destroyed, lost or stolen Notes, maintain an office or
agency for payments in respect of the Notes and segregate and hold such payments
in trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee
and (iv) the legal defeasance provisions of the Indenture. In addition, the
Company may, at its option and at any time, elect to terminate the obligations
of the Company and any Subsidiary Guarantor with respect to certain covenants
forth in the Indenture and described under "Certain Covenants" above, and any
omission
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to comply with such obligations would not constitute a Default or an Event of
Default with respect to the Notes ("covenant defeasance").
In order to exercise either legal defeasance or covenant defeasance: (a)
the Company must irrevocably deposit or cause to be deposited with the Trustee,
as trust funds in trust, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders, money in an amount, or U.S. Government
Obligations (as defined in the Indenture) that through the scheduled payment of
principal and interest thereon will provide money in an amount, or a combination
thereof, sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay and discharge the principal of (and
premium, if any, on) and interest on the outstanding Notes at maturity (or upon
redemption, if applicable) of such principal or installment of interest; (b) no
Default or Event of Default has occurred and is continuing on the date of such
deposit or, insofar as an event of bankruptcy under clause (i) of "Events of
Default" above is concerned, at any time during the period ending on the 91st
day after the date of such deposit; (c) such legal defeasance or covenant
defeasance may not result in a breach or violation of, or constitute a default
under, the Indenture or any material agreement or instrument to which the
Company or any Subsidiary Guarantor is a party or by which it is bound; (d) in
the case of legal defeasance, the Company must deliver to the Trustee an opinion
of counsel stating that the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or since the date hereof,
there has been a change in applicable federal income tax law, to the effect, and
based thereon such opinion must confirm that, the Holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such legal defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such legal defeasance had not occurred; (e) in the case of covenant
defeasance, the Company must 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; and (f) the Company must 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 or the covenant defeasance, as the case may be, have been
complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer document and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note for a
period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Modifications and amendments of the Indenture and any Subsidiary Guarantee
may be made by the Company, any affected Subsidiary Guarantor and the Trustee
with the consent of the Holders of a majority in aggregate outstanding principal
amount of the Notes; provided, however, that no such modification or amendment
may, without the consent of the Holder of each outstanding Note affected
thereby:
(a) change the Stated Maturity of the principal of, or any installment
of interest on, any Note, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption
thereof, or change the coin or currency in which any Note or any premium or
the interest thereon is payable, or impair the right to institute suit for
the enforcement of any such payment after the Stated Maturity thereof (or,
in the case of redemption, on or after the redemption date);
(b) amend, change or modify the obligation of the Company to make and
consummate an Excess Proceeds Offer with respect to any Asset Sale in
accordance with the covenant described under the covenant entitled
"Repurchase at the Option of the Holders -- Asset Sales" or the obligation
of the
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Company to make and consummate a Change of Control offer in the event of a
Change of Control in accordance with the covenant entitled "Repurchase at
the Option of the Holders -- Change of Control," including, in each case,
amending, changing or modifying any definition relating thereto;
(c) reduce the percentage in principal amount of outstanding Notes,
the consent of whose Holders is required for any waiver of compliance with
certain provisions of, or certain defaults and their consequences provided
for under, the Indenture;
(d) waive a default in the payment of principal of, or premium, if
any, or interest on the Notes or reduce the percentage or aggregate
principal amount of outstanding Notes the consent of whose Holders is
necessary for waiver of compliance with certain provisions of the Indenture
or for waiver of certain defaults;
(e) modify the ranking or priority of the Notes or the Subsidiary
Guarantee of any Subsidiary Guarantor; or
(f) release any Subsidiary Guarantor from any of its obligations under
its Subsidiary Guarantee or the Indenture other than in accordance with the
terms of the Indenture.
The Holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.
Without the consent of any Holders, the Company and the Trustee, at any
time and from time to time, may enter into one or more indentures supplemental
to the Indenture for any of the following purposes: (1) to evidence the
succession of another Person to the Company and the assumption by any such
successor of the covenants of the Company in the Indenture and in the Notes; or
(2) to add to the covenants of the Company for the benefit of the Holders, or to
surrender any right or power herein conferred upon the Company; or (3) to add
additional Events of Default; or (4) to provide for uncertificated Notes in
addition to or in place of the certificated Notes; or (5) to evidence and
provide for the acceptance of appointment under the Indenture by a successor
Trustee; or (6) to secure the Notes; or (7) to cure any ambiguity, to correct or
supplement any provision in the Indenture that may be defective or inconsistent
with any other provision in the Indenture, or to make any other provisions with
respect to matters or questions arising under the Indenture, provided that such
actions pursuant to this clause do not adversely affect the interests of the
Holders in any material respect; or (8) to comply with any requirements of the
Commission in order to effect and maintain the qualification of the Indenture
under the Trust Indenture Act.
CONCERNING THE TRUSTEE
Norwest Bank Minnesota, National Association, the Trustee under the
Indenture, is the paying agent and registrar for the Notes.
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. Under the Indenture, the Holders of a majority in outstanding
principal amount of the Notes will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee, subject to certain exceptions. If an Event of Default has occurred and
is continuing, the Trustee will exercise such rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise as
a prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Indenture and provisions of the Trust Indenture Act, incorporated by
reference therein, contain limitations on the rights of the Trustee thereunder,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claims, as security or otherwise. The Trustee is permitted to engage in
other transactions; provided, however, that, if it acquires any conflicting
interest (as defined), it must eliminate such conflict upon the occurrence of an
Event of Default or else resign.
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BOOK-ENTRY, DELIVERY AND FORM
The New Notes initially will be issued in the form of one or more global
notes (the "Global Notes"). The Global Notes will be deposited with, or on
behalf of, The Depository Trust Company (the "Depositary") and registered in the
name of Cede & Co., as nominee of the Depositary (such nominee being referred to
herein as the "Global Note Holder").
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit the
accounts of Participants designated by the Initial Purchaser with portions of
the principal amount of the Global Notes and (ii) ownership of the Notes
evidenced by the Global Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to own, transfer or pledge Notes evidenced
by the Global Notes will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of any
Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the
Global Notes will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records of the Depositary or for maintaining, supervising or reviewing
any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, and interest on
any Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of the Global
Note Holder in its capacity as the registered Holder under the Indenture. Under
the terms of the Indenture, the Company and the Trustee may treat the persons in
whose names Notes, including the Global Notes, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Notes. The Company believes,
however, that it is currently the policy of the Depositary to immediately credit
the accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
Transfers between Participants in DTC will be effected in accordance with
DTC rules and will be settled in immediately available funds. If a holder
requires physical delivery of a Certificated Note 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 Global Notes in accordance with the normal procedures of DTC and in
accordance with the procedures set forth in the Indenture.
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Before the 40th day after the later of the commencement of the Offering and
the Closing Date, transfers by an owner of a beneficial interest in the Offshore
Global Note to a transferee who takes delivery of such interest through the U.S.
Global Note will be made only in accordance with the applicable procedures and
upon receipt by the Trustee of a written certification from the transferor of
the beneficial interest in the form provided in the Indenture to the effect that
such transfer is being made to a person whom the transferor reasonably believes
is a Qualified Institutional Buyer within the meaning of Rule 144A in a
transaction meeting the requirements of Rule 144A or an institutional
"accredited investor."
Transfers by an owner of a beneficial interest in the U.S. Global Note to a
transferee who takes delivery of such interest through the Offshore Global Note,
whether before, on or after the 40th day after the later of the commencement of
the Offering and the Closing Date, will be made only upon receipt by the Trustee
of a certification to the effect that such transfer is being made in accordance
with Regulation S. Transfers of Certificated Notes held by institutional
"accredited investors" to persons who will hold through the U.S. Global Note or
the Offshore Global Note will be subject to certifications provided by the
Trustee.
CERTIFICATED NOTES
If (i) the Company notifies the Trustee in writing that the Depositary is
no longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
the form of Certificated Securities under the Indenture then, upon surrender by
the Global Note Holder of the Global Notes, Certificated Notes will be issued to
each person that the Global Note Holder and the Depositary identify as being the
beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Notes
represented by the Global Notes (including principal, premium, if any, and
interest) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. With respect to Certificated
Notes, the Company will make all payments of principal, premium, if any, and
interest by wire transfer of immediately available funds to the accounts
specified by the Holders thereof or, if no such account is specified, by mailing
a check to each such Holder's registered address. Secondary trading in long-term
notes and debentures of corporate issues is generally settled in clearinghouse
or next-day funds. In contrast, Notes represented by the Global Notes are
expected to be eligible to trade in the PORTAL market and to trade in the
Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such Senior Notes will, therefore, be required by the
Depositary to be settled in immediately available funds. The Company expects
that secondary trading in the Certificated Notes will also be settled in
immediately available funds.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant in
DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or Cedel participant, during the securities settlement processing day
(which must be a business day for Euroclear or Cedel) immediately following the
settlement date of DTC. DTC has advised the Company that cash received in
Euroclear or Cedel as a result of sales of interests in a Global Note by or
through a Euroclear or Cedel participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or Cedel cash account only as of the business day for
Euroclear or Cedel following DTC's settlement date.
REGISTRATION RIGHTS
Holders of the New Notes are not entitled to any registration rights with
respect to the New Notes. Pursuant to the Registration Rights Agreement, (a copy
of which has been filed as an exhibit to the
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registration statement of which this Prospectus is a part), the Company and the
Subsidiary Guarantors agreed, for the benefit of the Holders of the Old Notes,
at the expense of the Company and the Subsidiary Guarantors, to (i) file with
the Commission on or prior to the 90th calendar day following the date of
original issuance of the Old Notes a registration statement (the "Exchange Offer
Registration Statement") with respect to the Exchange Offer. The registration
statement of which this Prospectus is a part constitutes the Exchange Offer
Registration Statement.
Based on existing interpretations of the Securities Act by the staff of the
Commission set forth in several no-action letters to third parties, and subject
to the immediately following sentence, the Company believes that the New Notes
may be offered for resale, resold and otherwise transferred by the Holders
thereof without further compliance with the registration and prospectus delivery
provisions of the Securities Act. However, any Holder of Old Notes who is an
"affiliate" of the Company or who intends to participate in the Exchange Offer
for the purpose of distributing the New Notes (i) will not be able to rely on
the interpretations by the staff of the Commission set forth in the
above-mentioned no-action letters, (ii) will not be able to tender its Old Notes
in the Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of Notes unless such sale or transfer is made pursuant to an exemption
from such requirements.
Each Holder of Old Notes who wishes to exchange 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, (ii) any New Notes to be
received by it were acquired in the ordinary course of its business and (iii) at
the time of commencement of the Exchange Offer, it has no arrangement with any
person to participate in a distribution (within the meaning of the Securities
Act) of the New Notes. In addition, in connection with any resales of New Notes,
any broker-dealer (an "Exchanging Dealer") who acquired Old Notes for its own
account as a result of market-making activities or other trading activities must
deliver a prospectus meeting the requirements of the Securities Act. The
Commission has taken the position that Exchanging Dealers may fulfill their
prospectus delivery requirements with respect to the New Notes (other than a
resale of an unsold allotment from the original sale of the Old Notes) by
delivering a copy of this Prospectus, as the same may be amended or supplemented
from time to time. Under the Registration Rights Agreement, the Company is
required to allow Exchanging Dealers to use this Prospectus, as the same may be
amended or supplemented from time to time in connection with their resales of
New Notes.
In the event that any changes in law or applicable interpretations of the
staff of the Commission do not permit the Company to effect the Exchange Offer,
or if for any reason the Exchange Offer is not consummated within 150 days of
the date of original issuance of the Old Notes or in certain other
circumstances, the Company and the Subsidiary Guarantors will, at their expense,
(i) as promptly as practicable, and in any event on or prior to 30 days after
such filing obligation arises (and within 150 days after the Closing Date), file
with the Commission a shelf registration statement (the "Shelf Registration
Statement") covering resales of the Old Notes, (ii) use their best efforts to
cause the Shelf Registration Statement to be declared effective under the
Securities Act on or prior to 45 days after such filing occurs and (iii) keep
effective the Shelf Registration Statement until two years after its effective
date (or such shorter period that will terminate when all the Notes covered
thereby have been sold pursuant thereto or in certain other circumstances). In
the event of the filing of a Shelf Registration Statement, the Company will
provide to each Holder of Old Notes covered by the Shelf Registration Statement
copies of the prospectus that is a part of the Shelf Registration Statement,
notify each such Holder when the Shelf Registration Statement for the Old Notes
has become effective and take certain other actions as are required to permit
unrestricted resales of the Old Notes. A Holder that sells Old Notes pursuant to
the Shelf Registration Statement generally will be required to be named as a
selling securityholder in the related prospectus and to deliver a prospectus to
the purchaser, will be subject to certain of the civil liability provisions
under the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement that are applicable to such
Holder (including certain indemnification obligations). In addition, each Holder
will be required to deliver certain information to be used in connection with
the Shelf Registration Statement in order to have its Notes included in the
Shelf Registration Statement.
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The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is qualified in its entirety by
reference to the Registration Rights Agreement.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (a) existing at the
time such Person is merged with or into the Company or becomes a Subsidiary or
(b) assumed in connection with the acquisition of assets from such Person.
"Affiliate" means, with respect to any specified person, (a) any other
person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person or (b) any other person that
owns, directly or indirectly, 10% or more of such specified person's Capital
Stock or any executive officer or director of any such specified person or other
person or, with respect to any natural person, any person having a relationship
with such person by blood, marriage or adoption not more remote than first
cousin. For the purposes of this definition, "control," when used with respect
to any specified 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 "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent Bank" means NationsCredit Commercial Corporation and its successors
under the Credit Agreement, in its capacity as agent.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of merger, consolidation or
similar arrangement) (collectively, a "transfer") by the Company or any
Restricted Subsidiary other than in the ordinary course of business and (ii) the
issue or sale by the Company or any of its Restricted Subsidiaries of Shares of
Capital Stock of any of the Company's Restricted Subsidiaries (which shall be
deemed to include the sale, grant or conveyance of any interest in the income,
profits or proceeds therefrom), in the case of either clause (i) or (ii),
whether in a single transaction or a series of related transactions (x) that
have a fair market value in excess of $750,000 or (y) for Net Cash Proceeds in
excess of $750,000. For the purposes of this definition, the term "Asset Sale"
does not include any transfer of properties or assets (i) that is governed by
the provisions of the Indenture described under "-- Certain Covenants --
Consolidation, Merger and Sale of Assets" or "-- Restricted Payments," (ii)
between or among the Company and its Restricted Subsidiaries pursuant to
transactions that do not violate any other provision of the Indenture, (iii)
representing damaged, worn out, obsolete or permanently retired equipment and
facilities, (iv) that constitutes or would constitute the creation or grant of a
Lien not prohibited by the Indenture or (v) that constitutes or would constitute
the surrender or waiver of contract rights or the settlement, release or
surrender of contract tort or other claims of any kind.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remainder of the
lease included in such sale and leaseback transaction (including any period for
which such lease has been extended or may, at the option of the lessor, be
extended).
"Banks" means the banks and other financial institutions that from time to
time are lenders under the Credit Agreement.
"Borrowing Base" means, with respect to any Person, as of any date, an
amount equal to the sum of (a) 85% of the face amount of all accounts receivable
owned by such Person and its Subsidiaries (or, in the case of the Company, its
Subsidiary Guarantors) as of such date that are not more than 90 days past due
and (b) 60% of the book value of all inventory owned by such Person and its
Subsidiaries (or, in the case of the Company, its Subsidiary Guarantors) as of
such date, all calculated on a consolidated basis and in accordance with GAAP.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York are authorized or
obligated by law or executive order to close.
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"Capital Stock" of any Person means any and all shares, interests,
partnership interests, participations, rights in or other equivalents (however
designated) of such Person's equity interest (however designated), whether now
outstanding or issued after the Closing Date.
"Capitalized Lease Obligation" means, with respect to any Person, an
obligation incurred or assumed under or in connection with any capital lease of
real or personal property that, in accordance with GAAP, has been recorded as a
capitalized lease.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) (other than Permitted Holders) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 35% or more of the Voting Stock of the Company
or Parent and such person or group is or becomes, directly or indirectly,
the beneficial owner of a greater percentage of the voting power of the
Voting Stock of the Company or Parent than the percentage beneficially
owned by the Permitted Holders as a group;
(b) the Company consolidates with, or merges with or into, another
person or, sells, assigns, conveys, transfers, leases or otherwise disposes
of, or the Subsidiaries sell, assign, convey, transfer, lease or otherwise
dispose of, all or substantially all of the properties of the Company and
the Subsidiaries, taken as a whole (either in one transaction or a series
of related transactions), including Capital Stock of the Subsidiaries, to
any person (other than the Company or a Restricted Subsidiary) pursuant to
a transaction in which the outstanding Voting Stock of the Company is
converted into or exchanged for cash, securities or other property, other
than any such transaction (i) where the outstanding Voting Stock of the
Company is not converted or exchanged at all (except to the extent
necessary to reflect a change in the jurisdiction of incorporation of the
Company) or is converted into or exchanged for (A) Voting Stock (other than
Disqualified Stock) of the surviving or transferee corporation or (B)
Voting Stock (other than Disqualified Stock) of the surviving or transferee
corporation and cash, securities and other property (other than Capital
Stock of the surviving or transferee corporation) in an amount that could
be paid by the Company as a Restricted Payment as described under the
"Certain Covenants -- Restricted Payments" covenant and (ii) immediately
after such transaction, no "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) (other than Permitted
Holders) is the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of more than 35% of the total
outstanding Voting Stock of the surviving or transferee corporation;
(c) during any consecutive twenty-four month period, individuals who at the
beginning of such period constituted the Board of Directors of the Company or
Parent (together with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of the Company or
Parent, as the case may be, was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company or Parent then in office; or
(d) the Company is liquidated or dissolved or adopts a plan of liquidation
or dissolution, other than in a transaction that complies with the provisions
described under "Certain Covenants -- Consolidation, Merger and Sale of Assets."
"Closing Date" means the date on which the Notes are originally issued
under the Indenture.
"Consolidated EBITDA" means, for any period, the sum of, without
duplication, Consolidated Net Income for such period, plus (or, in the case of
clause (d) below, plus or minus) the following items to the extent included in
computing Consolidated Net Income for such period (a) Fixed Charges for such
period, plus (b) the provision for federal, state, local and foreign income
taxes of the Company and its Restricted Subsidiaries for such period, plus (c)
the aggregate depreciation and amortization expense of the Company and its
Restricted Subsidiaries for such period, plus (d) any other non-cash charges for
such period, and minus non-cash credits for such period, other than non-cash
charges or credits resulting from changes in prepaid assets or accrued
liabilities in the ordinary course of business, provided that fixed charges,
income tax
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expense, depreciation and amortization expense and non-cash charges and credits
of a Restricted Subsidiary will be included in Consolidated EBITDA only to the
extent (and in the same proportion) that the net income of such Subsidiary was
included in calculating Consolidated Net Income for such period.
"Consolidated Net Income" means, for any period, the net income (or net
loss) of the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP, adjusted to the
extent included in calculating such net income or loss by excluding (a) any net
after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) any net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to Asset Sales, (c) the portion of net income (or
loss) of any Person (other than the Company or a Restricted Subsidiary),
including Unrestricted Subsidiaries, in which the Company or any Restricted
Subsidiary has an ownership interest, except to the extent of the amount of
dividends or other distributions actually paid to the Company or any Restricted
Subsidiary in cash during such period, (d) the net income (or loss) of any
Person combined with the Company or any Restricted Subsidiary on a "pooling of
interests" basis attributable to any period prior to the date of combination,
(e) the net income (but not the net loss) of any Restricted Subsidiary to the
extent that the declaration or payment of dividends or similar distributions by
such Restricted Subsidiary is at the date of determination restricted, directly
or indirectly, except to the extent that such net income is actually paid to the
Company or a Restricted Subsidiary thereof by loans, advances, intercompany
transfers, principal repayments or otherwise; provided that, if any Restricted
Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated Net Income
will be reduced (to the extent not otherwise reduced in accordance with GAAP) by
an amount equal to (A) the amount of the Consolidated Net Income otherwise
attributable to such Restricted Subsidiary multiplied by (B) the quotient of (1)
the number of shares of outstanding common stock of such Restricted Subsidiary
not owned on the last day of such period by the Company or any of its Restricted
Subsidiaries divided by (2) the total number of shares of outstanding common
stock of such Restricted Subsidiary on the last day of such period, (f) for any
period ending on or prior to the first year anniversary of the Closing Date, the
aggregate amount of one-time, non-recurring costs, expenses and fees incurred by
the Company or a Restricted Subsidiary in connection with (i) the acquisition by
AFA Acquisition Corp. of AFA Products, Inc. pursuant to the Asset Purchase
Agreement dated as of July 29, 1997, (ii) the financings provided in connection
with the acquisition referred to in clause (i) above pursuant to the Credit
Agreement dated as of July 29, 1997 among AFA Acquisition Corp., Parent, the
lenders referred to therein and NationsCredit Commercial Corporation as agent of
the lenders or any refinancings thereof, (iii) the acquisition by the Company of
the Continental Sprayers International and Contour Cutting divisions and certain
other assets of Contico International, Inc. pursuant to the Asset Purchase
Agreement dated as of January 14, 1998, and the concurrent repayment of certain
indebtedness of AFA Products, Inc., (iv) the financings provided in connection
with the acquisition and repayment of indebtedness referred to in clause (iii)
above pursuant to the Credit Agreement, (v) the acquisition by Dejanu BV of the
capital stock of Polytek pursuant to the Stock Purchase Agreement dated as of
August 6, 1997, and (vi) the financings provided in connection with the
acquisition referred to in clause (v) above pursuant to the Polytek Credit
Agreement and (g) any non-cash charges attributable to (i) the amortization
expense of the Parent associated with any original issue discount attributable
to any warrants owned by NationsCredit Commercial Corporation or Waldock Limited
to purchase respectively 1,750,000 shares of Class B Common Stock, par value
$.01 per share of Parent and 950,000 shares of Class A Common Stock, par value
$.01 per share of Parent or (ii) the interest expense of the Parent incurred in
respect of the Subordinated Parent Notes, to the extent such amortization
expense or interest expense is incurred by the Company as a result of the
Parent's obligations under the warrants or the Subordinated Parent Notes being
accounted for financial reporting purposes as an expense of the Company in
accordance with "push-down" accounting.
"Consolidated Net Worth" means, at any date of determination, stockholders'
equity of the Company and its Restricted Subsidiaries as set forth on the most
recently available quarterly or annual consolidated balance sheet of the Company
and its Restricted Subsidiaries, less any amounts attributable to Disqualified
Stock or any equity security convertible into or exchangeable for Indebtedness,
the cost of treasury stock and the principal amount of any promissory notes
receivable from the sale of the Capital Stock of the Company or any of its
Restricted Subsidiaries and less to the extent included in calculating such
stockholders' equity of the Company and its Restricted Subsidiaries, the
stockholders' equity attributable to Unrestricted Subsidiaries,
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each item to be determined in conformity with GAAP (excluding the effects of
foreign currency adjustments under Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 52).
"Credit Agreement" means the Credit Agreement dated as of February 4, 1998,
among the Company, Parent, the lenders named therein, NationsCredit Commercial
Corporation, as collateral agent and as initial Issuing bank and NationsBridge
LLC, as administrative agent, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, as the same may be amended, restated, supplemented, refinanced or
otherwise modified from time to time.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) so long as the Senior Bank Debt
is outstanding or any lender has any commitment to extend credit to the Company
under the Credit Agreement, the Senior Bank Debt and (ii) any other Senior
Indebtedness permitted under the Indenture the principal amount of which at the
time of designation is $20 million or more and that has been specifically
designated by the Company, in the instrument creating or evidencing such Senior
Indebtedness or in an officers' certificate delivered to the Trustee, as
"Designated Senior Indebtedness."
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors, to make a finding or otherwise
take action under the Indenture, a member of the Board of Directors who does not
have any material direct or indirect financial interest in or with respect to
such transaction or series of transactions.
"Disqualified Stock" means any class or series of Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise (i) is or upon the happening of an
event or passage of time would be, required to be redeemed prior to the final
Stated Maturity of the Notes, (ii) is redeemable at the option of the Holder
thereof, at any time prior to such final Stated Maturity or (iii) at the option
of the Holder thereof is convertible into or exchangeable for debt securities at
any time prior to such final Stated Maturity; provided that any Capital Stock
that would not constitute Disqualified Stock but for provisions therein giving
Holders thereof the right to cause the issuer thereof to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes will not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the Holders of such
Capital Stock than the provisions contained in the covenants described under the
captions "Repurchase at the Option of Holders -- Change of Control" and
"-- Asset Sales" described herein and such Capital Stock specifically provides
that the issuer will not repurchase or redeem any such stock pursuant to such
provision prior to the Company's repurchase of such Notes as are required to be
repurchased pursuant to the provisions contained in the covenants described
under the captions "Repurchase at the Option of Holders -- Change of Control"
and "-- Asset Sales."
"Equity Offering" means a public or private offering of Capital Stock
(other than Disqualified Stock) of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means the Indebtedness of the Company and its
Restricted Subsidiaries (other than Indebtedness under the Credit Agreement)
outstanding on the date of the Indenture and listed on a schedule to the
Indenture, until such amounts are repaid.
"Fixed Charges" means, for any period, without duplication, the sum of (a)
the amount that, in conformity with GAAP, would be set forth opposite the
caption "interest expense" (or any like caption) on a consolidated statement of
operations of the Company and its Restricted Subsidiaries for such period,
including, without limitation, (i) amortization of debt discount, (ii) the net
cost of interest rate contracts (including amortization of discounts), (iii) the
interest portion of any deferred payment obligation, (iv) amortization of debt
issuance costs, and (v) the interest component of Capitalized Lease Obligations,
plus (b) cash dividends paid on Preferred Stock and Disqualified Stock by the
Company and any Restricted
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Subsidiary (to any Person other than the Company and its Restricted
Subsidiaries), computed on a tax effected basis, plus (c) all interest on any
Indebtedness of any Person guaranteed by the Company or any of its Restricted
Subsidiaries or secured by a lien on the assets of the Company or any of its
Restricted Subsidiaries; provided, however, that Fixed Charges will not include
(i) any gain or loss from extinguishment of debt, including the write-off of
debt issuance costs, and (ii) the fixed charges of a Restricted Subsidiary to
the extent (and in the same proportion) that the net income of such Subsidiary
was excluded in calculating Consolidated Net Income pursuant to clause (e) of
the definition thereof for such period.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of
Consolidated EBITDA for such period to Fixed Charges for such period.
"Foreign Subsidiary" means a Restricted Subsidiary that is incorporated in
a jurisdiction other than the United States or a state thereof or the District
of Columbia and that has no material operations or assets in the United States.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, that
are in effect on the Closing Date.
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person entered into in the ordinary course of business under (i) interest
rate swap agreements, interest rate cap agreements and interest rate collar
agreements and other similar financial agreements or arrangements designed to
protect such Person against, or manage the exposure of such Person to,
fluctuations in interest rates, and (ii) forward exchange agreements, currency
swap, currency option and other similar financial agreements or arrangements
designed to protect such Person against, or manage the exposure of such Person
to, fluctuations in foreign currency exchange rates.
"Holder" means the Person in whose name a Note is, at the time of
determination, registered on the Registrar's books.
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (a) every obligation of such Person for money borrowed, (b)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, (c) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person, (d) every obligation of such Person issued or
assumed as the deferred purchase price of property or services, (e) the
Attributable Debt of every Capitalized Lease Obligation of such Person, (f) all
Disqualified Stock of such Person valued at its maximum fixed repurchase price,
plus accrued and unpaid dividends, (g) all obligations of such Person under or
in respect of Hedging Obligations, and (h) every obligation of the type referred
to in clauses (a) through (g) of another Person and all dividends of another
Person the payment of which, in either case, such Person has guaranteed. For
purposes of this definition, the "maximum fixed repurchase price" of any
Disqualified Stock that does not have a fixed repurchase price will be
calculated in accordance with the terms of such Disqualified Stock as if such
Disqualified Stock were purchased on any date on which Indebtedness is required
to be determined pursuant to the Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Stock, such fair market
value will be determined in good faith by the board of directors of the issuer
of such Disqualified Stock. Notwithstanding the foregoing, trade accounts
payable and accrued liabilities arising in the ordinary course of business and
any liability for federal, state or local taxes or other taxes owed by such
Person will not be considered Indebtedness for purposes of this definition.
"Investment" in any Person means, (i) directly or indirectly, any advance,
loan or other extension of credit (including, without limitation, by way of
guarantee or similar arrangement) or capital contribution to such Person, the
purchase or other acquisition of any stock, bonds, notes, debentures or other
securities issued by such Person, the acquisition (by purchase or otherwise) of
all or substantially all of the business or assets of such Person, or the making
of any investment in such Person, (ii) the designation of any Restricted
Subsidiary
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as an Unrestricted Subsidiary and (iii) the fair market value of the Capital
Stock (or any other Investment), held by the Company or any of its Restricted
Subsidiaries, of (or in) any Person that has ceased to be a Restricted
Subsidiary. Investments exclude extensions of trade credit on commercially
reasonable terms in accordance with normal trade practices.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance upon, or with respect to, any
property of any kind, real or personal, movable or immovable, now owned or
hereafter acquired. A Person will be deemed to own subject to a Lien any
property that such Person has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Net Cash 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, or stock or other
assets when disposed for, cash or cash equivalents (except to the extent that
such obligations are financed or sold with recourse to the Company or any
Restricted Subsidiary), net of (a) brokerage commissions and other fees and
expenses (including fees and expenses of legal counsel and investment banks)
related to such Asset Sale, (b) provisions for all taxes payable as a result of
such Asset Sale, (c) payments made to retire Indebtedness where such
Indebtedness is secured by the assets that are the subject of such Asset Sale,
(d) amounts required to be paid to any Person (other than the Company or any
Restricted Subsidiary) owning a beneficial interest in the assets that are
subject to the Asset Sale and (e) appropriate amounts to be provided by the
Company or any Restricted Subsidiary, as the case may be, as a reserve required
in accordance with GAAP against any liabilities associated with such Asset Sale
and retained by the seller after such Asset Sale, including pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Parent" means Indesco Holdings Co., a Delaware corporation.
"Pari Passu Indebtedness" means (a) with respect to the Notes, Indebtedness
that ranks pari passu in right of payment to the Notes and (b) with respect to
any Subsidiary Guarantee, Indebtedness that ranks pari passu in right of payment
to such Subsidiary Guarantee.
"Permitted Holders" means any one or more of Ariel Gratch ("Gratch") and
Yehochai Schneider ("Schneider"), the estate, spouse, children and grandchildren
of each of Gratch and Schneider, any trust for the benefit solely of Gratch
and/or Schneider and/or members of their respective families, and any Person
controlled, directly or indirectly, by any one or more of the foregoing Persons.
"Permitted Investments" means any of the following:
(a) Investments in (i) securities with a maturity of one year or less
issued or directly and fully guaranteed or insured by the United States or
any agency or instrumentality thereof (provided that the full faith and
credit of the United States is pledged in support thereof); (ii)
certificates of deposit or acceptances with a maturity of one year or less
of any financial institution that is a member of the Federal Reserve System
having combined capital and surplus of not less than $500,000,000; (iii)
any shares of money market mutual or similar funds having assets in excess
of $500,000,000; and (iv) commercial paper with a maturity of one year or
less issued by a corporation that is not an Affiliate of the Company and is
organized under the laws of any state of the United States or the District
of Columbia and having a rating (A) from Moody's Investors Service, Inc. of
at least P-1 or (B) from Standard & Poor's Ratings Group of at least A-1;
(b) Investments by the Company or a Restricted Subsidiary in another
Person, if as a result of such Investment (x) such other Person becomes a
Restricted Subsidiary that is a Subsidiary Guarantor, or (y) such other
Person becomes a Restricted Subsidiary that is not a Subsidiary Guarantor
but, at the time of such Investment, is not subject to a consensual
encumbrance or consensual restriction that would
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be prohibited by the covenant described under "Certain Covenants --
Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries," without regard to the exception described in clauses (i),
(ii) and (iv) thereunder, or (z) such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all
of its assets to, the Company or a Restricted Subsidiary that, at the time
of such Investment, either is a Subsidiary Guarantor or is not subject to a
consensual encumbrance or consensual restriction that would be prohibited
by the covenant described under "Certain Covenants -- Dividends and Other
Payment Restrictions Affecting Restricted Subsidiaries," without regard to
the exception described in clause (i), (ii) and (iv) thereunder;
(c) Investments by the Company or a Restricted Subsidiary in (x) the
Company or, (y) a Subsidiary Guarantor or (z) a Restricted Subsidiary that
is not a Subsidiary Guarantor but, at the time of such Investment, is not
subject to a consensual encumbrance or consensual restriction that would be
prohibited by the covenant described under "Certain Covenants -- Dividends
and Other Payment Restrictions Affecting Restricted Subsidiaries," without
regard to the exception described in clause (i), (ii) and (iv) thereunder;
(d) Investments in existence on the Closing Date;
(e) promissory notes or other evidence of Indebtedness received as a
result of Asset Sales permitted under the covenant entitled "Repurchase at
the Option of Holders -- Asset Sales;"
(f) loans or advances to officers, directors and employees of the
Company or any of its Restricted Subsidiaries made in the ordinary course
of business after the date of the initial issuance of the Notes in an
amount not to exceed $1 million in the aggregate at any one time
outstanding; and
(g) other Investments that do not exceed $4 million in the aggregate
at any one time outstanding.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
provided that: (i) the principal amount of such Permitted Refinancing
Indebtedness does not exceed the principal amount of the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded plus the lesser of
the amount of any premium required to be paid in connection with such
refinancings pursuant to the terms of such indebtedness or the amount of any
premium reasonably determined by the Company as necessary to accomplish such
refinancing (plus the amount of reasonable expenses incurred in connection
therewith); (ii) such Permitted Refinancing Indebtedness has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Restricted Subsidiary of the Company that is the obligor
on the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means any individual, corporation, limited or general partnership,
joint venture, association, joint stock company, trust unincorporated
organization or government or any agency or political subdivision thereof.
"Polytek" means AFA Polytek B.V. and its successors.
"Polytek Credit Agreement" means the credit agreement dated July 24, 1997
between Polytek and ABN AMRO Bank NV, as such credit agreement may be amended,
restated, supplemented, refinanced or otherwise modified from time to time.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, partnership interests, participation, rights in or other equivalents
(however designated) of such Person's preferred or preference 82
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stock, whether now outstanding or issued after the Closing Date, and including,
without limitation, all classes and series of preferred or preference stock of
such Person.
"Qualified Equity Interest" means any Qualified Stock and all warrants,
options or other rights to acquire Qualified Stock (but excluding any debt
security that is convertible into or exchangeable for Capital Stock).
"Qualified Stock" of any Person means any and all Capital Stock of such
Person, other than Disqualified Stock.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary. Restricted Subsidiaries shall always include AFA Products, Inc., AFA
Polytek B.V., Continental Sprayers International, Inc., Continental Acquisition
(U.K.) Limited and Continental Sprayers de Mexico S.A. de C.V.
"Senior Bank Debt" means the Obligations outstanding under the Credit
Agreement.
"Senior Indebtedness" means (i) the Senior Bank Debt and (ii) all other
Indebtedness of the Company for borrowed money, including principal, premium, if
any, and interest on such Indebtedness, unless the instrument under which such
Indebtedness of the Company for money borrowed is created, incurred, assumed or
guaranteed expressly provides that such Indebtedness for money borrowed is not
senior or superior in right of payment to the Notes, and all renewals,
extensions, modifications, amendments, restatements, or refinancings thereof.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
will not include (i) Indebtedness evidenced by the Notes, (ii) Indebtedness of
the Company that is expressly subordinated in right of payment to any Senior
Indebtedness of the Company or the Notes, (iii) Indebtedness of the Company that
by operation of law is subordinate to any general unsecured obligations of the
Company, (iv) Indebtedness of the Company to the extent incurred in violation of
the Indenture, (v) any liability for federal, state or local taxes or other
taxes, owed or owing by the Company, (vi) trade account payables owed or owing
by the Company, (vii) amounts owed by the Company for compensation to employees
or for services rendered to the Company, (viii) Indebtedness of the Company to
any Restricted Subsidiary or any other Affiliate of the Company, (ix)
Disqualified Stock of the Company and (x) Indebtedness which when incurred and
without respect to any election under Section 1111(b) of Title 11 of the United
States Code is without recourse to the Company or any Restricted Subsidiary.
"Significant Subsidiary" means any Restricted Subsidiary of the Company
that, together with its Subsidiaries, (a) for the most recent fiscal year of the
Company, accounted for more than 10% of the consolidated net sales of the
Company and its Subsidiaries, (b) as of the end of such fiscal year, was the
owner of more than 10% of the consolidated assets of the Company and its
Restricted Subsidiaries, in the case of either (a) or (b), as set forth on the
most recently available consolidated financial statements of the Company for
such fiscal year or (c) was organized or acquired after the beginning of such
fiscal year and would have been a Significant Subsidiary if it had been owned
during such entire fiscal year.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable and, when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness or any installment of interest
thereon is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Subsidiary Guarantor that is subordinated in right of payment to the Notes or
the Subsidiary Guarantees issued by such Subsidiary Guarantor, as the case may
be.
"Subordinated Parent Notes" means the unsecured subordinated note issued by
Parent on February 4, 1998 to AFA International Limited in the principal amount
of $1,000,000 (plus interest on such principal amount accrued from July 29, 1997
through February 4, 1998), the unsecured subordinated note issued by Parent on
February 4, 1998 to Waldock Limited in the principal amount of $2,000,000 (plus
interest on such principal amount accrued from July 29, 1997 through February 4,
1998) and the unsecured subordinated notes issued by Parent on the Closing Date
to AFA International Limited and Ariel Gratch in the aggregate principal amount
of $2,500,000.
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"Subsidiary" means any Person a majority of the equity ownership or Voting
Stock of which is at the time owned, directly or indirectly, by the Company
and/or one or more other Subsidiaries of the Company.
"Subsidiary Guarantors" means, collectively, all Restricted Subsidiaries
that are incorporated in the United States or a State thereof or the District of
Columbia; provided that any Person that becomes an Unrestricted Subsidiary in
compliance with the "Restricted Payments" covenant shall not be included in
"Subsidiary Guarantors" after becoming an Unrestricted Subsidiary.
"Unrestricted Subsidiary" means (a) any Subsidiary that is designated by
the Board of Directors of the Company as an Unrestricted Subsidiary in
accordance with the "Unrestricted Subsidiaries" covenant and (b) any Subsidiary
of an Unrestricted Subsidiary.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the Holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes has, or might have, voting power by reason of the
happening of any contingency).
"Weighted Average Life" means, as of the date of determination with respect
to any Indebtedness or Disqualified Stock, the quotient obtained by dividing (a)
the sum of the products of (i) the number of years from the date of
determination to the date or dates of each successive scheduled principal or
liquidation value payment of such Indebtedness or Disqualified Stock,
respectively, multiplied by (ii) the amount of each such principal or
liquidation value payment by (b) the sum of all such principal or liquidation
value payments.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary, all
of the outstanding voting securities (other than directors' qualifying shares or
shares of foreign Restricted Subsidiaries required to be owned by foreign
nationals pursuant to applicable law) of which are owned, directly or
indirectly, by the Company.
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DESCRIPTION OF OTHER INDEBTEDNESS
REVOLVING CREDIT FACILITY
General. The Company is party to a Revolving Credit Facility with
NationsCredit Commercial Corporation, as Collateral Agent and Initial Issuing
Bank ("NationsCredit"), and other lending institutions party thereto (the
"Lenders") providing for $30.0 million of borrowings from time to time.
The following is a summary of the general terms of the Revolving Credit
Facility.
Letters of Credit Subfacility. The Revolving Credit Facility includes a
subfacility for the issuance of letters of credit up to a maximum aggregate
amount at any one time outstanding not to exceed $2,000,000.
Security. Indebtedness of the Company under the Revolving Credit Facility
is guaranteed by the Parent and by each of the Company's domestic subsidiaries
and is secured by: (i) a first priority security interest in substantially all
of the assets and properties (including, without limitation, accounts
receivable, inventory, real property, machinery, equipment, contracts and
contract rights) of the Company and each of its domestic subsidiaries, (ii) a
first priority security interest in the trademarks, copyrights, patents, license
agreements and general intangibles of the Company and each of its domestic
subsidiaries and (iii) a first priority security interest in all of the capital
stock of the Company and of each of the Company's domestic subsidiaries and a
first priority security interest in 66% of the voting common stock of the
Company's foreign subsidiaries.
Interest. Indebtedness under the Revolving Credit Facility bears interest
at a floating rate based (at the Company's option) upon (i) LIBOR for one month,
plus an Applicable Margin ranging from 1.75% to 2.25% or (ii) an Alternate Base
Rate plus an Applicable Margin as described in the Revolving Credit Facility.
Borrowing Base. Advances under the Revolving Credit Facility are
calculated using a Borrowing Base equal to the sum of 85% of eligible accounts
receivable and 60% of eligible inventory. From the date of consummation of the
Offering through April 30, 1999 the Revolving Credit Facility will allow for
additional availability of up to $5.0 million in excess of the Borrowing Base
(but not to exceed the total facility amount).
Maturity. The Revolving Credit Facility will mature on February 4, 2003.
Covenants. The Revolving Credit Facility requires the Company to meet
certain financial tests, including a minimum EBITDA test, a Total Debt Service
Coverage Ratio and a Leverage Ratio (as those terms are defined in the Revolving
Credit Facility). The Revolving Credit Facility also contains covenants that
include, without limitation; (i) required delivery of financial statements,
other reports and borrowing base certificates; (ii) notices of default, material
litigation and material governmental and environmental proceedings; (iii)
compliance with laws; (iv) payment of taxes; (v) maintenance of insurance; (vi)
limitation on liens; (vii) limitations on mergers, consolidations and sales of
assets; (viii) limitations on incurrence of debt; (ix) limitations on dividends
and stock redemptions and the redemption and/or prepayment of other debt; (x)
limitations on investments; (xi) ERISA (as defined therein) matters; (xii)
limitations on transactions with affiliates; and (xiii) limitations on capital
expenditures.
Events of Default; Remedies. The Revolving Credit Facility contains
customary events of default, including, without limitation, (i) the non-payment
of principal, interest or other amounts, (ii) violation of covenants, (iii)
inaccuracy of representations and warranties, (iv) cross-defaults to certain
other indebtedness and material agreements (including the Notes), (v) certain
events of bankruptcy and insolvency, (vi) ERISA, (vii) actual or asserted
invalidity of any loan documents or security interests, and (viii) changes in
control of the ownership of the Company or of the voting control of parent. If
any such event of default occurs, the Administrative Agent is entitled, on
behalf of the Lenders, to take all actions permitted to be taken by a secured
creditor under the Uniform Commercial Code and to accelerate the amounts due
under the Revolving Credit Facility and may require all such amounts outstanding
thereunder to be immediately paid in full.
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POLYTEK FACILITY
General. On July 24, 1997, Polytek entered into the Polytek Facilities
with ABN AMRO Bank N.V. ("Amro"). The Polytek Facilities consist of $5.5 million
aggregate principal amount of term loans, which include a $4.3 million 10-year
loan subfacility ("Ten-Year Loan") and a $1.2 million 20-year loan subfacility
("Twenty-Year Loan"), as well as a $5.5 million overdraft facility (the
"Overdraft Facility"). Borrowings under the Polytek Facilities are denominated
in Dutch guilders. The facilities amounts set forth above are U.S. dollar
equivalents of guilder amounts based on the Dutch guilder/U.S. dollar exchange
rate in effect on December 31, 1997.
Security. Indebtedness of Polytek under the Polytek Facilities is secured
by two mortgages on Polytek's manufacturing facility in The Netherlands with a
combined principal amount of $5.0 million.
Interest. Borrowings under the Polytek Facilities bear interest at the
following rates: (a) with respect to the Ten-Year Loan, at 6.10% per annum; (b)
with respect to the Twenty-Year Loan, at 5.50% per annum; and (c) with respect
to the Overdraft Facility, at a minimum base rate of 3.25% plus a margin of
1.5%.
Maturity. The Ten-Year Loan will mature on January 11, 2007 and is payable
in quarterly installments. The Twenty-Year Loan will mature on January 1, 2012
and is payable in annual installments.
Prepayments. Polytek is entitled to make early repayments on the Polytek
Facilities subject to the satisfaction of certain conditions described therein.
Early repayments are applied against amounts outstanding in inverse order of
their maturity dates.
Covenants. The Polytek Facilities contain covenants, including, without
limitation (i) required delivery of financial statements and other reports; (ii)
limitations on transfers of or liens on its assets; (iii) limitations on
guarantees in favor of associated companies; (iv) minimum net worth
requirements; and (v) limitations on dividends.
Events of Default; Remedies. The Polytek Facilities contain customary
events of default, including, without limitation, (i) the non-payment of
principal, interest or other amounts, (ii) the violation of covenants, (iii)
inaccuracy of information provided to Amro in connection with the Polytek
Facilities, (iv) cross-defaults to other indebtedness, financing arrangements or
guarantees, (iv) certain events of bankruptcy and insolvency, (v) actual or
asserted invalidity of any loan documents or security interests, and (vi)
changes in control of the ownership of Polytek. If any such event of default
occurs, Amro is entitled to demand repayment of the Polytek Facilities and costs
for losses sustained and income lost by Amro as a result of such event of
default.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion summarizes certain of the material U.S.
federal income tax aspects of the acquisition, ownership and disposition of the
New Notes. This discussion is a summary for general information only and does
not consider all aspects of U.S. federal income taxation that may be relevant to
the purchase, ownership and disposition of the New Notes by a prospective
investor in light of such investor's personal circumstances. This discussion
also does not address the U.S. federal income tax consequences of ownership of
Exchange Notes not held as capital assets within the meaning of Section 1221 of
the U.S. Internal Revenue Code of 1986, as amended (the "Code"), or the U.S.
federal income tax consequences to investors subject to special treatment under
the U.S. federal income tax laws, such as dealers in securities or foreign
currency, tax-exempt entities, financial institutions, insurance companies,
persons that hold the New Notes as part of a "straddle," a "hedge" or a
"conversion transaction," persons that have a "functional currency" other than
the U.S. dollar, and investors in pass-through entities. This discussion is
generally limited to the tax consequences to holders that purchased Old Notes
for cash at original issuance at the "issue price" and are exchanging those Old
Notes for New Notes pursuant to the Exchange Offer." 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 for money (excluding sales to bond houses, brokers, or
similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers). In addition, this discussion does not describe
any tax consequences arising under U.S. federal gift and estate taxes (except to
the limited extent set forth below under "Non-U.S. Holders") or under the tax
laws of any state, local or foreign jurisdiction.
This discussion is based upon the Code, existing regulations thereunder,
and current administrative rulings and court decisions. All of the foregoing is
subject to change, possibly on a retroactive basis, and any such change could
affect the continuing validity of this discussion.
U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a Holder of a New Note that is (i) a citizen or
resident (as defined in Section 7701(b)(l) 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 U.S. federal income tax regardless of the 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 United States
persons have the authority to control all of its substantial decisions (a "U.S.
Holder"). Certain U.S. federal income tax consequences relevant to a holder
other than a U.S. Holder are discussed separately below under the heading
"Non-U.S. Holders."
Exchange Offer
The exchange of Old Notes for New Notes pursuant to the Exchange Offer may
be disregarded for U.S. federal income tax purposes. As a result, there should
be no U.S. federal income tax consequences to U.S. Holders exchanging their Old
Notes for New Notes pursuant to the Exchange Offer. Moreover, even if the
exchange were not to be disregarded for U.S. federal income tax purposes, it
should qualify as a tax free recapitalization exchange under Section 368 of the
Code. In that event, U.S. Holders would not recognize any gain or loss and would
have the same tax basis and holding period in the New Notes they received that
they had in the Old Notes they exchanged.
Stated Interest
Interest on a New Note should be taxable to a U.S. Holder as ordinary
interest income at the time it accrues or is received in accordance with such
holder's method of accounting for U.S. federal income tax purposes.
Sale, Exchange or Redemption of the New Notes
Upon the sale, exchange or redemption of a New Note, a U.S. Holder
generally will recognize gain or loss equal to the difference between (i) the
amount realized on the disposition (other than amounts attributable to
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accrued interest not yet taken into income) and (ii) the U.S. Holder's tax basis
in the New Note. A U.S. Holder's tax basis in a New Note generally will equal
the cost to the U.S. Holder of the Old Note exchanged for that New Note. Such
gain or loss will generally constitute capital gain or loss.
Recently enacted legislation revised the holding period and tax rates
applicable to certain capital gains. For non-corporate Holders, long term
capital gain from the sale or exchange of a New Note is taxed at different rates
depending upon whether the holding period is more than one year but not more
than 18 months. U.S. Holders are advised to consult their tax advisors
concerning the new provisions on the taxation of capital gains.
Backup Withholding and Information Reporting
Under the Code, a U.S. Holder of a New Note may be subject, under certain
circumstances, to information reporting and/or backup withholding at a 31% rate
on cash payments of interest on, or the gross proceeds from disposition of, the
New Note thereof. This withholding applies only if a U.S. Holder (i) fails to
furnish its social security or other taxpayer identification number ("TIN")
within a reasonable time after it is requested, (ii) furnishes an incorrect TIN,
(iii) fails to report interest or dividends properly, or (iv) fails, under
certain circumstances, to provide a certified statement, signed under penalty of
perjury, that the TIN provided is a correct number and that the Holder is not
subject to backup withholding. Any amount withheld from a payment to a U.S.
Holder under the backup withholding rules is allowable as a credit (and may
entitle such holder to a refund) against such holder's U.S. federal income tax
liability, provided that the required information is furnished to the IRS.
Certain persons are exempt from backup withholding, including corporations and
financial institutions. Holders of Notes should consult their tax advisors as to
their qualification for an exemption from backup withholding and the procedure
for obtaining such an exemption.
NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a Holder of a New Note that is not a U.S. Holder (a
"Non-U.S. Holder"). This discussion does not consider all aspects of U.S.
federal income and estate taxation that may be relevant to the purchase,
ownership or disposition of New Notes by Non-U.S. Holder in light of such
holder's particular circumstances, including holding New Notes through a
partnership. For example, persons who are partners in foreign partnerships or
beneficiaries of foreign trusts or estates and who are subject to U.S. federal
income tax because of their own status, such as U.S. residents or foreign
persons engaged in a trade or business in the United States, may be subject to
U.S. federal income tax even though the foreign partnership, trust or estate is
not itself subject to U.S. Federal income tax on the disposition of its New
Notes. In addition, persons who hold New Notes through hybrid entities (i.e.,
entities that are fiscally transparent for U.S. tax purposes but not for foreign
law purposes) may not be entitled to any applicable treaty benefits. For
purposes of the following discussion, interest and gain on the sale, exchange or
other disposition of a New Note will be considered "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 resident of a country with
which the United States has an income tax treaty, attributable to a U.S.
permanent establishment (or to a fixed base) in the United States.
Stated Interest
Generally, any interest paid to a Non-U.S. Holder of a New Note that is not
U.S. trade or business income will not be subject to U.S. federal income tax if
the interest qualifies as "portfolio interest." Interest on the New Notes will
qualify as portfolio interest if the Non-U.S. Holder (i) does not actually or
constructively own 10% or more of the total voting power of all voting stock of
the Company; (ii) is not a "controlled foreign corporation" with respect to
which the Company is a "related person" within the meaning of the Code; (iii) is
not a bank extending credit pursuant to a loan agreement entered into in the
ordinary course of its trade or business; and (iv) the beneficial owner, under
penalty of perjury, certifies that it is not a U.S. person and such certificate
provides the beneficial owner's name and address.
88
<PAGE> 94
The gross amount of interest paid to a Non-U.S. Holder of interest that
does not qualify for the portfolio interest exception and that is not U.S. trade
or business income will be subject to U.S. withholding tax at the rate of 30%,
unless a U.S. income tax treaty reduces or eliminates withholding. U.S. trade or
business income is taxed on a net basis at regular U.S. federal income tax rates
rather than the 30% gross rate. 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 IRS designates), as applicable, prior to the payment of
interest. These forms must be periodically updated. Under newly-finalized
regulations, not currently in effect, the Forms 1001 and 4224 will be replaced
by Form W-8. Also under these newly-finalized regulations, a Non-U.S. Holder who
is claiming the benefits of a tax treaty may be required to obtain a U.S.
taxpayer identification number and to provide certain documentary evidence
issued by foreign governmental authorities to prove residence in the foreign
country. Certain special procedures are provided in these newly-finalized
regulations for payments through qualified intermediaries. These newly-finalized
regulations are effective January 1, 2000. However, valid withholding
certificates that are held on December 31, 1999 (including Forms 1001, 4224 and
W-8) will remain valid until the earlier of December 31, 2000 or the expiration
date of the certificate under the rules currently in effect.
NON-U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE
APPLICATION OF THE CERTIFICATION REQUIREMENTS IN THE NEWLY-FINALIZED
REGULATIONS.
Sale, Exchange or Redemption of New Notes
Except as described below and subject to the discussion of backup
withholding above, any gain realized by a Non-U.S. Holder on the sale, exchange
or redemption of a New Note generally will not be subject to U.S. federal income
tax, unless (i) the gain is U.S. trade or business income, (ii) subject to
certain exceptions, the Non-U.S. Holder is an individual who holds the New Note
as a capital asset and is present in the United States for 183 days or more
during the taxable year of the disposition or (iii) the Non-U.S. Holder is
subject to rules applicable to certain former citizens and residents of the
United States.
Federal Estate Tax
New Notes held (or treated as held) by an individual who is a Non-U.S.
Holder at the time of his or her death will not be subject to U.S. federal
estate tax, provided the individual did not actually or constructively own 10%
or more of the total voting power of all voting stock of the Company and
provided income on the New Notes was not U.S. trade or business income.
Information Reporting and Backup Withholding
The Company must report annually to the IRS and to each Non-U.S. Holder any
interest that is subject to U.S. withholding tax or that is exempt from
withholding pursuant to a tax treaty or the portfolio interest exception. Copies
of these information returns also may 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. In the case of interest (including OID) paid to
Non-U.S. Holders, information reporting and backup withholding (at a rate of
31%) does not apply to such payments if the holder makes the requisite
certification or has otherwise established an exemption (provided that neither
the payor nor its paying agent has actual knowledge that the holder is a U.S.
Holder or that the conditions of any other exemption are not, in fact,
satisfied).
Backup withholding and information reporting likewise do not apply to the
Company's payments of principal on the New Notes to a Non-U.S. Holder, if the
holder certifies as to its non-U.S. status under penalty of perjury or otherwise
establishes an exemption (provided that neither the Company nor its paying agent
has actual knowledge that the holder is a U.S. Holder or that the conditions of
any other exemption are not, in fact, satisfied).
The payment of the proceeds from the disposition of New Notes to or through
the U.S. office of any broker, U.S. or foreign, are subject to information
reporting and possible backup withholding unless the owner certifies as to its
non-U.S. status under penalty of perjury or otherwise establishes an exemption,
provided that
89
<PAGE> 95
the broker does not have actual knowledge that the holder is a U.S. Holder or
that the conditions of any other exemption are not, in fact, satisfied.
The payment of the proceeds from the disposition of a New Note to or
through a non-U.S. office of a non-U.S. broker that is not a "U.S. related
person" will not be subject to information reporting or backup withholding. For
this purpose, a "U.S. related person" is (i) a "controlled foreign corporation"
for U.S. federal income tax purposes, (ii) a foreign person 50% or more of whose
gross income from all sources for the three-year period ending with the close of
its taxable year preceding the payment (or for such part of the period that the
broker has been in existence) is derived from activities that are effectively
connected with the conduct of a U.S. trade or business, or, (iii) a foreign
partnership with certain connections to the U.S.
In the case of the payment of proceeds from the disposition of New 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 regulations require information reporting 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. Backup
withholding does not apply to payments made through foreign offices of a broker
that is not a U.S. person or a U.S. related person (absent actual knowledge that
the payee is a U.S. Holder).
Any amounts withheld from a payment to a Non-U.S. Holder under the backup
withholding rules will be allowed as a refund or a credit against such Non-U.S.
Holder's U.S. federal income tax liability, provided that the requisite
procedures are followed.
THE PRECEDING DISCUSSION OF CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY,
EACH INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR AS TO PARTICULAR TAX
CONSEQUENCES TO IT OF PURCHASING, HOLDING AND DISPOSING OF NEW NOTES, INCLUDING
THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY
PROPOSED CHANGES IN APPLICABLE LAWS.
90
<PAGE> 96
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that, starting on the Expiration Date
and ending on the close of business one year after the Expiration Date, it will
make this Prospectus, as amended or supplemented, available to any broker-dealer
for use in connection with any such resale. In addition, until ,
1998, all dealers effecting transactions in the New Notes may be required to
deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices of negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the 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 commission
or concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
LEGAL MATTERS
The validity of the New Notes will be passed upon for the Company by Weil,
Gotshal & Manges LLP, New York, New York.
EXPERTS
The balance sheet of Indesco International, Inc. as of December 31, 1997
and the financial statements of AFA Holdings Co. and Subsidiaries as of December
31, 1997 and for the five-month period then ended, WTI, Inc. and Subsidiaries as
of July 31, 1997 and December 31, 1996 and for the seven-month period ended July
31, 1997 and for the years ended December 31, 1996 and 1995, and of Continental
Sprayers and Affiliates as of May 31, 1997 and 1996 and for each of the three
years in the period ended May 31, 1997, included elsewhere in this Prospectus,
have been included herein in reliance on the reports of Coopers & Lybrand
L.L.P., given on the authority of that firm as experts in accounting and
auditing.
91
<PAGE> 97
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
AFA HOLDINGS CO. AND SUBSIDIARIES
Report of Independent Accountants....................... F-2
Combined Balance Sheet as of December 31, 1997.......... F-3
Combined Statement of Operations for the five month
period ended December 31, 1997....................... F-4
Combined Statement of Stockholders' Equity for the five
month period ended December 31, 1997................. F-5
Combined Statement of Cash Flows for the five month
period ended December 31, 1997....................... F-6
Notes to Combined Financial Statements.................. F-7
WTI INC. AND SUBSIDIARIES
Report of Independent Accountants....................... F-20
Consolidated Balance Sheets as of July 31, 1997 and
December 31, 1996.................................... F-21
Consolidated Statements of Operations for the seven
month period ended July 31, 1997 and the years ended
December 31, 1996 and 1995........................... F-22
Consolidated Statements of Stockholders' Equity for the
seven months ended July 31, 1997 and for the years
ended December 31, 1996 and 1995..................... F-23
Consolidated Statements of Cash Flows for the seven
month period ended July 31, 1997 and for the years
ended December 31, 1996 and 1995..................... F-24
Notes to Consolidated Financial Statements.............. F-25
CONTINENTAL SPRAYERS AND AFFILIATES
Report of Independent Accountants....................... F-43
Combined Balance Sheets as of May 31, 1997 and 1996..... F-44
Combined Statements of Operations for the years ended
May 31, 1997, 1996 and 1995.......................... F-45
Combined Statements of Divisional Equity for the years
ended May 31, 1997, 1996 and 1995.................... F-46
Combined Statements of Cash Flows for the years ended
May 31, 1997, 1996 and 1995.......................... F-47
Notes to Combined Financial Statements.................. F-48
CONTINENTAL SPRAYERS AND AFFILIATES
Unaudited Combined Balance Sheet as of December 31,
1997................................................. F-52
Unaudited Combined Statements of Operations for the
seven months ended December 31, 1997 and 1996........ F-53
Unaudited Statements of Cash Flows for the seven months
ended December 31, 1997 and 1996..................... F-54
Notes to Financial Statements........................... F-55
INDESCO INTERNATIONAL, INC.
Report of Independent Accountants....................... F-57
Balance Sheet as of December 31, 1997................... F-58
Notes to Financial Statement............................ F-59
</TABLE>
F-1
<PAGE> 98
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
AFA Holdings Co. and Subsidiaries:
We have audited the accompanying combined balance sheet of AFA Holdings Co.
and Subsidiaries (the "Company," see Note 1) as of December 31, 1997, and the
related combined statements of operations, stockholders' equity, and cash flows
for the five month period then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of AFA Holdings Co. and
Subsidiaries as of December 31, 1997 and the combined results of their
operations and their cash flows for the five month period then ended, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Charlotte, North Carolina
March 5, 1998.
F-2
<PAGE> 99
AFA HOLDINGS CO. AND SUBSIDIARIES
COMBINED BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS:
Current assets:
Cash and cash equivalents............................................................................. $ 1,051
Accounts receivable, net of allowances of $28......................................................... 6,821
Inventories........................................................................................... 9,918
Prepaid expenses and other............................................................................ 605
---------
Total current assets.......................................................................... 18,395
Property, plant and equipment........................................................................... 28,009
Excess of cost over fair value of net assets acquired, net.............................................. 6,365
Patents and other intangibles, net...................................................................... 5,834
Deferred financing costs................................................................................ 1,628
Other assets............................................................................................ 656
---------
Total assets.................................................................................. $ 60,887
=========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Current portion of long-term debt..................................................................... $ 2,379
Notes payable......................................................................................... 4,762
Accounts and drafts payable........................................................................... 2,410
Other accrued expenses................................................................................ 3,334
---------
Total current liabilities..................................................................... 12,885
Subordinated debt....................................................................................... 3,000
Long-term debt.......................................................................................... 41,154
Deferred income taxes................................................................................... 632
---------
Total liabilities............................................................................. 57,671
---------
Commitments and contingencies
Stockholders' equity:
Common stock.......................................................................................... 242
Additional paid-in capital............................................................................ 4,320
Accumulated deficit................................................................................... (1,374)
Cumulative translation adjustment..................................................................... 28
---------
Total stockholders' equity.................................................................... 3,216
---------
Total liabilities and stockholders' equity.................................................... $ 60,887
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 100
AFA HOLDINGS CO. AND SUBSIDIARIES
COMBINED STATEMENT OF OPERATIONS
FOR THE FIVE MONTH PERIOD ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Net sales............................................................................................... $ 20,108
Cost of sales........................................................................................... 16,595
---------
Gross profit.................................................................................. 3,513
Selling, general and administrative expenses............................................................ 2,862
---------
Income from operations........................................................................ 651
Other expense (income):
Interest.............................................................................................. 2,231
Other................................................................................................. (54)
---------
Total other expense........................................................................... 2,177
---------
Loss before income tax benefit.......................................................................... (1,526)
Income tax benefit...................................................................................... (152)
---------
Net loss...................................................................................... $ (1,374)
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 101
AFA HOLDINGS CO. AND SUBSIDIARIES
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE FIVE MONTH PERIOD ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
------------------ ADDITIONAL CUMULATIVE TOTAL
AFA PAID-IN ACCUMULATED TRANSLATION STOCKHOLDERS'
POLYTEK HOLDINGS CAPITAL DEFICIT ADJUSTMENT EQUITY
------- -------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, August 1, 1997............ $242 $-- $4,320 $ 4,562
Net loss........................... $(1,374) (1,374)
Translation adjustment............. $28 28
---- -- ------ ------- --- -------
Balance, December 31, 1997......... $242 $-- $4,320 $(1,374) $28 $ 3,216
==== == ====== ======= === =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 102
AFA HOLDINGS CO. AND SUBSIDIARIES
COMBINED STATEMENT OF CASH FLOWS
FOR THE FIVE MONTH PERIOD ENDED DECEMBER 31, 1997
(IN THOUSANDS)
Cash flows from operating
activities:
Net loss.........................($1,374)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation.................. 1,605
Amortization.................. 256
Deferred income taxes......... (180)
Changes in assets and
liabilities:
Accounts receivable......... (248)
Inventories................. 1,434
Prepaid expenses and
other...................... 31
Accounts and drafts
payable.................... (600)
Other accrued expenses...... 524
----
Net cash provided by
operating activities..... 1,448
----
Cash flows from investing
activities:
Expenditures for property, plant
and equipment................. (661)
----
Net cash used in
investing activities..... (661)
----
Cash flows from financing
activities:
Repayment of debt................ (770)
----
Net cash used in
financing activities..... (770)
----
Effect of exchange rate changes on
cash............................. 34
----
Net increase in cash and cash
equivalents...................... 51
Cash and cash equivalents at
beginning of period.............. 1,000
----
Cash and cash equivalents
at end of period......... $1,051
====
Cash paid during the period for:
Interest......................... $1,378
Income taxes..................... 0
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 103
AFA HOLDINGS CO.
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)
1. ORGANIZATION:
AFA HOLDINGS CO.
AFA Holdings Co. ("AFA") manufactures and sells finger activated liquid
dispensing devices ("trigger sprayers"). AFA was formed in July 1997 to acquire,
through a wholly-owned subsidiary, the assets and liabilities of AFA Products,
Inc. ("Products"), located in Forest City, North Carolina. Concurrent with this
transaction, Dejanu B.V., acquired the outstanding capital stock of AFA Polytek
B.V. ("Polytek") based in The Netherlands. AFA and Polytek are collectively
referred to herein as the "Company." AFA and Polytek were formerly operating
subsidiaries of W.T.I., Inc. ("WTI").
The acquisition of Products for an aggregate purchase price of $46,938
(including expenses of $1,926), and the acquisition of Polytek for approximately
$800 and refinancing of debt of approximately $7,900, resulted in the following
financial position:
<TABLE>
<CAPTION>
ASSETS: LIABILITIES AND EQUITY:
<S> <C> <C> <C>
Cash and receivables........... $7,526 Current liabilities............ $5,620
Inventories.................... 11,223 Bank debt...................... 48,771
Fixed assets................... 28,646 Subordinated debt.............. 3,000
Patents........................ 6,000 Other liabilities.............. 942
Other assets................... 2,885 Equity......................... 4,562
Goodwill....................... 6,615
------- -------
$62,895 $62,895
======= =======
</TABLE>
The WTI businesses were acquired through U.S. dollar bank debt of $38,000,
subordinated debt from shareholders of $3,000, an equity investment of $3,752,
issuance of warrants with a value of $810 to various lenders and borrowings
under lines of credit.
The acquisitions have been accounted for using the purchase method of
accounting and, accordingly, the purchase price has been allocated to the assets
purchased and liabilities assumed based upon the fair values at the date of
acquisition.
ACQUISITION OF CONTINENTAL SPRAYERS AND AFFILIATES
Effective February 1, 1998, AFA acquired certain assets and liabilities of
Continental Sprayers and Affiliates ("CSI"), a division of Contico
International, Inc. CSI also manufactures and sells trigger sprayers. AFA
acquired CSI for $92,947 in cash, paid outstanding debt of Products of $39,567
and paid fees of $4,980. Such amounts were paid through the issuance of term
loans of $135,000 and borrowings under a revolving credit facility.
The assets acquired and liabilities assumed of CSI based on the December
31, 1997 value thereof are as follows:
<TABLE>
<S> <C>
Cash and receivables....................................... $ 767
Inventory.................................................. 5,309
Fixed assets............................................... 27,789
Other assets............................................... 1,135
Goodwill................................................... 60,639
Payables................................................... (2,692)
-------
Purchase price................................... $92,947
=======
</TABLE>
F-7
<PAGE> 104
AFA HOLDINGS CO.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
The acquisitions have been accounted for using the purchase method of
accounting. The Company has increased the value of inventory by $850 in
accordance with Accounting Principles Board Opinion No. 16 and has recorded
fixed assets and identifiable intangibles at their net historical book value,
pending completion of appraisals. Differences, if any, between these amounts and
the amounts resulting from appraisals and valuations of these assets, which have
not yet been completed, will be reflected as adjustments to goodwill, which may
increase or decrease related depreciation and amortization charges.
In connection with the acquisition of the capital stock of Polytek, AFA
agreed to pay to the transferors, AFA International Limited and Warcop
Investments Ltd. (a company affiliated with Mr. Schneider), as consideration for
such capital stock, an aggregate of $10.8 million plus interest thereon at the
rate of 7% per annum, from the date of acquisition. Payment of such amount will
be made concurrently with the consummation of the Offering by the issuance of
AFA International Limited and Warcop Investments Ltd. of 820,500 shares and
273,500 shares, respectively, of a new class of Preferred Stock of the Parent
having a liquidation and redemption value of $10 per share and providing for
dividends at an annual rate of 7% of the liquidation value thereof.
Condensed pro forma unaudited combined results of operations of AFA, CSI
and Polytek for the years ended December 31, 1997 and 1996 as if the
transactions had occurred on January 1, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Net sales............................................ $114,531 $113,139
======== ========
Net income........................................... $ 1,424 $ 493
======== ========
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of AFA and Polytek
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
on the first-in, first-out (FIFO) basis.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided
primarily on a straight-line basis over the estimated useful lives of the
assets. Maintenance and repairs are charged to income as incurred and
betterments that extend the useful life are capitalized. Upon retirement or
sale, the cost and accumulated depreciation are eliminated from the respective
accounts, and the gain or loss, if any, is included in income.
If events or changes in circumstances indicate that the carrying amount of
a long-lived asset may not be recoverable, the Company estimates the future cash
flows expected to result from the use of the asset and its eventual disposition.
If the sum of the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the long-lived asset, an impairment
loss is recognized. To date, no impairment losses have been recognized.
RESEARCH AND DEVELOPMENT
The cost of research and development expenditures is expensed as incurred.
F-8
<PAGE> 105
AFA HOLDINGS CO.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
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. Significant
estimates in the financial statements relate to the allowance for uncollectible
accounts receivable, the allowance for slow-moving and obsolete inventories, the
allowance for sales returns and the valuation allowance for deferred tax assets.
INCOME TAXES
The Company uses the asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future. Such deferred income tax asset and liability computations are based
on enacted tax laws and rates applicable to periods in which the differences are
expected to affect taxable income. A valuation allowance is established when
necessary to reduce deferred tax assets to the amount expected to be realized.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of Polytek are translated at exchange rates in
effect at the balance sheet date ($.4935 per guilder at December 31, 1997).
Items of revenue and expense are translated at average exchange rates during the
period ($.4990 per guilder for the five months of 1997 presented). Translation
adjustments, resulting from translating Polytek's financial statements into
dollars, are reported in the equity section of the accompanying balance sheet
under the caption "cumulative translation adjustment."
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED
Net excess of cost over fair value of net assets acquired is being
amortized on a straight-line basis over a period of thirty years. Accumulated
amortization was $90 as of December 31, 1997. The Company assesses the
recoverability of this intangible asset by determining whether the amortization
of the goodwill balance over its remaining life can be recovered through
forecasted future operations. Impairment is evaluated by comparing future cash
flows (undiscounted and without interest charges) expected to result from the
use or sale of the asset and its eventual disposition, to the carrying amount of
the asset. To date, no impairment losses have been recognized.
PATENTS AND OTHER INTANGIBLE ASSETS
The cost of patents acquired and other intangible assets, consisting
primarily of an exclusive sales agreement and royalty agreements, are being
amortized using the straight-line method over the estimated useful lives of
fifteen years. Accumulated amortization was $166 at December 31, 1997.
DEFERRED FINANCING FEE
Costs incurred to obtain financing are amortized using the straight-line
method (which approximates the interest method) over the term of the related
debt.
F-9
<PAGE> 106
AFA HOLDINGS CO.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
DEFERRED TOOLING
From time to time, the Company purchases certain molds and equipment
(tooling) to meet specific customer product requirements. These tooling costs
are capitalized by the Company and are amortized into operations over the
estimated life of the sales contract period.
CASH EQUIVALENTS
The Company considers demand deposits and time deposits with original
maturities of three months or less as equivalent to cash.
RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income, is effective for years beginning after December 15, 1997.
This statement requires that an enterprise classify items of other comprehensive
income by their nature in the financial statements and display the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of the balance sheet.
Statement of Financial Accounting Standards No. 131, Disclosure About
Segments of an Enterprise and Related information, is effective for years
beginning after December 15, 1997. This statement requires that a public
business enterprise report financial and descriptive information about its
reportable business segments.
Management of the Company believes that the future adoption of these
statements will not have a significant impact on the Company's combined
financial position, results of operations or cash flows, but will result in
additional disclosure.
3. INVENTORIES:
The components of inventories as of December 31, 1997 are summarized below:
<TABLE>
<S> <C>
Raw material................................................ $2,172
Work-in-process............................................. 3,346
Finished goods.............................................. 4,400
------
$9,918
======
</TABLE>
F-10
<PAGE> 107
AFA HOLDINGS CO.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, summarized by major classification and
estimated useful lives for depreciation purposes, is as follows:
<TABLE>
<CAPTION>
USEFUL DECEMBER 31,
LIVES (YEARS) 1997
------------- ------------
<S> <C> <C>
Land.................................................... $ 1,293
Buildings............................................... 30 - 40 7,940
Machinery and equipment................................. 5 - 7 10,095
Molds................................................... 7 8,469
Furniture and fixtures.................................. 5 - 7 1,582
Vehicles................................................ 5 3
Construction in progress................................ -- 225
-------
29,607
Less accumulated depreciation........................... (1,598)
-------
Property, plant and equipment, net...................... $28,009
=======
</TABLE>
Construction in progress primarily consists of additions and improvements
to buildings, molds and machinery.
5. DEBT:
Debt consists of the following as of December 31, 1997:
<TABLE>
<S> <C>
WORKING CAPITAL BORROWINGS(A):
Working capital line of credit -- dollar denominated,
bearing interest at 9.22% at December 31, 1997......... $ 2,541
Working capital line of credit -- guilder denominated,
bearing interest at 4.75% at December 31, 1997......... 2,221
-------
Total working capital borrowings.................. $ 4,762
=======
LONG-TERM DEBT:
Senior mortgage note -- dollar denominated, bearing
interest at 9.72% at December 31, 1997(b).............. 28,000
Senior mortgage note -- dollar denominated, bearing
interest at 10.97% at December 31, 1997(c)............. 6,000
Senior mortgage note -- dollar denominated, bearing
interest at 11.86% at December 31, 1997(d)............. 4,000
Subordinated note payable -- dollar denominated, bearing
interest at 11.5% at December 31, 1997(e).............. 2,000
Subordinated note payable -- dollar denominated, bearing
interest at 11.5% at December 31, 1997(f).............. 1,000
ABN/AMRO loan -- guilder denominated, bearing interest at
6.1% at December 31, 1997(g)........................... 4,090
Senior mortgage note -- guilder denominated, payable in
quarterly principal installments of $86,363 (175,000
guilders), bearing interest at 5.5% at December 31,
1997(h)................................................ 1,209
Installment notes payable -- guilder denominated, bearing
interest at rates ranging from 7.1% to 7.75%........... 234
-------
46,533
Less current portion........................................ 2,379
-------
Total long-term debt.............................. $44,154
=======
</TABLE>
F-11
<PAGE> 108
AFA HOLDINGS CO.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
(A) WORKING CAPITAL BORROWINGS:
At December 31, 1997, the Company had loan and security agreements (the
"Agreements" or "Term Loans") with a U.S. lender and Dutch bank that provided
for working capital lines of credit, denominated in both dollars and guilders.
Borrowings under the dollar denominated working capital line of credit,
which had a maximum amount of $7,000 were limited to 85% of eligible accounts
receivable (as defined), and 60% of eligible inventories (as defined).
Borrowings under the guilder denominated line of credit had a maximum amount of
11,000 guilders ($5,429 at December 31, 1997.)
Interest payments on the dollar denominated working capital line of credit
are due monthly, beginning September 1, 1997 at a rate of LIBOR plus 3.25%. The
due date of the dollar denominated working capital line of credit is July 29,
2004. The dollar denominated working capital line of credit agreement contained
certain covenants, the most restrictive of which limit capital expenditures, set
forth maximum leverage ratios and set forth minimum debt coverage ratios and
earnings requirements.
Interest payments on the guilder denominated line of credit are due
quarterly. Borrowings under this line of credit are collateralized by a lien on
the facility. This line of credit contains certain prohibitions, the most
significant of which relate to minimum net worth requirements.
LONG-TERM DEBT
(B) TERM LOAN -- TRANCHE A -- DOLLAR DENOMINATED
At December 31, 1997, the Company had a Term Loan payable of $28,000 to a
bank. Quarterly installments of varying amounts are due beginning April 1998
through July 2004. Interest payments are due monthly, beginning September 1,
1997 at a rate of LIBOR plus 3.75%. The Term Loan agreement contained certain
covenants, the most restrictive of which limit capital expenditures, set forth
maximum leverage ratios and set forth minimum debt coverage ratios and earnings
requirements.
(C) TERM LOAN -- TRANCHE B -- DOLLAR DENOMINATED
At December 31, 1997, the Company had a Term Loan of $6,000 to a bank.
Quarterly installments of $1,500 are due beginning July 2003 through July 2004.
The Term Loan agreement contains a clause requiring quarterly payments to begin
upon repayment in full of the Term Loan described in (b) above. Interest
payments are due monthly, beginning September 1, 1997 at a rate of LIBOR plus
5.00%. The Term Loan agreement contains certain covenants, the most restrictive
of which limit capital expenditures, set forth maximum leverage ratios and set
forth minimum debt coverage ratios and earnings requirements.
(D) TERM LOAN -- TRANCHE C -- DOLLAR DENOMINATED
At December 31, 1997, the Company had a Term Loan payable of $4,000 to a
bank. Quarterly installments of $1,000 are due beginning July 2004 through July
2005. The Term Loan agreement contains a clause requiring quarterly payments to
begin upon repayment in full of the Term Loan described in (b) and (c) above.
Interest payments are due monthly, beginning September 1, 1997 at a rate of
LIBOR plus 5.90%. The Term Loan agreement contains certain covenants the most
restrictive of which limit capital expenditures, set forth maximum leverage
ratios and set forth minimum debt coverage ratios and earnings requirements.
Warrants, with a value of $525, were issued in conjunction with execution
of this Term Loan and are recorded as deferred financing costs. Under the terms
of these warrants, the bank was granted the option to purchase 175 shares of
Class B Common Stock at an exercise price of $.01 per share. These warrants
expire on July 29, 2007. No options have been exercised under these warrants as
of December 31, 1997.
F-12
<PAGE> 109
AFA HOLDINGS CO.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
(E) SUBORDINATED NOTE PAYABLE -- DOLLAR DENOMINATED
On July 29, 1997, the Company borrowed $2,000, with interest at 11.5%, from
Waldock Limited, an entity affiliated with a shareholder of AFA. The principal
amount of the loan is due the earlier of July 30, 2005 or the date on which the
Term Loan has been paid in full. In accordance with certain covenants contained
in the Term Loan agreements, interest payments have been deferred. Accrued
interest payable on this obligation amounted to $98.
Warrants, with a value of $285, were issued in conjunction with execution
of this note and are recorded as deferred financing costs. Under the terms of
these warrants, Waldock Limited was granted the option to purchase 95 shares of
Class A Common Stock at an exercise price of $.01 per share. These warrants
expire on July 29, 2007. No options have been exercised under these warrants as
of December 31, 1997.
(F) SUBORDINATED NOTE PAYABLE -- DOLLAR DENOMINATED
On July 29, 1997, the Company borrowed $1,000, with interest at 11.5%, from
AFA International Limited, an entity affiliated with a shareholder of AFA. The
principal amount of the loan is due the earlier of July 30, 2005 or the date on
which the Term Loans have been paid in full. In accordance with certain
covenants contained in the Term Loan agreements, interest payments have been
deferred. Accrued interest payable on this obligation amounted to $49.
(G) ABN/AMRO LOAN
Polytek has a credit facility with the ABN AMRO Bank, The Netherlands. This
credit facility includes a loan of $4,195 (8,500 guilders) requiring quarterly
payments of $105 (213 guilders) through 2007. This note is collateralized by a
lien on the facility. This note contains certain prohibitions, the most
significant of which relate to minimum net worth requirements.
(H) SENIOR MORTGAGE NOTE
In connection with the construction of a manufacturing facility in 1991,
Polytek obtained a 3,500 guilder mortgage from ABN Bank, The Netherlands.
Borrowings under this mortgage agreement are collateralized by a lien on the
facility.
In connection with the acquisition of CSI, the Company refinanced its
dollar denominated bank debt ((a), (b), (c) and (d) above) with a new credit
facility which provides for up to $135,000 of term loans and a $30,000 revolving
credit facility, that have various interest rates based upon type and level of
borrowings. The facility contains certain covenants, the most restrictive of
which limits capital expenditures, sets forth maximum leverage ratios, debt
coverage and income ratios.
COLLATERAL AND DEBT COVENANTS UNDER LOAN AGREEMENTS OUTSTANDING AT DECEMBER 31,
1997
Under the terms of the various financing arrangements described above at
December 31, 1997, substantially all of the Company's assets are pledged as
collateral, including, but not limited to, the stock of the various
subsidiaries. In addition, the various agreements contained restrictive
covenants, as defined therein, including limits on capital expenditures and
transactions with related parties, maintenance of certain minimum levels of cash
flow earnings and leverage ratios, among others.
F-13
<PAGE> 110
AFA HOLDINGS CO.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
AGGREGATE ANNUAL MATURITIES
Aggregate annual maturities of debt after December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998....................................................... $ 2,379
1999....................................................... 3,616
2000....................................................... 3,756
2001....................................................... 4,756
2002....................................................... 5,756
Thereafter................................................. 26,270
-------
$46,533
=======
</TABLE>
6. INCOME TAXES:
Pre-tax loss, for the five months ended December 31, 1997, consists of:
<TABLE>
<S> <C>
United States.............................................. $(1,159)
Foreign.................................................... (367)
-------
Total pre-tax loss............................... (1,526)
=======
Current expense............................................ $ 28
Deferred benefit........................................... (180)
-------
$ (152)
=======
</TABLE>
The income tax provision differs from the amount computed by applying the
U.S. federal statutory income tax rate of 34% to the pre-tax loss. The computed
amount, for the five months ended December 31, 1997, is reconciled to the income
tax benefit as follows:
<TABLE>
<S> <C>
Tax at federal statutory rate............................... $(519)
Increase in valuation allowance............................. 417
Other....................................................... (50)
-----
Income tax benefit................................ $(152)
=====
</TABLE>
The approximate tax effect of temporary differences that gave rise to the
Company's deferred income tax assets and liabilities at December 31, 1997 is as
follows:
<TABLE>
<CAPTION>
ASSETS LIABILITIES TOTAL
------ ----------- -------
<S> <C> <C> <C>
Property, plant and equipment.......................... $(1,008) $(1,008)
Intangible assets...................................... (91) (91)
Net operating loss credit carryforward................. $ 775 775
Accrued management fees................................ 49 49
Accrued incentive...................................... 53 53
Other.................................................. 7 7
----- ------- -------
Total before valuation allowance....................... 884 (1,099) (215)
----- ------- -------
Valuation allowance.................................... (417) (417)
----- ------- -------
Total deferred taxes......................... $ 467 $(1,099) $ (632)
===== ======= =======
</TABLE>
F-14
<PAGE> 111
AFA HOLDINGS CO.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
The deferred tax assets and liabilities are broken down between current and
noncurrent amounts in the accompanying balance sheets according to the
classification of the related asset and liability or in the case of tax loss
carryforwards, based on their expected utilization date.
7. EQUITY:
AFA HOLDINGS
Class A -- Class A common stock has 100% of the voting rights and is
convertible (at the option of the stockholder) into Class B stock on a share per
share basis. As of December 31, 1997, there were 730 shares of Class A common
stock outstanding and 5,000 shares authorized, with a par value of $.01.
Class B -- Class B common stock is non-voting and is convertible (at the
option of the stockholder) into Class A stock on a share per share basis. There
are no Class B shares outstanding and 3,000 shares authorized, with a par value
of $.01 per share.
POLYTEK
Common stock -- As of December 31, 1997, there were 980 shares of common
stock outstanding and 2,000 shares authorized with a par value of $247 per
share.
8. OPERATING LEASES:
The Company is obligated under noncancelable operating leases for certain
machinery and equipment and telephone equipment. Minimum annual rental payments
are as follows:
<TABLE>
<S> <C>
1998........................................................ $298
1999........................................................ 269
2000........................................................ 181
2001........................................................ 80
2002........................................................ 53
----
$881
====
</TABLE>
Rent expense was approximately $180 for the five month period ended
December 31, 1997.
9. RELATED PARTY TRANSACTIONS:
INTEREST ON SUBORDINATED DEBT
Included in interest expense for the five month period ended December 31,
1997 is approximately $147 relating to debt owed to shareholders. As of December
31, 1997, accrued interest of $147 on this obligation has been classified as a
noncurrent liability in the accompanying balance sheet.
MANAGEMENT FEES
Included in operating expenses for the five month period ended December
1997 are approximately $291 for management fees and certain expenses paid or
payable to entities affiliated with the shareholders. As of December 31, 1997,
the balance of unpaid fees, which has been included in other accrued expenses in
the accompanying balance sheet, approximated $125.
Effective February 4, 1998, the Company entered into a new management
agreement with an affiliate of one of the shareholders that provides for annual
payments of $300,000 and expires on July 29, 2008, subject to renewal for
successive five-year periods.
F-15
<PAGE> 112
AFA HOLDINGS CO.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
TRANSACTIONS WITH AFFILIATE
The Company has a 41% ownership in an affiliate, which is accounted for
using the equity method. Earnings of the affiliate are not material to the
operations of the Company. During the 1997 period presented, the Company
purchased molds from the affiliate for approximately $283. During the five month
period ended December 31, 1997 the affiliate provided certain repairs and
maintenance at a cost to the Company of approximately $70. Included in accounts
payable in the accompanying balance sheet at December 31, 1997 is approximately
$81 relating to these assets and services provided by the affiliate.
PROFESSIONAL SERVICES
The law firm of Gratch, Jacobs & Brozman, P.C., of which one of the
shareholders is a senior member, provides legal services on an ongoing basis to
the Company and its subsidiaries. During fiscal 1997, the Company paid fees of
approximately $364,000 to Gratch, Jacobs & Brozman, P.C.
10. EMPLOYEE BENEFITS PLANS:
401(k) PLAN
Effective July 1, 1996, AFA Products adopted an employee savings plan under
Section 401(k) of the Internal Revenue Code. The plan covers substantially all
full-time employees and the Company matches five percent of each employee's
contributions up to six percent of annual compensation. During the five month
period ended December 31, 1997, the Company expensed $10 in matching
contributions.
RETIREMENT PLAN
Polytek has various pension plans covering substantially all employees.
Polytek funds all costs through insurance contracts which provide for retiree
benefits. Under the terms of the plans, there are no unfunded or overfunded
benefit obligations. Pension expense for the period ended December 31, 1997 was
approximately $309.
11. FOREIGN OPERATIONS:
Information regarding the Company's operations in The Netherlands for the
five months ended December 31, 1997 is as follows:
<TABLE>
<S> <C>
Sales...................................................... $ 8,198
Net income................................................. (215)
Total assets............................................... 12,074
</TABLE>
12. SUPPLEMENTAL CONDENSED COMBINING FINANCIAL STATEMENTS
The following summarizes the Company's combining financial statements as of
December 31, 1997 and for the five month period then ended.
F-16
<PAGE> 113
SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEET
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AFA AFA
AFA PRODUCTS, INC. POLYTEK
HOLDINGS CO. (GUARANTOR) (NON-GUARANTOR) ELIMINATIONS COMBINED
ASSETS ------------ -------------- --------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents........ $ $ 142 $ 909 $ 1,051
Accounts receivable.............. 4,089 2,796 (64) 6,821
Inventories...................... 6,723 3,195 9,918
Prepaid expenses and other....... 130 475 605
------ ------- ------- ------- -------
Total current assets..... 11,084 7,375 (64) 18,395
Property, plant and equipment,
net.............................. 19,295 8,714 28,009
Intangibles, net................... 16,805 (4,607) 12,199
Investment in subsidiary........... 2,651 (2,651)
Other assets....................... 1,692 592 2,284
------ ------- ------- ------- -------
Total assets:...................... $2,651 $48,877 $12,074 ($2,715) $60,887
====== ======= ======= ======= =======
Liabilities and Stockholders'
equity
Current liabilities:............... $
Current portion of long-term
debt.......................... $ $ 1,750 $ 629 $ 2,379
Revolving credit facility........ 2,542 2,220 4,762
Accounts payable................. 1,134 1,275 1 2,410
Other Accrued expenses........... 1,550 1,849 (65) 3,334
------ ------- ------- ------- -------
Total current
liabilities............ 6,976 5,973 (64) 12,885
Revolving credit facilities........ 36,250 4,904 41,154
Subordinated debt.................. 3,000 3,000
Deferred income taxes.............. 632 632
------ ------- ------- ------- -------
Total liabilities........ 48,226 11,509 (64) 57,671
------ ------- ------- ------- -------
STOCKHOLDERS' EQUITY
Common stock..................... 242 242
Additional paid-in capital....... 3,810 3,810 510 (3,810) 4,320
Retained earnings (deficit)...... (1,159) (1,159) (215) 1,159 (1,374)
Cumulative translation
adjustment.................... 28 28
Total stockholders'
equity................. 2,651 2,651 565 (2,651) 3,216
------ ------- ------- ------- -------
Total liabilities and stockholders'
equity........................... $2,651 $48,877 $12,074 ($2,715) $60,887
====== ======= ======= ======= =======
</TABLE>
F-17
<PAGE> 114
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF OPERATIONS
FIVE MONTHS ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AFA
AFA POLYTEK
AFA CO. PRODUCTS, INC. (NON-
HOLDINGS (GUARANTOR) GUARANTOR) ELIMINATIONS COMBINED
-------- -------------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C>
Net sales...................... $ $ 12,011 $ 8,198 $ (101) $ 20,108
Cost of sales.................. 9,897 6,799 (101) 16,595
------------- ------------- ------------- ------------- -------------
Gross profit.............. 2,114 1,399 3,513
Selling and administrative
expenses..................... 1,712 1,150 2,862
Income from operations.... 402 249 651
Other expense (income):
Interest.................. 2,020 211 2,231
Other..................... (459) 405 (54)
------------- ------------- ------------- ------------- -------------
Total other
expense............ 1,561 616 2,177
Loss before income tax
provision.................... (1,159) (367) (1,526)
Tax benefit.................... (152) (152)
------------- ------------- ------------- ------------- -------------
Loss before equity in loss of
consolidated subsidiary...... (1,159) (215) (1,374)
Equity in loss of consolidated
subsidiary................... (1,159) 1,159
------------- ------------- ------------- ------------- -------------
Net income..................... $ (1,159) $ (1,159) $ (215) $ 1,159 $ (1,374)
============= ============= ============= ============= =============
</TABLE>
F-18
<PAGE> 115
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS
FIVE MONTHS ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AFA AFA
AFA PRODUCTS, INC. POLYTEK
HOLDINGS CO. (GUARANTOR) (NON-GUARANTOR) COMBINED
------------ -------------- --------------- --------
<S> <C> <C> <C> <C>
Cash flows from operating
activities...................... $ $ 456 $ 992 $ 1,448
Cash flows from investing
activities:
Capital expenditures......... (258) (403) (661)
----------- ----------- ----------- -----------
Net cash used in investing
activities................. (258) (403) (661)
Cash flows from financing
activities:
Change in line of credit..... (85) (85)
Repayment of long term
debt....................... (685) (685)
----------- ----------- ----------- -----------
Net cash from financing
activities................. (85) (685) (770)
Effect of exchange rate changes on
cash............................ 34 34
----------- ----------- ----------- -----------
Change in cash and cash
equivalents..................... 113 (62) 51
Cash and cash equivalents,
beginning of period............. 29 971 1,000
----------- ----------- ----------- -----------
Cash and cash equivalents, end of
period.......................... $ 142 $ 909 $ 1,051
=========== =========== =========== ===========
</TABLE>
F-19
<PAGE> 116
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
WTI, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of WTI, Inc.
and Subsidiaries (the "Company") as of July 31, 1997 and December 31, 1996, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the seven month period ended July 31, 1997 and for the years
ended December 31, 1996 and 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of WTI, Inc. and
Subsidiaries as of July 31, 1997 and December 31, 1996, and the consolidated
results of their operations and their cash flows for the seven month period
ended July 31, 1997 and for the years ended December 31, 1996 and 1995 in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Charlotte, North Carolina
March 5, 1998.
F-20
<PAGE> 117
WTI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 1997 AND DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
JULY 31, DECEMBER 31,
1997 1996
-------- ------------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents................................. $ 2,391 $ 837
Accounts receivable, net of allowances of $43 and $29,
respectively........................................... 5,909 6,499
Inventories............................................... 9,496 10,314
Prepaid expenses and other................................ 359 608
------- -------
Total current assets.............................. 18,155 18,258
Property, plant and equipment............................... 15,022 16,004
Excess of cost over fair value of net assets acquired, net
of accumulated amortization............................... 1,321 1,761
Patents, net of accumulated amortization.................... 4,236 4,734
Deferred income taxes....................................... 3,224 1,285
Other assets................................................ 2,407 2,759
------- -------
Total assets...................................... $44,365 $44,801
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Current portion of long-term debt......................... $ 4,944 $ 8,066
Accounts and drafts payable............................... 2,811 2,201
Income taxes payable...................................... 1,975 988
Other accrued expenses.................................... 5,490 6,058
------- -------
Total current liabilities......................... 15,220 17,313
Long-term debt.............................................. 15,176 16,045
Accrued interest to stockholder............................. 10,352 9,030
------- -------
Total liabilities................................. 40,748 42,388
------- -------
Commitments and contingencies
Stockholders' equity:
Class A common stock, $1 par value; 123,000 shares, issued
and outstanding........................................ 123 123
Class B common stock, convertible, $1,000 par value, no
shares issued..........................................
Additional paid-in capital................................ 9,047 9,047
Accumulated deficit....................................... (2,771) (5,844)
Cumulative translation adjustment......................... (2,782) (913)
------- -------
Total stockholders' equity........................ 3,617 2,413
------- -------
Total liabilities and stockholders' equity........ $44,365 $44,801
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-21
<PAGE> 118
WTI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEVEN MONTH YEAR ENDED
PERIOD ENDED DECEMBER 31,
JULY 31, ------------------
1997 1996 1995
------------ ------- -------
<S> <C> <C> <C>
Net sales................................................... $32,988 $54,133 $55,238
Cost of sales............................................... 23,864 39,868 41,971
------- ------- -------
Gross profit...................................... 9,124 14,265 13,267
Selling, general and administrative expense................. 4,205 7,389 7,877
------- ------- -------
Income from operations............................ 4,919 6,876 5,390
Other expense (income):
Interest expense.......................................... 2,295 4,275 4,489
Foreign currency (gain) loss.............................. (545) (230) 170
Royalty income............................................ (133) (178) (165)
Other..................................................... (125) 133 (256)
------- ------- -------
Total............................................. 1,492 4,000 4,238
------- ------- -------
Income before provision for income taxes.................... 3,427 2,876 1,152
Provision for income taxes.................................. 354 354 880
------- ------- -------
Net income........................................ $ 3,073 $ 2,522 $ 272
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-22
<PAGE> 119
WTI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SEVEN MONTH PERIOD ENDED JULY 31, 1997
AND THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A ADDITIONAL CUMULATIVE TOTAL
COMMON PAID-IN ACCUMULATED TRANSLATION STOCKHOLDERS'
STOCK CAPITAL DEFICIT ADJUSTMENT EQUITY
------- ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995.................. $123 $9,047 $(8,638) $ (42) $ 490
Net income................................ 272 272
---- ------ ------- ------- -------
Balance, December 31, 1995................ 123 9,047 (8,366) (42) 762
Net income................................ 2,522 2,522
Translation adjustment.................... (871) (871)
---- ------ ------- ------- -------
Balance, December 31, 1996................ 123 9,047 (5,844) (913) 2,413
Net income................................ 3,073 3,073
Translation adjustment.................... (1,869) (1,869)
---- ------ ------- ------- -------
Balance, July 31, 1997.................... $123 $9,047 $(2,771) $(2,782) $ 3,617
==== ====== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-23
<PAGE> 120
WTI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEVEN MONTH YEAR ENDED
PERIOD ENDED DECEMBER 31,
JULY 31, -----------------
1997 1996 1995
------------ ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 3,073 $ 2,522 $ 272
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 1,926 3,153 3,103
Amortization........................................... 594 1,317 1,333
Deferred income taxes.................................. (1,939) (1,441) (5)
Other, net............................................. (118) (54) (47)
Loss (gain) on sale of property, plant and equipment... (21) 3 (39)
Foreign currency transaction (gain) loss............... (545) (230) 170
Changes in assets and liabilities:
Accounts receivable.................................. 694 (83) 677
Inventories.......................................... 172 53 (270)
Prepaid expenses and other........................... 293 706 208
Accounts and drafts payable.......................... 891 (1,402) (694)
Other accrued expenses............................... (581) 1,202 2,676
Other, net........................................... 36
Income taxes payable or refundable................... 1,389 391 (679)
------- ------- -------
Net cash provided by operating activities......... 5,828 6,173 6,705
------- ------- -------
Cash flows from investing activities:
Expenditures for property, plant and equipment............ (2,498) (2,218) (3,604)
Proceeds from disposal of property, plant and equipment... 23 2 49
Investment in affiliate................................... 2
Expenditures for tooling.................................. (69) (84) (1,010)
------- ------- -------
Net cash used in investing activities............. (2,544) (2,300) (4,563)
------- ------- -------
Cash flows from financing activities:
Net (repayment) borrowings under revolving lines of
credit................................................. (1,775) (2,864) 1,162
Proceeds from long-term debt borrowing.................... 1,321 2,978 600
Repayment of debt......................................... (1,174) (4,110) (3,968)
Payment of bank financing fees............................ (162) (35)
------- ------- -------
Net cash used in financing activities............. (1,628) (4,158) (2,241)
------- ------- -------
Effect of exchange rate changes on cash..................... (102) (62) 89
------- ------- -------
Net increase (decrease) in cash and cash equivalents........ 1,554 (347) (10)
Cash and cash equivalents at beginning of period............ 837 1,184 1,194
------- ------- -------
Cash and cash equivalents at end of period........ $ 2,391 $ 837 $ 1,184
======= ======= =======
Cash paid during the period for:
Interest.................................................. $ 580 $ 1,513 $ 1,961
Income taxes.............................................. 2,817 1,040 1,564
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-24
<PAGE> 121
WTI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)
1. DESCRIPTION OF THE COMPANY AND CURRENT BUSINESS OPERATIONS:
WTI, Inc. (the "Company") was formed in 1988 by Waynesboro Textiles, Inc.
("Waynesboro"), Berkshire Partners and affiliates ("Berkshire") and AIG
Insurance Company and affiliates ("AIG").
WTI, Inc. has a subsidiary, AFA Products, Inc., based in Forest City, North
Carolina, which in turn has a subsidiary, WTI Holding B.V. ("WTI Holding"),
based in Helmond, The Netherlands. WTI Holding also has a subsidiary, AFA
Polytek B.V. ("Polytek"), which is also based in Helmond, The Netherlands.
The Company's primary business is the manufacture and sale of activated
liquid dispensing devices ("trigger sprayers"). Manufacturing is primarily
conducted in facilities located in Forest City, North Carolina, and Helmond, The
Netherlands.
SALE OF ASSETS
On July 31, 1997, the Company sold substantially all of its assets and
operations to AFA Holdings Co. Proceeds from the sale were used to retire
liabilities not assumed by the purchaser with the remainder distributed to
shareholders of the Company. These consolidated financial statements were
prepared immediately prior to the sale using the historical basis of accounting
followed by the Company and do not reflect the sale transaction.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
on the first-in, first-out (FIFO) basis.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided
primarily on a straight-line basis over the estimated useful lives of the
assets. Maintenance and repairs are charged to income as incurred and
betterments that extend the useful life are capitalized. Upon retirement or
sale, the cost and accumulated depreciation are eliminated from the respective
accounts, and the gain or loss, if any, is included in income.
If events or changes in circumstances indicate that the carrying amount of
a long-lived asset may not be recoverable, the Company estimates the future cash
flows expected to result from the use of the asset and its eventual disposition.
If the sum of the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the long-lived asset, an impairment
loss is recognized. To date, no impairment losses have been recognized.
RESEARCH AND DEVELOPMENT
The cost of research and development expenditures is expensed as incurred.
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
F-25
<PAGE> 122
WTI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
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.
Significant estimates in the financial statements relate to the allowance for
uncollectible accounts receivable, the allowance for slow-moving and obsolete
inventories, the allowance for sales returns and the valuation allowance for
deferred tax assets.
INCOME TAXES
The Company uses the asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future. Such deferred income tax asset and liability computations are based
on enacted tax laws and rates applicable to periods in which the differences are
expected to affect taxable income. A valuation allowance is established when
necessary to reduce deferred tax assets to the amount expected to be realized.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of WTI Holding are translated at exchange rates in
effect at the balance sheet dates ($.4767 and $.5744 per guilder at July 31,
1997 and December 31, 1996, respectively). Items of revenue and expense are
translated at average exchange rates during the periods ($.5211, $.5919 and
$.6236 per guilder for the 1997, 1996 and 1995 periods presented, respectively).
Translation adjustments, resulting from translating WTI Holding's financial
statements into dollars, are reported in the equity section of the accompanying
balance sheets under the caption "cumulative translation adjustment."
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED
Excess of cost over fair value of net assets acquired is being amortized on
a straight-line basis over a period of fifteen years. Accumulated amortization
was $2,283 and $2,581 as of July 31, 1997 and December 31, 1996, respectively.
The Company assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over its remaining life can be
recovered through forecasted future operations. Impairment is evaluated by
comparing future cash flows (undiscounted and without interest charges) expected
to result from the use or sale of the asset and its eventual disposition, to the
carrying amount of the asset. To date, no impairment losses have been
recognized.
PATENTS
The cost of patents acquired is being amortized using the straight-line
method over the estimated useful lives of the patents, which range from
approximately fourteen to seventeen years. The cost of patents developed are
expensed as incurred because the economic lives are indeterminable.
Accumulated amortization was $8,096 and $7,599 at July 31, 1997 and
December 31, 1996, respectively.
DEFERRED FINANCING FEES
Costs incurred to obtain financing are amortized using the straight-line
method (which approximates the interest method) over the term of the related
debt.
DEFERRED TOOLING
From time to time, the Company purchases certain molds and equipment
(tooling) to meet specific customer product requirements. These tooling costs
are capitalized by the Company and are amortized into operations over the
estimated life of the sales contract period.
F-26
<PAGE> 123
WTI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
OTHER INTANGIBLE ASSETS
Other intangible assets, consisting primarily of an exclusive sales
agreement and royalty agreements, are being amortized using the straight-line
method over the related lives of the agreements, which range from five to
fifteen years.
CASH EQUIVALENTS
The Company considers demand deposits and time deposits with original
maturities of three months or less as equivalent to cash.
RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income, is effective for years beginning after December 15, 1997.
This statement requires that an enterprise classify items of other comprehensive
income by their nature in the financial statements and display the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of the balance sheets.
Statement of Financial Accounting Standards No. 131, Disclosure About
Segments of an Enterprise and Related information, is effective for years
beginning after December 15, 1997. This statement requires that a public
business enterprise report financial and descriptive information about its
reportable business segments.
Management of the Company believes that the future adoption of these
statements will not have a significant impact on the Company's combined
financial position, results of operations or cash flows, but will result in
additional disclosure.
3. INVENTORIES:
The components of inventories are summarized below:
<TABLE>
<CAPTION>
JULY 31, DECEMBER 31,
1997 1996
-------- ------------
<S> <C> <C>
Raw material........................................... $2,089 $ 2,429
Work-in-process........................................ 3,102 3,084
Finished goods......................................... 4,305 4,801
------ -------
$9,496 $10,314
====== =======
</TABLE>
F-27
<PAGE> 124
WTI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, summarized by major classification and
estimated useful lives for depreciation purposes, is as follows:
<TABLE>
<CAPTION>
USEFUL JULY 31, DECEMBER 31,
LIVES (YEARS) 1997 1996
------------- -------- ------------
<S> <C> <C> <C>
Land............................................ $ 825 $ 947
Buildings....................................... 20 - 25 8,439 9,546
Machinery and equipment......................... 4 - 7 19,700 22,133
Molds........................................... 5 15,628 13,728
Furniture and fixtures.......................... 3 - 5 1,156 1,271
Vehicles........................................ 3 43 43
Construction in progress........................ -- 825 891
-------- --------
46,616 48,559
Less accumulated depreciation................... (31,594) (32,555)
-------- --------
Property, plant and equipment, net.............. $ 15,022 $ 16,004
======== ========
</TABLE>
Construction in progress primarily consists of additions and improvements
to buildings, molds and machinery.
5. OTHER NONCURRENT ASSETS:
Other noncurrent assets consists of the following:
<TABLE>
<CAPTION>
JULY 31, DECEMBER 31,
1997 1996
-------- ------------
<S> <C> <C>
Deferred financing fees................................ $ 122 $ 241
Royalty agreement...................................... 917 1014
Investment in affiliate................................ 568 554
Lease deposit.......................................... 75 75
Deferred tooling....................................... 725 875
------ ------
$2,407 $2,759
====== ======
</TABLE>
F-28
<PAGE> 125
WTI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
6. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JULY 31, DECEMBER 31,
1997 1996
-------- ------------
<S> <C> <C>
WORKING CAPITAL BORROWINGS(a):
Working capital line of credit -- dollar
denominated, bearing interest at 10% at December
31, 1996......................................... -- $ 1,411
Working capital line of credit -- guilder
denominated, bearing interest at 9.8% and 7.39%,
at July 31, 1997 and December 31, 1997
respectively..................................... $ 1,223 1,875
------- -------
Total working capital borrowings............ 1,223 3,286
------- -------
OTHER LONG-TERM DEBT:
Senior note -- dollar denominated................... 500 1,500
Senior mortgage note -- guilder denominated, payable
in quarterly principal installments of $25,204,
bearing interest at rates varying with the Dutch
prime rate (5.95% at July 31, 1997 and December
31, 1996(b)...................................... 1,188 1,508
Junior subordinated debt -- dollar denominated,
stockholder, bearing interest at 14% (Note
10)(c)........................................... 3,500 3,500
Subordinated note payable -- dollar denominated,
bearing interest at 13.5%(d)..................... 1,907 2,298
Senior subordinated debt -- dollar denominated,
stockholder, bearing interest at 13.5%(e)........ 10,000 10,000
Installment notes payable -- guilder denominated,
bearing interest at rates ranging from 7.1% to
7.75%............................................ 282 499
Promissory note payable -- dollar denominated,
affiliate, bearing interest at 14% (Note
10)(f)........................................... 320 320
Promissory note payable -- dollar denominated,
affiliate, bearing interest at 10.25% (Note
10)(f)........................................... 1,200 1,200
------- -------
Total other long-term debt.................. 18,897 20,825
------- -------
Total....................................... 20,120 24,111
Less current portion.................................. (4,944) (8,066)
------- -------
Total long-term debt........................ $15,176 $16,045
======= =======
</TABLE>
(a) WORKING CAPITAL BORROWINGS:
At July 31, 1997 and December 31, 1996, the Company had loan and security
agreements (the "Agreements") with the Bank of Boston that provided for two
working capital lines of credit, denominated in both dollars and guilders.
Borrowings under the dollar denominated working capital line of credit,
which had a maximum amount of $4,700, were limited to 80% of eligible accounts
receivable (as defined), and 50% of eligible raw material and finished goods
inventories (as defined). Borrowings under the guilder denominated line of
credit had a maximum amount of 4,754 guilders ($2,266 at July 31, 1997) and were
limited to 70% of eligible accounts receivable (as defined) and 25% of eligible
raw materials and finished goods inventories (as defined).
On December 2, 1996, AFA Products, Inc. entered into the third amendment of
its dollar denominated working capital line of credit with the Bank of Boston.
The amendment extended the due date of the working
F-29
<PAGE> 126
WTI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
capital line of credit until November 30, 1997. The third amendment also
provided a new $1,500 term loan to be used to make an installment payment on the
$5,000 junior subordinated note payable to stockholder (AIG). Interest on the
extended line of credit and the new 1996 term loan is payable quarterly in
arrears beginning January 1, 1997. The 1996 term loan was due to be repaid in
1997. The amendment modifies certain financial covenants contained in the
original agreement and waives all violations of all loan covenants contained in
the original agreement through the effective date of the amendment. At December
31, 1996, the Company was in violation of the covenant limiting capital
expenditures. A waiver for this covenant violation was obtained from the bank.
Also on December 2, 1996, AFA Polytek B.V. entered into the third amendment
of its guilder denominated working capital line of credit with the Bank of
Boston. The amendment extended the due date of the working capital line of
credit until November 30, 1997. Interest on the extended line of credit is
payable quarterly in arrears beginning January 1, 1997. The amendment modifies
certain financial covenants contained in the original agreement and waives all
violations of all loan covenants contained in the original agreement through the
effective date of the amendment.
Substantially all of these bank borrowings were paid simultaneously with
the sale of substantially all of the Company's assets.
OTHER LONG-TERM DEBT
(b) SENIOR MORTGAGE NOTE -- GUILDER DENOMINATED
In connection with the construction of a manufacturing facility in 1991,
Polytek obtained a 3,500 guilder mortgage from ABN Bank, Netherlands. Borrowings
under this mortgage agreement are collateralized by a lien on the facility. The
mortgage agreement contains certain prohibitions, the most significant of which
prohibit payments of dividends which would result in the net worth of Polytek
falling below 10,000 guilders ($4,767 and $5,774 at July 31, 1997 and December
31, 1996).
(c) JUNIOR SUBORDINATED DEBT
The junior subordinated debt is payable to AIG and has principal payments
of $1,500 due December 31, 1997 and a $2,000 principal payment due December 31,
1998.
(d) SUBORDINATED NOTE PAYABLE
On December 30, 1991, WTI borrowed 4,000 guilders from Parkhill Holdings
Limited, an unaffiliated entity. The loan is collateralized by a secondary
pledge of the shares of Polytek. Effective February 5, 1993, this guilder
denominated debt was converted to a dollar denominated obligation, and interest
rates were adjusted to a U.S. prime rate (8.5% at July 31, 1997 and December 31,
1996) plus 5%. In November 1996, the original maturity on the debt was extended
to December 31, 1998.
(e) SENIOR SUBORDINATED DEBT
The senior subordinated debt is payable to Waynesboro or its stockholders.
In November 1996, the maturity schedule for principal repayment was amended,
resulting in principal payments of $4,000 due December 31, 1998 and $6,000 due
December 31, 1999. In accordance with certain covenants contained in senior loan
agreements, interest payments on this obligation were deferred. Accrued interest
payable on this obligation amounted to $10,352 and $9,030 at July 31, 1997 and
December 31, 1996, respectively.
F-30
<PAGE> 127
WTI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
(f) PROMISSORY NOTES PAYABLE
The promissory notes payable represent borrowings from a partnership
controlled by certain shareholders of the Company. The obligations are
unsecured.
COLLATERAL AND DEBT COVENANTS UNDER LOAN AGREEMENTS OUTSTANDING AT JULY 31, 1997
Under the terms of the various financing arrangements described above at
July 31, 1997, substantially all of the Company's assets are pledged as
collateral, including, but not limited to, the stock of the various
subsidiaries. In addition, the various agreements contained restrictive
covenants, as defined, including limits on capital expenditures and transactions
with related parties, maintenance of certain minimum levels of cash flow
earnings and leverage ratios, among others.
AGGREGATE ANNUAL MATURITIES
Aggregate annual maturities of long-term debt after July 31, 1997 are as
follows:
<TABLE>
<S> <C>
1998....................................................... $ 4,944
1999....................................................... 8,091
2000....................................................... 6,147
2001....................................................... 83
2002....................................................... 83
Thereafter................................................. 772
-------
$20,120
=======
</TABLE>
7. INCOME TAXES:
Pre-tax income (loss) consists of:
<TABLE>
<CAPTION>
SEVEN MONTHS YEAR ENDED
ENDED DECEMBER 31,
JULY 31, ------------------
1997 1996 1995
------------ ------- -------
<S> <C> <C> <C>
United States.............................. $ 2,451 $ 2,145 $(1,044)
Foreign.................................... 976 731 2,196
------- ------- -------
Total pre-tax income............. $ 3,427 $ 2,876 $ 1,152
======= ======= =======
Current expense............................ 2,293 1,795 885
Deferred benefit........................... (1,939) (1,441) (5)
------- ------- -------
$ 354 $ 354 $ 880
======= ======= =======
</TABLE>
F-31
<PAGE> 128
WTI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
The income tax provision differs from the amount computed by applying the
U.S. federal statutory income tax rate of 34% to the pre-tax income. The
computed amount is reconciled to the total provision for income taxes as
follows:
<TABLE>
<CAPTION>
SEVEN MONTHS YEAR ENDED
ENDED DECEMBER 31,
JULY 31, -------------
1997 1996 1995
------------ ----- ----
<S> <C> <C> <C>
Tax at federal statutory rate.................. $ 1,165 $ 978 $392
Tax effect of nondeductible expenses........... 55 118 126
Foreign taxes at rates other than U.S.
statutory rate............................... 17 10 16
State taxes (net of federal benefit)........... 186 119
Increase (reduction) in valuation allowance.... (1,098) (848) 355
Other.......................................... 29 (23) (9)
------- ----- ----
Income tax provision................. $ 354 $ 354 $880
======= ===== ====
</TABLE>
The approximate tax effect of temporary differences that gave rise to the
Company's deferred income tax assets and liabilities at July 31, 1997 and
December 31, 1996 is as follows:
<TABLE>
<CAPTION>
JULY 31, 1997
-------------------------------
ASSETS LIABILITIES TOTAL
------ ----------- ------
<S> <C> <C> <C>
Property, plant and equipment................... $ $ (983) $ (983)
Intangible assets............................... (463) (463)
Patents......................................... 434 434
Accrued interest................................ 3,374 3,374
Accrued rent.................................... 264 264
AMT credit carryforward......................... 447 447
Other........................................... 151 151
------ ------- ------
Total deferred taxes.................. $4,670 $(1,446) $3,224
====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------
ASSETS LIABILITIES TOTAL
------- ----------- -------
<S> <C> <C> <C>
Property, plant and equipment................. $ $(1,140) $(1,140)
Intangible assets............................. (525) (525)
Patents....................................... 440 440
Accrued interest.............................. 2,823 2,823
Accrued rent.................................. 229 229
AMT credit carryforward....................... 447 447
Other......................................... 109 109
------- ------- -------
Total before valuation allowance.... 4,048 (1,665) 2,383
------- ------- -------
Valuation allowance........................... (1,098) (1,098)
------- ------- -------
Total deferred taxes................ $ 2,950 $(1,665) $ 1,285
======= ======= =======
</TABLE>
The deferred tax assets and liabilities are broken down between current and
noncurrent amounts in the accompanying balance sheets according to the
classification of the related asset and liability or in the case of tax loss or
AMT credit carryforwards, based on their expected utilization date.
F-32
<PAGE> 129
WTI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
During 1996, the Company reduced its valuation allowance by $848 and during
the period ended July 31, 1997, the allowance was reduced by $1,098.
8. COMMON STOCK:
CLASS A -- Class A common stock has 100% of the voting rights with the
exception of rights to certain matters as described below. As of July 31, 1997
and December 31, 1996, there were 123,000 shares of Class A common stock
outstanding and 150,000 shares authorized, with a par value of $1.
CLASS B -- Class B common stock limits voting rights to certain specified
matters. Class B stock is convertible (at the option of the stockholder) into
Class A stock on a share per share basis. There are no Class B shares
outstanding and 150,000 shares authorized, with a par value of $1,000 per share.
VOTING RIGHTS ON CERTAIN MATTERS -- In accordance with the articles of
incorporation, the affirmative vote of at least two-thirds of the aggregate
outstanding Class A and Class B common stock is required for certain specified
transactions, including, but not limited to, the merger of the Company with or
into another entity; the sale, lease or other disposition of a substantial
portion of the Company's assets; an initial public offering of equity
securities; and incurrence of additional indebtedness (as defined therein).
9. OPERATING LEASES:
The Company is obligated under noncancelable operating leases for certain
machinery and equipment and telephone equipment. Minimum annual rental payments
are as follows:
<TABLE>
<CAPTION>
PAYABLE TO
RELATED PAYABLE TO
PARTIES OTHERS TOTAL
---------- ---------- ------
<S> <C> <C> <C>
1998.......................................... $121 $ 353 $ 474
1999.......................................... 340 340
2000.......................................... 261 261
2001.......................................... 87 87
2002.......................................... 22 22
---- ------ ------
$121 $1,063 $1,184
==== ====== ======
</TABLE>
Rent expense approximated $381, $713 and $438 for the seven months ended
July 31, 1997 and the years ended December 31, 1996 and 1995, respectively,
including approximately $145 in 1997 and $249 for both 1996 and 1995 for rent
paid to an entity controlled by the stockholders of Waynesboro.
10. RELATED PARTY TRANSACTIONS:
INTEREST ON SENIOR SUBORDINATED DEBT
Included in interest expense for the seven month period ended July 31, 1997
and the years ended December 31, 1996 and 1995 is approximately $1,322, $2,156
and $1,969, respectively, relating to debt owed to Waynesboro or its
stockholders. As of July 31, 1997 and December 31, 1996, accrued interest of
$10,352 and $9,030, respectively, on this obligation has been classified as a
noncurrent liability in the accompanying balance sheet.
F-33
<PAGE> 130
WTI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
INTEREST ON JUNIOR SUBORDINATED DEBT
Included in interest expense for the 1997 period presented is $278 and for
both 1996 and 1995 is $700 relating to debt owed to AIG. As of July 31, 1997 and
December 31, 1996, accrued interest of $80 and $63 on this obligation has been
included in other accrued expenses in the accompanying balance sheets.
MANAGEMENT FEES
Included in operating expenses for the periods ended July 31, 1997 and
December 1996 and 1995 are approximately $295, $556 and $533, respectively, for
management fees and certain expenses paid or payable to entities affiliated with
Waynesboro or Berkshire. As of July 31, 1997 and December 31, 1996, the balance
of unpaid fees, which has been included in other accrued expenses in the
accompanying balance sheets, approximated $482 and $445, respectively.
TRANSACTIONS WITH AFFILIATE
The Company has a 41% ownership in an affiliate, which is accounted for
using the equity method. Earnings of the affiliate are not material to the
operations of the Company. During the 1997, 1996 and 1995 periods presented, the
Company purchased molds from the affiliate for approximately $160, $43 and $487,
respectively. During 1997, 1996 and 1995, the affiliate provided certain repairs
and maintenance at a cost to the Company of approximately $117, $203 and $135,
respectively. Included in accounts payable in the accompanying balance sheets at
July 31, 1997 and December 31, 1996, respectively, are approximately $22 and $40
relating to these assets and services provided by the affiliate.
ACCRUED RENT EXPENSE
As of July 31, 1997 and December 31, 1996, other accrued expenses includes
rent expense of $583 and $586, respectively, payable to a related party relating
to an operating lease for certain molding machines.
INTEREST ON PROMISSORY NOTE PAYABLE
Included in interest expense for the seven month period ended July 31, 1997
and the years ended December 31, 1996 and 1995 is approximately $100, $168 and
$66, respectively, relating to interest on funds advanced to the Company from an
affiliate. Accrued interest, which is computed at the rates of 10.25% and 14%
from the date of the advances, approximated $381 and $290 at July 31, 1997 and
December 31, 1996, respectively, and is included in accrued expenses on the
accompanying balance sheets.
11. OTHER INCOME (EXPENSE):
Other income consisted primarily of royalty income. In prior years, the
Company became involved in litigation with one or more of its competitors
regarding alleged patent infringements and ultimately reached out-of-court
settlements with those competitors. Royalty payments under two different
settlement agreements of $50 were received by the Company in 1996 and 1995, and
are recorded in other income in the accompanying consolidated statements of
operations.
12. EMPLOYEE BENEFITS PLANS:
RETIREMENT PLANS
Polytek has various pension plans covering substantially all employees.
Polytek funds all costs through insurance contracts which provide for retiree
benefits. Under the terms of the plans, there are no unfunded or
F-34
<PAGE> 131
WTI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
overfunded benefit obligations. Pension expense for July 31, 1997 and the years
ended December 31, 1996 and 1995 was approximately $241, $441 and $461,
respectively.
401(k) PLAN
Effective July 1, 1996, AFA Products adopted an employee savings plan under
Section 401(k) of the Internal Revenue Code. The plan covers substantially all
full-time employees and the Company matches five percent of each employee's
contributions up to six percent of annual compensation. During 1997 and 1996,
the Company expensed $20 and $9 in matching contributions.
13. CONTINGENCIES:
The Company is a defendant and plaintiff in several disputes and legal
actions in the normal course of business. In the opinion of management, the
resolution of these matters will not have a material adverse impact on the
financial condition or the future results of operations of the Company.
14. FOREIGN OPERATIONS:
Information regarding the Company's operations in The Netherlands is as
follows:
<TABLE>
<CAPTION>
SEVEN MONTHS YEAR ENDED
ENDED DECEMBER 31,
JULY 31, ------------------
1997 1996 1995
------------ ------- -------
<S> <C> <C> <C>
Sales...................................... $13,401 $23,698 $30,675
Net income................................. 1,172 1,328 2,483
Total assets............................... 15,734 19,172 21,866
</TABLE>
15. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA:
The following summarizes the Company's consolidating balance sheet as of
December 31, 1996 and consolidating results of operations and cash flows for the
years ended December 31, 1995 and 1996 and the seven month period ended July 31,
1997.
F-35
<PAGE> 132
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
SEVEN MONTHS ENDED JULY 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AFA
WTI, INC. AFA POLYTEK
(PREDECESSOR PRODUCTS, INC. (NON-
TO AFA) (GUARANTOR) GUARANTOR) ELIMINATIONS CONSOLIDATED
------------ -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales...................... $ $ 19,626 $ 13,401 $ (39) $ 32,988
Cost of sales.................. 13,708 10,195 (39) 23,864
------------- ------------- ------------- ------------- -------------
Gross profit.............. 5,918 3,206 9,124
Selling, general and
administrative expenses...... 134 2,643 1,428 4,205
------------- ------------- ------------- ------------- -------------
Income from operations.... (134) 3,275 1,778 4,919
------------- ------------- ------------- ------------- -------------
Other expense (income):
Interest.................. (24) 2,089 230 2,295
Other..................... (1,374) 571 (803)
------------- ------------- ------------- ------------- -------------
Total other
expense............ (24) 715 801 1,492
------------- ------------- ------------- ------------- -------------
Income before income tax
provision.................... (110) 2,560 977 3,427
Tax provision.................. 354 354
------------- ------------- ------------- ------------- -------------
Income before equity in income
of consolidated subsidiary... (110) 2,560 623 3,073
Equity in income of
consolidated subsidiary...... 3,183 623 (3,806)
------------- ------------- ------------- ------------- -------------
Net income..................... $ 3,073 $ 3,183 $ 623 $ (3,806) $ 3,073
============= ============= ============= ============= =============
</TABLE>
F-36
<PAGE> 133
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SEVEN MONTHS ENDED JULY 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AFA AFA
WTI, INC. PRODUCTS, INC. POLYTEK
(PREDECESSOR TO AFA) (GUARANTOR) (NON-GUARANTOR) CONSOLIDATED
-------------------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating
activities.......................... $ $ 4,237 $1,591 $ 5,828
Cash flows from investing activities:
Capital expenditures................ (1,649) (849) (2,498)
Other............................... (46) (46)
Net cash used in investing
activities....................... (1,695) (849) (2,544)
Cash flows from financing activities:
Change in line of credit............ (1,410) (365) (1,775)
Proceeds from long term debt........ 1,321 1,321
Repayment of long term debt......... (1,000) (174) (1,174)
------- ------- ------ -------
Net cash from financing
activities....................... (1,089) (539) (1,628)
Effect of exchange rate changes on
cash................................ (102) (102)
------- ------- ------ -------
Change in cash and cash equivalents... 1,453 101 1,554
Cash and cash equivalents, beginning
of period........................... 337 500 837
------- ------- ------ -------
Cash and cash equivalents, end of
period.............................. $ 1,790 $ 601 $ 2,391
======= ======= ====== =======
</TABLE>
F-37
<PAGE> 134
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WTI, INC. AFA AFA
(PREDECESSOR TO PRODUCTS, INC. POLYTEK
AFA) (GUARANTOR) (NON-GUARANTOR) ELIMINATIONS CONSOLIDATED
--------------- -------------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets:
Cash and cash
equivalents......... $ 337 $ 500 $ 837
Accounts receivable... $ 1,870 4,236 3,374 ($ 2,981) 6,499
Inventories........... 6,394 3,920 10,314
Prepaid expenses and
other current
assets.............. 64 544 608
------------- ------------- ------------- ------------- -------------
Total current
assets......... 1,870 11,031 8,338 (2,981) 18,258
Property, plant and
equipment, net...... 7,360 8,644 16,004
Intangibles, net...... 4,734 1,761 6,495
Investment in
subsidiary.......... 2,307 10,679 (12,986)
Deferred income
taxes............... 1,285 1,285
Other assets.......... 2,287 2,187 3,243 (4,958) 2,759
------------- ------------- ------------- ------------- -------------
Total assets..... $ 6,464 $ 37,276 $ 21,986 ($ 20,925) $ 44,801
============= ============= ============= ============= =============
Liabilities and
Stockholders' Equity
Current Liabilities:
Current portion of
long-term debt...... $ 1,500 $ 5,931 $ 2,135 ($ 1,500) $ 8,066
Accounts payable...... 14 1,359 857 (29) 2,201
Income taxes
payable............. 988 988
Other accrued
expenses............ 537 2,855 4,118 (1,452) 6,058
------------- ------------- ------------- ------------- -------------
Total current
liabilities.... 2,051 11,133 7,110 (2,981) 17,313
Long-term debt:
Credit facilities.....
Subordinated debt..... 2,000 14,957 4,046 (4,958) 16,045
Accrued interest of
stockholders........ 8,879 151 9,030
------------- ------------- ------------- ------------- -------------
Total
liabilities.... 4,051 34,969 11,307 (7,939) 42,388
------------- ------------- ------------- ------------- -------------
Stockholders' Equity
Common stock.......... 123 8,878 9,462 (18,340) 123
Additional
paid-in-capital..... 9,047 179 (179) 9,047
Retained earnings
(deficit)........... (6,757) (6,571) 1,951 5,533 (5,844)
Cumulative translation
adjustment.......... (913) (913)
Total
stockholders'
equity......... 2,413 2,307 10,679 (12,986) 2,413
------------- ------------- ------------- ------------- -------------
Total liabilities and
stockholders' equity..... $ 6,464 $ 37,276 $ 21,986 ($ 20,925) $ 44,801
============= ============= ============= ============= =============
</TABLE>
F-38
<PAGE> 135
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WTI, INC. AFA AFA
(PREDECESSOR TO PRODUCTS, INC. POLYTEK
AFA) (GUARANTOR) (NON-GUARANTOR) ELIMINATIONS
--------------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
Net sales.......................... $ $ 30,673 $ 23,698 $ (238)
Cost of sales...................... 21,715 18,140 13
------------- ------------- ------------- ---------------
Gross profit.................. 8,958 5,558 (251)
Selling, general and
administrative expense...... 200 3,239 2,879 1,071
Income from operations........ (200) 5,719 2,679 (1,322)
Other expense (income):
Interest...................... (35) 3,717 574 19
Other......................... 4 (312) 1,374 (1,341)
------------- ------------- ------------- ---------------
Total other expense...... (31) 3,405 1,948 (1,322)
Income (loss) before provision
(benefit) for income taxes....... (169) 2,314 731
------------- ------------- ------------- ---------------
Tax provision (benefit)............ 354
------------- ------------- ------------- ---------------
Income (loss) before equity in
income of consolidated
subsidiary....................... (169) 2,314 377
Equity in income of consolidated
subsidiaries..................... 2,691 377 (3,068)
------------- ------------- ------------- ---------------
Net income......................... $ 2,522 $ 2,691 $ 377 $ (3,068)
============= ============= ============= ===============
<CAPTION>
CONSOLIDATED
------------
<S> <C>
Net sales.......................... $ 54,133
Cost of sales...................... 39,868
-------------
Gross profit.................. 14,265
Selling, general and
administrative expense...... 7,389
Income from operations........ 6,876
Other expense (income):
Interest...................... 4,275
Other......................... (275)
-------------
Total other expense...... 4,000
Income (loss) before provision
(benefit) for income taxes....... 2,876
-------------
Tax provision (benefit)............ 354
-------------
Income (loss) before equity in
income of consolidated
subsidiary....................... 2,522
Equity in income of consolidated
subsidiaries.....................
-------------
Net income......................... $ 2,522
=============
</TABLE>
F-39
<PAGE> 136
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WTI, INC. AFA AFA
(PREDECESSOR TO PRODUCTS, INC. POLYTEK
AFA) (GUARANTOR) (NON-GUARANTOR) CONSOLIDATED
--------------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities.... $ $ 3,691 $ 2,482 $ 6,173
Cash flows from investing activities:
Capital expenditures............... (406) (1,812) (2,218)
Other.............................. (84) 2 (82)
------------- ------------- ------------- -------------
Net cash used in investing
activities....................... (490) (1,810) (2,300)
------------- ------------- ------------- -------------
Cash flows from financing activities:
Change in line of credit........... (2,657) (207) (2,864)
Repayment of long term debt........ (1,500) (1,633) (977) (4,110)
Intercompany advances.............. 1,500 (1,399) (101)
Proceeds from long term debt....... 2,594 222 2,816
------------- ------------- ------------- -------------
Net cash from financing
activities....................... (3,095) (1,063) (4,158)
------------- ------------- ------------- -------------
Effect of exchange rate changes on
cash.................................. (62) (62)
------------- ------------- ------------- -------------
Change in cash and cash equivalents..... 106 (453) (347)
Cash and cash equivalents, beginning of
period................................ 232 952 1,184
------------- ------------- ------------- -------------
Cash and cash equivalents, end of
period................................ $ 338 $ 499 $ 837
============= ============= ============= =============
</TABLE>
F-40
<PAGE> 137
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WTI, INC. AFA AFA
(PREDECESSOR TO PRODUCTS, INC. POLYTEK
AFA) (GUARANTOR) (NON-GUARANTOR) ELIMINATIONS CONSOLIDATED
--------------- -------------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales.................. $ $ 24,734 $ 30,675 $ (171) $ 55,238
Cost of sales.............. 19,327 22,738 (94) 41,971
------------- ------------- ------------- ------------- -------------
Gross profit.......... 5,407 7,937 (77) 13,267
Selling, general and
administrative expense... 179 2,783 3,581 1,334 7,877
------------- ------------- ------------- ------------- -------------
Income from
operations.......... (179) 2,624 4,356 (1,411) 5,390
Other expense (income):
Interest.............. (35) 3,832 664 28 4,489
Other................. 5 (313) 1,496 (1,439) (251)
------------- ------------- ------------- ------------- -------------
Total other
expense........ (30) 3,519 2,160 (1,411) 4,238
Income (loss) before
provision (benefit) for
income taxes............. (149) (895) 2,196 1,152
Tax provision.............. 880 880
------------- ------------- ------------- ------------- -------------
Income (loss) before equity
in income of
consolidating
subsidiary............... (149) (895) 1,316 272
Equity in income of
consolidated
subsidiaries............. 421 1,316 (1,737)
------------- ------------- ------------- ------------- -------------
Net income (loss).......... $ 272 $ 421 $ 1,316 $ (1,737) $ 272
============= ============= ============= ============= =============
</TABLE>
F-41
<PAGE> 138
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WTI, INC. AFA AFA
(PREDECESSOR TO PRODUCTS, INC. POLYTEK
AFA) (GUARANTOR) (NON-GUARANTOR) CONSOLIDATED
--------------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities.... $ $ 4,098 $ 2,607 $ 6,705
------------- ------------- ------------- -------------
Cash flows from investing activities:
Capital expenditures............... (2,140) (1,464) (3,604)
Other.............................. (982) 23 (959)
------------- ------------- ------------- -------------
Net cash used in investing
activities....................... (3,122) (1,441) (4,563)
------------- ------------- ------------- -------------
Cash flows from financing activities:
Change in line of credit........... 913 249 1,162
Repayment of long term debt........ (2,828) (1,140) (3,968)
Intercompany advances.............. 519 (519)
Proceeds from long term debt....... 565 565
------------- ------------- ------------- -------------
Net cash from financing
activities....................... (831) (1,410) (2,241)
------------- ------------- ------------- -------------
Effect of exchange rate changes on
cash.................................. 89 89
------------- ------------- ------------- -------------
Change in cash and cash equivalents..... 145 (155) (10)
Cash and cash equivalents, beginning of
period................................ 88 1,106 1,194
------------- ------------- ------------- -------------
Cash and cash equivalents, end of
period................................ $ $ 233 $ 951 $ 1,184
============= ============= ============= =============
</TABLE>
F-42
<PAGE> 139
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Contico International, Inc.:
We have audited the accompanying combined balance sheets of Continental
Sprayers and Affiliates (the "Company") as of May 31, 1997 and 1996, and the
related combined statements of operations, divisional equity and cash flows for
each of the three years in the period ended May 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Continental
Sprayers and Affiliates as of May 31, 1997 and 1996, and the combined results of
their operations and their cash flows for each of the three years in the period
ended May 31, 1997 in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
St. Louis, Missouri
March 12, 1998
F-43
<PAGE> 140
CONTINENTAL SPRAYERS AND AFFILIATES
COMBINED BALANCE SHEETS
MAY 31, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 21 $ 39
Trade receivables from Contico............................ 585 279
Trade receivables, less allowance for doubtful accounts of
$63 and $67............................................ 8,194 8,029
Inventories............................................... 5,768 6,847
Other current assets...................................... 287 589
------- -------
Total current assets.............................. 14,855 15,783
Property, plant and equipment............................... 30,588 32,464
Other assets................................................ 485 384
------- -------
Total assets...................................... $45,928 $48,631
======= =======
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Accounts payable.......................................... $ 2,441 $ 4,257
Accrued expenses.......................................... 1,958 2,286
Uncleared checks.......................................... 1,519 1,216
------- -------
Total current liabilities......................... 5,918 7,759
Advances from Contico....................................... 5,712 8,813
Minority interest in affiliate.............................. 120 119
------- -------
Total liabilities................................. 11,750 16,691
------- -------
Divisional equity........................................... 34,178 31,940
------- -------
Total liabilities and divisional equity........... $45,928 $48,631
======= =======
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-44
<PAGE> 141
CONTINENTAL SPRAYERS AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MAY 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net sales to third parties.................................. $58,600 $54,086 $54,658
Net sales to Contico........................................ 3,649 3,018 3,662
------- ------- -------
62,249 57,104 58,320
Cost of sales............................................... 48,901 44,614 42,491
------- ------- -------
Gross profit...................................... 13,348 12,490 15,829
Selling, general and administrative expenses................ 6,286 6,335 6,214
------- ------- -------
Income from operations............................ 7,062 6,155 9,615
------- ------- -------
Other expense (income):
Interest expense from Contico............................. 616 983 1,355
Other, net................................................ 28 142 (181)
------- ------- -------
644 1,125 1,174
------- ------- -------
Income before provision for income taxes.......... 6,418 5,030 8,441
Provision for income taxes.................................. 361 258 260
------- ------- -------
Net income........................................ $ 6,057 $ 4,772 $ 8,181
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-45
<PAGE> 142
CONTINENTAL SPRAYERS AND AFFILIATES
COMBINED STATEMENTS OF DIVISIONAL EQUITY
FOR THE YEARS ENDED MAY 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<S> <C>
Balance, June 1, 1994................................................................................... $ 27,068
Net income.............................................................................................. 8,181
Dividends............................................................................................... (5,065)
Foreign currency translation adjustment................................................................. 19
---------
Balance, May 31, 1995................................................................................... 30,203
Net income.............................................................................................. 4,772
Dividends............................................................................................... (3,018)
Foreign currency translation adjustment................................................................. (17)
---------
Balance, May 31, 1996................................................................................... 31,940
Net income.............................................................................................. 6,057
Dividends............................................................................................... (3,851)
Foreign currency translation adjustment................................................................. 32
---------
Balance, May 31, 1997................................................................................... $ 34,178
=========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-46
<PAGE> 143
CONTINENTAL SPRAYERS AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 6,057 $ 4,772 $ 8,181
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 6,526 6,173 5,562
Net gain on disposal of assets......................... (89) (6) 15
Decrease (increase) in receivable from Contico, net.... (355) 482 (19)
Decrease (increase) in trade receivable, less
reserves............................................. (117) (2,316) 922
Decrease (increase) in inventories..................... 1,119 1,589 (81)
Decrease (increase) in other current assets............ 311 (387) (141)
Increase (decrease) in accounts payable................ (1,822) 2,685 (606)
Increase (decrease) in accrued expenses................ (331) (286) 14
------- ------- -------
Net cash provided by operating activities......... 11,299 12,706 13,847
------- ------- -------
Cash flows from investing activities:
Purchases of property, plant and equipment................ (4,477) (3,337) (5,301)
Proceeds from disposal of assets.......................... 106 10 18
Purchases of other long-term assets....................... (238) (232) (131)
------- ------- -------
Net cash used in investing activities............. (4,609) (3,559) (5,414)
------- ------- -------
Cash flows from financing activities:
Payment of dividends to Contico........................... (3,851) (3,018) (5,065)
Net decrease in advances from Contico..................... (3,151) (6,490) (3,199)
Increase (decrease) in uncleared checks................... 303 363 (220)
------- ------- -------
Net cash used in financing activities............. (6,699) (9,145) (8,484)
------- ------- -------
Effect of exchange rate changes on cash........... (9) 4 (13)
------- ------- -------
Increase (decrease) in cash....................... (18) 6 (64)
Cash, beginning of period................................... 39 33 97
------- ------- -------
Cash, end of period......................................... $ 21 $ 39 $ 33
======= ======= =======
Cash paid during the period for:
Interest.................................................. $ 616 $ 983 $ 1,355
======= ======= =======
Taxes..................................................... $ 396 $ 178 $ 333
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-47
<PAGE> 144
CONTINENTAL SPRAYERS AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A. COMBINED ENTITIES AND BASIS OF PRESENTATION: The combined financial
statements of Continental Sprayers and affiliates (the "Company") include the
accounts of Continental Sprayers and Contour Cutting, divisions of Contico
International, Inc. ("Contico"), a Missouri corporation, of Continental Sprayers
de Mexico S.A. de C.V. (a majority owned Mexican subsidiary of Contico) and of
Continental Sprayers & Equipment (a United Kingdom division of Contico).
The purpose of the combined financial statements is to present the
financial position, results of operations and cash flows of Contico's liquid
dispenser business activities. The combined financial statements have been
prepared as if the Company had operated as a stand-alone entity for all periods
presented, and include those assets, liabilities, revenues, expenses and cash
flows directly attributable to the operations of the Company. The combined
financial statements have been presented using consolidation principles.
Minority interest in affiliate represents the minority stockholder's
proportionate share of net equity. As a result of the matters discussed above,
no separate components of equity are presented in the combined financial
statements. All significant intercompany accounts and transactions have been
eliminated.
Contico provides certain services to, and incurs certain costs on behalf
of, its subsidiaries and divisions. These costs, which include general overhead
and treasury services are billed to Contico's subsidiaries, including the
Company, based upon an analysis of the allocated resources required to perform
such services. Such costs are presented in the accompanying combined statements
of operations as administrative expenses (see Note 5).
Contico's management believes the method used to allocate expenses to the
Company is reasonable and appropriate. However, allocated expenses are not
necessarily indicative of the expenses which would have resulted had the Company
operated as a separate entity. The Company has relied upon Contico to fund
working capital needs and provide equity. The financial information included
herein is based on the operation of the Company as a division of Contico and
should not necessarily be considered indicative of future operating results of
the Company on a stand-alone basis.
B. RECENTLY ISSUED ACCOUNTING STANDARDS: Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income, is effective for
years beginning after December 15, 1997. This statement requires that an
enterprise classify items of other comprehensive income by their nature in the
financial statements and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in the
equity section of the statement of position.
Statement of Financial Accounting Standards No. 131, Disclosure About
Segments of an Enterprise and Related Information, is effective for years
beginning after December 15, 1997. This statement requires that a public
business enterprise report financial and descriptive information about its
reportable business segments.
Management of the Company believes that the future adoption of these
statements will not have a significant impact on the Company's combined
financial position, results of operations or cash flows, but will result in
additional disclosure.
C. INVENTORIES: Inventories are stated at the lower of cost or market.
Cost is determined on the first-in, first-out (FIFO) basis.
D. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is stated
at cost. Depreciation is provided primarily on a straight-line basis over the
estimated useful lives of the assets. The estimated lives utilized in
calculating depreciation are as follows: building -- 39 years; building
improvements -- 10 to 39 years; machinery and equipment -- 3 to 10 years; molds,
dies and tooling -- 5 years; and furniture and fixtures -- 5 to 10 years.
Leasehold improvements are amortized over the shorter of the life of the lease
or of the improvement. Maintenance and repairs are charged to income as incurred
and betterments that extend the
F-48
<PAGE> 145
CONTINENTAL SPRAYERS AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
useful life are capitalized. Upon retirement or sale, the cost and accumulated
depreciation are eliminated from the respective accounts, and the gain or loss,
if any, is included in income.
If events or changes in circumstances indicate that the carrying amount of
a long-lived asset may not be recoverable, the Company estimates the future cash
flows expected to result from the use of the asset and its eventual disposition.
If the sum of the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the long-lived asset, an impairment
loss is recognized. To date, no impairment losses have been recognized.
E. FOREIGN CURRENCY TRANSLATION: The functional currency of Continental
Sprayers de Mexico S.A. de C.V. is the U.S. dollar. The functional currency of
Continental Sprayers & Equipment is British pounds sterling. Assets and
liabilities of Continental Sprayers & Equipment are translated into U.S. dollars
at current exchange rates, and profit and loss accounts are translated at
average annual exchange rates. Resulting translation gains and losses are
included as a separate component in divisional equity. As of May 31, 1997 and
1996, the cumulative translation adjustment included in divisional equity was
$33 and $1, respectively. Foreign exchange transaction gains and losses are
included in the results of operations. Such amounts for the years presented were
insignificant.
F. REVENUE RECOGNITION: Sales and related costs of goods sold are
included in income when goods are shipped and title has passed to customers.
G. RESEARCH AND DEVELOPMENT: The cost of research and development is
expensed as incurred. Research and development costs for the periods were not
significant.
H. INCOME TAXES: Contico is a Subchapter S corporation for federal and
Missouri state tax purposes. Under this election, the United States taxable
income of the Company is included in the personal taxable income of the
stockholders of Contico. The provision for income taxes includes certain state
taxes and taxes provided for foreign affiliates and divisions.
I. 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.
2. INVENTORIES:
Inventories are comprised of the following:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Raw materials.............................................. $1,293 $1,562
Work in process............................................ 2,303 3,355
Finished goods............................................. 2,172 1,930
------ ------
$5,768 $6,847
====== ======
</TABLE>
F-49
<PAGE> 146
CONTINENTAL SPRAYERS AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Land, buildings and improvements....................... $ 7,897 $ 7,852
Machinery and equipment................................ 40,160 39,320
Molds, dies and tooling................................ 21,936 19,694
Furniture and fixtures................................. 1,216 989
Construction in progress............................... 669 608
-------- --------
71,878 68,463
Less accumulated depreciation..................... (41,290) (35,999)
-------- --------
$ 30,588 $ 32,464
======== ========
</TABLE>
4. ACCRUED EXPENSES:
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Accrued compensation....................................... $1,156 $1,248
Accrued workers' compensation.............................. 400 673
Other accrued expenses..................................... 402 365
------ ------
$1,958 $2,286
====== ======
</TABLE>
5. INTERENTITY TRANSACTIONS:
Net sales to Contico result from a wholesale distribution agreement whereby
the Company provides Contico's entire domestic requirements of liquid
dispensers. The agreement is renewable annually as mutually agreed by the
parties.
The Company has an agreement to purchase certain operating, administrative
and corporate services from Contico. The agreement, which is subject to certain
conditions, is renewable annually as mutually agreed by the parties. The Company
paid $285, $285 and $270 for services rendered during the years ended May 31,
1997, 1996 and 1995, respectively (see Note 1).
Contico advances funds to the Company as needed to meet the Company's
operating requirements. The Company is charged interest on these advances at
7.5% and 8.3% at May 31, 1997 and 1996, respectively. Interest expense on these
advances was $616, $983 and $1,355 for the years ended May 31, 1997, 1996 and
1995, respectively. The Company's domestic, as well as Contico's, assets are
pledged as collateral under Contico's bank financing agreements.
The Company paid dividends to Contico of $3,851, $3,018 and $5,065
representing 60% of the Company's income before provision for income taxes for
the years ended May 31, 1997, 1996 and 1995, respectively.
6. RETIREMENT BENEFITS:
The Company offers a 401(k) plan to substantially all domestic nonunion
employees. The Company's contributions under this plan were $83, $91 and $110
for the years ended May 31, 1997, 1996 and 1995, respectively.
F-50
<PAGE> 147
CONTINENTAL SPRAYERS AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
7. MAJOR CUSTOMERS:
Two customers accounted for approximately 30%, 34% and 24% of total net
sales for the years ended May 31, 1997, 1996 and 1995, respectively.
In January 1998, following the sale of certain of its product lines to S.C.
Johnson, Dow Brands, CSI's largest customer, notified CSI that it would be
terminating its contract with CSI effective April 23, 1998. Dow Brands purchases
from CSI for each of the three years in the period ended May 31, 1997 was 18.2%,
22.2% and 15.1%, respectively. The loss of the Dow Brands business could
adversely impact the Company's future results of operations. Following its
acquisition of the Dow Brands product lines, S.C. Johnson resold certain of the
acquired product lines to a third party. Management believes that the Company
will continue through the end of 1998 to supply trigger sprayers for those
product lines, which accounted for approximately one-half of CSI's unit sales to
Dow Brands, as well as for certain of the product lines retained by S.C.
Johnson. However, there can be no assurance of the extent to which the Company
will continue to supply trigger sprayers for any of these product lines or the
length of time it will continue to supply them.
8. GEOGRAPHIC SEGMENT INFORMATION:
The Company operates in one business segment -- the manufacture and sale of
liquid dispensers. The Company's operations can be grouped into two geographical
segments. Total revenue by segment includes both sales to customers and
intersegment sales, which are accounted for at prices charged to customers and
eliminated in consolidation. Pertinent financial data by major geographic
segment is as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
--------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
North America:
Net sales...................................... $60,582 $56,856 $59,844
Operating income............................... 6,026 5,537 8,992
Identifiable assets............................ 41,672 47,259
Europe:
Net sales...................................... $ 7,643 $ 4,110 $ 4,117
Operating income............................... 1,284 546 656
Identifiable assets............................ 5,566 4,009
Eliminations:
Net sales...................................... $(5,976) $(3,862) $(5,641)
Operating (loss) income........................ (248) 72 (33)
Identifiable assets............................ (1,310) (2,637)
Total:
Net sales...................................... $62,249 $57,104 $58,320
Operating income............................... 7,062 6,155 9,615
Identifiable assets............................ 45,928 48,631
</TABLE>
9. SUBSEQUENT EVENT -- SALE OF OPERATIONS:
Effective February 1, 1998, Contico sold certain of the assets, liabilities
and operations of the Company to Continental Acquisition Corp., for a net cash
sale price of approximately $91 million plus approximately $2 million,
contingently payable in the future based on the Company achieving certain
agreed-upon sales levels through 2005. No adjustments have been recorded in the
accompanying historical combined financial statements of the Company as a result
of this transaction.
F-51
<PAGE> 148
CONTINENTAL SPRAYERS AND AFFILIATES
COMBINED BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash.................................................................................................. $ 19
Trade receivables from Contico........................................................................ 625
Trade receivables, less allowance for doubtful accounts of $58........................................ 6,822
Inventories........................................................................................... 5,973
Other current assets.................................................................................. 321
---------
Total current assets.......................................................................... 13,760
Property, plant and equipment........................................................................... 27,850
Other assets............................................................................................ 512
---------
Total assets.................................................................................. $ 42,122
=========
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Accounts payable...................................................................................... $ 1,594
Accrued expenses...................................................................................... 1,718
Uncleared checks...................................................................................... 719
---------
Total current liabilities..................................................................... 4,031
Advances from Contico................................................................................... 1,647
Minority interest in affiliate.......................................................................... 117
---------
Total liabilities............................................................................. 5,795
Divisional equity....................................................................................... 36,327
---------
Total liabilities and divisional equity....................................................... $ 42,122
=========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-52
<PAGE> 149
CONTINENTAL SPRAYERS AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
FOR THE SEVEN MONTHS ENDED DECEMBER 31, 1997 AND 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Net sales to third parties.................................. $32,988 $31,446
Net sales to Contico........................................ 2,496 2,488
------- -------
35,484 33,934
Cost of sales............................................... 25,877 27,281
------- -------
Gross profit...................................... 9,607 6,653
Selling, general and administrative expenses................ 3,391 3,595
------- -------
Income from operations............................ 6,216 3,058
------- -------
Other expense:
Interest expense from Contico............................. 157 377
Other, net................................................ 57 60
------- -------
214 437
------- -------
Income before provision for income taxes.......... 6,002 2,621
Provision for income taxes.................................. 252 157
------- -------
Net income........................................ $ 5,750 $ 2,464
======= =======
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-53
<PAGE> 150
CONTINENTAL SPRAYERS AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE SEVEN MONTHS ENDED DECEMBER 31, 1997 AND 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 5,750 $ 2,464
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 3,733 4,030
Net gain on disposal of assets......................... (9) (10)
Decrease (increase) in receivable from Contico, net.... (40) (286)
Decrease (increase) in trade receivables, less
reserves.............................................. 1,372 1,662
Increase in inventories................................ (206) (1,276)
Decrease (increase) in other current assets............ (36) 287
Decrease in accounts payable........................... (849) (1,920)
Increase (decrease) in accrued expenses................ (238) 156
------- -------
Net cash provided by operating activities......... 9,477 5,107
------- -------
Cash flows from investing activities:
Purchases of property, plant and equipment................ (915) (3,115)
Proceeds from disposal of assets.......................... 18 32
Purchases of other long-term assets....................... (116) (100)
------- -------
Net cash used in investing activities............. (1,013) (3,183)
------- -------
Cash flows from financing activities:
Payment of dividends to Contico........................... (3,601) (1,573)
Net decrease in advances from Contico..................... (4,065) (598)
Increase (decrease) in uncleared checks................... (800) 215
------- -------
Net cash used in financing activities............. (8,466) (1,956)
------- -------
Effect of exchange rate changes on cash........... -- 11
------- -------
Decrease in cash.................................. (2) (21)
Cash, beginning of period................................... 21 39
------- -------
Cash, end of period......................................... $ 19 $ 18
======= =======
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-54
<PAGE> 151
CONTINENTAL SPRAYERS AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
1. COMBINED ENTITIES AND BASIS OF PRESENTATION:
The combined financial statements of Continental Sprayers and Affiliates
(the "Company") include the accounts of Continental Sprayers and Contour
Cutting, divisions of Contico International, Inc. ("Contico"), a Missouri
corporation, of Continental Sprayers de Mexico S.A. de C.V. (a majority-owned
Mexican subsidiary of Contico) and of Continental Sprayers & Equipment (a United
Kingdom division of Contico).
The purpose of the combined financial statements is to present financial
position, results of operations and cash flows of Contico's liquid dispenser
business activities. The combined financial statements have been prepared as if
the Company had operated as a stand-alone entity for all periods presented, and
include those assets, liabilities, revenues, expenses and cash flows directly
attributable to the operations of the Company. The combined financial statements
have been presented using consolidation principles. Minority interest in
affiliate represents the minority stockholder's proportionate share of net
equity. As a result of the matters discussed above, no separate components of
equity are presented in the combined financial statements. All significant
interentity transactions have been eliminated.
The unaudited combined balance sheet as of December 31, 1997 and the
unaudited combined statements of operations and cash flows for the seven months
ended December 31, 1997 and 1996, in the opinion of management, have been
prepared on the same basis as the Company's audited combined financial
statements and include all significant adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of the results of the
interim periods. The data disclosed in these notes to the financial statements
for these periods are also unaudited. Certain information and footnote
disclosure normally included in the Company's annual financial statements have
been condensed or omitted. The combined financial statements and notes thereto
should be read in conjunction with the combined financial statement and notes
thereto as of May 31, 1997 and 1996, and for the years ended May 31, 1997, 1996
and 1995. Results for the seven months ended December 31, 1997 are not
necessarily indicative of the results that may be expected for the entire year
ending May 31, 1998.
Contico provides certain services to, and incurs certain costs on behalf of
its subsidiaries and divisions. These costs, which include general overhead and
treasury services are billed to Contico's subsidiaries, including the Company,
based upon an analysis of the allocated resources required to perform such
services. Such costs are presented in the accompanying combined statements of
operations as administrative expenses (see Note 3).
Contico's management believes the method used to allocate expenses to the
Company is reasonable and appropriate. However, allocated expenses are not
necessarily indicative of the expenses which would have resulted had the Company
operated as a separate entity. The Company has relied upon Contico to fund
working capital needs and provide equity. The financial information included
herein is based on the operation of the Company as a division of Contico and
should not necessarily be considered indicative of future operating results of
the Company on a stand-alone basis.
2. INVENTORIES:
Inventories at December 31, 1997 are comprised of the following:
<TABLE>
<S> <C>
Raw materials............................................... $1,144
Work in process............................................. 2,485
Finished goods.............................................. 2,344
------
$5,973
======
</TABLE>
F-55
<PAGE> 152
CONTINENTAL SPRAYERS AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. INTERENTITY TRANSACTIONS:
Net sales to Contico result from a wholesale distribution agreement whereby
the Company provides Contico's entire domestic requirements of liquid
dispensers. The agreement is renewable annually as mutually agreed by the
parties.
The Company has an agreement to purchase certain operating, administrative
and corporate services from Contico. The agreement, which is subject to certain
conditions, is renewable annually as mutually agreed by the parties. The Company
paid $164 for services rendered during the periods ended December 31, 1997 and
1996 (see Note 1).
Contico advances funds to the Company as needed to meet the Company's
operating requirements. The Company is charged interest on these advances at
7.7% at December 31, 1997. Interest expense on these advances was $157 and $378
for the periods ended December 31, 1997 and 1996, respectively. The Company's
domestic, as well as Contico's, assets are pledged as collateral under Contico's
bank financing agreements.
The Company paid dividends to Contico of $3,601 and $1,573 representing 60%
of the Company's income before provision for income taxes for the periods ended
December 31, 1997 and 1996, respectively.
4. SUBSEQUENT EVENTS:
Effective February 1, 1998, Contico sold certain of the assets, liabilities
and operations of the Company to Continental Acquisition Corp., for a net cash
sale price of approximately $91 million plus approximately $2 million,
contingently payable in the future based on the Company achieving certain
agreed-upon sales levels through 2005. No adjustments have been recorded in the
accompanying historical combined financial statements of the Company as a result
of this transaction.
In September 1997, at the request of a customer, the Company implemented
certain design changes to a trigger sprayer, which changes were approved by the
customer. In October 1997, without informing the Company, the customer made
changes to the formulation of its product that were incompatible with the
revised design of the Company's trigger sprayer, resulting in malfunction of the
trigger sprayer when used with that product. Management believes that the
trigger sprayer functions in accordance with the customer's design
specifications. However, the Company may provide certain allowances to the
customer. The Company is currently unable to estimate the amount of any such
allowances and, accordingly, no accrual has been made therefor.
F-56
<PAGE> 153
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Indesco International, Inc.
We have audited the accompanying balance sheet of Indesco International,
Inc. as of December 31, 1997. This financial statement is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of the Company at December 31, 1997,
in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
March 16, 1998
F-57
<PAGE> 154
INDESCO INTERNATIONAL INC.
BALANCE SHEET
DECEMBER 31, 1997
STOCKHOLDER'S EQUITY
<TABLE>
<S> <C>
Common Stock -- authorized 3,000 shares of $.01 par value
each; 200 shares issued and outstanding................... $ 2
------
Subscription Receivable..................................... (2)
TOTAL............................................. $ --
======
</TABLE>
See accompanying notes to this financial statement.
F-58
<PAGE> 155
INDESCO INTERNATIONAL, INC.
NOTE TO FINANCIAL STATEMENT
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
1. ORGANIZATION:
Indesco International, Inc. (the "Company") is a wholly owned subsidiary of
AFA Holdings Co. ("Parent"). Parent was formed in July 1997 to acquire, through
a wholly-owned subsidiary, the assets and liabilities of AFA Products, Inc.
("AFA"), located in Forest City, North Carolina. Concurrent with this
transaction, Dejanu B.V. acquired the outstanding common stock of AFA Polytek
B.V. ("Polytek") based in the Netherlands. AFA and Polytek were formerly
operating subsidiaries of W.T.I., Inc. ("WTI").
ACQUISITION OF CONTINENTAL SPRAYERS AND AFFILIATES
Effective February 1, 1998, a subsidiary of the Parent acquired certain
assets and liabilities of Continental Sprayers and Affiliates ("CSI"), a
division of Contico International, Inc. CSI also manufactures and sells trigger
sprayers. Parent acquired CSI for $92,947 in cash, paid outstanding debt of
Parent of $39,567 and paid fees of $4,980. Such amounts were paid through
borrowings under a credit facility.
The assets acquired and liabilities assumed of CSI based on the December
31, 1997 value thereof are as follows:
<TABLE>
<S> <C>
Cash and receivables....................................... $ 767
Inventory.................................................. 5,309
Fixed assets............................................... 27,789
Other assets............................................... 1,135
Goodwill................................................... 60,639
Payables................................................... (2,692)
-------
Purchase price................................... $92,947
=======
</TABLE>
The acquisitions have been accounted for using the purchase method of
accounting. The Company has increased the value of inventory by $850 in
accordance with Accounting Principles Board Opinion No. 16 and has recorded
fixed assets and identifiable intangibles at their net historical book value,
pending completion of appraisals. Differences, if any, between these amounts and
the amounts resulting from appraisals and valuations of these assets, which have
not yet been completed, will be reflected as adjustments to goodwill, which may
increase or decrease related depreciation and amortization charges.
Concurrent with the acquisition, Polytek became an indirect wholly-owned
subsidiary of the Parent.
Condensed unaudited pro forma combined results of operations of AFA, CSI
and Polytek for the years ended December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net Sales............................................ $114,531 $113,139
======== ========
Net Income........................................... $ 1,424 $ 493
======== ========
</TABLE>
The financial information above assumes the Company has completed its
offering of $145,000 of debt securities. Subsequent to the completion of the CSI
Acquisition, the Parent contributed its investment in AFA, Polytek and CSI to
the Company.
F-59
<PAGE> 156
===================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER DESCRIBED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN
SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THIS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................... 1
Risk Factors......................... 12
Use of Proceeds...................... 18
Pro Forma Capitalization............. 19
Unaudited Pro Forma Combined
Financial Statements............... 20
Selected Historical Financial Data... 26
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 29
Business............................. 36
Management........................... 43
Security Ownership of Certain
Beneficial Owners and Management... 45
Certain Transactions................. 46
The Exchange Offer................... 47
Description of the Notes............. 53
Description of Other Indebtedness.... 85
Certain U.S. Federal Income Tax
Considerations..................... 87
Plan of Distribution................. 91
Legal Matters........................ 91
Experts.............................. 91
Index to Financial Statements........ F-1
</TABLE>
===================================================
===================================================
[AFA/INDESCO LOGO]
$145,000,000
9 3/4% Senior Subordinated Notes
due 2008
PROSPECTUS
, 1998
===================================================
<PAGE> 157
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Indesco International, Inc., Continental Sprayers International, Inc. and
AFA Products, Inc. (the "Registrants") are Delaware corporations. Subsection
(b)(7) of Section 102 of the Delaware General Corporation Law (the "DGCL"),
enables a corporation in its original certificate of incorporation or an
amendment thereto to eliminate or limit the personal liability of a director to
the corporation or its stockholders for monetary damages for violations of the
director's fiduciary duty, except (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions) or (iv) for any transaction from which a director derived an
improper personal benefit. The Certificate of Incorporation of each of the
Registrants includes a provision that has eliminated the personal liability of
its directors to the fullest extent permitted by law.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any director or officer, or former director or officer, who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding provided that such
director or officer acted in good faith in a manner reasonably believed to be
in, or not opposed to, the best interests of the corporation, and, with respect
to any criminal action or proceeding, provided further that such director or
officer had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
director or officer, or former director or officer, who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person acted in any of the capacities set forth
above, against expenses (including attorneys' fees) actually and reasonably
incurred in connection with the defense or settlement of such action or suit
provided that such director or officer acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, except that no indemnification may be made in respect of any claim,
issue or matter as to which such director or officer shall have been adjudged to
be liable to the corporation unless and only to the extent that the Court of
Chancery or other court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
of the circumstances of the case, such director or officer is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to in subsections (a) or (b) or in the defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith; that
indemnification and advancement of expenses provided for, by, or granted
pursuant to, Section 145 shall not be deemed exclusive of any rights to which
the indemnified party may be entitled; and empowers the corporation to purchase
and maintain insurance on behalf of any person who is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him or incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liabilities under Section 145.
II-1
<PAGE> 158
The Certificate of Incorporation of each of the Registrants states that
such corporation shall, to the fullest extent permitted by the DGCL, as amended
from time to time, indemnify all persons whom it may indemnify pursuant thereto.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1(a) -- Certificate of Incorporation of Indesco International,
Inc., as amended.*
(b) -- Certificate of Incorporation of Continental Sprayers
International, Inc., as amended.*
(c) -- Certificate of Incorporation of AFA Products, Inc., as
amended.*
3.2(a) -- By-laws of Indesco International, Inc.*
(b) -- By-laws of Continental Sprayers International, Inc.*
(c) -- By-laws of AFA Products, Inc.*
4.1 -- Indenture, dated as of April 23, 1998, between Indesco
International, Inc., AFA Products, Inc. and Continental
Sprayers International, Inc., as subsidiary guarantors,
and Norwest Bank Minnesota, National Association, as
trustee.*
4.2 -- Form of Notes (included in Exhibit 4.1).
4.3 -- Form of Subsidiary Guarantees (included in Exhibit 4.1).
4.4 -- Registration Rights Agreement, dated as of April 23,
1998, between Indesco International, Inc., AFA Products,
Inc. and Continental Sprayers International, Inc., as
subsidiary guarantors, and NationsBanc Montgomery
Securities LLC.*
5 -- Opinion of Weil, Gotshal & Manges LLP.**
10.1 -- Credit Agreement, dated as of February 4, 1998, among
Indesco International, Inc. (f/k/a APC Holding, Inc.),
NationsCredit Commercial Corporation, as Collateral Agent
and Initial Issuing Bank, NationsBridge L.L.C., as
Administrative Agent, and the Initial Lenders named
therein, as amended.*
10.2 -- Guaranty of AFA Products, Inc. and Continental Sprayers
International, Inc. (f/k/a Continental Acquisition Corp.)
dated as of February 4, 1998 in favor of Nations Credit
Commercial Corporation, as Collateral Agent and Initial
Issuing Bank, Nations Bridge L.L.C., as Administrative
Agent, and Initial Lenders named therein.*
10.3 -- Security Agreement, dated as of February 4, 1998, among
Indesco International, Inc. (f/k/a APC Holding, Inc.),
Indesco Holdings Co. (f/k/a AFA Holdings Co.), AFA
Products, Inc., Continental Sprayers International, Inc.
(f/k/a Continental Acquisition Corp.) and NationsCredit
Commercial Corporation.*
10.4 -- Intellectual Property Security Agreement, dated as of
February 4, 1998, among Indesco International, Inc.
(f/k/a APC Holding Inc.) Indesco Holdings Co. (f/k/a AFA
Holdings Co.), AFA Products, Inc., Continental Sprayers
International, Inc. (f/k/a Continental Acquisition Corp.)
and NationsCredit Commercial Corporation.*
10.5 -- Management Agreement, dated as of February 4, 1998,
between Indesco International, Inc. and Gadraz, Inc.*
10.6 -- Employment Agreement, dated as of February 4, 1998,
between Indesco International, Inc. and Ariel Gratch.*
10.7 -- Tax Sharing Agreement, dated as of August 1, 1997, among
Indesco International, Inc., Continental Sprayers
International, Inc. and AFA Products, Inc.*
12 -- Computation of Ratio of Earnings to Fixed Charges.*
21 -- Subsidiaries of Indesco International, Inc.*
</TABLE>
II-2
<PAGE> 159
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
23.1 -- Consent of Coopers & Lybrand L.L.P.*
23.2 -- Consent of Coopers & Lybrand L.L.P.*
23.3 -- Consent of Coopers & Lybrand L.L.P.*
23.4 -- Consent of Weil, Gotshal & Manges LLP (included in
exhibit 5).
24 -- Power of Attorney (included on signature pages to
Registration Statement).
25 -- Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of Norwest Bank
Minnesota, National Association, as Trustee under the
Indenture.*
99.1 -- Form of Letter of Transmittal.*
99.2 -- Form of Notice of Guaranteed Delivery.*
99.3 -- Form of Exchange Agent Agreement.**
</TABLE>
- ---------------
* Filed herewith.
** To be filed by Amendment.
(b) SCHEDULES
All schedules are omitted as the required information is presented in the
Registrant's consolidated financial statements or related notes or such
schedules are not applicable.
ITEM 22. UNDERTAKINGS
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, each of the
Registrants 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 a Registrant 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, such 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.
II-3
<PAGE> 160
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
each of the Registrants named below has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City and State of New York, this 14th day of May, 1998.
INDESCO INTERNATIONAL, INC.
CONTINENTAL SPRAYERS
INTERNATIONAL, INC.
AFA PRODUCTS, INC.
By: /s/ ARIEL GRATCH
-----------------------------------
Ariel Gratch
Vice Chairman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes Ariel Gratch and Louis H. Dixey, Jr., and each of them,
such person's true and lawful attorneys-in-fact and agents, with full power of
substitution, to sign for such person and in such person's name, place and
stead, in any and all capacities, any and all amendments, (including
post-effective amendments) to this Registration Statement, and to file the same
with the Securities and Exchange Commission, granting unto each of said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite to be done, as fully to all intents and purposes
as such person might or could do personally, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their respective
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement and the foregoing Power of Attorney has been signed
by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ARIEL GRATCH Vice Chairman of the Board of May 14, 1998
- --------------------------------------------------- Directors (Principal
Ariel Gratch Executive Officer)
/s/ YEHOCHAI SCHNEIDER Chairman of the Board of May 14, 1998
- --------------------------------------------------- Directors
Yehochai Schneider
/s/ LOUIS H. DIXEY, JR. Vice President, Treasurer, May 14, 1998
- --------------------------------------------------- Chief Financial Officer,
Louis H. Dixey, Jr. Secretary and a Director
(Principal Financial and
Accounting Officer)
</TABLE>
II-4
<PAGE> 1
Exhibit 3.1a
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
APC HOLDING, INC.
It is hereby certified that:
1. The present name of the corporation (hereinafter called the
"Corporation") is APC Holding, Inc. The name under which the Corporation was
originally incorporated is SME Holdings, Inc., and the date of filing the
original Certificate of Incorporation of the Corporation with the Secretary of
State of the State of Delaware is August 18, 1997.
2. The Certificate of Incorporation of the Corporation is hereby amended
by striking out Article FIRST thereof and by substituting in lieu thereof new
Article FIRST:
"FIRST. The name of the Corporation is Indesco International, Inc."
which is set forth in the Restated Certificate of Incorporation hereinafter
provided for.
3. The provisions of the Certificate of Incorporation of the Corporation
as heretofore amended, and as herein amended, are hereby restated and integrated
into the single instrument which is hereinafter set forth, and which is entitled
Restated Certificate of Incorporation of Indesco International, Inc. without any
further amendments other than the amendments herein certified and without any
discrepancy between the provisions of the Certificate of Incorporation as
heretofore amended and the provisions of the said single instrument hereinafter
set forth.
4. The amendment and the restatement of the Certificate of Incorporation
herein certified have been duly adopted by the stockholders in accordance with
the provisions of Sections 228, 242 and 245 of the General Corporation Law of
the State of Delaware.
5. The Certificate of Incorporation of the Corporation, as amended and
restated herein, shall at the effective time of this Restated Certificate of
Incorporation, reads as follows:
<PAGE> 2
RESTATED
CERTIFICATE OF INCORPORATION
OF
INDESCO INTERNATIONAL, INC.
FIRST: The name of the corporation is Indesco International, Inc.
SECOND: The name of the registered agent of the corporation is
Corporation Service Company. The address of the registered agent of the
corporation in the State of Delaware is Corporation Service Company, 1013 Centre
Road, Wilmington, 19805, in the County of New Castle.
THIRD: 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 the State of Delaware as set forth in Title 8 of the Delaware
Code (the "GCL").
FOURTH: The total number of shares of stock which the corporation is
authorized to issue is 3,000 shares of Common Stock, par value of $0.01.
FIFTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the corporation, and for further
definition, limitation and regulation of the powers of the corporation and of
its directors and stockholders:
1. The business and affairs of the corporation shall be
managed by or under the direction of the Board of Directors.
2. The directors shall have power without the assent or vote
of the stockholders to make, alter, amend, change, add to or repeal the By-Laws
of the corporation.
3. The number of directors of the corporation shall be as from
time to time fixed by, or in the manner provided in, the By-Laws of the
corporation. Election of directors need not be by written ballot unless the
By-Laws so provide.
4. No director shall be personally liable to the corporation
or its stockholders for monetary damages for any breach of fiduciary duty by
such director as a director.
2
<PAGE> 3
Notwithstanding the foregoing sentence, a director shall be liable to the extent
provided by applicable law (i) for breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) pursuant to Section 174 of the GCL or (iv) for any transaction from which
the director derived an improper personal benefit. Notwithstanding the foregoing
sentence, the corporation shall, to the fullest extent permitted by the GCL, as
amended from time to time, indemnify all persons whom it may indemnify pursuant
thereto. No amendment to or repeal of this Subsection 4 to Article FIFTH shall
apply to or have any effect on the liability or alleged liability of any
director of the corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
5. In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the corporation, subject, nevertheless, to the provisions of the GCL,
this Amended and Restated Certificate of Incorporation and any By-Laws adopted
by the stockholders; provided, however, that no By-Laws hereafter adopted by the
stockholders shall invalidate any prior act of the directors which would have
been valid if such By-Laws had not been adopted.
SIXTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the corporation may
be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the corporation.
SEVENTH: The corporation reserves the right to amend, alter, change
or repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
Signed on March 17, 1998
/s/ L.H. Dixey, Jr.
________________________
L.H. Dixey, Jr.
Vice President
ATTEST:
/s/ Alan S. Jacobs
______________________________
Alan S. Jacobs
Assistant Secretary
3
<PAGE> 1
Exhibit 3.1b
CERTIFICATE OF INCORPORATION
OF
CONTINENTAL ACQUISITION CORP.
FIRST: The name of the corporation is Continental Acquisition Corp.
SECOND: The name of the registered agent of the corporation is Corporation
Service Company. The address of the registered agent of the corporation in the
State of Delaware is Corporation Service Company, 1013 Centre Road, Wilmington,
19805, in the County of New Castle.
THIRD: 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 the State of Delaware as set forth in Title 8 of the Delaware Code (the
"GCL").
FOURTH: The total number of shares of stock which the corporation is
authorized to issue is 3000 shares of Common Stock, par value of $0.01.
FIFTH: The name and mailing address of the Sole Incorporator is as
follows:
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
Dinah Slavitt Gratch Jacobs & Brozman, P.C.
950 Third Avenue
New York, New York 10022
</TABLE>
SIXTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the corporation, and for further
definition, limitation and regulation of the powers of the corporation and of
its directors and stockholders:
1. The business and affairs of the corporation shall be managed by
or under the direction of the Board of Directors.
2. The directors shall have power without the assent or vote of the
stockholders to make, alter, amend, change, add to or repeal the By-Laws of the
corporation.
3. The number of directors of the corporation shall be as from time
to time fixed by, or in the manner provided in, the By-Laws of the corporation.
Election of directors need not be by written ballot unless the By-Laws so
provide.
<PAGE> 2
4. No director shall be personally liable to the corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law (i) for breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the GCL or (iv) for
any transaction from which the director derived an improper personal benefit.
Notwithstanding the foregoing sentence, the corporation shall, to the fullest
extent permitted by the GCL, as amended from time to time, indemnify all persons
whom it may indemnify pursuant thereto. No amendment to or repeal of this
Subsection 4 to Article SIXTH shall apply to or have any effect on the liability
or alleged liability of any director of the corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment.
5. In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the corporation, subject, nevertheless, to the provisions of the GCL,
this Certificate of Incorporation, and any By-Laws adopted by the stockholders;
provided, however, that no By-Laws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid if such
By-Laws had not been adopted.
SEVENTH: Meetings of stockholders may be held within or without the State
of Delaware, as the By-Laws may provide. The books of the corporation may be
kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the corporation.
EIGHTH: The corporation reserves the right amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the GCL, do make this
Certificate, hereby declaring and certifying that this is my act and deed and
the facts herein stated are true, and accordingly have hereunto set my hand this
16th day of December, 1997.
/s/ Dinah Slavitt
_____________________________
Sole Incorporator,
Dinah Slavitt
- 2 -
<PAGE> 3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CONTINENTAL ACQUISITION CORP.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation") is
Continental Acquisition Corp.
2. The certificate of incorporation of the corporation is hereby amended
by striking out Article First thereof and by substituting in lieu of said
Article the following new Article:
"FIRST: the name of the corporation is Continental Sprayers
International, Inc."
3. The amendment of the certificate of incorporation herein certified has
been duly adopted in accordance with the provisions of Sections 228 and 242 of
the General Corporation Law of the State of Delaware.
Signed on February 2, 1998
/s/ Ariel Gratch
_____________________________
Ariel Gratch, President
ATTEST:
/s/ Alan S. Jacobs
_______________________________
Alan S. Jacobs
Assistant Secretary
<PAGE> 1
Exhibit 3.1c
CERTIFICATE OF INCORPORATION
OF
AFA ACQUISITION CORP.
FIRST: The name of the corporation is AFA Acquisition Corp.
SECOND: The name of the registered agent of the corporation is Corporation
Service Company. The address of the registered agent of the corporation in the
State of Delaware is Corporation Service Company, 1013 Centre Road, Wilmington,
19805, in the County of New Castle.
THIRD: 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 the State of Delaware as set forth in Title 8 of the Delaware Code (the
"GCL").
FOURTH: The total number of shares of stock which the corporation is
authorized to issue is 3000 shares of Common Stock, par value of $0.01.
FIFTH: The name and mailing address of the Sole Incorporator is as
follows:
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
Marion Figur Gratch Jacobs & Brozman, P.C.
950 Third Avenue
New York, New York 10022
</TABLE>
SIXTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the corporation, and for further
definition, limitation and regulation of the powers of the corporation and of
its directors and stockholders:
1. The business and affairs of the corporation shall be managed by
or under the direction of the Board of Directors.
2. The directors shall have power without the assent or vote of the
stockholders to make, alter, amend, change, add to or repeal the By-Laws of the
corporation.
3. The number of directors of the corporation shall be as from time
to time fixed by, or in the manner provided in, the By-Laws of the corporation.
Election of directors need not be by written ballot unless the By-Laws so
provide.
<PAGE> 2
4. No director shall be personally liable to the corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law (i) for breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the GCL or (iv) for
any transaction from which the director derived an improper personal benefit.
Notwithstanding the foregoing sentence, the corporation shall, to the fullest
extent permitted by the GCL, as amended from time to time, indemnify all persons
whom it may indemnify pursuant thereto. No amendment to or repeal of this
Subsection 4 to Article SIXTH shall apply to or have any effect on the liability
or alleged liability of any director of the corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment.
5. In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the corporation, subject, nevertheless, to the provisions of the GCL,
this Certificate of Incorporation, and any By-Laws adopted by the stockholders;
provided, however, that no By-Laws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid if such
By-Laws had not been adopted.
SEVENTH: Meetings of stockholders may be held within or without the State
of Delaware, as the By-Laws may provide. The books of the corporation may be
kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the corporation.
EIGHTH: The corporation reserves the right amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the GCL, do make this
Certificate, hereby declaring and certifying that this is my act and deed and
the facts herein stated are true, and accordingly have hereunto set my hand this
18 day of June, 1997.
/s/ Marion Figur
___________________________
Sole Incorporator,
Marion Figur
- 2 -
<PAGE> 3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
AFA ACQUISITION CORP.
------
Under Section 242
of the General Corporation
Law of the State of Delaware
------
The undersigned, being the President and Secretary of AFA Acquisition
Corp. (the "Corporation"), a Delaware corporation, hereby certify that:
FIRST: The name of the Corporation is AFA Acquisition Corp.
SECOND: The Certificate of Incorporation of the Corporation was
filed in the office of the Secretary of State of Delaware on June 18, 1997.
THIRD: Article First is hereby amended by deleting it in its
entirety and inserting in lieu thereof the following:
FIRST: The name of the Corporation is "AFA Products, Inc."
FOURTH: The foregoing amendment of the Certificate of Incorporation
of the corporation has been duly adopted in accordance with the provisions of
Sections 228 and 141 of the General Corporation Law of the State of Delaware.
<PAGE> 4
IN WITNESS WHEREOF, the undersigned have hereunto signed this
Amendment of Certificate of Incorporation this 29th day of July, 1997.
/s/ Ariel Gratch
______________________________
Ariel Gratch, President
ATTEST:
/s/ Alan S. Jacobs
_____________________________
Alan S. Jacobs, Secretary
<PAGE> 1
Exhibit 3.2a
BY-LAWS
OF
APC HOLDING, INC.
N/K/A/ INDESCO INTERNATIONAL, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the Office of the Secretary of State, City of Wilmington, County of
New Castle, State of Delaware.
Section 2. Other Offices. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meeting of Stockholders shall be
held within five months after the close of the fiscal year of the Corporation,
at which meeting the stockholders shall elect by a plurality vote a Board of
Directors, and transact such other business as may properly be brought before
the meeting. Written notice of the Annual Meeting
<PAGE> 2
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
fifty days before the date of the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law or by the
Certificate of Incorporation, Special Meetings of Stockholders, for any purpose
or purposes, may be called by either (i) the Chairman, if there be one, or (ii)
the President and shall be called by any such officer at the request in writing
of a majority of the Board of Directors or at the request in writing of
stockholders owning a majority of the capital stock of the Corporation issued
and outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. Written notice of a Special Meeting stating
the place, date and hour of the meeting and the purpose or purposes for which
the meeting is called shall be given not less than ten nor more than fifty days
before the date of the meeting to each stockholder entitled to vote at such
meeting.
Section 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting,a notice of
the adjourned meeting shall be given to each stockholder entitled to vote at the
meeting.
-2-
<PAGE> 3
Section 5. Voting. Unless otherwise required by law, the Certificate of
Incorporation or these By-Laws, any question brought before any meeting of
stockholders, other than the election of directors, shall be decided by the vote
of the holders of a majority of the stock represented and entitled to vote
thereat. Each stockholder represented at a meeting of stockholders shall be
entitled to cast one vote for each share of the capital stock entitled to vote
thereat held by such stockholder. Such votes may be cast in person or by proxy
but no proxy shall be voted on or after three years from its date, unless such
proxy provides for a longer period. The Board of Directors, in its discretion,
or the officer of the Corporation presiding at a meeting of stockholders, in his
discretion, may require that any votes cast at such meeting shall be cast by
written ballot.
Section 6. Consent of Stockholders in Lieu of Meeting. Unless otherwise
provided in the Certificate of Incorporation, any action required or permitted
to be taken at any Annual or Special Meeting of Stockholders of the Corporation,
may be taken without a meeting, without prior written notice and without a vote,
if a consent in writing, setting forth the action so taken, shall be signed by
the holders of the outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
Section 7. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any
-3-
<PAGE> 4
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder of the Corporation who is present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of Directors of the
Corporation shall consist of no less than one (1) but no more than eleven (11)
directors unless and until otherwise determined by vote of a majority of the
entire Board of Directors. Except as provided in Section 2 of this Article, all
directors shall be elected by a plurality of the votes cast at Annual Meetings
of Stockholders, and each director so elected shall hold office until the next
Annual Meeting and until his successor is duly elected and qualified, or until
his earlier resignation or removal. Any director may resign at any time upon
notice to the Corporation. Directors need not be stockholders.
Section 2. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until the
-4-
<PAGE> 5
next annual election and until their successors are duly elected and qualified,
or until their earlier resignation or removal.
Section 3. Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or these By-Laws directed
or required to be exercised or done by the stockholders.
Section 4. Meetings. The Board of Directors of the Corporation may hold
meeting, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman of the Board or the President. Notice thereof stating the place,
date and hour of the meeting shall be given to each director either by mail not
less than forty-eight (48) hours before the date of the meeting, by telephone or
telegram on twenty-four (24) hours notice, or on such shorter notice as the
person or persons calling such meeting may deem necessary or appropriate in the
circumstances.
Section 5. Quorum. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these By-Laws, at all meetings of the
Board of Directors, a majority of the entire Board of Directors shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 6. Actions of Board. Unless otherwise provided by the Certificate
of Incorporation or these By-Laws, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken
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without a meeting, if all the members of the Board of Directors or committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors or committee.
Section 7. Meetings by Means of Conference Telephone. Unless otherwise
provided by the Certificate of Incorporation or these By-Laws, members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 6 shall constitute
presence in person at such meeting.
Section 8. Committees. The Board of Directors may, by resolution passed by
a majority of the entire Board of Directors, designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of any such committee. In the absence or disqualification of a member of
a committee, and in the absence of a designation by the Board of Directors of an
alternate member to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any absent or
disqualified member. Any committee, to the extent allowed by law and provided in
the resolution establishing such committee, shall have and may execute all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation. Each committee shall keep regular minutes and
report to the Board of Directors when required.
Section 9. Compensation. The directors may be paid their expenses, if any,
of attendance at each meeting of the
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Board of Directors and may be paid a fixed sum for attendance at each meeting of
the Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
Section 10. Interested Directors. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
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ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen by the
Board of Directors and shall be a President, a Secretary and a Treasurer. The
Board of Directors, in its discretion, may also choose a Chairman of the Board
of Directors (who must be a director) and one or more Chairmans,
Vice-Presidents, Assistant Secretaries, Assistant Treasurers and other officers.
Any number of offices may be held by the same person, unless otherwise
prohibited by law, the Certificate of Incorporation or these By-Laws. The
officers of the Corporation need not be stockholders of the Corporation nor,
except in the case of the Chairman of the Board of Directors, need such officers
be directors of the Corporation.
Section 2. Election. The Board of Directors at its first meeting held
after each Annual Meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the President or any Vice-President and any such
officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of
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security holders of any corporation in which the Corporation may own securities
and at any such meeting shall possess and may exercise any and all rights and
power incident to the ownership of such securities and which, as the owner
thereof, the Corporation might have exercised and possessed if present. The
Board of Directors may, by resolution, from time to time confer like powers upon
any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of the Board
of Directors, if there be one, shall preside at all meetings of the stockholders
and of the Board of Directors. He shall be the Chief Executive Officer of the
Corporation, and except where by law the signature of the President is required,
the Chairman of the Board of Directors shall possess the same power as the
President to sign all contracts, certificates and other instruments of the
Corporation which may be authorized by the Board of Directors. During the
absence or disability of the President, the Chairman of the Board of Directors
shall exercise all the powers and discharge all the duties of the President. The
Chairman of the Board of Directors shall also perform such other duties and may
exercise such other powers as from time to time may be assigned to him by these
By-Laws or by the Board of Directors.
Section 5. President. The President shall, subject to the control of the
Board of Directors and, if there be one, the Chairman of the Board of Directors,
have general supervision of the business of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried into effect. He
shall execute all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except that
the other officers of the Corporation may sign and execute documents when so
authorized by these By-Laws, the Board of Directors or the President. In the
absence or disability of the Chairman of the Board of Directors, or if there be
none, the President shall preside at all meetings of the stockholders and the
Board of
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Directors. If there be no Chairman of the Board of Directors, the President
shall be the Chief Executive Officer of the Corporation. The President shall
also perform such other duties and may exercise such other powers as from time
to time may be assigned to him by these By-Laws or by the Board of Directors.
Section 6. Vice-Presidents. At the request of the President or in his
absence or in the event of his inability or refusal to act (and if there be no
Chairman of the Board of Directors), the Vice-President or the Vice-Presidents
if there is more than one (in the order designated by the Board of Directors)
shall perform the duties of the President, and when so acting, shall have all
the powers of and by subject to all the restrictions upon the President. Each
Vice-President shall perform such other duties and have such other powers as the
Board of Directors from time to time may prescribe. If there be no Chairman of
the Board of Directors and no Vice-President, the Board of Directors shall
designate the officer of the Corporation who, in the absence of the President or
in the event of the inability or refusal of the President to act, shall perform
the duties of the President, and when so acting, shall have all powers of and be
subject to all the restrictions upon the President.
Section 7. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of stockholders and record all the proceedings
thereat in a book or books to be kept for the purpose; the Secretary shall also
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or President, under whose
supervision he shall be. If the Secretary shall be unable or shall refuse to
cause to be given notice of all meetings of the stockholders and special
meetings of the Board of Directors, and if there be no Assistant Secretary, than
either the Board of Directors or the President may choose another officer to
cause
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such notice to be given. The Secretary shall have custody of the seal of the
Corporation and the Secretary or any Assistant Secretary, if there be one, shall
have authority to affix the same to any instrument requiring it and when so
affixed, it may be attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing by his signature. The Secretary shall see that all books,
reports, statements, certificates and other documents and records required by
law to be kept or filed are properly kept or filed, as the case may be.
Section 8. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging the Corporation and shall deposit
all moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the Corporation. If required by the
Board of Directors, the Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
Section 9. Assistant Secretaries. Except as may be otherwise provided in
these By-Laws, Assistant Secretaries, if there by any, shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of
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Directors, the President, any Vice-President, if there be one, or the Secretary,
and in the absence of the Secretary or in the event of his disability or refusal
to act, shall perform the duties of the Secretary, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there by any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice-President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of Directors,
an Assistant Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 11. Other Officers. Such other officers as the Board of Directors
may choose shall perform such duties and have such powers as from time to time
my be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other officer of the Corporation the power to choose such other
officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate
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signed, in the name of the Corporation (i) by the Chairman of the Board of
Directors, the President or a Vice-President and (ii) by the Treasurer or an
Assistant Treasurer, or the Secretary or Assistant-Secretary of the Corporation,
certifying the number of shares owned by him in the Corporation.
Section 2. Signatures. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these By-Laws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by his attorney lawfully constituted in writing and upon the
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surrender of the certificate therefor, which shall be cancelled before a new
certificate shall be issued.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, 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 change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than fifty days nor less than ten days
before the date of such meeting, nor more than fifty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such
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director, member of a committee or stockholder, at his address as it appears on
the records of the Corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Written notice may also be given personally or by telegram,
telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, and may be
paid in cash, in property, or in shares of the capital stock. Before payment of
any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Board of Directors from time to
time, in its absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
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Section 4. Corporate Seal. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Indemnification Generally. The Corporation shall, to the
fullest extent permitted by the General Corporation Law of the State of Delaware
(the "GCL"), as amended from time to time, indemnify all persons whom it may
indemnify pursuant thereto.
Section 2. Good Faith Defined. For purposes of any determination under
this Article VIII, a person shall be deemed to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, or, with respect to any criminal action or proceeding, to have
had no reasonable cause to believe his conduct was unlawful, if his action is
based on the records or books of account of the Corporation or another
enterprise, or on information supplied to him by the officers of the Corporation
or another enterprise in the course of their duties, or on the advice of legal
counsel for the Corporation or another enterprise or on information or records
given or reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section 2 shall mean any other corporation or any
partnership, joint venture, trust or other enterprise of which such person is or
was serving at the request of the Corporation as a director, officer, employee
or agent. The provisions of this Section 2 shall not be deemed to be exclusive
or to limit in any way the circumstances
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in which a person may be deemed to have met the applicable standard of conduct.
Section 3. Indemnification by a Court. Notwithstanding any determination
on the part of the Corporation or its agents that indemnification of any
director, officer, employee or agent is not proper, and notwithstanding the
absence of any determination, any director, officer, employee or agent may apply
to any court of competent jurisdiction in the State of Delaware for
indemnification to the extent otherwise permissible under this Article VIII. The
basis of such indemnification by a court shall be a determination by such court
that indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standards of conduct set
forth in this Article VIII or the GCL, as the case may be. Notice of any
application for indemnification pursuant to this Section 3 shall be given to the
Corporation promptly upon the filing of such application.
Section 4. Non-Exclusivity of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by or granted pursuant
to this Article VIII shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any By-Law, agreement, contract, vote of stockholders or disinterested directors
or pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
Corporation that indemnification of any director, officer, employee or agent of
the Corporation or any director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise who is
serving at the request of the Corporation shall be made to the fullest extent
permitted by law. The provisions of this Article VIII shall not be deemed to
preclude the indemnification of any director, officer, employee or agent of the
Corporation or any director, officer, employee or agent of
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another corporation, partnership, joint venture, trust or other enterprise who
is serving at the request of the Corporation who is not specified in this
Article VIII but whom the Corporation has the power or obligation to indemnify
under the provisions of the GCL, or otherwise.
Section 5. Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article VIII.
Section 6. Meaning of "Corporation" for Purposes of Article VIII. For
purposes of this Article VIII, references to "the Corporation" include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article VIII with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
Section 7. Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Section 7 shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer,
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employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, or new By-Laws may be adopted by the stockholders of the Corporation or
by the Board of Directors; provided, however, that notice of such alteration,
amendment, repeal or adoption of new By-Laws be contained in the notice of such
meeting of stockholders. All such amendments must be approved by either the
holders of a majority of the outstanding capital stock entitled to vote thereon
or by a majority of the entire Board of Directors then in office.
Section 2. Entire Board of Directors. As used in this Article IX and in
these By-Laws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.
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<PAGE> 1
Exhibit 3.2b
BY-LAWS
OF
CONTINENTAL ACQUISITION CORP.
K/N/A/ CONTINENTAL SPRAYERS INTERNATIONAL, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the Office of the Secretary of State, City of Wilmington, County of
New Castle, State of Delaware.
Section 2. Other Offices. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meeting of Stockholders shall be
held within five months after the close of the fiscal year of the Corporation,
at which meeting the stockholders shall elect by a plurality vote a Board of
Directors, and transact such other business as may properly be brought before
the meeting. Written notice of the Annual Meeting
<PAGE> 2
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
fifty days before the date of the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law or by the
Certificate of Incorporation, Special Meetings of Stockholders, for any purpose
or purposes, may be called by either (i) the Chairman, if there be one, or (ii)
the President and shall be called by any such officer at the request in writing
of a majority of the Board of Directors or at the request in writing of
stockholders owning a majority of the capital stock of the Corporation issued
and outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. Written notice of a Special Meeting stating
the place, date and hour of the meeting and the purpose or purposes for which
the meeting is called shall be given not less than ten nor more than fifty days
before the date of the meeting to each stockholder entitled to vote at such
meeting.
Section 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder entitled to vote at
the meeting.
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Section 5. Voting. Unless otherwise required by law, the Certificate of
Incorporation or these By-Laws, any question brought before any meeting of
stockholders, other than the election of directors, shall be decided by the vote
of the holders of a majority of the stock represented and entitled to vote
thereat. Each stockholder represented at a meeting of stockholders shall be
entitled to cast one vote for each share of the capital stock entitled to vote
thereat held by such stockholder. Such votes may be cast in person or by proxy
but no proxy shall be voted on or after three years from its date, unless such
proxy provides for a longer period. The Board of Directors, in its discretion,
or the officer of the Corporation presiding at a meeting of stockholders, in his
discretion, may require that any votes cast at such meeting shall be cast by
written ballot.
Section 6. Consent of Stockholders in Lieu of Meeting. Unless otherwise
provided in the Certificate of Incorporation, any action required or permitted
to be taken at any Annual or Special Meeting of Stockholders of the Corporation,
may be taken without a meeting, without prior written notice and without a vote,
if a consent in writing, setting forth the action so taken, shall be signed by
the holders of the outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
Section 7. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any
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stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder of the Corporation who is present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of Directors of the
Corporation shall consist of no less than one (1) but no more than eleven (11)
directors unless and until otherwise determined by vote of a majority of the
entire Board of Directors. Except as provided in Section 2 of this Article, all
directors shall be elected by a plurality of the votes cast at Annual Meetings
of Stockholders, and each director so elected shall hold office until the next
Annual Meeting and until his successor is duly elected and qualified, or until
his earlier resignation or removal. Any director may resign at any time upon
notice to the Corporation. Directors need not be stockholders.
Section 2. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until the
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next annual election and until their successors are duly elected and qualified,
or until their earlier resignation or removal.
Section 3. Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or these By-Laws directed
or required to be exercised or done by the stockholders.
Section 4. Meetings. The Board of Directors of the Corporation may hold
meeting, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman of the Board or the President. Notice thereof stating the place,
date and hour of the meeting shall be given to each director either by mail not
less than forty-eight (48) hours before the date of the meeting, by telephone or
telegram on twenty-four (24) hours notice, or on such shorter notice as the
person or persons calling such meeting may deem necessary or appropriate in the
circumstances.
Section 5. Quorum. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these By-Laws, at all meetings of the
Board of Directors, a majority of the entire Board of Directors shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 6. Actions of Board. Unless otherwise provided by the Certificate
of Incorporation or these By-Laws, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken
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without a meeting, if all the members of the Board of Directors or committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors or committee.
Section 7. Meetings by Means of Conference Telephone. Unless otherwise
provided by the Certificate of Incorporation or these By-Laws, members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 6 shall constitute
presence in person at such meeting.
Section 8. Committees. The Board of Directors may, by resolution passed by
a majority of the entire Board of Directors, designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of any such committee. In the absence or disqualification of a member of
a committee, and in the absence of a designation by the Board of Directors of an
alternate member to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any absent or
disqualified member. Any committee, to the extent allowed by law and provided in
the resolution establishing such committee, shall have and may execute all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation. Each committee shall keep regular minutes and
report to the Board of Directors when required.
Section 9. Compensation. The directors may be paid their expenses, if any,
of attendance at each meeting of the
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Board of Directors and may be paid a fixed sum for attendance at each meeting of
the Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
Section 10. Interested Directors. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
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ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen by the
Board of Directors and shall be a President, a Secretary and a Treasurer. The
Board of Directors, in its discretion, may also choose a Chairman of the Board
of Directors (who must be a director) and one or more Chairmans,
Vice-Presidents, Assistant Secretaries, Assistant Treasurers and other officers.
Any number of offices may be held by the same person, unless otherwise
prohibited by law, the Certificate of Incorporation or these By-Laws. The
officers of the Corporation need not be stockholders of the Corporation nor,
except in the case of the Chairman of the Board of Directors, need such officers
be directors of the Corporation.
Section 2. Election. The Board of Directors at its first meeting held
after each Annual Meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the President or any Vice-President and any such
officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of
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security holders of any corporation in which the Corporation may own securities
and at any such meeting shall possess and may exercise any and all rights and
power incident to the ownership of such securities and which, as the owner
thereof, the Corporation might have exercised and possessed if present. The
Board of Directors may, by resolution, from time to time confer like powers upon
any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of the Board
of Directors, if there be one, shall preside at all meetings of the stockholders
and of the Board of Directors. He shall be the Chief Executive Officer of the
Corporation, and except where by law the signature of the President is required,
the Chairman of the Board of Directors shall possess the same power as the
President to sign all contracts, certificates and other instruments of the
Corporation which may be authorized by the Board of Directors. During the
absence or disability of the President, the Chairman of the Board of Directors
shall exercise all the powers and discharge all the duties of the President. The
Chairman of the Board of Directors shall also perform such other duties and may
exercise such other powers as from time to time may be assigned to him by these
By-Laws or by the Board of Directors.
Section 5. President. The President shall, subject to the control of the
Board of Directors and, if there be one, the Chairman of the Board of Directors,
have general supervision of the business of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried into effect. He
shall execute all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except that
the other officers of the Corporation may sign and execute documents when so
authorized by these By-Laws, the Board of Directors or the President. In the
absence or disability of the Chairman of the Board of Directors, or if there be
none, the President shall preside at all meetings of the stockholders and the
Board of
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Directors. If there be no Chairman of the Board of Directors, the President
shall be the Chief Executive Officer of the Corporation. The President shall
also perform such other duties and may exercise such other powers as from time
to time may be assigned to him by these By-Laws or by the Board of Directors.
Section 6. Vice-Presidents. At the request of the President or in his
absence or in the event of his inability or refusal to act (and if there be no
Chairman of the Board of Directors), the Vice-President or the Vice-Presidents
if there is more than one (in the order designated by the Board of Directors)
shall perform the duties of the President, and when so acting, shall have all
the powers of and by subject to all the restrictions upon the President. Each
Vice-President shall perform such other duties and have such other powers as the
Board of Directors from time to time may prescribe. If there be no Chairman of
the Board of Directors and no Vice-President, the Board of Directors shall
designate the officer of the Corporation who, in the absence of the President or
in the event of the inability or refusal of the President to act, shall perform
the duties of the President, and when so acting, shall have all powers of and be
subject to all the restrictions upon the President.
Section 7. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of stockholders and record all the proceedings
thereat in a book or books to be kept for the purpose; the Secretary shall also
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or President, under whose
supervision he shall be. If the Secretary shall be unable or shall refuse to
cause to be given notice of all meetings of the stockholders and special
meetings of the Board of Directors, and if there be no Assistant Secretary, than
either the Board of Directors or the President may choose another officer to
cause
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such notice to be given. The Secretary shall have custody of the seal of the
Corporation and the Secretary or any Assistant Secretary, if there be one, shall
have authority to affix the same to any instrument requiring it and when so
affixed, it may be attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing by his signature. The Secretary shall see that all books,
reports, statements, certificates and other documents and records required by
law to be kept or filed are properly kept or filed, as the case may be.
Section 8. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging the Corporation and shall deposit
all moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the Corporation. If required by the
Board of Directors, the Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
Section 9. Assistant Secretaries. Except as may be otherwise provided in
these By-Laws, Assistant Secretaries, if there by any, shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of
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Directors, the President, any Vice-President, if there be one, or the Secretary,
and in the absence of the Secretary or in the event of his disability or refusal
to act, shall perform the duties of the Secretary, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there by any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice-President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of Directors,
an Assistant Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 11. Other Officers. Such other officers as the Board of Directors
may choose shall perform such duties and have such powers as from time to time
my be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other officer of the Corporation the power to choose such other
officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate
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signed, in the name of the Corporation (i) by the Chairman of the Board of
Directors, the President or a Vice-President and (ii) by the Treasurer or an
Assistant Treasurer, or the Secretary or Assistant-Secretary of the Corporation,
certifying the number of shares owned by him in the Corporation.
Section 2. Signatures. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these By-Laws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by his attorney lawfully constituted in writing and upon the
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surrender of the certificate therefor, which shall be cancelled before a new
certificate shall be issued.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, 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 change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than fifty days nor less than ten days
before the date of such meeting, nor more than fifty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such
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director, member of a committee or stockholder, at his address as it appears on
the records of the Corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Written notice may also be given personally or by telegram,
telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, and may be
paid in cash, in property, or in shares of the capital stock. Before payment of
any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Board of Directors from time to
time, in its absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
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Section 4. Corporate Seal. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Indemnification Generally. The Corporation shall, to the
fullest extent permitted by the General Corporation Law of the State of Delaware
(the "GCL"), as amended from time to time, indemnify all persons whom it may
indemnify pursuant thereto.
Section 2. Good Faith Defined. For purposes of any determination under
this Article VIII, a person shall be deemed to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, or, with respect to any criminal action or proceeding, to have
had no reasonable cause to believe his conduct was unlawful, if his action is
based on the records or books of account of the Corporation or another
enterprise, or on information supplied to him by the officers of the Corporation
or another enterprise in the course of their duties, or on the advice of legal
counsel for the Corporation or another enterprise or on information or records
given or reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section 2 shall mean any other corporation or any
partnership, joint venture, trust or other enterprise of which such person is or
was serving at the request of the Corporation as a director, officer, employee
or agent. The provisions of this Section 2 shall not be deemed to be exclusive
or to limit in any way the circumstances
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in which a person may be deemed to have met the applicable standard of conduct.
Section 3. Indemnification by a Court. Notwithstanding any determination
on the part of the Corporation or its agents that indemnification of any
director, officer, employee or agent is not proper, and notwithstanding the
absence of any determination, any director, officer, employee or agent may apply
to any court of competent jurisdiction in the State of Delaware for
indemnification to the extent otherwise permissible under this Article VIII. The
basis of such indemnification by a court shall be a determination by such court
that indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standards of conduct set
forth in this Article VIII or the GCL, as the case may be. Notice of any
application for indemnification pursuant to this Section 3 shall be given to the
Corporation promptly upon the filing of such application.
Section 4. Non-Exclusivity of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by or granted pursuant
to this Article VIII shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any By-Law, agreement, contract, vote of stockholders or disinterested directors
or pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
Corporation that indemnification of any director, officer, employee or agent of
the Corporation or any director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise who is
serving at the request of the Corporation shall be made to the fullest extent
permitted by law. The provisions of this Article VIII shall not be deemed to
preclude the indemnification of any director, officer, employee or agent of the
Corporation or any director, officer, employee or agent of
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another corporation, partnership, joint venture, trust or other enterprise who
is serving at the request of the Corporation who is not specified in this
Article VIII but whom the Corporation has the power or obligation to indemnify
under the provisions of the GCL, or otherwise.
Section 5. Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article VIII.
Section 6. Meaning of "Corporation" for Purposes of Article VIII. For
purposes of this Article VIII, references to "the Corporation" include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article VIII with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
Section 7. Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Section 7 shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer,
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employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, or new By-Laws may be adopted by the stockholders of the Corporation or
by the Board of Directors; provided, however, that notice of such alteration,
amendment, repeal or adoption of new By-Laws be contained in the notice of such
meeting of stockholders. All such amendments must be approved by either the
holders of a majority of the outstanding capital stock entitled to vote thereon
or by a majority of the entire Board of Directors then in office.
Section 2. Entire Board of Directors. As used in this Article IX and in
these By-Laws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.
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Exhibit 3.2c
BY-LAWS
OF
AFA ACQUISITION CORP.
K/N/A AFA PRODUCTS, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the Office of the Secretary of State, City of Wilmington, County of
New Castle, State of Delaware.
Section 2. Other Offices. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meeting of Stockholders shall be
held within five months after the close of the fiscal year of the Corporation,
at which meeting the stockholders shall elect by a plurality vote a Board of
Directors, and transact such other business as may properly be brought before
the meeting. Written notice of the Annual Meeting
<PAGE> 2
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
fifty days before the date of the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law or by the
Certificate of Incorporation, Special Meetings of Stockholders, for any purpose
or purposes, may be called by either (i) the Chairman, if there be one, or (ii)
the President and shall be called by any such officer at the request in writing
of a majority of the Board of Directors or at the request in writing of
stockholders owning a majority of the capital stock of the Corporation issued
and outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. Written notice of a Special Meeting stating
the place, date and hour of the meeting and the purpose or purposes for which
the meeting is called shall be given not less than ten nor more than fifty days
before the date of the meeting to each stockholder entitled to vote at such
meeting.
Section 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting,a notice of
the adjourned meeting shall be given to each stockholder entitled to vote at the
meeting.
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Section 5. Voting. Unless otherwise required by law, the Certificate of
Incorporation or these By-Laws, any question brought before any meeting of
stockholders, other than the election of directors, shall be decided by the vote
of the holders of a majority of the stock represented and entitled to vote
thereat. Each stockholder represented at a meeting of stockholders shall be
entitled to cast one vote for each share of the capital stock entitled to vote
thereat held by such stockholder. Such votes may be cast in person or by proxy
but no proxy shall be voted on or after three years from its date, unless such
proxy provides for a longer period. The Board of Directors, in its discretion,
or the officer of the Corporation presiding at a meeting of stockholders, in his
discretion, may require that any votes cast at such meeting shall be cast by
written ballot.
Section 6. Consent of Stockholders in Lieu of Meeting. Unless otherwise
provided in the Certificate of Incorporation, any action required or permitted
to be taken at any Annual or Special Meeting of Stockholders of the Corporation,
may be taken without a meeting, without prior written notice and without a vote,
if a consent in writing, setting forth the action so taken, shall be signed by
the holders of the outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
Section 7. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any
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stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder of the Corporation who is present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of Directors of the
Corporation shall consist of no less than one (1) but no more than eleven (11)
directors unless and until otherwise determined by vote of a majority of the
entire Board of Directors. Except as provided in Section 2 of this Article, all
directors shall be elected by a plurality of the votes cast at Annual Meetings
of Stockholders, and each director so elected shall hold office until the next
Annual Meeting and until his successor is duly elected and qualified, or until
his earlier resignation or removal. Any director may resign at any time upon
notice to the Corporation. Directors need not be stockholders.
Section 2. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until the
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next annual election and until their successors are duly elected and qualified,
or until their earlier resignation or removal.
Section 3. Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or these By-Laws directed
or required to be exercised or done by the stockholders.
Section 4. Meetings. The Board of Directors of the Corporation may hold
meeting, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman of the Board or the President. Notice thereof stating the place,
date and hour of the meeting shall be given to each director either by mail not
less than forty-eight (48) hours before the date of the meeting, by telephone or
telegram on twenty-four (24) hours notice, or on such shorter notice as the
person or persons calling such meeting may deem necessary or appropriate in the
circumstances.
Section 5. Quorum. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these By-Laws, at all meetings of the
Board of Directors, a majority of the entire Board of Directors shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 6. Actions of Board. Unless otherwise provided by the Certificate
of Incorporation or these By-Laws, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken
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without a meeting, if all the members of the Board of Directors or committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors or committee.
Section 7. Meetings by Means of Conference Telephone. Unless otherwise
provided by the Certificate of Incorporation or these By-Laws, members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 6 shall constitute
presence in person at such meeting.
Section 8. Committees. The Board of Directors may, by resolution passed by
a majority of the entire Board of Directors, designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of any such committee. In the absence or disqualification of a member of
a committee, and in the absence of a designation by the Board of Directors of an
alternate member to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any absent or
disqualified member. Any committee, to the extent allowed by law and provided in
the resolution establishing such committee, shall have and may execute all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation. Each committee shall keep regular minutes and
report to the Board of Directors when required.
Section 9. Compensation. The directors may be paid their expenses, if any,
of attendance at each meeting of the
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Board of Directors and may be paid a fixed sum for attendance at each meeting of
the Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
Section 10. Interested Directors. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
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ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen by the
Board of Directors and shall be a President, a Secretary and a Treasurer. The
Board of Directors, in its discretion, may also choose a Chairman of the Board
of Directors (who must be a director) and one or more Chairmans,
Vice-Presidents, Assistant Secretaries, Assistant Treasurers and other officers.
Any number of offices may be held by the same person, unless otherwise
prohibited by law, the Certificate of Incorporation or these By-Laws. The
officers of the Corporation need not be stockholders of the Corporation nor,
except in the case of the Chairman of the Board of Directors, need such officers
be directors of the Corporation.
Section 2. Election. The Board of Directors at its first meeting held
after each Annual Meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the President or any Vice-President and any such
officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of
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security holders of any corporation in which the Corporation may own securities
and at any such meeting shall possess and may exercise any and all rights and
power incident to the ownership of such securities and which, as the owner
thereof, the Corporation might have exercised and possessed if present. The
Board of Directors may, by resolution, from time to time confer like powers upon
any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of the Board
of Directors, if there be one, shall preside at all meetings of the stockholders
and of the Board of Directors. He shall be the Chief Executive Officer of the
Corporation, and except where by law the signature of the President is required,
the Chairman of the Board of Directors shall possess the same power as the
President to sign all contracts, certificates and other instruments of the
Corporation which may be authorized by the Board of Directors. During the
absence or disability of the President, the Chairman of the Board of Directors
shall exercise all the powers and discharge all the duties of the President. The
Chairman of the Board of Directors shall also perform such other duties and may
exercise such other powers as from time to time may be assigned to him by these
By-Laws or by the Board of Directors.
Section 5. President. The President shall, subject to the control of the
Board of Directors and, if there be one, the Chairman of the Board of Directors,
have general supervision of the business of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried into effect. He
shall execute all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except that
the other officers of the Corporation may sign and execute documents when so
authorized by these By-Laws, the Board of Directors or the President. In the
absence or disability of the Chairman of the Board of Directors, or if there be
none, the President shall preside at all meetings of the stockholders and the
Board of
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Directors. If there be no Chairman of the Board of Directors, the President
shall be the Chief Executive Officer of the Corporation. The President shall
also perform such other duties and may exercise such other powers as from time
to time may be assigned to him by these By-Laws or by the Board of Directors.
Section 6. Vice-Presidents. At the request of the President or in his
absence or in the event of his inability or refusal to act (and if there be no
Chairman of the Board of Directors), the Vice-President or the Vice-Presidents
if there is more than one (in the order designated by the Board of Directors)
shall perform the duties of the President, and when so acting, shall have all
the powers of and by subject to all the restrictions upon the President. Each
Vice-President shall perform such other duties and have such other powers as the
Board of Directors from time to time may prescribe. If there be no Chairman of
the Board of Directors and no Vice-President, the Board of Directors shall
designate the officer of the Corporation who, in the absence of the President or
in the event of the inability or refusal of the President to act, shall perform
the duties of the President, and when so acting, shall have all powers of and be
subject to all the restrictions upon the President.
Section 7. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of stockholders and record all the proceedings
thereat in a book or books to be kept for the purpose; the Secretary shall also
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or President, under whose
supervision he shall be. If the Secretary shall be unable or shall refuse to
cause to be given notice of all meetings of the stockholders and special
meetings of the Board of Directors, and if there be no Assistant Secretary, than
either the Board of Directors or the President may choose another officer to
cause
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such notice to be given. The Secretary shall have custody of the seal of the
Corporation and the Secretary or any Assistant Secretary, if there be one, shall
have authority to affix the same to any instrument requiring it and when so
affixed, it may be attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing by his signature. The Secretary shall see that all books,
reports, statements, certificates and other documents and records required by
law to be kept or filed are properly kept or filed, as the case may be.
Section 8. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging the Corporation and shall deposit
all moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the Corporation. If required by the
Board of Directors, the Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
Section 9. Assistant Secretaries. Except as may be otherwise provided in
these By-Laws, Assistant Secretaries, if there by any, shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of
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Directors, the President, any Vice-President, if there be one, or the Secretary,
and in the absence of the Secretary or in the event of his disability or refusal
to act, shall perform the duties of the Secretary, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there by any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice-President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of Directors,
an Assistant Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 11. Other Officers. Such other officers as the Board of Directors
may choose shall perform such duties and have such powers as from time to time
my be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other officer of the Corporation the power to choose such other
officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate
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signed, in the name of the Corporation (i) by the Chairman of the Board of
Directors, the President or a Vice-President and (ii) by the Treasurer or an
Assistant Treasurer, or the Secretary or Assistant-Secretary of the Corporation,
certifying the number of shares owned by him in the Corporation.
Section 2. Signatures. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these By-Laws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by his attorney lawfully constituted in writing and upon the
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surrender of the certificate therefor, which shall be cancelled before a new
certificate shall be issued.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, 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 change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than fifty days nor less than ten days
before the date of such meeting, nor more than fifty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such
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director, member of a committee or stockholder, at his address as it appears on
the records of the Corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Written notice may also be given personally or by telegram,
telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, and may be
paid in cash, in property, or in shares of the capital stock. Before payment of
any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Board of Directors from time to
time, in its absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
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Section 4. Corporate Seal. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Indemnification Generally. The Corporation shall, to the
fullest extent permitted by the General Corporation Law of the State of Delaware
(the "GCL"), as amended from time to time, indemnify all persons whom it may
indemnify pursuant thereto.
Section 2. Good Faith Defined. For purposes of any determination under
this Article VIII, a person shall be deemed to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, or, with respect to any criminal action or proceeding, to have
had no reasonable cause to believe his conduct was unlawful, if his action is
based on the records or books of account of the Corporation or another
enterprise, or on information supplied to him by the officers of the Corporation
or another enterprise in the course of their duties, or on the advice of legal
counsel for the Corporation or another enterprise or on information or records
given or reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section 2 shall mean any other corporation or any
partnership, joint venture, trust or other enterprise of which such person is or
was serving at the request of the Corporation as a director, officer, employee
or agent. The provisions of this Section 2 shall not be deemed to be exclusive
or to limit in any way the circumstances
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in which a person may be deemed to have met the applicable standard of conduct.
Section 3. Indemnification by a Court. Notwithstanding any determination
on the part of the Corporation or its agents that indemnification of any
director, officer, employee or agent is not proper, and notwithstanding the
absence of any determination, any director, officer, employee or agent may apply
to any court of competent jurisdiction in the State of Delaware for
indemnification to the extent otherwise permissible under this Article VIII. The
basis of such indemnification by a court shall be a determination by such court
that indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standards of conduct set
forth in this Article VIII or the GCL, as the case may be. Notice of any
application for indemnification pursuant to this Section 3 shall be given to the
Corporation promptly upon the filing of such application.
Section 4. Non-Exclusivity of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by or granted pursuant
to this Article VIII shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any By-Law, agreement, contract, vote of stockholders or disinterested directors
or pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
Corporation that indemnification of any director, officer, employee or agent of
the Corporation or any director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise who is
serving at the request of the Corporation shall be made to the fullest extent
permitted by law. The provisions of this Article VIII shall not be deemed to
preclude the indemnification of any director, officer, employee or agent of the
Corporation or any director, officer, employee or agent of
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another corporation, partnership, joint venture, trust or other enterprise who
is serving at the request of the Corporation who is not specified in this
Article VIII but whom the Corporation has the power or obligation to indemnify
under the provisions of the GCL, or otherwise.
Section 5. Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article VIII.
Section 6. Meaning of "Corporation" for Purposes of Article VIII. For
purposes of this Article VIII, references to "the Corporation" include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article VIII with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
Section 7. Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Section 7 shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer,
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employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, or new By-Laws may be adopted by the stockholders of the Corporation or
by the Board of Directors; provided, however, that notice of such alteration,
amendment, repeal or adoption of new By-Laws be contained in the notice of such
meeting of stockholders. All such amendments must be approved by either the
holders of a majority of the outstanding capital stock entitled to vote thereon
or by a majority of the entire Board of Directors then in office.
Section 2. Entire Board of Directors. As used in this Article IX and in
these By-Laws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.
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<PAGE> 1
Exhibit 4.1
================================================================================
INDESCO INTERNATIONAL, INC.
Issuer,
THE SUBSIDIARY GUARANTORS NAMED HEREIN,
Guarantors
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
Trustee
--------------------
Indenture
Dated as of April 23, 1998
---------------------
$145,000,000
9 3/4% Senior Subordinated Notes Due 2008
================================================================================
<PAGE> 2
INDESCO INTERNATIONAL, INC.
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of April 23, 1998
Trust Indenture
Act Section Indenture Section
ss. 310(a)(1) .......................................... 608
(a)(2) .......................................... 608
(b) .......................................... 608
ss. 312(c) .......................................... 701
ss. 313 .......................................... 702
ss. 314(a)(4) .......................................... 1008(a)
(c)(1) .......................................... 103
(c)(2) .......................................... 103
(e) .......................................... 103
ss. 315(b) .......................................... 602
ss. 316(a)(last
sentence) .......................................... 101 ("Outstanding")
(a)(1)(A) .......................................... 502, 512
(a)(1)(B) .......................................... 513
(b) .......................................... 508
(c) .......................................... 105(d)
ss. 317(a)(1) .......................................... 503
(a)(2) .......................................... 504
(b) .......................................... 1003
ss. 318(a) .......................................... 114
- ----------
Note: This reconciliation and tie shall not, for any purpose, be deemed part of
the Indenture
<PAGE> 3
TABLE OF CONTENTS
Page
PARTIES.................................................................... 1
RECITALS OF THE COMPANY.................................................... 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions....................................................2
Acquired Indebtedness............................................2
Act..............................................................2
Additional Notes.................................................2
Affiliate........................................................2
Agent Bank.......................................................3
Asset Sale.......................................................3
Attributable Debt................................................3
Banks............................................................3
Board of Directors...............................................3
Board Resolution.................................................4
Borrowing Base...................................................4
Business Day.....................................................4
Capital Stock....................................................4
Capitalized Lease Obligation.....................................4
Change of Control................................................4
Closing Date.....................................................5
Commission.......................................................5
Common Stock.....................................................5
Company..........................................................6
Company Request" or "Company Order...............................6
Consolidated EBITDA..............................................6
Consolidated Net Income..........................................6
Consolidated Net Worth...........................................7
Consolidated Tangible Assets.....................................8
- ----------
Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
<PAGE> 4
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Corporate Trust Office...........................................8
corporation......................................................8
Credit Agreement.................................................8
Default..........................................................8
Defaulted Interest...............................................8
Depositary.......................................................8
Designated Senior Indebtedness...................................8
Disinterested Director...........................................9
Disqualified Stock...............................................9
Equity Offering..................................................9
Event of Default.................................................9
Exchange Act.....................................................9
Exchange Notes...................................................9
Exchange Offer..................................................10
Exchange Offer Registration Statement...........................10
Existing Indebtedness...........................................10
Federal Bankruptcy Code.........................................10
Fixed Charges...................................................10
Fixed Charge Coverage Ratio.....................................10
Foreign Subsidiary..............................................10
Generally Accepted Accounting Principles" or "GAAP..............10
Hedging Obligations.............................................11
Holder..........................................................11
Indebtedness....................................................11
Indenture.......................................................12
Initial Notes...................................................12
Interest Payment Date...........................................12
Investment......................................................12
Lien............................................................12
Maturity........................................................12
Net Cash Proceeds...............................................12
Non-payment Event Default.......................................13
Non-U.S. Person.................................................13
Notes...........................................................13
Obligations.....................................................13
Officers' Certificate...........................................13
Opinion of Counsel..............................................13
Outstanding.....................................................13
Parent..........................................................14
<PAGE> 5
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Page
Pari Passu Indebtedness.........................................14
Paying Agent....................................................14
Payment Default.................................................15
Payment Event of Default........................................15
Permitted Holders...............................................15
Permitted Investments...........................................15
Permitted Refinancing Indebtedness..............................16
Person..........................................................16
Polytek.........................................................17
Polytek Credit Agreement........................................17
Predecessor Note................................................17
Preferred Stock.................................................17
QIB.............................................................17
Qualified Equity Interest.......................................17
Qualified Stock.................................................17
Redemption Date.................................................17
Redemption Price................................................17
Register" and "Registrar........................................17
Registration Rights Agreement...................................17
Registration Statement..........................................18
Regular Record Date.............................................18
Regulation S....................................................18
Restricted Subsidiary...........................................18
Rule 144A.......................................................18
sale and leaseback transaction..................................18
Securities Act..................................................18
Senior Bank Debt................................................18
Senior Indebtedness.............................................18
Shelf Registration Statement....................................19
Significant Subsidiary..........................................19
Special Record Date.............................................19
Stated Maturity.................................................19
Subordinated Indebtedness.......................................19
Subordinated Parent Notes.......................................19
Subsidiary......................................................20
Subsidiary Guarantee............................................20
Subsidiary Guarantors...........................................20
Trust Indenture Act" or "TIA....................................20
Trustee.........................................................20
<PAGE> 6
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Unrestricted Subsidiary.........................................20
U.S. Government Obligations.....................................20
Voting Stock....................................................21
Weighted Average Life...........................................21
Wholly Owned Restricted Subsidiary..............................21
SECTION 102. Incorporation by Reference of Trust Indenture Act.......21
SECTION 103. Compliance Certificates and Opinions....................22
SECTION 104. Form of Documents Delivered to Trustee..................22
SECTION 105. Acts of Holders.........................................23
SECTION 106. Notices, etc., to Trustee, Company and Subsidiary
Guarantors...........................................24
SECTION 107. Notice to Holders; Waiver...............................25
SECTION 108. Effect of Headings and Table of Contents................26
SECTION 109. Successors and Assigns..................................26
SECTION 110. Separability Clause.....................................26
SECTION 111. Benefits of Indenture...................................26
SECTION 112. Governing Law...........................................26
SECTION 113. Legal Holidays..........................................26
SECTION 114. Conflict of Any Provision of Indenture with Trust
Indenture Act........................................27
ARTICLE TWO
NOTE FORMS
SECTION 201. Forms Generally.........................................27
SECTION 202. Restrictive Legends.....................................28
ARTICLE THREE
THE NOTES
SECTION 301. Title and Terms.........................................31
SECTION 302. Denominations...........................................32
SECTION 303. Execution, Authentication, Delivery and Dating..........32
SECTION 304. Temporary Notes.........................................33
SECTION 305. Registration, Registration of Transfer and Exchange.....34
SECTION 306. Book-Entry Provisions for Global Notes..................35
SECTION 307. Special Transfer Provisions.............................37
SECTION 308. Mutilated, Destroyed, Lost and Stolen Notes.............40
SECTION 309. Payment of Interest; Interest Rights Preserved..........41
SECTION 310. Persons Deemed Owners...................................43
<PAGE> 7
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Page
SECTION 311. Cancellation............................................43
SECTION 312. Issuance of Additional Notes............................43
SECTION 313. Computation of Interest.................................44
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.................44
SECTION 402. Application of Trust Money..............................45
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.......................................45
SECTION 502. Acceleration of Maturity; Rescission and Annulment......47
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee..............................................48
SECTION 504. Trustee May File Proofs of Claim........................49
SECTION 505. Trustee May Enforce Claims Without Possession of Notes..50
SECTION 506. Application of Money Collected..........................50
SECTION 507. Limitation on Suits.....................................50
SECTION 508. Unconditional Right of Holders to Receive Principal
Premium and Interest.................................51
SECTION 509. Restoration of Rights and Remedies......................51
SECTION 510. Rights and Remedies Cumulative..........................51
SECTION 511. Delay or Omission Not Waiver............................52
SECTION 512. Control by Holders......................................52
SECTION 513. Waiver of Past Defaults.................................52
SECTION 514. Waiver of Stay or Extension Laws........................53
SECTION 515. Waiver of Personal Liability of Directors, Officers,
Employees and Stockholders...........................53
ARTICLE SIX
THE TRUSTEE
SECTION 601. Duties of Trustee.......................................53
SECTION 602. Notice of Defaults......................................54
SECTION 603. Certain Rights of Trustee...............................55
SECTION 604. Trustee Not Responsible for Recitals or Issuance of
Notes................................................56
<PAGE> 8
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Page
SECTION 605. May Hold Notes..........................................56
SECTION 606. Money Held in Trust.....................................57
SECTION 607. Compensation and Reimbursement..........................57
SECTION 608. Corporate Trustee Required; Eligibility.................58
SECTION 609. Resignation and Removal; Appointment of Successor.......58
SECTION 610. Acceptance of Appointment by Successor..................60
SECTION 611. Merger, Conversion, Consolidation or Succession to
Business.............................................60
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of Holders............61
SECTION 702. Reports by Trustee......................................61
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 801. Company May Consolidate, etc., Only on Certain Terms....61
SECTION 802. Successor Substituted...................................63
ARTICLE NINE
SUPPLEMENTS AND AMENDMENTS TO INDENTURE
AND SUBSIDIARY GUARANTEES
SECTION 901. Without Consent of Holders..............................63
SECTION 902. With Consent of Holders.................................64
SECTION 903. Execution of Supplemental Indentures....................65
SECTION 904. Effect of Supplemental Indentures.......................66
SECTION 905. Conformity with Trust Indenture Act.....................66
SECTION 906. Reference in Notes to Supplemental Indentures...........66
SECTION 907. Notice of Supplemental Indentures.......................66
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and Interest....67
SECTION 1002. Maintenance of Office or Agency........................67
<PAGE> 9
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SECTION 1003. Money for Note Payments to Be Held in Trust............67
SECTION 1004. Corporate Existence....................................69
SECTION 1005. Payment of Taxes and Other Claims......................69
SECTION 1006. Maintenance of Properties..............................69
SECTION 1007. Insurance..............................................70
SECTION 1008. Statement by Officers As to Default....................70
SECTION 1009. Reports................................................70
SECTION 1010. Limitation on Incurrence of Indebtedness and Issuance
of Disqualified Stock...............................71
SECTION 1011. Limitation on Restricted Payments......................73
SECTION 1012. Limitation on Issuances and Sales of Capital Stock of
Restricted Subsidiaries.............................78
SECTION 1013. Limitation on Transactions with Affiliates.............78
SECTION 1014. Limitation on Liens....................................79
SECTION 1015. Purchase of Notes upon a Change of Control.............80
SECTION 1016. Limitation on Certain Asset Sales......................81
SECTION 1017. Unrestricted Subsidiaries..............................82
SECTION 1018. Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries...................83
SECTION 1019. Waiver of Certain Covenants............................84
SECTION 1020. Payment for Consent....................................84
SECTION 1021. Limitation on Layering Debt............................84
SECTION 1022. Limitation on Guarantees of Indebtedness by Restricted
Subsidiaries........................................85
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. Right of Redemption....................................85
SECTION 1102. Applicability of Article...............................86
SECTION 1103. Election to Redeem; Notice to Trustee..................86
SECTION 1104. Selection by Trustee of Notes to Be Redeemed...........86
SECTION 1105. Notice of Redemption...................................87
SECTION 1106. Deposit of Redemption Price............................88
SECTION 1107. Notes Payable on Redemption Date.......................88
SECTION 1108. Notes Redeemed in Part.................................88
<PAGE> 10
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ARTICLE TWELVE
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company Option to Effect Legal Defeasance or Covenant
Defeasance..........................................89
SECTION 1202. Legal Defeasance and Discharge.........................89
SECTION 1203. Covenant Defeasance....................................89
SECTION 1204. Conditions to Legal Defeasance or Covenant Defeasance..90
SECTION 1205. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions.......91
SECTION 1206. Reinstatement..........................................92
ARTICLE THIRTEEN
GUARANTEES
SECTION 1301. Subsidiary Guarantees..................................92
SECTION 1302. Execution and Delivery of Subsidiary Guarantee.........94
SECTION 1303. Severability...........................................94
SECTION 1304. Seniority of Subsidiary Guarantees.....................94
SECTION 1305. Limitation of Subsidiary Guarantor's Liability.........94
SECTION 1306. Contribution...........................................95
SECTION 1307. Release of a Subsidiary Guarantor......................95
SECTION 1308. Benefits Acknowledged..................................96
SECTION 1309. Issuance of Subsidiary Guarantees by Certain New
Restricted Subsidiaries.............................96
ARTICLE FOURTEEN
SUBORDINATION
SECTION 1401. Notes Subordinate to Senior Indebtedness...............97
SECTION 1402. Payment over by the Company of Proceeds upon
Dissolution, etc....................................97
SECTION 1403. Suspension of Payment on Notes When Senior
Indebtedness of the Company in Default..............99
SECTION 1404. Payment Over by Subsidiary Guarantors of Proceeds
upon Dissolution, etc..............................100
SECTION 1405. Suspension of Payment on Subsidiary Guarantees When
Senior Indebtedness of Subsidiary Guarantor in
Default............................................101
SECTION 1406. Payment Permitted If No Default.......................102
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SECTION 1407. Subrogation to Rights of Holders of Senior
Indebtedness......................................102
SECTION 1408. Provisions Solely to Define Relative Rights...........102
SECTION 1409. Trustee to Effectuate Subordination...................103
SECTION 1410. No Waiver of Subordination Provisions.................103
SECTION 1411. Notice to Trustee.....................................104
SECTION 1412. Reliance on Judicial Order or Certificate of
Liquidating Agent..................................104
SECTION 1413. Rights of Trustee As a Holder of Senior Indebtedness;
Preservation of Trustees Rights....................105
SECTION 1414. Article Applicable to Paying Agents...................105
SECTION 1415. No Suspension of Remedies.............................105
SECTION 1416. Trust Moneys Not Subordinated.........................105
SECTION 1417. Trustee Not Fiduciary for Holders of Senior
Indebtedness.......................................106
<PAGE> 12
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Page
EXHIBITS
Exhibit A - Form of Note.............................................A-1
Exhibit B - Form of Subsidiary Guarantee.............................B-1
Exhibit C - Form of Certificate to Be Delivered in Connection with
Transfers to Non-QIB Institutional Accredited
Investors.............................................C-1
Exhibit D - Form of Certificate to Be Delivered in Connection with
Transfers Pursuant to Regulation S....................D-1
SCHEDULES
Schedule I - Existing Indebtedness
<PAGE> 13
INDENTURE, dated as of April 23, 1998 among Indesco International,
Inc., a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), the Subsidiary Guarantors (as
hereinafter defined) and Norwest Bank Minnesota, National Association, a
national banking association organized and existing under the laws of United
States of America, trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of and issue of 9 3/4%
Senior Subordinated Notes Due 2008 (herein called the "Initial Notes") and 9
3/4% Series B Senior Subordinated Notes Due 2008 (the "Exchange Notes" and,
together with the Initial Notes, the "Notes") of substantially the tenor and
amount hereinafter set forth, and to provide therefor the Company has duly
authorized the execution and delivery of this Indenture.
Each of the Subsidiary Guarantors has duly authorized its guarantee
of the Notes, and to provide therefor each of them has duly authorized the
execution and delivery of this Indenture.
Upon the issuance of the Exchange Notes, if any, or the
effectiveness of the Shelf Registration Statement (as defined herein), this
Indenture will be subject to the provisions of the Trust Indenture Act of 1939,
as amended, that are required to be part of this Indenture and shall, to the
extent applicable, be governed by such provisions.
All things necessary have been done to make the Notes, when executed
by the Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company and to make this Indenture a valid
agreement of the Company and the Subsidiary Guarantors, each in accordance with
their respective terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Notes by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Notes, as follows:
<PAGE> 14
2
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein, and the terms "cash transaction" and
"self-liquidating paper", as used in TIA Section 311, shall have the
meanings assigned to them in the rules of the Commission adopted under the
Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles; and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms, used principally in Article Two, Eight, Ten and
Twelve are defined in that Article.
"Acquired Indebtedness" means Indebtedness of a Person (a) existing
at the time such Person is merged with or into the Company or becomes a
Subsidiary or (b) assumed in connection with the acquisition of assets from such
Person.
"Act", when used with respect to any Holder, has the meaning
specified in Section 105.
"Additional Notes" has the meaning specified in Section 312.
"Affiliate" means, with respect to any specified person, (a) any
other person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified person or (b) any other person
that owns, directly or indirectly, 10% or
<PAGE> 15
3
more of such specified person's Capital Stock or any executive officer or
director of any such specified person or other person or, with respect to any
natural person, any person having a relationship with such person by blood,
marriage or adoption not more remote than first cousin. For the purposes of this
definition, "control," when used with respect to any specified 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 "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent Bank" means NationsCredit Commercial Corporation and its
successors under the Credit Agreement, in its capacity as agent.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets (including, without limitation, by way of merger,
consolidation or similar arrangement) (collectively, a "transfer") by the
Company or any Restricted Subsidiary other than in the ordinary course of
business and (ii) the issue or sale by the Company or any of its Restricted
Subsidiaries of Shares of Capital Stock of any of the Company's Restricted
Subsidiaries (which shall be deemed to include the sale, grant or conveyance of
any interest in the income, profits or proceeds therefrom), in the case of
either clause (i) or (ii), whether in a single transaction or a series of
related transactions (x) that have a fair market value in excess of $750,000 or
(y) for Net Cash Proceeds in excess of $750,000. For the purposes of this
definition, the term "Asset Sale" does not include any transfer of properties or
assets (i) that is governed by Sections 801 and 1011, (ii) between or among the
Company and its Restricted Subsidiaries pursuant to transactions that do not
violate any other provision of this Indenture, (iii) representing damaged, worn
out, obsolete or permanently retired equipment and facilities, (iv) that
constitutes or would constitute the creation or grant of a Lien not prohibited
by this Indenture or (v) that constitutes or would constitute the surrender or
waiver of contract rights or the settlement, release or surrender of contract
tort or other claims of any kind.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remainder of the
lease included in such sale and leaseback transaction (including any period for
which such lease has been extended or may, at the option of the lessor, be
extended).
"Banks" means the banks and other financial institutions that from
time to time are lenders under the Credit Agreement.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
<PAGE> 16
4
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Borrowing Base" means, with respect to any Person, as of any date,
an amount equal to the sum of (a) 85% of the face amount of all accounts
receivable owned by such Person and its Subsidiaries (or, in the case of the
Company, its Subsidiary Guarantors) as of such date that are not more than 90
days past due and (b) 60% of the book value of all inventory owned by such
Person and its Subsidiaries (or, in the case of the Company, its Subsidiary
Guarantors) as of such date, all calculated on a consolidated basis and in
accordance with GAAP.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York are
authorized or obligated by law or executive order to close.
"Capital Stock" of any Person means any and all shares, interests,
partnership interests, participations, rights in or other equivalents (however
designated) of such Person's equity interest (however designated), whether now
outstanding or issued after the Closing Date.
"Capitalized Lease Obligation" means, with respect to any Person, an
obligation incurred or assumed under or in connection with any capital lease of
real or personal property that, in accordance with GAAP, has been recorded as a
capitalized lease.
"Change of Control" means the occurrence of any of the following
events:
(a) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act) (other than Permitted Holders) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 35% or more of the Voting Stock
of the Company or Parent and such person or group is or becomes, directly
or indirectly, the beneficial owner of a greater percentage of the voting
power of the Voting Stock of the Company or Parent than the percentage
beneficially owned by the Permitted Holders as a group;
(b) the Company consolidates with, or merges with or into, another
person, or sells, assigns, conveys, transfers, leases or otherwise
disposes of, or the Subsidiaries sell, assign, convey, transfer, lease or
otherwise dispose of, all or substantially all of the properties of the
Company and the Subsidiaries, taken as a whole (either in one transaction
or a series of related transactions), including Capital Stock of the
Subsidiaries, to any person (other than the Company or a Restricted
Subsidiary)
<PAGE> 17
5
pursuant to a transaction in which the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other
property, other than any such transaction (i) where the outstanding Voting
Stock of the Company is not converted or exchanged at all (except to the
extent necessary to reflect a change in the jurisdiction of incorporation
of the Company) or is converted into or exchanged for (A) Voting Stock
(other than Disqualified Stock) of the surviving or transferee corporation
or (B) Voting Stock (other than Disqualified Stock) of the surviving or
transferee corporation and cash, securities and other property (other than
Capital Stock of the surviving or transferee corporation) in an amount
that could be paid by the Company as a Restricted Payment as described
under Section 1011 and (ii) immediately after such transaction, no
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act) (other than Permitted Holders) is the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of more than 35% of the total outstanding Voting Stock of the surviving or
transferee corporation;
(c) during any consecutive twenty-four month period, individuals who
at the beginning of such period constituted the Board of Directors of the
Company or Parent (together with any new directors whose election by such
Board of Directors or whose nomination for election by the stockholders of
the Company or Parent, as the case may be, was approved by a vote of a
majority of the directors then still in office who were either directors
at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company or Parent then in
office; or
(d) the Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution, other than in a transaction that complies with
the provisions described under Section 801.
"Closing Date" means the date on which the Initial Notes are
originally issued under this Indenture.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all
shares, interests, participations and other equivalents (however designated,
whether voting or non-voting) of such Person's Common Stock, whether now
outstanding or issued after the date of this Indenture, and includes, without
limitation, all series and classes of such Common Stock.
<PAGE> 18
6
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its Chairman, its President, any Vice
President, its Treasurer or an Assistant Treasurer, and delivered to the
Trustee.
"Consolidated EBITDA" means, for any period, the sum of, without
duplication, Consolidated Net Income for such period, plus (or, in the case of
clause (d) below, plus or minus) the following items to the extent included in
computing Consolidated Net Income for such period (a) Fixed Charges for such
period, plus (b) the provision for federal, state, local and foreign income
taxes of the Company and its Restricted Subsidiaries for such period, plus (c)
the aggregate depreciation and amortization expense of the Company and its
Restricted Subsidiaries for such period, plus (d) any other non-cash charges for
such period, and minus non-cash credits for such period, other than non-cash
charges or credits resulting from changes in prepaid assets or accrued
liabilities in the ordinary course of business, provided, however, that fixed
charges, income tax expense, depreciation and amortization expense and non-cash
charges and credits of a Restricted Subsidiary shall be included in Consolidated
EBITDA only to the extent (and in the same proportion) that the net income of
such Subsidiary was included in calculating Consolidated Net Income for such
period.
"Consolidated Net Income" means, for any period, the net income (or
net loss) of the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP, adjusted to the
extent included in calculating such net income or loss by excluding (a) any net
after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) any net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to Asset Sales, (c) the portion of net income (or
loss) of any Person (other than the Company or a Restricted Subsidiary),
including Unrestricted Subsidiaries, in which the Company or any Restricted
Subsidiary has an ownership interest, except to the extent of the amount of
dividends or other distributions actually paid to the Company or any Restricted
Subsidiary in cash during such period, (d) the net income (or loss) of any
Person combined with the Company or any Restricted Subsidiary on a "pooling of
interests" basis attributable to any period prior to the date of combination,
(e) the net income (but not the net loss) of any Restricted Subsidiary to the
extent that the declaration or payment of dividends or similar distributions by
such Restricted Subsidiary is at the date of determination restricted, directly
or indirectly, except to the extent that such net income is actually paid to the
Company or a Restricted Subsidiary thereof by loans, advances, intercompany
transfers, principal repayments or otherwise; provided, however, that, if any
Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated
Net Income
<PAGE> 19
7
will be reduced (to the extent not otherwise reduced in accordance with GAAP) by
an amount equal to (A) the amount of the Consolidated Net Income otherwise
attributable to such Restricted Subsidiary multiplied by (B) the quotient of (1)
the number of shares of outstanding common stock of such Restricted Subsidiary
not owned on the last day of such period by the Company or any of its Restricted
Subsidiaries divided by (2) the total number of shares of outstanding common
stock of such Restricted Subsidiary on the last day of such period, (f) for any
period ending on or prior to the first year anniversary of the Closing Date, the
aggregate amount of one-time, non-recurring costs, expenses and fees incurred by
the Company or a Restricted Subsidiary in connection with (i) the acquisition by
AFA Acquisition Corp. of AFA Products, Inc. pursuant to the Asset Purchase
Agreement dated as of July 29, 1997, (ii) the financings provided in connection
with the acquisition referred to in clause (i) above pursuant to the Credit
Agreement dated as of July 29, 1997 among AFA Acquisition Corp., Parent, the
lenders referred to therein and NationsCredit Commercial Corporation as agent of
the lenders or any refinancings thereof, (iii) the acquisition by the Company of
the Continental Sprayers International and Contour Cutting divisions and certain
other assets of Contico International, Inc. pursuant to the Asset Purchase
Agreement dated as of January 14, 1998, and the concurrent repayment of certain
indebtedness of AFA Products, Inc., (iv) the financings provided in connection
with the acquisition and repayment of indebtedness referred to in clause (iii)
above pursuant to the Credit Agreement, (v) the acquisition by Dejanu BV of the
capital stock of Polytek pursuant to the Stock Purchase Agreement dated as of
August 6, 1997, and (vi) the financings provided in connection with the
acquisition referred to in clause (v) above pursuant to the Polytek Credit
Agreement and (g) any non-cash charges attributable to (i) the amortization
expense of the Parent associated with any original issue discount attributable
to any warrants owned by NationsCredit Commercial Corporation or Waldock Limited
to purchase respectively 1,750,000 shares of Class B Common Stock, par value
$.01 per share of Parent and 950,000 shares of Class A Common Stock, par value
$.01 per share of Parent or (ii) the interest expense of the Parent incurred in
respect of the Subordinated Parent Notes, to the extent such amortization
expense or interest expense is incurred by the Company as a result of the
Parent's obligations under the warrants or the Subordinated Parent Notes being
accounted for financial reporting purposes as an expense of the Company in
accordance with "push-down" accounting.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity of the Company and its Restricted Subsidiaries as set forth
on the most recently available quarterly or annual consolidated balance sheet of
the Company and its Restricted Subsidiaries, less any amounts attributable to
Disqualified Stock or any equity security convertible into or exchangeable for
Indebtedness, the cost of treasury stock and the principal amount of any
promissory notes receivable from the sale of the Capital Stock of the Company or
any of its Restricted Subsidiaries and less to the extent included in
calculating such stockholders' equity of the Company and its Restricted
Subsidiaries, the stockholders' equity attributable to Unrestricted
Subsidiaries, each item to be determined in conformity with GAAP
<PAGE> 20
8
(excluding the effects of foreign currency adjustments under Financial
Accounting Standards Board Statement of Financial Accounting Standards No. 52).
"Consolidated Tangible Assets" means, as of the date of
determination, the total assets, less goodwill and other intangibles (other than
patents, trademarks, copyrights, licenses and other intellectual property),
shown on the balance sheet of the Company and its Restricted Subsidiaries as of
the most recent date for which such a balance sheet is available, determined on
a consolidated basis in accordance with GAAP less all write-ups (other than
writeups in connection with acquisitions) subsequent to the date of this
Indenture in the book value of any asset (except any such intangible assets)
owned by the Company or any of its Restricted Subsidiaries.
"Corporate Trust Office" means the principal corporate trust office
of the Trustee, at which at any particular time its corporate trust business
shall be administered, which office at the date of execution of this Indenture
is located at 6th and Marquette, Minneapolis, Minnesota 55479-0069, except that
with respect to presentation of Notes for payment or for registration of
transfer or exchange, such term shall mean the office or agency of the Trustee
at which, at any particular time, its corporate trust and agency business shall
be conducted.
"corporation" includes corporations, associations, companies and
business trusts.
"Credit Agreement" means the Credit Agreement dated as of February
4, 1998, among the Company, Parent, the lenders named therein, NationsCredit
Commercial Corporation, as collateral agent and as initial issuing bank and
NationsBridge LLC, as administrative agent, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, as the same may be amended, restated, supplemented,
refinanced or otherwise modified from time to time.
"Default" means any event that is, or after notice or passage of
time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 309.
"Depositary" means The Depository Trust Company, its nominees and
successors.
"Designated Senior Indebtedness" means (i) so long as the Senior
Bank Debt is outstanding or any lender has any commitment to extend credit to
the Company thereunder, the Credit Agreement and (ii) any other Senior
Indebtedness permitted under this Indenture the
<PAGE> 21
9
principal amount of which at the time of designation is $20 million or more and
that has been specifically designated by the Company, in the instrument creating
or evidencing such Senior Indebtedness or in an Officers' Certificate delivered
to the Trustee, as "Designated Senior Indebtedness."
"Disinterested Director" means, with respect to any transaction or
series of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors, to make a finding or otherwise
take action under this Indenture, a member of the Board of Directors who does
not have any material direct or indirect financial interest in or with respect
to such transaction or series of transactions.
"Disqualified Stock" means any class or series of Capital Stock
that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise (i) is or upon the
happening of an event or passage of time would be, required to be redeemed prior
to the final Stated Maturity of the Notes, (ii) is redeemable at the option of
the Holder thereof, at any time prior to such final Stated Maturity or (iii) at
the option of the Holder thereof is convertible into or exchangeable for debt
securities at any time prior to such final Stated Maturity; provided, however,
that any Capital Stock that would not constitute Disqualified Stock but for
provisions therein giving Holders thereof the right to cause the issuer thereof
to repurchase or redeem such Capital Stock upon the occurrence of an "asset
sale" or "change of control" occurring prior to the Stated Maturity of the Notes
will not constitute Disqualified Stock if the "asset sale" or "change of
control" provisions applicable to such Capital Stock are no more favorable to
the Holders of such Capital Stock than Sections 1015 and 1016 hereof, and such
Capital Stock specifically provides that the issuer will not repurchase or
redeem any such stock pursuant to such provision prior to the Company's
repurchase of such Notes as are required to be repurchased pursuant to the
provisions contained in Sections 1015 and 1016 hereof.
"Equity Offering" means a public or private offering of Capital
Stock (other than Disqualified Stock) of the Company.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations thereunder.
"Exchange Notes" has the meaning stated in the first recital of this
Indenture and refers to any Exchange Notes containing terms substantially
identical to the Initial Notes (except that such Exchange Notes shall not
contain terms with respect to the interest rate step-up provision and transfer
restrictions) that are issued and exchanged for the Initial Notes pursuant to
the Registration Rights Agreement and this Indenture.
<PAGE> 22
10
"Exchange Offer" means the exchange offer that may be effected
pursuant to the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"Existing Indebtedness" means the Indebtedness of the Company and
its Restricted Subsidiaries (other than Indebtedness under the Credit Agreement)
outstanding on the date of this Indenture and listed on a schedule to this
Indenture, until such amounts are repaid.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of
the United States Code, as amended from time to time.
"Fixed Charges" means, for any period, without duplication, the sum
of (a) the amount that, in conformity with GAAP, would be set forth opposite the
caption "interest expense" (or any like caption) on a consolidated statement of
operations of the Company and its Restricted Subsidiaries for such period,
including, without limitation, (i) amortization of debt discount, (ii) the net
cost of interest rate contracts (including amortization of discounts), (iii) the
interest portion of any deferred payment obligation, (iv) amortization of debt
issuance costs, and (v) the interest component of Capitalized Lease Obligations,
plus (b) cash dividends paid on Preferred Stock and Disqualified Stock by the
Company and any Restricted Subsidiary (to any Person other than the Company and
its Restricted Subsidiaries), computed on a tax effected basis, plus (c) all
interest on any Indebtedness of any Person guaranteed by the Company or any of
its Restricted Subsidiaries or secured by a lien on the assets of the Company or
any of its Restricted Subsidiaries; provided, however, that Fixed Charges will
not include (i) any gain or loss from extinguishment of debt, including the
write-off of debt issuance costs, and (ii) the fixed charges of a Restricted
Subsidiary to the extent (and in the same proportion) that the net income of
such Subsidiary was excluded in calculating Consolidated Net Income pursuant to
clause (e) of the definition thereof for such period.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of
Consolidated EBITDA for such period to Fixed Charges for such period.
"Foreign Subsidiary" means a Restricted Subsidiary that is
incorporated in a jurisdiction other than the United States or a state thereof
or the District of Columbia and that has no material operations or assets in the
United States.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, that
are in effect on the Closing Date.
<PAGE> 23
11
"guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person entered into in the ordinary course of business under
(i) interest rate swap agreements, interest rate cap agreements and interest
rate collar agreements and other similar financial agreements or arrangements
designed to protect such Person against, or manage the exposure of such Person
to, fluctuations in interest rates, and (ii) forward exchange agreements,
currency swap, currency option and other similar financial agreements or
arrangements designed to protect such Person against, or manage the exposure of
such Person to, fluctuations in foreign currency exchange rates.
"Holder" means the Person in whose name a Note is, at the time of
determination, registered on the Registrar's books.
"Indebtedness" means (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (a) every obligation of such Person for money
borrowed, (b) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (d) every obligation of such
Person issued or assumed as the deferred purchase price of property or services,
(e) the Attributable Debt of every Capitalized Lease Obligation of such Person,
(f) all Disqualified Stock of such Person valued at its maximum fixed repurchase
price, plus accrued and unpaid dividends, (g) all obligations of such Person
under or in respect of Hedging Obligations, and (h) every obligation of the type
referred to in clauses (a) through (g) of another Person and all dividends of
another Person the payment of which, in either case, such Person has guaranteed.
For purposes of this definition, the "maximum fixed repurchase price" of any
Disqualified Stock that does not have a fixed repurchase price will be
calculated in accordance with the terms of such Disqualified Stock as if such
Disqualified Stock were purchased on any date on which Indebtedness is required
to be determined pursuant to this Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Stock, such fair market
value will be determined in good faith by the board of directors of the issuer
of such Disqualified Stock. Notwithstanding the foregoing, trade accounts
payable and accrued liabilities arising in the ordinary course of business and
any liability for federal, state or local taxes or other taxes owed by such
Person will not be considered Indebtedness for purposes of this definition.
<PAGE> 24
12
"Indenture" means this instrument as originally executed and as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Initial Notes" has the meaning stated in the first recital of this
Indenture.
"Interest Payment Date" means the Stated Maturity of an installment
of interest on the Notes.
"Investment" in any Person means, (i) directly or indirectly, any
advance, loan or other extension of credit (including, without limitation, by
way of guarantee or similar arrangement) or capital contribution to such Person,
the purchase or other acquisition of any stock, bonds, notes, debentures or
other securities issued by such Person, the acquisition (by purchase or
otherwise) of all or substantially all of the business or assets of such Person,
or the making of any investment in such Person, (ii) the designation of any
Restricted Subsidiary as an Unrestricted Subsidiary and (iii) the fair market
value of the Capital Stock (or any other Investment), held by the Company or any
of its Restricted Subsidiaries, of (or in) any Person that has ceased to be a
Restricted Subsidiary. Investments exclude extensions of trade credit on
commercially reasonable terms in accordance with normal trade practices.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation, assignment for
security, claim, or preference or priority or other encumbrance upon, or with
respect to, any property of any kind, real or personal, movable or immovable,
now owned or hereafter acquired. A Person will be deemed to own subject to a
Lien any property that such Person has acquired or holds subject to the interest
of a vendor or lessor under any conditional sale agreement, capital lease or
other title retention agreement.
"Maturity", when used with respect to any Note, means the date on
which the principal of such Note or an installment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, notice of redemption or otherwise.
"Net Cash 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, or stock
or other assets when disposed for, cash or cash equivalents (except to the
extent that such obligations are financed or sold with recourse to the Company
or any Restricted Subsidiary), net of (a) brokerage commissions and other fees
and expenses (including fees and expenses of legal counsel and investment banks)
related to such Asset Sale, (b) provisions for all taxes payable as a result of
such Asset Sale, (c) payments made to retire Indebtedness where such
Indebtedness is secured by the assets that
<PAGE> 25
13
are the subject of such Asset Sale, (d) amounts required to be paid to any
Person (other than the Company or any Restricted Subsidiary) owning a beneficial
interest in the assets that are subject to the Asset Sale and (e) appropriate
amounts to be provided by the Company or any Restricted Subsidiary, as the case
may be, as a reserve required in accordance with GAAP against any liabilities
associated with such Asset Sale and retained by the seller after such Asset
Sale, including pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale.
"Non-payment Event Default" means any event (other than a Payment
Event of Default) the occurrence of which entitles one or more Persons to
accelerate the maturity of any Designated Senior Indebtedness.
"Non-U.S. Person" means a Person that is not a "U.S. Person" as
defined in Regulation S.
"Notes" has the meaning stated in the first recital of this
Indenture and more particularly means any Notes authenticated and delivered
under this Indenture. For all purposes of this Indenture, the term "Notes" shall
include any Exchange Notes to be issued and exchanged for any Notes pursuant to
the Registration Rights Agreement and this Indenture and, for purposes of this
Indenture, all Initial Notes and Exchange Notes shall vote together as one
series of Notes under this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officers' Certificate" means a certificate signed by the Chairman,
the Chief Executive Officer, President or any Vice President, and by the Chief
Financial Officer, Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary of the Company, or any Subsidiary Guarantor, and delivered
to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, including an employee of the Company, and who shall be
acceptable to the Trustee.
"Outstanding", when used with respect to Notes, means, as of the
date of determination, all Notes theretofore authenticated and delivered under
this Indenture, except:
(a) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancellation; and
<PAGE> 26
14
(b) Notes, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or set aside
and segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Notes; provided that, if such
Notes are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made; and
(c) Notes, except to the extent provided in Sections 1202 and 1203,
with respect to which the Company has effected defeasance and/or covenant
defeasance as provided in Article Twelve; and
(d) Notes which have been paid pursuant to Section 308 or in
exchange for or in lieu of which other Notes have been authenticated and
delivered pursuant to this Indenture, other than any such Notes in respect
of which there shall have been presented to the Trustee proof satisfactory
to it that such Notes are held by a bona fide purchaser in whose hands the
Notes are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Notes have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Notes owned by
the Company or any other obligor upon the Notes or any Affiliate of the Company
or such other obligor shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in making
such calculation or in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes which the Trustee knows to be
so owned shall be so disregarded. Notes so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Notes and that the pledgee is not the Company or any other obligor upon the
Notes or any Affiliate of the Company or such other obligor.
"Parent" means Indesco Holdings Co., a Delaware corporation.
"Pari Passu Indebtedness" means (a) with respect to the Notes,
Indebtedness that ranks pari passu in right of payment to the Notes and (b) with
respect to any Subsidiary Guarantee, Indebtedness that ranks pari passu in right
of payment to such Subsidiary Guarantee.
"Paying Agent" means Norwest Bank Minnesota, National Association,
and any successor (including the Company acting as Paying Agent) authorized by
the Company to pay the principal of (and premium, if any) or interest on any
Notes on behalf of the Company.
<PAGE> 27
15
"Payment Default" has the meaning specified in Section 501.
"Payment Event of Default" has the meaning specified in Section
1403.
"Permitted Holders" means any one or more of Ariel Gratch ("Gratch")
and Yehochai Schneider ("Schneider"), the estate, spouse, children and
grandchildren of each of Gratch and Schneider, any trust for the benefit solely
of Gratch and/or Schneider and/or members of their respective families, and any
Person controlled, directly or indirectly, by any one or more of the foregoing
Persons.
"Permitted Investments" means any of the following:
(a) Investments in (i) securities with a maturity of one year or
less issued or directly and fully guaranteed or insured by the United
States or any agency or instrumentality thereof (provided, however, that
the full faith and credit of the United States is pledged in support
thereof); (ii) certificates of deposit or acceptances with a maturity of
one year or less of any financial institution that is a member of the
Federal Reserve System having combined capital and surplus of not less
than $500,000,000; (iii) any shares of money market mutual or similar
funds having assets in excess of $500,000,000; and (iv) commercial paper
with a maturity of one year or less issued by a corporation that is not an
Affiliate of the Company and is organized under the laws of any state of
the United States or the District of Columbia and having a rating (A) from
Moody's Investors Service, Inc. of at least P-1 or (B) from Standard &
Poor's Ratings Group of at least A-1;
(b) Investments by the Company or a Restricted Subsidiary in another
Person, if as a result of such Investment (x) such other Person becomes a
Restricted Subsidiary that is a Subsidiary Guarantor, or (y) such other
Person becomes a Restricted Subsidiary that is not a Subsidiary Guarantor
but, at the time of such Investment, is not subject to a consensual
encumbrance or consensual restriction that would be prohibited by Section
1018, without regard to the exception described in clauses (i), (ii) and
(iv) of Section 1018, or (z) such other Person is merged or consolidated
with or into, or transfers or conveys all or substantially all of its
assets to, the Company or a Restricted Subsidiary that, at the time of
such Investment, either is a Subsidiary Guarantor or is not subject to a
consensual encumbrance or consensual restriction that would be prohibited
by Section 1018, without regard to the exception described in clauses (i),
(ii) and (iv) of Section 1018;
(c) Investments by the Company or a Restricted Subsidiary in (x) the
Company or, (y) a Subsidiary Guarantor or (z) a Restricted Subsidiary that
is not a Subsidiary Guarantor but, at the time of such Investment, is not
subject to a consensual
<PAGE> 28
16
encumbrance or consensual restriction that would be prohibited by Section
1018, without regard to the exception described in clauses (i), (ii) and
(iv) of Section 1018;
(d) Investments in existence on the Closing Date;
(e) promissory notes or other evidence of Indebtedness received as a
result of Asset Sales permitted under Section 1016;
(f) loans or advances to officers, directors and employees of the
Company or any of its Restricted Subsidiaries made in the ordinary course
of business after the date of the initial issuance of the Notes in an
amount not to exceed $1 million in the aggregate at any one time
outstanding; and
(g) other Investments that do not exceed $4 million in the aggregate
at any one time outstanding.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
provided, however, that: (i) the principal amount of such Permitted Refinancing
Indebtedness does not exceed the principal amount of the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded plus the lesser of
the amount of any premium required to be paid in connection with such
refinancings pursuant to the terms of such indebtedness or the amount of any
premium reasonably determined by the Company as necessary to accomplish such
refinancing (plus the amount of reasonable expenses incurred in connection
therewith); (ii) such Permitted Refinancing Indebtedness has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Restricted Subsidiary of the Company that is the obligor
on the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means any individual, corporation, limited or general
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
<PAGE> 29
17
"Polytek" means AFA Polytek, BV and its successors.
"Polytek Credit Agreement" means the credit agreement dated July 24,
1997 between Polytek and ABN AMRO Bank NV, as such credit agreement may be
amended, restated, supplemented, refinanced or otherwise modified from time to
time.
"Predecessor Note" of any particular Note means every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 308 in exchange for a mutilated
security or in lieu of a lost, destroyed or stolen Note shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Note.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, partnership interests, participation, rights in or other
equivalents (however designated) of such Person's preferred or preference stock,
whether now outstanding or issued after the Closing Date, and including, without
limitation, all classes and series of preferred or preference stock of such
Person.
"QIB" means a "Qualified Institutional Buyer" under Rule 144A.
"Qualified Equity Interest" means any Qualified Stock and all
warrants, options or other rights to acquire Qualified Stock (but excluding any
debt security that is convertible into or exchangeable for Capital Stock).
"Qualified Stock" of any Person means any and all Capital Stock of
such Person, other than Disqualified Stock.
"Redemption Date", when used with respect to any Note to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Note to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Register" and "Registrar" have the respective meanings specified in
Section 305.
"Registration Rights Agreement" means the Registration Rights
Agreement among the Company, the Subsidiary Guarantors and the Initial Purchaser
named therein, dated as of April 23, 1998 relating to the Notes.
<PAGE> 30
18
"Registration Statement" means the Registration Statement as defined
in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the April 1 or October 1 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Restricted Subsidiary" means any Subsidiary other than an
Unrestricted Subsidiary. Restricted Subsidiaries shall always include AFA
Products, Inc., AFA Polytek B.V., Continental Sprayers International, Inc.,
Continental Acquisition (U.K.) Limited and Continental Sprayers de Mexico S.A.
de C.V.
"Rule 144A" means Rule 144A under the Securities Act.
"sale and leaseback transaction" means any transaction or series of
related transactions pursuant to which a person sells or transfers any property
or asset in connection with the leasing, or the resale against installment
payments, of such property or asset to the seller or transferor.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and the rules and regulations thereunder.
"Senior Bank Debt" means the Obligations outstanding under the
Credit Agreement.
"Senior Indebtedness" means (i) the Senior Bank Debt and (ii) all
other Indebtedness of the Company for borrowed money, including principal,
premium, if any, and interest on such Indebtedness, unless the instrument under
which such Indebtedness of the Company for money borrowed is created, incurred,
assumed or guaranteed expressly provides that such Indebtedness for money
borrowed is not senior or superior in right of payment to the Notes, and all
renewals, extensions, modifications, amendments, restatements, or refinancings
thereof. Notwithstanding anything to the contrary in the foregoing, Senior
Indebtedness will not include (i) Indebtedness evidenced by the Notes, (ii)
Indebtedness of the Company that is expressly subordinated in right of payment
to any Senior Indebtedness of the Company or the Notes, (iii) Indebtedness of
the Company that by operation of law is subordinate to any general unsecured
obligations of the Company, (iv) Indebtedness of the Company to the extent
incurred in violation of this Indenture, (v) any liability for federal, state or
local taxes or other taxes, owed or owing by the Company, (vi) trade account
payables owed or owing by the Company, (vii) amounts owed by the Company for
compensation to employees or for services rendered to
<PAGE> 31
19
the Company, (viii) Indebtedness of the Company to any Restricted Subsidiary or
any other Affiliate of the Company, (ix) Disqualified Stock of the Company and
(x) Indebtedness which when incurred and without respect to any election under
Section 1111(b) of Title 11 of the United States Code is without recourse to the
Company or any Restricted Subsidiary.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary of the
Company that, together with its Subsidiaries, (a) for the most recent fiscal
year of the Company, accounted for more than 10% of the consolidated net sales
of the Company and its Subsidiaries, (b) as of the end of such fiscal year, was
the owner of more than 10% of the consolidated assets of the Company and its
Restricted Subsidiaries, in the case of either (a) or (b), as set forth on the
most recently available consolidated financial statements of the Company for
such fiscal year or (c) was organized or acquired after the beginning of such
fiscal year and would have been a Significant Subsidiary if it had been owned
during such entire fiscal year.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 309.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable and, when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness or any installment of interest
thereon is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Subsidiary Guarantor that is subordinated in right of payment to the Notes or
the Subsidiary Guarantees issued by such Subsidiary Guarantor, as the case may
be.
"Subordinated Parent Notes" means the unsecured subordinated note
issued by Parent to AFA International Limited dated as of July 29, 1997 in the
principal amount of $1,000,000, the unsecured subordinated note issued by Parent
to Waldock Limited dated as of July 29, 1997 in the principal amount of
$2,000,000 and the unsecured subordinated notes issued by Parent on the Closing
Date to AFA International Limited and Ariel Gratch in the aggregate principal
amount of $2,500,000.
"Subsidiary" means any Person a majority of the equity ownership or
Voting Stock of which is at the time owned, directly or indirectly, by the
Company and/or one or more other Subsidiaries of the Company.
<PAGE> 32
20
"Subsidiary Guarantee" means with respect to each Subsidiary
Guarantor, the unconditional guarantee by such Subsidiary Guarantor, pursuant to
Article Thirteen.
"Subsidiary Guarantors" means, collectively, all Restricted
Subsidiaries that are incorporated in the United States or a State thereof or
the District of Columbia; provided, however, that any Person that becomes an
Unrestricted Subsidiary in compliance with Section 1011 shall not be included in
"Subsidiary Guarantors" after becoming an Unrestricted Subsidiary.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
as in force at the date as of which this Indenture was executed, except as
provided in Section 905.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted Subsidiary" means (a) any Subsidiary that is
designated by the Board of Directors of the Company as an Unrestricted
Subsidiary in accordance with Section 1017 and (b) any Subsidiary of an
Unrestricted Subsidiary.
"U.S. Government Obligations" means (i) securities that are (a)
direct obligations of the United States of America for the payment of which the
full faith and credit of the United States of America is 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 (ii) depositary receipts issued by a bank (as
defined in Section 3(a)(2) of the Securities Act) as custodian with respect to
any U.S. Government Obligation which is specified in clause (i) above and held
by such bank for the account of the holder of such depositary receipt, or with
respect to any specific payment of principal or interest on any U.S. Government
Obligation which is so specified and held, 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 depositary receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of principal or interest of the U.S. Government Obligation evidenced by such
depositary receipt.
"Voting Stock" means any class or classes of Capital Stock pursuant
to which the Holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes has, or might have, voting power by reason of the
happening of any contingency).
<PAGE> 33
21
"Weighted Average Life" means, as of the date of determination with
respect to any Indebtedness or Disqualified Stock, the quotient obtained by
dividing (a) the sum of the products of (i) the number of years from the date of
determination to the date or dates of each successive scheduled principal or
liquidation value payment of such Indebtedness or Disqualified Stock,
respectively, multiplied by (ii) the amount of each such principal or
liquidation value payment by (b) the sum of all such principal or liquidation
value payments.
"Wholly Owned Restricted Subsidiary" means any Restricted
Subsidiary, all of the outstanding voting securities (other than directors'
qualifying shares or shares of foreign Restricted Subsidiaries required to be
owned by foreign nationals pursuant to applicable law) of which are owned,
directly or indirectly, by the Company.
SECTION 102. Incorporation by Reference of Trust Indenture Act.
(a) This Indenture is expressly made subject to the Trust Indenture
Act as if this Indenture were, on the date hereof, subject to the Trust
Indenture Act under the provisions of such statute and such provisions are
incorporated by reference in this Indenture.
(b) Whenever this Indenture refers to a provision of the Trust
Indenture Act, the provision is incorporated by reference in and made a part of
this Indenture. The following Trust Indenture Act terms used in this Indenture
have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the indenture securities means the Company or any other
obligor on the Notes.
All other Trust Indenture Act terms used in this Indenture that are
defined by the Trust Indenture Act, defined by reference in the Trust Indenture
Act to another statute or defined by a rule of the Commission and not otherwise
defined herein shall have the meanings assigned to them therein.
<PAGE> 34
22
SECTION 103. Compliance Certificates and Opinions.
Upon any application or request by the Company and the Subsidiary
Guarantors to the Trustee to take any action under any provision of this
Indenture, the Company and the Subsidiary Guarantors shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture (including any covenant compliance which
constitutes a condition precedent) relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1008(a)) shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) 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;
(c) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 104. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company and/or the
Subsidiary Guarantors may be based, insofar as it relates to legal matters, upon
a certificate or opinion of,
<PAGE> 35
23
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company or such Subsidiary
Guarantor, as the case may be, stating that the information with respect to such
factual matters is in the possession of the Company or such Subsidiary
Guarantor, as the case may be, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 105. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in Person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee, the Company and the Subsidiary
Guarantors, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of the signer's authority. The fact and date of the execution of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner that the Trustee deems sufficient.
(c) The principal amount and serial numbers of Notes held by any
Person, and the date of holding the same, shall be proved by the Register.
<PAGE> 36
24
(d) If the Company or any Subsidiary Guarantor shall solicit from
the Holders of Notes any request, demand, authorization, direction, notice,
consent, waiver or other Act, the Company or any such Subsidiary Guarantor (as
the case may be), may, at its option, by or pursuant to a Board Resolution, fix
in advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company or any such Subsidiary Guarantor (as the case may be) shall have
no obligation to do so. Notwithstanding TIA Section 316(c), such record date
shall be the record date specified in or pursuant to such Board Resolution,
which shall be a date not earlier than the date 30 days prior to the first
solicitation of Holders generally in connection therewith and not later than the
date such solicitation is completed. If such a record date is fixed, such
request, demand, authorization, direction, notice, consent, waiver or other Act
may be given before or after such record date, but only the Holders of record at
the close of business on such record date shall be deemed to be Holders for the
purposes of determining whether Holders of the requisite proportion of
Outstanding Notes have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act, and for
that purpose the Outstanding Notes shall be computed as of such record date;
provided that no such authorization, agreement or consent by the Holders on such
record date shall be deemed effective unless it shall become effective pursuant
to the provisions of this Indenture not later than eleven months after the
record date.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Note shall bind every future Holder of
the same Note and the Holder of every Note issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company
and/or the Subsidiary Guarantors in reliance thereon, whether or not notation of
such action is made upon such Note.
SECTION 106. Notices, etc., to Trustee, Company and Subsidiary
Guarantors.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(a) the Trustee by any Holder, the Company or any Subsidiary
Guarantor shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its Corporate
Trust Office, Attention: Corporate Trust Department, or
(b) the Company by the Trustee, any Holder or any Subsidiary
Guarantor shall be sufficient for every purpose hereunder (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, to the Company
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25
addressed to it at 950 Third Avenue, New York, New York 10022, Attention:
Ariel Gratch, or at any other address previously furnished in writing to
the Trustee or such Subsidiary Guarantor (as the case may be) by the
Company, or
(c) any Subsidiary Guarantor by any Holder, the Trustee or the
Company shall be sufficient for every purpose hereunder (unless otherwise
herein expressly provided) if in writing and mailed, first-class postage
prepaid, to Subsidiary Guarantor addressed to it at 950 Third Avenue, New
York, New York 10022, Attention: Ariel Gratch, or at any other address
previously furnished in writing to the Trustee or the Company (as the case
may be) by such Subsidiary Guarantor.
SECTION 107. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to Holders by
the Company or the Trustee, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, to each Holder affected by such event, at his address as it
appears in the Register, not later than the latest date, and not earlier than
the earliest date, prescribed for the giving of such notice. In any case where
notice to Holders is given by mail, neither the failure to mail such notice, nor
any defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice mailed to a
Holder in the manner herein prescribed shall be conclusively deemed to have been
received by such Holder, whether or not such Holder actually receives such
notice. Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause, it shall be impracticable to mail
notice of any event to Holders when such notice is required to be given pursuant
to any provision of this Indenture, then any manner of giving such notice as
shall be satisfactory to the Trustee shall be deemed to be a sufficient giving
of such notice for every purpose hereunder.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
<PAGE> 38
26
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company and
the Subsidiary Guarantors shall bind their respective successors and assigns,
whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in 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.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Notes, express or implied, shall
give to any Person, other than the parties hereto, any Paying Agent, any
Registrar and their successors hereunder, the Holders any benefit or any legal
or equitable right, remedy or claim under this Indenture.
SECTION 112. Governing Law.
This Indenture and the Notes shall be governed by, and construed in
accordance with, the law of the State of New York. Upon the issuance of the
Exchange Notes, if any, or the effectiveness of the Shelf Registration
Statement, this Indenture shall be subject to the provisions of the Trust
Indenture Act of 1939, as amended, that are required to be part of this
Indenture and shall, to the extent applicable, be governed by such provisions.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, date
established for payment of Defaulted Interest pursuant to Section 309, Stated
Maturity or Maturity with respect to any Note shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Notes) payment
of principal (or premium, if any) or interest need not be made on such date, but
may be made on the next succeeding Business Day with the same force and effect
as if made on the Interest Payment Date, Redemption Date, date established for
payment of Defaulted Interest pursuant to Section 309, Stated Maturity or
Maturity; provided that no interest shall accrue for the period from and after
such Interest Payment Date, Redemption Date, date established for payment of
Defaulted Interest pursuant to Section 309, Stated Maturity or Maturity, Change
in Control Purchase Date or Asset Sale Purchase Date, as the case may be, to the
next succeeding Business Day.
<PAGE> 39
27
SECTION 114. Conflict of Any Provision of Indenture with Trust
Indenture Act.
If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by Trust Indenture Act Sections
310 to 318, inclusive, or conflicts with any provision (an "incorporated
provision") required by or deemed to be included in this Indenture by operation
of such Trust Indenture Act Sections, such imposed duties or incorporated
provision shall control. If any provision of this Indenture modifies or excludes
any provision of the Trust Indenture Act that may be so modified or excluded,
the latter provision shall be deemed to apply to this Indenture as so modified
or excluded, as the case may be.
ARTICLE TWO
NOTE FORMS
SECTION 201. Forms Generally.
The Initial Notes shall be known as the "9 3/4% Senior Subordinated
Notes due 2008" and the Exchange Notes shall be known as the "9 3/4% Series B
Senior Subordinated Notes due 2008", in each case, of the Company. The Notes and
the Trustee's certificate of authentication shall be in substantially the form
annexed hereto as Exhibit A. The Notes may have such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture and may have letters, notations or other marks of identification
and such notations, legends or endorsements required by law, stock exchange
agreements to which the Company is subject or usage. Any portion of the text of
any Note may be set forth on the reverse thereof, with an appropriate reference
thereto on the face of the Note. The Company shall approve the form of the Notes
and any notation, legend or endorsement on the Notes. Each Note shall be dated
the date of its authentication.
The definitive Notes shall be printed, lithographed or engraved on
steel-engraved borders or may be produced in any other manner, all as determined
by the officers of the Company executing such Notes, as evidenced by their
execution of such Notes.
The terms and provisions contained in the form of the Notes annexed
hereto as Exhibit A shall constitute, and are hereby expressly made, a part of
this Indenture. To the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
<PAGE> 40
28
Initial Notes offered and sold in reliance on Rule 144A shall be
issued initially in the form of a permanent global Note substantially in the
form set forth in Exhibit A (the "U.S. Global Note") deposited with, or on
behalf of, the Depositary or with the Trustee, as custodian for the Depositary,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the U.S. Global Note may from time
to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
Initial Notes offered and sold in offshore transactions in reliance
on Regulation S shall be issued initially in the form of a single permanent
global Note in registered form substantially in the form set forth in Exhibit A
(the "Offshore Global Note") deposited with the Trustee, as custodian for the
Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount at maturity of the Offshore
Global Note may from time to time be increased or decreased by adjustments made
in the records of the Trustee, as custodian for the Depositary or its nominee,
as herein provided.
Initial Notes offered and sold to "accredited investors" (as defined
in Rule 501(a)(1), (2), (3) and (7) under the Securities Act) who are not QIBs
(excluding non-U.S. Persons) shall initially be issued in the form of permanent
certificated Notes ("U.S. Physical Notes") in registered form in substantially
the form of Exhibit A hereto. Notes issued pursuant to Section 306 in exchange
for or upon transfer of interests in the U.S. Global Note or the Offshore Global
Note shall be in the form of U.S. Physical Notes or in the form of permanent
certificated Notes in registered form substantially in the form set forth in
Exhibit A (the "Offshore Physical Note").
The Offshore Physical Notes and the U.S. Physical Notes are
sometimes collectively herein referred to as the "Physical Notes". The Offshore
Global Note and the U.S. Global Note are sometimes collectively referred to as
the "Global Notes."
SECTION 202. Restrictive Legends.
Unless and until (i) an Initial Note is sold under an effective
Registration Statement or (ii) an Initial Note is exchanged for an Exchange Note
in connection with an effective Registration Statement, in each case pursuant to
the Registration Rights Agreement, (A) each U.S. Global Note and U.S. Physical
Note shall bear the legend set forth below (the "Private Placement Legend") on
the face thereof and (B) the Offshore Physical Notes and the Offshore Global
Note shall bear the legend set forth below on the face thereof until at least 41
days after the Closing Date and receipt by the Company and the Trustee of a
certificate substantially in the form of Exhibit D hereto:
<PAGE> 41
29
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, 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, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO 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
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION
TERMINATION DATE") ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY, (B) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR
SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A 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, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS 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), (2), (3)
OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY
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 ANOTHER 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 (i)
PURSUANT TO CLAUSE (D) PRIOR TO THE END OF THE 40-DAY RESTRICTED PERIOD
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR PURSUANT TO
CLAUSES (E) OR (F) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION
<PAGE> 42
30
SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO
REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER
AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.
Each Global Note, whether or not an Initial Note, shall also bear
the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY 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 TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTIONS 306 AND 307 OF THE INDENTURE.
ARTICLE THREE
THE NOTES
SECTION 301. Title and Terms.
The aggregate principal amount of Notes which may be authenticated
and delivered under this Indenture is limited to $145,000,000, except for Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes
<PAGE> 43
31
pursuant to Section 304, 305, 306, 307, 308, 906, 1015, 1016 or 1108, pursuant
to an Exchange Offer or pursuant to Section 312.
The Initial Notes shall be known and designated as the "9 3/4%
Senior Subordinated Notes Due 2008" and the Exchange Notes shall be known and
designated as the "9 3/4% Series B Senior Subordinated Notes Due 2008" of the
Company. Their Stated Maturity shall be April 15, 2008, and they shall bear
interest at the rate of 9.75% per annum from April 23, 1998, or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, payable semiannually on April 15 and October 15 in each year, commencing
October 15, 1998, until the principal thereof is paid or duly provided for, to
the Person in whose name the Note (or any Predecessor Note) is registered at the
close of business on the April 1 or October 1 next preceding such Interest
Payment Date.
The principal of (and premium, if any), and interest on the Notes
shall be payable, and the Notes shall be exchangeable and transferable, at the
office or agency of the Company in The City of New York maintained for such
purposes (which initially shall be the office of the Trustee located in the care
of the Depositary Trust Company, at 55 Water Street, New York, New York 10041)
or, at the option of the Company, interest may be paid by check mailed to the
address of the Person entitled thereto as such address shall appear on the
Register; provided that all payments with respect to the Global Notes and the
Physical Notes the Holders of which have given wire transfer instructions to the
Company will be required to be made by wire transfer of immediately available
funds to the accounts specified by the Holders thereof.
Notes that remain outstanding after the consummation of the Exchange
Offer and Exchange Notes issued in connection with the Exchange Offer will be
treated as a single class of securities under this Indenture.
The Notes shall be redeemable as provided in Article Eleven.
SECTION 302. Denominations.
The Notes shall be issuable only in registered form without coupons
and only in denominations of $1,000 and any integral multiple thereof; provided
that U.S. Physical Notes originally purchased by or transferred to institutional
"accredited investors" (as defined in Rule 501(a), (1), (2), (3) or (7) under
the Securities Act) who are not QIBs (excluding Non-U.S. Persons) (as defined in
Rule 144A) will be subject to a minimum denomination of $250,000.
<PAGE> 44
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SECTION 303. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Company by its
Chairman, its President or a Vice President. The signature of any of these
officers on the Notes may be manual or facsimile signatures of the present or
any future such authorized officer and may be imprinted or otherwise reproduced
on the Notes.
Notes bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Initial Notes executed by the Company
to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Initial Notes directing the Trustee to
authenticate the Notes and certifying that all conditions precedent to the
issuance of Notes contained herein have been fully complied with, and the
Trustee in accordance with such Company Order shall authenticate and deliver
such Initial Notes. On Company Order, the Trustee shall authenticate for
original issue Exchange Notes in an aggregate principal amount not to exceed the
sum of $145,000,000 plus the aggregate principal amount of any Additional Notes
issued; provided that such Exchange Notes shall be issuable only upon the valid
surrender for cancellation of Initial Notes of a like aggregate principal amount
in accordance with an Exchange Offer pursuant to the Registration Rights
Agreement. In each case, the Trustee shall be entitled to receive an Officers'
Certificate and an Opinion of Counsel of the Company that it may reasonably
request in connection with such authentication of Notes. Such order shall
specify the amount of Notes to be authenticated and the date on which the
original issue of Initial Notes or Exchange Notes is to be authenticated.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for in Exhibit
A duly executed by the Trustee by manual signature of an authorized officer, and
such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder and
is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall
<PAGE> 45
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have been merged, or the Person which shall have received a conveyance,
transfer, lease or other disposition as aforesaid, shall have executed an
indenture supplemental hereto with the Trustee pursuant to Article Eight, any of
the Notes authenticated or delivered prior to such consolidation, merger,
conveyance, transfer, lease or other disposition may, from time to time, at the
request of the successor Person, be exchanged for other Notes executed in the
name of the successor Person with such changes in phraseology and form as may be
appropriate, but otherwise in substance of like tenor as the Notes surrendered
for such exchange and of like principal amount; and the Trustee, upon Company
Request of the successor Person, shall authenticate and deliver Notes as
specified in such request for the purpose of such exchange. If Notes shall at
any time be authenticated and delivered in any new name of a successor Person
pursuant to this Section in exchange or substitution for or upon registration of
transfer of any Notes, such successor Person, at the option of the Holders but
without expense to them, shall provide for the exchange of all Notes at the time
Outstanding for Notes authenticated and delivered in such new name.
SECTION 304. Temporary Notes.
Pending the preparation of definitive Notes, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Notes which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Notes in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Notes may determine, as conclusively evidenced by their
execution of such Notes.
If temporary Notes are issued, the Company will cause definitive
Notes to be prepared without unreasonable delay. After the preparation of
definitive Notes, the temporary Notes shall be exchangeable for definitive Notes
upon surrender of the temporary Notes at the office or agency of the Company
designated for such purpose pursuant to Section 1002, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes, the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
referred to as the "Register") in which, subject to such reasonable regulations
as it may prescribe, the Company shall provide for the
<PAGE> 46
34
registration of Notes and of transfers of Notes. The Register shall be in
written form or any other form capable of being converted into written form
within a reasonable time. At all reasonable times, the Register shall be open to
inspection by the Trustee. The Trustee is hereby initially appointed as security
registrar (the "Registrar") for the purpose of registering Notes and transfers
of Notes as herein provided.
Subject to the provisions of Section 307, upon surrender for
registration of transfer of any Note at the office or agency of the Company
designated pursuant to Section 1002, the Company shall execute, and the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denomination or
denominations of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes
of any authorized denomination and of a like aggregate principal amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange (including an exchange of Initial Notes
for Exchange Notes), the Company shall execute, and the Trustee shall
authenticate and deliver, the Notes which the Holder making the exchange is
entitled to receive; provided that no exchange of Initial Notes for Exchange
Notes shall occur until an Exchange Offer Registration Statement shall have been
declared effective by the Commission and that the Initial Notes to be exchanged
for the Exchange Notes shall be canceled by the Trustee.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Registrar) 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.
No service charge shall be made for any registration of transfer or
exchange or redemption of Notes, but the Company may require payment in certain
circumstances of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any registration of transfer or exchange
of Notes, other than exchanges pursuant to Section 304, 906, 1015, 1016 or 1108
not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange any Note during a period beginning at the opening of
business 15 days before the selection of Notes to be redeemed under Section 1104
and ending at the close of business on
<PAGE> 47
35
the day of such mailing of the relevant notice of redemption, or (ii) to
register the transfer of or exchange any Note so selected for redemption in
whole or in part, except the unredeemed portion of any Note being redeemed in
part.
SECTION 306. Book-Entry Provisions for Global Notes.
(a) Each Global Note initially shall (i) be registered in the name
of Cede & Co., as nominee of the Depositary (such nominee being referred to
herein as the "Global Note Holder"), (ii) be deposited with, or on behalf of,
the Depositary or with the Trustee, as custodian for such Depositary, and (iii)
bear legends as set forth in Section 202.
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depositary, or the Trustee as its custodian, or under any
Global Note, and the Depositary may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of such 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 Depositary or shall impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a Holder of any Note.
(b) Transfers of any Global Note shall be limited to transfers of
such Global Note in whole, but not in part, to the Depositary, its successors or
their respective nominees. Interests of beneficial owners in a Global Note may
be transferred in accordance with the rules and procedures of the Depositary and
the provisions of Section 307. In addition, U.S. Physical Notes or Offshore
Physical Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in the U.S. Global Note or the Offshore Global Note,
respectively, if: (x) the Depositary notifies the Company that it is unwilling
or unable to continue as Depositary for the applicable Global Note or the
Depositary ceases to be a "Clearing Agency" registered under the Exchange Act
and a successor depositary is not appointed by the Company within 90 days or (y)
an Event of Default has occurred and is continuing and Holders of more than 25%
in aggregate principal amount of the Notes at the time Outstanding represented
by the Global Notes advise the Trustee through the Depositary in writing that
the continuation of a book-entry system through the Depositary with respect to
the Global Notes is no longer required.
(c) Any beneficial interest in one of the Global Notes that is
transferred to a person who takes delivery in the form of an interest in the
other Global Note will, upon transfer, cease to be an interest in such Global
Note and become an interest in the other Global Note and, accordingly, will
thereafter be subject to all transfer restrictions, if any, and other
<PAGE> 48
36
procedures applicable to beneficial interests in such other Global Note for as
long as it remains such an interest.
(d) In connection with any transfer pursuant to paragraph (b) of
this Section of a beneficial interest in any Global Note to a beneficial owner
who is required or permitted to hold a Physical Note, the Registrar shall
reflect on its books and records the date and a decrease in the principal amount
of the applicable Global Note in an amount equal to the principal amount of the
beneficial interest in such Global Note to be transferred, and the Company shall
execute, and the Trustee shall authenticate and deliver, subject to the terms
and conditions of Section 307 hereof, one or more Physical Notes of like tenor
and amount.
(e) In connection with the transfer of the entire U.S. Global Note
or Offshore Global Note to beneficial owners pursuant to paragraph (b) of this
Section, the U.S. Global Note or Offshore Global Note, as the case may be, shall
be deemed to be surrendered to the Trustee for cancellation, and the Company
shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the U.S. Global Note or Offshore Global Note, as the case may be, an
equal aggregate principal amount of U.S. Physical Notes or Offshore Physical
Notes, as the case may be, of authorized denominations.
(f) Any U.S. Physical Note delivered in exchange for an interest in
the U.S. Global Note pursuant to subsection (b) or (d) of this Section shall,
unless such exchange is made on or after the Resale Restriction Termination Date
and except as otherwise provided in Section 307, bear the applicable legend
regarding transfer restrictions applicable to the U.S. Physical Note set forth
in Section 202.
(g) The registered Global Note Holder 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.
(h) Beneficial owners of interests in a Global Note may receive
Physical Notes (which shall bear the Private Placement Legend if required by
Section 202) in accordance with the procedures of the Depositary. In connection
with the execution, authentication and delivery of such Physical Notes, the
Registrar shall reflect on its books and records a decrease in the principal
amount of the relevant Global Note equal to the principal amount of such
Physical Notes and the Company shall execute and the Trustee shall authenticate
and deliver one or more Physical Notes having an equal aggregate principal
amount.
<PAGE> 49
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SECTION 307. Special Transfer Provisions.
Unless and until (i) an Initial Note is sold under an effective
Registration Statement, or (ii) an Initial Note is exchanged for an Exchange
Note in connection with an effective Registration Statement, in each case
pursuant to the Registration Rights Agreement, the following provisions shall
apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. The
following provisions shall apply with respect to the registration of any
proposed transfer of an Initial Note to any institutional "accredited investor"
(as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act) which is not a QIB (excluding Non-U.S. Persons):
(i) The Registrar shall register the transfer of any Initial Note,
whether or not such Initial Note bears the Private Placement Legend, if
(x) the requested transfer is at least two years after the original issue
date of the Initial Notes or (y) the proposed transferee has delivered to
the Registrar a certificate substantially in the form of Exhibit C hereto.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Note, upon receipt by the Registrar
of (x) the documents, if any, required by paragraph (i) and (y)
instructions given in accordance with the Depositary's and the Registrar's
procedures therefor, the Registrar shall reflect on its books and records
the date and a decrease in the principal amount of the U.S. Global Note in
an amount equal to the principal amount of the beneficial interest in the
U.S. Global Note to be transferred, and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more U.S. Physical Notes of
like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a U.S. Physical Note or
an interest in the U.S. Global Note to a QIB (excluding Non-U.S. Persons):
(i) If the Note to be transferred consists of (i) U.S. Physical
Notes, the Registrar shall register the transfer and the Company shall
execute, and the Trustee shall authenticate and deliver one or more U.S.
Physical Notes if such transfer is being made by a proposed transferor who
has checked the box provided for on the form of Initial 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
Initial Note stating, or has otherwise advised the Company and the
Registrar in writing, that it is purchasing the Initial Note for its own
account or an account with respect to which it exercises sole investment
discretion and that it, or the Person on whose behalf it is
<PAGE> 50
38
acting with respect to any such account, is a QIB within the meaning of
Rule 144A, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding
the Company as it has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor
is relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A or (ii) an interest in
the U.S. Physical Note, the transfer of such interest may be effected only
through the book-entry system maintained by the Depositary.
(ii) If the proposed transferee is an Agent Member, and the Initial
Notes to be transferred consist of U.S. Physical Notes, upon receipt by
the Registrar of instructions given in accordance with the Depositary's
and the Registrar's procedures therefor, the Registrar shall reflect on
its books and records the date and an increase in the principal amount of
the U.S. Global Note in an amount equal to the principal amount of the
U.S. Physical Notes, as the case may be, to be transferred, and the
Trustee shall cancel the U.S. Physical Notes so transferred.
(c) Transfers of Interests in the Offshore Global Note or Offshore
Physical Notes to U.S. Persons. The following provisions shall apply with
respect to any transfer of interests in the Offshore Global Note or Offshore
Physical Notes to U.S. Persons:
(i) prior to the removal of the Private Placement Legend from the
Offshore Global Notes or Offshore Physical Notes pursuant to Section 202,
the Registrar shall refuse to register such transfer; and
(ii) after such removal pursuant to Section 202, the Registrar shall
register the transfer of any such Note without requiring any additional
certification.
(d) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of an Initial Note to a
Non-U.S. Person:
(i) The Registrar shall register any proposed transfer to any
Non-U.S. Person if the Note to be transferred is a U.S. Physical Note or
an interest in the U.S. Global Note only upon receipt of a certificate
substantially in the form of Exhibit D from the proposed transferor.
(ii) (x) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Note, upon receipt by the Registrar
of (1) the document required by paragraph (i) and (2) instructions in
accordance with the Depositary's and the Registrar's procedures, the
Registrar shall reflect on its books and records the date and a decrease
in the principal amount of the U.S. Global Note in an amount equal to
<PAGE> 51
39
the principal amount of the beneficial interest in the U.S. Global Note to
be transferred, and (y) if the proposed transferor is an Agent Member,
upon receipt by the Registrar of instructions given in accordance with the
Depositary's and the Registrar's procedures, the Registrar shall reflect
on its books and records the date and an increase in the principal amount
of the Offshore Global Note in an amount equal to the principal amount of
the U.S. Physical Note or the U.S. Global Note, as the case may be, to be
transferred, and the Trustee shall cancel the Physical Note, if any, so
transferred or decrease the amount of the U.S. Global Note.
(e) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of an Initial Note to a
Non-U.S. Person:
(i) Prior to June 2, 1998, the Registrar shall register any proposed
transfer of an Initial Note to a Non-U.S. Person upon receipt of a
certificate substantially in the form of Exhibit C hereto from the
proposed transferor and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Physical Notes of like tenor and
amount.
(ii) On and after June 2, 1998, the Registrar shall register any
proposed transfer to any Non-U.S. Person (x) if the Initial Note to be
transferred is an Offshore Physical Note, (y) if the Initial Note to be
transferred is a U.S. Physical Note or an interest in the U.S. Global
Note, upon receipt of a certificate substantially in the form of Exhibit C
from the proposed transferor and (z) in the case of either clause (x) or
(y), the Company shall execute, and the Trustee shall authenticate and
deliver, one or more Physical Notes of like tenor and amount.
(iii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Note, upon receipt by the Registrar
of (x) the document, if any, required by paragraph (i), and (y)
instructions in accordance with the Depositary's and the Registrar's
procedures therefor, the Registrar shall reflect on its books and records
the date and a decrease in the principal amount of the U.S. Global Note in
an amount equal to the principal amount of the beneficial interest in the
U.S. Global Note to be transferred and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Physical Notes of like
tenor and amount.
(f) 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 either (i) the circumstances contemplated by the sixth paragraph of
Section 201 or paragraph (a)(i)(x) of this Section 307 exist or (ii) there is
<PAGE> 52
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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.
(g) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain until such time as no Notes remain
Outstanding copies of all letters, notices and other written communications
received pursuant to Section 306 or this Section 307. The Company shall have the
right to inspect and make copies of all such letters, notices or other written
communications at any reasonable time upon the giving of reasonable written
notice to the Registrar.
SECTION 308. Mutilated, Destroyed, Lost and Stolen Notes.
If (i) any mutilated Note is surrendered to the Trustee or the
Registrar, or (ii) the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Note, and there is
delivered to the Company and the Trustee such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Company or the Trustee that such Note has been acquired by a bona fide
purchaser, the Company shall execute and upon Company Order the Trustee shall
authenticate and deliver, in exchange for any such mutilated Note or in lieu of
any such destroyed, lost or stolen Note, a new Note of like tenor and principal
amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all benefits of this Indenture equally and proportionately
with any and all other Notes duly issued hereunder.
<PAGE> 53
41
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 309. Payment of Interest; Interest Rights Preserved.
Interest on any Note which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name such Note (or one or more Predecessor Notes) is registered at the
close of business on the Regular Record Date for such interest at the office or
agency of the Company in The City of New York maintained for such purposes
(which initially shall be the office of the Trustee located in care of the
Depositary Trust Company, at 55 Water Street, New York, New York 10041 pursuant
to Section 1002 or, at the option of the Company, interest may be paid by check
mailed to the address of the Person entitled thereto pursuant to Section 310 as
such address appears in the Register; provided that all payments with respect to
the Global Notes and Physical Notes the Holders of which have given wire
transfer instructions to the Trustee (or other Paying Agent) by the Regular
Record Date shall be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof.
Any interest on any Note which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date shall forthwith cease to
be payable to the Holder on the Regular Record Date by virtue of having been
such Holder, and such defaulted interest and (to the extent lawful) interest on
such defaulted interest at the rate borne by the Notes (such defaulted interest
and interest thereon herein collectively called "Defaulted Interest") may be
paid by the Company, at its election in each case, as provided in clause (a) or
(b) below:
(a) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Note and the date
of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted Interest
as in this clause provided. Thereupon the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest which shall be not
more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Company of such Special Record Date,
<PAGE> 54
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and in the name and at the expense of the Company, shall cause notice of
the proposed payment of such Defaulted Interest and the Special Record
Date therefor to be given in the manner provided for in Section 107, not
less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor having been so given, such Defaulted Interest shall be paid to
the Persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business on such Special Record Date
and shall no longer be payable pursuant to the following clause (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, if, after notice given by the Company
to the Trustee of the proposed payment pursuant to this clause, such
manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
If the Company shall be required to pay any additional interest
pursuant to the terms of the Registration Rights Agreement, it shall deliver an
Officer's Certificate to the Trustee setting forth the new interest rate and the
period for which such rate is applicable.
SECTION 310. Persons Deemed Owners.
Prior to the due presentment of a Note for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Note is registered as the owner of such Note for
the purpose of receiving payment of principal of (and premium, if any) and
(subject to Sections 305 and 309) interest on such Note and for all other
purposes whatsoever, whether or not such Note be overdue, and none of the
Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 311. Cancellation.
All Notes surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly canceled by it. The Company
may at any time deliver to the Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Company
<PAGE> 55
43
may have acquired in any manner whatsoever, and may deliver to the Trustee (or
to any other Person for delivery to the Trustee) for cancellation any Notes
previously authenticated hereunder which the Company has not issued and sold,
and all Notes so delivered shall be promptly canceled by the Trustee. If the
Company shall so acquire any of the Notes, however, such acquisition shall not
operate as a redemption or satisfaction of the indebtedness represented by such
Notes unless and until the same are surrendered to the Trustee for cancellation.
No Notes shall be authenticated in lieu of or in exchange for any Notes canceled
as provided in this Section, except as expressly permitted by this Indenture.
All canceled Notes held by the Trustee shall be disposed of by the Trustee in
accordance with its customary procedures and certification of their disposal
delivered to the Company unless by Company Order the Company shall direct that
canceled Notes be returned to it.
SECTION 312. Issuance of Additional Notes.
The Company may, subject to Article Ten of this Indenture, issue up
to $75,000,000 aggregate principal amount of additional Notes having identical
terms and conditions as the Notes offered hereby, except that interest may begin
accruing from a date other than the date hereof (the "Additional Notes"). Any
Additional Notes will be part of the same issue as the Notes offered hereby and
will vote on all matters with the Notes offered hereby.
SECTION 313. Computation of Interest.
Interest on the Notes shall be computed on the basis of a 360-day
year of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
Upon the request of the Company, this Indenture will cease to be of
further effect (except as to surviving rights of registration of transfer or
exchange of the Notes, as expressly provided for herein or pursuant hereto) and
the Trustee, at the expense of the Company, will execute proper instruments
acknowledging satisfaction and discharge of this Indenture when:
(a) either (i) all the Notes theretofore authenticated and delivered
(other than mutilated, destroyed, lost or stolen Notes that have been
replaced or paid and Notes
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that have been subject to defeasance under Article Twelve) have been
delivered to the Trustee for cancellation or (ii) all Notes not
theretofore delivered to the Trustee for cancellation (A) have become due
and payable, (B) will become due and payable at maturity within one year
or (C) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company, and the Company,
in the case of (A), (B) or (C) above, has irrevocably deposited or caused
to be deposited with the Trustee funds in trust for the purpose in an
amount sufficient to pay and discharge the entire Indebtedness on such
Notes not theretofore delivered to the Trustee for cancellation, for
principal (and premium, if any, on) and interest on the Notes to the date
of such deposit (in the case of Notes that have become due and payable) or
to the Stated Maturity or redemption date, as the case may be;
(b) the Company has paid or caused to be paid all sums payable under
this Indenture by the Company; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided herein 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 607 and, if
money shall have been deposited with the Trustee pursuant to subclause
(ii) of clause (a) of this Section, the obligations of the Trustee under
Section 402 and the last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
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ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(a) default in the payment of any interest on any Note when it
becomes due and payable, and continuance of such default for a period of
30 days (whether or not prohibited by Article 14;
(b) default in the payment of the principal of (or premium, if any,
on) any Note when due (whether or not prohibited by Article 14);
(c) failure to perform or comply with Sections 801, 1015 and 1016;
(d) failure to perform or comply with Sections 1010 and 1011 and
continuance of such default or breach for a period of 30 days after
written notice has been given 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 Notes then outstanding;
(e) default in the performance, or breach, of any covenant or
agreement of the Company or any Subsidiary Guarantor contained in this
Indenture or in any Note or Subsidiary Guarantee (other than a default in
the performance, or breach, of a covenant or agreement that is
specifically dealt with elsewhere herein), and continuance of such default
or breach for a period of 60 days after written notice has been given 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 Notes then
outstanding;
(f) (i) an event of default has occurred under any mortgage, bond,
indenture, loan agreement or other document evidencing an issue of
Indebtedness of the Company or any Restricted Subsidiary, which issue
individually or in the aggregate has an aggregate outstanding principal
amount of not less than $5 million, and such default has resulted in such
Indebtedness becoming, whether by declaration or otherwise, due and
payable prior to the date on which it would otherwise become due and
payable or (ii) a default in any payment when due at final maturity of any
such Indebtedness;
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(g) failure by the Company or any of its Restricted Subsidiaries to
pay one or more final judgments (not subject to appeal), the uninsured
portion of which exceeds in the aggregate $5 million, which judgment or
judgments are not paid, discharged or stayed for a period of 60 days;
(h) any Subsidiary Guarantee ceases to be in full force and effect
or is declared null and void or any such Subsidiary Guarantor denies that
it has any further liability under any Subsidiary Guarantee, or gives
notice to such effect (other than by reason of the termination of this
Indenture or the release of any such Subsidiary Guarantee in accordance
with this Indenture);
(i) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company or any Significant Subsidiary a
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustments or composition of or in respect
of the Company or any Significant Subsidiary under the Federal Bankruptcy
Code or any other applicable federal or state law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or any Significant Subsidiary or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 90 consecutive days; or
(j) the institution by the Company or any Significant Subsidiary of
proceedings to be adjudicated a bankrupt or insolvent, or the consent by
it to the institution of bankruptcy or insolvency proceedings against it,
or the filing by it of a petition or answer or consent seeking
reorganization or relief under the Federal Bankruptcy Code or any other
applicable federal or state law, or the consent by it to the filing of any
such petition or to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Company or any
Significant Subsidiary or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as
they become due.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than as specified in Section 501(i) or
501(j)) occurs and is continuing, the Trustee or the Holders of not less than
25% in aggregate principal amount of the Notes then outstanding may, and the
Trustee at the request of such Holders will, declare the principal of, and
accrued interest on, all of the outstanding Notes immediately due and payable
and, upon any such declaration, such principal and such interest will become due
and payable immediately provided, however, that the Notes shall not become due
and payable
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until the earlier to occur of (i) the acceleration of the maturity of any
Indebtedness under the Credit Agreement or (ii) five business days following
written notice of such declaration to the agent under the Credit Agreement.
If an Event of Default specified in Section 501(i) or 501(j) occurs
and is continuing, then the principal of and accrued interest on all of the
outstanding Notes will ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration under this
Indenture, but before a judgment or decree for payment of the money due has been
obtained by the Trustee, the Holders of a majority in aggregate principal amount
of the outstanding Notes, by written notice to the Company and the Trustee, may
rescind such declaration and its consequences if: (i) the Company has paid or
deposited with the Trustee a sum sufficient to pay (A) all overdue interest on
all Notes, (B) all unpaid principal of (and premium, if any, on) any outstanding
Notes that has become due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the Notes, (C) to the extent that payment
of such interest is lawful, interest upon overdue interest and overdue principal
at the rate borne by the Notes and (D) all sums paid or advanced by the Trustee
under this Indenture and the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel; and (ii) all Events of
Default, other than the non-payment of amounts of principal of (or premium, if
any, on) or interest on the Notes that have become due solely by such
declaration of acceleration, have been cured or waived. No such rescission will
affect any subsequent default or impair any right consequent thereon.
Notwithstanding the preceding paragraph, in the event of a
declaration of acceleration in respect of the Notes because an Event of Default
specified in Section 501(f) shall have occurred and be continuing and provided
no judgment or decree for payment of the money due has been obtained by the
Trustee, such declaration of acceleration shall be automatically annulled if the
Indebtedness that is the subject of such Event of Default has been discharged or
the holders thereof have rescinded their declaration of acceleration in respect
of such Indebtedness, and written notice of such discharge or rescission, as the
case may be, shall have been given to the Trustee by the Company and
countersigned by the holders of such Indebtedness or a trustee, fiduciary or
agent for such holders, within 30 days after such declaration of acceleration in
respect of the Notes, and no other Event of Default has occurred during such
30-day period which has not been cured or waived during such period.
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SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company and each of the Subsidiary Guarantors covenants that if
(a) default is made in the payment of any installment of interest on
any Note when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or premium,
if any, on) any Note at the Maturity thereof,
the Company and each Subsidiary Guarantor, subject to Section 1305, will, upon
demand of the Trustee, pay to the Trustee for the benefit of the Holders of such
Notes, the whole amount then due and payable on such Notes for principal (and
premium, if any) and interest, and interest on any overdue principal (and
premium, if any) and, to the extent that payment of such interest shall be
legally enforceable, upon any overdue installment of interest, at the rate borne
by the Notes, and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If the Company or any Subsidiary Guarantor, as the case may be,
fails to pay such amounts forthwith upon such demand, the Trustee, in its own
name as trustee of an express trust, may institute a judicial proceeding for the
collection of the sums so due and unpaid, may prosecute such proceeding to
judgment or final decree and may enforce the same against the Company, such
Subsidiary Guarantor or any other obligor upon the Notes and collect the moneys
adjudged or decreed to be payable in the manner provided by law out of the
property of the Company, such Subsidiary Guarantor or any other obligor upon the
Notes, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or any other obligor upon the
Notes (including the Subsidiary
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Guarantors) or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Notes shall
then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Company
for the payment of overdue principal, premium, if any, or interest) shall be
entitled and empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Notes and
to file such 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 of the Holders allowed in such
judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same,
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due 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 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Notes.
All rights of action and claims under this Indenture or the Notes
may be prosecuted and enforced by the Trustee without the possession of any of
the Notes or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name and
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Notes in respect of which such judgment
has been recovered.
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SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any) or interest, upon presentation of the Notes and the notation thereon of
the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
607;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Notes in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due
and payable on such Notes for principal (and premium, if any) and
interest, respectively; and
THIRD: The balance, if any, to the Company or any other obligors of
the Notes, including the Subsidiary Guarantors, as their interests may
appear, or as a court of competent jurisdiction may direct.
SECTION 507. Limitation on Suits.
No Holder of any of the Notes has any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture or for the
appointment of a receiver or trustee or for any other remedy thereunder, unless
such Holder has previously given written notice to the Trustee of a continuing
Event of Default, 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, the Trustee has failed
to institute any such proceeding within 60 days after receipt of such notice,
request and offer of indemnity and the Trustee, within such 60-day period, has
not received directions inconsistent with such written request from 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 of a Note
for the enforcement of the payment of the principal of, premium, if any, or
interest on such Note on or after the respective due dates expressed in such
Note. A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
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SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment, as provided herein (including, if applicable, Article Twelve) and in
such Note of the principal of (and premium, if any) and (subject to Section 309)
interest on such Note on the respective Stated Maturities expressed in such Note
(or, in the case of redemption, on the Redemption Date) and to institute suit
for the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Subsidiary Guarantors, the
Trustee and the Holders shall be restored severally and respectively to their
former positions hereunder and thereafter all rights and remedies of the Trustee
and the Holders shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes in the last paragraph of
Section 308, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
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SECTION 512. Control by Holders.
The Holders of not less than a majority in principal amount of the
Outstanding Notes shall 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, provided that
(a) such direction shall not be in conflict with any rule of law or
with this Indenture,
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(c) the Trustee need not take any action which might conflict with
law or this Indenture or involve it in personal liability or be unjustly
prejudicial to the Holders not consenting.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal
amount of the outstanding Notes may, by notice to the Trustee, on behalf of the
Holders of all of the Notes, waive any existing Default or Event of Default and
its consequences under this Indenture, except a continuing Default or Event of
Default in the payment of the principal of (and premium, if any) or interest on
any Note (except for such a default resulting from an acceleration that has been
rescinded), or in respect of a covenant or provision that under this Indenture
cannot be modified or amended without the consent of the Holder of each
outstanding Note.
Upon any such waiver, such Default or Event of 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 thereon.
SECTION 514. Waiver of Stay or Extension Laws.
The Company and each Subsidiary Guarantor covenants (to the extent
that it may lawfully do so) that it will not at any time insist upon, or plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law wherever enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this Indenture; and the Company
and each Subsidiary Guarantor (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law
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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 515. Waiver of Personal Liability of Directors, Officers,
Employees and Stockholders.
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Notes or this Indenture or for any claim based on, in respect of, or
by reason of, such obligations or their creation. No director, officer,
employee, incorporator or stockholder of any Subsidiary Guarantor, as such,
shall have any liability for any obligations of such Subsidiary Guarantor under
its Subsidiary Guarantee or this Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes and the Subsidiary
Guarantees. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such waiver is
against public policy.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the
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requirements of this Indenture. However, in the case of any such
certificates or opinions which by any provisions hereof are specifically
required to be furnished to the Trustee, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a responsible officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 512 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b) and (c) of this Section.
SECTION 602. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing and is
known to the Trustee, the Trustee shall mail to each Holder of the Notes notice
of the Default or Event of Default within 90 days after the occurrence thereof.
However, except in the case of a Default or an Event of Default in payment of
principal of (and premium, if any, on) or interest on any Notes, the Trustee may
withhold the notice to the Holders of the Notes if a committee of its trust
officers in good faith determines that withholding such notice is in the
interests of the Holders of the Notes.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of TIA Sections 315(a) through 315(d):
(a) the Trustee may conclusively rely and shall be protected in
acting or refraining from acting, pursuant to the terms of this Indenture
or otherwise, upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or
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document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order with
sufficient detail as may be requested by the Trustee and any resolution of
the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate and/or an
Opinion of Counsel;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities (including fees and expenses
of its agents and counsel) which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into,
and may conclusively rely upon, the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence
of indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder;
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(h) the Trustee shall not be liable for any action taken, suffered
or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Indenture; and
(i) except during the continuance of an Event of Default, the
Trustee need perform only those duties as are specifically set forth in
this Indenture.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
SECTION 604. Trustee Not Responsible for Recitals or Issuance of
Notes.
The recitals contained herein and in the Notes, except for the
Trustee's certificates of authentication, shall be taken as the statements of
the Company and the Subsidiary Guarantors, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Indenture, the Notes or any Subsidiary
Guarantee, except that the Trustee represents that it is duly authorized to
execute and deliver this Indenture, authenticate the Notes and perform its
obligations hereunder and, upon the effectiveness of the Registration Statement,
that the statements made by it in a Statement of Eligibility on Form T-1
supplied to the Company are true and accurate, subject to the qualifications set
forth therein. The Trustee shall not be accountable for the use or application
by the Company of Notes or the proceeds thereof.
SECTION 605. May Hold Notes.
The Trustee, any Paying Agent, any Registrar or any other agent of
the Company or of the Trustee, in its individual or other capacity, may become
the owner or pledgee of Notes and, subject to TIA Sections 310(b) and 311, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Paying Agent, Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company or any Subsidiary Guarantor, as the case may
be.
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SECTION 607. Compensation and Reimbursement.
The Company agrees:
(a) to pay to the Trustee (in its capacity as Trustee, Paying Agent
and Registrar) from time to time reasonable compensation for all services
rendered by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(b) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(c) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or
administration of this trust, including the 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. The
Trustee shall notify the Company promptly of any claim for which it may
seek indemnity. Failure by the Trustee to so notify the Company shall not
relieve the Company of its obligations hereunder. The Company shall defend
the claim and the Trustee shall cooperate in the defense. The Trustee may
have separate counsel and the Company shall pay the reasonable fees and
expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section to compensate the
Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture. As security for the performance of such obligations
of the Company, the Trustee shall have a claim prior to the Notes upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the payment of principal of (and premium, if any) or interest on
particular Notes.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(i) or 501(j), the expenses
(including the reasonable charges and expenses of its counsel) of and the
compensation for such services are intended to constitute expenses of
administration under any applicable Federal or State bankruptcy, insolvency or
other similar law.
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The provisions of this Section shall survive the termination of this
Indenture.
SECTION 608. Corporate Trustee Required; Eligibility.
There shall be at all times a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1). Each successor Trustee
shall have a combined capital and surplus of at least $50,000,000. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of Federal, State, territorial or District of Columbia
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
SECTION 609. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 610.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If the instrument of acceptance by a successor Trustee
required by Section 610 shall not have been delivered to the Trustee within 30
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of
not less than a majority in principal amount of the Outstanding Notes, delivered
to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Note for at least six months,
except when the Trustee's duty to resign is stayed in accordance with the
provisions of TIA Section 310(b), or
(2) the Trustee shall cease to be eligible under Section 608 and
shall fail to resign after written request therefor by the Company or by
any Holder who has been a bona fide Holder of a Note for at least six
months, or
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(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation, winding-up or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Notes delivered to
the Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders and accepted
appointment in the manner hereinafter provided subject to TIA Section 315(e),
any Holder who has been a bona fide Holder of a Note for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders of Notes in the manner provided for in Section 107. Each notice shall
include the name of the successor Trustee and the address of its Corporate Trust
Office.
SECTION 610. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder subject to the retiring Trustee's
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rights as provided under the last sentence of Section 607. Upon request of any
such successor Trustee, the Company shall execute any and all instruments for
more fully and certainly vesting in and confirming to such successor Trustee all
such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 611. Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Notes shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Notes so authenticated with the same effect
as if such successor Trustee had itself authenticated such Notes. In case at
that time any of the Notes shall not have been authenticated, any successor
Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor Trustee. In all such cases such
certificates shall have the full force and effect which this Indenture provides
that the certificate of authentication of the Trustee shall have for the
certificate of authentication of the Trustee shall have; provided, however, that
the right to adopt the certificate of authentication of any predecessor Trustee
or to authenticate Notes in the name of any predecessor Trustee shall apply only
to its successor or successors by merger, conversion or consolidation.
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of Holders.
Every Holder of Notes, by receiving and holding the same, agrees
with the Company and the Trustee that none of the Company or the Trustee or any
agent of either of them shall be held accountable by reason of the disclosure of
any such information as to the names and addresses of the Holders in accordance
with TIA Section 312, regardless of the source from which such information was
derived, and that the Trustee shall not be held
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accountable by reason of mailing any material pursuant to a request made under
TIA Section 312(b).
SECTION 702. Reports by Trustee.
Within 60 days after May 15 of each year commencing with the first
May 15 after the first issuance of Notes, the Trustee shall transmit to the
Holders, in the manner and to the extent provided in TIA Section 313(c), a brief
report dated as of such May 15 if required by TIA Section 313(a).
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 801. Company May Consolidate, etc., Only on Certain Terms.
(1) The Company shall not, in a single transaction or series of
related transactions, consolidate or merge with or into (whether or not the
Company is the surviving corporation), or directly and/or indirectly through its
Subsidiaries, sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of its properties or assets (determined on a consolidated
basis for the Company and its Subsidiaries taken as a whole) in one or more
related transactions to, another corporation, Person or entity unless:
(a) either (i) the Company is the surviving corporation or (ii) in
the case of a transaction involving the Company, the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (the "Surviving Entity") is a
corporation organized or existing under the laws of the United States, any
state thereof or the District of Columbia and assumes all the obligations
of the Company under the Notes and this Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee;
(b) immediately after giving effect to such transaction and treating
any obligation of the Company in connection with or as a result of such
transaction as having been incurred as of the time of such transaction, no
Default or Event of Default has occurred and is continuing;
(c) the Company (or the Surviving Entity if the Company is not the
continuing obligor under this Indenture) could, at the time of such
transaction and after
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giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to
subsection (a) of Section 1010;
(d) each Subsidiary Guarantor, unless it is the other party to the
transaction described above, has by supplemental indenture confirmed that
its Subsidiary Guarantee applies to the Surviving Entity's obligations
under this Indenture and the Notes;
(e) if any of the property or assets of the Company or any of its
Restricted Subsidiaries would thereupon become subject to any Lien, the
provisions of Section 1014 are complied with;
(f) immediately after giving effect to such transaction on a pro
forma basis, the Consolidated Net Worth of the Company (or of the
Surviving Entity if the Company is not the continuing obligor under this
Indenture) is equal to or greater than the Consolidated Net Worth of the
Company immediately prior to such transaction; and
(g) the Company delivers, or causes to be delivered, to the Trustee,
in form and substance reasonably satisfactory to the Trustee, an Officers'
Certificate and an Opinion of Counsel, each stating that such transaction
complies with the requirements of this Indenture.
(2) No Subsidiary Guarantor shall consolidate with or merge with or
into any other Person or convey, sell, assign, transfer, lease or otherwise
dispose of its properties and assets substantially as an entirety to any other
Person (other than the Company or another Subsidiary Guarantor) unless:
(a) subject to the provisions of Clause (3) of this Section, the
Person formed by or surviving such consolidation or merger (if other than
such Subsidiary Guarantor) or to which such properties and assets are
transferred assumes all of the obligations of such Subsidiary Guarantor
under this Indenture and its Subsidiary Guarantee, pursuant to a
supplemental indenture in form and substance satisfactory to the Trustee;
(b) immediately after giving effect to such transaction, no Default
or Event of Default has occurred and is continuing; and
(c) the Subsidiary Guarantor delivers, or causes to be delivered, to
the Trustee, in form and substance reasonably satisfactory to the Trustee,
an Officers' Certificate and an Opinion of Counsel, each stating that such
transaction complies with the requirements of this Indenture.
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(3) For purposes of this Section, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Restricted Subsidiaries, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
SECTION 802. Successor Substituted.
In the event of any transaction described in and complying with the
conditions listed in Section 801(1) in which the Company is not the continuing
obligor under this Indenture, the Surviving Entity will succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture, and thereafter the Company will, except in the case of a lease,
be discharged from all its obligations and covenants under this Indenture and
the Notes.
ARTICLE NINE
SUPPLEMENTS AND AMENDMENTS TO INDENTURE
AND SUBSIDIARY GUARANTEES
SECTION 901. Without Consent of Holders.
Without the consent of any Holders, the Company and any affected
Subsidiary Guarantor, each when authorized by a Board Resolution, and the
Trustee may amend or supplement this Indenture, the Notes or any Subsidiary
Guarantee without the consent of any Holder of a Note:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company in
this Indenture and in the Notes; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(3) to add additional Events of Default; or
(4) to provide for uncertificated Notes in addition to or in place
of the Physical Notes; or
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(5) to evidence and provide for the acceptance of appointment under
this Indenture by a successor Trustee; or
(6) to secure the Notes; or
(7) to cure any ambiguity, to correct or supplement any provision in
this Indenture that may be defective or inconsistent with any other
provision in this Indenture, or to make any other provisions with respect
to matters or questions arising under this Indenture, provided, however,
that such actions pursuant to this clause do not adversely affect the
interests of the Holders in any material respect; or
(8) to comply with any requirements of the Commission in order to
effect and maintain the qualification of this Indenture under the Trust
Indenture Act.
SECTION 902. With Consent of Holders.
With the consent of the Holders of not less than a majority in
aggregate Outstanding principal amount of the Notes (including consents obtained
in connection with a tender offer or exchange offer for the Notes), by Act of
said Holders delivered to the Company, any affected Subsidiary Guarantor and the
Trustee, the Company and the Subsidiary Guarantor, each when authorized by a
Board Resolution, and the Trustee may amend or supplement in any manner this
Indenture or any Subsidiary Guarantee or modify in any manner the rights of the
Holders under this Indenture or any Subsidiary Guarantee; provided, however,
that no such supplement, amendment or modification may, without the consent of
the Holder of each Outstanding Note affected thereby:
(a) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the coin or currency in which any Note or
any premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment after the Stated
Maturity thereof (or, in the case of redemption, on or after the
redemption date);
(b) amend, change or modify the obligation of the Company to make
and consummate an Excess Proceeds Offer with respect to any Asset Sale in
accordance with the Section 1016 or the obligation of the Company to make
and consummate a Change of Control offer in the event of a Change of
Control in accordance with Section 1015, including, in each case,
amending, changing or modifying any definition relating thereto;
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(c) reduce the percentage in principal amount of outstanding Notes,
the consent of whose Holders is required for any amendment, supplement or
waiver of compliance with certain provisions of, or certain defaults and
their consequences provided for under, this Indenture;
(d) waive a Default or Event of Default in the payment of principal
of, or premium, if any, or interest on the Notes or reduce the percentage
or aggregate principal amount of outstanding Notes the consent of whose
Holders is necessary for waiver of compliance with certain provisions of
this Indenture or for waiver of certain Defaults or Events of Default;
(e) modify the ranking or priority of the Notes or the Subsidiary
Guarantee of any Subsidiary Guarantor;
(f) release any Subsidiary Guarantor from any of its obligations
under its Subsidiary Guarantee or this Indenture other than in accordance
with the terms of this Indenture; or
(g) make any change in the foregoing amendment and waiver provisions
of this Section 902.
It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
Upon the request of the Company accompanied by a Board Resolution
authorizing the execution of any amended or supplemental indenture, the Trustee
shall, subject to this Section 903, join with the Company in the execution of
such amended or supplemental indenture authorized or permitted by the terms of
this Indenture. In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and shall be fully protected in relying upon, an Opinion of Counsel stating that
the execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustees own rights, duties or
immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
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Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes theretofore or thereafter authenticated and delivered hereunder shall
be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to the Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Notes.
SECTION 907. Notice of Supplemental Indentures.
Promptly after the execution by the Company, any affected Subsidiary
Guarantor and the Trustee of any supplemental indenture or Subsidiary Guarantee
pursuant to the provisions of Section 902, the Company shall give notice thereof
to the Holders of each Outstanding Note affected, in the manner provided for in
Section 107, setting forth in general terms the substance of such supplemental
indenture or Subsidiary Guarantee.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and Interest.
The Company covenants and agrees for the benefit of the Holders that
it will duly and punctually pay the principal of (and premium, if any) and
interest on the Notes in accordance with the terms of the Notes and this
Indenture.
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SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in The City of New York, an office or
agency where Notes may be presented or surrendered for payment, where Notes may
be surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Corporate Trust Office located, in care of The Depositary Trust
Company, at 55 Water Street, New York, New York 10041 of the Trustee shall be
such office or agency of the Company, unless the Company shall designate and
maintain some other office or agency for one or more of such purposes. The
Company will give prompt written notice to the Trustee of any change in the
location of any 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 Corporate Trust Office of the Trustee, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the Notes may
be presented or surrendered for any or all such purposes and may from time to
time rescind any such designation; provided, however, that no such designation
or rescission shall in any manner relieve the Company of its obligation to
maintain an office or agency in The City of New York for such purposes. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and any change in the location of any such other office or agency.
SECTION 1003. Money for Note Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it
will, on or before each due date of the principal of (or premium, if any) or
interest on any of the Notes, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal of (or premium,
if any) or interest so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and will promptly notify the
Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Notes, it will, on or before each due date of the principal of (or premium, if
any) or interest on any Notes, deposit with a Paying Agent a sum sufficient to
pay the principal (and premium, if any) or interest so becoming due, such sum to
be held in trust for the benefit of the Persons entitled to such principal,
premium or interest, and (unless such Paying Agent is the Trustee) the Company
will promptly notify the Trustee of such action or any failure so to act.
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The Company will cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of
(and premium, if any) or interest on Notes in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or any
other obligor upon the Notes) in the making of any payment of principal
(and premium, if any) or interest; and
(c) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such sums.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of (or premium,
if any) or interest on any Note and remaining unclaimed for two years after such
principal (and premium, if any) or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Note shall thereafter, as
an unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
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SECTION 1004. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect the corporate
existence, rights (charter and statutory) and franchises of the Company and each
Subsidiary; provided, however, that the Company shall not be required to
preserve any such right or franchise 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 as a whole and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1005. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary and (b)
all lawful claims for labor, materials and supplies, which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 1006. Maintenance of Properties.
The Company will cause all properties owned by the Company or any
Subsidiary or used or held for use in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the maintenance of any of such properties
if such discontinuance is, in the judgment of the Company, desirable in the
conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
SECTION 1007. Insurance.
The Company will at all times keep all of its and its Subsidiaries'
properties which are of an insurable nature insured with insurers, believed by
the Company to be responsible, against loss or damage to the extent that
property of similar character is usually so insured by corporations similarly
situated and owning like properties.
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SECTION 1008. Statement by Officers As to Default.
(a) The Company and each Subsidiary Guarantor will deliver to the
Trustee, within 120 days after the end of each fiscal year, a brief certificate
from the principal executive officer, principal financial officer or principal
accounting officer as to his or her knowledge of compliance by the Company and
such Subsidiary Guarantor with all conditions and covenants under this
Indenture. For purposes of this Section 1008(a), such compliance shall be
determined without regard to any period of grace or requirement of notice under
this Indenture.
(b) When any Default has occurred and is continuing under this
Indenture, or if the trustee for or the holder of any other evidence of
Indebtedness of the Company or any Subsidiary Guarantor gives any notice or
takes any other action with respect to a claimed default (other than with
respect to Indebtedness in the principal amount of less than $2,000,000), the
Company shall deliver to the Trustee by registered or certified mail or by
telegram, telex or facsimile transmission an Officers' Certificate specifying
such event, notice or other action within five Business Days of becoming aware
of its occurrence.
SECTION 1009. Reports.
Whether or not required by the rules and regulations of the
Commission, so long as any Notes are outstanding, the Company will furnish to
the Holders of Notes, and file with the Trustee, (a) prior to the effectiveness
of a registration statement with respect to the Exchange Offer or a Shelf
Registration Statement, the information specified in Rule 144A(d)(4) under the
Securities Act and (b) within 15 days after it is or would have been required to
file such with the Commission (i) all quarterly and annual financial information
that would be required to be contained in a filing with the Commission on Forms
10-Q and 10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all current reports
that would be required to be filed with the Commission on Form 8-K if the
Company were required to file such reports. In addition, following the
consummation of the Exchange Offer, whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request.
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SECTION 1010. Limitation on Incurrence of Indebtedness and Issuance
of Disqualified Stock.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, create, issue, assume, guarantee or in any manner become directly
or indirectly liable for the payment of, or otherwise incur (collectively,
"incur"), any Indebtedness (including Acquired Indebtedness and the issuance of
Disqualified Stock), except that the Company or any Subsidiary Guarantor may
incur Indebtedness if, at the time of such event, the Fixed Charge Coverage
Ratio for the immediately preceding four full fiscal quarters for which internal
financial statements are available, taken as one accounting period, would have
been equal to at least 2.0 to 1.0.
(b) In making the foregoing calculation for any four-quarter period
that includes the Closing Date, pro forma effect will be given to the
[Offering], as if such transactions had occurred at the beginning of such
four-quarter period. In addition (but without duplication), in making the
foregoing calculation, pro forma effect will be given to:
(i) the incurrence of such Indebtedness and (if applicable) the
application of the net proceeds therefrom, including to refinance other
Indebtedness, as if such Indebtedness was incurred and the application of
such proceeds occurred at the beginning of such four-quarter period;
(ii) the incurrence, repayment or retirement of any other
Indebtedness by the Company or its Restricted Subsidiaries since the first
day of such four-quarter period as if such Indebtedness was incurred,
repaid or retired at the beginning of such four-quarter period; and
(iii) the acquisition (whether by purchase, merger or otherwise) or
disposition (whether by sale, merger or otherwise) of any company, entity
or business acquired or disposed of by the Company or its Restricted
Subsidiaries, as the case may be, since the first day of such four-quarter
period, as if such acquisition or disposition occurred at the beginning of
such four-quarter period. In making a computation under the foregoing
clause (i) or (ii), (A) the amount of Indebtedness under a revolving
credit facility will be computed based on the average daily balance of
such Indebtedness during such four-quarter period, (B) if such
Indebtedness bears, at the option of the Company, a fixed or floating rate
of interest, interest thereon will be computed by applying, at the option
of the Company, either the fixed or floating rate, and (C) the amount of
any Indebtedness that bears interest at a floating rate will be calculated
as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Hedging
Obligations applicable to such Indebtedness if such
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Hedging Obligations have a remaining term at the date of determination in
excess of 12 months).
(c) Notwithstanding the foregoing, the Company may, and may permit
its Restricted Subsidiaries to, incur the following Indebtedness ("Permitted
Indebtedness"):
(i) Indebtedness of the Company or any Subsidiary Guarantor under
the Credit Agreement (and the incurrence by any Subsidiary Guarantor of
guarantees thereof) in an aggregate principal amount at any one time
outstanding not to exceed the greater of (x) $30 million or (y) the amount
of the Borrowing Base of the Company, less any amounts applied to the
permanent reduction of such credit facilities pursuant to the provisions
of Section 1016;
(ii) Indebtedness represented by the Notes (other than the
Additional Notes) and the Subsidiary Guarantees;
(iii) Existing Indebtedness (other than the Polytek Credit
Agreement);
(iv) the incurrence by the Company of Permitted Refinancing
Indebtedness in exchange for, or the net proceeds of which are used to
refund, refinance or replace, any Indebtedness that is permitted to be
incurred under clause (ii) or (iii) above;
(v) Indebtedness owed by the Company to any Wholly Owned Restricted
Subsidiary or owed by any Restricted Subsidiary to the Company or a Wholly
Owned Restricted Subsidiary (provided, however, that such Indebtedness is
held by the Company or such Restricted Subsidiary); provided, however,
that any Indebtedness of the Company owing to any such Restricted
Subsidiary is unsecured and subordinated in right of payment from and
after such time as the Notes shall become due and payable (whether at
Stated Maturity, acceleration, or otherwise) to the payment and
performance of the Company's obligations under the Notes;
(vi) Indebtedness of the Company or any Restricted Subsidiary under
Hedging Obligations incurred in the ordinary course of business;
(vii) Indebtedness of the Company or any Restricted Subsidiary
consisting of guarantees, indemnities or obligations in respect of
purchase price adjustments in connection with the acquisition or
disposition of assets, including, without limitation, shares of Capital
Stock;
(viii) either (A) Capitalized Lease Obligations of the Company or
any Restricted Subsidiary or (B) Indebtedness under purchase money
mortgages or secured
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by purchase money security interests, in each case, incurred to finance
the purchase, lease or improvement of real or personal property so long as
(x) such Indebtedness is not secured by any property or assets of the
Company or any Restricted Subsidiary other than the property and assets so
acquired and (y) such Indebtedness is created within 90 days of the
acquisition of the related property; provided, however, that the aggregate
amount of Indebtedness under clauses (A) and (B) does not exceed $10
million at any one time outstanding;
(ix) Guarantees by any Restricted Subsidiary made in accordance with
the provisions of Section 1022;
(x) Indebtedness under the Polytek Credit Agreement in an aggregate
principal amount at any one time outstanding not to exceed the greater of
(A) $11 million or (B) the amount of the Borrowing Base of Polytek;
(xi) Indebtedness of the Company or any Subsidiary Guarantor not
permitted by any other clause of this definition, in an aggregate
principal amount not to exceed $10 million at any one time outstanding;
and
(xii) Indebtedness in respect of surety or performance bonds,
worker's compensation claims, payment obligations in connection with
self-insurance and other similar requirements arising in the ordinary
course of business.
SECTION 1011. Limitation on Restricted Payments.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, take any of the following actions:
(a) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Capital Stock of the Company or any
Restricted Subsidiary, other than (i) dividends or distributions payable
solely in Qualified Equity Interests or (ii) dividends or distributions by
a Restricted Subsidiary payable to the Company or another Restricted
Subsidiary;
(b) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of Capital Stock, or any options,
warrants or other rights to acquire such shares of Capital Stock, of the
Company, any Restricted Subsidiary or any Affiliate of the Company (other
than, in either case, any such Capital Stock owned by the Company or any
of its Restricted Subsidiaries);
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(c) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Pari Passu Indebtedness or
Subordinated Indebtedness; and
(d) make any Investment (other than a Permitted Investment) in any
Person; (such payments or other actions described in (but not excluded
from) clauses (a) through (d) being referred to as "Restricted Payments"),
unless at the time of, and immediately after giving effect to, the
proposed Restricted Payment:
(i) no Default or Event of Default has occurred and is
continuing,
(ii) the Company could incur at least $1.00 of additional
Indebtedness pursuant to subsection (a) of Section 1010, and
(iii) the aggregate amount of all Restricted Payments made
after the Closing Date does not exceed the sum of:
(A) 50% of the aggregate Consolidated Net Income of the
Company during the period (taken as one accounting period)
from the first day of the Company's fiscal quarter during
which the Closing Date occurs to the last day of the Company's
most recently ended fiscal quarter for which internal
financial statements are available at the time of such
proposed Restricted Payment (or, if such aggregate cumulative
Consolidated Net Income is a loss, minus 100% of such amount);
plus
(B) the aggregate net cash proceeds received by the
Company after the Closing Date from the issuance or sale
(other than to a Subsidiary) of either (1) Qualified Equity
Interests of the Company or (2) debt securities or
Disqualified Stock that have been converted into or exchanged
for Qualified Equity Interests of the Company, together with
the aggregate net cash proceeds received by the Company at the
time of such conversion or exchange.
Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may take the following actions, so long as no Default or Event of
Default has occurred and is continuing or would occur:
(a) the payment of any dividend in cash or Qualified Equity
Interests of the Company within 60 days after the date of declaration
thereof, if at the declaration date such payment would not have been
prohibited by the foregoing provisions;
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(b) the repurchase, redemption or other acquisition or retirement
for value of any shares of Capital Stock of the Company, in exchange for,
or out of the net cash proceeds of a substantially concurrent issuance and
sale (other than to a Subsidiary) of, Qualified Equity Interests of the
Company;
(c) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Pari Passu Indebtedness or Subordinated
Indebtedness in exchange for, or out of the net cash proceeds of a
substantially concurrent issuance and sale (other than to a Subsidiary)
of, shares of Qualified Equity Interests of the Company;
(d) the purchase, redemption, defeasance or other acquisition or
retirement for value of Pari Passu Indebtedness or Subordinated
Indebtedness in exchange for, or out of the net cash proceeds of a
substantially concurrent issuance or sale (other than to a Subsidiary) of,
Pari Passu Indebtedness or Subordinated Indebtedness, respectively, so
long as the Company or a Restricted Subsidiary would be permitted to
refinance such original Pari Passu Indebtedness or Subordinated
Indebtedness with such new Pari Passu Indebtedness or Subordinated
Indebtedness pursuant to clause (iv) of the definition of Permitted
Indebtedness;
(e) the repurchase of any Subordinated Indebtedness at a purchase
price not greater than 101% of the principal amount of such Subordinated
Indebtedness in the event of a Change of Control in accordance with
Section 1016; provided, however, that, prior to or simultaneously with
such repurchase, the Company has made the Change of Control Offer as
provided in Section 1016 with respect to the Notes and has repurchased all
Notes validly tendered for payment in connection with such Change of
Control Offer;
(f) the purchase, redemption, acquisition, cancellation or other
retirement for value of shares of Capital Stock of the Company or the
Parent, options on any such shares or related stock appreciation rights or
similar securities held by officers or employees or former officers or
employees of the Company or of any Restricted Subsidiary (or their estates
or beneficiaries under their estates) or by any employee benefit plan,
upon death, disability, retirement or termination of employment or
pursuant to the terms of any employee benefit plan or any other agreement
under which such shares of stock or related rights were issued; provided,
however, that the aggregate cash consideration paid for such purchase,
redemption, acquisition, cancellation or other retirement of such shares
of Capital Stock after the Closing Date does not exceed in any fiscal year
the sum of (i) $500,000 and (ii) amounts referred to in clause (i) that
remains unused from the two immediately preceding fiscal years;
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(g) the payment of any dividend or distribution by the Company to
the Parent pursuant to the terms of the tax sharing agreement in existence
on the Closing Date among the Company, the Parent and other members of the
consolidated group of corporations of which the Company is a member, and
any amendments to such agreement, provided, however, that the tax sharing
agreement as so amended is no less favorable in any material respect to
the Company than the tax sharing agreement in effect on the Closing Date;
(h) the payment of dividends or distributions to the Parent to pay
its franchise taxes and other fees required to maintain its legal
existence and to provide for operating expenses of up to $150,000 in any
fiscal year of the Company;
(i) the payment of a distribution to the Parent that does not exceed
$2,500,000 on the Closing Date for the Parent's repurchase from
NationsCredit of warrants to purchase the Parent's common stock; and
(j) other Restricted Payments that do not exceed $1,000,000.
The actions described in clauses (b), (c), (e) and (j) of the
preceding paragraph will be Restricted Payments that will be permitted to be
taken in accordance with this Section 1011 but will reduce the amount that would
otherwise be available for Restricted Payments under clause (d)(iii) of the
first paragraph of this Section 1011 and the actions described in clauses (a),
(d), (f), (g), (h) and (i) of this Section 1011 will be Restricted Payments that
will be permitted to be taken in accordance with this Section 1011 and will not
reduce the amount that would otherwise be available for Restricted Payments
under clause (d)(iii) of the first paragraph of this Section 1011.
For the purpose of making any calculations under this Indenture (i)
if a Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company
will be deemed to have made an Investment in an amount equal to the greater of
the fair market value or net book value of the net assets of such Restricted
Subsidiary at the time of such designation as determined by the Board of
Directors of the Company, and (ii) any property transferred to or from an
Unrestricted Subsidiary will be valued at fair market value at the time of such
transfer, as determined by the Board of Directors of the Company. The amount of
all Restricted Payments (other than cash) shall be the fair market value on the
date of the Restricted Payment of the asset(s) or securities proposed to be
transferred or issued by the Company or such Restricted Subsidiary, as the case
may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $5 million.
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Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required under this Section 1011 were computed, together with a copy of any
fairness opinion or appraisal required by this Indenture.
If the aggregate amount of all Restricted Payments calculated under
the foregoing provision includes an Investment in an Unrestricted Subsidiary or
other Person that thereafter becomes a Restricted Subsidiary, the aggregate
amount of all Restricted Payments calculated under the foregoing provision will
be reduced by the lesser of (x) the net asset value of such Subsidiary at the
time it becomes a Restricted Subsidiary and (y) the initial amount of such
Investment.
If an Investment resulted in the making of a Restricted Payment, the
aggregate amount of all Restricted Payments calculated under the foregoing
provision will be reduced by the amount of any net reduction in such Investment
(resulting from the payment of interest or dividends, loan repayment, transfer
of assets or otherwise, other than the redesignation of an Unrestricted
Subsidiary or other Person as a Restricted Subsidiary), to the extent such net
reduction is not included in the Company's Consolidated Net Income; provided
that the total amount by which the aggregate amount of all Restricted Payments
may be reduced may not exceed the lesser of (x) the cash proceeds received by
the Company and its Restricted Subsidiaries in connection with such net
reduction and (y) the initial amount of such Investment.
In computing the Consolidated Net Income of the Company for purposes
of the foregoing clause (iii)(A) of subsection (d) of this Section 1011, (i) the
Company may use audited financial statements for the portions of the relevant
period for which audited financial statements are available on the date of
determination and unaudited financial statements and other current financial
data based on the books and records of the Company for the remaining portion of
such period and (ii) the Company will be permitted to rely in good faith on the
financial statements and other financial data derived from its books and records
that are available on the date of determination. If the Company makes a
Restricted Payment that, at the time of the making of such Restricted Payment,
would in the good faith determination of the Company be permitted under the
requirements of this Indenture, such Restricted Payment will be deemed to have
been made in compliance with this Indenture notwithstanding any subsequent
adjustments made in good faith to the Company's financial statements affecting
Consolidated Net Income of the Company for any period.
SECTION 1012. Limitation on Issuances and Sales of Capital Stock of
Restricted Subsidiaries.
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The Company (a) shall not permit any Restricted Subsidiary to issue
any Capital Stock (other than to the Company or a Wholly Owned Restricted
Subsidiary) and (b) shall not, and shall not permit any Restricted Subsidiary
to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of
any Restricted Subsidiary to any Person (other than the Company or a Wholly
Owned Restricted Subsidiary); provided, however, that this covenant will not
prohibit (i) the sale or other disposition of all, but not less than all, of the
issued and outstanding Capital Stock of a Restricted Subsidiary owned by the
Company and its Restricted Subsidiaries in compliance with the other provisions
of this Indenture, or (ii) the ownership by directors of director's qualifying
shares or the ownership by foreign nationals of Capital Stock of any Restricted
Subsidiary, to the extent mandated by applicable law.
The Company shall not permit any Restricted Subsidiary to issue any
Preferred Stock.
SECTION 1013. Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, enter into or suffer to exist any
transaction with, or for the benefit of, any Affiliate of the Company
("Interested Persons"), unless (a) such transaction is on terms that are no less
favorable to the Company or such Restricted Subsidiary, as the case may be, than
those that could have been obtained in an arm's-length transaction with third
parties who are not Interested Persons and (b) the Company delivers to the
Trustee (i) with respect to any transaction or series of related transactions
entered into after the Closing Date involving aggregate payments in excess of
$1.0 million, a resolution of the Board of Directors of the Company set forth in
an Officers' Certificate certifying that such transaction or transactions comply
with clause (a) above and that such transaction or transactions have been
approved by the Board of Directors (including a majority of the Disinterested
Directors) of the Company and (ii) with respect to a transaction or series of
related transactions involving aggregate payments equal to or greater than $5.0
million, a written opinion as to the fairness to the Company or such Restricted
Subsidiary of such transaction or series of transactions from a financial point
of view issued by an accounting, appraisal or investment banking firm, in each
case of national standing.
The foregoing covenant will not restrict:
(A) transactions among the Company and/or its Restricted
Subsidiaries;
(B) the Company from paying reasonable and customary regular
compensation and fees to directors of the Company or any Restricted
Subsidiary who are not employees of the Company or any Restricted
Subsidiary;
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(C) maintenance in the ordinary course of business of benefit
programs or arrangements for employees, officers or directors of the
Company or any Subsidiary, including vacation plans, health and life
insurance plans, deferred compensation plans and retirement or savings
plans and similar plans;
(D) payment of management, consulting and advisory fees and related
expenses to the Permitted Holders or their Affiliates not subject to
employment agreements not to exceed $300,000 in any fiscal year of the
Company;
(E) transactions permitted by the provisions of Section 1011; or
(F) payment of any amounts under a supply agreement effective as of
February 4, 1998, between the Company and Springs & Wire Design LLC, and
the employment agreement effective as of February 4, 1998 between the
Company and Ariel Gratch, and any amendments to such agreements, provided
that such agreements as so amended are no less favorable in any material
respect to the Company than the agreements in effect on the Closing Date.
SECTION 1014. Limitation on Liens.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien securing Pari Passu Indebtedness or Subordinated Indebtedness of the
Company on or with respect to any of its property or assets, including any
shares of stock or indebtedness of any Restricted Subsidiary, whether owned at
the Closing Date or thereafter acquired, or any income, profits or proceeds
therefrom, or assign or otherwise convey any right to receive income thereon,
unless:
(i) in the case of any Lien securing Subordinated Indebtedness, the
Notes are secured by a Lien on such property, assets or proceeds that is
senior in priority to such Lien; and
(ii) in the case of any Lien securing Pari Passu Indebtedness, the
Notes are secured by a Lien on such property, assets or proceeds that is
senior in priority to or pari passu with such Lien.
(b) The Company shall not permit any Subsidiary Guarantor to,
directly or indirectly, create, incur, assume or suffer to exist any Lien
securing Pari Passu Indebtedness or Subordinated Indebtedness of such Subsidiary
Guarantor on or with respect to such Subsidiary Guarantor's properties or
assets, including any shares of stock or Indebtedness of any other Restricted
Subsidiary, whether owned at the date of this Indentures or thereafter acquired,
or
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any income, profits or proceeds therefrom, or assign or otherwise convey any
right to receive income thereon, unless:
(i) in the case of any Lien securing Pari Passu Indebtedness of such
Subsidiary Guarantor, each Subsidiary Guarantee of such Subsidiary
Guarantor is secured by a Lien on such property, assets or proceeds that
is senior in priority to or pari passu with such Lien; and
(ii) in the case of any Lien securing Subordinated Indebtedness of
such Subsidiary Guarantor, each Subsidiary Guarantee of such Subsidiary
Guarantor is secured by a Lien on such property, assets or proceeds that
is senior in priority to such Lien.
SECTION 1015. Purchase of Notes upon a Change of Control.
(a) If a Change of Control occurs at any time, then each Holder
shall have the right to require that the Company purchase such Holder's Notes
and Additional Notes, if any, in whole or in part in integral multiples of
$1,000, at a purchase price in cash equal to 101% of the principal amount of
such Notes, plus accrued and unpaid interest, if any, to the date of purchase,
pursuant to the offer described below (the "Change of Control Offer") and the
other procedures set forth in this Indenture.
(b) Within 30 days following any Change of Control, the Company
shall notify the Trustee thereof and give written notice of such Change of
Control to each Holder of Notes and Additional Notes by first-class mail,
postage prepaid, at its address appearing in the security register, stating,
among other things:
(i) the purchase price and the purchase date, which will be a
Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed or such later date as is necessary to comply with
requirements under the Exchange Act;
(ii) that any Note or Additional Note not tendered will continue to
accrue interest;
(iii) that, unless the Company defaults in the payment of the
purchase price, any Notes or Additional Notes accepted for payment
pursuant to the Change of Control Offer will cease to accrue interest
after the Change of Control purchase date; and
(iv) certain other procedures that a Holder must follow to accept a
Change of Control Offer or to withdraw such acceptance.
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(c) The Company shall comply with the applicable tender offer rules
including Rule 14e-1 under the Exchange Act, and any other applicable securities
laws and regulations in connection with a Change of Control Offer. To the extent
that provisions of any applicable securities laws or regulations conflict with
provisions of this Section 1015, the Company shall comply with such securities
laws and regulations and shall not be deemed to have breached its obligations
under this Section 1015 by virtue thereof.
SECTION 1016. Limitation on Certain Asset Sales.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any Asset Sale unless (i) the consideration received by
the Company or such Restricted Subsidiary for such Asset Sale is not less than
the fair market value of the assets sold evidenced by a resolution of the Board
of Directors of such entity set forth in an Officers' Certificate delivered to
the Trustee and (ii) the consideration received by the Company or the relevant
Restricted Subsidiary in respect of such Asset Sale consists of at least 75%
cash or cash equivalents (for purposes of this clause (ii), cash and cash
equivalents includes (a) the principal amount of any Indebtedness for money
borrowed (as reflected in the Company's consolidated balance sheet) of the
Company or any Restricted Subsidiary that is assumed by any transferee of any
such assets or other property in such Asset Sale and (b) any securities, notes
or other obligations received by the Company or such Restricted Subsidiary from
such transferee that are converted within 30 days of consummation of such Asset
Sale by the Company or such Restricted Subsidiary into cash and cash equivalents
(to the extent of the cash and cash equivalents received)).
(b) If the Company or any Restricted Subsidiary engages in an Asset
Sale, the Company may, at its option, within 12 months after such Asset Sale,
(i) apply all or a portion of the Net Cash Proceeds to the permanent reduction
of amounts outstanding under the Credit Agreement or to the permanent repayment
of other senior Indebtedness of the Company or a Restricted Subsidiary or (ii)
invest (or enter into a legally binding agreement to invest) all or a portion of
such Net Cash Proceeds in properties and assets to replace the properties and
assets that were the subject of the Asset Sale or in properties and assets that
will be used in the business of the Company or its Restricted Subsidiaries, as
the case may be. If any such legally binding agreement to invest such Net Cash
Proceeds is terminated, the Company may, within 90 days of such termination or
within 12 months of such Asset Sale, whichever is later, invest such Net Cash
Proceeds as provided in clause (i) or (ii) (without regard to the parenthetical
contained in such clause (ii)) above. The amount of such Net Cash Proceeds not
so used as set forth above in this paragraph shall constitute "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $5.0
million, the Company will, within 30 days thereafter, make an offer to purchase
(an "Excess Proceeds Offer") from all Holders of Notes and Additional Notes, if
any, on a pro rata basis, in
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accordance with the procedures set forth in this Indenture, the maximum
principal amount (expressed as a multiple of $1,000) of Notes and Additional
Notes, if any, that may be purchased with the Excess Proceeds, at a purchase
price in cash equal to 100% of the principal amount thereof, plus accrued
interest, if any, to the date such offer to purchase is consummated. To the
extent that the aggregate principal amount of Notes and Additional Notes, if
any, tendered pursuant to such offer to purchase is less than the Excess
Proceeds, the Company may use such deficiency for general corporate purposes. If
the aggregate principal amount of Notes and Additional Notes, if any, validly
tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, the
Notes and Additional Notes, if any, to be purchased will be selected on a pro
rata basis. Upon completion of such offer to purchase, the amount of Excess
Proceeds will be reset to zero.
(d) The Company shall comply with the applicable tender offer rules
including Rule 14e-1 under the Exchange Act, and any other applicable securities
laws and regulations in connection with the repurchase of Notes as a result of
an Asset Sale. To the extent that provisions of any applicable securities laws
or regulations conflict with provisions of this Section 1016, the Company shall
comply with such securities laws and regulations and shall not be deemed to have
breached its obligations under this Section 1016 by virtue thereof.
SECTION 1017. Unrestricted Subsidiaries.
(a) The Board of Directors of the Company may designate any
Subsidiary (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary so long as (i) neither the Company nor any Restricted
Subsidiary is directly or indirectly liable for any Indebtedness of such
Subsidiary, (ii) no default with respect to any Indebtedness of such Subsidiary
would permit (upon notice, lapse of time or otherwise) any holder of any other
Indebtedness of the Company or any Restricted Subsidiary to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity, (iii) any Investment in such Subsidiary
made as a result of designating such Subsidiary an Unrestricted Subsidiary will
not violate the provisions of Section 1011, (iv) neither the Company nor any
Restricted Subsidiary has a contract, agreement, arrangement, understanding or
obligation of any kind, whether written or oral, with such Subsidiary other than
those that might be obtained at the time from Persons who are not Affiliates of
the Company, (v) neither the Company nor any Restricted Subsidiary has any
obligation to subscribe for additional shares of Capital Stock or other equity
interest in such Subsidiary, or to maintain or preserve such Subsidiary's
financial condition or to cause such Subsidiary to achieve certain levels of
operating results, and (vi) such Unrestricted Subsidiary has at least one
director on its Board of Directors that is not a director or executive officer
of the Company or any of its Restricted Subsidiaries and has at least one
executive officer of the Company or any of its Restricted Subsidiaries.
Notwithstanding the foregoing, the Company may not designate any of its
Subsidiaries existing as of the Closing Date or any successor to any of
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them as an Unrestricted Subsidiary and may not sell, transfer or otherwise
dispose of any properties or assets of any such Subsidiary to an Unrestricted
Subsidiary, other than in the ordinary course of business.
(b) The Board of Directors of the Company may designate any
Unrestricted Subsidiary as a Restricted Subsidiary; provided, however, that (i)
no Default or Event of Default has occurred and is continuing following such
designation and (ii) the Company could incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to subsection (a) of
Section 1010 (treating any Indebtedness of such Unrestricted Subsidiary as the
incurrence of Indebtedness by a Restricted Subsidiary).
SECTION 1018. Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or consensual restriction
of any kind on the ability of any Restricted Subsidiary to (a) pay dividends, in
cash or otherwise, or make any other distributions on or in respect of its
Capital Stock, (b) pay any Indebtedness owed to the Company or any other
Restricted Subsidiary, (c) make loans or advances to the Company or any other
Restricted Subsidiary or (d) transfer any of its properties or assets to the
Company or any other Restricted Subsidiary, except for such encumbrances or
restrictions imposed under or by reason of:
(i) any agreement existing on the Closing Date;
(ii) customary non-assignment provisions of any lease governing a
leasehold interest of the Company or any Restricted Subsidiary;
(iii) the refinancing or successive refinancing of Indebtedness
incurred under the agreements in effect on the Closing Date, so long as
such encumbrances or restrictions are no more restrictive than those
contained in such original agreement;
(iv) any agreement or other instrument of a Person acquired by the
Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance
or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of
the Person, so acquired; or
(v) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all
or substantially all the
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Capital Stock or assets of such Restricted Subsidiary pending the closing
of such sale or disposition.
SECTION 1019. Waiver of Certain Covenants.
The Company or any Subsidiary Guarantor may omit in any particular
instance to comply with any term, provision or condition set forth in Section
803 or Sections 1007 through 1022, inclusive, if before or after the time for
such compliance the Holders of at least a majority in principal amount of the
Outstanding Notes, by Act of such Holders, waive such compliance in such
instance with such term, provision or condition, but no such waiver shall extend
to or affect such term, provision or condition except to the extent so expressly
waived, and, until such waiver shall become effective, the obligations of the
Company and the duties of the Trustee in respect of any such term, provision or
condition shall remain in full force and effect.
SECTION 1020. Payment for Consent.
Neither the Company nor any of its Restricted Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Notes unless such consideration is offered to be paid or is paid to all
Holders that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
SECTION 1021. Limitation on Layering Debt.
The Company and each Subsidiary Guarantor shall not incur, create,
issue, assume, guarantee or otherwise become liable for any Indebtedness or
guarantee, as applicable, that is subordinate or junior in right of payment to
any Senior Indebtedness and senior in any respect in right of payment to the
Notes or such Subsidiary Guarantor's Subsidiary Guarantee, respectively.
SECTION 1022. Limitation on Guarantees of Indebtedness by Restricted
Subsidiaries.
The Company shall not permit any Restricted Subsidiary that is not a
Subsidiary Guarantor, directly or indirectly, to guarantee, assume or in any
other manner become liable for the payment of any Indebtedness of the Company or
any Indebtedness of any other Restricted Subsidiary, unless (a) such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture
providing for a guarantee of payment of the Notes by such Restricted Subsidiary
and (b) with respect to any guarantee of Subordinated Indebtedness by a
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Restricted Subsidiary, any such guarantee is subordinated to such Restricted
Subsidiary's guarantee with respect to the Notes at least to the same extent as
such Subordinated Indebtedness is subordinated to the Notes, provided, however,
that the foregoing provision will not be applicable to any guarantee by any
Restricted Subsidiary that existed at the time such Person became a Restricted
Subsidiary and was not incurred in connection with, or in contemplation of, such
Person becoming a Restricted Subsidiary.
Any guarantee by a Restricted Subsidiary of the Notes pursuant to
the preceding paragraph may provide by its terms that it will be automatically
and unconditionally released and discharged upon (i) any sale, exchange or
transfer to any Person not an Affiliate of the Company of all of the Company's
and the Restricted Subsidiaries' Capital Stock in, or all or substantially all
the assets of, such Restricted Subsidiary (which sale, exchange or transfer is
not prohibited by this Indenture) or (ii) the release or discharge of the
guarantee that resulted in the creation of such guarantee of the Notes, except a
discharge or release by or as a result of payment under such guarantee.
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. Right of Redemption.
(a) The Notes may be redeemed at the option of the Company, as a
whole or from time to time in part, at any time on or after April 15, 2003,
subject to the conditions and at the Redemption Prices specified in the form of
Note, together with accrued interest, if any, to the Redemption Date.
(b) In addition, at any time or from time to time prior to April 15,
2001, the Company may redeem, on one or more occasions, up to 35% of the sum of
(i) the initial aggregate principal amount of the Notes and (ii) the initial
aggregate principal amount of any Additional Notes on one or more occasions with
the net proceeds of one or more Equity Offerings at a redemption price equal to
109.75% of the principal amount thereof, plus accrued interest, if any, to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on an interest payment date); provided that,
immediately after giving effect to such redemption, at least 65% of the initial
aggregate principal amount of the Notes (excluding Additional Notes) remains
outstanding; provided further that such redemptions shall occur within 60 days
of the date of closing of each Equity Offering.
(c) The Company is not required to make mandatory redemption or
sinking fund payments with respect to the Notes.
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SECTION 1102. Applicability of Article.
Redemption of Notes at the election of the Company or otherwise, as
permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Notes pursuant to Section
1101 shall be evidenced by a Board Resolution. In case of any redemption at the
election of the Company, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Notes to be redeemed and shall deliver to the Trustee
such documentation and records as shall enable the Trustee to select the Notes
to be redeemed pursuant to Section 1104.
SECTION 1104. Selection by Trustee of Notes to Be Redeemed.
If less than all the Notes or Additional Notes, if any, are to be
redeemed, selection of Notes for redemption shall be made by the Trustee not
more than 60 days prior to the redemption date 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 so listed, by such method as the
Trustee shall deem fair and appropriate and which may provide for the selection
for redemption of portions of the principal of Notes; provided, however, that no
such partial redemption shall reduce the portion of the principal amount of a
Note not redeemed to less than $1,000. The Company shall notify the Trustee of
any national securities exchange on which the Notes may be listed.
The Trustee shall promptly notify the Company in writing 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, all provisions relating to redemption of Notes shall relate, in the
case of any Note redeemed or to be redeemed only in part, to the portion of the
principal amount of such Note which has been or is to be redeemed.
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SECTION 1105. Notice of Redemption.
Notice of redemption shall be given in the manner provided for in
Section 107 not less than 30 nor more than 60 days prior to the Redemption Date,
to each Holder of Notes to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest to the
Redemption Date payable as provided in Section 1107, if any,
(3) if less than all Outstanding Notes are to be redeemed, the
identification (and, in the case of a partial redemption, the principal
amounts) of the particular Notes to be redeemed,
(4) in case any Note is to be redeemed in part only, the notice
which relates to such Note shall state that on and after the Redemption
Date, upon surrender of such Note, the Holder will receive, without
charge, a new Note or Notes of authorized denominations for the principal
amount thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and accrued
interest, if any, to the Redemption Date payable as provided in Section
1107) will become due and payable upon each such Note, or the portion
thereof, to be redeemed, and that interest thereon will cease to accrue on
and after said date,
(6) the place or places where such Notes are to be surrendered for
payment of the Redemption Price and accrued interest, if any, and
(7) the CUSIP number.
Notice of redemption of Notes to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold
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in trust as provided in Section 1003) an amount of money sufficient to pay the
Redemption Price of, and accrued interest on, all the Notes which are to be
redeemed on that date.
SECTION 1107. Notes Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Notes so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued interest, if any, to
the Redemption Date), and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such Notes
shall cease to bear interest. Upon surrender of any such Note for redemption in
accordance with said notice, such Note shall be paid by the Company at the
Redemption Price, together with accrued interest, if any, to the Redemption
Date; provided, however, that installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Notes, or one or more Predecessor Notes, registered as such at the close of
business on the relevant Regular Record Dates according to their terms and the
provisions of Section 309.
If any Note called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Notes.
SECTION 1108. Notes Redeemed in Part.
Any Note which is to be redeemed only in part shall be surrendered
at the office or agency of the Company maintained for such purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or such Holders attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Note without service charge, a
new Note or Notes, of any authorized denomination as requested by such Holder,
in aggregate principal amount equal to and in exchange for the unredeemed
portion of the principal of the Note so surrendered.
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ARTICLE TWELVE
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company Option to Effect Legal Defeasance or Covenant
Defeasance.
The Company may, at its option and at any time, with respect to the
Notes, elect to have either Section 1202 or Section 1203 be applied to all
Outstanding Notes upon compliance with the conditions set forth below in this
Article Twelve.
SECTION 1202. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1202, the Company and the Subsidiary Guarantors shall
be deemed to have been discharged from its obligations with respect to all
Outstanding Notes and the Subsidiary Guarantees on the date the conditions set
forth in Section 1204 are satisfied (hereinafter, "Legal Defeasance"). For this
purpose, such Legal Defeasance means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by the Outstanding Notes
and the Subsidiary Guarantees, which shall thereafter be deemed to be
"Outstanding" only for the purposes of Section 1205 and the other Sections of
this Indenture referred to in (A) and (B) below, 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 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 payments in respect of the principal of
(and premium, if any, on) and interest on such Notes when such payments are due
from the trust described in Section 1204, (B) the Company's obligations under
Sections 304, 305, 308, 1002 and 1003, (C) the rights, powers, trusts, duties
and immunities of the Trustee and (D) this Article Twelve. Subject to compliance
with this Article Twelve, the Company may exercise its option under this Section
1202 notwithstanding the prior exercise of its option under Section 1203 with
respect to the Notes.
SECTION 1203. Covenant Defeasance.
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1203, the Company and any Subsidiary Guarantor shall
be released from its obligations under any covenant contained in Section 801 and
Section 803 and in Sections 1006 through 1018 and Sections 1021 and 1022 with
respect to the Outstanding Notes on and after the date the conditions set forth
below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not to be "Outstanding" for the purposes of any direction,
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waiver, consent or declaration or Act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"Outstanding" for all other purposes hereunder. For this purpose, such Covenant
Defeasance means that, with respect to the Outstanding Notes, the Company and
any Subsidiary Guarantor may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 501(c), (d)
or (e), but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby.
SECTION 1204. Conditions to Legal Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either
Section 1202 or Section 1203 to the Outstanding Notes:
(a) the Company must irrevocably deposit or cause to be deposited
with the Trustee, as trust funds in trust, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders, money
in an amount, or U.S. Government Obligations that through the scheduled
payment of principal and interest thereon will provide money in an amount,
or a combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay and discharge
the principal of (and premium, if any, on) and interest on the outstanding
Notes at maturity (or upon redemption, if applicable) of such principal or
installment of interest;
(b) no Default or Event of Default has occurred and is continuing on
the date of such deposit or, insofar as an event of bankruptcy under
Section 501(i) or 501(j) is concerned, at any time during the period
ending on the 91st day after the date of such deposit;
(c) such Legal Defeasance or Covenant Defeasance may not result in a
breach or violation of, or constitute a default under, this Indenture or
any material agreement or instrument to which the Company or any
Subsidiary Guarantor is a party or by which it is bound;
(d) in the case of Legal Defeasance, the Company must deliver to the
Trustee an Opinion of Counsel stating that the Company has received from,
or there has been published by, the Internal Revenue Service a ruling, or,
since the date of this Indenture, there has been a change in applicable
federal income tax law, to the effect, and based thereon such Opinion of
Counsel must confirm, that the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax
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purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not
occurred;
(e) in the case of Covenant Defeasance, the Company must 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; and
(f) the Company must 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 or the
Covenant Defeasance, as the case may be, have been complied with.
SECTION 1205. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee, collectively for purposes of this
Section 1205, the "Trustee") pursuant to Section 1204 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 (including the Company acting as its
own 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 (and premium, if
any) and interest, but such money need not be segregated from other funds except
to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Governmental Obligations
deposited pursuant to Section 1204 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Notes.
Anything in this Article Twelve 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 1204 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
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then be required to be deposited to effect an equivalent Legal Defeasance or
Covenant Defeasance, as applicable, in accordance with this Article.
SECTION 1206. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any money in
accordance with Section 1205 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 1202 or 1203, as the case may be, until such time as the Trustee or
Paying Agent is permitted to apply all such money in accordance with Section
1205; provided, however, that if the Company makes any payment of principal of
(or premium, if any) or interest on any Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or Paying
Agent.
ARTICLE THIRTEEN
GUARANTEES
SECTION 1301. Subsidiary Guarantees.
Each Subsidiary Guarantor hereby jointly and severally, fully,
unconditionally and irrevocably guarantees the Notes and obligations of the
Company hereunder and thereunder, and guarantees to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee on behalf of such
Holder, that: (a) the principal of (and premium, if any) and interest on the
Notes will be paid in full when due, whether at Stated Maturity, by
acceleration, call for redemption or otherwise (including, without limitation,
the amount that would become due but for the operation of the automatic stay
under Section 362(a) of the Federal Bankruptcy Code), together with interest on
the overdue principal, if any, and interest on any overdue interest, to the
extent lawful, and all other obligations of the Company to the Holders or the
Trustee hereunder or thereunder will be 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 of any such other obligations, the
same will be paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at Stated Maturity, by acceleration or
otherwise, subject, however, in the case of clauses (a) and (b) above, to the
limitations set forth in Section 1306 hereof. Each of the Subsidiary Guarantees
shall be a guarantee of payment and not of collection.
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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, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a Subsidiary
Guarantor.
Each Subsidiary Guarantor hereby waives the benefits of diligence,
presentment, demand for payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company or any other Person, protest, notice and all demands
whatsoever and covenants that the Subsidiary Guarantee of such Subsidiary
Guarantor will not be discharged as to any Note except by complete performance
of the obligations contained in such Note and such Subsidiary Guarantee or as
provided for in this Indenture. Each of the Subsidiary Guarantors hereby agrees
that, in the event of a default in payment of principal (or premium, if any) or
interest on such Note, whether at its Stated Maturity, by acceleration, call for
redemption, purchase or otherwise, legal proceedings may be instituted by the
Trustee on behalf of, or by, the Holder of such Note, subject to the terms and
conditions set forth in this Indenture, directly against each of the Subsidiary
Guarantors to enforce such Subsidiary Guarantor's Subsidiary Guarantee without
first proceeding against the Company or any other Subsidiary Guarantor. Each
Subsidiary Guarantor agrees that if, after the occurrence and during the
continuance of an Event of Default, the Trustee or any of the Holders are
prevented by applicable law from exercising their respective rights to
accelerate the maturity of the Notes, to collect interest on the Notes, or to
enforce or exercise any other right or remedy with respect to the Notes, such
Subsidiary Guarantor will pay to the Trustee for the account of the Holders,
upon demand therefor, the amount that would otherwise have been due and payable
had such rights and remedies been permitted to be exercised by the Trustee or
any of the Holders.
If any Holder or the Trustee is required by any court or otherwise
to return to the Company or any Subsidiary Guarantor, or any custodian, trustee,
liquidator or other similar official acting in relation to either the Company or
any Subsidiary Guarantor, any amount paid by any of them to the Trustee or such
Holder, the Subsidiary Guarantee of each of the Subsidiary Guarantors, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Subsidiary Guarantor further agrees that, as between each Subsidiary
Guarantor, on the one hand, and the Holders and the Trustee, on the other hand,
(x) the maturity of the obligations guaranteed hereby may be accelerated as
provided in Article Five hereof for the purposes of the Subsidiary Guarantee of
such Subsidiary Guarantor, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article Five hereof, such obligations (whether or not due and
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payable) shall forthwith become due and payable by each Subsidiary Guarantor for
the purpose of the Subsidiary Guarantee of such Subsidiary Guarantor.
SECTION 1302. Execution and Delivery of Subsidiary Guarantee.
To further evidence the Subsidiary Guarantee set forth in Section
1301, each Subsidiary Guarantor hereby agrees that such Subsidiary Guarantee,
substantially in the form included in Exhibit B of this Indenture, shall be
endorsed on each Note authenticated and delivered by the Trustee. Such
Subsidiary Guarantee shall be executed by manual or facsimile signature on
behalf of each Subsidiary Guarantor by its Chairman, any Vice Chairman, its
President or a Vice President and attested by its Secretary or Assistant
Secretary, and shall have been duly authorized by all requisite corporate
action. The validity and enforceability of any Subsidiary Guarantee shall not be
affected by the fact that it is not affixed to any particular Note.
Each Subsidiary Guarantor hereby agrees that its respective
Subsidiary Guarantee set forth in Section 1301 shall remain in full force and
effect notwithstanding any failure to endorse on each note a notation of such
Subsidiary Guarantee.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Subsidiary Guarantee set
forth in this Indenture on behalf of the Subsidiary Guarantors.
SECTION 1303. Severability.
In case any provision of any Subsidiary Guarantee shall be invalid,
illegal or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1304. Seniority of Subsidiary Guarantees.
The obligations of each Subsidiary Guarantor to the Holders of Notes
and to the Trustee pursuant to such Subsidiary Guarantor's Subsidiary Guarantee
and this Indenture are unsecured senior subordinated obligations of such
Subsidiary Guarantor ranking pari passu in right of payment with all existing
and future senior subordinated obligations of such Subsidiary Guarantor.
SECTION 1305. Limitation of Subsidiary Guarantor's Liability.
Each Subsidiary Guarantor and by its acceptance hereof each Holder
confirms that it is the intention of all such parties that the guarantee by each
Subsidiary Guarantor
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pursuant to its Subsidiary Guarantee not constitute a fraudulent transfer or
conveyance for purposes of the Federal Bankruptcy Code, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or
state law or the provisions of its local law relating to fraudulent transfer or
conveyance. To effectuate the foregoing intention, the Holders and such
Subsidiary Guarantor hereby irrevocably agree that the obligations of such
Subsidiary Guarantor under its Subsidiary Guarantee shall be limited to the
maximum amount that will not, 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 Subsidiary Guarantee or pursuant to Section 1306 hereof, result in the
obligations of such Subsidiary Guarantor under its Subsidiary Guarantee
constituting such fraudulent transfer or conveyance.
SECTION 1306. Contribution.
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under a Subsidiary Guarantee, such Funding Guarantor shall
be entitled to a contribution from all other Subsidiary Guarantors in a pro rata
amount based on the Adjusted Net Assets of each Subsidiary Guarantor (including
the Funding Guarantor) for all payments, damages and expenses incurred by that
Funding Guarantor in discharging the Company's obligations with respect to the
Notes or any other Subsidiary Guarantor's obligations with respect to the
Subsidiary Guarantee of such Subsidiary Guarantor. "Adjusted Net Assets" of such
Subsidiary Guarantor at any date shall mean the lesser of (x) the amount by
which the fair value of the property of such Subsidiary Guarantor exceeds the
total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date), but excluding liabilities under the
Subsidiary Guarantee of such Subsidiary Guarantor at such date and (y) the
amount by which the present fair salable value of the assets of such Subsidiary
Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Subsidiary Guarantor on its debts (after giving
effect to all other fixed and contingent liabilities incurred or assumed on such
date), excluding debt in respect of the Subsidiary Guarantee of such Subsidiary
Guarantor, as they become absolute and matured.
SECTION 1307. Release of a Subsidiary Guarantor.
(a) A Subsidiary Guarantor will be deemed automatically and
unconditionally released and discharged from all of its obligations under its
Subsidiary Guarantee without any further action on the part of the Trustee or
any Holder of the Notes upon (i) a sale or other disposition to a Person not an
Affiliate of the Company of all of the
<PAGE> 108
96
Capital Stock of, or all or substantially all of the assets of, such Subsidiary
Guarantor, by way of merger, consolidation or otherwise, which transaction is
carried out in accordance with Section 801 and 1016, so long as (a) no Default
or Event of Default shall have occurred and be continuing at the time of, or
would occur after giving effect on a pro forma basis to, such release and (b)
the Company is permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in subsection (a) of
Section 1010 on the date on which such release occurs; provided that any such
termination shall occur (x) only to the extent that all obligations of such
Subsidiary Guarantor under all of its guarantees of, and under all of its
pledges of assets or other security interests which secure any Indebtedness of
the Company shall also terminate upon such sale, disposition or release and (y)
only if the Trustee is furnished with written notice of such release together
with an Officer's Certificate from such Subsidiary Guarantor to the effect that
all of the conditions to release in this Section 1307(a) have been satisfied.
(b) Any Subsidiary Guarantor that is designated by the Board of
Directors of the Company as an Unrestricted Subsidiary in accordance with the
terms of this Indenture may, at such time, at the option of the Board of
Directors, be released and relieved of its obligations under its Subsidiary
Guarantee. The Trustee shall deliver an appropriate instrument evidencing such
release upon receipt of a Company Request accompanied by an Officers'
Certificate certifying as to the compliance with this Section 1307. Any
Subsidiary Guarantor not so released shall remain liable for the full amount of
principal of and interest on the Notes as provided in its Subsidiary Guarantee.
(c) Concurrently with the Legal Defeasance of the Notes under
Section 1202 hereof, or the Covenant Defeasance of the Notes under Section 1203
hereof, the Subsidiary Guarantors shall be released from all their obligations
under their Subsidiary Guarantees under this Article Thirteen.
SECTION 1308. Benefits Acknowledged.
Each Subsidiary Guarantor acknowledges that it will receive direct
and indirect benefits from the financing arrangements contemplated by this
Indenture and that its guarantee and waivers pursuant to its Subsidiary
Guarantee are knowingly made in contemplation of such benefits.
SECTION 1309. Issuance of Subsidiary Guarantees by Certain New
Restricted Subsidiaries.
The Company shall provide to the Trustee, on the date that any
Person becomes a Restricted Subsidiary, a supplemental indenture to this
Indenture, executed by such new Restricted Subsidiary, providing for a full and
unconditional guarantee on a senior
<PAGE> 109
97
subordinated basis by such new Restricted Subsidiary of the Company's
obligations under the Notes and this Indenture to the same extent as that set
forth in this Indenture, provided, however, that, in the case of any new
Restricted Subsidiary that becomes a Restricted Subsidiary through the
acquisition of a majority of its voting Capital Stock by the Company or any
other Restricted Subsidiary, such guarantee may be subordinated to the extent
required by the obligations of such new Restricted Subsidiary existing on the
date of such acquisition that were not incurred in contemplation of such
acquisition and provided further that any such Restricted Subsidiary that is a
Foreign Subsidiary shall not be required to provide a Subsidiary Guarantee so
long as such Restricted Subsidiary has not guaranteed any other Indebtedness of
the Company or of any other Restricted Subsidiary.
ARTICLE FOURTEEN
SUBORDINATION
SECTION 1401. Notes Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder, by its acceptance
thereof, likewise covenants and agrees, for the benefit of the Holders, from
time to time, of Senior Indebtedness that, to the extent and in the manner
hereinafter set forth in this Article, the Indebtedness represented by the Notes
and the payment of the principal of (and premium, if any) and interest on each
and all of the Notes are hereby expressly made subordinate and subject in right
of payment as provided in this Article to the prior payment in full in cash of
all Senior Indebtedness, whether outstanding on the date of this Indenture or
thereafter incurred; provided, however, that the Notes, the Indebtedness
represented thereby and the payment of the principal of (and premium, if any)
and interest on the Notes in all respects shall rank equally with, or prior to,
all existing and future unsecured indebtedness (including, without limitation,
Indebtedness) of the Company that is subordinated to Senior Indebtedness.
SECTION 1402. Payment over by the Company of Proceeds upon
Dissolution, etc.
Upon any distribution to creditors of the Company in a total or
partial liquidation or dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property, whether voluntary or involuntary, an assignment for the
benefit of creditors or any marshaling of the Company's assets and liabilities,
(1) the holders of Senior Indebtedness of the Company shall be
entitled to receive payment in full in cash of all Obligations due in
respect of such Senior
<PAGE> 110
98
Indebtedness (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Indebtedness)
before the Holders of Notes will be entitled to receive any payment with
respect to the Notes, and until all Obligations with respect to Senior
Indebtedness are paid in full in cash or cash equivalents, any
distribution to which the Holders of Notes (or the Trustee on their
behalf) would be entitled shall be made to the holders of Senior
Indebtedness (except that Holders of Notes may receive securities that are
subordinated at least to the same extent as the Notes to Senior
Indebtedness ("Permitted Junior Securities") and any securities issued in
exchange for Senior Indebtedness and Holders of Notes may recover payments
made from the trust described in Section 1204); and
(2) in the event that, notwithstanding the foregoing provisions of
this Section, the Trustee or any Holder of Notes shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, in respect of principal of (and
premium, if any) or interest on the Notes before all Senior Indebtedness
is paid in full or payment thereof provided for, and if such fact shall at
or prior to the time of such payment or distribution, have been made known
to the Trustee or such Holder, as the case may be, by the holders of
Senior Indebtedness or their respective trustee, agent or other
representative under any agreement or indenture pursuant to which any such
Senior Indebtedness may have been issued, then and in such event such
payment or distribution (other than a payment or distribution in the form
of Permitted Junior Securities or out of the trust described in Section
1204) shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or
other Person making payment or distribution of assets of the Company for
application to the payment of all Senior Indebtedness remaining unpaid, to
the extent necessary to pay all Senior Indebtedness in full, after giving
effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company
into, another Person or the liquidation or dissolution of the Company following
the conveyance, transfer or lease of its properties and assets substantially as
an entirety to another Person upon the terms and conditions set forth in Article
Eight shall not be deemed a dissolution, winding up, liquidation,
reorganization, assignment for the benefit of creditors or marshaling of assets
and liabilities of the Company for the purposes of this Section if the Person
formed by such consolidation or into which the Company is merged or the Person
which acquires by conveyance, transfer or lease such properties and assets
substantially as an entirety, as the case may be, shall, as a part of such
consolidation, merger, conveyance, transfer or lease, comply with the conditions
set forth in Article Eight.
<PAGE> 111
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SECTION 1403. Suspension of Payment on Notes When Senior
Indebtedness of the Company in Default.
(a) Unless Section 1402 shall be applicable, the Company shall not
make any direct or indirect payment upon or in respect of the Notes (except in
such Permitted Junior Securities or from the trust described in Section 1204) if
(i) a default in the payment when due of all or any portion of
the principal of, premium, if any, or interest on or any other
obligations under or in respect of any Designated Senior
Indebtedness exists, whether at maturity, on account of mandatory
redemption or prepayment, acceleration or otherwise and such default
shall not have been cured or waived (a "Payment Event of Default")
which is notified to the Trustee in writing from the Company, the
Agent or any other representative of holders of Designated Senior
Indebtedness, or
(ii) any Non-payment Event of Default occurs and is continuing
with respect to Designated Senior Indebtedness which permits holders
of the Designated Senior Indebtedness as to which such default
relates to accelerate its maturity and the Trustee receives a notice
of such default (a "Payment Blockage Notice") from the Agent Bank or
the holders or the representative of the holders of any Designated
Senior Indebtedness.
(b) Payments on the Notes may and shall be resumed (a) in the case
of a Payment Event of Default, upon the date on which such default is cured or
waived and (b) in case of a Non-payment Event of Default, the earlier of the
date on which such Non-payment Event of Default is cured or waived or 179 days
after the date on which the applicable Payment Blockage Notice is received. No
new period of payment blockage may be commenced by a Payment Blockage Notice
unless and until 360 days have elapsed since the first day of the effectiveness
of the immediately prior Payment Blockage Notice. No Non-payment Event of
Default that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent
Payment Blockage Notice, unless such default has been cured or waived for a
period of not less than 90 days.
<PAGE> 112
100
SECTION 1404. Payment Over by Subsidiary Guarantors of Proceeds upon
Dissolution, etc.
Upon any distribution to creditors of any Subsidiary Guarantor in a
liquidation or dissolution of such Subsidiary Guarantor or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to such
Subsidiary Guarantor or its property, whether voluntary or involuntary, an
assignment for the benefit of creditors or any marshaling of such Subsidiary
Guarantor's assets and liabilities,
(1) the holders of Senior Indebtedness of such Subsidiary Guarantor
shall be entitled to receive indefeasible payment in full in cash or cash
equivalents of all Obligations due or in respect of such Senior
Indebtedness (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Indebtedness)
before the Holders of Notes will be entitled to receive any payment with
respect to the respective Subsidiary Guarantee, and until all Obligations
with respect to Senior Indebtedness of such Subsidiary Guarantor and
Senior Indebtedness of the Company are paid in full in cash or cash
equivalents, any distribution to which the Holders of Notes (or the
Trustee on their behalf) would be entitled shall be made to the holders of
such Senior Indebtedness (except that Holders of Notes may receive (i)
Capital Stock of such Subsidiary Guarantor (other than Disqualified Stock)
and (ii) Permitted Junior Securities and any securities issued in exchange
for such Senior Indebtedness); and
(2) in the event that, notwithstanding the foregoing provisions of
this Section, the Trustee or any Holder of Notes shall have received any
payment or distribution of assets of such Subsidiary Guarantor of any kind
or character, whether in cash, property or securities, in respect of
principal of (and premium, if any) or interest on the Notes before all
Senior Indebtedness of such Subsidiary Guarantor is paid in full or
payment thereof provided for, and if such fact shall at or prior to the
time of such payment or distribution, have been made known to the Trustee
or such Holder, as the case may be, by the holders of Senior Indebtedness
or their respective trustee, agent or other representative under any
agreement or indenture pursuant to which any such Senior Indebtedness may
have been issued, then and in such event such payment or distribution
(other than a payment or distribution in the form of Permitted Junior
Securities) shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or
other Person making payment or distribution of assets of such Subsidiary
for application to the payment of all Senior Indebtedness of such
Subsidiary Guarantor remaining unpaid, to the extent necessary to pay all
such Senior Indebtedness in full, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Indebtedness.
<PAGE> 113
101
The consolidation of any Subsidiary Guarantor with, or the merger of
any Subsidiary Guarantor into, another Person or the liquidation or dissolution
of any Subsidiary Guarantor following the conveyance, transfer or lease of its
properties and assets substantially as an entirety to another Person upon the
terms and conditions set forth in Article Eight shall not be deemed a
dissolution, winding up, liquidation, reorganization, assignment for the benefit
of creditors or marshaling of assets and liabilities of such Subsidiary
Guarantor for the purposes of this Section if the Person formed by such
consolidation or into which such Subsidiary Guarantor is merged or the Person
which acquires by conveyance, transfer or lease such properties and assets
substantially as an entirety, as the case may be, shall, as a part of such
consolidation, merger, conveyance, transfer or lease, comply with the conditions
set forth in Article Eight.
SECTION 1405. Suspension of Payment on Subsidiary Guarantees When
Senior Indebtedness of Subsidiary Guarantor in
Default.
(a) Unless Section 1404 shall be applicable, a Subsidiary Guarantor
shall not make any direct or indirect payment upon or in respect of such
Subsidiary Guarantor's Subsidiary Guarantee (except in such Permitted Junior
Securities) if:
(i) a Payment Event of Default on Designated Senior
Indebtedness of such Subsidiary Guarantor or Designated Senior
Indebtedness of the Company which is notified to the Trustee in
writing from such Subsidiary Guarantor, the Agent or any other
representative of holders of Designated Senior Indebtedness, or
(ii) any Non-payment Event of Default occurs and is continuing
with respect to Designated Senior Indebtedness of such Subsidiary
Guarantor or Designated Senior Indebtedness of the Company which
permits holders of the Designated Senior Indebtedness of such
Subsidiary Guarantor or Designated Senior Indebtedness of the
Company as to which such default relates to accelerate its maturity
and the Trustee receives a Payment Blockage Notice from the Agent
Bank or the holders or the representative of the holders of such
Designated Senior Indebtedness.
(b) Payments on the Subsidiary Guarantees may and shall be resumed
(a) in the case of a Payment Event of Default, upon the date on which such
default is cured or waived and (b) in case of a Non-payment Event of Default,
the earlier of the date on which such Non-payment Event of Default is cured or
waived or 179 days after the date on which the applicable Payment Blockage
Notice is received. No new period of payment blockage may be commenced by a
Payment Blockage Notice unless and until 360 days have elapsed since the first
day of the effectiveness of the immediately prior Payment Blockage Notice. No
Non-
<PAGE> 114
102
payment Event of Default that existed or was continuing on the date of delivery
of any Payment Blockage Notice to the Trustee shall be, or be made, the basis
for a subsequent Payment Blockage Notice.
SECTION 1406. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this Indenture, in
any of the Notes or in any Subsidiary Guarantee shall prevent the Company or any
Subsidiary Guarantors, as applicable, at any time except during the pendency of
any case, proceeding, dissolution, liquidation or other winding up, assignment
for the benefit of creditors or other marshaling of assets and liabilities of
the Company or any Subsidiary Guarantor referred to in Section 1402 or 1404 or
under the conditions described in Section 1403 or 1405, from making payments at
any time of principal of (and premium, if any, on) or interest on the Notes or
under a Subsidiary Guarantee, as applicable.
SECTION 1407. Subrogation to Rights of Holders of Senior
Indebtedness.
Subject to the payment in full of all Senior Indebtedness, the
Holders shall be subrogated (equally and ratably with the holders of all
indebtedness of the Company or any Subsidiary Guarantor which by its express
terms is subordinated to Senior Indebtedness of the Company or such Subsidiary
Guarantor to the same extent as the Notes or the Subsidiary Guarantees are
subordinated and which is entitled to like rights of subrogation) to the rights
of the holders of such Senior Indebtedness to receive payments and distributions
of cash, property and securities applicable to the Senior Indebtedness until the
principal of (and premium, if any) and interest on the Notes shall be paid in
full. For purposes of such subrogation, no payments or distributions to the
holders of Senior Indebtedness of any cash, property or securities to which the
Holders or the Trustee would be entitled except for the provisions of this
Article, and no payments over pursuant to the provisions of this Article to the
holders of Senior Indebtedness by Holders or the Trustee, shall, as among the
Company, the Subsidiary Guarantors, their respective creditors other than
holders of Senior Indebtedness, and the Holders of the Notes, be deemed to be a
payment or distribution by the Company or any Subsidiary Guarantor to or on
account of the Senior Indebtedness.
SECTION 1408. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Notes on the one
hand and the holders of Senior Indebtedness on the other hand. Nothing contained
in this Article or elsewhere in this Indenture or in the Notes is intended to or
shall (a) impair, as between the Company, or any Subsidiary Guarantor as
applicable, and the Holders, the obligation of the Company or such Subsidiary
Guarantor, which is absolute and unconditional, to pay to the Holders the
principal
<PAGE> 115
103
of (and premium, if any) and interest on the Notes as and when the same shall
become due and payable in accordance with their terms; or (b) affect the
relative rights against the Company or any Subsidiary Guarantor of the Holders
and creditors of the Company or such Subsidiary Guarantor other than the holders
of Senior Indebtedness; or (c) prevent the Trustee or any Holder from exercising
all remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article of the holders of
Senior Indebtedness.
SECTION 1409. Trustee to Effectuate Subordination.
Each Holder of a Note by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 1410. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or any Subsidiary Guarantor, or by any act or failure to act, in
good faith, by any such holder, or by any non-compliance by the Company or any
Subsidiary Guarantor with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
(b) Without in any way limiting the generality of paragraph (a) of
this Section, the holders of Senior Indebtedness may, at any time and from time
to time, without the consent of or notice to the Trustee or the Holders of the
Notes, without incurring responsibility to the Holders and without impairing or
releasing the subordination provided in this Article or the obligations
hereunder of the Holders to the holders of Senior Indebtedness, do any one or
more of the following: (1) change the manner, place or terms of payment or
extend the time of payment of, or renew or alter, Senior Indebtedness or any
instrument evidencing the same or any agreement under which Senior Indebtedness
is outstanding; (2) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness; (3) release any
Person liable in any manner for the collection of Senior Indebtedness; and (4)
exercise or refrain from exercising any rights against the Company, any
Subsidiary Guarantor and any other Person.
<PAGE> 116
104
SECTION 1411. Notice to Trustee.
(a) The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Notes. Notwithstanding the provisions of
this Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Notes, unless and
until the Trustee shall have received written notice thereof from the Company,
the Agent or a holder of Senior Indebtedness or from any trustee, fiduciary or
agent therefor; and, prior to the receipt of any such written notice, the
Trustee, subject to TIA Sections 315(a) through 315(d), shall be entitled in all
respects to assume that no such facts exist; provided, however, that, if the
Trustee shall not have received the notice provided for in this Section at least
three Business Days prior to the date upon which by the terms hereof any money
may become payable for any purpose (including, without limitation, the payment
of the principal of (and premium, if any) or interest on any Note), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to apply the same to the
purpose for which such money was received and shall not be affected by any
notice to the contrary which may be received by it within three Business Days
prior to such date.
(b) Subject to TIA Sections 315(a) through 315(d), the Trustee shall
be entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor) to establish that such notice has been given by a
holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor). In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 1412. Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution of assets of the Company referred
to in this Article, the Trustee, subject to TIA Sections 315(a) through 315(d),
and the Holders shall be entitled to rely upon any order or decree entered by
any court of competent jurisdiction in which such insolvency, bankruptcy,
receivership, liquidation, reorganization, dissolution,
<PAGE> 117
105
winding up or similar case or proceeding is pending, or a certificate of the
trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for
the benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the Holders, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article.
SECTION 1413. Rights of Trustee As a Holder of Senior Indebtedness;
Preservation of Trustees Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder. Nothing in this Article shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 607.
SECTION 1414. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the Trustee; provided,
however, that Section 1413 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
SECTION 1415. No Suspension of Remedies.
Nothing contained in this Article shall limit the right of the
Trustee or the Holders to take any action to accelerate the maturity of the
Notes pursuant to Article Five or to pursue any rights or remedies hereunder or
under applicable law, except as provided in Article Five.
SECTION 1416. Trust Moneys Not Subordinated.
Notwithstanding anything contained herein to the contrary, payments
from cash or the proceeds of U.S. Government Obligations held in trust under
Article Twelve hereof by the Trustee (or other qualifying trustee) and which
were deposited in accordance with the terms of Article Twelve hereof and not in
violation of Section 1403 hereof for the payment of principal of (and premium,
if any) and interest on the Notes shall not be subordinated to the
<PAGE> 118
106
prior payment of any Senior Indebtedness or subject to the restrictions set
forth in this Article Fourteen, and none of the Holders shall be obligated to
pay over any such amount to the Company or any holder of Senior Indebtedness or
any other creditor of the Company.
SECTION 1417. Trustee Not Fiduciary for Holders of Senior
Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to Holders or to the
Company or to any other Person cash, property or securities to which any holders
of Senior Indebtedness shall be entitled by virtue of this Article or otherwise.
This Indenture may be signed in any number of counterparts each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Indenture.
<PAGE> 119
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed all as of the day and year first above written.
INDESCO INTERNATIONAL, INC.
By: /s/ Ariel Gratch
-----------------------------------
Name: Ariel Gratch
Title: Vice Chairman, President,
Asst. Secretary and CEO
AFA PRODUCTS, INC.
By: /s/ Ariel Gratch
-----------------------------------
Name: Ariel Gratch
Title: Vice Chairman
CONTINENTAL SPRAYERS INTERNATIONAL, INC.
By: /s/ Ariel Gratch
-----------------------------------
Name: Ariel Gratch
Title: Vice Chairman, Secretary and CEO
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
as Trustee
By: /s/ Curtis D. Schwegman
-----------------------------------
Name: Curtis D. Schwegman
Title: Assistant Vice President
<PAGE> 120
Exhibit A
[FACE OF NOTE]
INDESCO INTERNATIONAL, INC.
9 3/4% [Series B]** Senior Subordinated Note Due 2008
CUSIP [_________]
No. [_______] $
INDESCO INTERNATIONAL, INC., a Delaware corporation (the "Company",
which term includes any successor under the Indenture hereinafter referred to),
for value received, promises to pay to [___________], or its registered assigns,
the principal sum of [___________], on April 15, 2008.
[Initial Interest Rate: 9 3/4% per annum.]*
[Interest Rate: [___]% per annum.]**
Interest Payment Dates: April 15 and October 15 of each year
commencing October 15, 1998.
Regular Record Dates: April 1 and October 1 of each year.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
- ----------
* Include only for Initial Notes.
** Include only for Exchange Notes.
<PAGE> 121
IN WITNESS WHEREOF, the Company has caused this Note to be executed.
Date: April 23, 1998 INDESCO INTERNATIONAL, INC.
By: __________________________
Title:
<PAGE> 122
Form of Trustee's Certificate of Authentication
This is one of the 9 3/4% [Series B]** Senior Subordinated Notes due 2008
described in the within-mentioned Indenture.
Date: April 23, 1998 NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
as Trustee
By: _____________________________
Authorized Signatory
- ----------
** Include only for Exchange Notes.
A-3
<PAGE> 123
[REVERSE SIDE OF NOTE]
INDESCO INTERNATIONAL, INC.
9 3/4% [Series B]** Senior Subordinated Note due 2008
1. Principal and Interest.
The Company will pay the principal of this Note on April 15, 2008.
The Company promises to pay interest on the principal amount of this
Note on each Interest Payment Date, as set forth below, at the rate of [9.75%
per annum (subject to adjustment as provided below)]* 9.75%] per annum, except
that interest accrued on this Note pursuant to the penultimate paragraph of this
Section 1 for periods prior to the applicable Exchange Date (as such term is
defined in the Registration Rights Agreement referred to below) will accrue at
the rate or rates borne by the Notes from time to time during such periods].**
Interest will be payable semiannually (to the Holders of record of
the Notes (or any Predecessor Notes) at the close of business on the April 1, or
October 1, immediately preceding the Interest Payment Date) on each Interest
Payment Date, commencing October 15, 1998.
If (a) the Exchange Offer Registration Statement is not filed with
the Commission on or prior to the 90th calendar day following the Closing Date
or (b) the Exchange Offer Registration Statement is not declared effective on or
prior to the 120th calendar day following the Closing Date or the Exchange Offer
consummated on or prior to the 150th calendar day following the Closing Date or
(c) a Shelf Registration Statement is not declared effective when required, the
Company will pay liquidated damages ("Liquidated Damages") to each Holder of
Notes with respect to the first 30-day period following the 90-day period
referred to in clause (a) above or the first 90-day period following the periods
referred to in clauses (b) or (c) above in an amount equal to $0.05 per week per
$1,000 principal amount of Notes held by such Holder. The amount of Liquidated
Damages will increase by an additional $0.05 per week per $1,000 principal
amount of Notes at the beginning of each subsequent 30-day period in the case of
clause (a) above or 90-day period in
- ----------
* Include only for Initial Notes.
** Include only for Exchange Notes.
A-4
<PAGE> 124
the case of clauses (b) and (c) above, up to a maximum amount of Liquidated
Damages of $0.30 per week per $1,000 principal amount of Notes. Upon the filing
of the Exchange Offer Registration Statement, the consummation of the Exchange
Offer or the effectiveness of a Shelf Registration Statement, as the case may
be, Liquidated Damages will cease to accrue from the date of such filing,
consummation or effectiveness, as the case may be; provided, however, that, if,
after the date such Liquidated Damages cease to accrue, a different event
specified in clause (a), (b) or (c) above occurs, Liquidated Damages may again
commence accruing pursuant to the foregoing provisions.
Interest on this Note will accrue from the most recent date to which
interest has been paid [on this Note or the Note surrendered in exchange
herefor]** or, if no interest has been paid, from April 23, 1998; provided that,
if there is no existing default in the payment of interest and if this Note is
authenticated between a Regular Record Date referred to on the face hereof and
the next succeeding Interest Payment Date, interest shall accrue from such
Interest Payment Date. Interest will be computed on the basis of a 360-day year
of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
a rate per annum equal to the rate of interest applicable to the Notes.
2. Method of Payment.
The Company will pay interest (except defaulted interest) on the
principal amount of the Notes on each April 15 and October 15 to the persons who
are Holders (as reflected in the Register at the close of business on the April
1 and October 1 immediately preceding the Interest Payment Date), in each case,
even if the Note is canceled on registration of transfer or registration of
exchange after such record date.
The principal of (and premium, if any), and interest on the Notes
shall be payable, and the Notes shall be exchangeable and transferable, at the
office or agency of the Company in The City of New York maintained for such
purposes, (which initially shall be the office of the Trustee located in care of
The Depositary Trust Company, at 55 Water Street, New York, New York 10041) or,
at the option of the Company, interest may be paid by check mailed to the
address of the Person entitled thereto as such address shall appear on the
Register; provided that all payments with respect to the Global Notes and the
Physical Notes the Holder of which have given wire transfer instructions to the
Company will be required to be made by wire transfer of immediately available
funds to the accounts specified by the Holders thereof.
- ----------
** Include only for Exchange Notes.
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<PAGE> 125
3. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar upon written notice thereto.
The Company, any Subsidiary or any Affiliate of any of them may act as Paying
Agent, Registrar or co-registrar.
4. Subsidiary Guarantees.
This Note is initially entitled to the benefits of the Subsidiary
Guarantee made by the Subsidiary Guarantors as described in the Indenture and
may thereafter be entitled to Subsidiary Guarantees made by other Subsidiary
Guarantors for the benefit of the Holders of Notes. Each present Subsidiary
Guarantor has, and each future Subsidiary Guarantor will, irrevocably and
unconditionally, jointly and severally, guarantee on a senior subordinated basis
the punctual payment when due, whether at Stated Maturity, by acceleration, in
connection with a Change of Control Offer, an Asset Sale Offer or redemption, or
otherwise, of all obligations of the Company under the Indenture and this Note,
whether for payment of principal of, premium, if any, or interest, if any, on
the Notes, expenses, indemnification or otherwise. A Subsidiary Guarantor shall
be released from its Subsidiary Guarantee upon the terms and subject to the
conditions set forth in the Indenture.
5. Subordination.
This Note and the Subsidiary Guarantees are subordinated in right of
payment, as set forth in the Indenture, to the prior payment in full of all
existing and future Senior Indebtedness. Each of the Company and the Subsidiary
Guarantors agrees, and each Holder by accepting a Note agrees, to the
subordination provisions set forth in the Indenture, authorizes the Trustee to
give them effect and appoints the Trustee as attorney-in-fact for such purposes.
6. Indenture; Limitations.
The Company issued the Notes under an Indenture dated as of April
23, 1998 (the "Indenture"), between the Company, the Subsidiary Guarantors and
Norwest Bank Minnesota, National Association, as trustee (the "Trustee").
Capitalized terms herein are used as defined in the Indenture unless otherwise
indicated. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act. The
Notes are subject to all such terms, and Holders are referred to the Indenture
and the Trust Indenture Act for a statement of all such terms. To the extent
permitted by applicable law, in the event of any inconsistency between the terms
of this Note and the terms of the Indenture, the terms of the Indenture shall
control.
The Notes are general unsecured obligations of the Company.
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<PAGE> 126
7. Redemption.
Optional Redemption. The Notes may be redeemed at the option of the
Company, in whole or in part, at any time and from time to time on or April 15,
2003 at the following Redemption Prices (expressed in percentages of principal
amount), plus accrued and unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date that is on or prior to the
Redemption Date), if redeemed during the 12-month period beginning April 15 of
each of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- -------------
<S> <C>
2003....................................104.875%
2004 ...................................103.250%
2005 ..................................101.625%
2006 and thereafter ...................100.000%
</TABLE>
In addition, at any time or from time to time prior to April 15,
2001, the Company may redeem up to 35% of the sum of (i) the initial aggregate
principal amount of the Notes and (ii) the initial aggregate principal amount of
any Additional Notes on one or more occasions with the net proceeds of one or
more Equity Offerings at a redemption price equal to 109.75% of the principal
amount thereof, plus accrued interest, if any, to the redemption date (subject
to the right of Holders of record on the relevant record date to receive
interest due on an interest payment date); provided that, immediately after
giving effect to such redemption, at least 65% of the initial aggregate
principal amount of the Notes (excluding Additional Notes) remains outstanding;
provided further that such redemptions shall occur within 60 days of the date of
closing of each Equity Offering.
Notice of a redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder to be redeemed at such
Holder's last address as it appears in the Register. Notes in original
denominations larger than $1,000 may be redeemed in part in integral multiples
of $1,000. On and after the Redemption Date, interest ceases to accrue on Notes
or portions of Notes called for redemption, unless the Company defaults in the
payment of the Redemption Price.
8. Repurchase upon a Change in Control and Asset Sales.
(a) If a Change of Control occurs at any time, then, each Holder of
Notes or Additional Notes shall have the right to require that the Company
purchase such Holder's Notes or Additional Notes, as applicable, in whole or in
part in integral multiples of $1,000, at
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<PAGE> 127
a purchase price in cash equal to 101% of the principal amount of such Notes or
Additional Notes, plus accrued and unpaid interest, if any, to the date of
purchase, pursuant to the offer described in the Indenture (the "Change of
Control Offer") and (b) upon Asset Sales, the Company may be obligated to make
offers to purchase Notes with a portion of the Net Cash Proceeds of such Asset
Sales at a redemption price of 100% of the principal amount thereof plus accrued
and unpaid interest, if any, to the date of purchase in accordance with the
procedures set forth in the Indenture.
9. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons, in denominations
of $1,000 and multiples of $1,000 in excess thereof; provided that U.S. Physical
Notes originally purchased by or transferred to institutional "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act) who are not "qualified institutional buyers" (as defined in Rule 144A under
the Securities Act) will be subject to a minimum denomination of $250,000. 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 or exchange of any Notes selected for redemption (except the
unredeemed portion of any Note being redeemed in part). Also, it need not
register the transfer or exchange of any Notes for a period of 15 days before a
selection of Notes to be redeemed is made.
10. Persons Deemed Owners.
A Holder may be treated as the owner of a Note for all purposes.
11. Unclaimed Money.
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to the
money must look to the Company for payment, unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity.
If the Company irrevocably deposits, or causes to be deposited, with
the Trustee money or U.S. Government Obligations sufficient to pay the then
outstanding principal of,
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<PAGE> 128
premium, if any, and accrued interest on the Notes to redemption or maturity,
the Company will be discharged from the Indenture and the Notes, except in
certain circumstances for certain sections thereof.
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in aggregate principal amount of the Notes then outstanding, and any existing
default or compliance with any provision may be waived with the consent of the
Holders of a majority in aggregate principal amount of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties thereto
may amend or supplement the Indenture or the Notes to, among other things, cure
any ambiguity, defect or inconsistency.
14. Restrictive Covenants.
The Indenture contains certain covenants, including, without
limitation, covenants with respect to the following matters: (i) Indebtedness;
(ii) Restricted Payments; (iii) issuances and sales of Restricted Subsidiary
Capital Stock; (iv) transactions with Affiliates; (v) Liens; (vi) certain Asset
Sales; (vii) dividends and other payment restrictions affecting Restricted
Subsidiaries; (viii) mergers and certain transfers of assets. Within 120 days
after the end of each fiscal year, the Company must report to the Trustee on
compliance with such limitations.
15. Successor Persons.
When a successor person or other entity assumes all the obligations
of its predecessor under the Notes and the Indenture, the predecessor person
will be released from those obligations.
16. Remedies for Events of Default.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of not less than 25% in principal amount
of the Notes then outstanding may declare all the Notes to be immediately due
and payable. If a bankruptcy or insolvency default with respect to the Company
or any of its Significant Subsidiaries occurs and is continuing, the Notes
automatically become immediately due and payable. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. The Trustee may
require indemnity satisfactory to it before it enforces the Indenture or the
Notes. Subject to
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<PAGE> 129
certain limitations, Holders of at least a majority in principal amount of the
Notes then outstanding may direct the Trustee in its exercise of any trust or
power.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Notes and may make loans to, accept
deposits from, perform services for, and otherwise deal with, the Company and
its Affiliates as if it were not the Trustee.
18. No Recourse Against Certain Others
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Notes or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. No director, officer, employee,
incorporator or stockholder of any Subsidiary Guarantor, as such, shall have any
liability for any obligations of such Subsidiary Guarantor under its Subsidiary
Guarantee or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Notes by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes and the Subsidiary Guarantees.
19. Authentication.
This Note shall not be valid until the Trustee manually signs the
certificate of authentication on the other side of this Note.
20. Governing Law.
The Notes shall be governed by, and construed in accordance with,
the law of the State of New York.
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<PAGE> 130
21. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to Indesco
International, Inc., 950 Third Avenue, New York, New York, Attention: Ariel
Gratch.
A-11
<PAGE> 131
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered Holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
(Please print or typewrite name and address including zip code of assignee)
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
attorney to transfer such Note on the books of the Company with full power of
substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE PHYSICAL
CERTIFICATES]
In connection with any transfer of this Note occurring prior to the
date which is the earlier of the date of an effective Registration Statement or
[________], the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ](a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933, as amended, 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 other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless
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<PAGE> 132
and until the conditions to any such transfer of registration set forth herein
and in Section 307 of the Indenture shall have been satisfied.
Date: ---------------------------------
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or any
change whatsoever.
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 of
1933, as amended, 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
A-13
<PAGE> 133
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 1015 or Section 1016 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 1015 or Section 1016 of the Indenture, state the amount (in
original principal amount) below:
$_______________________.
Date:
Your Signature:
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
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<PAGE> 134
Exhibit B
FORM OF SUBSIDIARY GUARANTEE
Each Subsidiary Guarantor hereby jointly and severally, absolutely,
unconditionally and irrevocably guarantees the Notes and obligations of the
Company hereunder and thereunder, and guarantees to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee on behalf of such
Holder, that: (a) the principal of (and premium, if any) and interest on the
Notes will be paid in full when due, whether at Stated Maturity, by
acceleration, call for redemption or otherwise (including, without limitation,
the amount that would become due but for the operation of the automatic stay
under Section 362(a) of the Federal Bankruptcy Code), together with interest on
the overdue principal, if any, and interest on any overdue interest, to the
extent lawful, and all other obligations of the Company to the Holders or the
Trustee hereunder or thereunder will be 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 of any such other obligations, the
same will be paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at Stated Maturity, by acceleration or
otherwise, subject, however, in the case of clauses (a) and (b) above, to the
limitations set forth in Section 1306 of the Indenture.
The obligations of the Subsidiary Guarantors to the Holders of the
Notes and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture
are expressly set forth in Article Thirteen of the Indenture, and reference is
hereby made to such Indenture for the precise terms of this Subsidiary
Guarantee. The terms of Article Thirteen of the Indenture are incorporated
herein by reference.
This is a continuing guarantee and shall remain in full force and
effect and shall be binding upon each Subsidiary Guarantor and its respective
successors and assigns to the extent set forth in the Indenture until full and
final payment of all of the Company's obligations under the Notes and the
Indenture and shall inure to the benefit of the successors and assigns of the
Trustee and the Holders of Notes and, in the event of any transfer or assignment
of rights by any Holder of Notes or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
This is a guarantee of payment and not a guarantee of collection.
In certain circumstances more fully described in the Indenture, any
Subsidiary Guarantor may be released from its liability under this Subsidiary
Guarantee, and any such release will be effective whether or not noted herein.
<PAGE> 135
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Senior Subordinated Note
upon which this Subsidiary Guarantee is noted shall have been executed by the
Trustee under the Indenture by the manual signature of one of its authorized
officers.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
B-2
<PAGE> 136
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused its
Subsidiary Guarantee to be duly executed.
Date: April 23, 1998 AFA PRODUCTS, INC.
By ___________________________
Name:
Title:
Attest: _________________________
Secretary
CONTINENTAL SPRAYERS
INTERNATIONAL, INC.
By ___________________________
Name:
Title:
Attest: _________________________
Secretary
B-3
<PAGE> 137
Exhibit C
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Institutional Accredited Investors
____________________, _____
Indesco International, Inc.
950 Third Avenue
New York, New York 10022
Attention: Ariel Gratch
Re: Indesco International, Inc., (the "Company")
9 3/4% Senior Subordinated Notes due 2008 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed purchase of $[____________]
aggregate principal amount of the Notes:
1. We understand that the Notes have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be
sold except as permitted in the following sentence. We agree on our own
behalf and on behalf of any investor account for which we are purchasing
the Notes to offer, sell or otherwise transfer such Notes prior to the
date which is two years after the later of the date of original issue and
the last date on which the Company or any affiliate of the Company was the
owner of such Notes, or any predecessor thereto (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
under the Securities Act, to a person we reasonably believe is a qualified
institutional buyer under Rule 144A (a "QIB") that purchases for its own
account or for the account of a QIB to whom notice is given that the
transfer is being made in reliance on Rule 144A, (d) pursuant to offers
and sales to non-U.S. Persons that occur outside the United States within
the meaning of Regulations S under the Securities Act, (e) to an
institutional "accredited investor"
C-1
<PAGE> 138
within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501
under the Securities Act that is acquiring the Notes 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 thereof in violation of the Securities
Act or (f) pursuant to any other available exemption from the registration
requirements of the Securities Act, subject in each of the foregoing cases
to any requirement of law that the disposition of our property and the
property of such investor account or accounts be at all times within our
or their control and to compliance with any applicable state securities
laws. The foregoing restrictions on resale will not apply subsequent to
the Resale Restriction Termination Date. If any resale or other transfer
of the Notes is proposed to be made pursuant to clause (e) above prior to
the Resale Restriction Termination Date, the transferor shall deliver a
letter from the transferee substantially in the form of this letter to the
Trustee, which shall provide, among other things, that the transferee is
an institutional "accredited investor" within the meaning of subparagraph
(a)(1), (2), (3) or (7) or Rule 501 under the Securities Act and that it
is acquiring such Notes for investment purposes and not for distribution
in violation of the Securities Act. We acknowledge that the Company and
the Trustee reserve the right prior to any offer, sale or other transfer
prior to the Resale Restriction Termination Date of the Notes pursuant to
clauses (d), (e) and (f) above to require the delivery of an Opinion of
Counsel, certifications and/or other information satisfactory to the
Company and the Trustee.
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
purchasing for our own account or for the account of such an institutional
"accredited investor," and we are acquiring the Notes 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 and we 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.
3. We are acquiring the Notes purchased by us for our own account or
for one or more accounts as to each of which we exercise sole investment
discretion.
C-2
<PAGE> 139
4. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party
in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
By:
(NAME OF PURCHASER)
Date:
Upon transfer, the Notes should be registered in the name of the new
beneficial owner as follows:
Name:
Address:
Taxpayer ID Number:
C-3
<PAGE> 140
Exhibit D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
____________________, _____
Indesco International, Inc.
950 Third Avenue
New York, New York 10022
c/o
NORWEST BANK OF MINNESOTA, NATIONAL ASSOCIATION
6th and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Re: Indesco International, Inc. (the "Company")
9 3/4% Senior Subordinated Notes Due 2008 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $[_________] aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended, and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States and the proposed transferee is a Non-U.S. Person (as defined in the
Indenture pursuant to which the Notes were issued);
(2) either (a) at the time the buy order 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
<PAGE> 141
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; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933, as amended.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be.
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> 142
Schedule I
Existing Indebtedness
<PAGE> 1
Exhibit 4.4
INDESCO INTERNATIONAL, INC.
$145,000,000
9 3/4% SENIOR SUBORDINATED NOTES DUE 2008
REGISTRATION RIGHTS AGREEMENT
April 23, 1998
NationsBanc Montgomery Securities LLC
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255-0001
Ladies and Gentlemen:
Indesco International, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell (the "Initial Placement") to NationsBanc Montgomery
Securities LLC (the "Initial Purchaser"), upon the terms set forth in a purchase
agreement dated as of April 20, 1998 (the "Purchase Agreement") among the
Company, the Initial Purchaser and the subsidiary guarantors named therein, its
9 3/4% Senior Subordinated Notes due 2008 (the "Notes"). The Notes are to be
fully and unconditionally guaranteed jointly and severally on an unsecured
senior subordinated basis by all existing and future United States subsidiaries
of the Company, as guarantors (the "Subsidiary Guarantors" and, individually,
each a "Subsidiary Guarantor"). As an inducement to the Initial Purchaser to
enter into the Purchase Agreement and purchase the Notes and in satisfaction of
a condition to your obligations under the Purchase Agreement, the Company and
the Subsidiary Guarantors agree with you for the benefit of the holders from
time to time of the Notes (including the Initial Purchaser) (each of the
foregoing a "Holder" and together the "Holders"), as follows:
1. Definitions. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following capitalized defined terms shall have the
following meanings:
"Affiliate" of any specified person means any other person that,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such specified person. For purposes of this
definition, control of a person means the power, direct or indirect, to
direct or cause the direction of the management and policies of
<PAGE> 2
2
such person whether by contract or otherwise; and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"Closing Date" has the meaning set forth in the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Company" has the meaning set forth in the preamble hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"Exchange Notes" means debt securities issued by the Company and
guaranteed by the Subsidiary Guarantors, identical in all material
respects to the Notes (except that (i) interest thereon shall accrue from
the last date on which interest was paid on the Notes or, if no such
interest has been paid, from April 23, 1998 and (ii) the liquidated
damages provisions and the transfer restrictions pertaining to the Notes
will be modified or eliminated, as appropriate, in the Exchange Notes), to
be issued under the Indenture.
"Exchange Offer" means the proposed offer to the Holders to issue
and deliver to such Holders, in exchange for the Notes, a like principal
amount of Exchange Notes.
"Exchange Offer Registration Period" means the longer of (A) the
period until the consummation of the Exchange Offer and (B) two years
after effectiveness of the Exchange Offer Registration Statement,
exclusive of any period during which any stop order shall be in effect
suspending the effectiveness of the Exchange Offer Registration Statement;
provided, however, that in the event that all resales of Exchange Notes
(including, subject to the time periods set forth herein, any resales by
Exchanging Dealers) covered by such Exchange Offer Registration Statement
have been made, the Exchange Offer Registration Statement need not remain
continuously effective for the period set forth in clause (B) above.
"Exchange Offer Registration Statement" means a registration
statement of the Company on an appropriate form under the Securities Act
with respect to the Exchange Offer, all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Exchanging Dealer" means any Holder (which may include the Initial
Purchaser) that is a broker-dealer, electing to exchange Notes acquired
for its own
<PAGE> 3
3
account as a result of market-making activities or other trading
activities for Exchange Notes.
"Final Memorandum" has the meaning set forth in the Purchase
Agreement.
"Holder" has the meaning set forth in the preamble hereto.
"Indenture" means the indenture relating to the Notes and the
Exchange Notes, to be dated as of the Closing Date, among the Company and
all existing and future United States subsidiaries of the Company, as
Subsidiary Guarantors, and Norwest Bank Minnesota, National Association,
as trustee, as the same may be amended, supplemented, waived or otherwise
modified from time to time in accordance with the terms thereof.
"Initial Placement" has the meaning set forth in the preamble
hereto.
"Initial Purchaser" has the meaning set forth in the Purchase
Agreement.
"Losses" has the meaning set forth in Section 6(d) hereto.
"Majority Holders" means the Holders of a majority of the aggregate
principal amount of Notes registered under a Registration Statement.
"Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten
offering under a Shelf Registration Statement.
"Notes" has the meaning set forth in the preamble hereto.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A 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 Notes or
the Exchange Notes covered by such Registration Statement, and all
amendments and supplements to the Prospectus, including post-effective
amendments.
"Purchase Agreement" has the meaning set forth in the preamble
hereto.
"Registration Statement" means any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Notes or
the Exchange Notes
<PAGE> 4
4
(including the Subsidiary Guarantees thereon) pursuant to the provisions
of this Agreement, amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto, and all material
incorporated by reference therein.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Shelf Registration" means a registration effected pursuant to
Section 3 hereof.
"Shelf Registration Period" has the meaning set forth in Section
3(b) hereof.
"Shelf Registration Statement" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 3 hereof,
which covers some or all of the Notes or Exchange Notes, as applicable
(including the Subsidiary Guarantees thereon), on an appropriate form
under Rule 415 under the Securities Act, or any similar rule that may be
adopted by the Commission, amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Subsidiary Guarantees" has the meaning set forth in the Purchase
Agreement.
"Subsidiary Guarantors" has the meaning set forth in the preamble
hereto.
"Trustee" means the trustee with respect to the Notes or Exchange
Notes, as applicable, under the Indenture.
"underwriter" means any underwriter of Notes in connection with an
offering thereof under a Shelf Registration Statement.
2. Exchange Offer; Resales of Exchange Notes by Exchanging Dealers;
Private Exchange.
(a) The Company and the Subsidiary Guarantors shall prepare and, on
or prior to the 90th calendar day following the Closing Date, shall file with
the Commission the Exchange Offer Registration Statement with respect to the
Exchange Offer. The Company and the Subsidiary Guarantors shall use their best
efforts (i) to cause the Exchange Offer Registration Statement to be declared
effective under the Securities Act on or prior to the 120th calendar day
following the Closing Date and remain effective until the closing of the
Exchange
<PAGE> 5
5
Offer and (ii) to consummate the Exchange Offer on or prior to the 150th
calendar day following the Closing Date.
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Company and the Subsidiary Guarantors shall promptly commence the
Exchange Offer, it being the objective of such Exchange Offer to enable each
Holder electing to exchange Notes for Exchange Notes (assuming that such Holder
(x) is not an "affiliate" of the Company within the meaning of the Securities
Act, (y) is not a broker-dealer that acquired the Notes in a transaction other
than as a part of its market-making or other trading activities and (z) if such
Holder is not a broker-dealer, acquires the Exchange Notes in the ordinary
course of such Holder's business, is not participating in the distribution of
the Exchange Notes and has no arrangements or understandings with any person to
participate in the distribution of the Exchange Notes) to resell such Exchange
Notes from and after their receipt without any limitations or restrictions under
the Securities Act and without material restrictions under the securities laws
of a substantial proportion of the several states of the United States.
(c) In connection with the Exchange Offer, the Company shall 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, stating, in addition to such other disclosures as are
required by applicable law:
(i) that the Exchange Offer is being made pursuant to this Agreement
and that all Notes validly tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange;
(iii) that any Note not tendered will remain outstanding and
continue to accrue interest, but will not retain any rights under this
Agreement;
(iv) that Holders electing to have a Note exchanged pursuant to the
Exchange Offer will be required to surrender such Note, together with the
enclosed letters of transmittal, to the institution and at the address
(located in the Borough of Manhattan, The City of New York) specified in
the notice prior to the close of business on the last day of acceptance
for exchange; and
(v) that Holders will be entitled to withdraw their election, not
later than the close of business on the last day of acceptance for
exchange, by sending to the institution and at the address (located in the
Borough of Manhattan, The City of New York) specified in the notice a
telegram, telex, facsimile transmission or letter setting forth the name
of such Holder, the principal amount of Notes delivered for exchange and a
statement that such Holder is withdrawing his election to have such Notes
<PAGE> 6
6
exchanged; and shall keep the Exchange Offer open for acceptance for not
less than 30 days and not more than 45 days (or longer if required by
applicable law) after the date notice thereof is mailed to the Holders;
utilize the services of a depositary for the Exchange Offer with an
address in the Borough of Manhattan, The City of New York; and comply in
all respects with all applicable laws relating to the Exchange Offer.
(d) As soon as practicable after the close of the Exchange Offer,
the Company shall:
(i) accept for exchange all Notes duly tendered and not validly
withdrawn pursuant to the Exchange Offer;
(ii) deliver to the Trustee for cancellation all Notes so accepted
for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver to each
Holder Exchange Notes equal in principal amount to the Notes of such
Holder so accepted for exchange.
(e) The Initial Purchaser, the Company and the Subsidiary Guarantors
acknowledge that, pursuant to interpretations by the staff of the Commission of
Section 5 of the Securities Act, and in the absence of an applicable exemption
therefrom, each Exchanging Dealer is required to deliver a Prospectus in
connection with a sale of any Exchange Notes received by such Exchanging Dealer
pursuant to the Exchange Offer in exchange for Notes acquired for its own
account as a result of market-making activities or other trading activities.
Accordingly, the Company and the Subsidiary Guarantors shall:
(i) include the information set forth in Annex A hereto on the cover
of the Exchange Offer Registration Statement, in Annex B hereto in the
forepart of the Exchange Offer Registration Statement in a section setting
forth details of the Exchange Offer, in Annex C hereto in the underwriting
or plan of distribution section of the Prospectus forming a part of the
Exchange Offer Registration Statement, and in Annex D hereto in the letter
of transmittal delivered pursuant to the Exchange Offer; and
(ii) use its best efforts to keep the Exchange Offer Registration
Statement continuously effective under the Securities Act during the
Exchange Offer Registration Period for delivery of the prospectus included
therein by Exchanging Dealers in connection with sales of Exchange Notes
received pursuant to the Exchange Offer, as contemplated by Section 4(h)
below; provided, however, that the Company shall not be required to
maintain the effectiveness of the Exchange Offer Registration Statement
for more than 60 days following the consummation of the Exchange Offer
unless the
<PAGE> 7
7
Company has been notified in writing on or prior to the 60th day following
the consummation of the Exchange Offer by one or more Exchanging Dealers
that such Holder has received Exchange Notes as to which it will be
required to deliver a prospectus upon resale; provided further, however,
that in any event, the Company shall not be required to maintain the
effectiveness of the Exchange Offer Registration Statement for more than
180 days.
(f) In the event that the Initial Purchaser determines that it is
not eligible to participate in the Exchange Offer with respect to the exchange
of Notes constituting any portion of an unsold allotment, upon the effectiveness
of the Shelf Registration Statement as contemplated by Section 3 hereof and at
the request of the Initial Purchaser, the Company shall issue and deliver to the
Initial Purchaser, or to the party purchasing Exchange Notes registered under
the Shelf Registration Statement from the Initial Purchaser, in exchange for
such Notes, a like principal amount of Exchange Notes. The Company shall use
commercially reasonable efforts to cause the CUSIP Service Bureau to issue the
same CUSIP number for such Exchange Notes as for Exchange Notes issued pursuant
to the Exchange Offer.
(g) The Company and the Subsidiary Guarantors shall use their best
efforts to complete the Exchange Offer as provided above and shall comply with
the applicable requirements of the Securities Act, the Exchange Act and other
applicable laws and regulations in connection with the Exchange Offer. The
Exchange Offer shall not be subject to any conditions, other than that the
Exchange Offer does not violate applicable law or any applicable interpretation
of the staff of the Commission. The Company shall inform the Initial Purchaser
of the names and addresses of the Holders to whom the Exchange Offer is made,
and the Initial Purchaser shall have the right, subject to applicable law, to
contact such Holders and otherwise facilitate the tender of Notes in the
Exchange Offer.
3. Shelf Registration. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Company
determines upon advice of its outside counsel that it is not permitted to effect
the Exchange Offer as contemplated by Section 2 hereof, or (ii) for any reason
other than those specified in clause (i) above, the Exchange Offer is not
consummated within 150th days of the Closing Date unless the Exchange Offer has
commenced, in which case, the Exchange Offer is not consummated within 30 days
after the date on which the Exchange Offer was commenced, or (iii) the Initial
Purchaser so requests with respect to Notes held by it within 120 days following
consummation of the Exchange Offer, or (iv) any Holder (other than the Initial
Purchaser) is not eligible to participate in the Exchange Offer or has
participated in the Exchange Offer and has received Exchange Notes that are not
freely tradeable or (v) in the case where the Initial Purchaser participates in
the Exchange Offer or acquires Exchange Notes pursuant to Section 2(f) hereof,
the Initial Purchaser does not receive freely tradeable Exchange Notes in
exchange for Notes constituting any portion of an unsold allotment (it being
understood that, for purposes of this Section 3, (x)
<PAGE> 8
8
the requirement that the Initial Purchaser deliver a Prospectus containing the
information required by Items 507 and/or 508 of Regulation S-K under the
Securities Act in connection with sales of Exchange Notes acquired in exchange
for such Notes shall result in such Exchange Notes being not "freely tradeable"
and (y) the requirement that an Exchanging Dealer deliver a Prospectus in
connection with sales of Exchange Notes acquired in the Exchange Offer in
exchange for Notes acquired as a result of market-making activities or other
trading activities shall not result in such Exchange Notes being not "freely
tradeable"), the following provisions shall apply:
(a) The Company and the Subsidiary Guarantors shall, as promptly as
practicable, file with the Commission a Shelf Registration Statement
relating to the offer and sale of the Notes or the Exchange Notes, as
applicable, by the Holders from time to time in accordance with the
methods of distribution elected by such Holders and set forth in such
Shelf Registration Statement and Rule 415 under the Securities Act,
provided that, with respect to Exchange Notes received by the Initial
Purchaser in exchange for Notes constituting any portion of an unsold
allotment, the Company and the Subsidiary Guarantors may, if permitted by
current interpretations by the Commission's staff, file a post-effective
amendment to the Exchange Offer Registration Statement containing the
information required by Regulation S-K Items 507 and/or 508, as
applicable, in satisfaction of its obligations under this paragraph (a)
with respect thereto, and any such Exchange Offer Registration Statement,
as so amended, shall be referred to herein as, and governed by the
provisions herein applicable to, a Shelf Registration Statement.
(b) The Company and the Subsidiary Guarantors shall use their best
efforts to cause the Shelf Registration Statement to be declared effective
under the Securities Act as promptly as possible after filing such Shelf
Registration Statement pursuant to this Section 3 and to keep such Shelf
Registration Statement continuously effective in order to permit the
Prospectus contained therein to be usable by Holders for a period of two
years from the date the Shelf Registration Statement is declared effective
by the Commission or such shorter period that will terminate when all the
Notes or Exchange Notes, as applicable, covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement (in
any such case, such period being called the "Shelf Registration Period").
The Company shall be deemed not to have used its best efforts to keep the
Shelf Registration Statement effective during the requisite period if it
voluntarily takes any action that would result in Holders of Notes covered
thereby not being able to offer and sell such Notes during that period,
unless (i) such action is required by applicable law, (ii) the Company
complies with this Agreement or (iii) such action is taken by the Company
in good faith and for valid business reasons (not including avoidance of
the Company's obligations hereunder), including the acquisition
<PAGE> 9
9
or divestiture of assets, so long as the Company promptly thereafter
complies with the requirements of Section 4(l) hereof, if applicable.
4. Registration Procedures. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Company and the Subsidiary Guarantors shall, within a
reasonable time prior to the filing of any Registration Statement, any
Prospectus, any amendment to a Registration Statement or amendment or
supplement to a Prospectus or any document which is to be incorporated by
reference into a Registration Statement or a Prospectus after initial
filing of a Registration Statement, provide copies of such document to the
Initial Purchaser and its counsel (and, in the case of a Shelf
Registration Statement, the Holders and their counsel) and make such
representatives of the Company and the Subsidiary Guarantors as shall be
reasonably requested by the Initial Purchaser or its counsel (and, in the
case of a Shelf Registration Statement, the Majority Holders or their
counsel) available for discussion of such document, and shall not at any
time file or make any amendment to the Registration Statement, any
Prospectus or any amendment of or supplement to a Registration Statement
or a Prospectus or any document which is to be incorporated by reference
into a Registration Statement or a Prospectus, of which the Initial
Purchaser and its counsel (and, in the case of a Shelf Registration
Statement, the Holders and their counsel) shall not have previously been
advised and furnished a copy or to which the Initial Purchaser or its
counsel (and, in the case of a Shelf Registration Statement, the Holders
or their counsel) shall reasonably object, except for any amendment or
supplement or document (a copy of which has been previously furnished to
the Initial Purchaser and its counsel (and, in the case of a Shelf
Registration Statement, the Majority Holders and their counsel)) which
counsel to the Company and the Subsidiary Guarantors shall advise the
Company and the Subsidiary Guarantors is required in order to comply with
applicable law; the Initial Purchaser agrees that, if it receives timely
notice and drafts under this clause (a), it will not take actions or make
objections pursuant to this clause (a) such that the Company and the
Subsidiary Guarantors are unable to comply with their obligations under
Section 2.
(b) The Company and the Subsidiary Guarantors shall ensure that:
(i) any Registration Statement and any amendment thereto and
any Prospectus contained therein and any amendment or supplement
thereto complies in all material respects with the Securities Act
and the rules and regulations thereunder;
<PAGE> 10
10
(ii) any Registration Statement and any amendment thereto does
not, when it becomes effective, 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 not misleading;
and
(iii) any Prospectus forming part of any Registration
Statement, including any amendment or supplement to such Prospectus,
does not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
(c) (1) The Company shall advise the Initial Purchaser and, in the
case of a Shelf Registration Statement, the Holders of Notes covered
thereby, and, if requested by the Initial Purchaser or any such Holder,
confirm such advice in writing:
(i) when a Registration Statement and any amendment thereto
has been filed with the Commission and when the Registration
Statement or any post-effective amendment thereto has become
effective; and
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus included
therein or for additional information.
(2) During the Shelf Registration Period or the Exchange Offer
Registration Period, as applicable, the Company shall advise the Initial
Purchaser and, in the case of a Shelf Registration Statement, the Holders
of Notes covered thereby, and, in the case of an Exchange Offer
Registration Statement, any Exchanging Dealer that has provided in writing
to the Company a telephone or facsimile number and address for notices,
and, if requested by the Initial Purchaser or any such Holder or
Exchanging Dealer, confirm such advice in writing:
(i) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(ii) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Notes included
therein for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
<PAGE> 11
11
(iii) of the happening of any event that requires the making
of any changes in the Registration Statement or the Prospectus so
that, as of such date, the Registration Statement or the Prospectus
does not include an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein (in
the case of the Prospectus, in light of the circumstances under
which they were made) not misleading (which advice shall be
accompanied by an instruction to suspend the use of the Prospectus
until the requisite changes have been made).
(d) The Company and the Subsidiary Guarantors shall use their best
efforts to obtain the withdrawal of any order suspending the effectiveness
of any Registration Statement at the earliest possible time.
(e) The Company shall furnish to each Holder of Notes covered by any
Shelf Registration Statement, without charge, at least one copy of such
Shelf Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so
requests in writing, all exhibits thereto.
(f) The Company shall, during the Shelf Registration Period, deliver
to each Holder of Notes covered by any Shelf Registration Statement,
without charge, as many copies of the Prospectus (including each
preliminary Prospectus) included in such Shelf Registration Statement and
any amendment or supplement thereto as such Holder may reasonably request;
and the Company consents to the use of the Prospectus or any amendment or
supplement thereto by each of the selling Holders of Notes in connection
with the offering and sale of the Notes covered by the Prospectus or any
amendment or supplement thereto.
(g) The Company shall furnish to each Exchanging Dealer that so
requests, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, any documents incorporated by
reference therein and, if the Exchanging Dealer so requests in writing,
all exhibits thereto.
(h) The Company shall, during the Exchange Offer Registration
Period, promptly deliver to each Exchanging Dealer, without charge, as
many copies of the Prospectus included in such Exchange Offer Registration
Statement and any amendment or supplement thereto as such Exchanging
Dealer may reasonably request for delivery by such Exchanging Dealer in
connection with a sale of Exchange Notes received by it pursuant to the
Exchange Offer; and the Company consents to the use of the Prospectus or
any amendment or supplement thereto by any such Exchanging Dealer, as
provided in Section 2(e) above.
<PAGE> 12
12
(i) Prior to the Exchange Offer or any other offering of Notes
pursuant to any Registration Statement, the Company and the Subsidiary
Guarantors shall register or qualify or cooperate with the Holders of
Notes included therein and their respective counsel in connection with the
registration or qualification of such Notes for offer and sale under the
securities or blue sky laws of such states as any such Holders reasonably
request in writing and do any and all other acts or things necessary or
advisable to enable the offer and sale in such states of the Notes covered
by such Registration Statement; provided, however, that the Company and
the Subsidiary Guarantors will not be required to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it
is not then so qualified, to file any general consent to service of
process or to take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or to
subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject.
(j) The Company shall cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing Notes to be
sold pursuant to any Registration Statement free of any restrictive
legends and in denominations of $1,000 or an integral multiple thereof and
registered in such names as Holders may request prior to sales of Notes
pursuant to such Registration Statement.
(k) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) of this Section 4, the Company and the Subsidiary Guarantors
shall promptly prepare and file a post-effective amendment to any
Registration Statement or an amendment or supplement to the related
Prospectus or any other required document so that, as thereafter delivered
to purchasers of the Notes included therein, the Prospectus will not
include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Notwithstanding
the foregoing, the Company shall not be required to amend or supplement a
Shelf Registration Statement, any related Prospectus or any document
incorporated therein by reference, for a period not to exceed an aggregate
of 30 days in any calendar year, if (i) an event occurs and is continuing
as a result of which the Shelf Registration would, in the Company's good
faith judgment, contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading and (ii) the Company determines in their good faith judgment
that the disclosure of such event at such time would have a material
adverse effect on the business, operations, or prospects of the Company or
the disclosure otherwise related to a pending material business
transaction that has not yet been publicly disclosed.
<PAGE> 13
13
(l) Not later than the effective date of any such Registration
Statement hereunder, the Company shall provide a CUSIP number for the
Notes or Exchange Notes, as the case may be, registered under such
Registration Statement, and provide the Trustee with certificates for such
Notes or Exchange Notes, in a form eligible for deposit with The
Depository Trust Company.
(m) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make
generally available to its security holders as soon as practicable after
the effective date of the applicable Registration Statement an earnings
statement satisfying the provisions of Section 11(a) of the Securities
Act.
(n) The Company shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), in a
timely manner.
(o) The Company may require each Holder of Notes to be sold pursuant
to any Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of such Notes as the
Company may from time to time reasonably require for inclusion in such
Registration Statement.
(p) The Company shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf Registration
Statement, such information as the Managing Underwriters, if any, and
Majority Holders reasonably agree should be included therein, and shall
make all required filings of such Prospectus supplement or post-effective
amendment promptly upon notification of the matters to be incorporated in
such Prospectus supplement or post-effective amendment.
(q) In the case of any Shelf Registration Statement, the Company and
the Subsidiary Guarantors shall enter into such agreements (including
underwriting agreements) and take all other appropriate actions in order
to expedite or to facilitate the registration or the disposition of any
Notes included therein, and in connection therewith, if an underwriting
agreement is entered into, cause the same to contain indemnification
provisions and procedures no less favorable than those set forth in
Section 6 (or such other provisions and procedures acceptable to the
Majority Holders and the Managing Underwriters, if any) with respect to
all parties to be indemnified pursuant to Section 6.
<PAGE> 14
14
(r) In the case of any Shelf Registration Statement, the Company and
the Subsidiary Guarantors shall:
(i) make reasonably available for inspection by the Holders of
Notes to be registered thereunder, any underwriter participating in
any disposition pursuant to such Shelf Registration Statement, and
any attorney, accountant or other agent retained by the Holders or
any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and any
of its subsidiaries;
(ii) cause the Company's and the Subsidiary Guarantors'
officers, directors and employees to supply all relevant information
reasonably requested by the Holders or any such underwriter,
attorney, accountant or agent in connection with any such
Registration Statement as is customary for similar due diligence
examinations and make such representatives of the Company and the
Subsidiary Guarantors as shall be reasonably requested by the
Initial Purchaser or Managing Underwriters, if any, available for
discussion of any such Registration Statement; provided, however,
that any information that is designated in writing by the Company or
the Subsidiary Guarantors, in good faith, as confidential at the
time of delivery of such information shall be kept confidential by
the Holders or any such underwriter, attorney, accountant or agent,
unless such disclosure is made in connection with a court proceeding
or required by law, or such information becomes available to the
public generally or through a third party without an accompanying
obligation of confidentiality other than as a result of a disclosure
of such information by any such Holder, underwriter, attorney,
accountant or agent;
(iii) make such representations and warranties to the Holders
of Notes registered thereunder and the underwriters, if any, in
form, substance and scope as are customarily made by issuers to
underwriters in similar underwritten offerings as may be reasonably
requested by them;
(iv) obtain opinions of counsel to the Company and the
Subsidiary Guarantors and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably
satisfactory to the Managing Underwriters, if any) addressed to each
selling Holder and the underwriters, if any, covering such matters
as are customarily covered in opinions requested in similar
underwritten offerings and such other matters as may be reasonably
requested by such Holders and underwriters;
<PAGE> 15
15
(v) obtain "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company and the
Subsidiary Guarantors (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of
any business acquired by the Company for which financial statements
and financial data are, or are required to be, included in the
Registration Statement), addressed to the underwriters, if any, and
use reasonable efforts to have such letter addressed to the selling
Holders of Notes registered thereunder (to the extent consistent
with Statement on Auditing Standards No. 72 of the American
Institute of Certified Public Accountants (AICPA) ("SAS 72")), in
customary form and covering matters of the type customarily covered
in "cold comfort" letters in connection with similar underwritten
offerings, or if the provision of such "cold comfort" letters is not
permitted by SAS No. 72 or if requested by the Initial Purchaser or
its counsel in lieu of a "cold comfort" letter, an agreed-upon
procedures letter under Statement on Auditing Standards No. 35 of
the AICPA, covering matters requested by the Initial Purchaser or
its counsel; and
(vi) deliver such documents and certificates as may be
reasonably requested by the Majority Holders and the Managing
Underwriters, if any, and customarily delivered in similar
offerings, including those to evidence compliance with Section 4(k)
and with any conditions contained in the underwriting agreement or
other agreement entered into by the Company.
The foregoing actions set forth in clauses (iii), (iv), (v) and (vi)
of this Section 4(r) shall be performed at (A) the effectiveness of such
Shelf Registration Statement and each post-effective amendment thereto and
(B) each closing under any underwriting or similar agreement as and to the
extent required thereunder.
(s) The Company and the Subsidiary Guarantors shall, in the case of
a Shelf Registration, use their best efforts to cause all Notes to be
listed on any securities exchange or any automated quotation system on
which similar securities issued by the Company are then listed if
requested by the Majority Holders, to the extent such Notes satisfy
applicable listing requirements.
(t) The Company and the Subsidiary Guarantors shall use their best
efforts to cause the Exchange Notes or Notes, as the case may be, to be
rated by two nationally recognized statistical rating organizations (as
such term is defined in Rule 436(g)(2) under the 1933 Act).
5. Registration Expenses; Remedies. (a) The Company and the
Subsidiary Guarantors shall bear all expenses incurred in connection with the
performance of their
<PAGE> 16
16
obligations under Sections 2, 3 and 4 hereof, including without limitation: (i)
all Commission, stock exchange or National Association of Securities Dealers,
Inc. registration and filing fees, (ii) all fees and expenses incurred in
connection with compliance with state securities or blue sky laws (including
reasonable fees and disbursements of counsel for any underwriters or Holders in
connection with blue sky qualification of any of the Exchange Notes or Notes),
(iii) all expenses of any persons in preparing or assisting in preparing, word
processing, printing and distributing any Registration Statement, any
Prospectus, any amendments or supplements thereto, any underwriting agreements,
securities sales agreements and other documents relating to the performance of
and compliance with this Agreement, (iv) all rating agency fees, if any, (v) all
fees and disbursements relating to the qualification of the Indenture under
applicable securities laws, (vi) the fees and disbursements of the Trustee and
its counsel, (vii) the fees and disbursements of counsel for the Company and the
Subsidiary Guarantors and, in the case of a Shelf Registration Statement, the
fees and disbursements of one counsel for the Holders (which counsel shall be
selected by the Majority Holders and which counsel may also be counsel for the
Initial Purchaser) and in the case of any Exchange Offer Registration Statement,
the fees and expenses of counsel to the Initial Purchaser acting in connection
therewith and (viii) the fees and disbursements of the independent public
accountants of the Company and the Subsidiary Guarantors, including the expenses
of any special audits or "cold comfort" letters required by or incident to such
performance and compliance, but excluding fees and expenses of counsel to the
underwriters (other than fees and expenses set forth in clause (ii) above) or
the Holders and underwriting discounts and commissions and transfer taxes, if
any, relating to the sale or disposition of Notes by a Holder.
(b) The Notes provide that if (i) the Company fails to file any of
the Registration Statements required by this Agreement on or before the date
specified for such filing, (ii) any of such Registration Statements is not
declared effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), (iii) the Company fails to
consummate the Exchange Offer within 30 business days of the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement or (iv)
the Shelf Registration Statement or the Exchange Offer Registration Statement is
declared effective but thereafter ceases to be effective or usable in connection
with resales of the Notes during the periods specified in this Agreement (each
such event referred to in clauses (i) through (iv) above a "Registration
Default"), then the Company will pay liquidated damages ("Liquidated Damages")
to each Holder of Notes, with respect to the first 90-day period immediately
following the occurrence of such Registration Default in an amount equal to
$0.05 per week per $1,000 principal amount of Notes held by such Holder. The
amount of the Liquidated Damages will increase by an additional $0.05 per week
per $1,000 principal amount of Notes with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum amount
of Liquidated Damages of $0.30 per week per $1,000 principal amount of Notes.
Upon the filing of the required Registration Statement, the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be,
<PAGE> 17
17
Liquidated Damages will cease to accrue from the date of such filing,
consummation or effectiveness, as the case may be; provided, however, that, if
after the date such Liquidated Damages cease to accrue, a different event
specified in clause (i), (ii), (iii) or (iv) above occurs, Liquidated Damages
may again commence accruing pursuant to the foregoing provisions.
(c) Without limiting the remedies available to the Initial Purchaser
and the Holders, the Company and the Subsidiary Guarantors acknowledge that any
failure by the Company and the Subsidiary Guarantors to comply with their
respective obligations under Sections 2 and 3 hereof may result in material
irreparable injury to the Initial Purchaser or the Holders for which there is no
adequate remedy at law, that it will not be possible to measure damages for such
injuries precisely and that, in the event of any such failure, the Initial
Purchaser or any Holder may obtain such relief as may be required to
specifically enforce the Company's and the Subsidiary Guarantors' obligations
under Sections 2 and 3 hereof.
6. Indemnification and Contribution. (a) In connection with any
Registration Statement, the Company and each Subsidiary Guarantor jointly and
severally agree to indemnify and hold harmless each Holder of Notes covered
thereby (including the Initial Purchaser and, with respect to any Prospectus
delivery as contemplated by Sections 2(e) and 4(h) hereof, each Exchanging
Dealer) the directors, officers, employees and agents of such Holder and each
person who controls such Holder within the meaning of either the Securities Act
or the Exchange Act, against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject under the
Securities Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
such Registration Statement as originally filed or in any amendment thereof, or
in any preliminary Prospectus or Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage or liability (or action in respect
thereof); provided, however, that the Company and each Subsidiary Guarantor will
not be liable in any case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any such indemnified party specifically for inclusion therein;
provided further, however, that the Company and each Subsidiary Guarantor will
not be liable in any case with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary
<PAGE> 18
18
Prospectus or Prospectus, or in any amendment thereof or supplement thereto to
the extent that any such loss, claim, damage or liability (or action in respect
thereof) resulted from the fact that any indemnified party sold Notes or
Exchange Notes to a person to whom there was not sent or given, at or prior to
the written confirmation of such sale, a copy of the Prospectus as then amended
or supplemented, if the Company had previously complied with the provisions of
Section 4(c)(2) and 4(f) or 4(h) hereof and if the untrue statement contained in
or omission from such preliminary Prospectus or Prospectus was corrected in the
Prospectus as then amended or supplemented. This indemnity agreement will be in
addition to any liability that the Company or any Subsidiary Guarantor may
otherwise have.
The Company and each Subsidiary Guarantor also agree jointly and
severally to indemnify or contribute to Losses of, as provided in Section 6(d)
hereof, any underwriters of Notes registered under a Shelf Registration
Statement, their employees, officers, directors and agents and each person who
controls such underwriters on the same basis as that of the indemnification of
the Initial Purchaser and the selling Holders provided in this Section 6(a) and
shall, if requested by any Holder, enter into an underwriting agreement
reflecting such agreement, as provided in Section 4(q) hereof.
(b) Each Holder of Notes covered by a Registration Statement
(including the Initial Purchaser and, with respect to any Prospectus delivery as
contemplated by Sections 2(e) and 4(h) hereof, each Exchanging Dealer) severally
agrees to indemnify and hold harmless (i) the Company and each Subsidiary
Guarantor, (ii) each of the directors of the Company and each Subsidiary
Guarantor, (iii) each of the officers of the Company and the Subsidiary
Guarantors who signs such Registration Statement and (iv) each Person who
controls the Company or any Subsidiary Guarantor within the meaning of either
the Securities Act or the Exchange Act to the same extent as the foregoing
indemnity from the Company and each Subsidiary Guarantor to each such Holder,
but only with respect to written information furnished to the Company by or on
behalf of such Holder specifically for inclusion in the documents referred to in
the foregoing indemnity. This indemnity agreement will be in addition to any
liability that any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 6, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve the indemnifying party from liability under paragraph (a) or
(b) above unless and to the extent it did not otherwise learn of such action and
such failure results in the forfeiture by the indemnifying party of substantial
rights and defenses, and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel (including local
counsel) of
<PAGE> 19
19
the indemnifying party's choice at the indemnifying party's expense to represent
the indemnified party in any action for which indemnification is sought (in
which case the indemnifying party shall not thereafter be responsible for the
fees and expenses of any separate counsel retained by the indemnified party or
parties except as set forth below); provided, however, that such counsel shall
be reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel (and local
counsel) if (i) the use of counsel chosen by the indemnifying party to represent
the indemnified party would present such counsel with a conflict of interest,
(ii) the actual or potential defendants in, or targets of, any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties that are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. It is understood that the indemnifying party shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all such indemnified parties and that all
such fees and expenses shall be reimbursed as they are incurred. An indemnifying
party will not, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 6 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending the same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Initial Placement and the
Registration Statement that resulted in such Losses; provided, however, that in
no case shall the Initial Purchaser or any subsequent Holder of any Note or
Exchange Note be responsible, in the aggregate, for any amount in excess of the
purchase discount or commission applicable to such Note, or in the case of an
Exchange Note,
<PAGE> 20
20
applicable to the Note that was exchangeable into such Exchange Note, as set
forth on the cover page of the Final Memorandum, nor shall any underwriter be
responsible for any amount in excess of the underwriting discount or commission
applicable to the Notes purchased by such underwriter under the Registration
Statement that resulted in such Losses. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the indemnifying
party and the indemnified party shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of such indemnifying party, on the one hand, and such indemnified party,
on the other hand, in connection with the statements or omissions that resulted
in such Losses as well as any other relevant equitable considerations. Benefits
received by the Company and the Subsidiary Guarantors shall be deemed to be
equal to the sum of (x) the total net proceeds from the Initial Placement
(before deducting expenses) as set forth on the cover page of the Final
Memorandum and (y) the total amount of additional interest that the Company was
not required to pay as a result of registering the Notes covered by the
Registration Statement that resulted in such losses. Benefits received by the
Initial Purchaser shall be deemed to be equal to the total purchase discounts
and commissions as set forth on the cover page of the Final Memorandum, and
benefits received by any other Holders shall be deemed to be equal to the value
of receiving Notes or Exchange Notes, as applicable, registered under the
Securities Act. Benefits received by any underwriter shall be deemed to be equal
to the total underwriting discounts and commissions, as set forth on the cover
page of the Prospectus forming a part of the Registration Statement that
resulted in such Losses. Relative fault shall be determined by reference to
whether any alleged untrue statement or omission relates to information provided
by the indemnifying party, on the one hand, or by the indemnified party, on the
other hand. The parties agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation that did not take account of the equitable considerations referred to
above. Notwithstanding the provisions of this paragraph (d), 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. For purposes of this Section 6,
each person who controls a Holder within the meaning of either the Securities
Act or the Exchange Act and each director, officer, employee and agent of such
Holder shall have the same rights to contribution as such Holder, and each
person who controls the Company or any Subsidiary Guarantor within the meaning
of either the Securities Act or the Exchange Act, each officer of the Company or
any Subsidiary Guarantor who shall have signed the Registration Statement and
each director of the Company and each Subsidiary Guarantor shall have the same
rights to contribution as the Company and each Subsidiary Guarantor, subject in
each case to the applicable terms and conditions of this paragraph (d).
(e) The provisions of this Section 6 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder or
the Company or any Subsidiary Guarantor or any of the officers, directors or
controlling persons referred to in
<PAGE> 21
21
Section 6 hereof, and will survive the sale by a Holder of Notes covered by a
Registration Statement.
7. Miscellaneous.
(a) No Inconsistent Agreement. The Company and the Subsidiary
Guarantors have not, as of the date hereof, entered into, nor shall any of them,
on or after the date hereof, enter into, any agreement that conflicts with the
rights granted to the Holders herein or otherwise conflicts with the provisions
hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Holders of at least a majority of the then outstanding aggregate
principal amount of Notes (or, after the consummation of any Exchange Offer in
accordance with Section 2 hereof, of Exchange Notes); provided that, with
respect to any matter that directly or indirectly affects the rights of the
Initial Purchaser hereunder, the Company shall obtain the written consent of the
Initial Purchaser. Notwithstanding the foregoing (except the foregoing proviso),
a waiver or consent to departure from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders whose Notes are being
sold pursuant to a Registration Statement and that does not directly or
indirectly affect the rights of other Holders may be given by the Majority
Holders, determined on the basis of Notes being sold rather than registered
under such Registration Statement.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section 7(c),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture, with a copy
in like manner to NationsBanc Montgomery Securities LLC;
(ii) if to the Initial Purchaser, at NationsBanc Montgomery
Securities LLC, 767 Fifth Avenue, Floor 12A, New York, New York 10153,
Attention: Paul Jetter; and
(iii) if to the Company or any Subsidiary Guarantor, c/o Gratch,
Jacobs & Brozman, P.C., 950 Third Avenue, 11th Floor, New York, NY 10022,
Attention: Alan Jacobs.
<PAGE> 22
22
All such notices and communications shall be deemed to have been
duly given when received. The Initial Purchaser, on the one hand, or the Company
or any Subsidiary Guarantor, on the other, by notice to the other party or
parties may designate additional or different addresses for subsequent notices
or communications.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Company or any Subsidiary Guarantor thereto, subsequent Holders of Notes
and/or Exchange Notes. The Company and the Subsidiary Guarantors hereby agree to
extend the benefits of this Agreement to any Holder of Notes and/or Exchange
Notes and any such Holder may specifically enforce the provisions of this
Agreement as if an original party hereto.
(e) 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.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(i) Notes Held by the Company, Etc. Whenever the consent or approval
of Holders of a specified percentage of principal amount of Notes or Exchange
Notes is required hereunder, Notes or Exchange Notes, as applicable, held by the
Company or its Affiliates (other than subsequent Holders of Notes or Exchange
Notes if such subsequent Holders are deemed to be Affiliates solely by reason of
their holdings of such Notes or Exchange Notes) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
<PAGE> 23
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Subsidiary Guarantors and you.
Very truly yours,
INDESCO INTERNATIONAL, INC.
By: /s/ Ariel Gratch
________________________
Name: Ariel Gratch
Title: Vice Chairman, President,
Asst. Secretary and CEO
AFA PRODUCTS, INC.
By: /s/ Ariel Gratch
________________________
Name: Ariel Gratch
Title: Vice Chairman
CONTINENTAL SPRAYERS
INTERNATIONAL, INC.
By: /s/ Ariel Gratch
________________________
Name: Ariel Gratch
Title: Vice Chairman,
Secretary and CEO
The foregoing Agreement is hereby accepted as of the date first above written.
NATIONSBANC MONTGOMERY
SECURITIES LLC
By: /s/ Paul D. Jetter
________________________
Name: Paul D. Jetter
Title: Senior Managing Director
<PAGE> 24
ANNEX A
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amend or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Notes where such Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Company has agreed that, starting on the
Expiration Date (as defined herein) and ending on the close of business one year
after the Expiration Date, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
<PAGE> 25
ANNEX B
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."
<PAGE> 26
ANNEX C
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Notes where such Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that, starting on
the Expiration Date and ending on the close of business one year after the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until such date all dealers effecting transactions in the Exchange
Notes may be required to deliver a prospectus.
<PAGE> 27
ANNEX D
If the undersigned is a broker-dealer that will receive Exchange Notes for
its own account in exchange for Notes, it represents that the Notes to be
exchanged for the Exchange Notes were acquired by it as a result of
market-making activities or other trading activities and acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange 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.
<PAGE> 1
EXHIBIT 10.1
EXECUTION COPY
$165,000,000
CREDIT AGREEMENT
Dated as of February 4, 1998
Among
APC HOLDING, INC.,
as Borrower,
and
THE INITIAL LENDERS NAMED HEREIN,
as Initial Lenders,
and
NATIONSCREDIT COMMERCIAL CORPORATION,
as Collateral Agent and as Initial Issuing Bank,
and
NATIONSBRIDGE, L.L.C.,
as Administrative Agent.
<PAGE> 2
T A B L E O F C O N T E N T S
Section Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01. Certain Defined Terms...............................................1
1.02. Computation of Time Periods........................................25
1.03. Accounting Terms...................................................25
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
2.01. The Advances and the Letters of Credit.............................25
2.02. Making the Advances................................................26
2.03. Issuance of and Drawings and Reimbursement Under
Letters of Credit.................................................27
2.04. Repayment of Advances..............................................29
2.05. Termination or Reduction of the Commitments........................31
2.06. Prepayments........................................................32
2.07. Interest...........................................................33
2.08. Fees...............................................................34
2.09. Conversion of Advances.............................................35
2.10. Increased Costs, Etc...............................................35
2.11. Payments and Computations..........................................36
2.12. Taxes..............................................................37
2.13. Sharing of Payments, Etc...........................................39
2.14. Use of Proceeds....................................................40
2.15. Defaulting Lenders.................................................40
ARTICLE III
CONDITIONS OF LENDING
3.01. Conditions Precedent to Initial Extension of Credit................42
3.02. Conditions Precedent to Each Borrowing and Issuance................49
3.03. Determinations Under Section 3.01..................................49
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties of the Borrower.....................50
<PAGE> 3
ii
Section Page
ARTICLE V
COVENANTS OF THE BORROWER
5.01. Affirmative Covenants..............................................56
5.02. Negative Covenants.................................................65
5.03. Reporting Requirements.............................................70
5.04. Financial Covenants................................................74
ARTICLE VI
EVENTS OF DEFAULT
6.01. Events of Default..................................................76
6.02. Actions in Respect of the Letters of Credit upon Default...........79
ARTICLE VII
THE AGENTS
7.01. Authorization and Action...........................................80
7.02. Agents' Reliance, Etc..............................................80
7.03. NationsBridge, NationsCredit and Affiliates........................80
7.04. Lender Party Credit Decision.......................................81
7.05. Indemnification....................................................81
7.06. Successor Agents...................................................82
ARTICLE VIII
MISCELLANEOUS
8.01. Amendments, Etc....................................................83
8.02. Notices, Etc.......................................................84
8.03. No Waiver; Remedies................................................84
8.04. Costs and Expenses.................................................84
8.05. Right of Set-off...................................................85
8.06. Binding Effect.....................................................86
8.07. Assignments and Participations.....................................86
8.08. Execution in Counterparts..........................................88
8.09. No Liability of the Issuing Bank...................................88
8.10. Confidentiality....................................................88
8.11. Jurisdiction, Etc..................................................89
8.12. Governing Law......................................................89
8.13. Waiver of Jury Trial...............................................90
<PAGE> 4
iii
SCHEDULES
Schedule I - Commitments and Applicable Lending Offices
Schedule II - Owners
Schedule III - EBITDA Adjustments
Schedule 3.01(g) - Disclosed Litigation
Schedule 3.01(n)(x) - Mortgaged Property
Schedule 3.01(n)(x)(B) - Surveyed Property
Schedule 3.01(n)(xxiv) - Local Counsel Jurisdictions
Schedule 4.01(a) - Parent Ownership
Schedule 4.01(b) - Subsidiaries
Schedule 4.01(d) - Governmental Authorization
Schedule 4.01(m) - Plans and Multiemployer Plans
Schedule 4.01(u) - Environmental
Schedule 4.01(z) - Open Years
Schedule 4.01(ee) - Existing Debt
Schedule 4.01(ff) - Surviving Debt
Schedule 4.01(gg) - Real Property
Schedule 4.01(hh) - Leasehold Property
Schedule 4.01(ii) - Investments
Schedule 4.01(jj) - Intellectual Properties
Schedule 5.01(d) - Insurance
Schedule 5.01(o)(ii) - Texas Property
Schedule 5.02(a) - Existing Liens
EXHIBITS
Exhibit A-1 - Form of Term A Note
Exhibit A-2 - Form of Term B Note
Exhibit A-3 - Form of Revolving Credit Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Security Agreement
Exhibit E - Form of Subsidiary Guaranty
Exhibit F - Form of Parent Guaranty
<PAGE> 5
iv
Exhibit G - Form of Solvency Certificate
Exhibit H - Form of Opinion of Counsel to the Loan Parties
Exhibit I - Form of Intellectual Property Security Agreement
Exhibit J - Form of Intellectual Property Opinion
Exhibit K - Borrowing Base Certificate
<PAGE> 6
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of February 4, 1998 (this "Agreement")
among APC HOLDING, INC., a Delaware corporation (the "Borrower") and a wholly
owned subsidiary of AFA Holdings Co., a Delaware corporation (the "Parent"), the
banks, financial institutions and other institutional lenders listed on the
signature pages hereof as the Initial Lenders (the "Initial Lenders"),
NATIONSCREDIT COMMERCIAL CORPORATION ("NationsCredit"), as collateral agent (in
such capacity and together with any successor appointed pursuant to Article VII,
the "Collateral Agent"), and as initial issuing bank (in such capacity, the
"Initial Issuing Bank"), and NATIONSBRIDGE, L.L.C. ("NationsBridge"), as
administrative agent (in such capacity and together with NationsCredit or any
other successor appointed pursuant to Article VII, the "Administrative Agent")
for the Lender Parties (as hereinafter defined).
PRELIMINARY STATEMENTS:
(1) Continental Acquisition Corp. ("CAC"), a wholly-owned subsidiary
of the Borrower, as purchaser, has entered into an Asset Purchase Agreement
dated as of January 14, 1998 (as amended, supplemented or otherwise modified
from time to time in accordance with its terms and the provisions of the Loan
Documents (as hereinafter defined), the "Purchase Agreement") with Contico
International, Inc., as seller, a Missouri corporation (the "Seller"), pursuant
to which CAC has agreed to purchase the Continental Sprayers International and
Contour Cutting divisions and certain other assets (collectively, the "Acquired
Business") from the Seller (the "Acquisition").
(2) The Borrower has requested that the Lender Parties lend to the
Borrower, and issue Letters of Credit (as hereinafter defined) for the account
of the Borrower, in an aggregate principal amount of up to $165,000,000, to
finance the Acquisition, refinance certain existing indebtedness of the
Subsidiaries of the Borrower, pay related costs and expenses of the Borrower,
and, from time to time, provide working capital for the Borrower and its
Subsidiaries (as hereinafter defined). The Lender Parties have indicated their
willingness to agree to lend such amounts on the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Acquisition" has the meaning specified in Preliminary Statement (1)
to this Agreement.
"Acquired Business" has the meaning specified in Preliminary
Statement (1) to this Agreement.
"Administrative Agent" has the meaning specified in the recital of
parties to this Agreement.
<PAGE> 7
2
"Administrative Agent's Account" means the account of the
Administrative Agent maintained at NationsBank at NationsBank's office at
100 North Tryon Street, Charlotte, North Carolina 28255, Account No.
13661-22506, Attention: Corporate Credit Services or such other account as
shall be designated in writing by the Administrative Agent to the Borrower
and the Lender Parties.
"Advance" means a Term A Advance, a Term B Advance, a Revolving
Credit Advance or a Letter of Credit Advance.
"Affiliate" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with
such Person or is a director or officer of such Person. For purposes of
this definition, the term "control" (including the terms "controlling,"
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to vote 10% or more of the
Voting Stock of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
Voting Stock, by contract or otherwise.
"Agents" means the Collateral Agent and the Administrative Agent.
"Alternate Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be equal
to the higher of:
(a) the rate of interest announced publicly by NationsBank in
Charlotte, North Carolina, from time to time, as its prime rate; and
(b) 1/2 of 1% per annum above the Federal Funds Rate.
"Alternate Base Rate Advance" means an Advance that bears interest
as provided in Section 2.07(a)(i).
"Applicable Lending Office" means, with respect to each Lender
Party, such Lender Party's Domestic Lending Office in the case of an
Alternate Base Rate Advance and such Lender Party's Eurodollar Lending
Office in the case of a Eurodollar Rate Advance.
"Applicable Margin" means:
(a) with respect to any Term A Advance at any time prior to
the Bridge Repayment Date, subject to clause (e) below, a percentage
per annum equal to (i) for Eurodollar Rate Advances, 3.75% and (ii)
for Alternate Base Rate Advances, 2.75%, plus, in each case, an
additional 0.5% on and after each of (x) the date that falls four
months after the Closing Date, (y) the date that falls six months
after the Closing Date and (z) the last day of each three month
period thereafter,
(b) with respect to any Term B Advance at any time, a
percentage per annum as it may be in effect from time to time equal
to (i) for Eurodollar Rate Advances, 5.5% and (ii) for Alternate
Base Rate Advances, 4.5%, plus, in each case, an additional 0.5% on
and after each of (x) the date that falls four months after the
Closing Date, (y) the date that falls six months after the Closing
Date and (z) the last day of each three month period thereafter,
<PAGE> 8
3
(c) with respect to any Revolving Credit Advance at any time
prior to the Bridge Repayment Date, a percentage per annum equal to
(i) for Eurodollar Rate Advances, 3.0% and (ii) for Alternate Base
Rate Advances, 2.0%,
(d) with respect to (i) any Term A Advance or (ii) any
Revolving Credit Advance, in each case at any time on or after the
High Yield Date, a percentage per annum as it may be in effect from
time to time determined by reference to the Leverage Ratio, as set
forth below:
<TABLE>
<CAPTION>
================================================================================
LEVERAGE RATIO EURODOLLAR RATE ALTERNATE BASE
ADVANCES RATE ADVANCES
- --------------------------------------------------------------------------------
Level I Term A Revolving Term A Revolving
Credit Credit
---------------------------------------------------
<S> <C> <C> <C> <C>
less than 4.5:1.0 2.00% 1.75% 1.00% 0.75%
- --------------------------------------------------------------------------------
Level II
2.25% 2.00% 1.25% 1.00%
4.5:1.0 or greater,
but less than 5.0:1.0
- --------------------------------------------------------------------------------
Level III
5.0:1.0 or greater 2.50% 2.25% 1.50% 1.25%
================================================================================
</TABLE>
In the case of clauses (d) above, the Applicable Margin for each Advance
shall be determined by reference to the Leverage Ratio in effect from time
to time; provided, however, that (A) no change in the Applicable Margin
shall be effective until three Business Days after the date on which the
Administrative Agent receives the financial statements required to be
delivered pursuant to Section 5.03(b) or (c), as the case may be, and a
certificate of the chief financial officer of the Borrower demonstrating
such Leverage Ratio and (B) the Applicable Margin for clause (d) above
shall be at Level III for so long as the Borrower has not submitted to the
Administrative Agent the information described in clause (A) of this
proviso as and when required under Section 5.03(b) or (c), as the case may
be.
"Appropriate Lender" means, at any time, with respect to (a) any of
the Term A Facility, the Term B Facility or the Revolving Credit Facility,
a Lender that has a Commitment with respect to such Facility at such time
and (b) the Letter of Credit Facility, (i) the Issuing Bank and (ii) if
the other Revolving Credit Lenders have made Letter of Credit Advances
pursuant to Section 2.03(c) that are outstanding at such time, each such
other Revolving Credit Lender.
"Asset Sale" means any sale, lease or other disposition (including
any such transaction effected by way of merger or consolidation) by any
Loan Party or any of its Subsidiaries of any asset, but excluding
dispositions of inventory in the ordinary course of business; provided
that a disposition of assets not excluded by the foregoing during any
Fiscal Year shall constitute an Asset Sale only to the extent that the
aggregate Net Cash Proceeds from such disposition, when combined with all
other such dispositions previously made during such Fiscal Year, exceeds
$250,000.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender Party and an Eligible Assignee, and accepted by
the Administrative Agent, in accordance with Section 8.07 and in
substantially the form of Exhibit C hereto.
<PAGE> 9
4
"Available Amount" of any Letter of Credit means, at any time, the
maximum amount available to be drawn under such Letter of Credit at such
time (assuming compliance at such time with all conditions to drawing).
"Bank Hedge Agreement" means any Hedge Agreement required or
permitted under Article V that is entered into by and between the Borrower
and any Hedge Bank.
"Borrower" has the meaning specified in the recital of parties to
this Agreement.
"Borrower's Account" means the account of the Borrower maintained by
the Borrower with NationsBank at its office at 100 North Tryon Street,
Charlotte, North Carolina 28255, Account No. 375- 100-8837.
"Borrowing" means a Term A Borrowing, a Term B Borrowing or a
Revolving Credit Borrowing.
"Borrowing Base" means, on any date, a dollar amount equal to the
sum of 85% of Eligible Receivables and 60% of Eligible Inventory, each
determined as of such date.
"Borrowing Base Certificate" means a certificate, duly executed by
the chief financial officer or treasurer of the Borrower, appropriately
completed and substantially in the form of Exhibit K hereto.
"Borrowing Base Subsidiaries" means AFA Products, Inc., a Delaware
corporation and Continental Acquisition Corp., a Delaware corporation, and
their respective successors.
"Bridge Advances" means, at any time, (a) all of the Term A Advances
outstanding at such time in excess of $20,000,000 and (b) all of the Term
B Advances outstanding at such time .
"Bridge Repayment Date" means the date on which (i) all the Term B
Advances are repaid in full pursuant to Section 2.06 and the Term B
Commitments are terminated pursuant to Section 2.05 and (ii) an amount of
Term A Advances is repaid pursuant to Section 2.06 such that the remaining
aggregate outstanding amount of Term A Advances is equal to or less than
$20,000,000 and the Term A Commitments are reduced to $20,000,000 or less
pursuant to Section 2.05.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in Charlotte, North Carolina and,
if the applicable Business Day relates to any Eurodollar Rate Advances, on
which dealings are carried on in the London interbank market.
"CAC" has the meaning specified in Preliminary Statement (1) to this
Agreement.
"Capital Contribution Agreement" has the meaning specified in
Section 3.01(n)(xxi).
"Capital Escrow Agreement" has the meaning specified in Section
3.01(n)(xxi).
"Capital Expenditures" means, for any Person for any period, the sum
of (a) all expenditures made, directly or indirectly, by such Person or
any of its Subsidiaries during such period for equipment, fixed assets,
real property or improvements, or for replacements or substitutions
therefor or additions thereto, that have been or should be, in accordance
with GAAP, reflected as additions to property, plant or equipment on a
Consolidated balance sheet of such Person or have a useful life of more
than one year
<PAGE> 10
5
minus (b) any such expenditures made for the replacement or restoration of
assets to the extent financed by condemnation awards or proceeds of
insurance received with respect to the loss or taking of or damage to the
asset or assets being replaced or restored, plus (c) the aggregate
principal amount of all Debt (including Obligations under Capitalized
Leases) assumed or incurred in connection with any such expenditures.
"Capitalized Leases" means all leases that have been or should be,
in accordance with GAAP, recorded as capitalized leases.
"Cash Collateral Account" has the meaning specified in the Security
Agreement.
"Cash Equivalents" means any of the following, to the extent owned
by the Borrower or any of its Subsidiaries free and clear of all Liens
other than Liens created under the Collateral Documents and having a
maturity of not greater than 90 days from the date of issuance thereof:
(a) readily marketable direct obligations of the Government of the United
States or any agency or instrumentality thereof or obligations
unconditionally guaranteed by the full faith and credit of the Government
of the United States, (b) insured certificates of deposit of or time
deposits with any commercial bank that is a Lender Party or a member of
the Federal Reserve System, issues (or the parent of which issues)
commercial paper rated as described in clause (c), is organized under the
laws of the United States or any State thereof and has a combined capital
and surplus of at least $1 billion or (c) commercial paper in an aggregate
amount of no more than $5,000,000 per issuer outstanding at any time,
issued by any corporation organized under the laws of any State of the
United States and rated at least "Prime-1" (or the then equivalent grade)
by Moody's Investors Service, Inc. or "A-1" (or the then equivalent grade)
by Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System maintained by the U.S.
Environmental Protection Agency.
"Closing Date" means the first date on which the conditions
precedent set forth in Article III shall have been satisfied.
"Collateral" means all "Collateral" referred to in the Collateral
Documents and all other property that is or is intended to be subject to
any Lien in favor of the Administrative Agent for the benefit of the
Secured Parties.
"Collateral Agent" has the meaning specified in the recital of
parties hereto.
"Collateral Documents" means the Security Agreement, the
Intellectual Property Security Agreement, the Pledge Agreement, the
Mortgages and any other agreement that creates or purports to create a
Lien in favor of the Administrative Agent for the benefit of the Secured
Parties.
"Commitment" means a Term A Commitment, Term B Commitment, a
Revolving Credit Commitment or a Letter of Credit Commitment.
"Confidential Information" means information that the Borrower
furnishes to any Agent or any Lender Party in a writing designated as
confidential, but does not include any such information that is or
<PAGE> 11
6
becomes generally available to the public or that is or becomes available
to such Agent or such Lender Party from a source other than the Borrower
that is not, to the best of such Agent's or such Lender Party's knowledge,
acting in violation of a confidentiality agreement with the Borrower.
"Consent Letter" has the meaning specified in Section 5.01(t).
"Consolidated" refers to the consolidation of accounts in accordance
with GAAP.
"Consolidated Free Cash Flow" means, for any period, EBITDA for such
period minus the sum of the following amounts:
(i) all cash payments of income taxes by the Loan Parties and
their Subsidiaries during such period solely to the extent such
taxes are directly attributable to the operations of the Borrower
and its Subsidiaries;
(ii) Consolidated Capital Expenditures for such period, to the
extent that such Consolidated Capital Expenditures are permitted by
Section 5.02(p) and are not financed during such period (and will
not be financed in any future period) with the proceeds of Debt of
the Borrower or any of its Subsidiaries permitted by Sections
5.02(b)(iii)(B) or (C); and
(iii) any Net Cash Proceeds in respect of Asset Sales to the
extent a prepayment was made in respect thereof pursuant to Section
2.06(b)(ii).
"Constitutive Documents" means, with respect to any Person, the
certificate of incorporation or registration (including, if applicable,
certificate of change of name), articles of incorporation or association,
memorandum of association, charter, bylaws, partnership agreement, trust
agreement, joint venture agreement, limited liability company operating or
members agreement, joint venture agreement or one or more similar
agreements, instruments or documents constituting the organization or
formation of such Person.
"Conversion", "Convert" and "Converted" each refer to a conversion
of Advances of one Type into Advances of the other Type pursuant to
Section 2.09 or 2.10.
"Current Assets" of any Person means all assets of such Person that
would, in accordance with GAAP, be classified as current assets of a
company conducting a business the same as or similar to that of such
Person, after deducting adequate reserves in each case in which a reserve
is proper in accordance with GAAP.
"Current Liabilities" of any Person means (a) all Debt of such
Person except Funded Debt that by its terms is payable on demand or
matures within one year after the date of determination that in accordance
with GAAP would be classified as current liabilities of such Person
(excluding any Debt renewable or extendible, at the option of such Person,
to a date more than one year from such date or arising under a revolving
credit or similar agreement that obligates the lender or lenders to extend
credit during a period of more than one year from such date) and (b) all
other items (including taxes accrued as estimated) that in accordance with
GAAP would be classified as current liabilities of such Person.
"Debt" of any Person means (a) all indebtedness of such Person for
borrowed money, (b) all Obligations of such Person for the deferred
purchase price of property or services (other than trade payables and
accrued expenses incurred in the ordinary course of such Person's
business), (c) all
<PAGE> 12
7
Obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all Obligations of such Person created or arising
under any conditional sale or other title retention agreement with respect
to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (e) all Obligations of
such Person as lessee under Capitalized Leases, (f) all Obligations,
contingent or otherwise, of such Person under acceptance, letter of credit
or similar facilities, (g) all Obligations of such Person to purchase,
redeem, retire, defease or otherwise make any payment in respect of any
capital stock of or other ownership or profit interest in such Person or
any other Person or any warrants, rights or options to acquire such
capital stock, valued, in the case of Redeemable Preferred Stock, at the
greater of its voluntary or involuntary liquidation preference plus
accrued and unpaid dividends, (h) all Obligations of such Person in
respect of Hedge Agreements, (i) all Debt of others referred to in clauses
(a) through (h) above or clause (j) below guaranteed directly or
indirectly in any manner by such Person, or in effect guaranteed directly
or indirectly by such Person through an agreement (i) to pay or purchase
such Debt or to advance or supply funds for the payment or purchase of
such Debt, (ii) to purchase, sell or lease (as lessee or lessor) property,
or to purchase or sell services, primarily for the purpose of enabling the
debtor to make payment of such Debt or to assure the holder of such Debt
against loss, (iii) to supply funds to or in any other manner invest in
the debtor (including any agreement to pay for property or services
irrespective of whether such property is received or such services are
rendered) or (iv) otherwise to assure a creditor against loss, and (j) all
Debt referred to in clauses (a) through (i) above of another Person
secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) any Lien on property
(including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for
the payment of such Debt.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Defaulted Advance" means, with respect to any Lender Party at any
time, the portion of any Advance required to be made by such Lender Party
to the Borrower pursuant to Section 2.01 or 2.02 at or prior to such time
which has not been made by such Lender Party or by the Administrative
Agent for the account of such Lender Party pursuant to Section 2.02(d) as
of such time. In the event that a portion of a Defaulted Advance shall be
deemed made pursuant to Section 2.15(a), the remaining portion of such
Defaulted Advance shall be considered a Defaulted Advance originally
required to be made pursuant to Section 2.01 on the same date as the
Defaulted Advance so deemed made in part.
"Defaulted Amount" means, with respect to any Lender Party at any
time, any amount required to be paid by such Lender Party to the
Administrative Agent or any other Lender Party hereunder or under any
other Loan Document at or prior to such time which has not been so paid as
of such time, including, without limitation, any amount required to be
paid by such Lender Party to (a) the Issuing Bank pursuant to Section
2.03(c) to purchase a portion of a Letter of Credit Advance made by the
Issuing Bank, (b) the Administrative Agent pursuant to Section 2.02(d) to
reimburse the Administrative Agent for the amount of any Advance made by
the Administrative Agent for the account of such Lender Party, (c) any
other Lender Party pursuant to Section 2.13 to purchase any participation
in Advances owing to such other Lender Party and (d) the Administrative
Agent or the Issuing Bank pursuant to Section 7.05 to reimburse the
Administrative Agent or the Issuing Bank for such Lender Party's ratable
share of any amount required to be paid by the Lender Parties to the
Administrative Agent or the Issuing Bank as provided therein. In the event
that a portion of a Defaulted Amount shall be deemed paid pursuant to
Section 2.15(b), the remaining portion of such Defaulted Amount shall be
considered a Defaulted
<PAGE> 13
8
Amount originally required to be paid hereunder or under any other Loan
Document on the same date as the Defaulted Amount so deemed paid in part.
"Defaulting Lender" means, at any time, any Lender Party that, at
such time, (a) owes a Defaulted Advance or a Defaulted Amount or (b) shall
take any action or be the subject of any action or proceeding of a type
described in Section 6.01(f).
"Disclosed Litigation" has the meaning specified in Section 3.01(g).
"Domestic Lending Office" means, with respect to any Lender Party,
the office of such Lender Party specified as its "Domestic Lending Office"
opposite its name on Schedule I hereto or in the Assignment and Acceptance
pursuant to which it became a Lender Party, as the case may be, or such
other office of such Lender Party as such Lender Party may from time to
time specify to the Borrower and the Administrative Agent.
"EBITDA" means, for any period, the sum, determined on a
Consolidated basis, without duplication, of (a) Net Income, (b) interest
expense, (c) income tax expense, (d) depreciation expense, (e)
amortization expense, and (f) for any period ending on or prior to the one
year anniversary of the Closing Date, the aggregate amount of one-time,
non-recurring costs, expenses and fees, whether cash or non-cash,
amortized or expensed (to the extent deducted in arriving at Net Income
and to the extent not otherwise included in clauses (b) through (e) above)
set forth on Schedule III hereto, in each case of the Borrower and its
Subsidiaries, determined in accordance with GAAP for such period,
provided, however, that there shall be excluded from each of the items
referred to in clauses (b) through (f) above (to the extent otherwise
included in the calculation of Net Income) such expenses, costs and fees
that would otherwise be included therein of any Consolidated Subsidiary of
such Person to the extent that the income of such Consolidated Subsidiary
is excluded from Net Income pursuant to the proviso to the definition of
"Net Income."
"Eligible Assignee" means (a) with respect to any Facility (other
than the Letter of Credit Facility), (i) a Lender; (ii) an Affiliate of a
Lender; (iii) a commercial bank organized under the laws of the United
States, or any State thereof, and having total assets in excess of
$500,000,000; (iv) a savings and loan association or savings bank
organized under the laws of the United States, or any State thereof, and
having total assets in excess of $500,000,000; (v) a commercial bank
organized under the laws of any other country that is a member of the OECD
or has concluded special lending arrangements with the International
Monetary Fund associated with its General Arrangements to Borrow, or a
political subdivision of any such country, and having total assets in
excess of $500,000,000, so long as such bank is acting through a branch or
agency located in the United States; (vi) the central bank of any country
that is a member of the OECD; (vii) a finance company, insurance company
or other financial institution or fund (whether a corporation,
partnership, trust or other entity) that is engaged in making, purchasing
or otherwise investing in commercial loans in the ordinary course of its
business and having total assets in excess of $500,000,000; and (viii) any
other Person approved by the Administrative Agent, such approval not to be
unreasonably withheld or delayed, and (b) with respect to the Letter of
Credit Facility, a Person that is an Eligible Assignee under subclause
(iii) or (v) of clause (a) of this definition and is approved by the
Administrative Agent, such approval not to be unreasonably withheld or
delayed; provided, however, that neither any Loan Party nor any Affiliate
of a Loan Party shall qualify as an Eligible Assignee under this
definition.
"Eligible Inventory" means, at any date of determination thereof,
the aggregate value (determined at the lower of cost or market on a basis
consistent with GAAP at such date of all Inventory
<PAGE> 14
9
owned by the Borrowing Base Subsidiaries and located in any jurisdiction
in the United States of America or Costa Rica as to which appropriate UCC
financing statements have been filed naming any such Borrowing Base
Subsidiary as "debtor" and the Collateral Agent as "secured party" or, in
the case of Inventory located in Costa Rica, as to which other appropriate
measures have been taken to perfect the security interest of the
Collateral Agent in such Inventory (including the delivery of a legal
opinion to the Collateral Agent with respect to such security interest),
all in form and substance satisfactory to the Collateral Agent, all net of
any amounts payable by such Borrowing Base Subsidiaries in respect of
commissions, processing fees or other charges, excluding, however, without
duplication (i) any such Inventory which has been shipped to a customer,
even if on a consignment or "sale or return" basis and whether or not such
Inventory has been subsequently returned by such customer; (ii) any
Inventory subject to a Lien (other than Liens created pursuant to the
Security Agreement), including a landlord's or warehouseman's Lien; (iii)
any Inventory against which the applicable Borrowing Base Subsidiary has
taken a reserve; (iv) any Inventory not subject to a valid and perfected
first-priority Lien in favor of the Collateral Agent under the Security
Agreement, subject to no prior or equal Lien; (v) any Inventory not
produced in compliance with the applicable requirements of the Fair Labor
Standards Act; and (vi) any supply, scrap or obsolete Inventory and any
Inventory that is not reasonably marketable; provided that no Inventory
located in Costa Rica on such date of determination that would otherwise
constitute Eligible Inventory shall constitute Eligible Inventory to the
extent that the sum of such Inventory plus the aggregate amount of all
Eligible Inventory located in Costa Rica on such date of determination
exceeds $600,000.
"Eligible Receivables" means, at any date of determination thereof,
the aggregate amount of all Receivables at such date due to any Borrowing
Base Subsidiary other than the following (determined without duplication);
(a) (i) any Receivable due from an account debtor that is not
both domiciled in the United States of America or Canada and (if not
a natural person) organized under the laws of the United States of
America or Canada or any political subdivision thereof; provided
that if such account debtor is either domiciled or organized under
the laws of Canada or any subdivision thereof (a "Canadian Account
Debtor"), such Receivable shall not be an Eligible Receivable (A) to
the extent that the sum of such Receivable plus the aggregate amount
of all Eligible Receivables owing from Canadian Account Debtors
exceeds $1,000,000 or (B) if the Collateral Agent does not have a
perfected security interest in such Receivable under all applicable
laws of Canada and any subdivision thereof and (ii) any Receivable
that is not denominated and payable in U.S. dollars;
(b) any Receivable that does not comply with all applicable
legal requirements, including, without limitation, all laws, rules,
regulations and orders of any governmental or judicial authority
(including any Receivable due from an account debtor located in the
States of Indiana, New Jersey or Minnesota, unless such Borrowing
Base Subsidiary (at the time the Receivable was created and at all
times thereafter) (i) has filed and has maintained effective a
current notice of business activities report with the appropriate
office or agency of the State of Indiana, New Jersey or Minnesota,
as applicable or (ii) was and has continued to be exempt from filing
such report and has provided the Collateral Agent with satisfactory
evidence thereof;
(c) any Receivable in respect of which there is any unresolved
dispute with the account debtor, but only to the extent of such
dispute;
<PAGE> 15
10
(d) any Receivable payable more than 30 days after the date of
the issuance of the original invoice therefor;
(e) any Receivable that remains unpaid for more than 60 days
from the original due date specified at the time of the original
issuance of the invoice therefor;
(f) any unbilled Receivable and any Receivable in respect of
goods not yet shipped;
(g) any Receivable arising outside the ordinary course of
business of the Borrower;
(h) any Receivable in respect of which there has been
established a contra account, or which is due from an account debtor
to whom such Borrowing Base Subsidiary owes a trade payable, but
only to the extent of such account or trade payable;
(i) any Receivable that is not subject to a first priority
perfected Lien under the Security Agreement and any Receivable
evidenced by an "instrument" (as defined in the Uniform Commercial
Code) not in the possession of the Collateral Agent;
(j) any Receivable due from an account debtor (I) as to which
on such date Receivables representing more than 50% of aggregate
amount of all Receivables of such account debtor have remained
unpaid for more than 60 days from the original due date specified at
the time of the original issuance of the invoice therefor, (II) in
respect of which a credit loss has been recognized or reserved by
any Borrowing Base Subsidiary or any of its Subsidiaries, (III) in
respect of which the Collateral Agent shall have notified the
Borrower that such account debtor does not have a satisfactory
credit standing as determined in good faith by the Agent, (IV) that
is a Subsidiary or Affiliate of any Borrowing Base Subsidiary, (V)
that is the United States of America or any department, agency or
instrumentality thereof, unless such Borrowing Base Subsidiary has
complied in all respects with the Federal Assignment of Claims Act
of 1940, or (VI) that is the subject of a case or proceeding of the
type described in Section 6.01(f);
(k) any Receivable due from an account debtor that such
Borrowing Base Subsidiary has not instructed such account debtor in
the invoice therefor to make payments in respect of such Receivable
to a Pledged Account (as defined in the Security Agreement) or from
any account debtor that makes payments in a form that cannot be
accepted in the Pledged Account; and
(l) any Receivables due from an account debtor at any time, to
the extent that the aggregate outstanding amount of Receivables due
from such account debtor and its affiliates at such time exceeds
25%, in the case of any account debtor other than Monsanto-Solaris
Group, and 35%, in the case of Monsanto-Solaris Group, of the
aggregate amount of all Receivables due to the Borrowing Base
Subsidiaries at such time, but only to the extent of such excess.
"Employment Contracts" means each employment agreement and other
compensation arrangements with each officer of any Loan Party or any of
its Subsidiaries, including, without limitation, all employee stock option
plans of any such Loan Party or such Subsidiary.
<PAGE> 16
11
"Environmental Action" means any action, suit, demand, demand
letter, claim, notice of non-compliance or violation, notice of liability
or potential liability, investigation, proceeding, consent order or
consent agreement relating in any way to any Environmental Law, any
Environmental Permit or Hazardous Material or arising from alleged injury
or threat to health, safety or the environment, including, without
limitation, (a) by any governmental or regulatory authority for
enforcement, cleanup, removal, response, remedial or other actions or
damages and (b) by any governmental or regulatory authority or third party
for damages, contribution, indemnification, cost recovery, compensation or
injunctive relief.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, writ, judgment,
injunction, decree or judicial or agency interpretation, policy or
guidance relating to pollution or protection of the environment, health,
safety or natural resources, including, without limitation, those relating
to the use, handling, transportation, treatment, storage, disposal,
release or discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any Environmental
Law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV of
ERISA is a member of the controlled group of any Loan Party, or under
common control with any Loan Party, within the meaning of Section 414 of
the Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable event,
within the meaning of Section 4043 of ERISA, with respect to any Plan
unless the 30-day notice requirement with respect to such event has been
waived by the PBGC, or (ii) the requirements of subsection (1) of Section
4043(b) of ERISA (taking into account subsection (2) of such Section) are
met with respect to a contributing sponsor, as defined in Section
4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9),
(10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably
expected to occur with respect to such Plan within the following 30 days;
(b) the application for a minimum funding waiver with respect to a Plan;
(c) the provision by the administrator of any Plan of a notice of intent
to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including
any such notice with respect to a plan amendment referred to in Section
4041(e) of ERISA); (d) the cessation of operations at a facility of any
Loan Party or any ERISA Affiliate in the circumstances described in
Section 4062(e) of ERISA; (e) the withdrawal by any Loan Party or any
ERISA Affiliate from a Multiple Employer Plan during a plan year for which
it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(f) the conditions for imposition of a lien under Section 302(f) of ERISA
shall have been met with respect to any Plan; (g) the adoption of an
amendment to a Plan requiring the provision of security to such Plan
pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of
proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition described in Section 4042 of ERISA
that constitutes grounds for the termination of, or the appointment of a
trustee to administer, such Plan.
"Eurocurrency Liabilities" has the meaning specified in Regulation D
of the Board of Governors of the Federal Reserve System, as in effect from
time to time.
"Eurodollar Lending Office" means, with respect to any Lender Party,
the office of such Lender Party specified as its "Eurodollar Lending
Office" opposite its name on Schedule I hereto or in the
<PAGE> 17
12
Assignment and Acceptance pursuant to which it became a Lender Party (or,
if no such office is specified, its Domestic Lending Office), or such
other office of such Lender Party as such Lender Party may from time to
time specify to the Borrower and the Administrative Agent.
"Eurodollar Rate" means, for any Interest Period beginning (i) prior
to the Bridge Repayment Date with respect to Term A Advances or Term B
Advances, for all Eurodollar Rate Advances comprising part of the same
Borrowing, an interest rate per annum equal to the rate per annum obtained
by dividing (a) the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor
page) as the London interbank offered rate for deposits in U.S. dollars at
11:00 A.M. (London time) two Business Days before the first day of such
Interest Period in an amount substantially equal to NationsBridge's
Eurodollar Rate Advance comprising part of such Borrowing to be
outstanding during such Interest Period (or, if NationsBridge shall not
have such a Eurodollar Rate Advance, $1,000,000) and for a period equal to
such Interest Period (provided that if for any reason such rate is not
available, the term "Eurodollar Rate" shall mean, for any Interest Period
for all Eurodollar Rate Advances comprising part of the same Borrowing,
the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of
1%) appearing on Reuters Screen LIBO Page as the London interbank offered
rate for deposits in Dollars at approximately 11:00 A.M. (London time) two
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period; provided, however, if more than one
rate is specified on Reuters Screen LIBO Page, the applicable rate shall
be the arithmetic mean of all such rates) by (b) a percentage equal to
100% minus the Eurodollar Rate Reserve Percentage for such Interest Period
and (ii) on and after the Bridge Repayment Date with respect to Term A
Advances or Term B Advances, and at any date with respect to Revolving
Credit Advances, in each case which are Eurodollar Rate Advances, for any
day in any Interest Period, the one month LIBO (London Interbank Offered
Rate) Rate published in The Wall Street Journal (the "Reported Rate") on
the first date of publication of The Wall Street Journal of the applicable
Interest Period. If The Wall Street Journal (i) publishes more than one
Reported Rate on any date of publication, the higher or highest of such
rates shall apply, or (ii) publishes a retraction or correction of any
Reported Rate, the corrected rate reported in such retraction or
correction shall apply. If the Reported Rate is no longer published at
least monthly, in the sole and absolute discretion of the Administrative
Agent, either (x) the Eurodollar Rate shall be deemed to be such other
London Interbank Offered Rate published in The Wall Street Journal and
reasonably satisfactory to the Administrative Agent, or (y) the Eurodollar
Rate shall be deemed to be the Alternative Base Rate.
"Eurodollar Rate Advance" means an Advance that bears interest as
provided in Section 2.07(a)(ii).
"Eurodollar Rate Reserve Percentage" means, for any Interest Period
for all Eurodollar Rate Advances comprising part of the same Borrowing,
the reserve percentage applicable two Business Days before the first day
of such Interest Period under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve
requirement) for a member bank of the Federal Reserve System in New York
City with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest rate
on Eurodollar Rate Advances is determined) having a term equal to such
Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
<PAGE> 18
13
"Excess Cash Flow" means, for any period, an amount equal to (i)
Consolidated Free Cash Flow plus (or minus), without duplication, (ii) any
net extraordinary cash gains (or extraordinary cash losses) for such
period of the Borrower and its Subsidiaries (except for such gains or
losses in respect of Asset Sales) plus (or minus) (iii) any decrease (or
increase) in the average of the Net Working Investment at the end of each
fiscal month ended during such period, when compared with the average of
the Net Working Investment at the end of each fiscal month ended during
the corresponding period in the prior Fiscal Year, plus (iv) any interest
income of the Borrower and its Subsidiaries for such period, minus (v) the
sum for such period of (x) Total Debt Service (exclusive of amortization
of debt discount or premium) for such period, (y) all optional prepayments
of the Advances pursuant to Section 2.06 during such period and (z) all
Permitted Payments made during such period.
"Existing Debt" has the meaning specified in Section 4.01(ee)
hereof.
"Extraordinary Receipt" means any cash received by or paid to or for
the account of any Person not in the ordinary course of business, tax
refunds, pension plan reversions, proceeds of insurance (other than
proceeds of business interruption insurance to the extent such proceeds
constitute compensation for lost earnings) and indemnity payments;
provided, however, that an Extraordinary Receipt shall not include (a)
cash receipts received from proceeds of insurance, condemnation awards (or
payments in lieu thereof) or indemnity payments to the extent that such
proceeds, awards or payments in respect of loss or damage to equipment,
fixed assets or real property are applied (or in respect of which
expenditures were previously incurred) to replace or repair the equipment,
fixed assets or real property in respect of which such proceeds were
received in accordance with the terms of the Loan Documents, so long as
such application is made within 12 months after the occurrence of such
damage or loss and (b) any reimbursement by the Seller of any fees payable
by the Borrower in connection with the Facilities.
"Facility" means the Term A Facility, the Term B Facility, the
Revolving Credit Facility or the Letter of Credit Facility.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the
next preceding Business Day) by the Federal Reserve Bank of New York, or,
if such rate is not so published for any day that is a Business Day, the
average of the quotations for such day for such transactions received by
the Administrative Agent from three Federal funds brokers of recognized
standing selected by it.
"Fee Letter" means that certain fee letter dated February 2, 1998,
from NationsBridge, NationsCredit and NationsBank to the Borrower, as
amended, supplemented or otherwise modified from time to time.
"Fifth Amendment" means the Fifth Amendment dated as of January 30,
1998 to the Secured Credit Agreement dated as of December 22, 1993 among
Contico International Inc., the banks listed on the signature pages
thereof and Mercantile Bank National Association (formerly known as
Mercantile Bank of St. Louis, National Association) and NationsBank, N.A.
(successor by merger to the Boatmen's National Bank of St. Louis) as
agents for such banks and Fleet National Bank (formerly known as Fleet
Bank of Massachusetts, N.A.), as co-agent for such banks.
"First Warrant Agreement" has the meaning specified in Section
3.01(n)(xix).
<PAGE> 19
14
"Fiscal Year" means a fiscal year of the Borrower and its
Consolidated Subsidiaries ending on December 31 in any calendar year.
"Fixture" has the meaning specified in any Mortgage.
"Funded Debt" of any Person means Debt in respect of the Advances,
in the case of the Borrower, and all other Debt of such Person that by its
terms matures more than one year after the date of determination or
matures within one year from such date but is renewable or extendible, at
the option of such Person, to a date more than one year after such date or
arises under a revolving credit or similar agreement that obligates the
lender or lenders to extend credit during a period of more than one year
after such date, including, without limitation, all amounts of Funded Debt
of such Person required to be paid or prepaid within one year after the
date of determination.
"GAAP" has the meaning specified in Section 1.03.
"Guaranties" means the Parent Guaranty and the Subsidiary Guaranty.
"Hazardous Materials" means (a) petroleum or petroleum products,
by-products or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon gas and
(b) any other chemicals, materials or substances designated, classified or
regulated as hazardous or toxic or as a pollutant or contaminant under any
Environmental Law.
"Hedge Agreements" means 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.
"Hedge Bank" means any Lender Party or any of its Affiliates in its
capacity as a party to a Bank Hedge Agreement.
"High Yield Date" means the date on which (i) all the Term B
Advances are repaid in full pursuant to Section 2.06 and the Term B
Commitments are terminated pursuant to Section 2.05 and (ii) an amount of
Term A Advances is repaid pursuant to Section 2.06 such that the remaining
aggregate outstanding amount of Term A Advances is equal to or less than
$20,000,000 and the Term A Commitments are reduced to $20,000,000 or less
pursuant to Section 2.05, provided, in each case, that such repayment is
made from the Net Cash Proceeds of Refinancing Securities consisting of
senior subordinated notes issued pursuant to a Rule 144A offering in an
aggregate amount equal to or exceeding $115,000,000.
"Indemnified Party" has the meaning specified in Section 8.04(b).
"Information Memorandum" means information supplied by the Borrower
to prospective Lenders, including, without limitation, the Borrower's
financial statements dated December 31, 1997 and the forecasts for each
year thereafter until the applicable Termination Date.
"Initial Extension of Credit" means the earlier to occur of the
initial Borrowing and the initial issuance of a Letter of Credit
hereunder.
"Initial Issuing Bank" has the meaning specified in the recital of
parties to this Agreement.
<PAGE> 20
15
"Initial Lenders" has the meaning specified in the recital of
parties to this Agreement.
"Insufficiency" means, with respect to any Plan, the amount, if any,
of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of
ERISA.
"Intellectual Property Security Agreement" has the meaning specified
in Section 3.01(n)(xx).
"Intercreditor Agreement" has the meaning specified in Section
5.01(t).
"Interest Expense" means, with respect to the Borrower for any
period, the aggregate interest charges incurred by the Borrower and its
Subsidiaries for such period, whether expensed or capitalized, including,
without limitation, the portion of any obligation under Capitalized Leases
allocable to interest expense in accordance with GAAP and the portion of
any debt discount or premium that shall be amortized in such period.
"Interest Period" means, for each Eurodollar Rate Advance comprising
part of the same Borrowing, the period commencing on the date of such
Eurodollar Rate Advance or the date of the Conversion of any Alternate
Base Rate Advance into such Eurodollar Rate Advance, and ending on the
last day of the period selected by the Borrower pursuant to the provisions
below and, thereafter, each subsequent period commencing on the last day
of the immediately preceding Interest Period and ending on the last day of
the period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be (i) for any Interest Period
commencing prior to the Bridge Repayment Date, with respect to Term A
Advances and Term B Advances, one, two or three months (or such other
period as each Lender and the Borrower may agree), as the Borrower may,
upon notice received by the Administrative Agent not later than 10:00 A.M.
(Charlotte, North Carolina time) on the third Business Day prior to the
first day of such Interest Period, select or (ii) for any Interest Period
commencing on or after the Bridge Repayment Date, with respect to Term A
Advances and Term B Advances, and at any date with respect to Revolving
Credit Advances, one month; provided, however, with respect to Term A
Advances and Term B Advances, that:
(a) the Borrower may not select any Interest Period with
respect to any Eurodollar Rate Advance under a Facility that ends
after any principal repayment installment date for such Facility
unless, after giving effect to such selection, the aggregate
principal amount of Alternate Base Rate Advances and of Eurodollar
Rate Advances having Interest Periods that end on or prior to such
principal repayment installment date for such Facility shall be at
least equal to the aggregate principal amount of Advances under such
Facility due and payable on or prior to such date;
(b) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Borrowing shall
be of the same duration;
(c) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next
succeeding Business Day; provided, however, that, if such extension
would cause the last day of such Interest Period to occur in the
next following calendar month, the last day of such Interest Period
shall occur on the next preceding Business Day; and
(d) whenever the first day of any Interest Period occurs on a
day of an initial calendar month for which there is no numerically
corresponding day in the calendar month that
<PAGE> 21
16
succeeds such initial calendar month by the number of months equal
to the number of months in such Interest Period, such Interest
Period shall end on the last Business Day of such succeeding
calendar month.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Inventory" has the meaning specified in the Security Agreement.
"Investment" in any Person means any loan or advance to such Person,
any purchase or other acquisition of any capital stock or other ownership
or profit interest, warrants, rights, options, obligations or other
securities of such Person, any capital contribution to such Person or any
other investment in such Person, including, without limitation, any
arrangement pursuant to which the investor incurs Debt of the types
referred to in clause (i) or (j) of the definition of "Debt" in respect of
such Person.
"Issuing Bank" means the Initial Issuing Bank and each Eligible
Assignee to which a Letter of Credit Commitment hereunder has been
assigned pursuant to Section 8.07.
"L/C Cash Collateral Account" has the meaning specified in the
Security Agreement.
"L/C Related Documents" has the meaning specified in Section
2.04(c)(ii)(A).
"Leasehold Property" has the meaning specified in Section 4.01(hh).
"Lender Party" means any Lender or the Issuing Bank.
"Lenders" means the Initial Lenders and each Person that shall
become a Lender hereunder pursuant to Section 8.07.
"Letter of Credit" has the meaning specified in Section 2.01(d).
"Letter of Credit Advance" means an advance made by the Issuing Bank
or any Revolving Credit Lender pursuant to Section 2.03(c).
"Letter of Credit Agreement" has the meaning specified in Section
2.03(a).
"Letter of Credit Commitment" means, with respect to the Issuing
Bank at any time, the amount set forth opposite the Issuing Bank's name on
Schedule I hereto under the caption "Letter of Credit Commitment" or, if
the Issuing Bank has entered into one or more Assignments and Acceptances,
set forth for the Issuing Bank in the Register maintained by the
Administrative Agent pursuant to Section 8.07(d) as such Issuing Bank's
"Letter of Credit Commitment", as such amount may be reduced at or prior
to such time pursuant to Section 2.05.
"Letter of Credit Facility" means, at any time, an amount equal to
the amount of the Issuing Bank's Letter of Credit Commitment at such time,
as such amount may be reduced at or prior to such time pursuant to Section
2.05.
"Leverage Ratio" means, as of any date of determination, the ratio
of Funded Debt (excluding, until the documents required to be delivered
pursuant to Section 5.01(t) shall have been delivered or the
<PAGE> 22
17
refinancing contemplated therein shall have occurred, Funded Debt of Afa
Polytek B.V. incurred under the Polytek Agreement, to the extent the
amount of such Funded Debt does not exceed $10,000,000) as at the end of
the most recently ended fiscal quarter to Consolidated EBITDA for the most
recently completed four fiscal quarters of the Borrower and its
Subsidiaries, in each case as reflected in the financial statements most
recently delivered pursuant to Section 5.03(b) or (c) and the certificate
of the chief financial officer of the Borrower demonstrating such ratio;
provided, however, that for each fiscal quarter of the Borrower ending on
or prior to December 31, 1998, Consolidated EBITDA for the four fiscal
quarters then ended shall be the actual Consolidated EBITDA for the period
since the Closing Date multiplied by a fraction the numerator of which is
12 and the denominator of which is the number of months that have elapsed
since the Closing Date.
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance on
title to real property.
"Loan Documents" means (a) for purposes of this Agreement and the
Notes and any amendment, supplement or modification hereof or thereof and
for all other purposes other than for purposes of any Guaranty or the
Collateral Documents, (i) this Agreement, (ii) the Notes, (iii) the
Subsidiary Guaranty, (iv) the Collateral Documents, (v) each Letter of
Credit Agreement, (vi) the Parent Guaranty and (vii) the Fee Letter, and
(b) for purposes of any Guaranty and the Collateral Documents, (i) this
Agreement, (ii) the Notes, (iii) the Subsidiary Guaranty, (iv) the
Collateral Documents, (v) each Letter of Credit Agreement, (vi) the Parent
Guaranty, (vii) the Fee Letter and (ix) each Bank Hedge Agreement, in each
case as amended, supplemented or otherwise modified from time to time.
"Loan Parties" means the Borrower, the Parent and each Subsidiary
Guarantor.
"Management Agreement" has the meaning specified in Section 5.02(t).
"Margin Stock" has the meaning specified in Regulation U.
"Material Adverse Change" means any material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower or the Borrower and its
Subsidiaries taken as a whole or the Acquired Business.
"Material Adverse Effect" means a material adverse effect on (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower or the Borrower and its
Subsidiaries taken as a whole or the Acquired Business, (b) the rights and
remedies of the Administrative Agent or any Lender Party under any Loan
Document or Related Document or (c) the ability of any Loan Party to
perform its Obligations under any Loan Document or Related Document to
which it is or is to be a party.
"Mortgages" has the meaning specified in Section 3.01(n)(x).
"Mortgage Policies" has the meaning specified in Section
3.01(n)(x)(A).
"Mortgaged Property" has the meaning specified in Section
3.01(n)(x).
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA
Affiliate is making or accruing an obligation to make
<PAGE> 23
18
contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any
Loan Party or any ERISA Affiliate and at least one Person other than the
Loan Parties and the ERISA Affiliates or (b) was so maintained and in
respect of which any Loan Party or any ERISA Affiliate could reasonably be
expected to have liability under Section 4064 or 4069 of ERISA in the
event such plan has been or were to be terminated.
"NationsBank" means NationsBank, N.A.
"NationsBridge" has the meaning specified in the recital of parties
to this Agreement.
"NationsCredit" has the meaning specified in the recital of parties
to this Agreement.
"Net Cash Proceeds" means, with respect to any sale, lease, transfer
or other disposition of any asset or the sale or issuance of any Debt or
capital stock or other ownership or profit interest, any securities
convertible into or exchangeable for capital stock or other ownership or
profit interest or any warrants, rights, options or other securities to
acquire capital stock or other ownership or profit interest by any Person,
or any Extraordinary Receipt received by or paid to or for the account of
any Person, the aggregate amount of cash received from time to time
(whether as initial consideration or through payment or disposition of
deferred consideration) by or on behalf of such Person in connection with
such transaction after deducting therefrom only (without duplication) (a)
reasonable and customary brokerage commissions, underwriting fees and
discounts, legal fees, finder's fees and other similar fees and
commissions, (b) the amount of taxes payable in connection with or as a
result of such transaction and (c) the amount of any Debt secured by a
Lien on such asset that, by the terms of the agreement or instrument
governing such Debt, is required to be repaid upon such disposition, in
each case to the extent, but only to the extent, that the amounts so
deducted are, at the time of receipt of such cash, actually paid to a
Person that is not an Affiliate of such Person or any Loan Party or any
Affiliate of any Loan Party and are properly attributable to such
transaction or to the asset that is the subject thereof.
"Net Income" of any Person shall mean, for any period, the net
income (or loss) of such Person and its Subsidiaries on a Consolidated
basis for such period taken as a single accounting period; provided that
there shall be excluded the income of any Consolidated Subsidiary of such
Person to the extent that the declaration or payment of dividends or
distributions of any kind to such Person by such Consolidated Subsidiary
of such income at such time is encumbered or charged, or is not permitted,
by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Consolidated Subsidiary, or by any agency or
instrumentality of any government or subdivision thereof.
"Net Working Investment" means, at any date, (i) the Consolidated
Current Assets (excluding cash and Cash Equivalents) of the Borrower and
its Subsidiaries minus (ii) the sum of (x) Consolidated Current
Liabilities (excluding Debt) of the Borrower and its Subsidiaries plus (y)
the Current Liabilities of any Person (other than the Borrower and any of
its Subsidiaries) which are guaranteed by the Borrower or any such
Subsidiary, all determined as of such date.
"NMS" means NationsBanc Montgomery Securities LLC, a Delaware
limited liability company.
"Note" means a Term A Note, a Term B Note or a Revolving Credit
Note.
<PAGE> 24
19
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
"Notice of Issuance" has the meaning specified in Section 2.03(a).
"Notice of Renewal" has the meaning specified in Section 2.01(d).
"Notice of Termination" has the meaning specified in Section
2.01(d).
"NPL" means the National Priorities List under CERCLA.
"Obligation" means, with respect to any Person, any payment,
performance or other obligation of such Person of any kind, including,
without limitation, any liability of such Person on any claim, whether or
not the right of any creditor to payment in respect of such claim is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
disputed, undisputed, legal, equitable, secured or unsecured, and whether
or not such claim is discharged, stayed or otherwise affected by any
proceeding referred to in Section 6.01(f). Without limiting the generality
of the foregoing, the Obligations of each Loan Party under the Loan
Documents include (a) the obligation to pay principal, interest, Letter of
Credit commissions, charges, expenses, fees, attorneys' fees and
disbursements, indemnities and other amounts payable by such Loan Party
under any Loan Document and (b) the obligation of such Loan Party to
reimburse any amount in respect of any of the foregoing that any Lender
Party, in its sole discretion, may elect to pay or advance on behalf of
such Loan Party.
"OECD" means the Organization for Economic Cooperation and
Development.
"Open Year" has the meaning specified in Section 4.01(z).
"Other Taxes" has the meaning specified in Section 2.12(b).
"Owners" means the Persons listed on Schedule II attached hereto.
"Parent" has the meaning specified in the recital of parties to this
Agreement.
"Parent Guaranty" has the meaning set forth in Section 3.01(n)(ix).
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
"Permitted Encumbrances" has the meaning specified in the Mortgages.
"Permitted Payments" means dividends or distributions made by the
Borrower to the Parent solely when and to the extent necessary to permit
the Parent to pay taxes on behalf of the Borrower and its Subsidiaries
pursuant to and in accordance with the Tax Agreement, if any, and only to
the extent that the aggregate amount thereof shall not exceed the amount
that the Borrower would otherwise have been required to pay if it were
paying taxes directly to the relevant tax authorities.
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government
or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
<PAGE> 25
20
"Pledge Agreement" has the meaning specified in Section 5.01(t)(C).
"Pledged Account" has the meaning specified in the Security
Agreement.
"Pledged Account Bank" has the meaning specified in the Security
Agreement.
"Pledged Account Letter" has the meaning specified in the Security
Agreement.
"Pledged Debt" has the meaning specified in the Security Agreement.
"Pledged Shares" has the meaning specified in the Security
Agreement.
"Polytek Agreement" means the Credit Agreement between Afa Polytek
B.V. and ABN Amro Bank N.V., a copy of which was furnished to the Lender
Parties prior to the Closing Date, and all other documents delivered in
connection therewith, as amended, supplemented or otherwise modified from
time to time in accordance with their respective terms, to the extent
permitted in accordance with the Loan Documents.
"Preferred Stock" means, with respect to any corporation, capital
stock issued by such corporation that is entitled to a preference or
priority over any other capital stock issued by such corporation upon any
distribution of such corporation's assets, whether by dividend or upon
liquidation.
"Pro Rata Share" of any amount means, with respect to any Revolving
Credit Lender at any time, the product of such amount times a fraction the
numerator of which is the amount of such Lender's Revolving Credit
Commitment at such time and the denominator of which is the Revolving
Credit Facility at such time.
"Purchase Agreement" has the meaning specified in Preliminary
Statement (1) to this Agreement.
"Receivables" has the meaning specified in the Security Agreement.
"Redeemable" means, with respect to any capital stock or other
ownership or profit interest, Debt or other right or Obligation, any such
right or Obligation that (a) the issuer has undertaken to redeem at a
fixed or determinable date or dates, whether by operation of a sinking
fund or otherwise, or upon the occurrence of a condition not solely within
the control of the issuer or (b) is redeemable at the option of the
holder.
"Refinancing" means the public offering or private placement and
sale by the Borrower of the Refinancing Securities contemplated by Section
5.01(q) or otherwise in order to repay the Bridge Advances.
"Refinancing Agreement" means the indenture or other agreement
pursuant to which the Refinancing Securities are issued, together with all
documents delivered in connection therewith, in each case as amended,
supplemented or otherwise modified from time to time, in each case as
amended, supplemented or otherwise modified from time to time in
accordance with their respective terms, to the extent permitted in
accordance with the Loan Documents.
<PAGE> 26
21
"Refinancing Securities" means the debt or equity securities of the
Borrower proposed to be sold in order to consummate the Refinancing.
"Register" has the meaning specified in Section 8.07(d).
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Related Documents" means (i) the Purchase Agreement (and all
schedules and exhibits thereto), any Management Agreement, any Tax
Agreement, the Polytek Agreement, the Capital Contribution Agreement, the
Supply Agreement, the First Warrant Agreement, the Second Warrant
Agreement, the Waldock Warrant Agreement, the Subordinated Notes, the
Capital Escrow Agreement and the Warrant Escrow Agreement (ii) upon the
execution and delivery thereof pursuant to Section 5.01(o), the
Refinancing Agreement and the Refinancing Securities and (iii) upon the
execution and delivery thereof pursuant to Section 5.01(t), the Consent
Letter and the Intercreditor Agreement.
"Required Lenders" means, at any time, Lenders owed or holding more
than 50% of the sum of (a) the aggregate principal amount of the Advances
outstanding at such time, (b) the aggregate Available Amount of all
Letters of Credit outstanding at such time, (c) the aggregate unused
Commitments under the Term A Facility at such time, (d) the aggregate
unused Commitments under the Term B Facility at such time and (e) the
aggregate Unused Revolving Credit Commitments at such time; provided,
however, that if any Lender shall be a Defaulting Lender at such time,
there shall be excluded from the determination of Required Lenders at such
time (A) the aggregate principal amount of the Advances owing to such
Lender (in its capacity as a Lender) and outstanding at such time, (B)
such Lender's Pro Rata Share of the aggregate Available Amount of all
Letters of Credit outstanding at such time, (C) the aggregate unused Term
A Commitment of such Lender at such time, (D) the aggregate unused Term B
Commitment of such Lender at such time and (E) the Unused Revolving Credit
Commitment of such Lender at such time. For purposes of this definition,
the aggregate principal amount of Letter of Credit Advances owing to the
Issuing Bank and the Available Amount of each Letter of Credit shall be
considered to be owed to the Revolving Credit Lenders ratably in
accordance with their respective Revolving Credit Commitments.
"Requirements of Law" means, with respect to any Person, all laws,
constitutions, statutes, treaties, ordinances, rules and regulations, all
orders, writs, decrees, injunctions, judgments, determinations or awards
of an arbitrator, a court or any other governmental authority, and all
governmental authorizations, binding upon or applicable to such Person or
to any of its properties, assets or businesses.
"Responsible Officer" means, with respect to the Borrower, any
senior officer thereof and, with respect to any other Loan Party, the
President thereof.
"Revolving Credit Advance" has the meaning specified in Section
2.01(c).
"Revolving Credit Borrowing" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type made by the
Revolving Credit Lenders.
"Revolving Credit Commitment" means, with respect to any Revolving
Credit Lender at any time, the amount set forth opposite such Lender's
name on Schedule I hereto under the caption Revolving Credit Commitment"
or, if such Lender has entered into one or more Assignments and
Acceptances, set
<PAGE> 27
22
forth for such Lender in the Register maintained by the Administrative
Agent pursuant to Section 8.07(d) as such Lender's "Revolving Credit
Commitment", as such amount may be reduced at or prior to such time
pursuant to Section 2.05.
"Revolving Credit Facility" means, at any time, the aggregate amount
of the Revolving Credit Lenders' Revolving Credit Commitments at such
time.
"Revolving Credit Lender" means any Lender that has a Revolving
Credit Commitment.
"Revolving Credit Note" means a promissory note of the Borrower
payable to the order of any Revolving Credit Lender, in substantially the
form of Exhibit A-3 hereto, evidencing the aggregate indebtedness of the
Borrower to such Lender resulting from the Revolving Credit Advances made
by such Lender, as amended, supplemented or otherwise modified from time
to time.
"Second Warrant Agreement" has the meaning specified in Section
3.01(k).
"Secured Obligations" has the meaning specified in the Security
Agreement.
"Secured Parties" means the Administrative Agent, the Collateral
Agent, the Hedge Banks and the Lender Parties.
"Security Agreement" has the meaning specified in Section
3.01(n)(vii).
"Seller" has the meaning specified in Preliminary Statement (1) to
this Agreement.
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any
Loan Party or any ERISA Affiliate and no Person other than the Loan
Parties and the ERISA Affiliates or (b) was so maintained and in respect
of which any Loan Party or any ERISA Affiliate could reasonably be
expected to have liability under Section 4069 of ERISA in the event such
plan has been or were to be terminated.
"Solvent" and "Solvency" mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property of
such Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person, (b) the
present fair salable value of the assets of such Person is not less than
the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay such debts and liabilities
as they mature and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for
which such Person's property would constitute an unreasonably small
capital. The amount of contingent liabilities at any time shall be
computed as the amount that, in the light of all the facts and
circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Subordinated Debt" means any debt of the Borrower that is
subordinated to the Obligations of the Borrower under the Loan Documents
and that otherwise contains terms and conditions satisfactory to the
Required lenders.
"Subordinated Notes" means the subordinated promissory notes dated
February 4, 1998 made by the Parent to Afa International Limited in the
principal amount of $1,000,000 and to Waldock Limited in
<PAGE> 28
23
the principal amount of $2,000,000, as such notes may be amended,
supplemented or otherwise modified from time to time in accordance with
their terms, to the extent permitted in accordance with the Loan
Documents.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which)
more than 50% of (a) the issued and outstanding capital stock having
ordinary voting power to elect a majority of the Board of Directors of
such corporation (irrespective of whether at the time capital stock of any
other class or classes of such corporation shall or might have voting
power upon the occurrence of any contingency), (b) the interest in the
capital or profits of such partnership, joint venture or limited liability
company or (c) the beneficial interest in such trust or estate is at the
time directly or indirectly owned or controlled by such Person, by such
Person and one or more of its other Subsidiaries or by one or more of such
Person's other Subsidiaries.
"Subsidiary Guarantors" means all existing and hereafter acquired
direct or indirect domestic Subsidiaries of the Borrower.
"Subsidiary Guaranty" has the meaning set forth in Section
3.01(n)(viii).
"Supply Agreement" means the Supply Agreement dated as of February
4, 1998, between Continental Sprayers International, Inc. and the Seller,
as amended, supplemented or otherwise modified from time to time in
accordance with its terms, to the extent permitted in accordance with the
Loan Documents.
"Surveyed Property" has the meaning specified in Section
3.01(n)(x)(B).
"Surviving Debt" has the meaning specified in Section 3.01(e).
"Tax Agreement" has the meaning specified in Section 5.03(s).
"Tax Certificate" has the meaning specified in Section 5.03(o).
"Taxes" has the meaning specified in Section 2.12(a).
"Term A Advance" has the meaning specified in Section 2.01(a).
"Term A Borrowing" means a borrowing consisting of simultaneous Term
A Advances of the same Type made by the Term A Lenders.
"Term A Commitment" means, with respect to any Term A Lender at any
time, the amount set forth opposite such Lender's name on Schedule I
hereto under the caption "Term A Commitment" or, if such Lender has
entered into one or more Assignments and Acceptances, set forth for such
Lender in the Register maintained by the Administrative Agent pursuant to
Section 8.07(d) as such Lender's "Term A Commitment", as such amount may
be reduced at or prior to such time pursuant to Section 2.05.
"Term A Facility" means, at any time, the aggregate amount of the
Term A Lenders' Term A Commitments at such time.
"Term A Lender" means any Lender that has a Term A Commitment.
<PAGE> 29
24
"Term A Note" means a promissory note of the Borrower payable to the
order of any Term A Lender, in substantially the form of Exhibit A-1
hereto, evidencing the indebtedness of the Borrower to such Lender
resulting from the Term A Advances made by such Lender, as amended,
supplemented or otherwise modified from time to time.
"Term B Advance" has the meaning specified in Section 2.01(b).
"Term B Borrowing" means a borrowing consisting of simultaneous Term
B Advances of the same Type made by the Term B Lenders.
"Term B Commitment" means, with respect to any Term B Lender at any
time, the amount set forth opposite such Lender's name on Schedule I
hereto under the caption "Term B Commitment" or, if such Lender has
entered into one or more Assignments and Acceptances, set forth for such
Lender in the Register maintained by the Administrative Agent pursuant to
Section 8.07(d) as such Lender's "Term B Commitment", as such amount may
be reduced at or prior to such time pursuant to Section 2.05.
"Term B Facility" means, at any time, the aggregate amount of the
Term B Lenders' Term B Commitments at such time.
"Term B Lender" means any Lender that has a Term B Commitment.
"Term B Note" means a promissory note of the Borrower payable to the
order of any Term B Lender, in substantially the form of Exhibit A-2
hereto, evidencing the indebtedness of the Borrower to such Lender
resulting from the Term B Advances made by such Lender, as amended,
supplemented or otherwise modified from time to time.
"Termination Date" means the earlier of (a) the date of termination
in whole of the Term A Commitments, the Term B Commitments, the Revolving
Credit Commitments and the Letter of Credit Commitments pursuant to
Section 2.05 or 6.01 and (b) (i) for purposes of the Revolving Credit
Facility and the Letter of Credit Facility, February 4, 2003, (ii) for
purposes of the Term A Facility, December 31, 2003 or, if the High Yield
Date shall have occurred, February 4, 2003 and (iii) for purposes of the
Term B Facility and for all other purposes, February 4, 2005.
"Total Debt Service" means, for any period, the sum of (a) Interest
Expense for such period and (b) the aggregate amount of mandatory
principal payments scheduled to be paid by the Borrower pursuant to
Section 2.04 during such period and all other scheduled principal payments
on all other Debt, including the portion of any payments under Capitalized
Leases that is allocable to principal, paid by the Borrower during such
period.
"Type" refers to the distinction between Advances bearing interest
at the Alternate Base Rate and Advances bearing interest at the Eurodollar
Rate.
"Unused Revolving Credit Commitment" means, with respect to any
Revolving Credit Lender at any time, (a) such Lender's Revolving Credit
Commitment at such time minus (b) the sum of (i) the aggregate principal
amount of all Revolving Credit Advances and Letter of Credit Advances made
by such Lender (in its capacity as a Lender) and outstanding at such time,
plus (ii) such Lender's Pro Rata Share of (A) the aggregate Available
Amount of all Letters of Credit outstanding at such time and (B) the
aggregate principal amount of all Letter of Credit Advances made by the
Issuing Bank pursuant to Section 2.03(c) and outstanding at such time.
<PAGE> 30
25
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the happening
of such a contingency.
"Waldock Warrant Agreement" has the meaning specified in Section
3.01(k).
"Warrant Escrow Agreement" has the meaning specified in Section
3.01(n)(xix).
"Welfare Plan" means a welfare plan, as defined in Section 3(1) of
ERISA, that is maintained for employees of any Loan Party or in respect of
which any Loan Party could reasonably be expected to have liability.
"Withdrawal Liability" has the meaning specified in Part I of
Subtitle E of Title IV of ERISA.
"WTI, Inc." means WTI, Inc., a Delaware corporation.
SECTION 1.02. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(f) ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
SECTION 2.01. The Advances and the Letters of Credit. (a) The Term A
Advances. Each Term A Lender severally agrees, on the terms and conditions
hereinafter set forth, to make a single advance (a "Term A Advance") to the
Borrower on the Closing Date in an amount not to exceed such Lender's Term A
Commitment at such time. The Term A Borrowing shall consist of Term A Advances
made simultaneously by the Term A Lenders ratably according to their Term A
Commitments. Amounts borrowed under this Section 2.01(a) and repaid or prepaid
may not be reborrowed.
(b) The Term B Advances. Each Term B Lender severally agrees, on the
terms and conditions hereinafter set forth, to make a single advance (a "Term B
Advance") to the Borrower on the Closing Date in an amount not to exceed such
Lender's Term B Commitment at such time. The Term B Borrowing shall consist of
Term B Advances made simultaneously by the Term B Lenders ratably according to
their Term B Commitments. Amounts borrowed under this Section 2.01(b) and repaid
or prepaid may not be reborrowed.
(c) The Revolving Credit Advances. Each Revolving Credit Lender
severally agrees, on the terms and conditions hereinafter set forth, to make
advances (each a "Revolving Credit Advance") to the Borrower from time to time
on any Business Day during the period from the date hereof until the applicable
Termination Date in an amount for each such Advance not to exceed such Lender's
Unused Revolving Credit Commitment at such time. Each Revolving Credit Borrowing
shall be in an aggregate amount of $100,000 or an
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26
integral multiple of $100,000 in excess thereof (other than a Borrowing the
proceeds of which shall be used solely to repay or prepay in full outstanding
Letter of Credit Advances) and shall consist of Revolving Credit Advances made
simultaneously by the Revolving Credit Lenders ratably according to their
Revolving Credit Commitments. Within the limits of each Revolving Credit
Lender's Unused Revolving Credit Commitment in effect from time to time, the
Borrower may borrow under this Section 2.01(c), prepay pursuant to Section 2.06
and reborrow under this Section 2.01(c).
(d) Letters of Credit. The Issuing Bank agrees, on the terms and
conditions hereinafter set forth, to issue standby letters of credit (the
"Letters of Credit") for the account of the Borrower from time to time on any
Business Day during the period from the date hereof until 60 days before the
applicable Termination Date (i) in an aggregate Available Amount for all Letters
of Credit issued by the Issuing Bank not to exceed at any time the Issuing
Bank's Letter of Credit Commitment at such time and (ii) in an Available Amount
for each such Letter of Credit not to exceed the lesser of (x) the Letter of
Credit Facility at such time and (y) the Unused Revolving Credit Commitments of
the Revolving Credit Lenders at such time. No Letter of Credit shall have an
expiration date (including all rights of the Borrower or the beneficiary to
require renewal) later than the earlier of 60 days before the applicable
Termination Date and one year after the date of issuance thereof, but may by its
terms be renewable annually upon notice (a "Notice of Renewal") given to the
Issuing Bank and the Administrative Agent on or prior to any date for notice of
renewal set forth in such Letter of Credit but in any event at least three
Business Days prior to the date of the proposed renewal of such Letter of Credit
and upon fulfillment of the applicable conditions set forth in Article III
unless the Issuing Bank has notified the Borrower (with a copy to the
Administrative Agent) on or prior to the date for notice of termination set
forth in such Letter of Credit but in any event at least 30 Business Days prior
to the date of automatic renewal of its election not to renew such Letter of
Credit (a "Notice of Termination"); provided that the terms of each Letter of
Credit that is automatically renewable annually shall (x) require the Issuing
Bank to give the beneficiary named in such Letter of Credit notice of any Notice
of Termination, (y) permit such beneficiary, upon receipt of such notice, to
draw under such Letter of Credit prior to the date such Letter of Credit
otherwise would have been automatically renewed and (z) not permit the
expiration date (after giving effect to any renewal) of such Letter of Credit in
any event to be extended to a date later than 60 days before the applicable
Termination Date. If either a Notice of Renewal is not given by the Borrower or
a Notice of Termination is given by the Issuing Bank pursuant to the immediately
preceding sentence, such Letter of Credit shall expire on the date on which it
otherwise would have been automatically renewed; provided, however, that even in
the absence of receipt of a Notice of Renewal the Issuing Bank may in its
discretion, unless instructed to the contrary by the Administrative Agent or the
Borrower, deem that a Notice of Renewal had been timely delivered and in such
case, a Notice of Renewal shall be deemed to have been so delivered for all
purposes under this Agreement. Within the limits of the Letter of Credit
Facility, and subject to the limits referred to above, the Borrower may request
the issuance of Letters of Credit under this Section 2.01(d), repay any Letter
of Credit Advances resulting from drawings thereunder pursuant to Section
2.03(c) and request the issuance of additional Letters of Credit under this
Section 2.01(d).
SECTION 2.02. Making the Advances. (a) Except as otherwise provided
in Section 2.02(b) or 2.03, each Borrowing shall be made on notice, given not
later than 11:00 A.M. (Charlotte, North Carolina time) on, at any time prior to
the Bridge Repayment Date, the third Business Day prior to the date of the
proposed Borrowing and thereafter on the date of the proposed Borrowing in the
case of a Borrowing consisting of Eurodollar Rate Advances, or the first
Business Day prior to the date of the proposed Borrowing in the case of a
Borrowing consisting of Alternate Base Rate Advances, by the Borrower to the
Administrative Agent, which shall give to each Appropriate Lender prompt notice
thereof by telex or telecopier. Each such notice of a Borrowing (a "Notice of
Borrowing") shall be by telephone, confirmed immediately in writing, or telex or
telecopier, in substantially the form of Exhibit B hereto, specifying therein
the requested (i) date of such Borrowing, (ii) Facility under which such
Borrowing is to be made, (iii) Type of Advances comprising such Borrowing, (iv)
aggregate amount of such Borrowing and (v) in the case of a Borrowing consisting
of Eurodollar Rate Advances, initial
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27
Interest Period for each such Advance. Each Appropriate Lender shall, before
1:00 P.M. (Charlotte, North Carolina time) on the date of such Borrowing, make
available for the account of its Applicable Lending Office to the Administrative
Agent at the Administrative Agent's Account, in same day funds, such Lender's
ratable portion of such Borrowing in accordance with the respective Commitments
under the applicable Facility of such Lender and the other Appropriate Lenders.
After the Administrative Agent's receipt of such funds and upon fulfillment of
the applicable conditions set forth in Article III, the Administrative Agent
will make such funds available to the Borrower by crediting the Borrower's
Account; provided, however, that, in the case of any Revolving Credit Borrowing,
the Administrative Agent shall first make a portion of such funds equal to the
aggregate principal amount of any Letter of Credit Advances made by the Issuing
Bank and by any other Revolving Credit Lender and outstanding on the date of
such Revolving Credit Borrowing, plus interest accrued and unpaid thereon to and
as of such date, available to the Issuing Bank and such other Revolving Credit
Lenders for repayment of such Letter of Credit Advances.
(b) Unless and until the Bridge Repayment Date shall have occurred,
anything in subsection (a) above to the contrary notwithstanding, (i) the
Borrower may not select Eurodollar Rate Advances under the Term A Facility and
the Term B Facility for the initial Borrowing hereunder or if the obligation of
the Appropriate Lenders to make Eurodollar Rate Advances shall then be suspended
pursuant to Section 2.09 or Section 2.10 and (ii) the Term B Advances may not be
outstanding as part of more than one separate Borrowing, respectively, and each
of the Term A Advances and the Revolving Credit Advances may not be outstanding
as part of more than five separate Borrowings, respectively.
(c) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower. In the case of any Borrowing that the related Notice of Borrowing
specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall
indemnify each Appropriate Lender against any loss, cost or expense incurred by
such Lender as a result of any failure to fulfill on or before the date
specified in such Notice of Borrowing for such Borrowing the applicable
conditions set forth in Article III, including, without limitation, any loss
(including loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to fund the Advance to be made by such Lender as part of such Borrowing
when such Advance, as a result of such failure, is not made on such date.
(d) Unless the Administrative Agent shall have received notice from
an Appropriate Lender prior to the date of any Borrowing under a Facility under
which such Lender has a Commitment that such Lender will not make available to
the Administrative Agent such Lender's ratable portion of such Borrowing, the
Administrative Agent may assume that such Lender has made such portion available
to the Administrative Agent on the date of such Borrowing in accordance with
subsection (a) or (b) of this Section 2.02 and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have so
made such ratable portion available to the Administrative Agent, such Lender and
the Borrower severally agree to repay or pay to the Administrative Agent
forthwith on demand such corresponding amount and to pay interest thereon, for
each day from the date such amount is made available to the Borrower until the
date such amount is repaid or paid to the Administrative Agent, at (i) in the
case of the Borrower, the interest rate applicable at such time under Section
2.07 to Advances comprising such Borrowing and (ii) in the case of such Lender,
the Federal Funds Rate. If such Lender shall pay to the Administrative Agent
such corresponding amount, such amount so paid shall constitute such Lender's
Advance as part of such Borrowing for all purposes.
(e) The failure of any Lender to make the Advance to be made by it
as part of any Borrowing shall not relieve any other Lender of its obligation,
if any, hereunder to make its Advance on the date of such Borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the
Advance to be made by such other Lender on the date of any Borrowing.
<PAGE> 33
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SECTION 2.03. Issuance of and Drawings and Reimbursement Under
Letters of Credit. (a) Request for Issuance. Each Letter of Credit shall be
issued upon notice, given not later than 11:00 A.M. (Charlotte, North Carolina
time) on the second Business Day prior to the date of the proposed issuance of
such Letter of Credit, by the Borrower to the Issuing Bank, which shall give to
the Administrative Agent and each Revolving Credit Lender prompt notice thereof
by telex or telecopier. Each such notice of issuance of a Letter of Credit (a
"Notice of Issuance") shall be by telephone, confirmed immediately in writing,
or telex or telecopier, specifying therein the requested (A) date of such
issuance (which shall be a Business Day), (B) Available Amount of such Letter of
Credit, (C) expiration date of such Letter of Credit, (D) name and address of
the beneficiary of such Letter of Credit and (E) form of such Letter of Credit,
and shall be accompanied by such application and agreement for letters of credit
as the Issuing Bank may specify to the Borrower for use in connection with such
requested Letter of Credit (a "Letter of Credit Agreement"). If (x) the
requested form of such Letter of Credit is acceptable to the Issuing Bank in its
sole discretion and (y) it has not received notice of objection to such issuance
from Lenders holding more than 50% of the Revolving Credit Commitments, the
Issuing Bank will, upon fulfillment of the applicable conditions set forth in
Article III, make such Letter of Credit available to the Borrower at its office
referred to in Section 8.02 or as otherwise agreed with the Borrower in
connection with such issuance. In the event and to the extent that the
provisions of any Letter of Credit Agreement shall conflict with this Agreement,
the provisions of this Agreement shall govern.
(b) Letter of Credit Reports. The Issuing Bank shall furnish (A) to
the Administrative Agent on the first Business Day of each week a written report
summarizing issuance and expiration dates of Letters of Credit issued by such
Issuing Bank during the previous week and drawings during such week under all
Letters of Credit issued by such Issuing Bank, (B) to each Revolving Credit
Lender on the first Business Day of each month a written report summarizing
issuance and expiration dates of Letters of Credit issued by such Issuing Bank
during the preceding month and drawings during such month under all Letters of
Credit issued by such Issuing Bank and (C) to the Administrative Agent and each
Revolving Credit Lender on the first Business Day of each calendar quarter a
written report setting forth the average daily aggregate Available Amount during
the preceding calendar quarter of all Letters of Credit issued by such Issuing
Bank.
(c) Drawing and Reimbursement. The payment by the Issuing Bank of a
draft drawn under any Letter of Credit shall constitute for all purposes of this
Agreement the making by the Issuing Bank of a Letter of Credit Advance, which
shall be an Alternate Base Rate Advance, in the amount of such draft. Upon
written demand by the Issuing Bank with an outstanding Letter of Credit Advance,
with a copy of such demand to the Administrative Agent, each Revolving Credit
Lender shall purchase from the Issuing Bank, and the Issuing Bank shall sell and
assign to each such Revolving Credit Lender, such Lender's Pro Rata Share of
such outstanding Letter of Credit Advance as of the date of such purchase, by
making available for the account of its Applicable Lending Office to the
Administrative Agent for the account of the Issuing Bank, by deposit to the
Administrative Agent's Account, in same day funds, an amount equal to the
portion of the outstanding principal amount of such Letter of Credit Advance to
be purchased by such Lender. Promptly after receipt thereof, the Administrative
Agent shall transfer such funds to the Issuing Bank. The Borrower hereby agrees
to each such sale and assignment. Each Revolving Credit Lender agrees to
purchase its Pro Rata Share of an outstanding Letter of Credit Advance on (i)
the Business Day on which demand therefor is made by the Issuing Bank provided
notice of such demand is given not later than 10:00 A.M. (Charlotte, North
Carolina time) on such Business Day or (ii) the first Business Day next
succeeding such demand if notice of such demand is given after such time. Upon
any such assignment by the Issuing Bank to any other Revolving Credit Lender of
a portion of a Letter of Credit Advance, the Issuing Bank represents and
warrants to such other Lender that the Issuing Bank is the legal and beneficial
owner of such interest being assigned by it, free and clear of any liens, but
makes no other representation or warranty and assumes no responsibility with
respect to such Letter of Credit Advance, the Loan Documents or any Loan Party.
If and to the extent that any Revolving Credit Lender shall not have so made the
amount of such Letter of Credit Advance available to the Administrative Agent,
such Revolving Credit Lender agrees to pay to
<PAGE> 34
29
the Administrative Agent forthwith on demand such amount together with interest
thereon, for each day from the date of demand by the Issuing Bank until the date
such amount is paid to the Administrative Agent, at the Federal Funds Rate for
its account or the account of the Issuing Bank, as applicable. If such Lender
shall pay to the Administrative Agent such amount for the account of the Issuing
Bank on any Business Day, such amount so paid in respect of principal shall
constitute a Letter of Credit Advance made by such Lender on such Business Day
for purposes of this Agreement, and the outstanding principal amount of the
Letter of Credit Advance made by the Issuing Bank shall be reduced by such
amount on such Business Day.
(d) Failure to Make Letter of Credit Advances. The failure of any
Lender to make the Letter of Credit Advance to be made by it on the date
specified in Section 2.03(c) shall not relieve any other Lender of its
obligation hereunder to make its Letter of Credit Advance on such date, but no
Lender shall be responsible for the failure of any other Lender to make the
Letter of Credit Advance to be made by such other Lender on such date.
SECTION 2.04. Repayment of Advances . (a) Term A Advances and Term B
Advances. The Borrower shall repay to the Administrative Agent for the ratable
account of the Term A Lenders and the Term B Lenders, as the case may be, the
aggregate outstanding principal amount of the Term A Advances and the Term B
Advances, respectively, (i) prior to the High Yield Date, on the following dates
in the amounts indicated (which amounts shall be reduced as a result of the
application of prepayments in accordance with the order of priority set forth in
Section 2.06):
<TABLE>
<CAPTION>
Amount for Term A Amount for Term B
Date Advances Advances
- ---- -------- --------
<S> <C> <C>
June 30, 1998 $500,000 $125,000
September 30, 1998 $500,000 $125,000
December 31, 1998 $500,000 $125,000
March 31, 1999 $500,000 $125,000
June 30, 1999 $1,250,000 $125,000
September 30, 1999 $1,250,000 $125,000
December 31, 1999 $1,250,000 $125,000
March 31, 2000 $1,250,000 $125,000
June 30, 2000 $2,000,000 $125,000
September 30, 2000 $2,000,000 $125,000
December 31, 2000 $2,000,000 $125,000
March 31, 2001 $2,000,000 $125,000
June 30, 2001 $3,750,000 $125,000
September 30, 2001 $3,750,000 $125,000
December 31, 2001 $3,750,000 $125,000
March 31, 2002 $3,750,000 $125,000
June 30, 2002 $3,750,000 $125,000
September 30, 2002 $3,750,000 $125,000
December 31, 2002 $3,750,000 $125,000
March 31, 2003 $3,750,000 $125,000
June 30, 2003 $8,250,000 $125,000
September 30, 2003 $8,250,000 $125,000
December 31, 2003 $8,500,000 $125,000
March 31, 2004 $125,000
June 30, 2004 $125,000
September 30, 2004 $125,000
</TABLE>
<PAGE> 35
30
<TABLE>
<CAPTION>
Amount for Term A Amount for Term B
Date Advances Advances
- ---- -------- --------
<S> <C> <C>
December 31, 2004 $125,000
February 4, 2005 $61,625,000
</TABLE>
and (ii) on and after the High Yield Date, on the following dates in the amounts
indicated (which amounts shall be reduced as a result of the application of
prepayments in accordance with the order of priority set forth in Section 2.06):
<TABLE>
<S> <C>
June 30, 1998 $500,000
September 30, 1998 $500,000
December 31, 1998 $500,000
March 31, 1999 $500,000
June 30, 1999 $750,000
September 30, 1999 $750,000
December 31, 1999 $750,000
March 31, 2000 $750,000
June 30, 2000 $1,000,000
September 30, 2000 $1,000,000
December 31, 2000 $1,000,000
March 31, 2001 $1,000,000
June 30, 2001 $1,250,000
September 30, 2001 $1,250,000
December 31, 2001 $1,250,000
March 31, 2002 $1,250,000
June 30, 2002 $1,500,000
September 30, 2002 $1,500,000
December 31, 2002 $1,500,000
February 4, 2003 $1,500,000
</TABLE>
provided, however, that in the case of each of clauses (i) and (ii) above, the
final principal installments shall be repaid on the applicable Termination Date
and in any event shall be in an amount equal to the aggregate principal amount
of the Term A Advances or the Term B Advances, as the case may be, outstanding
on such date.
(b) Revolving Credit Advances. The Borrower shall repay to the
Administrative Agent for the ratable account of the Revolving Credit Lenders on
the applicable Termination Date the aggregate outstanding principal amount of
the Revolving Credit Advances then outstanding.
(c) Letter of Credit Advances. (i) The Borrower shall repay to the
Administrative Agent for the account of the Issuing Bank and each other
Revolving Credit Lender that has made a Letter of Credit Advance on the earlier
of demand and the applicable Termination Date the outstanding principal amount
of each Letter of Credit Advance made by each of them.
(ii) The Obligations of the Borrower under this Agreement, any
Letter of Credit Agreement and any other agreement or instrument relating to any
Letter of Credit shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement, such Letter of Credit
Agreement and such other agreement or instrument under all circumstances,
including, without limitation, the following circumstances (it being understood
that any such payment by the Borrower is without prejudice to, and does not
constitute a
<PAGE> 36
31
waiver of, any rights the Borrower might have or might acquire as a result of
the payment by the Issuing Bank of any draft or the reimbursement by the
Borrower thereof):
(A) any lack of validity or enforceability of any Loan Document, any
Letter of Credit Agreement, any Letter of Credit or any other agreement or
instrument relating thereto (all of the foregoing being, collectively, the
"L/C Related Documents");
(B) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of the Borrower in respect of
any L/C Related Document or any other amendment or waiver of or any
consent to departure from all or any of the L/C Related Documents;
(C) the existence of any claim, set-off, defense or other right that
the Borrower may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank or any
other Person, whether in connection with the transactions contemplated by
the L/C Related Documents or any unrelated transaction;
(D) any statement or any other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect;
(E) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or certificate that does not strictly comply with
the terms of such Letter of Credit;
(F) any exchange, release or non-perfection of any Collateral or
other collateral, or any release or amendment or waiver of or consent to
departure from any Guaranty or any other guarantee, for all or any of the
Obligations of the Borrower in respect of the L/C Related Documents; or
(G) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including, without limitation, any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Borrower or a guarantor.
SECTION 2.05. Termination or Reduction of the Commitments. (a)
Optional. The Borrower may, upon at least five Business Days' notice to the
Administrative Agent, terminate in whole or reduce in part the unused portions
of the Term A Commitments, the Term B Commitments and the Letter of Credit
Facility and the Unused Revolving Credit Commitments; provided, however, that
each partial reduction of a Facility (i) shall be in an aggregate amount of
$1,000,000 or an integral multiple of $1,000,000 in excess thereof and (ii)
shall be made ratably among the Appropriate Lenders in accordance with their
Commitments with respect to such Facility.
(b) Mandatory. (i) On the date of the Term A Borrowing, after giving
effect to such Term A Borrowing, and from time to time thereafter upon each
repayment or prepayment of the Term A Advances, the aggregate Term A Commitments
of the Term A Lenders shall be automatically and permanently reduced, on a pro
rata basis, by an amount equal to the amount by which the aggregate Term A
Commitments immediately prior to such reduction exceed the aggregate unpaid
principal amount of the Term A Advances then outstanding.
(ii) On the date of the Term B Borrowing, after giving effect to
such Term B Borrowing, and from time to time thereafter upon each repayment or
prepayment of the Term B Advances, the aggregate Term B Commitments of the Term
B Lenders shall be automatically and permanently reduced, on a pro rata
<PAGE> 37
32
basis, by an amount equal to the amount by which the aggregate Term B
Commitments immediately prior to such reduction exceed the aggregate unpaid
principal amount of the Term B Advances then outstanding.
(iii) The Commitments of the Revolving Credit Lenders shall be
terminated in whole on the applicable Termination Date.
(iv) The Letter of Credit Facility shall be permanently reduced from
time to time on the date of each reduction in the Revolving Credit Facility by
the amount, if any, by which the amount of the Letter of Credit Facility exceeds
the Revolving Credit Facility after giving effect to such reduction of the
Revolving Credit Facility.
SECTION 2.06. Prepayments. (a) Optional. The Borrower may, upon at
least five Business Days' notice to the Administrative Agent stating the
proposed date and aggregate principal amount of the prepayment, and if such
notice is given the Borrower shall, prepay the outstanding aggregate principal
amount of the Advances comprising part of the same Borrowing in whole or ratably
in part, together with (i) accrued interest to the date of such prepayment on
the aggregate principal amount prepaid; provided, however, that (x) each partial
prepayment shall be in an aggregate principal amount of $1,000,000 or an
integral multiple of $1,000,000 in excess thereof and (y) if any prepayment of a
Eurodollar Rate Advance is made on a date other than the last day of an Interest
Period for such Advance the Borrower shall also pay any amounts owing pursuant
to Section 8.04(c). Each such prepayment (other than prepayments of the
Revolving Credit Facility) shall be applied ratably first to the Term B Facility
and to the installments thereof in inverse order of maturity and second to the
Term A Facility and to the installments thereof in inverse order of maturity.
(b) Mandatory. (i) (A) The Borrower shall, on the 45th day following
the end of each fiscal quarter of the Borrower ending prior to the High Yield
Date, prepay an aggregate principal amount of the Advances comprising part of
the same Borrowings equal to seventy-five per cent (75%) of the amount of Excess
Cash Flow for such fiscal quarter and (B) the Borrower shall, on the 90th day
following the end of each Fiscal Year ending on or after the High Yield Date,
prepay an aggregate principal amount of the Advances comprising part of the same
Borrowings equal to fifty percent (50%) of the amount of Excess Cash Flow for
such Fiscal Year, provided, however, that in no event shall the Borrower be
required, under this clause (B), to prepay the Term A Advances to the extent
that after giving effect to such prepayment, the amount of the Term A Advances
then outstanding shall be less than $10,000,000. Each such prepayment shall be
applied ratably first to the Term B Facility and to the installments thereof in
inverse order of maturity, second to the Term A Facility and to the installments
thereof in inverse order of maturity and third to the Revolving Credit Facility
as set forth in clause (v) below.
(ii) The Borrower shall, on the date of receipt of the Net Cash
Proceeds by any Loan Party or any of its Subsidiaries (or, in the case of clause
(A) below, such later date as may be specified in Section 5.02(e), and in the
case of clause (D) below, such later date as may be specified in the Capital
Escrow Agreement) from (A) the sale, lease, transfer or other disposition of any
assets of the Borrower or any of its Subsidiaries (other than any sale, lease,
transfer or other disposition of assets pursuant to clause (i), (ii), (iv) or
(v) of Section 5.02(e)), (B) the incurrence or issuance by any Loan Party or any
of its Subsidiaries of any Debt, including, without limitation, the Refinancing
Securities (other than Debt incurred or issued pursuant to Section
5.02(b)(i)(B), (ii) or (iii)), (C) the sale or issuance by any Loan Party or any
of its Subsidiaries of any capital stock or other ownership or profit interest
(other than in respect of stock options or warrants currently outstanding or
hereafter issued pursuant to any stock option plan or other compensation
arrangement approved by the Borrower's Board of Directors and other than
contributions to capital of any Loan Party), any securities convertible into or
exchangeable for capital stock or other ownership or profit interest or any
warrants, rights or options to acquire capital stock or other ownership or
profit interest, (D) any contribution to the capital of any
<PAGE> 38
33
Loan Party, subject, with respect to any such contributions pursuant to the
Capital Contribution Agreement, to the terms and conditions thereof and of the
Capital Escrow Agreement, and (E) any Extraordinary Receipt received by or paid
to or for the account of any Loan Party or any of its Subsidiaries and not
otherwise included in clause (A), (B), (C) or (D) above, prepay an aggregate
principal amount of the Advances comprising part of the same Borrowings equal to
the amount of such Net Cash Proceeds, provided, however, that in the case of
prepayments from the incurrence or issuance of Debt pursuant to clause (B) above
after the Bridge Repayment Date, no such Debt may be incurred or issued unless
the Net Cash Proceeds thereof shall be sufficient to, and shall be applied to,
prepay in full all Advances then outstanding hereunder and all other amounts
payable under the Loan Documents, and deposit in the L/C Cash Collateral Account
an amount equal to 105% of the Available Amount of the Letters of Credit then
outstanding. Upon the drawing of any Letter of Credit for which funds are on
deposit in the L/C Cash Collateral Account, such funds shall be applied to
reimburse the Issuing Bank or the Revolving Credit Lenders, as applicable. Each
such prepayment pursuant to clause (A) or (E) above shall be applied ratably
first to the Term A Facility and the Term B Facility on a pro rata basis and to
the installments of each such Facility in inverse order of maturity and second
to the Revolving Credit Facility as set forth in clause (v) below, and all other
prepayments pursuant to this Section 2.06(b)(ii) shall be applied ratably first
to the Term B Facility and to the installments thereof in inverse order of
maturity, second to the Term A Facility and to the installments thereof in
inverse order of maturity and third to the Revolving Credit Facility as set
forth in clause (v) below.
(iii) The Borrower shall, on each Business Day, prepay an aggregate
principal amount of the Revolving Credit Advances comprising part of the same
Borrowings and the Letter of Credit Advances equal to the amount by which (A)
the sum of the aggregate principal amount of (x) the Revolving Credit Advances
and (y) the Letter of Credit Advances then outstanding plus the aggregate
Available Amount of all Letters of Credit then outstanding exceeds (B) the
lesser of the Revolving Credit Facility and the Borrowing Base on such Business
Day.
(iv) The Borrower shall, on each Business Day, pay to the
Administrative Agent for deposit in the L/C Cash Collateral Account an amount
sufficient to cause the aggregate amount on deposit in such Account to equal the
amount by which the aggregate Available Amount of all Letters of Credit then
outstanding exceeds the Letter of Credit Facility on such Business Day.
(v) Prepayments of the Revolving Credit Facility made pursuant to
clause (i), (ii) or (iii) above shall be first applied to prepay Revolving
Credit Advances then outstanding comprising part of the same Borrowings until
such Advances are paid in full, and second applied to prepay Letter of Credit
Advances then outstanding until such Advances are paid in full.
(vi) All prepayments under this subsection (b) shall be made
together with accrued interest but without premium to the date of such
prepayment on the principal amount prepaid.
SECTION 2.07. Interest. (a) Scheduled Interest. The Borrower shall
pay interest on the unpaid principal amount of each Advance owing to each Lender
from the date of such Advance until such principal amount shall be paid in full,
at the following rates per annum:
(i) Alternate Base Rate Advances. During such periods as such
Advance is an Alternate Base Rate Advance, a rate per annum equal at all
times to the sum of (A) the Alternate Base Rate in effect from time to
time plus (B) the Applicable Margin in effect from time to time, payable
in arrears quarterly on the last day of each fiscal quarter during such
periods and on the date such Alternate Base Rate Advance shall be
Converted or paid in full;
(ii) Eurodollar Rate Advances. Prior to the Bridge Repayment Date,
during such periods as such Advance is a Eurodollar Rate Advance, a rate
per annum equal at all times during each Interest
<PAGE> 39
34
Period for such Advance to the sum of (A) the Eurodollar Rate for such
Interest Period for such Advance plus (B) the Applicable Margin in effect
from time to time, payable in arrears on the last day of such Interest
Period and, if such Interest Period has a duration of more than three
months, on each day that occurs during such Interest Period every three
months from the first day of such Interest Period and on the date such
Eurodollar Rate Advance shall be Converted or paid in full and on and
after the Bridge Repayment Date, during such periods as such Advance is a
Eurodollar Rate Advance, a rate per annum equal at all times during each
Interest Period for such Advance to the sum of (A) the Eurodollar Rate for
such Interest Period for such Advance plus (B) the Applicable Margin in
effect from time to time, payable in arrears monthly on the last day of
each month during such period and on the date such Eurodollar Rate Advance
shall be Converted or paid in full;
provided, however, that if the rate of interest payable on any Bridge Advance
shall exceed 14.0%, the Borrower may elect, so long as no Default has occurred
and is continuing, not to pay such excess interest in cash, but instead to
capitalize such excess interest, which shall thereafter be deemed to be
additional principal owing hereunder and under the respective Note and which
shall bear interest at the same rate, and be payable at the same times, as such
Bridge Advance; provided, further, that, except as provided in Section 2.07(b),
in no event shall the rate of interest payable on any Bridge Advance exceed
16.0% per annum at any time.
(b) Default Interest. Upon the occurrence and during the continuance
of a Default, the Borrower shall pay interest on (i) the unpaid principal amount
of each Advance owing to each Lender, payable in arrears on the dates referred
to in clause (a)(i) or (a)(ii) above and on demand, at a rate per annum equal at
all times to 2% per annum above the rate per annum required to be paid on such
Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the fullest
extent permitted by law, the amount of any interest, fee or other amount payable
under the Loan Documents that is not paid when due, from the date such amount
shall be due until such amount shall be paid in full, payable in arrears on the
date such amount shall be paid in full and on demand, at a rate per annum equal
at all times to 2% per annum above the rate per annum required to be paid, in
the case of interest, on the Type of Advance on which such interest has accrued
pursuant to clause (a)(i) or (a)(ii) above, and, in all other cases, on
Alternate Base Rate Advances pursuant to clause (a)(i) above.
(c) Notice of Interest Rate. Promptly after receipt of a Notice of
Borrowing pursuant to Section 2.02(a), the Administrative Agent shall give
notice to the Borrower and each Appropriate Lender of the applicable interest
rate determined by the Administrative Agent for purposes of clause (a)(i) or
(ii) above.
SECTION 2.08. Fees. (a) Commitment Fee. The Borrower shall pay to
the Administrative Agent for the account of the Lenders a commitment fee, from
the date hereof in the case of each Initial Lender and from the effective date
specified in the Assignment and Acceptance pursuant to which it became a Lender
in the case of each other Lender until the applicable Termination Date, payable
in arrears quarterly on the last Business Day of each fiscal quarter of the
Borrower, commencing March 31, 1998, and on the applicable Termination Date, at
the rate of 1/2 of 1% per annum on the average daily Unused Revolving Credit
Commitment of such Lender; provided, however, that any commitment fee accrued
with respect to any of the Commitments of a Defaulting Lender during the period
prior to the time such Lender became a Defaulting Lender and unpaid at such time
shall not be payable by the Borrower so long as such Lender shall be a
Defaulting Lender except to the extent that such commitment fee shall otherwise
have been due and payable by the Borrower prior to such time; and provided
further that no commitment fee shall accrue on any of the Commitments of a
Defaulting Lender so long as such Lender shall be a Defaulting Lender.
(b) Letter of Credit Fees, Etc. The Borrower shall pay to the
Administrative Agent for the account of each Revolving Credit Lender a
commission, payable in arrears quarterly on the last Business Day of each fiscal
quarter, commencing March 31, 1998, and on the earliest to occur of the full
drawing, expiration,
<PAGE> 40
35
termination or cancellation of any such Letter of Credit and on the applicable
Termination Date, on such Lender's Pro Rata Share of the sum of the average
daily aggregate Available Amount during such quarter of the sum of all Letters
of Credit then outstanding plus the average daily Letter of Credit Advances
outstanding during such quarter at a rate equal to 2.0% per annum.
(c) Administrative Agent's Fees. The Borrower shall pay to the
Administrative Agent for its own account the fees set forth in the Fee Letter
and such other fees as may from time to time be agreed between the Borrower and
the Administrative Agent.
SECTION 2.09. Conversion of Advances. (a) Optional. The Borrower may
on any Business Day, upon notice given to the Administrative Agent not later
than 10:00 A.M. (Charlotte, North Carolina time) on the third Business Day prior
to the date of the proposed Conversion and subject to the provisions of Sections
2.07 and 2.10, Convert all or any portion of the Term A Advances or Term B
Advances of one Type comprising the same Borrowing into Advances of the other
Type; provided, however, that any Conversion of Eurodollar Rate Advances into
Alternate Base Rate Advances shall be made only on the last day of an Interest
Period for such Eurodollar Rate Advances, any Conversion of Alternate Base Rate
Advances into Eurodollar Rate Advances shall be in an amount not less than the
minimum amount specified in Section 2.02(b), no Conversion of any Advances shall
result in more separate Borrowings than permitted under Section 2.02(b) and each
Conversion of Advances comprising part of the same Borrowing under any Facility
shall be made ratably among the Appropriate Lenders in accordance with their
Commitments under such Facility. Each such notice of Conversion shall, within
the restrictions specified above, specify (i) the date of such Conversion, (ii)
the Advances to be Converted and (iii) if such Conversion is into Eurodollar
Rate Advances, the duration of the initial Interest Period for such Advances.
Each notice of Conversion shall be irrevocable and binding on the Borrower.
(b) Mandatory. (i) On the date on which the aggregate unpaid
principal amount of Term A Advances or Term B Advances which are Eurodollar Rate
Advances comprising any Borrowing shall be reduced, by payment or prepayment or
otherwise, to less than $1,000,000, such Advances shall automatically Convert
into Alternate Base Rate Advances.
(ii) If the Borrower shall fail to select the duration of any
Interest Period for any Term A Advances or Term B Advances which are Eurodollar
Rate Advances in accordance with the provisions contained in the definition of
"Interest Period" in Section 1.01, the Administrative Agent will forthwith so
notify the Borrower and the Appropriate Lenders, whereupon each such Eurodollar
Rate Advance will automatically, on the last day of the then existing Interest
Period therefor, Convert into an Alternate Base Rate Advance.
(iii) Upon the occurrence and during the continuance of any Default,
with respect to Term A Advances and Term B Advances (x) each Term A Advance or
Term B Advance which is a Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into an
Alternate Base Rate Advance and (y) the obligation of the Lenders to make, or to
Convert Advances into, Eurodollar Rate Advances shall be suspended.
SECTION 2.10. Increased Costs, Etc. (a) If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to any Lender Party of agreeing to make
or of making, funding or maintaining Eurodollar Rate Advances or of agreeing to
issue or of issuing or maintaining Letters of Credit or of agreeing to make or
of making or maintaining Letter of Credit Advances (excluding, for purposes of
this Section 2.10, any such increased costs resulting from (x) Taxes or Other
Taxes (as to which Section 2.12 shall govern) and (y) changes in the basis of
taxation of overall net income or overall gross income by the United States or
by the foreign
<PAGE> 41
36
jurisdiction or state under the laws of which such Lender Party is organized or
has its Applicable Lending Office or any political subdivision thereof), then
the Borrower shall from time to time, upon demand by such Lender Party (with a
copy of such demand to the Administrative Agent), pay to the Administrative
Agent for the account of such Lender Party additional amounts sufficient to
compensate such Lender Party for such increased cost. A certificate as to the
amount of such increased cost, submitted to the Borrower by such Lender Party,
shall be conclusive and binding for all purposes, absent manifest error.
(b) If any Lender Party determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender Party or any corporation controlling such Lender Party and that the
amount of such capital is increased by or based upon the existence of such
Lender Party's commitment to lend or to issue Letters of Credit hereunder and
other commitments of such type or the issuance or maintenance of the Letters of
Credit (or similar contingent obligations), then, upon demand by such Lender
Party (with a copy of such demand to the Administrative Agent), the Borrower
shall pay to the Administrative Agent for the account of such Lender Party, from
time to time as specified by such Lender Party, additional amounts sufficient to
compensate such Lender Party in the light of such circumstances, to the extent
that such Lender Party reasonably determines such increase in capital to be
allocable to the existence of such Lender Party's commitment to lend or to issue
Letters of Credit hereunder or to the issuance or maintenance of any Letters of
Credit. A certificate as to such amounts submitted to the Borrower by such
Lender Party shall be conclusive and binding for all purposes, absent manifest
error.
(c) If, with respect to any Eurodollar Rate Advances under any
Facility, Lenders notify the Administrative Agent that the Eurodollar Rate for
any Interest Period for such Advances will not adequately reflect the cost to
such Lenders of making, funding or maintaining their Eurodollar Rate Advances
for such Interest Period, the Administrative Agent shall forthwith so notify the
Borrower and the Appropriate Lenders, whereupon (i) each such Eurodollar Rate
Advance under such Facility will automatically, on the last day of the then
existing Interest Period therefor, Convert into an Alternate Base Rate Advance
and (ii) the obligation of the Appropriate Lenders to make, or to Convert
Advances into, Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower that such Lenders have determined
that the circumstances causing such suspension no longer exist.
(d) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful, or any central bank or other governmental
authority shall assert that it is unlawful, for any Lender or its Eurodollar
Lending Office to perform its obligations hereunder to make Eurodollar Rate
Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder,
then, on notice thereof and demand therefor by such Lender to the Borrower
through the Administrative Agent, (i) each Eurodollar Rate Advance under each
Facility under which such Lender has a Commitment will automatically, upon such
demand, Convert into an Alternate Base Rate Advance and (ii) the obligation of
the Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended until the Administrative Agent shall notify the
Borrower that such Lender has determined that the circumstances causing such
suspension no longer exist.
SECTION 2.11. Payments and Computations. (a) The Borrower shall make
each payment hereunder and under the Notes, irrespective of any right of
counterclaim or set-off (except as otherwise provided in Section 2.15), not
later than 11:00 A.M. (Charlotte, North Carolina time) on the day when due in
U.S. dollars to the Administrative Agent at the Administrative Agent's Account
in same day funds. The Administrative Agent will promptly thereafter cause like
funds to be distributed (i) if such payment by the Borrower is in respect of
principal, interest, commitment fees or any other Obligation then payable
hereunder and under the Notes to more than one Lender Party, to such Lender
Parties for the account of their respective Applicable Lending Offices
<PAGE> 42
37
ratably in accordance with the amounts of such respective Obligations then
payable to such Lender Parties and (ii) if such payment by the Borrower is in
respect of any Obligation then payable hereunder to one Lender Party, to such
Lender Party for the account of its Applicable Lending Office, in each case to
be applied in accordance with the terms of this Agreement. Upon its acceptance
of an Assignment and Acceptance and recording of the information contained
therein in the Register pursuant to Section 8.07(d), from and after the
effective date of such Assignment and Acceptance, the Administrative Agent shall
make all payments hereunder and under the Notes in respect of the interest
assigned thereby to the Lender Party assignee thereunder, and the parties to
such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) If the Administrative Agent receives funds for application to
the Obligations under the Loan Documents under circumstances for which the Loan
Documents do not specify the Advances or the Facility to which, or the manner in
which, such funds are to be applied, the Administrative Agent may, but shall not
be obligated to, elect to distribute such funds to each Lender Party ratably in
accordance with such Lender Party's proportionate share of the principal amount
of all outstanding Advances and the Available Amount of all Letters of Credit
then outstanding, in repayment or prepayment of such of the outstanding Advances
or other Obligations owed to such Lender Party, and for application to such
principal installments, as the Administrative Agent shall direct.
(c) The Borrower hereby authorizes each Lender Party, if and to the
extent payment owed to such Lender Party is not made when due hereunder or, in
the case of a Lender, under the Note held by such Lender, to charge from time to
time against any or all of the Borrower's accounts with such Lender Party any
amount so due.
(d) All computations of interest, fees and Letter of Credit
commissions shall be made by the Administrative Agent on the basis of a year of
360 days, in each case for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest,
fees or commissions are payable. Each determination by the Administrative Agent
of an interest rate, fee or commission hereunder shall be conclusive and binding
for all purposes, absent manifest error.
(e) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or commitment fee, as
the case may be; provided, however, that, if such extension would cause payment
of interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(f) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to any Lender Party
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each such Lender Party
on such due date an amount equal to the amount then due such Lender Party. If
and to the extent the Borrower shall not have so made such payment in full to
the Administrative Agent, each such Lender Party shall repay to the
Administrative Agent forthwith on demand such amount distributed to such Lender
Party together with interest thereon, for each day from the date such amount is
distributed to such Lender Party until the date such Lender Party repays such
amount to the Administrative Agent, at the Federal Funds Rate.
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38
SECTION 2.12. Taxes. (a) Any and all payments by the Borrower
hereunder or under the Notes shall be made, in accordance with Section 2.11,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender Party and the
Administrative Agent, taxes that are imposed on its overall net income by the
United States and taxes that are imposed on its overall net income (and
franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction
under the laws of which such Lender Party or the Administrative Agent (as the
case may be) is organized or any political subdivision thereof and, in the case
of each Lender Party, taxes that are imposed on its overall net income (and
franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction of
such Lender Party's Applicable Lending Office or in which such Lender Party is,
without regard to any sums payable hereunder, doing business or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities in respect of payments hereunder or under
the Notes being hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Note to any Lender Party or the Administrative Agent, (i)
the sum payable by the Borrower shall be increased as may be necessary so that
after the Borrower and the Administrative Agent have made all required
deductions (including deductions applicable to additional sums payable under
this Section 2.12) such Lender Party or the Administrative Agent (as the case
may be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make all such deductions and (iii)
the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any present or future stamp,
documentary, excise, property or similar taxes, charges or levies that arise
from any payment made hereunder or under the Notes or from the execution,
delivery or registration of, performance under, or otherwise with respect to,
this Agreement or the Notes (hereinafter referred to as "Other Taxes").
(c) The Borrower shall indemnify each Lender Party and the
Administrative Agent for and hold them harmless against the full amount of Taxes
and Other Taxes, and for the full amount of taxes of any kind imposed by any
jurisdiction on amounts payable under this Section 2.12, imposed on or paid by
such Lender Party or the Administrative Agent (as the case may be) and any
liability (including penalties, additions to tax, interest and expenses) arising
therefrom or with respect thereto. This indemnification shall be made within 30
days from the date such Lender Party or the Administrative Agent (as the case
may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower shall furnish to the Administrative Agent, at its address referred to
in Section 8.02, the original or a certified copy of a receipt evidencing such
payment. In the case of any payment hereunder or under the Notes by or on behalf
of the Borrower through an account or branch outside the United States or by or
on behalf of the Borrower by a payor that is not a United States person, if the
Borrower determines that no Taxes are payable in respect thereof, the Borrower
shall furnish, or shall cause such payor to furnish, to the Administrative
Agent, at such address, an opinion of counsel acceptable to the Administrative
Agent stating that such payment is exempt from Taxes. For purposes of this
subsection (d) and subsection (e) of this Section 2.12, the terms "United
States" and "United States person" shall have the meanings specified in Section
7701 of the Internal Revenue Code.
(e) Each Lender Party organized under the laws of a jurisdiction
outside the United States shall, on or prior to the date of its execution and
delivery of this Agreement in the case of each Initial Lender or Initial Issuing
Bank, as the case may be, and on the date of the Assignment and Acceptance
pursuant to which it becomes a Lender Party in the case of each other Lender
Party, and from time to time thereafter as requested in writing by the Borrower
(but only so long thereafter as such Lender Party remains lawfully able to do
so), provide each of the Administrative Agent and the Borrower with two original
Internal Revenue Service forms 1001 or 4224 or an applicable successor form. If
the forms provided by a Lender Party at the time such Lender Party first
<PAGE> 44
39
becomes a party to this Agreement indicate a United States interest withholding
tax rate in excess of zero, withholding tax at such rate shall be considered
excluded from Taxes unless and until such Lender Party provides the appropriate
forms certifying that a lesser rate applies, whereupon withholding tax at such
lesser rate only shall be considered excluded from Taxes for periods governed by
such forms; provided, however, that, if at the date of the Assignment and
Acceptance pursuant to which a Lender Party becomes a party to this Agreement,
the Lender Party assignor was entitled to payments under subsection (a) of this
Section 2.12 in respect of United States withholding tax with respect to
interest paid at such date, then, to such extent, the term Taxes shall include
(in addition to withholding taxes that may be imposed in the future or other
amounts otherwise includable in Taxes) United States withholding tax, if any,
applicable with respect to the Lender Party assignee on such date. If any form
or document referred to in this subsection (e) requires the disclosure of
information, other than information necessary to compute the tax payable and
information required on the date hereof by Internal Revenue Service form 1001 or
4224 or an applicable successor form, that the Lender Party reasonably considers
to be confidential, the Lender Party shall give notice thereof to the Borrower
and shall not be obligated to include in such form or document such confidential
information.
(f) For any period with respect to which a Lender Party has failed
to provide the Borrower with the appropriate form described in subsection (e)
above (other than if such failure is due to a change in law occurring after the
date on which a form originally was required to be provided or if such form
otherwise is not required under subsection (e) above), such Lender Party shall
not be entitled to indemnification under subsection (a) or (c) of this Section
2.12 with respect to Taxes imposed by the United States by reason of such
failure; provided, however, that should a Lender Party become subject to Taxes
because of its failure to deliver a form required hereunder, the Borrower shall
take such steps as such Lender Party shall reasonably request to assist such
Lender Party to recover such Taxes.
(g) If the Internal Revenue Service or any other governmental
authority of the United States or other jurisdiction asserts a claim that the
Administrative Agent did not properly withhold tax from amounts paid to or for
the account of any Lender Party (because the appropriate form was not delivered
or was not properly executed, or because such Lender Party failed to notify the
Administrative Agent of a change in circumstances which rendered the exemption
from, or reduction of, withholding tax ineffective, or for any other reason)
such Lender Party shall indemnify the Administrative Agent fully for all amounts
paid, directly or indirectly, by the Administrative Agent as tax or otherwise,
including penalties and interest, and including any taxes imposed by any
jurisdiction on the amounts payable to the Administrative Agent under this
Section, together with all cost and expenses (including fees and disbursements
of counsel). The obligation of the Lender Parties under this subsection shall
survive the payment of all obligations and the resignation or replacement of the
Administrative Agent.
SECTION 2.13. Sharing of Payments, Etc. If any Lender Party shall
obtain at any time any payment (whether voluntary, involuntary, through the
exercise of any right of set-off, or otherwise) (a) on account of Obligations
due and payable to such Lender Party hereunder and under the Notes at such time
in excess of its ratable share (according to the proportion of (i) the amount of
such Obligations due and payable to such Lender Party at such time to (ii) the
aggregate amount of the Obligations due and payable to all Lender Parties
hereunder and under the Notes at such time) of payments on account of the
Obligations due and payable to all Lender Parties hereunder and under the Notes
at such time obtained by all the Lender Parties at such time or (b) on account
of Obligations owing (but not due and payable) to such Lender Party hereunder
and under the Notes at such time in excess of its ratable share (according to
the proportion of (i) the amount of such Obligations owing to such Lender Party
at such time to (ii) the aggregate amount of the Obligations owing (but not due
and payable) to all Lender Parties hereunder and under the Notes at such time)
of payments on account of the Obligations owing (but not due and payable) to all
Lender Parties hereunder and under the Notes at such time obtained by all of the
Lender Parties at such time, such Lender Party shall forthwith purchase from the
other Lender Parties such participations
<PAGE> 45
40
in the Obligations due and payable or owing to them, as the case may be, as
shall be necessary to cause such purchasing Lender Party to share the excess
payment with each of them; provided, however, that if all or any portion of such
excess payment is thereafter recovered from such purchasing Lender Party, such
purchase from each other Lender Party shall be rescinded and such other Lender
Party shall repay to the purchasing Lender Party the purchase price to the
extent of such Lender Party's ratable share (according to the proportion of (i)
the purchase price paid to such Lender Party to (ii) the aggregate purchase
price paid to all Lender Parties) of such recovery together with an amount equal
to such Lender Party's ratable share (according to the proportion of (i) the
amount of such other Lender Party's required repayment to (ii) the total amount
so recovered from the purchasing Lender Party) of any interest or other amount
paid or payable by the purchasing Lender Party in respect of the total amount so
recovered. The Borrower agrees that any Lender Party so purchasing a
participation from another Lender Party pursuant to this Section 2.13 may, to
the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender Party were the direct creditor of the Borrower in the amount of
such participation.
SECTION 2.14. Use of Proceeds. The proceeds of Advances and
issuances of Letters of Credit shall be available (and the Borrower agrees that
it shall use such proceeds and Letters of Credit) solely to finance the
Acquisition, refinance certain indebtedness of the Subsidiaries of Borrower, pay
transaction fees and expenses, provide working capital for the Borrower and its
Subsidiaries and for other general corporate purposes of the Borrower and its
Subsidiaries.
SECTION 2.15. Defaulting Lenders. (a) In the event that, at any one
time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting
Lender shall owe a Defaulted Advance to the Borrower and (iii) the Borrower
shall be required to make any payment hereunder or under any other Loan Document
to or for the account of such Defaulting Lender, then the Borrower may, so long
as no Default shall occur or be continuing at such time and to the fullest
extent permitted by applicable law, set-off and otherwise apply the Obligation
of the Borrower to make such payment to or for the account of such Defaulting
Lender against the obligation of such Defaulting Lender to make such Defaulted
Advance. In the event that, on any date, the Borrower shall so set-off and
otherwise apply its obligation to make any such payment against the obligation
of such Defaulting Lender to make any such Defaulted Advance on or prior to such
date, the amount so set-off and otherwise applied by the Borrower shall
constitute for all purposes of this Agreement and the other Loan Documents an
Advance by such Defaulting Lender made on the date under the Facility pursuant
to which such Defaulted Advance was originally required to have been made
pursuant to Section 2.01. Such Advance shall be of the same Type as such
Defaulted Advance and shall be considered, for all purposes of this Agreement,
to comprise part of the Borrowing in connection with which such Defaulted
Advance was originally required to have been made pursuant to Section 2.01, even
if the other Advances comprising such Borrowing shall be Eurodollar Rate
Advances on the date such Advance is deemed to be made pursuant to this
subsection (a). The Borrower shall notify the Administrative Agent at any time
the Borrower exercises its right of set-off pursuant to this subsection (a) and
shall set forth in such notice (A) the name of the Defaulting Lender and the
Defaulted Advance required to be made by such Defaulting Lender and (B) the
amount set-off and otherwise applied in respect of such Defaulted Advance
pursuant to this subsection (a). Any portion of such payment otherwise required
to be made by the Borrower to or for the account of such Defaulting Lender which
is paid by the Borrower, after giving effect to the amount set-off and otherwise
applied by the Borrower pursuant to this subsection (a), shall be applied by the
Administrative Agent as specified in subsection (b) or (c) of this Section 2.15.
(b) In the event that, at any one time, (i) any Lender Party shall
be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount
to the Administrative Agent or any of the other Lender Parties and (iii) the
Borrower shall make any payment hereunder or under any other Loan Document to
the Administrative Agent for the account of such Defaulting Lender, then the
Administrative Agent may, on its behalf or on behalf of such other Lender
Parties and to the fullest extent permitted by applicable law, apply at such
time
<PAGE> 46
41
the amount so paid by the Borrower to or for the account of such Defaulting
Lender to the payment of each such Defaulted Amount to the extent required to
pay such Defaulted Amount. In the event that the Administrative Agent shall so
apply any such amount to the payment of any such Defaulted Amount on any date,
the amount so applied by the Administrative Agent shall constitute for all
purposes of this Agreement and the other Loan Documents payment, to such extent,
of such Defaulted Amount on such date. Any such amount so applied by the
Administrative Agent shall be retained by the Administrative Agent or
distributed by the Administrative Agent to such other Lender Parties, ratably in
accordance with the respective portions of such Defaulted Amounts payable at
such time to the Administrative Agent and such other Lender Parties and, if the
amount of such payment made by the Borrower shall at such time be insufficient
to pay all Defaulted Amounts owing at such time to the Administrative Agent and
the other Lender Parties, in the following order of priority:
(i) first, to the Administrative Agent for any Defaulted Amount then
owing to the Administrative Agent; and
(ii) second, to any other Lender Parties for any Defaulted Amounts
then owing to such other Lender Parties, ratably in accordance with such
respective Defaulted Amounts then owing to such other Lender Parties.
Any portion of such amount paid by the Borrower for the account of such
Defaulting Lender remaining, after giving effect to the amount applied by the
Administrative Agent pursuant to this subsection (b), shall be applied by the
Administrative Agent as specified in subsection (c) of this Section 2.15.
(c) In the event that, at any one time, (i) any Lender Party shall
be a Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted
Advance or a Defaulted Amount and (iii) the Borrower, the Administrative Agent
or any other Lender Party shall be required to pay or distribute any amount
hereunder or under any other Loan Document to or for the account of such
Defaulting Lender, then the Borrower or such other Lender Party shall pay such
amount to the Administrative Agent to be held by the Administrative Agent, to
the fullest extent permitted by applicable law, in escrow or the Administrative
Agent shall, to the fullest extent permitted by applicable law, hold in escrow
such amount otherwise held by it. Any funds held by the Administrative Agent in
escrow under this subsection (c) shall be deposited by the Administrative Agent
in an account with NationsBridge (or, after the Bridge Repayment Date,
NationsCredit), in the name and under the control of the Administrative Agent,
but subject to the provisions of this subsection (c). The terms applicable to
such account, including the rate of interest payable with respect to the credit
balance of such account from time to time, shall be NationsBridge's (or, after
the Bridge Repayment Date, NationsCredit's) standard terms applicable to escrow
accounts maintained with it. Any interest credited to such account from time to
time shall be held by the Administrative Agent in escrow under, and applied by
the Administrative Agent from time to time in accordance with the provisions of,
this subsection (c). The Administrative Agent shall, to the fullest extent
permitted by applicable law, apply all funds so held in escrow from time to time
to the extent necessary to make any Advances required to be made by such
Defaulting Lender and to pay any amount payable by such Defaulting Lender
hereunder and under the other Loan Documents to the Administrative Agent or any
other Lender Party, as and when such Advances or amounts are required to be made
or paid and, if the amount so held in escrow shall at any time be insufficient
to make and pay all such Advances and amounts required to be made or paid at
such time, in the following order of priority:
(i) first, to the Administrative Agent for any amount then due and
payable by such Defaulting Lender to the Administrative Agent hereunder;
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42
(ii) second, to any other Lender Parties for any amount then due and
payable by such Defaulting Lender to such other Lender Parties hereunder,
ratably in accordance with such respective amounts then due and payable to
such other Lender Parties; and
(iii) third, to the Borrower for any Advance then required to be
made by such Defaulting Lender pursuant to a Commitment of such Defaulting
Lender.
In the event that any Lender Party that is a Defaulting Lender shall, at any
time, cease to be a Defaulting Lender, any funds held by the Administrative
Agent in escrow at such time with respect to such Lender Party shall be
distributed by the Administrative Agent to such Lender Party and applied by such
Lender Party to the Obligations owing to such Lender Party at such time under
this Agreement and the other Loan Documents ratably in accordance with the
respective amounts of such Obligations outstanding at such time.
(d) The rights and remedies against a Defaulting Lender under this
Section 2.15 are in addition to other rights and remedies that the Borrower may
have against such Defaulting Lender with respect to any Defaulted Advance and
that the Administrative Agent or any Lender Party may have against such
Defaulting Lender with respect to any Defaulted Amount.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Initial Extension of Credit.
The obligation of each Lender to make an Advance or of the Issuing Bank to issue
a Letter of Credit on the occasion of the Initial Extension of Credit hereunder
is subject to the satisfaction of the following conditions precedent before or
concurrently with the Initial Extension of Credit:
(a) (i) The Lender Parties shall be satisfied with the corporate and
legal structure and capitalization of each Loan Party and each of its
Subsidiaries, including the terms and conditions of their respective
Constitutive Documents and each class of capital stock or other equity
interest of each Loan Party and each such Subsidiary and of each agreement
or instrument relating to such structure or capitalization and (ii) 100%
of the capital stock of Afa Polytek B.V., a corporation organized under
the laws of the Netherlands, shall have been contributed to the Borrower.
(b) All of the Related Documents shall be in full force and effect,
in form and substance satisfactory to the Lender Parties and no amendment
or waiver thereof, or consent to departure from any provision thereof,
shall have been made, unless satisfactory to the Lender Parties.
(c) The Acquisition shall have been consummated or shall be
consummated concurrently with the Initial Extension of Credit, in
accordance with the terms of the Purchase Agreement, and in compliance
with all applicable Requirements of Law; the purchase price paid for the
Acquired Business shall be equal to $93,670,000, $2,000,000 of which will
be held in escrow pursuant to an agreement between the Seller and the
Borrower; on the Closing Date, the Seller will have made a cash payment to
the Borrower pursuant to Section 7.12A of the Purchase Agreement equal to
30.3% of the fees charged to the Borrower for providing the Facilities; no
fees or similar amounts payable by the Borrower to the Owners in
connection with the Acquisition shall have been paid; and the aggregate
fees and expenses incurred or to be incurred by the Borrower and its
Subsidiaries in connection with the Acquisition shall not have exceeded
$4,600,000; all such fees and expenses shall have been disclosed on an
itemized basis
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43
to the Administrative Agent and all such fees and expenses shall be on
terms and conditions and in amounts satisfactory to the Administrative
Agent.
(d) All of the governmental authorizations, and all of the consents,
approvals and authorizations of, and notices and filings to or with, and
other actions by, any other Person necessary in connection with any aspect
of the Acquisition, any of the Loan Documents or the Related Documents or
any of the other transactions contemplated thereby, other than the
governmental authorizations, and the consents, approvals, authorizations,
notices, filings and other actions described on Schedule 4.01(d) hereto,
shall have been obtained (without the imposition of any conditions that
are not reasonably acceptable to the Lender Parties) and shall remain in
full force and effect; and all applicable waiting periods shall have
expired without any action being taken by any competent authority.
(e) The Lender Parties shall be satisfied that (i) after giving
effect to the Acquisition, the aggregate Unused Revolving Credit
Commitments shall not be less than $27,500,000 and (ii) all Existing Debt,
other than the Debt identified on Schedule 4.01(ff) hereto (the "Surviving
Debt"), has been prepaid, redeemed or defeased in full or otherwise
satisfied and extinguished and that all such Surviving Debt shall be on
terms and conditions satisfactory to the Lender Parties.
(f) Before giving effect to the Acquisition and the other
transactions contemplated by this Agreement, there shall have occurred no
material adverse change in the business, condition (financial or
otherwise), operations, performance, properties or prospects of (i) the
Borrower or the Borrower and its Subsidiaries taken as a whole since
December 31, 1996 and (ii) the Acquired Business since May 31, 1997.
(g) There shall exist no action, suit, investigation, litigation or
proceeding affecting any Loan Party, Owner or any of its Subsidiaries
pending or threatened before any court, governmental agency or arbitrator
that (i) could be reasonably likely to have a Material Adverse Effect
other than the matters described on Schedule 3.01(g) hereto (the
"Disclosed Litigation") or (ii) purports to affect the legality, validity
or enforceability of the Acquisition, this Agreement, any Note, any other
Loan Document, any Related Document or the consummation of the Acquisition
or the transactions contemplated thereby, and there shall have been no
adverse change in the status, or financial effect on any Loan Party, Owner
or any of its Subsidiaries, of the Disclosed Litigation from that
described on Schedule 3.01(g).
(h) Nothing shall have come to the attention of the Lender Parties
during the course of such due diligence investigation to lead them to
believe (i) that the Information Memorandum was or has become misleading,
incorrect or incomplete in any material respect, (ii) that, following the
consummation of the Acquisition, the Borrower and its Subsidiaries would
not have good and marketable title to all material assets of the Borrower,
its Subsidiaries and the Acquired Business reflected in the Information
Memorandum and (iii) that the Acquisition will have a Material Adverse
Effect; without limiting the generality of the foregoing, the Lender
Parties shall have been given such access to the management, records,
books of account, contracts and properties of the Borrower and its
Subsidiaries and of the Seller relating to the Acquired Business as they
shall have requested.
(i) The Borrower shall have paid all accrued fees and expenses of
the Administrative Agent and the Lender Parties (including the accrued
fees and expenses of counsel to the Administrative Agent and local counsel
to the Lender Parties).
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(j) The Borrower shall have executed the Fee Letter, and such letter
shall be in full force and effect and the Borrower shall not have breached
any of its obligations thereunder.
(k) The warrants held by NationsCredit pursuant to the Warrant
expiring July 29, 2007 for the purchase of shares in the Parent shall have
been amended and restated on terms and conditions satisfactory to the
Lender Parties and the warrantholders rights agreement related thereto
(collectively, as amended, supplemented or otherwise modified from time to
time, the "Second Warrant Agreement") shall have been delivered to the
Administrative Agent; and the warrants held by Waldock, Limited, a
corporation organized under the laws of the British Virgin Islands,
pursuant to the Warrant expiring July 29, 2007, for the purchase of shares
in the Parent shall have been amended and restated on terms and conditions
satisfactory to the Lender Parties and such Warrant (collectively, as
amended, supplemented as otherwise modified from time to time, the
"Waldock Warrant Agreement") shall have been delivered to the
Administrative Agent.
(l) The Debt owing by AFA Products, Inc. to Afa International
Limited and Waldock Limited shall have been refinanced with the proceeds
of the Subordinated Notes issued by the Parent.
(m) An underwriter reasonably satisfactory to the Administrative
Agent shall have been engaged in connection with the Refinancing.
(n) The Administrative Agent shall have received on or before the
day of the Initial Extension of Credit the following, each dated such day
(unless otherwise specified), in form and substance satisfactory to the
Administrative Agent (unless otherwise specified) and (except for the
Notes) in sufficient copies for each Lender Party:
(i) The Notes payable to the order of the Lenders.
(ii) Certified copies of the resolutions of the Board of
Directors of the Borrower and each other Loan Party approving the
Acquisition and the other transactions contemplated by the Loan
Documents, this Agreement, the Notes, each other Loan Document and
each Related Document to which it is or is to be a party, and of all
documents evidencing other necessary corporate (or the equivalent
thereof) action and governmental and other third party approvals and
consents, if any, with respect to the Acquisition, this Agreement,
the Notes, each other Loan Document and each Related Document to
which it is or is to be a party.
(iii) A copy of a certificate of the Secretary of State of the
jurisdiction of organization of each Loan Party, dated reasonably
near the date of the Initial Extension of Credit, certifying as to
(A) a true and correct copy of the charter of such Loan Party and
each amendment thereto on file in his office and that (B) (1) such
amendments are the only amendments to such Loan Party's charter on
file in his office, (2) such Loan Party has paid all franchise taxes
(or the equivalent thereof) to the date of such certificate and (3)
such Loan Party is duly incorporated and in good standing under the
laws of the State of the jurisdiction of its organization.
(iv) A copy of a certificate of the Secretary of State (or the
equivalent governmental authority) of each jurisdiction in which any
Loan Party is qualified or licensed as a foreign corporation dated
reasonably near the date of the Initial Extension of Credit, stating
that such Loan Party is duly qualified and in good standing as a
foreign corporation in such State and has filed all annual reports
required to be filed to the date of such certificate.
<PAGE> 50
45
(v) A certificate of the Borrower, and each other Loan Party,
signed on behalf of the Borrower and such other Loan Party by its
President or a Vice President and its Secretary or any Assistant
Secretary, dated the date of the Initial Extension of Credit (the
statements made in which certificate shall be true on and as of the
date of the Initial Extension of Credit), certifying as to (A) the
absence of any amendments to the charter of the Borrower or such
other Loan Party since the date of the Secretary of State's
certificate referred to in Section 3.01(n)(iii), (B) a true and
correct copy of the bylaws (or similar Constitutive Document) of the
Borrower, and such other Loan Party as in effect on the date of the
Initial Extension of Credit, (C) the due organization and good
standing of the Borrower and such other Loan Party as a Person
organized under the laws of the State of the jurisdiction of its
organization, and the absence of any proceeding for the dissolution
or liquidation of the Borrower or such other Loan Party, (D) the
truth of the representations and warranties contained in the Loan
Documents as though made on and as of the date of the Initial
Extension of Credit, both before and after giving effect to the
transactions contemplated hereby, and (E) the absence of any event
occurring and continuing, or resulting from the Initial Extension of
Credit, that constitutes a Default.
(vi) A certificate of the Secretary or an Assistant Secretary
of the Borrower, and each other Loan Party certifying the names and
true signatures of the officers of the Borrower and such other Loan
Party authorized to sign this Agreement, the Notes, each other Loan
Document and each Related Document to which they are or are to be
parties and the other documents to be delivered hereunder and
thereunder.
(vii) A security agreement in substantially the form of
Exhibit D hereto (together with each other security agreement
delivered pursuant to Section 5.01(n), in each case as amended,
supplemented or otherwise modified from time to time in accordance
with its terms, the "Security Agreement"), duly executed by each
Loan Party, together with:
(A) certificates representing the Pledged Shares
referred to therein accompanied by undated stock powers
executed in blank and instruments evidencing the Pledged Debt
referred to therein indorsed in blank,
(B) proper financing statements, completed in a manner
satisfactory to the Lender Parties and duly executed by the
applicable Loan Party on or before the day of the Initial
Extension of Credit under the Uniform Commercial Code of all
jurisdictions that the Administrative Agent may deem necessary
or desirable in order to perfect and protect the first
priority liens and security interests created under the
Security Agreement and the Mortgages, covering the Collateral
described in the Security Agreement and the Mortgages,
(C) completed requests for information, dated on or
before the date of the Initial Extension of Credit, listing
all of the effective financing statements filed in the
jurisdictions referred to in clause (B) above that name the
Borrower or any other Loan Party as debtor, together with
copies of such other financing statements,
(D) evidence of the insurance required by the terms of
the Security Agreement,
(E) copies of the Assigned Agreements referred to in the
Security Agreement, together with a consent to such
assignment, in substantially the form of
<PAGE> 51
46
Exhibit B to the Security Agreement, duly executed by each
party to such Assigned Agreements other than the Loan Parties,
(F) evidence that all other action that the
Administrative Agent may deem necessary or desirable in order
to perfect and protect the first priority liens and security
interests created under the Security Agreement has been taken.
(viii) A guaranty in substantially the form of Exhibit E
hereto duly executed by each of the Subsidiary Guarantors (together
with each other guaranty of any such entity delivered pursuant to
Section 5.01(n), in each case as amended, supplemented or otherwise
modified from time to time in accordance with its terms, the
"Subsidiary Guaranty").
(ix) A guaranty in substantially the form of Exhibit F hereto
duly executed by the Parent (as amended, supplemented or otherwise
modified from time to time in accordance with its terms, the "Parent
Guaranty").
(x) Deeds of trust, trust deeds, mortgages, leasehold
mortgages and leasehold deeds of trust in form and substance
satisfactory to the Administrative Agent and covering the properties
listed on Schedule 3.01(n)(x) hereto (the "Mortgaged Property")
(together with each other mortgage delivered pursuant to Section
5.01(n), in each case as amended, supplemented or otherwise modified
from time to time in accordance with their terms, the "Mortgages"),
duly executed by the applicable Loan Party, together with:
(A) fully paid American Land Title Association Lender's
Extended Coverage title insurance policies (the "Mortgage
Policies") in form and substance, with endorsements and in
amounts acceptable to the Administrative Agent, issued,
coinsured and reinsured by title insurers acceptable to the
Administrative Agent, insuring the Mortgages to be valid first
and subsisting Liens on the property described therein, free
and clear of all defects (including, but not limited to,
mechanics' and materialmen's Liens) and encumbrances,
excepting only Permitted Encumbrances, and providing for such
other affirmative insurance (including endorsements for future
advances under the Loan Documents and for mechanics' and
materialmen's Liens) and such coinsurance and direct access
reinsurance as the Administrative Agent may deem necessary or
desirable,
(B) American Land Title Association form surveys for the
properties listed on Schedule 3.01(n)(x)(B) hereto (the
"Surveyed Property"), dated as of the day of the Initial
Extension of Credit, certified to the Administrative Agent and
the issuer of the Mortgage Policies in a manner satisfactory
to the Administrative Agent by a land surveyor duly registered
and licensed in the States in which the property described in
such surveys is located and acceptable to the Administrative
Agent, showing all buildings and other improvements, any
off-site improvements, the location of any easements, parking
spaces, rights of way, building set-back lines and other
dimensional regulations and the absence of encroachments,
either by such improvements or on to such property, and other
defects, other than encroachments and other defects acceptable
to the Administrative Agent,
(C) to the extent applicable, the Assignments of Leases
and Rents referred to in the Mortgages, duly executed by the
applicable Loan Party,
<PAGE> 52
47
(D) such consents and agreements of lessors and other
third parties, and such estoppel letters and other
confirmations, as the Administrative Agent may deem necessary
or desirable,
(E) evidence of the insurance required by the terms of
the Mortgages,
(F) an appraisal of each of the properties described in
the Mortgages complying with the requirements of the Federal
Financial Institutions Reform, Recovery and Enforcement Act of
1989, which appraisals shall be from a Person acceptable to
the Lender Parties and otherwise in form and substance
satisfactory to the Lender Parties, to the extent available,
and
(G) evidence that all other action that the
Administrative Agent may deem necessary or desirable in order
to create valid first and subsisting Liens on the Mortgaged
Property has been taken.
(xi) Such financial, business and other information regarding
each Loan Party, its Subsidiaries and the Acquired Business as the
Lender Parties shall have requested, including, without limitation,
information as to possible contingent liabilities, tax matters,
environmental matters, obligations under Plans, Multiemployer Plans
and Welfare Plans, collective bargaining agreements and other
arrangements with employees, audited annual financial statements
dated (A) with respect to WTI, Inc. and its Subsidiaries, December
31, 1996 and (B) with respect to the Acquired Business, May 31,
1997, interim financial statements dated the end of the most recent
fiscal quarter for which financial statements are available (or, in
the event the Lender Parties' due diligence review reveals material
changes since such financial statements, as of a later date within
45 days of the day of the Initial Extension of Credit), pro forma
financial statements as to the Borrower and forecasts prepared by
management of the Borrower, in form and substance satisfactory to
the Lender Parties, of balance sheets, income statements and cash
flow statements on a monthly basis for the first year following the
day of the Initial Extension of Credit and on an annual basis for
each year thereafter until the applicable Termination Date.
(xii) Certified copies of each of the Related Documents and
the Fifth Amendment, duly executed by the parties thereto and in
form and substance satisfactory to the Lender Parties, together with
(i) all agreements, instruments and other documents delivered in
connection therewith and (ii) a reliance letter of counsel to the
Seller stating that the Agents and the Lender Parties, may rely on
such counsel's opinion delivered pursuant to the Purchase Agreement.
(xiii) Environmental assessment reports, in form and substance
satisfactory to the Lender Parties, from environmental consulting
firms acceptable to the Administrative Agent, as to any hazards,
costs or liabilities under Environmental Laws to which any Loan
Party, any of its Subsidiaries or the Acquired Business may be
subject, the amount and nature of which and the Borrower's plans
with respect to which shall be acceptable to the Lender Parties,
together with evidence, in form and substance satisfactory to the
Lender Parties, that all applicable Environmental Laws in connection
with the Acquisition shall have been complied with. To the extent
either the report or any other information that may become available
to the Lender Parties shall disclose any hazards, costs or
liabilities under Environmental Laws or otherwise that the Lender
Parties deem material, the Lender Parties shall be satisfied that
such hazards, costs or liabilities were adequately reflected in the
Borrower's financial reserves shown on the financial
<PAGE> 53
48
statements included in the Information Memorandum or that, to the
extent not so reflected, the Borrower has made adequate provision
for such hazards, costs or liabilities.
(xiv) Certificates in substantially the form of Exhibit G
hereto, attesting to the Solvency of each Loan Party after giving
effect to the Acquisition and the other transactions contemplated
hereby, from its chief financial officer.
(xv) A letter, in form and substance satisfactory to the
Administrative Agent, from the Borrower to Coopers & Lybrand, its
independent certified public accountants, advising such accountants
that the Administrative Agent and the Lender Parties have been
authorized to exercise all rights of the Borrower to require such
accountants to disclose any and all financial statements and any
other information of any kind that they may have with respect to the
Borrower and its Subsidiaries and directing such accountants to
comply with any reasonable request of the Administrative Agent or
any Lender Party for such information.
(xvi) Evidence that the Borrower has obtained and will
thereafter maintain through the High Yield Date a term life
insurance policy in form and substance and issued by a life
insurance company, in each case satisfactory to the Collateral
Agent, with respect to Peter Mancuso, in an amount not less than
$10,000,000 and providing that any amounts payable thereunder shall
be payable directly to the Collateral Agent as loss payee.
(xvii) Evidence of insurance naming the Collateral Agent as
insured and loss payee with such responsible and reputable insurance
companies or associations, and in such amounts and covering such
risks, as is satisfactory to the Lender Parties.
(xviii) Certified copies of each Employment Contract.
(xix) A warrant agreement governing the terms and conditions
of the warrants for the purchase of shares of common stock of the
Parent to be held by NationsBank and the warrants issued in
connection therewith, in each case in form and substance
satisfactory to the Lender Parties (collectively with all documents
and instruments delivered in connection therewith, in each case as
amended, supplemented or otherwise modified from time to time in
accordance with its terms, the "First Warrant Agreement"); and in
connection therewith, an escrow agreement among NationsBank, the
Parent and First Trust of New York, National Association, in form
and substance satisfactory to the Lender Parties (as amended,
supplemented or otherwise modified from time to time in accordance
with its terms, the "Warrant Escrow Agreement").
(xx) An intellectual property security agreement in
substantially the form of Exhibit I (together with each other
intellectual property security agreement delivered pursuant to
Section 5.01(n), in each case as amended, supplemented or otherwise
modified from time to time in accordance with its terms, the
"Intellectual Property Security Agreement"), duly executed by the
Borrower and each other applicable Loan Party, together with
evidence that all action that the Administrative Agent may deem
necessary or desirable in order to perfect and protect the first
priority liens and security interests created under the Intellectual
Property Security Agreement has been taken.
(xxi) A capital contribution agreement, in form and substance
satisfactory to the Lender Parties and duly executed by the parties
thereto (as amended, supplemented or otherwise
<PAGE> 54
49
modified from time to time in accordance with its terms, the
"Capital Contribution Agreement"); and, in connection therewith, an
escrow agreement among the Parent, the Borrower, NMS and
NationsCredit, in form and substance satisfactory to the Lender
Parties (as amended, supplemented or otherwise modified from time to
time in accordance with its terms, the "Capital Escrow Agreement").
(xxii) A favorable opinion of Gratch, Jacobs & Brozman, P.C.,
counsel to the Loan Parties, in substantially the form of Exhibit H
hereto and as to such other matters as any Lender Party through the
Administrative Agent may reasonably request.
(xxiii) A favorable opinion from the local counsel to the
Lender Parties in each of the jurisdictions listed on Schedule
3.01(n)(xxiv) hereto, in form and substance satisfactory to the
Lender Parties.
(xxiv) A favorable opinion of Pennie & Edmonds, intellectual
property counsel to the Lender Parties, in substantially the form of
Exhibit J hereto and as to such other matters as any Lender Party
through the Administrative Agent may reasonably request.
(xxv) A favorable opinion of Shearman & Sterling, counsel for
the Administrative Agent, in form and substance satisfactory to the
Lender Parties.
SECTION 3.02. Conditions Precedent to Each Borrowing and Issuance.
The obligation of each Appropriate Lender to make an Advance (other than a
Letter of Credit Advance made by an Issuing Bank or a Revolving Credit Lender
pursuant to Section 2.03(c)) on the occasion of each Borrowing (including the
Initial Extension of Credit), and the obligation of the Issuing Bank to issue a
Letter of Credit (including the initial issuance) or renew a Letter of Credit,
shall be subject to the further conditions precedent that on the date of such
Borrowing or issuance or renewal (a) the following statements shall be true (and
each of the giving of the applicable Notice of Borrowing, Notice of Issuance or
Notice of Renewal and the acceptance by the Borrower of the proceeds of such
Borrowing or of such Letter of Credit or the renewal of such Letter of Credit
shall constitute a representation and warranty by the Borrower that both on the
date of such notice and on the date of such Borrowing or issuance or renewal
such statements are true):
(i) the representations and warranties contained in each Loan
Document are correct on and as of such date, before and after giving
effect to such Borrowing or issuance or renewal and to the application of
the proceeds therefrom, as though made on and as of such date other than
any such representations or warranties that, by their terms, refer to a
specific date other than the date of such Borrowing or issuance or
renewal, in which case as of such specific date;
(ii) no event has occurred and is continuing, or would result from
such Borrowing or issuance or renewal or from the application of the
proceeds therefrom, that constitutes a Default;
(iii) other than with respect to any Borrowing on the Closing Date,
immediately after such Borrowing and after application of the proceeds
thereof, (i) in the case of a Revolving Credit Borrowing, the aggregate
Revolving Credit of the Lenders will not exceed the lesser of (A) the
Borrowing Base and (B) the aggregate amount of the Revolving Credit
Commitments (or, if such Borrowing is on the Closing Date, an amount not
to exceed $2,500,000);
and (b) the Administrative Agent shall have received, in the case of each
Revolving Credit Borrowing (other than any such Borrowing occurring on the
Closing Date, a Borrowing Base Certificate as of the close of business on
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the Business Day immediately preceding the date of such Borrowing, and in each
case, such other approvals, opinions or documents as any Appropriate Lender
through the Administrative Agent may reasonably request.
SECTION 3.03. Determinations Under Section 3.01. For purposes of
determining compliance with the conditions specified in Section 3.01, each
Lender Party shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lender Parties unless an
officer of the Administrative Agent responsible for the transactions
contemplated by the Loan Documents shall have received notice from such Lender
Party prior to the Initial Extension of Credit specifying its objection thereto
and if the Initial Extension of Credit consists of a Borrowing, such Lender
Party shall not have made available to the Administrative Agent such Lender
Party's ratable portion of such Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) Each Loan Party (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (ii) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which it owns or leases property
or in which the conduct of its business requires it to so qualify or be
licensed except where the failure to so qualify or be licensed would not
be reasonably likely to have a Material Adverse Effect and (iii) has all
requisite power and authority (including, without limitation, all
governmental licenses, permits and other approvals) to own or lease and
operate its properties and to carry on its business as now conducted and
as proposed to be conducted. All of the outstanding capital stock of the
Borrower has been validly issued, is fully paid and non-assessable and is
owned by the Parent, free and clear of all Liens. All of the outstanding
capital stock of the Parent has been validly issued, is fully paid and
non-assessable and is owned by the Owners in the amounts specified in
Schedule 4.01(a) hereto, free and clear of all Liens. 100% of the capital
stock of Afa Polytek B.V., a corporation organized under the laws of the
Netherlands, is owned directly or indirectly by the Borrower.
(b) Set forth on Schedule 4.01(b) 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) the jurisdiction of its organization, 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 each Loan Party's
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 under the Loan Documents. Each
such Subsidiary (i) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization,
(ii) is duly qualified and in good standing as a foreign corporation in
each other jurisdiction in which it owns or leases property or in which
the conduct of its business requires it to so qualify or be licensed
except where the failure to so qualify or be licensed would not be
reasonably likely to have a Material Adverse Effect and (iii) has all
requisite power and authority (including, without limitation, all
governmental licenses, permits and other approvals) to own or lease and
operate its properties and to carry on its business as
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now conducted and as proposed to be conducted except, solely in connection
with the Acquisition, for any such licenses, permits or other approvals
which are not material and which will be obtained within 60 days of the
Closing Date.
(c) The execution, delivery and performance by each Loan Party of
this Agreement, the Notes, each other Loan Document and each Related
Document to which it is or is to be a party, and the consummation of the
Acquisition and the other transactions contemplated hereby, are within
such Loan Party's corporate powers, have been duly authorized by all
necessary action (corporate and otherwise), and do not (i) contravene such
Loan Party's Constitutive Documents, (ii) violate any law (including,
without limitation, the Securities Exchange Act of 1934 and the Racketeer
Influenced and Corrupt Organizations Chapter of the Organized Crime
Control Act of 1970), rule, regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System),
order, writ, judgment, injunction, decree, determination or award, (iii)
conflict with or result in the breach of, or constitute a default under,
any contract, loan agreement, indenture, mortgage, deed of trust, lease or
other instrument binding on or affecting any Loan Party, any of its
Subsidiaries or any of their properties except, solely with respect to the
Acquisition, any lease or contract (other than any such contract which
evidences indebtedness for borrowed money) so long as such conflict,
breach or default could not be reasonably likely to have a Material
Adverse Effect, or (iv) except for the Liens created under the Loan
Documents, result in or require the creation or imposition of any Lien
upon or with respect to any of the properties of any Loan Party or any of
its Subsidiaries. No Loan Party or any of its Subsidiaries is in violation
of any such law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award or in breach of any such contract, loan
agreement, indenture, mortgage, deed of trust, lease or other instrument,
the violation or breach of which could be reasonably likely to have a
Material Adverse Effect.
(d) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body or any
other third party is required for (i) the due execution, delivery,
recordation, filing or performance by any Loan Party of this Agreement,
the Notes, any other Loan Document or any Related Document to which it is
or is to be a party, or for the consummation of the Acquisition or the
other transactions contemplated hereby and thereby, (ii) the grant by any
Loan Party of the Liens granted by it pursuant to the Collateral
Documents, (iii) the perfection or maintenance of the Liens created by the
Collateral Documents (including the first priority nature thereof) other
than the filings to be made pursuant to Section 5.01(o) within the period
of time set forth therein or (iv) the exercise by the Administrative Agent
or any Lender Party of its rights under the Loan Documents or the remedies
in respect of the Collateral pursuant to the Collateral Documents, except
for the authorizations, approvals, actions, notices and filings listed on
Schedule 4.01(d) hereto, all of which have been duly obtained, taken,
given or made and are in full force and effect and the filings to be made
pursuant to Section 5.01(o) within the period of time set forth therein.
All applicable waiting periods in connection with the Acquisition and the
other transactions contemplated hereby have expired without any action
having been taken by any competent authority restraining, preventing or
imposing materially adverse conditions upon the Acquisition or the rights
of the Loan Parties or their Subsidiaries freely to transfer or otherwise
dispose of, or to create any Lien on, any properties now owned or
hereafter acquired by any of them.
(e) This Agreement has been, and each of the Notes, each other Loan
Document and each Related Document when delivered hereunder will have
been, duly executed and delivered by each Loan Party thereto. This
Agreement is, and each of the Notes, each other Loan Document and each
Related Document when delivered hereunder will be, the legal, valid and
binding obligation of each Loan Party thereto, enforceable against such
Loan Party in accordance with its terms.
<PAGE> 57
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(f) The Consolidated balance sheets of (i) WTI, Inc. as at December
31, 1996 and (ii) the Acquired Business as at May 31, 1997, and the
related Consolidated statements of income and Consolidated statement of
cash flows of the Borrower and its Subsidiaries and the Acquired Business
for the fiscal year then ended, respectively, accompanied by an opinion of
Deloitte & Touche and Arthur Andersen, respectively, independent public
accountants, and the preliminary Consolidated balance sheet of each of (i)
the Borrower and its Subsidiaries and (ii) the Acquired Business as at
December 31, 1997, and the related Consolidated statement of income and
Consolidated statement of cash flows of the Borrower and its Subsidiaries
and the Acquired Business for the 12 months then ended, in each case duly
certified by the chief financial officer of the Borrower, copies of which
have been furnished to each Lender Party, fairly present, subject, in the
case of said balance sheets as at December 31, 1997, and said statement of
income and cash flows for the 12 months then ended, to year-end audit
adjustments and the footnotes, the Consolidated financial condition of the
Borrower and its Subsidiaries and the Acquired Business, as at such dates,
and the Consolidated results of the operations of the Borrower and its
Subsidiaries and the Acquired Business, for the periods ended on such
dates, all in accordance with generally accepted accounting principles
applied on a consistent basis, and there has been no material adverse
change in the business, condition (financial or otherwise), operations,
performance, properties or prospects of (i) the Borrower or the Borrower
and its Subsidiaries taken as a whole since December 31, 1996 and (ii) the
Acquired Business since May 31, 1997 (it being understood that the
cancellation of the Acquired Business' sales agreement with DowBrands, a
unit of Dow Chemical Company, in and of itself, does not constitute a
material adverse change).
(g) The Consolidated pro forma balance sheets of the Borrower and
its Subsidiaries as at December 31, 1997, and the related Consolidated pro
forma statements of income and cash flows of the Borrower and its
Subsidiaries for the 12 months then ended, certified by the chief
financial officer of the Borrower, copies of which have been furnished to
each Lender Party, fairly present the Consolidated pro forma financial
condition of the Borrower and its Subsidiaries as at such date and the
Consolidated pro forma results of operations of the Borrower and its
Subsidiaries for the period ended on such date, in each case giving effect
to the Acquisition and the other transactions contemplated hereby, all in
accordance with GAAP.
(h) The Consolidated forecasted balance sheets, income statements
and cash flows statements of the Borrower and its Subsidiaries delivered
to the Lender Parties pursuant to Section 3.01(n)(xi) or 5.03, if any,
were prepared in good faith on the basis of the assumptions stated
therein, which assumptions were fair in the light of conditions existing
at the time of delivery of such forecasts, and represented, at the time of
delivery, the Borrower's best estimate of its future financial
performance.
(i) No information, exhibit or report furnished by any Loan Party to
the Administrative Agent or any Lender Party in connection with the
negotiation of the Loan Documents or pursuant to the terms of the Loan
Documents contained any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements made therein not
misleading.
(j) There is no action, suit, investigation, litigation or
proceeding affecting any Loan Party or any of its Subsidiaries, including
any Environmental Action, pending or threatened before any court,
governmental agency or arbitrator that (i) could be reasonably likely to
have a Material Adverse Effect other than the Disclosed Litigation or (ii)
purports to affect the legality, validity or enforceability of the
Acquisition, this Agreement, any Note, any other Loan Document or any
Related Document or the consummation of the transactions contemplated
thereby, and there shall have been no adverse change in
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53
the status, or financial effect on any Loan Party or any of its
Subsidiaries, of the Disclosed Litigation from that described on Schedule
3.01(g) hereto.
(k) No proceeds of any Advance or drawings under any Letter of
Credit will be used to acquire any equity security of a class that is
registered pursuant to Section 12 of the Securities Exchange Act of 1934.
(l) The Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying Margin Stock, and no proceeds of
any Advance or drawings under any Letter of Credit will be used to
purchase or carry any Margin Stock or to extend credit to others for the
purpose of purchasing or carrying any Margin Stock.
(m) Set forth on Schedule 4.01(m) hereto is a complete and accurate
list of all Plans, Multiemployer Plans and Welfare Plans.
(n) No ERISA Event has occurred or is reasonably expected to occur
with respect to any Plan that has resulted in or is reasonably expected to
result in a material liability of any Loan Party or any ERISA Affiliate.
(o) Schedule B (Actuarial Information) to the most recent annual
report (Form 5500 Series) for each Plan, copies of which have been filed
with the Internal Revenue Service and furnished to the Lender Parties, is
complete and accurate and fairly represents the funding status of such
Plan, and since the date of such Schedule B there has been no material
adverse change in such funding status.
(p) No Loan Party or ERISA Affiliate has incurred or is reasonably
expected to incur any Withdrawal Liability to any Multiemployer Plan.
(q) No Loan Party or ERISA Affiliate has been notified by the
sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or has been terminated, within the meaning of Title IV of
ERISA, and no such Multiemployer Plan to the best knowledge of any of the
Loan Parties or ERISA Affiliates is reasonably expected to be in
reorganization or to be terminated, within the meaning of Title IV of
ERISA.
(r) Except as set forth in the financial statements referred to in
this Section 4.01 and in Section 5.03, the Loan Parties and their
respective Subsidiaries have no material liability with respect to
"expected post retirement benefit obligations" within the meaning of
Statement of Financial Accounting Standards No. 106.
(s) Neither the business nor the properties of any Loan Party or any
of its Subsidiaries are affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo,
act of God or of the public enemy or other casualty (whether or not
covered by insurance) that could be reasonably likely to have a Material
Adverse Effect.
(t) The operations and properties of each Loan Party and each of its
Subsidiaries comply in all material respects with all applicable
Environmental Laws and Environmental Permits, all past non-compliance with
such Environmental Laws and Environmental Permits has been resolved
without material ongoing obligations or costs, and no circumstances exist
that could be reasonably likely to (i) form the basis of an Environmental
Action against any Loan Party or any of its Subsidiaries or any of
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their properties that could have a Material Adverse Effect or (ii) cause
any such property to be subject to any material restrictions on ownership,
occupancy, use or transferability under any Environmental Law.
(u) None of the properties currently or formerly owned or operated
by any Loan Party or any of its Subsidiaries is listed or proposed for
listing on the NPL or on the CERCLIS or any analogous foreign, state or
local list or is adjacent to any such property; except as disclosed in
Schedule 4.01(u) hereto there are no underground or aboveground storage
tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in
which Hazardous Materials are being or have been treated, stored or
disposed on any property currently owned or operated by any Loan Party or
any of its Subsidiaries or, to the best of its knowledge, on any property
formerly owned or operated by any Loan Party or any of its Subsidiaries;
except as otherwise disclosed on Schedule 4.01(u) hereto, there is no
asbestos or asbestos- containing material on any property currently owned
or operated by any Loan Party or any of its Subsidiaries; and, except as
otherwise disclosed on Schedule 4.01(u) hereto, Hazardous Materials have
not been released, discharged or disposed of on any property currently or
formerly owned or operated by any Loan Party or any of its Subsidiaries
other than in compliance with Environmental Laws.
(v) Neither any Loan Party nor any of its Subsidiaries is
undertaking, and has not completed, either individually or together with
other potentially responsible parties, any investigation or assessment or
remedial or response action relating to any actual or threatened release,
discharge or disposal of Hazardous Materials at any site, location or
operation, either voluntarily or pursuant to the order of any governmental
or regulatory authority or the requirements of any Environmental Law; and
all Hazardous Materials generated, used, treated, handled or stored at, or
transported to or from, any property currently or formerly owned or
operated by any Loan Party or any of its Subsidiaries have been disposed
of in a manner not reasonably expected to result in material liability to
any Loan Party or any of its Subsidiaries.
(w) Neither any Loan Party nor any of its Subsidiaries is a party to
any indenture, loan or credit agreement or any lease or other agreement or
instrument or subject to any charter or corporate restriction that could
be reasonably likely to have a Material Adverse Effect.
(x) The Collateral Documents create a valid and perfected first
priority security interest in the Collateral, securing the payment of the
Secured Obligations (as defined therein), and all filings and other
actions necessary or desirable to perfect and protect such security
interest have been duly taken. The Loan Parties are the legal and
beneficial owners of the Collateral free and clear of any Lien, except for
the liens and security interests created or permitted under the Loan
Documents.
(y) Each Loan Party and each of its Subsidiaries has filed, has
caused to be filed or has been included in all tax returns (Federal,
state, local and foreign) required to be filed and has paid all taxes
shown thereon to be due, together with applicable interest and penalties
except to the extent that failure to file could not have a Material
Adverse Effect.
(z) Set forth on Schedule 4.01(z) hereto is a complete and accurate
list, as of the date hereof, of each taxable year of each Loan Party and
each of its Subsidiaries and Affiliates for which Federal income tax
returns have been filed and for which the expiration of the applicable
statute of limitations for assessment or collection has not occurred by
reason of extension or otherwise (an "Open Year").
(aa) The aggregate unpaid amount, as of the date hereof, of
adjustments to the Federal income tax liability of each Loan Party and
each of its Subsidiaries and Affiliates proposed by the
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Internal Revenue Service with respect to Open Years does not exceed
$100,000. No issues have been raised by the Internal Revenue Service in
respect of Open Years that, in the aggregate, could be reasonably likely
to have a Material Adverse Effect.
(bb) The aggregate unpaid amount, as of the date hereof, of
adjustments to the state, local and foreign tax liability of each Loan
Party and its Subsidiaries and Affiliates proposed by all state, local and
foreign taxing authorities (other than amounts arising from adjustments to
Federal income tax returns) does not exceed $100,000. No issues have been
raised by such taxing authorities that, in the aggregate, could be
reasonably likely to have a Material Adverse Effect.
(cc) Neither any Loan Party nor any of its Subsidiaries is an
"investment company," or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended. Neither the
making of any Advances, nor the issuance of any Letters of Credit, nor the
application of the proceeds or repayment thereof by the Borrower, nor the
consummation of the other transactions contemplated hereby, will violate
any provision of such Act or any rule, regulation or order of the
Securities and Exchange Commission thereunder.
(dd) Each Loan Party is, individually and together with its
Subsidiaries, Solvent.
(ee) Set forth on Schedule 4.01(ee) hereto is a complete and
accurate list of all Existing Debt (other than Surviving Debt), showing as
of the date hereof the principal amount outstanding thereunder.
(ff) Set forth on Schedule 4.01(ff) hereto is a complete and
accurate list of all Surviving Debt, showing as of the date hereof the
principal amount outstanding thereunder, the maturity date thereof and the
amortization schedule therefor.
(gg) Set forth on Schedule 4.01(gg) hereto is a complete and
accurate list of all real property owned by any Loan Party or any of its
Subsidiaries, showing as of the date hereof the street address, county or
other relevant jurisdiction, state, record owner and book and the
acquisition value thereof. Each Loan Party or such Subsidiary has good,
marketable and insurable fee simple title to such real property, free and
clear of all Liens, other than Liens created or permitted by the Loan
Documents.
(hh) Set forth on Schedule 4.01(hh) hereto (the "Leasehold
Property") is a complete and accurate list of all leases of real property
under which any Loan Party or any of its Subsidiaries is the lessee or
sublessee (with respect to the property located in El Paso, Texas only),
showing as of the date hereof the street address, county or other relevant
jurisdiction, state, lessor, lessee or sublessee (with respect to the
property located in El Paso, Texas only), expiration date and annual
rental cost thereof. Each such lease or sublease (with respect to the
property located in El Paso, Texas only) is the legal, valid and binding
obligation of the lessor or sublessor, as the case may be thereof,
enforceable in accordance with its terms.
(ii) Set forth on Schedule 4.01(ii) hereto is a complete and
accurate list of all Investments held by any Loan Party or any of its
Subsidiaries, showing as of the date hereof the amount, obligor or issuer
and maturity, if any, thereof.
(jj) Set forth on Schedule 4.01(jj) hereto is a complete and
accurate list of all patents, trademarks, trade names, service marks and
copyrights, and all applications therefor and licenses thereof,
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of each Loan Party or any of its Subsidiaries, showing as of the date
hereof the jurisdiction in which registered, the registration number, the
date of registration and the expiration date.
(kk) The Acquisition has been consummated in all material respects
in accordance with the terms of the Purchase Agreement.
(ll) The Acquisition will not result in an income tax liability to
the Borrower and its Subsidiaries or Affiliates.
(mm) Set forth on Schedule 4.01(a) hereto is a schedule of the
initial capitalization of the Borrower and of the Parent after giving
effect to the transactions contemplated to take place on the Closing Date.
(nn) As of the Closing Date, each of the representations and
warranties made in the Related Documents by each of the parties thereto is
true and correct in all material respects, and such representations and
warranties are hereby incorporated herein by reference with the same
effect as though set forth in their entirety herein, as qualified therein.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, the Borrower will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable
laws, rules, regulations and orders, such compliance to include, without
limitation, compliance with ERISA and the Racketeer Influenced and Corrupt
Organizations Chapter of the Organized Crime Control Act of 1970.
(b) Payment of Taxes, Etc. (i) Pay and discharge, and cause each of
its Subsidiaries to pay and discharge, before the same shall become
delinquent, (x) all taxes, assessments and governmental charges or levies
imposed upon it or upon its property and (y) all lawful claims that, if
unpaid, might by law become a Lien upon its property, including, without
limitation, the Mortgaged Property and the Leasehold Property; provided,
however, that neither the Borrower nor any of its Subsidiaries shall be
required to pay or discharge any such tax, assessment, charge or claim
that is being contested in good faith and by proper proceedings and as to
which appropriate reserves are being maintained, unless and until any Lien
resulting therefrom attaches to its property and becomes enforceable
against its other creditors; and (ii) (1) pay and discharge, and cause
each of its Subsidiaries to pay and discharge, at or before maturity, all
of their other respective material obligations and liabilities, except
where the same may be the subject of a contest in good faith by
appropriate proceedings promptly instituted and diligently conducted and
with respect to which such reserve or other appropriate provision, if any,
as shall be required in conformity with GAAP shall have been made;
provided that compliance with the obligation that is the subject of such
contest is effectively stayed during such challenge and (2) maintain, and
cause each of its Subsidiaries to maintain, in accordance with GAAP,
appropriate reserves for the accrual of any of such material obligations
and liabilities.
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57
(c) Compliance with Environmental Laws. Comply, and cause each of
its Subsidiaries and all lessees and other Persons operating or occupying
its properties to comply, in all material respects, with all applicable
Environmental Laws and Environmental Permits; obtain and renew and cause
each of its Subsidiaries to obtain and renew all Environmental Permits
necessary for its operations and properties; and conduct, and cause each
of its Subsidiaries to conduct, any investigation, study, sampling and
testing, and undertake any cleanup, removal, remedial or other action
necessary to remove and clean up all Hazardous Materials from any of its
properties that are required to be removed or cleaned up under applicable
Environmental Laws, in accordance with the requirements of all
Environmental Laws; provided, however, that neither the Borrower nor any
of its Subsidiaries shall be required to undertake any such cleanup,
removal, remedial or other action to the extent that its obligation to do
so is being contested in good faith and by proper proceedings and
appropriate reserves are being maintained with respect to such
circumstances.
(d) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Borrower
or such Subsidiary operates, including, without limitation, (i) physical
damage insurance on all real and personal property on an all risks basis
(including the perils of flood and quake), covering the repair and
replacement cost of all such property and consequential loss coverage for
business interruption and extra expense, covering such risks, for amounts
not less than those, and with deductible amounts not greater than those,
set forth in Part I of Schedule 5.01(d), (ii) public liability insurance
(including products/completed operations liability coverage) covering such
risks, for amounts not less than those, and with deductible amounts not
greater than those, set forth in Part II of Schedule 5.01(d), (iii) until
the High Yield Date, any life insurance policy delivered entered into
pursuant to Section 3.01(n)(xvi) and (iv) such other insurance coverage in
such amounts and with respect to such risks as the Required Lenders may
reasonably request in writing; provided that all such insurance shall be
provided by responsible and reputable insurers having an A.M. Best
policyholders rating of not less than B+ or such other insurers as the
Required Lenders may approve in writing.
(e) Preservation of Corporate Existence, Etc. Preserve and maintain,
and cause each of its Subsidiaries to preserve and maintain, its
existence, legal structure, legal name, rights (charter and statutory),
permits, licenses, approvals, privileges and franchises; provided,
however, that neither the Borrower nor any of its Subsidiaries shall be
required to preserve any right, permit, license, approval, privilege or
franchise if the Board of Directors of the Borrower or such Subsidiary
shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Borrower or such Subsidiary, as the
case may be, and that the loss thereof is not disadvantageous in any
material respect to the Borrower, such Subsidiary or the Lender Parties;
provided further that nothing in this Section 5.01(e) shall prevent the
consummation of any merger or consolidation permitted pursuant to Section
5.02(d); provided still further that (i) Continental Acquisition Corp.
shall be permitted to change its legal name to Continental Sprayers
International, Inc. and (ii) the Borrower shall be permitted to change its
legal name, so long as prior to making any such change with respect to the
Borrower (x) the Borrower shall have given the Administrative Agent at
least 10 Business Days' notice and (y) the Borrower shall have complied
with all the requirements set forth in Section 5.01(p) of this Agreement
and Section 10 of the Security Agreement.
(f) Visitation Rights. At any reasonable time and from time to time,
permit the Administrative Agent or any of the Lender Parties or any agents
or representatives thereof to examine and make copies of and abstracts
from the records and books of account of, and visit the properties of, the
Borrower and any of its Subsidiaries, to conduct a collateral audit and
analysis of their respective
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58
inventories and accounts receivable and to discuss the affairs, finances
and accounts of the Borrower and any of its Subsidiaries with any of their
officers or directors and with their independent certified public
accountants; provided that, after the High Yield Date, any such
examination, making of copies or abstracts, and visits shall be at the
Administrative Agent's or such Lender Party's expense, as the case may be;
provided, however, the Borrower shall only be required to pay the fees,
expenses and disbursements of independent accountants and other experts
retained by the Administrative Agent in connection with not more than two
accounting and collateral audits and reviews of the Borrower and its
affairs during any calendar year.
(g) Preparation of Environmental Reports. At the request of the
Administrative Agent once a year or whenever the Administrative Agent
reasonably believes there is a material risk or whenever there is an
acquisition or sale of property, and, in any event, during the continuance
of an Event of Default, provide to the Lender Parties within 60 days after
such request, at the expense of the Borrower, an environmental site
assessment report for any of its or its Subsidiaries' properties described
in such request, prepared by an environmental consulting firm acceptable
to the Administrative Agent, indicating the presence or absence of
Hazardous Materials and the estimated cost of any compliance, removal or
remedial action in connection with any Hazardous Materials on such
properties; without limiting the generality of the foregoing, if the
Administrative Agent determines at any time that a material risk exists
that any such report will not be provided within the time referred to
above, the Administrative Agent may retain an environmental consulting
firm to prepare such report at the expense of the Borrower, and the
Borrower hereby grants and agrees to cause any Subsidiary that owns any
property described in such request to grant at the time of such request,
to the Administrative Agent, the Lender Parties, such firm and any agents
or representatives thereof an irrevocable non-exclusive license, subject
to the rights of tenants, to enter onto their respective properties to
undertake such an assessment.
(h) Keeping of Books. Keep, and cause each of its Subsidiaries to
keep, proper books of record and account, in which full and correct
entries shall be made of all financial transactions and the assets and
business of the Borrower and each such Subsidiary in accordance with
generally accepted accounting principles in effect from time to time.
(i) Maintenance of Properties, Etc. Maintain and preserve, and cause
each of its Subsidiaries to maintain and preserve, all of its properties
that are used or useful in the conduct of its business in good working
order and condition, ordinary wear and tear and surplus properties which
are not necessary to the conduct of business excepted.
(j) Compliance with Terms of Leaseholds. Make all payments and
otherwise perform all obligations in respect of all leases or subleases
(with respect to the real property located in El Paso, Texas only) of real
property to which the Borrower or any of its Subsidiaries is a party, keep
such leases or subleases (with respect to the real property located in El
Paso, Texas, only) in full force and effect and not allow such leases to
lapse or be terminated or any rights to renew such leases to be forfeited
or cancelled, notify the Administrative Agent of any default by any party
with respect to such leases or subleases (with respect to the real
property located in El Paso, Texas only) and cooperate with the
Administrative Agent in all respects to cure any such default, and cause
each of its Subsidiaries to do so except, in any case, where the failure
to do so, either individually or in the aggregate, could not be reasonably
likely to have a Material Adverse Effect.
(k) Performance of Related Documents. Perform and observe all of the
terms and provisions of each Related Document to be performed or observed
by it, maintain each such Related Document in full force and effect,
enforce such Related Document in accordance with its terms, take all
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59
such action to such end as may be from time to time requested by the
Administrative Agent and, upon request of the Administrative Agent, make
to each other party to each such Related Document such demands and
requests for information and reports or for action as the Borrower is
entitled to make under such Related Document.
(l) Transactions with Affiliates. Conduct, and cause each of its
Subsidiaries to conduct, all transactions otherwise permitted under the
Loan Documents with any of their Affiliates on terms that are fair and
reasonable and no less favorable to the Borrower or such Subsidiary than
it would obtain in a comparable arm's-length transaction with a Person not
an Affiliate, except that with respect to all Management Agreements, fees
thereunder shall be payable only so long as immediately before and after
giving effect thereto, no Event of Default shall have occurred and be
continuing and the aggregate amount of salary, fees and other compensation
payable, directly or indirectly, to Ariel Gratch or Yehochai Schneider
under all Employment Contracts and fees payable under all Management
Agreements shall not exceed, in any four fiscal quarter period of the
Borrower commencing prior to the High Yield Date, $500,000, and in any
four fiscal quarter period of the Borrower commencing on or after the High
Yield Date, $1,000,000.
(m) Cash Concentration Accounts. Maintain and cause each Loan Party
to maintain main cash concentration accounts with NationsCredit and
maintain and cause each Loan Party to maintain Pledged Accounts into which
all proceeds of Collateral are paid with NationsCredit or one or more
banks acceptable to the Administrative Agent that have accepted the
assignment of such accounts to the Administrative Agent pursuant to the
terms of the Security Agreement.
(n) Covenant to Guarantee Obligations and Give Security. Upon (x)
the request of the Administrative Agent following the occurrence and
during the continuance of an Event of Default, (y) the formation or
acquisition of any new direct or indirect Subsidiaries by any Loan Party
or (z) the acquisition of any property by any Loan Party, and such
property, in the reasonable opinion of the Administrative Agent, shall not
already be subject to a perfected first priority security interest in
favor of the Administrative Agent for the benefit of the Secured Parties,
then the Borrower shall, in each case at the Borrower's expense:
(i) in connection with the formation or acquisition of a
domestic Subsidiary, and, if an Event of Default shall have occurred
and be continuing, a domestic or foreign Subsidiary, within 10 days
after such formation or acquisition, cause each such Subsidiary, and
cause each direct and indirect parent of such Subsidiary (if it has
not already done so), to duly execute and deliver to the
Administrative Agent a Subsidiary Guaranty, in form and substance
satisfactory to the Administrative Agent, guaranteeing the other
Loan Parties' obligations under the Loan Documents,
(ii) within 10 days after such request, formation or
acquisition, furnish to the Administrative Agent a description of
the real and personal properties of the Loan Parties and their
respective Subsidiaries in detail satisfactory to the Administrative
Agent,
(iii) within 15 days after such request, formation or
acquisition, duly execute and deliver, and cause each such
Subsidiary and each direct and indirect parent of such Subsidiary
(if it has not already done so) to duly execute and deliver, to the
Administrative Agent mortgages, pledges, assignments and other
security agreements, as specified by and in form and substance
satisfactory to the Administrative Agent, securing payment of all
the obligations of the
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applicable Loan Party, such Subsidiary or such parent, as the case
may be, under the Loan Documents and constituting Liens on all such
properties,
(iv) within 30 days after such request, formation or
acquisition, take, and cause such Subsidiary or such parent to take,
whatever action (including, without limitation, the recording of
mortgages, the filing of Uniform Commercial Code financing
statements, the giving of notices and the endorsement of notices on
title documents) may be necessary or advisable in the opinion of the
Administrative Agent to vest in the Administrative Agent (or in any
representative of the Administrative Agent designated by it) valid
and subsisting Liens on the properties purported to be subject to
the mortgages, pledges, assignments and security agreements
delivered pursuant to this Section 5.01(n), enforceable against all
third parties in accordance with their terms,
(v) within 60 days after such request, formation or
acquisition, deliver to the Administrative Agent, upon the request
of the Administrative Agent in its sole discretion, a signed copy of
a favorable opinion, addressed to the Administrative Agent and the
other Secured Parties, of counsel for the Loan Parties acceptable to
the Administrative Agent as to the matters contained in clauses (i),
(iii) and (iv) above, as to such guaranties, mortgages, pledges,
assignments and security agreements being legal, valid and binding
obligations of each party thereto enforceable in accordance with
their terms and as to such other matters as the Administrative Agent
may reasonably request,
(vi) as promptly as practicable after such request, formation
or acquisition, deliver, upon the request of the Administrative
Agent in its sole discretion, to the Administrative Agent with
respect to each parcel of real property owned or held by the entity
that is the subject of such request, formation or acquisition
surveys and engineering, soils and other reports, and environmental
assessment reports, title reports, each in scope, form and substance
satisfactory to the Administrative Agent, provided, however, that to
the extent that any Loan Party or any of its Subsidiaries shall have
otherwise received any of the foregoing items with respect to such
real property, such items shall promptly after the receipt thereof
be delivered to the Administrative Agent,
(vii) upon the occurrence and during the continuance of an
Event of Default, promptly cause to be deposited any and all cash
dividends paid or payable to it or any of its Subsidiaries from any
of its Subsidiaries from time to time into the Cash Collateral
Account, and with respect to all other dividends paid or payable to
it or any of its Subsidiaries from time to time, promptly execute
and deliver, or cause such Subsidiary to promptly execute and
deliver, as the case may be, any and all further instruments and
take or cause such Subsidiary to take, as the case may be, all such
other action as the Administrative Agent may deem necessary or
desirable in order to obtain and maintain from and after the time
such dividend is paid or payable a perfected, first priority lien on
and security interest in such dividends, and
(viii)at any time and from time to time, promptly execute and
deliver any and all further instruments and documents and take all
such other action as the Administrative Agent may deem necessary or
desirable in obtaining the full benefits of, or in perfecting and
preserving the Liens of, such guaranties, mortgages, pledges,
assignments and security agreements.
(o) Conditions Subsequent to Initial Extension of Credit. (i)
Deliver to the Administrative Agent as soon as possible and in any event
within the earlier of the Bridge Repayment Date and 45 days
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61
after the Initial Extension of Credit (or such later date as may be agreed
by the Borrower and the Administrative Agent or as may be specified
herein):
(A) acknowledgement copies of proper financing statements,
duly filed under the Uniform Commercial Code of all jurisdictions
that the Administrative Agent may deem necessary or desirable in
order to perfect and protect the first priority liens and security
interests created under the Collateral Documents, covering the
Collateral described therein,
(B) evidence that counterparts of the Mortgages have been duly
recorded on or before the day of the Initial Extension of Credit in
all filing or recording offices that the Administrative Agent may
deem necessary or desirable in order to create a valid first and
subsisting Lien on the property described therein in favor of the
Secured Parties and that all filing and recording taxes and fees
have been paid,
(C) evidence of the completion of all other recordings and
filings of or with respect to the Security Agreement that the
Administrative Agent may deem necessary or desirable in order to
perfect and protect the Liens created thereby,
(D) the Pledged Account Letters referred to in the Security
Agreement, duly executed by each Pledged Account Bank referred to in
the Security Agreement, and
(E) evidence that counterparts of the Intellectual Property
Security Agreement have been duly recorded in such recording offices
as the Administrative Agent may deem necessary or desirable in order
to create a valid first and subsidiary lien on the property
described therein in favor of the Secured Parties and that all
filing and recording taxes and fees have been paid.
(ii) Deliver to the Collateral Agent within 15 days (or such
later date as may be agreed upon by Borrower and the Administrative
Agent) after the Seller has assigned its interest in the property
specified on Schedule 5.01(o)(ii) hereto to Borrower, (a) a deed of
trust, trust deed, mortgage, leasehold mortgage or leasehold deed of
trust, in form and substance satisfactory to the Administrative
Agent, covering such property, (b) to the extent applicable, all of
the items specified in Section 3.01(n)(x) clauses (A) through (G)
and (c) a favorable opinion from the local counsel to the Lender
Parties in each of the jurisdictions in which such property is
located, in form and substance satisfactory to the Lender Parties.
(iii) Deliver to the Administrative Agent as soon as possible
and in any event within 60 days after the Initial Extension of
Credit (or such later date as may be agreed by the Borrower and the
Administrative Agent) completed requests for information, listing
the financing statements referred to in clause (i) (A) above and all
other effective financing statements filed in the jurisdictions
referred to in clause (i) (A) above that name the Borrower or any
other Loan Party as debtor, together with copies of such financing
statements.
(iv) Deliver to the Administrative Agent as soon as possible
and in any event within 15 days after the Initial Extension of
Credit (or such later date as may be agreed by the Borrower and the
Administrative Agent), certified copies of duly executed proxies as
to (A) voting control by Yehochai Schneider of the common stock of
the Parent held by Waldock Limited and (B) voting control by Ariel
Gratch of the common stock of the Parent held by AFA International
Limited,
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(v) Deliver to the Administrative Agent promptly after the
date of execution thereof by all parties thereto, the Refinancing
Agreement which shall be, as of such date, in form and substance
reasonably satisfactory to the Required Lenders.
(p) Further Assurances. Promptly upon the request of the
Administrative Agent, or any of the Lender Parties through the
Administrative Agent, at any time and from time to time, do, execute,
acknowledge, deliver, record, rerecord, file, refile, register and
reregister, and cause of each of its Subsidiaries promptly to do, execute,
acknowledge, deliver, rerecord, record, file, refile, register and
reregister, any and all further acts, conveyances, security agreements,
assignments, floating and fixed debentures, pledge agreements, estoppel
certificates, financing statements and continuations thereof, termination
statements, notices of assignment, transfers, mortgages, deeds of trust,
certificates, assurances and other instruments as the Administration
Agent, or any of the Lender Parties through the Administrative Agent, may
reasonably require from time to time in order to (A) carry out more
effectively the purposes of this Agreement, the Notes or any of the other
Loan Documents, (B) subject any of the property, assets, rights or
interests of the Borrower or any of its Subsidiaries (other than, solely
for purposes of this Section 5.01(p), Afa Polytek B.V.) included or
intended to be included in the Collateral to the Liens created or now or
hereafter intended to be created under any of the Collateral Documents,
(C) perfect and maintain the validity, effectiveness and priority of any
of the Collateral Documents or any of the Liens created or intended to be
created thereunder and (D) assure, convey, grant, assign, transfer,
preserve, protect and confirm more effectively unto the Administrative
Agent and the Secured Parties the rights granted or now or hereafter
intended to be granted to the Administrative Agent and the Secured Parties
under any of the Loan Documents or under any of the other instruments
executed in connection with any of the Loan Documents to which the
Borrower or any of its domestic Subsidiaries is or is to be a party.
(q) Refinancing. Use its best efforts to effectuate an offering and
sale of the Refinancing Securities to Persons other than any of its
Subsidiaries or such other financing transactions, in each case reasonably
acceptable in form and substance to the Administrative Agent for the
purpose of repaying the principal amount of Bridge Advances and paying
interest accrued thereon and all fees, expenses, commissions and other
amounts payable with respect thereto by the Loan Parties under the Loan
Documents and in connection with the Refinancing, which will yield an
amount sufficient to repay the principal amount of Bridge Advances and pay
all interest accrued thereon and all fees, expenses, commissions and all
other amounts payable with respect thereto by the Loan Parties under the
Loan Documents and in connection with the Refinancing, including, but not
limited to:
(i) preparing an offering memorandum (the "Offering
Memorandum") for a private offering (the "Offering") of the
Refinancing Securities, such Refinancing Securities to contain terms
and conditions satisfactory to NMS (or another underwriter
reasonably satisfactory to the Lender Parties) and the Required
Lenders, and be issued pursuant to a Refinancing Agreement in form
and substance satisfactory to the Required Lenders, in an amount to
be agreed upon by the Borrower and NMS (or another underwriter
reasonably satisfactory to the Administrative Agent), but in no
event less than an amount which will provide to the Borrower net
proceeds sufficient to repay the principal amount of Bridge Advances
and pay all interest accrued thereon and all fees, expenses,
commissions and all other amounts payable with respect thereto by
the Loan Parties under the Loan Documents and in connection with the
Refinancing, and containing such disclosures as may be appropriate
and customary for such documents and using its best efforts to
consummate the Offering as soon as practicable after the date
hereof;
<PAGE> 68
63
(ii) in the event that the Offering is not consummated, in
connection with any other public offering or private placement of
the Refinancing Securities, promptly preparing a registration
statement or offering memorandum containing such disclosures as may
be appropriate and customary for such documents, and using its best
efforts to cause any such registration statement to become effective
under the Securities Act of 1933, as amended;
(iii) cooperating fully with NMS (or another underwriter
reasonably satisfactory to the Administrative Agent) and providing
all information reasonably requested thereby in connection with any
refinancing pursuant to this Section 5.01(q), including, without
limitation, providing all information reasonably requested thereby
to effect the sale or placement of any Refinancing Securities to be
offered;
(iv) in the event any Refinancing Securities are offered
publicly, executing underwriting agreements, to reflect the terms of
the refinancing, and containing covenants, representations and
warranties, indemnities and delivery of legal opinions, officers'
certificates and accountants' comfort letters, all in form and
substance satisfactory to NMS (or another underwriter reasonably
satisfactory to the Administrative Agent) in its reasonable
judgment;
(v) in connection with any public offering or private
placement of debt or equity securities (including the Offering),
offering such securities on terms, including, but not limited to,
interest and/or dividend rates, maturities, preferences, covenants
and redemption dates and prices, which will be determined by NMS (or
another underwriter reasonably satisfactory to the Administrative
Agent) in its reasonable judgment, in light of prevailing
circumstances and current market conditions and the Borrower's
financial condition and prospects;
(vi) (A) in connection with any private placement of debt
securities (including the Offering), filing and causing to become
effective a registration statement (within such periods of time as
NMS (or another underwriter reasonably satisfactory to the
Administrative Agent) may reasonably request prior to such private
placement) with respect to a registered offer to exchange (an
"Exchange Offer") any such privately placed debt securities for
notes of the Borrower with terms identical in all material respects
(the "Exchange Notes") to such privately placed debt securities
(except that the Exchange Notes will not contain terms with respect
to transfer restrictions or interest rate increases), and causing
such Exchange Offer to be consummated within such period of time as
NMS (or another underwriter reasonably satisfactory to the
Administrative Agent) may reasonably request prior to such period of
time; and (B) in the event any debt or equity securities are sold in
a private placement, causing the debt or equity securities held by
the purchasers (including NMS (or another underwriter reasonably
satisfactory to the Administrative Agent)) in such a private
placement to be registered pursuant to such number of registration
statements over such period of time as NMS (or another underwriter
reasonably satisfactory to the Administrative Agent) may reasonably
request prior to such private placement;
(vii) paying all reasonable costs and expenses of engaging a
qualified independent underwriter in connection with any public
offering and, to the extent necessary, a private placement of
Refinancing Securities;
(viii) in the event any Refinancing Securities are offered
publicly or sold in a private placement, upon a request made by NMS
(or another underwriter reasonably satisfactory to the
Administrative Agent) in its sole discretion, making available for
sale, and selling with any such
<PAGE> 69
64
sale of debt or equity securities, the terms of which will be
determined by NMS (or another underwriter reasonably satisfactory to
the Administrative Agent) in its reasonable judgment, in light of
prevailing circumstances and current market conditions and the
Borrower's financial condition and prospects;
(ix) assisting NMS (or another underwriter reasonably
satisfactory to the Administrative Agent) in connection with the
marketing of any Refinancing Securities to be offered publicly or
placed privately;
(x) providing such other cooperation and assistance as is
customarily provided by issuers in connection with the private
placement and/or public sale of securities;
(xi) cooperating fully with NMS (or another underwriter
reasonably satisfactory to the Administrative Agent), and providing
all information reasonably requested by NMS (or another underwriter
reasonably satisfactory to the Administrative Agent), in connection
with other financing transactions on terms which will be determined
by NMS (or another underwriter reasonably satisfactory to the
Administrative Agent) in its reasonable judgment, in light of
prevailing circumstances and current market conditions and the
Borrower's financial condition and prospects; and
(xii) in the event of any such other financing transaction,
executing such documentation as may be necessary, and containing
covenants, representations and warranties, indemnities and delivery
of legal opinions, officers' certificates and accountants' comfort
letters, all in form and substance satisfactory to NMS (or another
underwriter reasonably satisfactory to the Administrative Agent) in
its reasonable judgment.
(r) Hedge Agreements. If the Bridge Repayment Date shall not have
occurred within 90 days from the Closing Date, enter into an interest rate
Hedge Agreement in form and substance satisfactory to the Administrative
Agent.
(s) Non-Compete Agreements. Preserve, protect and defend, to the
extent permitted by applicable law, all of its rights, if any, with
respect to any covenant not to compete contained in any contract of the
Borrower and its Subsidiaries or contained in any employment agreement
with any employee whose annual salary and other compensation payable by
the Borrower and its Subsidiaries is $150,000 or more.
(t) Intercreditor Arrangements. Deliver (or in the case of clauses
(A) and (B) below, use its best efforts to deliver) to the Administrative
Agent as soon as possible and in any event within 30 days after the
Initial Extension of Credit (or such later date as may be agreed by the
Borrower and the Administrative Agent):
(A) An intercreditor agreement between the Administrative
Agent and ABN Amro Bank N.V. in form and substance satisfactory to
the Administrative Agent (as amended, supplemented or otherwise
modified from time to time, in accordance with its terms, the
"Intercreditor Agreement");
(B) A consent letter from ABN Amro Bank N.V. to the
Administrative Agent consenting to the execution, delivery and
performance of the Loan Documents and the consummation of the
transactions contemplated thereby, in form and substance
<PAGE> 70
65
satisfactory to the Administrative Agent (as amended, supplemented
or otherwise modified from time to time, the "Consent Letter");
(C) A pledge of the stock of Afa Polytek, B.V. (subject to the
limitations set forth in the Security Agreement) from the Borrower
under New York law and the law of the Netherlands, in form and
substance satisfactory to the Administrative Agent (such pledge or
pledges, and together with any other pledges delivered with respect
to foreign subsidiaries, in each case together with all agreements
and instruments delivered in connection therewith, and in each case
as amended, supplemented or otherwise modified from time to time in
accordance with its terms, the "Pledge Agreement");
(D) A favorable opinion from Netherlands counsel to the Lender
Parties as to the perfection of the Collateral Agent's security
interest in any Collateral located in the Netherlands and as to such
other matters as the Administrative Agent may require, in each case
in form and substance satisfactory to the Administrative Agent;
provided, however, that if any of the Intercreditor Agreement, the Consent
Letter, the Pledge Agreement or the opinion referred to in Section
5.01(t)(C) above are not delivered to the Administrative Agent within the
period specified therein, the Borrower shall, at the request of the
Administrative Agent at any time thereafter, within 5 Business Days after
such request, cause all amounts owing by it under the Polytek Agreement to
be prepaid or repaid in full and, in the event that such prepayment or
repayment is financed, such financing shall be on terms and conditions
satisfactory to the Administrative Agent.
SECTION 5.02. Negative Covenants. So long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, the Borrower will not, at any time:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit
any of its Subsidiaries to create, incur, assume or suffer to exist, any
Lien on or with respect to any of its properties of any character
(including, without limitation, accounts) whether now owned or hereafter
acquired, or sign or file or suffer to exist, or permit any of its
Subsidiaries to sign or file or suffer to exist, under the Uniform
Commercial Code of any jurisdiction, a financing statement that names the
Borrower or any of its Subsidiaries as debtor, or sign or suffer to exist,
or permit any of its Subsidiaries to sign or suffer to exist, any security
agreement authorizing any secured party thereunder to file such financing
statement, or assign, or permit any of its Subsidiaries to assign, any
accounts or other right to receive income, excluding, however, from the
operation of the foregoing restrictions the following:
(i) Liens created under the Loan Documents;
(ii) Liens existing on the date hereof and described on
Schedule 5.02(a) hereto;
(iii) purchase money Liens upon or in real property or
equipment acquired or held by the Borrower or any of its
Subsidiaries in the ordinary course of business to secure the
purchase price of such property or equipment or to secure Debt
incurred solely for the purpose of financing the acquisition of any
such property or equipment to be subject to such Liens, or Liens
existing on any such property or equipment at the time of
acquisition (other than any such Liens created in contemplation of
such acquisition that do not secure the purchase price), or
extensions, renewals or replacements of any of the foregoing for the
same or a lesser amount; provided, however, that no such Lien shall
extend to or cover any property other than the
<PAGE> 71
66
property or equipment being acquired, and no such extension, renewal
or replacement shall extend to or cover any property not theretofore
subject to the Lien being extended, renewed or replaced; and
provided further that the aggregate principal amount of the Debt
secured by Liens permitted by this clause (iv) shall not exceed the
amount permitted under Section 5.02(b)(iii)(B) at any time
outstanding and that any such Debt shall not otherwise be prohibited
by the terms of the Loan Documents;
(iv) Liens arising in connection with Capitalized Leases
permitted under Section 5.02(b)(iii)(C); provided that no such Lien
shall extend to or cover any Collateral or assets other than the
assets subject to such Capitalized Leases;
(v) the replacement, extension or renewal of any Lien
permitted by clause (ii) above upon or in the same property
theretofore subject thereto or the replacement, extension or renewal
(without increase in the amount or change in any direct or
contingent obligor) of the Debt secured thereby; and
(vi) other Liens arising in the ordinary course of business
which (A) do not secure Debt, (B) do not secure any Obligation in an
amount exceeding $50,000, and (C) do not in the aggregate materially
detract from the value of its assets or materially impair the use
thereof in the operation of its business.
(b) Debt. Create, incur, assume or suffer to exist, or permit any of
its Subsidiaries to create, incur, assume or suffer to exist, any Debt
other than:
(i) in the case of the Borrower,
(A) the Refinancing Securities, and
(B) Debt consisting of Hedge Agreements entered into
pursuant to Section 5.01(r),
(ii) in the case of any of the Subsidiary Guarantors,
(A) Debt owed to the Borrower or to another Subsidiary
Guarantor, provided that (x) such Debt is subordinated to any
Debt of such Subsidiary Guarantor under the Loan Documents on
terms and conditions acceptable to the Required Lenders and
(y) such Debt is evidenced by a promissory note and such
promissory note is pledged in favor of the Secured Parties
pursuant to the terms of the Security Agreement, and
(B) Debt of Subsidiary Guarantors consisting of
subordinated guaranties of the Refinancing Securities,
provided that the subordination terms thereof shall be
satisfactory to the Required Lenders; and
(iii) in the case of the Borrower and all its Subsidiaries,
(A) Debt under the Loan Documents,
<PAGE> 72
67
(B) Debt of the Borrower and its Subsidiaries secured by
Liens permitted by Section 5.02(a)(iii) not to exceed in the
aggregate $1,000,000 at any time outstanding,
(C) Capitalized Leases entered into by the Borrower and
its Subsidiaries not to exceed in the aggregate $1,000,000 at
any time outstanding,
(D) the Surviving Debt,
(E) endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business.
(F) any Debt in connection with the financing permitted
under the proviso to Section 5.01(t).
(c) Lease Obligations. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to
exist, any obligations as lessee (i) for the rental or hire of real or
personal property in connection with any sale and leaseback transaction,
or (ii) for the rental or hire of other real or personal property of any
kind under leases or agreements to lease including Capitalized Leases
having an original term of one year or more that would cause the direct
and contingent liabilities of the Borrower and its Subsidiaries, on a
Consolidated basis, in respect of all such obligations to exceed $800,000
payable in any period of 12 consecutive months; provided, however, that
after the High Yield Date, the Loan Parties may lease Equipment (as
defined in the Security Agreement) to one another on an arm's length basis
and in the ordinary course of business; provided further that after the
High Yield Date any Subsidiary of the Borrower that is not a Loan Party
may lease Equipment which is not Collateral to any other such Subsidiary.
(d) Mergers, Etc. Merge into or consolidate with any Person or
permit any Person to merge into it, or permit any of its Subsidiaries to
do so, except that (i) any Subsidiary Guarantor may merge into or
consolidate with any other Subsidiary Guarantor, (ii) any other Subsidiary
may merge into or consolidate with any other Subsidiary and (iii) any
Subsidiary of the Borrower may merge into any Subsidiary Guarantor,
provided that such Subsidiary Guarantor is the surviving corporation;
provided, however, that in each case, immediately after giving effect
thereto, no event shall occur and be continuing that constitutes a
Default.
(e) Sales, Etc., of Assets. Sell, lease, transfer or otherwise
dispose of, or permit any of its Subsidiaries to sell, lease, transfer or
otherwise dispose of, any assets, or grant any option or other right to
purchase, lease or otherwise acquire any assets other than Inventory to be
sold in the ordinary course of its business, except:
(i) sales of Inventory in the ordinary course of its business,
(ii) in a transaction authorized by Section 5.02(d),
(iii) sales of assets for cash and for fair value which the
Board of Directors of the Borrower or Subsidiary selling such assets
determines in good faith are no longer useful to its business in an
aggregate amount not to exceed $200,000 in any Fiscal Year, provided
that in the case of sales of assets pursuant to this clause (iii),
the Borrower shall, on the date of receipt by the Borrower or any of
its Subsidiaries of the Net Cash Proceeds from such sale, prepay the
<PAGE> 73
68
Advances pursuant to, and in the amount and order of priority set
forth in, Section 2.06(b)(ii), as specified therein, except, in the
case of sales occurring after the Bridge Repayment Date, to the
extent the Net Cash Proceeds from such sale are used to purchase
like assets within 6 months after receipt of such Net Cash Proceeds,
(iv) after the High Yield Date, transfers of assets among the
Loan Parties on an arm's length basis and in the ordinary course of
business; and
(v) leases permitted pursuant to the proviso of Section
5.02(c).
(f) Investments in Other Persons. Make or hold, or permit any of its
Subsidiaries to make or hold, any Investment in any Person other than:
(i) Investments by the Borrower and the Subsidiary Guarantors
in wholly-owned Subsidiaries in an aggregate amount not to exceed
$200,000, provided that, with respect to Investments in any newly
acquired or created wholly-owned Subsidiary, such Subsidiary (x)
shall become a Loan Party as required by Section 5.01(n) and (y)
shall engage in a business similar to that engaged in by the
Borrower and its Subsidiaries on the date hereof;
(ii) Investments by the Borrower and its Subsidiaries in Cash
Equivalents;
(iii) Investments consisting of intercompany Debt permitted
under Section 5.02(b)(ii)(A);
(iv) Investments by the Borrower in the Hedge Agreements
permitted under Section 5.02(b)(i)(B); and
(v) after the High Yield Date, other Investments in an
aggregate amount invested not to exceed at any time outstanding
$1,000,000; provided that with respect to Investments made under
this clause (v): (1) any newly acquired or created Subsidiary of the
Borrower or any of its Subsidiaries shall be a wholly-owned
Subsidiary thereof; (2) immediately before and after giving effect
thereto, no Default shall have occurred and be continuing or would
result therefrom; (3) any business acquired or invested in pursuant
to this clause (v) shall be in the same line of business as the
business of the Borrower or any of its Subsidiaries.
(g) Dividends, Etc. Declare or pay any dividends, purchase, redeem,
retire, defease or otherwise acquire for value any of its capital stock or
any warrants, rights or options to acquire such capital stock, now or
hereafter outstanding, return any capital to its stockholders as such,
make any distribution of assets, capital stock, warrants, rights, options,
obligations or securities to its stockholders as such or issue or sell any
capital stock or any warrants, rights or options to acquire such capital
stock, or permit any of its Subsidiaries to do any of the foregoing or
permit any of its Subsidiaries to purchase, redeem, retire, defease or
otherwise acquire for value any capital stock of the Borrower or any
warrants, rights or options to acquire such capital stock or to issue or
sell any capital stock or any warrants, rights or options to acquire such
capital stock, except that, so long as no Default shall have occurred and
be continuing at the time of any action described in clauses (i) through
(v) below or would result therefrom, (i) any Subsidiary of the Borrower
may (A) declare and pay cash dividends to the Borrower and (B) declare and
pay cash dividends to any other wholly-owned Subsidiary of the Borrower of
which it is a Subsidiary; (ii) the Borrower may make Permitted Payments;
(iii) after the High Yield Date, the Borrower may declare and pay cash
dividends to the Parent solely when and as necessary to permit the
<PAGE> 74
69
Parent to purchase or redeem shares of its capital stock from members of
management of the Loan Parties upon their death, retirement or termination
so long as the aggregate amount of such payment does not exceed $250,000
in any Fiscal Year; (iv) after the Bridge Repayment Date, with the consent
of the Required Lenders, the Borrower may declare and pay dividends to the
Parent solely when and to the extent necessary to permit the Parent to
redeem its warrants issued in connection with the First Warrant Agreement
or the Second Warrant Agreement; (v) after the High Yield Date, the
Borrower may declare and pay cash dividends to the Parent solely when and
to the extent necessary to permit the Parent to prepay all or a portion of
the principal of, and interest on, the Subordinated Notes in accordance
with the terms thereof in an amount not to exceed 50% of the Excess Cash
Flow for the immediately preceding Fiscal Year; and (vi) after the High
Yield Date, if the Subordinated Notes shall have been paid in full, the
Borrower may declare and pay cash dividends to the Parent in an amount not
to exceed 50% of the Excess Cash Flow for the immediately preceding Fiscal
Year.
(h) Change in Nature of Business. Make, or permit any of its
Subsidiaries to make, any material change in the nature of its business as
carried on at the date hereof.
(i) Constitutive Document Amendments. Amend, or permit any of its
Subsidiaries to amend, its Constitutive Documents, except to the extent
required in connection with any change of legal name permitted under
Section 5.01(e).
(j) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in (i) accounting policies or
reporting practices, except as required or permitted by generally accepted
accounting principles or (ii) Fiscal Year.
(k) Prepayments, Etc., of Debt. Prepay, redeem, purchase, defease or
otherwise satisfy prior to the scheduled maturity thereof in any manner,
or make any payment in violation of any subordination terms of, any Debt,
other than (i) the prepayment of the Advances in accordance with the terms
of this Agreement, (ii) regularly scheduled or required repayments or
redemptions of Surviving Debt and (iii) any repayment or prepayment of
amounts owing by Afa Polytek B.V. under the Polytek Agreement required
pursuant to the proviso to Section 5.01(t), or amend, modify or change in
any manner any term or condition of any Surviving Debt or permit any of
its Subsidiaries to do any of the foregoing other than to prepay any Debt
payable to the Borrower.
(l) Amendment, Etc., of Related Documents. Cancel or terminate any
Related Document or consent to or accept any cancellation or termination
thereof, amend, modify or change in any manner any term or condition of
any Related Document or give any consent, waiver or approval thereunder,
waive any default under or any breach of any term or condition of any
Related Document, agree in any manner to any other amendment, modification
or change of any term or condition of any Related Document or take any
other action in connection with any Related Document that would impair the
value of the interest or rights of the Borrower thereunder or that would
impair the rights or interests of the Administrative Agent or any Lender
Party, or permit any of its Subsidiaries to do any of the foregoing,
except, in each case, as required pursuant to the proviso to Section
5.01(t).
(m) Negative Pledge. Enter into or suffer to exist, or permit any of
its Subsidiaries to enter into or suffer to exist, any agreement
prohibiting or conditioning the creation or assumption of any Lien upon
any of its property or assets other than (i) in favor of the Secured
Parties or (ii) in connection with any Surviving Debt.
<PAGE> 75
70
(n) Partnerships, Etc. Become a general partner in any general or
limited partnership or joint venture, or permit any of its Subsidiaries to
do so.
(o) Speculative Transactions. Engage, or permit any of its
Subsidiaries to engage, in any transaction involving commodity options or
futures contracts or any similar speculative transactions (including,
without limitation, take-or-pay contracts).
(p) Capital Expenditures. Make, or permit any of its Subsidiaries to
make, any Capital Expenditures that would cause the aggregate of all such
Capital Expenditures made by the Borrower and its Subsidiaries in any
Fiscal Year to exceed (i) in the case of any Fiscal Year commencing prior
to the High Yield Date, for each Fiscal Year set forth below the dollar
amount set forth opposite each such Fiscal Year:
<TABLE>
<CAPTION>
Fiscal Year Amount
ending on ------
----------
<S> <C>
December 31, 1998 $12,000,000
December 31, 1999 $10,000,000
December 31, 2000 $7,000,000
December 31, 2001 $5,000,000
December 31, 2002
and each Fiscal Year
thereafter $5,000,000
</TABLE>
and (ii) in the case of any Fiscal Year commencing on or after the High
Yield Date, $12,000,000 in any such Fiscal Year.
(q) Performance of All Agreements. Breach or permit any of its
Subsidiaries to breach, in any material respect, or permit to exist any
material default under, the terms of any lease, commitment, contract,
instrument or obligation to which it is a party, or by which its
properties or assets are bound.
(r) Employment Contracts. (i) Enter into, or permit any of its
Subsidiaries to enter into, any Employment Contract other than on terms
and conditions satisfactory to the Administrative Agent, and (ii) permit,
or permit any of its Subsidiaries, to, directly or indirectly, pay or
become obligated to pay, any compensation for services in any form to or
for the account of Ariel Gratch, Peter D. Mancuso, Bill Driggers and James
A. Wantuch, except as expressly provided in the Employment Contracts.
(s) Owner Fees. (i) Permit, or permit any of its Subsidiaries to,
directly or indirectly, pay or become obligated to pay any fees or other
amounts to or for the account of any Owner except, so long as no Default
is then continuing or would result therefrom, pursuant to the Management
Agreements; or (ii) permit, or permit any of its Subsidiaries to, directly
or indirectly, pay or become obligated to pay any compensation, fees,
salary or any other such amount, to Ariel Gratch and Yehochai Schneider,
in excess of the amounts permitted to be paid therefor pursuant to Section
5.01(l).
(t) Management Agreements. Enter into, or permit any of its
Subsidiaries to enter into, any management agreement with any Person,
including, without limitation, any Owner, other than on terms and
conditions, and pursuant to an agreement in form and substance,
satisfactory to the Administrative Agent (each such agreement, as amended,
supplemented or otherwise modified from time to time being a "Management
Agreement"), provided, however, that in no event shall the aggregate
<PAGE> 76
71
amount of fees and other amounts payable to all such Persons under all
such Management Agreements exceed the amounts permitted to be paid
therefor pursuant to Section 5.01(l).
SECTION 5.03. Reporting Requirements. So long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, the Borrower will furnish to the Lender
Parties:
(a) Default Notice. As soon as possible and in any event within two
days after the occurrence of each Default or any event, development or
occurrence that is reasonably likely to have a Material Adverse Effect
continuing on the date of such statement, a statement of the chief
financial officer of the Borrower setting forth details of such Default
and the action that the Borrower has taken and proposes to take with
respect thereto.
(b) Monthly Financials. As soon as available and in any event within
30 days after the end of each month, a Consolidated balance sheet of the
Borrower and its Subsidiaries as of the end of such month and Consolidated
statements of income and a Consolidated statement of cash flows of the
Borrower and its Subsidiaries for the period commencing at the end of the
previous month and ending with the end of such month and Consolidated
statements of income and a Consolidated statement of cash flows of the
Borrower and its Subsidiaries for the period commencing at the end of the
previous Fiscal Year and ending with the end of such month, setting forth
in each case in comparative form the corresponding figures for the
corresponding month of the preceding Fiscal Year, all in reasonable detail
and duly certified by the chief financial officer of the Borrower.
(c) Quarterly Financials. As soon as available and in any event
within 45 days after the end of each of the first three quarters of each
Fiscal Year, Consolidated and consolidating balance sheets of the Borrower
and its Subsidiaries as of the end of such quarter and Consolidated and
consolidating statements of income and a Consolidated statement of cash
flows of the Borrower and its Subsidiaries for the period commencing at
the end of the previous fiscal quarter and ending with the end of such
fiscal quarter and Consolidated and consolidating statements of income and
a Consolidated statement of cash flows of the Borrower and its
Subsidiaries for the period commencing at the end of the previous Fiscal
Year and ending with the end of such quarter, setting forth in each case
in comparative form the corresponding figures for the corresponding period
of the preceding Fiscal Year (which financial statements, in the case of
the financial statements for the fiscal quarter ended March 31, 1998,
shall have received an SAS 71 review from Coopers & Lybrand or other
independent public accountants of recognized standing acceptable to the
Required Lenders), all in reasonable detail and duly certified (subject to
year-end audit adjustments) by the chief financial officer of the Borrower
as having been prepared in accordance with GAAP, together with (i) a
certificate of said officer stating that no Default has occurred and is
continuing or, if a Default has occurred and is continuing, a statement as
to the nature thereof and the action that the Borrower has taken and
proposes to take with respect thereto and (ii) a schedule in form
satisfactory to the Administrative Agent of the computations used by the
Borrower in determining compliance with the covenants contained in
Sections 5.04(a) through (c), provided that in the event of any change in
GAAP used in the preparation of such financial statements, the Borrower
shall also provide, if necessary for the determination of compliance with
Section 5.04, a statement of reconciliation conforming such financial
statements to GAAP.
(d) Annual Financials. (i) As soon as available and in any event
within 90 days after the end of each Fiscal Year, a copy of the annual
audit report for such year for the Borrower and its Subsidiaries,
including therein Consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as of the end of such Fiscal Year and
Consolidated and consolidating statements of income
<PAGE> 77
72
and a Consolidated statement of cash flows of the Borrower and its
Subsidiaries for such Fiscal Year, in each case accompanied by an opinion
acceptable to the Administrative Agent of Coopers & Lybrand or other
independent public accountants of recognized standing acceptable to the
Required Lenders, together with (A) a certificate of such accounting firm
to the Lender Parties stating that in the course of the regular audit of
the business of the Borrower and its Subsidiaries, which audit was
conducted by such accounting firm in accordance with generally accepted
auditing standards, such accounting firm has obtained no knowledge that a
Default has occurred and is continuing, or if, in the opinion of such
accounting firm, a Default has occurred and is continuing, a statement as
to the nature thereof, (B) a schedule in form satisfactory to the
Administrative Agent of the computations used by such accountants in
determining, as of the end of such Fiscal Year, compliance with the
covenants contained in Sections 5.04(a) through (c), provided that in the
event of any change in GAAP used in the preparation of such financial
statements, the Borrower shall also provide, if necessary for the
determination of compliance with Section 5.04, a statement of
reconciliation conforming such financial statements to GAAP and (C) a
certificate of the chief financial officer of the Borrower stating that no
Default has occurred and is continuing or, if a default has occurred and
is continuing, a statement as to the nature thereof and the action that
the Borrower has taken and proposes to take with respect thereto and (ii)
as soon as available and in any event within 90 days after the end of the
Fiscal Year ending on December 31, 1997, a certified copy of the pro forma
Consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries (after giving effect to the Acquisition and the other
transactions contemplated by the Loan Documents) as of the end of such
Fiscal Year and pro forma Consolidated and consolidating statements of
income and a pro forma Consolidated statement of cash flows of the
Borrower and its Subsidiaries for such Fiscal Year, as such balance sheets
and statements of income and cash flows will be included in any offering
memorandum prepared in connection with any Refinancing.
(e) Annual Forecasts. As soon as available and in any event no later
than 30 days after the end of each Fiscal Year, forecasts prepared by
management of the Borrower, in form satisfactory to the Administrative
Agent, of balance sheets, income statements and cash flow statements on a
monthly basis for the first Fiscal Year following the date of the Initial
Extension of Credit and on a quarterly basis for each Fiscal Year
thereafter.
(f) ERISA Events and ERISA Reports. Promptly and in any event within
10 days after any Loan Party or any ERISA Affiliate knows or has reason to
know that any ERISA Event has occurred, a statement of the chief financial
officer of the Borrower describing such ERISA Event and the action, if
any, that such Loan Party or such ERISA Affiliate has taken and proposes
to take with respect thereto and on the date any records, documents or
other information must be furnished to the PBGC with respect to any Plan
pursuant to Section 4010 of ERISA, a copy of such records, documents and
information.
(g) Plan Terminations. Promptly and in any event within three
Business Days after receipt thereof by any Loan Party or any ERISA
Affiliate, copies of each notice from the PBGC stating its intention to
terminate any Plan or to have a trustee appointed to administer any Plan.
(h) Plan Annual Reports. Promptly and in any event within 30 days
after the filing thereof with the Internal Revenue Service, copies of each
Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
with respect to each Plan.
(i) Multiemployer Plan Notices. Promptly and in any event within
five Business Days after receipt thereof by any Loan Party or any ERISA
Affiliate from the sponsor of a Multiemployer Plan, copies of each notice
concerning (i) the imposition of Withdrawal Liability by any such
<PAGE> 78
73
Multiemployer Plan, (ii) the reorganization or termination, within the
meaning of Title IV of ERISA, of any such Multiemployer Plan or (iii) the
amount of liability incurred, or that may be incurred, by such Loan Party
or any ERISA Affiliate in connection with any event described in clause
(i) or (ii).
(j) Litigation. Promptly after the commencement thereof, notice of
all actions, suits, investigations, litigation and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting any Loan Party or any of
its Subsidiaries of the type described in Section 4.01(j), and promptly
after a Responsible Officer knows or should have known of the occurrence
thereof, notice of any adverse change in the status or the financial
effect on any Loan Party or any of its Subsidiaries of the Disclosed
Litigation from that described on Schedule 3.01(g).
(k) Securities Reports. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements and reports
that any Loan Party or any of its Subsidiaries sends to its stockholders,
and copies of all regular, periodic and special reports, and all
registration statements, that any Loan Party or any of its Subsidiaries
files with the Securities and Exchange Commission or any governmental
authority that may be substituted therefor, or with any national
securities exchange.
(l) Creditor Reports. Promptly after the furnishing thereof, copies
of any statement or report furnished to any other holder of the securities
of any Loan Party or of any of its Subsidiaries pursuant to the terms of
any indenture, loan or credit or similar agreement and not otherwise
required to be furnished to the Lender Parties pursuant to any other
clause of this Section 5.03.
(m) Agreement Notices. Promptly upon receipt thereof, copies of all
notices, requests and other documents received by any Loan Party or any of
its Subsidiaries under or pursuant to any Related Document or indenture,
loan or credit or similar agreement regarding or related to any breach or
default by any party thereto or any other event that could impair the
value of the interests or the rights of any Loan Party or otherwise have a
Material Adverse Effect and copies of any amendment, modification or
waiver of any provision of any Related Agreement or indenture, loan or
credit or similar agreement and, from time to time upon request by the
Administrative Agent, such information and reports regarding the Related
Documents as the Administrative Agent may request.
(n) Revenue Agent Reports. Within 10 days after receipt, copies of
all Revenue Agent Reports (Internal Revenue Service Form 886), or other
written proposals of the Internal Revenue Service, that propose, determine
or otherwise set forth positive adjustments to the Federal income tax
liability of the affiliated group (within the meaning of Section
1504(a)(1) of the Internal Revenue Code) of which the Borrower is a member
aggregating $100,000 or more.
(o) Tax Certificates. Promptly, and in any event within five
Business Days after the due date (with extensions) for filing the final
Federal income tax return in respect of each taxable year, a certificate
(a "Tax Certificate"), signed by the President or the chief financial
officer of the Borrower, stating that the common parent of the affiliated
group (within the meaning of Section 1504(a)(1) of the Internal Revenue
Code) of which the Borrower is a member has paid to the Internal Revenue
Service or other taxing authority, or to the Borrower, the full amount
that such affiliated group is required to pay in respect of Federal income
tax for such year and that the Borrower and its Subsidiaries have received
any amounts payable to them, and have not paid amounts in respect of taxes
(Federal, state, local or foreign) in excess of the amount they are
required to pay, under the Tax Agreements in respect of such taxable year.
<PAGE> 79
74
(p) Environmental Conditions. Promptly after the assertion or
occurrence thereof, notice of any Environmental Action against or of any
noncompliance by any Loan Party or any of its Subsidiaries with any
Environmental Law or Environmental Permit that (i) could reasonably be
expected to have a Material Adverse Effect or (ii) cause any property
described in the Mortgages to be subject to any restrictions on ownership,
occupancy, use or transferability under any Environmental Law.
(q) Real Property. As soon as available and in any event within 30
days after the end of each Fiscal Year, a report supplementing Schedules
4.01(gg) and 4.01(hh) hereto, including an identification of all real and
leased property disposed of by the Borrower or any of its Subsidiaries
during such Fiscal Year, a list and description (including the street
address, county or other relevant jurisdiction, state, record owner, book
value thereof, and in the case of leases of property, lessor, lessee,
expiration date and annual rental cost thereof) of all real property
acquired or leased during such Fiscal Year and a description of such other
changes in the information included in such Schedules as may be necessary
for such Schedules to be accurate and complete.
(r) Insurance. As soon as available and in any event within 30 days
after the end of each Fiscal Year, a report summarizing the insurance
coverage (specifying type, amount and carrier) in effect for the Borrower
and its Subsidiaries and containing such additional information as any
Lender Party (through the Administrative Agent) may reasonably specify.
(s) Tax Agreements. If the Borrower and such of the other Loan
Parties and Affiliates of the Borrower as shall be members of a
consolidated federal income tax filing group or a combined or unitary
state or local income tax filing group shall, subsequent to the Closing
Date, enter into a tax sharing agreement including, without limitation,
any such agreement which provides, among other things, for a hypothetical
determination of the separate company federal and, if applicable, state
and local income tax liability of each member of such consolidated,
combined or unitary group (without regard to carry forwards of net
operating losses and other tax attributes), and the payment of such
separate company income tax liability by each member of such consolidated,
combined or unitary group to the common parent or other person responsible
for the payment of tax liabilities of the group to the relevant taxing
authority for Federal, and if applicable, state and local income tax
purposes, deliver such agreement promptly after the execution thereof,
provided that such agreement shall be in form and substance satisfactory
to the Administrative Agent (each such agreement, as amended, supplemented
or otherwise modified from time to time being a "Tax Agreement").
(t) Borrowing Base Certificate. As soon as available and in any
event within 10 days after the end of each month, a Borrowing Base
Certificate, as at the end of the previous month (or the previous week, if
furnished more often than monthly), certified by the chief financial
officer of the Borrower.
(u) Other Information. Such other information respecting the
business, condition (financial or otherwise), operations, performance,
properties or prospects of any Loan Party or any of its Subsidiaries as
any Lender Party (through the Administrative Agent) may from time to time
reasonably request.
SECTION 5.04. Financial Covenants. So long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, the Borrower will:
<PAGE> 80
75
(a) Minimum EBITDA. Maintain at the end of each fiscal quarter of
the Borrower ending prior to the later of (i) the Bridge Repayment Date
and (ii) the date occurring 12 months after the Closing Date, Consolidated
EBITDA of the Borrower and its Subsidiaries of not less than the amount
set forth below for the four fiscal quarters ending at the end of such
fiscal quarter set forth below:
<TABLE>
<CAPTION>
Minimum
Quarter Ending On EBITDA
----------------- ------
<S> <C>
June 30, 1998 $28,000,000
September 30, 1998 $28,000,000
December 31, 1998 $30,000,000
March 31, 1999 $30,000,000
June 30, 1999 $32,000,000
September 30, 1999 $32,000,000
December 31, 1999 $34,000,000
December 31, 2000
and each fiscal quarter
thereafter $39,000,000
</TABLE>
(b) Total Debt Service Coverage Ratio. Maintain at the end of each
fiscal quarter of the Borrower a ratio of Consolidated Free Cash Flow for
the most recently completed four fiscal quarters of the Borrower and its
Subsidiaries to Total Debt Service for such four fiscal quarters of not
less than the ratio set forth below, provided, however, that for each
fiscal quarter of the Borrower ending on or prior to December 31, 1998,
the Consolidated Free Cash Flow and Total Debt Service shall be the actual
amount thereof, respectively, for the period since the Closing Date
multiplied by a fraction the numerator of which is 12 and the denominator
of which is the number of months that have elapsed since the Closing Date:
<TABLE>
<CAPTION>
Quarter Ending On Ratio
----------------- -----
<S> <C>
June 30, 1998 1.0 : 1.0
September 30, 1998 1.0 : 1.0
December 31, 1998 1.1 : 1.0
March 31, 1999 1.1 : 1.0
June 30, 1999 1.2 : 1.0
September 30, 1999 1.2 : 1.0
December 31, 1999 1.3 : 1.0
March 31, 2000 1.3 : 1.0
June 30, 2000 1.3 : 1.0
September 30, 2000 1.3 : 1.0
December 31, 2000
and each fiscal quarter
thereafter 1.4 : 1.0
</TABLE>
<PAGE> 81
76
provided, however, that notwithstanding the foregoing, for each fiscal
quarter of the Borrower ending on or after the High Yield Date, the
Borrower shall maintain such a ratio of not less than 1.2 : 1.0 for each
four fiscal quarter period of the Borrower ending on or after the High
Yield Date.
(c) Leverage Ratio. Maintain at the end of each fiscal quarter of
the Borrower (i) ending prior to the High Yield Date, a Leverage Ratio of
not more than the ratio set forth below:
<TABLE>
<CAPTION>
Quarter Ending On Ratio
----------------- -----
<S> <C>
June 30, 1998 5.50 : 1.0
September 30, 1998 5.40 : 1.0
December 31, 1998 5.40 : 1.0
March 31, 1999 5.25 : 1.0
June 30, 1999 5.00 : 1.0
September 30, 1999 5.00 : 1.0
December 31, 1999 5.00 : 1.0
March 31, 2000 4.75 : 1.0
June 30, 2000 4.50 : 1.0
September 30, 2000
and each fiscal quarter
thereafter 4:00 : 1.0
</TABLE>
and (ii) ending on or after the High Yield Date, a Leverage Ratio of not
more than the ratio set forth below:
<TABLE>
<CAPTION>
Quarter Ending On Ratio
----------------- -----
<S> <C>
June 30, 1998 6.00 : 1.0
September 30, 1998 5.75 : 1.0
December 31, 1998 5.50 : 1.0
March 31, 1999 5.25 : 1.0
June 30, 1999 5.25 : 1.0
September 30, 1999 5.00 : 1.0
December 31, 1999 5.00 : 1.0
March 31, 2000 4.75 : 1.0
June 30, 2000 4.75 : 1.0
September 30, 2000 4:50 : 1.0
December 31, 2000
and each fiscal quarter
thereafter 4.00 : 1.0
</TABLE>
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
<PAGE> 82
77
(a) (i) the Borrower shall fail to pay any principal of any Advance
when the same shall become due and payable or (ii) the Borrower shall fail
to pay any interest on any Advance, or any Loan Party shall fail to make
any other payment under any Loan Document, in each case under this clause
(ii) within 2 Business Day(s) after the same becomes due and payable; or
(b) any representation or warranty made by any Loan Party (or any of
its officers) under or in connection with any Loan Document shall prove to
have been incorrect in any material respect when made; or
(c) the Borrower shall fail to perform or observe any term, covenant
or agreement contained in Section 2.14, 5.01(e), (f), (g), (l), (m), (n),
(o) or (t), 5.02, 5.03 or 5.04; or
(d) any Loan Party shall fail to perform any other term, covenant or
agreement contained in any Loan Document on its part to be performed or
observed if such failure shall remain unremedied for 10 days after the
earlier of the date on which (A) a Responsible Officer of the Borrower
becomes aware of such failure or (B) written notice thereof shall have
been given to the Borrower by the Administrative Agent or any Lender
Party; or
(e) any Loan Party or any of such Loan Party's Subsidiaries shall
fail to pay any principal of, premium or interest on or any other amount
payable in respect of any Debt that is outstanding in a principal or
notional amount of at least $250,000 either individually or in the
aggregate (but excluding Debt outstanding hereunder) of such Loan Party or
such Subsidiary (as the case may be), when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the applicable
grace period, if any, specified in the agreement or instrument relating to
such Debt; or any other event shall occur or condition shall exist under
any agreement or instrument relating to any such Debt and shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or
to permit the acceleration of, the maturity of such Debt or otherwise to
cause, or to permit the holder thereof to cause, such Debt to mature; or
any such Debt shall be declared to be due and payable or required to be
prepaid or redeemed (other than by a regularly scheduled required
prepayment or redemption), purchased or defeased, or an offer to prepay,
redeem, purchase or defease such Debt shall be required to be made, in
each case prior to the stated maturity thereof; or
(f) any Loan Party or any of such Loan Party's Subsidiaries shall
generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against any Loan Party or any of such Loan Party's
Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors,
or seeking the entry of an order for relief or the appointment of a
receiver, trustee, or other similar official for it or for any substantial
part of its property and, in the case of any such proceeding instituted
against it (but not instituted by it) that is being diligently contested
by it in good faith, either such proceeding shall remain undismissed or
unstayed for a period of 60 days or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for
relief against, or the appointment of a receiver, trustee, custodian or
other similar official for, it or any substantial part of its property)
shall occur; or any Loan Party or any of such Loan Party's Subsidiaries
shall take any corporate (or the equivalent thereof) action to authorize
any of the actions set forth above in this subsection (f); or
<PAGE> 83
78
(g) any judgment or order for the payment of money in excess of
$250,000 shall be rendered against any Loan Party or any of such Loan
Party's Subsidiaries and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order or (ii) there
shall be any period of 10 Business Days during which a stay of enforcement
of such judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; or
(h) any non-monetary judgment or order shall be rendered against any
Loan Party or any of such Loan Party's Subsidiaries that could be
reasonably likely to have a Material Adverse Effect, and there shall be
any period of 10 Business Days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not
be in effect; or
(i) any provision of any Loan Document after delivery thereof
pursuant to Section 3.01 or 5.01(n) or 5.01(o) shall for any reason cease
to be valid and binding on or enforceable against any Loan Party party to
it, or any such Loan Party shall so state in writing; or
(j) any Collateral Document after delivery thereof pursuant to
Section 3.01 or 5.01(n) or 5.01(o) shall for any reason (other than
pursuant to the terms thereof) cease to create a valid and perfected first
priority lien on and security interest in the Collateral purported to be
covered thereby; or
(k) any ERISA Event shall have occurred with respect to a Plan and
the sum (determined as of the date of occurrence of such ERISA Event) of
the Insufficiency of such Plan and the Insufficiency of any and all other
Plans with respect to which an ERISA Event shall have occurred and then
exist (or the liability of the Loan Parties and the ERISA Affiliates
related to such ERISA Event) exceeds $250,000; or
(l) any Loan Party or any ERISA Affiliate shall have been notified
by the sponsor of a Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan in an amount that, when aggregated
with all other amounts required to be paid to Multiemployer Plans by the
Loan Parties and the ERISA Affiliates as Withdrawal Liability (determined
as of the date of such notification), exceeds $250,000 or requires
payments exceeding $50,000 per annum; or
(m) any Loan Party or any ERISA Affiliate shall have been notified
by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of
ERISA, and as a result of such reorganization or termination the aggregate
annual contributions of the Loan Parties and the ERISA Affiliates to all
Multiemployer Plans that are then in reorganization or being terminated
have been or will be increased over the amounts contributed to such
Multiemployer Plans for the plan years of such Multiemployer Plans
immediately preceding the plan year in which such reorganization or
termination occurs by an amount exceeding $50,000; or
(n) (i) the Parent shall cease to be the record and beneficial owner
of 100% of the issued and outstanding capital stock of the Borrower; (ii)
any Person or two or more Persons acting in concert other than the Owners
shall have acquired beneficial ownership (within the meaning of Rule 13d-3
of the Securities and Exchange Commission under the Securities Exchange
Act of 1934), directly or indirectly, of Voting Stock of the Parent (or
other securities convertible into such Voting Stock) representing 20% or
more of the combined voting power of all Voting Stock of the Parent; or
(iii) during any period of up to 12 consecutive months, commencing after
the date of this Agreement, individuals who at the beginning of such
12-month period were directors of the Borrower shall cease for any reason
to constitute a majority of the board of directors of the Borrower; or
(iv) any Person or two or more Persons acting in concert other than the
Owners shall have acquired by contract or otherwise, or shall have entered
into a
<PAGE> 84
79
contract or arrangement that, upon consummation, will result in its or
their acquisition of the power to exercise, directly or indirectly, a
controlling influence over the management or policies of the Parent; or
(v) prior to the High Yield Date, Peter Mancuso and William Driggers shall
cease to hold such positions and respective successors shall not have been
appointed by the Borrower and approved by the Required Lenders (such
approval not to be unreasonably withheld) within 90 days thereafter; or
(vi) Ariel Gratch shall cease to have voting control over all common stock
of the Parent held by Afa International Limited, a corporation organized
under the laws of the British Virgin Islands or Yehochai Schneider shall
cease to have voting control over all common stock of the Parent held by
Waldock Limited, a corporation organized under the laws of the British
Virgin Islands, or (vii) Ariel Gratch and Yehochai Schneider, individually
or in the aggregate, shall cease to have voting control over at least 51%
of the Voting Stock of the Parent; or
(o) any Loan Party or Owner party to the Capital Contribution
Agreement shall fail to perform any term, covenant or agreement contained
in the Capital Contribution Agreement on its part to be performed or
observed by it, or any other default or breach shall occur thereunder;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrower,
declare the obligation of each Appropriate Lender to make Advances (other than
Letter of Credit Advances by an Issuing Bank or a Revolving Credit Lender
pursuant to Section 2.03(d)) and of the Issuing Bank to issue Letters of Credit
to be terminated, whereupon the same shall forthwith terminate, and (ii) shall
at the request, or may with the consent, of the Required Lenders, by notice to
the Borrower, declare the Notes, all interest thereon and all other amounts
payable under this Agreement and the other Loan Documents to be forthwith due
and payable, whereupon the Notes, all such interest and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided, however, that in the event of an actual or deemed entry of
an order for relief with respect to the Borrower under the Federal Bankruptcy
Code, (x) the obligation of each Lender to make Advances (other than Letter of
Credit Advances by the Issuing Bank or a Revolving Credit Lender pursuant to
Section 2.03(c)) and of the Issuing Bank to issue Letters of Credit shall
automatically be terminated and (y) the Notes, all such interest and all such
amounts shall automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby expressly
waived by the Borrower.
SECTION 6.02. Actions in Respect of the Letters of Credit upon
Default. If any Event of Default shall have occurred and be continuing, the
Administrative Agent may, or shall at the request of the Required Lenders,
irrespective of whether it is taking any of the actions described in Section
6.01 or otherwise, make demand upon the Borrower to, and forthwith upon such
demand the Borrower will, pay to the Administrative Agent on behalf of the
Lender Parties in same day funds at the Administrative Agent's office designated
in such demand, for deposit in the L/C Cash Collateral Account, an amount equal
to the aggregate Available Amount of all Letters of Credit then outstanding. If
at any time the Administrative Agent determines that any funds held in the L/C
Cash Collateral Account are subject to any right or claim of any Person other
than the Administrative Agent and the Lender Parties or that the total amount of
such funds is less than the aggregate Available Amount of all Letters of Credit,
the Borrower will, forthwith upon demand by the Administrative Agent, pay to the
Administrative Agent, as additional funds to be deposited and held in the L/C
Cash Collateral Account, an amount equal to the excess of (a) such aggregate
Available Amount over (b) the total amount of funds, if any, then held in the
L/C Cash Collateral Account that the Administrative Agent determines to be free
and clear of any such right and claim.
<PAGE> 85
80
ARTICLE VII
THE AGENTS
SECTION 7.01. Authorization and Action. Each Lender Party (in its
capacities as a Lender and the Issuing Bank (if applicable)) hereby appoints and
authorizes each Agent to take such action as agent on its behalf and to exercise
such powers and discretion under this Agreement and the other Loan Documents as
are delegated to such Agent by the terms hereof and thereof, together with such
powers and discretion as are reasonably incidental thereto. As to any matters
not expressly provided for by the Loan Documents (including, without limitation,
enforcement or collection of the Notes), each Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding upon all Lender Parties and all holders of Notes;
provided, however, that no Agent shall be required to take any action that
exposes such Agent to personal liability or that is contrary to this Agreement
or applicable law. Each Agent agrees to give to each Lender Party prompt notice
of each notice given to it by the Borrower pursuant to the terms of this
Agreement.
SECTION 7.02. Agents' Reliance, Etc. Neither the Agents nor any of
their directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by them under or in connection with the Loan
Documents, except for their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, each Agent: (a) may treat the
payee of any Note as the holder thereof until, in the case of the Administrative
Agent, the Administrative Agent receives and accepts an Assignment and
Acceptance entered into by the Lender that is the payee of such Note, as
assignor, and an Eligible Assignee, as assignee, or, in the case of the
Collateral Agent, such Agent has received notice from the Administrative Agent
that it has received and accepted such Assignment and Acceptance, in each case
as provided in Section 8.07; (b) may consult with legal counsel (including
counsel for any Loan Party), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any Lender
Party and shall not be responsible to any Lender Party for any statements,
warranties or representations (whether written or oral) made in or in connection
with the Loan Documents; (d) shall not have any duty to ascertain or to inquire
as to the performance or observance of any of the terms, covenants or conditions
of any Loan Document on the part of any Loan Party or to inspect the property
(including the books and records) of any Loan Party; (e) shall not be
responsible to any Lender Party for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with, any Loan Document or any other instrument or
document furnished pursuant thereto; and (f) shall incur no liability under or
in respect of any Loan Document by acting upon any notice, consent, certificate
or other instrument or writing (which may be by telegram, telecopy or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 7.03. NationsBridge, NationsCredit and Affiliates. With
respect to its Commitments, the Advances made by it and the Notes issued to it,
each of NationsBridge and NationsCredit shall have the same rights and powers
under the Loan Documents as any other Lender Party and may exercise the same as
though it were not an Agent; and the term "Lender Party" or "Lenders Parties"
shall, unless otherwise expressly indicated, include each of NationsBridge and
NationsCredit in its individual capacity. Each of NationsBridge and
NationsCredit and its affiliates may accept deposits from, lend money to, act as
trustee under indentures of, accept investment banking engagements from and
generally engage in any kind of business with, any Loan Party, any of its
Subsidiaries and any Person who may do business with or own securities of any
Loan Party or any such Subsidiary, all as if NationsBridge or NationsCredit were
not an Agent and without any duty to account therefor to the Lender Parties.
<PAGE> 86
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SECTION 7.04. Lender Party Credit Decision. Each Lender Party
acknowledges that it has, independently and without reliance upon any Agent or
any other Lender Party and based on the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender Party also acknowledges that it will, independently and
without reliance upon any Agent or any other Lender Party and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement.
SECTION 7.05. Indemnification. (a) Each Lender Party severally
agrees to indemnify each Agent (to the extent not promptly reimbursed by the
Borrower) from and against such Lender Party's ratable share (determined as
provided below) of any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against such Agent in any way relating to or arising out of the Loan Documents
or any action taken or omitted by such Agent under the Loan Documents; provided,
however, that no Lender Party shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct. Without limitation of the foregoing, each Lender Party
agrees to reimburse each Agent promptly upon demand for its ratable share of any
costs and expenses (including, without limitation, fees and expenses of counsel)
payable by the Borrower under Section 8.04, to the extent that such Agent is not
promptly reimbursed for such costs and expenses by the Borrower. For purposes of
this Section 7.05(a), the Lender Parties' respective ratable shares of any
amount shall be determined, at any time, according to the sum of (a) the
aggregate principal amount of the Advances outstanding at such time and owing to
the respective Lender Parties, (b) their respective Pro Rata Shares of the
aggregate Available Amount of all Letters of Credit outstanding at such time,
(c) the aggregate unused portions of their respective Term A Commitments at such
time, (d) the aggregate unused portions of their respective Term B Commitments
at such time and (e) their respective Unused Revolving Credit Commitments at
such time; provided that the aggregate principal amount of Letter of Credit
Advances owing to the Issuing Bank shall be considered to be owed to the
Revolving Credit Lenders ratably in accordance with their respective Revolving
Credit Commitments. In the event that any Defaulted Advance shall be owing by
any Defaulting Lender at any time, such Lender Party's Commitment with respect
to the Facility under which such Defaulted Advance was required to have been
made shall be considered to be unused for purposes of this Section 7.05(a) to
the extent of the amount of such Defaulted Advance. The failure of any Lender
Party to reimburse any Agent promptly upon demand for its ratable share of any
amount required to be paid by the Lender Party to such Agent as provided herein
shall not relieve any other Lender Party of its obligation hereunder to
reimburse such Agent for its ratable share of such amount, but no Lender Party
shall be responsible for the failure of any other Lender Party to reimburse such
Agent for such other Lender Party's ratable share of such amount. Without
prejudice to the survival of any other agreement of any Lender Party hereunder,
the agreement and obligations of each Lender Party contained in this Section
7.05(a) shall survive the payment in full of principal, interest and all other
amounts payable hereunder and under the other Loan Documents.
(b) Each Lender Party severally agrees to indemnify the Issuing Bank
(to the extent not promptly reimbursed by the Borrower) from and against such
Lender Party's ratable share (determined as provided below) of any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Issuing Bank in any way
relating to or arising out of the Loan Documents or any action taken or omitted
by the Issuing Bank under the Loan Documents; provided, however, that no Lender
Party shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Issuing Bank's gross negligence or willful misconduct.
Without limitation of the foregoing, each Lender Party agrees to reimburse the
Issuing Bank promptly upon demand for its ratable share of any costs and
expenses (including, without limitation, fees and expenses of counsel) payable
by
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the Borrower under Section 8.04, to the extent that the Issuing Bank is not
promptly reimbursed for such costs and expenses by the Borrower. For purposes of
this Section 7.05(b), the Lender Parties' respective ratable shares of any
amount shall be determined, at any time, according to the sum of (a) the
aggregate principal amount of the Advances outstanding at such time and owing to
the respective Lender Parties, (b) their respective Pro Rata Shares of the
aggregate Available Amount of all Letters of Credit outstanding at such time,
(c) the aggregate unused portions of their respective Term A Commitments at such
time plus, (d) the aggregate unused portions of their respective Term B
Commitments at such time, (e) their respective Unused Revolving Credit
Commitments at such time; provided, that the aggregate principal amount of
Letter of Credit Advances owing to the Issuing Bank shall be considered to be
owed to the Revolving Credit Lenders ratably in accordance with their respective
Revolving Credit Commitments. In the event that any Defaulted Advance shall be
owing by any Defaulting Lender at any time, such Lender Party's Commitment with
respect to the Facility under which such Defaulted Advance was required to have
been made shall be considered to be unused for purposes of this Section 7.05(b)
to the extent of the amount of such Defaulted Advance. The failure of any Lender
Party to reimburse the Issuing Bank promptly upon demand for its ratable share
of any amount required to be paid by the Lender Parties to the Issuing Bank as
provided herein shall not relieve any other Lender Party of its obligation
hereunder to reimburse the Issuing Bank for its ratable share of such amount,
but no Lender Party shall be responsible for the failure of any other Lender
Party to reimburse the Issuing Bank for such other Lender Party's ratable share
of such amount. Without prejudice to the survival of any other agreement of any
Lender Party hereunder, the agreement and obligations of each Lender Party
contained in this Section 7.05(b) shall survive the payment in full of
principal, interest and all other amounts payable hereunder and under the other
Loan Documents.
SECTION 7.06. Successor Agents. Effective as of the Bridge Repayment
Date, NationsBridge shall resign as to all of the Facilities as Administrative
Agent and NationsCredit shall be appointed and hereby accepts appointment as
successor Administrative Agent as to all the Facilities. In addition, each Agent
may resign as to any or all of the Facilities at any time by giving written
notice thereof to the Lender Parties and the Borrower and may be removed as to
all of the Facilities at any time with or without cause by the Required Lenders.
Upon any resignation or removal pursuant to the immediately foregoing sentence,
the Required Lenders shall have the right, subject to, so long as no Default has
occurred and is continuing, the consent of the Borrower, which shall not be
unreasonably withheld or delayed, to appoint a successor Agent as to such of the
Facilities as to which such Agent has resigned or been removed. If no successor
Administrative Agent shall have been so appointed by the Required Lenders, and
shall have accepted such appointment, within 30 days after the retiring Agent's
giving of notice of resignation or the Required Lenders' removal of the retiring
Agent, then the retiring Agent may, on behalf of the Lender Parties, appoint a
successor Agent, which shall be a commercial bank organized under the laws of
the United States or of any State thereof and having a combined capital and
surplus of at least $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent as to all of the Facilities and upon the
execution and filing or recording of such financing statements, or amendments
thereto, and such amendments or supplements to the Mortgages, and such other
instruments or notices, as may be necessary or desirable, or as the Required
Lenders may request, in order to continue the perfection of the Liens granted or
purported to be granted by the Collateral Documents, such successor Agent shall
succeed to and become vested with all the rights, powers, discretion, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under the Loan Documents. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent as to less than all of
the Facilities and upon the execution and filing or recording of such financing
statements, or amendments thereto, and such amendments or supplements to the
Mortgages, and such other instruments or notices, as may be necessary or
desirable, or as the Required Lenders may request, in order to continue the
perfection of the Liens granted or purported to be granted by the Collateral
Documents, such successor Agent shall succeed to and become vested with all the
rights, powers, discretion, privileges and duties of the retiring Agent as to
such Facilities, other than with respect to funds transfers and other similar
aspects of the administration of Borrowings under such Facilities, issuances of
Letters of Credit (notwithstanding any resignation as Agent with respect to the
Letter of Credit Facility) and
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payments by the Borrower in respect of such Facilities, and the retiring Agent
shall be discharged from its duties and obligations under this Agreement as to
such Facilities, other than as aforesaid. After any retiring Agent's resignation
or removal hereunder as Agent as to all of the Facilities, the provisions of
this Article VII shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent as to any Facilities under this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Notes or any other Loan Document, nor consent
to any departure by any Loan Party from any such provision, shall in any event
be effective unless the same shall be in writing and signed (or, in the case of
the Collateral Documents, consented to) by the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by all of the Lenders (other than
any Lender Party that is, at such time, a Defaulting Lender), do any of the
following at any time: (i) waive any of the conditions specified in Section 3.01
or, in the case of the Initial Extension of Credit, Section 3.02, (ii) change
the number of Lenders or the percentage of (x) the Commitments, (y) the
aggregate unpaid principal amount of the Advances or (z) the aggregate Available
Amount of outstanding Letters of Credit that, in each case, shall be required
for the Lenders or any of them to take any action hereunder, (iii) reduce or
limit the obligations of the Subsidiary Guarantors under Section 1 of the
Subsidiary Guaranty or otherwise limit the Subsidiary Guarantors' liability with
respect to the Obligations owing to the Administrative Agent and the Lender
Parties, (iv) release any of the Collateral in any transaction or series of
related transactions or permit the creation, incurrence, assumption or existence
of any Lien on any material portion of the Collateral in any transaction or
series of related transactions to secure any Obligations other than Obligations
owing to the Secured Parties under the Loan Documents and other than Debt owing
to any other Person, provided that, in the case of any Lien on any material
portion of the Collateral to secure Debt owing to any other Person, (A) the
Borrower shall, on the date such Debt shall be incurred or issued, prepay the
Advances pursuant to, and in the order of priority set forth in, Section
2.06(b)(ii) in an aggregate principal amount equal to the amount of such Net
Cash Proceeds to the extent required to do so under Section 2.06(b)(ii), (B)
such Lien shall be subordinated to the Liens created under the Loan Documents on
terms acceptable to the Required Lenders and (C) the Required Lenders shall
otherwise permit the creation, incurrence, assumption or existence of such Lien
and, to the extent not otherwise permitted under Section 5.02(b), of such Debt,
(v) amend this Section 8.01, or (vi) limit the liability of any Loan Party under
any of the Loan Documents and (c) no amendment, waiver or consent shall, unless
in writing and signed by the Required Lenders and each Lender that has a
Commitment under the Term A Facility, the Term B Facility or the Revolving
Credit Facility if affected by such amendment, waiver or consent, (i) increase
the Commitments of such Lender or subject such Lender to any additional
obligations, (ii) reduce the principal of, or interest on, the Notes held by
such Lender or any fees or other amounts payable hereunder to such Lender, (iii)
postpone any date fixed for any payment of principal of, or interest on, the
Notes held by such Lender or any fees or other amounts payable hereunder to such
Lender or (iv) change the order of application of any prepayment set forth in
Section 2.06 in any manner that materially affects such Lender; provided further
that no amendment, waiver or consent shall, unless in writing and signed by the
Issuing Bank, in addition to the Lenders required above to take such action,
affect the rights or obligations of the Issuing Bank under this Agreement; and
provided further that no amendment, waiver or consent shall, unless in writing
and signed by the Administrative Agent in addition to the Lenders required above
to take such action, affect the rights or duties of the Administrative Agent
under this Agreement.
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SECTION 8.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed or delivered,
if to the Borrower, at its address at 950 Third Avenue, New York, New York
10022, Attention: Ariel Gratch; if to any Initial Lender or the Initial Issuing
Bank, at its Domestic Lending Office specified opposite its name on Schedule I
hereto; if to any other Lender Party, at its Domestic Lending Office specified
in the Assignment and Acceptance pursuant to which it became a Lender Party; and
if to the Administrative Agent, at its address at 100 North Tryon Street,
Charlotte, North Carolina 28255, Attention: Lynne Wertz, with a copy to
NationsCredit, One Canterbury Green, P.O. Box 12013, Stamford, CT 06912-0013,
Attention: Alan Pagnotta; or, as to the Borrower or the Administrative Agent, at
such other address as shall be designated by such party in a written notice to
the other parties and, as to each other party, at such other address as shall be
designated by such party in a written notice to the Borrower and the
Administrative Agent. All such notices and communications shall, when mailed,
telegraphed, telecopied or telexed, be effective when deposited in the mails,
delivered to the telegraph company, transmitted by telecopier or confirmed by
telex answerback, respectively, except that notices and communications to the
Administrative Agent pursuant to Article II, III or VII shall not be effective
until received by the Administrative Agent. Delivery by telecopier of an
executed counterpart of any amendment or waiver of any provision of this
Agreement or the Notes or of any Exhibit hereto to be executed and delivered
hereunder shall be effective as delivery of a manually executed counterpart
thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any
Lender Party or the Administrative Agent to exercise, and no delay in
exercising, any right hereunder or under any Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay on
demand (i) all costs and expenses of the Administrative Agent in connection with
the preparation, execution, delivery, administration, modification and amendment
of the Loan Documents (including, without limitation, (A) all due diligence,
collateral review, syndication, transportation, computer, duplication,
appraisal, audit, insurance, consultant, search, filing and recording fees and
expenses and (B) the reasonable fees and expenses of counsel for the
Administrative Agent with respect thereto, with respect to advising the
Administrative Agent as to its rights and responsibilities, or the perfection,
protection or preservation of rights or interests, under the Loan Documents,
with respect to negotiations with any Loan Party or with other creditors of any
Loan Party or any of its Subsidiaries arising out of any Default or any events
or circumstances that may give rise to a Default and with respect to presenting
claims in or otherwise participating in or monitoring any bankruptcy, insolvency
or other similar proceeding involving creditors' rights generally and any
proceeding ancillary thereto) and (ii) all costs and expenses of the
Administrative Agent and the Lender Parties in connection with the enforcement
of the Loan Documents, whether in any action, suit or litigation, any
bankruptcy, insolvency or other similar proceeding affecting creditors' rights
generally (including, without limitation, the reasonable fees and expenses of
counsel for the Administrative Agent and each Lender Party with respect
thereto); provided, however, that with respect to the accounting and collateral
audits referred to in Section 5.01(f), so long as no Event of Default should
have occurred and be continuing, the Borrower shall not be required to pay the
costs and expenses for more than two such audits in any year.
(b) The Borrower agrees to indemnify and hold harmless the
Administrative Agent, each Lender Party and each of their Affiliates and their
officers, directors, employees, agents and advisors (each, an "Indemnified
Party") from and against (and will reimburse each Indemnified Party as the same
are incurred) any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees, disbursements and other charges
of counsel) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of (including, without limitation,
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in connection with any investigation, litigation or proceeding or preparation of
a defense in connection therewith) (A) (i) the Acquisition or any other
acquisition or proposed acquisition by any Loan Party or any of its Subsidiaries
or any of the other transactions contemplated by the Loan Documents or (ii) the
Facilities or any other financing or any actual or proposed use of the proceeds
of the Advances or the Letters of Credit, the Loan Documents or (B) the actual
or alleged presence of Hazardous Materials on any property of any Loan Party or
any of its Subsidiaries or any Environmental Action relating in any way to any
Loan Party or any of its Subsidiaries, except to the extent such claim, damage,
loss, liability or expense is found in a final, non-appealable judgment by a
court of competent jurisdiction to have resulted from such Indemnified Party's
gross negligence or willful misconduct. In the case of an investigation,
litigation or other proceeding to which the indemnity in this Section 8.04(b)
applies, such indemnity shall be effective whether or not such investigation,
litigation or proceeding is brought by any Loan Party, its directors,
shareholders or creditors or an Indemnified Party or any Indemnified Party is
otherwise a party thereto and whether or not the Acquisition and other
transactions contemplated hereby are consummated. The Borrower also agrees not
to assert any claim against the Administrative Agent, any Lender Party or any of
their Affiliates, or any of their respective officers, directors, employees,
attorneys and agents, on any theory of liability, for special, indirect,
consequential or punitive damages arising out of or otherwise relating to the
Facilities, the actual or proposed use of the proceeds of the Advances or the
Letters of Credit, the Loan Documents or any of the transactions contemplated
thereby.
(c) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance is made by the Borrower to or for the account of a Lender Party
other than on the last day of the Interest Period for such Advance, as a result
of a payment or Conversion pursuant to Section 2.09(b)(i) or 2.10(d),
acceleration of the maturity of the Notes pursuant to Section 6.01 or for any
other reason, the Borrower shall, upon demand by such Lender Party (with a copy
of such demand to the Administrative Agent), pay to the Administrative Agent for
the account of such Lender Party any amounts required to compensate such Lender
Party for any additional losses, costs or expenses that it may reasonably incur
as a result of such payment, including, without limitation, any loss (including
loss of anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by any Lender
Party to fund or maintain such Advance.
(d) If any Loan Party fails to pay when due any costs, expenses or
other amounts payable by it under any Loan Document, including, without
limitation, fees and expenses of counsel and indemnities, such amount may be
paid on behalf of such Loan Party by the Administrative Agent or any Lender
Party, in its sole discretion.
(e) Without prejudice to the survival of any other agreement of any
Loan Party hereunder or under any other Loan Document, the agreements and
obligations of the Borrower contained in Sections 2.10 and 2.12 and this Section
8.04 shall survive the payment in full of principal, interest and all other
amounts payable hereunder and under any of the other Loan Documents.
SECTION 8.05. Right of Set-off. Upon (a) the occurrence and during
the continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Lender Party and each of its respective
Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set-off and otherwise apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender Party or such
Affiliate to or for the credit or the account of the Borrower against any and
all of the Obligations of the Borrower now or hereafter existing under this
Agreement and the Note or Notes (if any) held by such Lender Party, irrespective
of whether such Lender Party shall have made any demand under this Agreement or
such Note or Notes and although such obligations may be unmatured. Each Lender
Party agrees promptly to notify the Borrower after any such set-off and
application; provided, however, that the failure to give
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such notice shall not affect the validity of such set-off and application. The
rights of each Lender Party and its respective Affiliates under this Section are
in addition to other rights and remedies (including, without limitation, other
rights of set-off) that such Lender Party and its respective Affiliates may
have.
SECTION 8.06. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower and the Administrative Agent
and when the Administrative Agent shall have been notified by each Initial
Lender and the Initial Issuing Bank that such Initial Lender and the Initial
Issuing Bank have executed it and thereafter shall be binding upon and inure to
the benefit of the Borrower, the Administrative Agent and each Lender Party and
their respective successors and assigns, except that the Borrower shall not have
the right to assign its rights hereunder or any interest herein without the
prior written consent of the Lender Parties.
SECTION 8.07. Assignments and Participations. (a) Each Lender may
assign to one or more Eligible Assignees all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment or Commitments, the Advances owing to it and the Note
or Notes held by it); provided, however, that (i) each such assignment shall be
of a uniform, and not a varying, percentage of all rights and obligations under
and in respect of one or more Facilities, (ii) except in the case of an
assignment to a Person that, immediately prior to such assignment, was a Lender
or an assignment of all of a Lender's rights and obligations under this
Agreement, the amount of the Commitment of the assigning Lender being assigned
pursuant to each such assignment (determined as of the date of the Assignment
and Acceptance with respect to such assignment) shall in no event be less than
$3,500,000 or an integral multiple of $1,000,000 in excess thereof, (iii) each
such assignment shall be to an Eligible Assignee, and (iv) the parties to each
such assignment shall execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register, an Assignment and Acceptance, together
with any Note or Notes subject to such assignment and a processing and
recordation fee of $3,500.
(b) Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in such Assignment and Acceptance, (x)
the assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such Assignment
and Acceptance, have the rights and obligations of a Lender or Issuing Bank, as
the case may be, hereunder and (y) the Lender or Issuing Bank assignor
thereunder shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under this Agreement (and, in the case of
an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's or Issuing Bank's rights and obligations under this
Agreement, such Lender or Issuing Bank shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance, the
Lender Party assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender Party makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with, this Agreement or any other Loan Document or any
other instrument or document furnished pursuant hereto or thereto; (ii) such
assigning Lender Party makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any
other Loan Party or the performance or observance by any Loan Party of any of
its obligations under any Loan Document or any other instrument or document
furnished pursuant thereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in Section 4.01 and such other documents and information as it has
deemed appropriate to make its
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own credit analysis and decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without reliance upon the
Administrative Agent, such assigning Lender Party or any other Lender Party and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers and
discretion under the Loan Documents as are delegated to the Administrative Agent
by the terms hereof, together with such powers and discretion as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender or Issuing Bank, as the
case may be.
(d) The Administrative Agent shall maintain at its address referred
to in Section 8.02 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lender Parties and the Commitment under each Facility of, and principal
amount of the Advances owing under each Facility to, each Lender Party from time
to time (the "Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the
Administrative Agent and the Lender Parties may treat each Person whose name is
recorded in the Register as a Lender Party hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender Party at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender Party and an assignee, together with any Note or Notes subject
to such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit C
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Borrower. In the case of any assignment by a Lender, within five Business Days
after its receipt of such notice, the Borrower, at its own expense, shall
execute and deliver to the Administrative Agent in exchange for the surrendered
Note or Notes a new Note to the order of such Eligible Assignee in an amount
equal to the Commitment assumed by it under a Facility pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained a Commitment
hereunder under such Facility, a new Note to the order of the assigning Lender
in an amount equal to the Commitment retained by it hereunder. Such new Note or
Notes shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of Exhibit A-1, A-2 or A-3 hereto, as the case may be.
(f) The Issuing Bank may assign to an Eligible Assignee all of its
rights and obligations under the undrawn portion of its Letter of Credit
Commitment at any time; provided, however, that (i) each such assignment shall
be to an Eligible Assignee and (ii) the parties to such assignment shall execute
and deliver to the Administrative Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance, together with a processing and
recordation fee of $3,500.
(g) Each Lender Party may sell participations to one or more Persons
(other than any Loan Party or any of its Affiliates) in or to all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments, the Advances owing to it and
the Note or Notes (if any) held by it); provided, however, that (i) such Lender
Party's obligations under this Agreement (including, without limitation, its
Commitments) shall remain unchanged, (ii) such Lender Party shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender Party shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Borrower, the Administrative Agent and the
other Lender Parties shall continue to deal solely and directly with such Lender
Party in connection with such Lender Party's rights and obligations under this
Agreement and (v) no participant under any such participation shall have any
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right to approve any amendment or waiver of any provision of any Loan Document,
or any consent to any departure by any Loan Party therefrom, except to the
extent that such amendment, waiver or consent would reduce the principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation, postpone any date fixed for
any payment of principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, or release all or substantially all of the Collateral.
(h) Any Lender Party may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Lender
Party by or on behalf of the Borrower; provided, however, that, prior to any
such disclosure, the assignee or participant or proposed assignee or participant
shall agree to preserve the confidentiality of any Confidential Information
received by it from such Lender Party.
(i) Notwithstanding any other provision set forth in this Agreement,
any Lender Party may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
SECTION 8.08. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different 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. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 8.09. No Liability of the Issuing Bank. The Borrower assumes
all risks of the acts or omissions of any beneficiary or transferee of any
Letter of Credit with respect to its use of such Letter of Credit. Neither the
Issuing Bank nor any of its officers or directors shall be liable or responsible
for: (a) the use that may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith; (b) the
validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (c) payment by the Issuing Bank
against presentation of documents that do not comply with the terms of a Letter
of Credit, including failure of any documents to bear any reference or adequate
reference to the Letter of Credit; or (d) any other circumstances whatsoever in
making or failing to make payment under any Letter of Credit, except that the
Borrower shall have a claim against the Issuing Bank, and the Issuing Bank shall
be liable to the Borrower, to the extent of any direct, but not consequential,
damages suffered by the Borrower that the Borrower proves were caused by (i) the
Issuing Bank's willful misconduct or gross negligence in determining whether
documents presented under any Letter of Credit comply with the terms of the
Letter of Credit or (ii) the Issuing Bank's willful failure to make lawful
payment under a Letter of Credit after the presentation to it of a draft and
certificates strictly complying with the terms and conditions of the Letter of
Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank
may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
SECTION 8.10. Confidentiality. Neither the Administrative Agent nor
any Lender Party shall disclose any Confidential Information to any Person
without the consent of the Borrower, other than (a) to the Administrative
Agent's or such Lender Party's Affiliates and their officers, directors,
employees, agents and advisors and to actual or prospective Eligible Assignees
and participants, and then only on a confidential basis, (b) as required by any
law, rule or regulation or judicial process and (c) as requested or required by
any state, federal or foreign authority or examiner regulating banks or banking.
<PAGE> 94
89
SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties hereto
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or any of the other Loan Documents to which it is a party, 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 any such New York State
court 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 shall
affect any right that any party may otherwise have to bring any action or
proceeding relating to this Agreement or any of the other Loan Documents in the
courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, 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 of the
other Loan Documents to which it is a party in any New York State or federal
court. 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.
SECTION 8.12. Governing Law. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.
<PAGE> 95
SECTION 8.13. Waiver of Jury Trial. Each of the Borrower, the
Administrative Agent and the Lender Parties irrevocably waives all right to
trial by jury in any action, proceeding or counterclaim (whether based on
contract, tort or otherwise) arising out of or relating to any of the Loan
Documents, the Advances or the actions of the Administrative Agent or any Lender
Party in the negotiation, administration, performance or enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
APC HOLDING, INC.
By /s/ Ariel Gratch
_____________________________________
Title: Vice Chairman
NATIONSBRIDGE, L.L.C., as Administrative
Agent
By /s/ L.E. Wirtz
_____________________________________
Title: Managing Director
NATIONSCREDIT COMMERCIAL
CORPORATION, as Collateral Agent
By /s/ Allan J. Pagnotta
_____________________________________
Title: Vice President
Initial Lenders
NATIONSBRIDGE, L.L.C.
By /s/ L.E. Wirtz
_____________________________________
Title: Managing Director
<PAGE> 96
91
NATIONSCREDIT COMMERCIAL
CORPORATION
By /s/ Alan J. Pagnotta
-------------------------------------
Title: Vice President
NATIONSBANK, N.A.
By /s/ Michael S. McKay
-------------------------------------
Title: Senior Vice President
Initial Issuing Bank
NATIONSCREDIT COMMERCIAL
CORPORATION
By /s/ Alan J. Pagnotta
-------------------------------------
Title: Vice President
<PAGE> 97
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
<TABLE>
<CAPTION>
=========================================================================================================================
Name of Revolving Letter of Domestic Eurodollar
Initial Term A Term B Credit Credit Lending Lending
Lender Commitment Commitment Commitment Commitment Office Office
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
NationsBridge, $0.00 $65,000,000.00 $0.00 $0.00 100 North Tryon Street 100 North Tryon Street
L.L.C. 15th Floor 15th Floor
Charlotte, NC 28255 Charlotte, NC 28255
Attn: Lynne Cole Attn: Lynne Cole
Tel. (704) 380-9068 Tel. (704) 380-9068
Fax (704) 380-9923 Fax (704) 380-9923
- -------------------------------------------------------------------------------------------------------------------------
NationsCredit $0.00 $0.00 $30,000,000 $2,000,000 1 Canterbury Green 1 Canterbury Green
Commercial P.O. Box 12013 P.O. Box 12013
Corporation Stamford, CT 06912-0013 Stamford, CT
Attn: Alan Pagnotta 06912-0013
Tel. (203) 352-4034 Attn: Alan Pagnotta
Fax (203) 352-4102 Tel. (203) 352-4034
Fax (203) 352-4102
- -------------------------------------------------------------------------------------------------------------------------
NationsBank, N.A. $70,000,000.00 $0.00 $0.00 $0.00 100 North Tryon Street 100 North Tryon Street
15th Floor 15th Floor
Charlotte, NC 28255 Charlotte, NC 28255
Attn: Tim Pacitto Attn: Tim Pacitto
Tel. (704) 388-1340 Tel. (704) 388-1340
Fax (704) 386-0456 Fax (704) 386-0456
=========================================================================================================================
</TABLE>
<PAGE> 98
APC HOLDING, INC.
LETTER AMENDMENT AND WAIVER NO. 1
Dated as of February 4, 1998
To the Lender Parties party to the
Credit Agreement referred to
below, to NationsBridge, L.L.C.,
as Administrative Agent, and
NationsCredit Commercial
Corporation, as Collateral Agent
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of February 4, 1998 (the
"Credit Agreement") among APC Holding, Inc., a Delaware corporation (the
"Borrower"), the banks, financial institutions and other institutional lenders
party thereto, NationsCredit Commercial Corporation, as collateral agent, and
NationsBridge, L.L.C., as administrative agent. Capitalized terms used and not
otherwise defined in this Letter Amendment and Waiver ("Letter Amendment and
Waiver") have the meanings assigned to such terms in the Credit Agreement.
I. Amendments to the Credit Agreement.
The Credit Agreement is, effective as of the date of this Letter
Amendment and Waiver, hereby amended as follows:
(a) Section 1.01 is amended by deleting the definition of
"Subordinated Notes" in its entirety and substituting therefor the
following:
<PAGE> 99
2
"Subordinated Notes" means (a) the subordinated promissory
notes dated February 4, 1998 made by the Parent to Afa International
Limited in the principal amount of $1,000,000 and to Waldock Limited
in the principal amount of $2,000,000 and (b) after the issuance
thereof, (i) the subordinated promissory note made by the Parent to
Afa International Limited in the principal amount of $1,500,000,
which note may be prepayable at any time in cash or by the issuance
of warrants for 525,000 shares of Class B common stock of the
Parent, subject, however, to the terms of the Loan Documents, and
which note shall otherwise be in form and substance satisfactory to
the Administrative Agent and (ii) the subordinated promissory note
made by the Parent to Ariel Gratch in the principal amount of
$1,000,000, which note may be prepayable at any time in cash or by
the issuance of warrants for 350,000 shares of Class B common stock
of the Parent, subject, however, to the terms of the Loan Documents,
and which note shall otherwise be in form and substance satisfactory
to the Administrative Agent, in each case as such notes may be
amended, supplemented or otherwise modified from time to time in
accordance with their terms, to the extent permitted in accordance
with the Loan Documents.
(b) Section 2.06(b)(iii) is amended in full to read as follows:
"(iii) The Borrower shall, on each Business Day, prepay an
aggregate principal amount of the Revolving Credit Advances
comprising part of the same Borrowings and the Letter of Credit
Advances equal to the amount by which (A) the sum of the aggregate
principal amount of the Revolving Credit Advances and the Letter of
Credit Advances then outstanding plus the aggregate Available Amount
of all Letters of Credit then outstanding exceeds (B) the lesser of
(x) the Revolving Credit Facility on such Business Day and (y) (I)
during the period from the High Yield Date to April 30, 1999, the
sum of $5,000,000 and the Borrowing Base on such Business Day and
(II) at all other times, the Borrowing Base on such Business Day."
(c) Section 2.08 is amended by adding a new subsection (d) thereto
to read as follows:
"(d) Other Fees. Unless, on or before April 30, 1999, all
Advances owing to NationsCredit shall have been repaid in full,
together with interest thereon and all other amounts owing with
respect thereto, and the Commitments of NationsCredit shall have
been terminated, then on April 30, 1999, the Borrower shall pay to
NationsCredit a non-refundable fee of $250,000 in consideration for
the Overadvance Privilege (as defined in Section 3.02), which
terminates on such date."
<PAGE> 100
3
(d) Section 3.02(a)(iii) is amended in full to read as follows:
"(iii) other than with respect to any Borrowing on the Closing
Date, immediately after such Borrowing or any issuance of a Letter
of Credit and after application of the proceeds thereof, in the case
of each Revolving Credit Advance or the issuance of a Letter of
Credit, the aggregate principal amount of the Revolving Credit
Advances plus Letter of Credit Advances to be outstanding plus the
aggregate Available Amount of all Letters of Credit to be
outstanding after giving effect to such Advance or issuance will not
exceed the lesser of (A) the aggregate amount of the Revolving
Credit Commitments (or, if such Borrowing is on the Closing Date, an
amount not to exceed $2,500,000) and (B) the Borrowing Base;
provided that, in the case of this clause (B), in the case of any
Revolving Credit Borrowing to be made during the period from the
High Yield Date to April 30, 1999, the aggregate principal amount of
the Revolving Credit Advances plus Letter of Credit Advances to be
outstanding plus the aggregate Available Amount of all Letters of
Credit to be outstanding after giving effect to such Borrowing may
exceed the Borrowing Base by not more than $5,000,000 (the
"Overadvance Privilege" and any such Revolving Credit Advances made
in excess of the Borrowing Base being the "Overadvances"); provided
that, in any event, such Overadvance Privilege will terminate on
April 30, 1999;".
(e) The second sentence of Section 4.01(a) is amended in full to
read as follows:
"All of the outstanding capital stock of the Parent has been validly
issued, is fully paid and non-assessable and is owned by the Owners,
as of the date hereof, in the amounts specified in Schedule 4.01(a)
hereto, free and clear of all Liens."
(f) Section 5.01(o)(iv)(A) is amended by deleting the name "Yehochai
Schneider" and substituting therefor the name "Ariel Gratch".
(g) Section 5.02(g) is amended (i) by deleting the figure "(v)" in
the tenth line thereof and substituting therefor the figure "(vii)" and
(ii) by deleting the phrase "and (vi)" in the twenty-fourth line thereof
and substituting therefor the following:
"(vi) the Borrower may make a distribution to the Parent in respect
of the return of capital to the Parent in an aggregate amount not to
exceed $2,500,000 solely when and to the extent necessary to permit
the Parent to redeem or repurchase its warrants issued pursuant to
the Second Warrant Agreement; and (vii)".
<PAGE> 101
4
(h) Section 6.01(n)(vi) is amended by deleting the name "Yehochai
Schneider" and substituting therefor the name "Ariel Gratch".
(i) Schedule 4.01(a) is amended in full to read as set forth on
Annex A hereto.
II. Amendments to the Parent Guaranty.
The Parent Guaranty is, effective as of the date of this Letter
Waiver and Amendment, hereby amended as follows:
(a) Section 7(a)(ii) is amended by deleting the period at the end
thereof and substituting therefor the following:
";
(iii) as soon as practicable and prior to the High Yield Date
(unless the Borrower and the Administrative Agent shall agree to a
later date), enter into an equity incentive plan in form and
substance reasonably satisfactory to the Administrative Agent (any
such plan being a "Stock Plan") to issue to management and employees
of the Loan Parties and their Subsidiaries (other than Ariel Gratch
and Yehochai Schneider) common stock and/or stock options and/or
stock appreciation rights representing in the aggregate
approximately 10% of the outstanding capital stock of the Guarantor
on a fully diluted basis; and
(iv) on or before June 30, 1998 (unless the Borrower and the
Administrative Agent shall agree to a later date), issue common
stock and/or stock options and/or stock appreciation rights pursuant
to the Stock Plan referred to in subsection (iii) above."
(b) Section 7(b)(vii) is amended by adding a proviso at the end
thereof that reads as follows:
"provided, however, and subject to the foregoing limitations, that
with respect to the Subordinated Notes in the amounts of $1,500,000
and $1,000,000 issued after the date hereof to Afa International
Limited and to Ariel Gratch, respectively, the Guarantor may elect
to prepay such notes either in cash or through the issuance of
warrants to purchase 525,000 shares and 350,000 shares,
respectively, of the Guarantor's Class B common stock;".
<PAGE> 102
5
(c) Section 7(b)(ix) is amended by deleting the phrase "and (x)" at
the end thereof and substituting therefor the following:
"(x) the issuance by the Guarantor of shares of common stock
and/or stock options and/or stock appreciation rights pursuant to a
Stock Plan permitted under Section 7(a)(iii) hereof;
(xi) the execution and delivery (but not the performance) of
an agreement (the "Polytek Consideration Agreement") among the
Guarantor and Afa International, Limited and Warcop Investment Ltd.,
as the former shareholders of Afa Polytek B.V., a corporation
organized under the laws of the Netherlands ("Polytek"), a copy of
the form of which is attached hereto as Exhibit A;
(xii) the Guarantor may effect a 10,000 for 1 stock split of
its common stock; and
(xiii)".
(d) Section 7(b)(xii) is further amended by deleting the phrase "and
(xiii)" at the end thereof and substituting therefor the following:
"(xiii) concurrently with or subsequent to the redemption or
repurchase in full of the warrants issued by it pursuant to the
Second Warrant Agreement, the issuance of preferred stock or the
making of a cash payment to Afa International Limited and Warcop
Investment Ltd., in either case representing consideration of up to
$10,940,000 plus dividends or interest thereon, as the case may be,
at a rate of 7% per annum, accruing from the date of issuance
thereof, in connection with the transfer of the capital stock of
Polytek to the Guarantor pursuant to and in accordance with the
terms of the Polytek Consideration Agreement and the amendment of
the Constitutive Documents solely in order to permit such issuance;
(xiv) the incurrence of Debt after the date hereof pursuant to
certain Subordinated Notes (A) in the principal amount of $1,500,000
payable to Afa International Limited and (B) in the principal amount
of $1,000,000 payable to Ariel Gratch, in either case, with a
maturity date not earlier than May 15, 2008 and evidenced by a
promissory note in form and substance satisfactory to the
Administrative Agent, provided, however, that upon receipt of the
proceeds thereof, the Guarantor shall use such proceeds to redeem or
repurchase in part the warrants issued by it pursuant to the Second
Warrant Agreement;
<PAGE> 103
6
(xv) the redemption or repurchase of the warrants issued by it
pursuant to the Second Warrant Agreement for consideration not to
exceed $5,000,000 pursuant to an agreement between the Guarantor and
NationsCredit, such agreement to be in form and substance
satisfactory to the Administrative Agent; and
(xvi)".
(e) A new Exhibit A, a copy of which is attached hereto as Annex B,
is added at the end of the Parent Guaranty.
III. Waivers.
(a) The Borrower intends to use an aggregate amount not to exceed
$573,000 of the Net Cash Proceeds from the sale of the Refinancing
Securities to pay a prepayment fee incurred in the prepayment of certain
Existing Debt pursuant to the Credit Agreement. In connection therewith,
the Borrower hereby requests that you waive, solely to permit the Borrower
to pay such fee, the prepayment requirement of Section 2.06(b)(ii) of the
Credit Agreement.
(b) The Borrower intends to use an aggregate amount not to exceed
$2,500,000 of the Net Cash Proceeds from the sale of the Refinancing
Securities to make a distribution in respect of return of capital to the
Parent, in order to enable the Parent to redeem or repurchase the warrants
issued by the Parent pursuant to the Second Warrant Agreement. In
connection therewith, the Borrower hereby requests that you waive, solely
to permit such distribution to be made, the prepayment requirement of
Section 2.06(b)(ii) of the Credit Agreement.
(c) The Parent intends to incur subordinated Debt in the form of
Subordinated Notes (i) in the principal amount of $1,500,000 payable to
Afa International Limited and (ii) in the principal amount of $1,000,000
payable to Ariel Gratch, in either case in order to redeem warrants issued
pursuant to the Second Warrant Agreement. In connection therewith, the
Borrower hereby requests that you waive, solely to permit the Parent to
incur such subordinated Debt in order to effect such redemption or
repurchase, the prepayment requirement of Section 2.06(b)(ii) of the
Credit Agreement.
(d) The Parent may issue warrants for 875,000 shares of its Class B
common stock to prepay the Subordinated Notes referred to in the waiver
referred to in Section III(c) above. In connection therewith, the Borrower
hereby requests that you
<PAGE> 104
7
waive, solely to permit the Parent to issue such warrants, the prepayment
requirement of Section 2.06(b)(ii) of the Credit Agreement.
(e) The Parent intends to issue preferred stock to Afa International
Limited and Warcop Investment Ltd. pursuant to the Polytek Consideration
Agreement as consideration for the transfer of the capital stock of Afa
Polytek B.V., a corporation organized under the laws of the Netherlands,
to the Borrower. In connection therewith, the Borrower hereby requests
that you waive, so long as the warrants issued by the Parent pursuant to
the Second Warrant Agreement have been redeemed or repurchased and solely
to permit the Parent to issue such preferred stock, the prepayment
requirement of Section 2.06(b)(ii) of the Credit Agreement.
(f) The Borrower intends to file a Restated Certificate of
Incorporation in order to change its name from APC Holding, Inc. to
Indesco International, Inc. Prior to the Borrower being permitted to
change its legal name, Section 5.01(e) of the Credit Agreement requires
that the Borrower give the Administrative Agent at least 10 Business Days'
notice of such change. In addition, the Parent intends to file a Restated
Certificate of Incorporation in order to change its name from AFA Holdings
Co. to Indesco Holdings Co. In connection therewith, the Borrower hereby
requests that you waive, solely to permit the Borrower to change its name
from APC Holding, Inc. to Indesco International, Inc., the notice
requirement of Section 5.01(e) of the Credit Agreement. Further, the
Borrower hereby requests that you waive, solely to permit the Parent to
change its name from AFA Holdings Co. to Indesco Holdings Co., the
requirements of Section 7 of the Parent Guaranty.
(g) The Parent intends to extend the maturity date of certain
Subordinated Notes until May 15, 2008. In connection therewith, the
Borrower hereby requests that you waive, solely to permit the Parent to
extend the maturity dates of such Subordinated Notes, the requirements of
Section 5.02(l) of the Credit Agreement and Section 7 of the Parent
Guaranty.
(h) Further, solely with respect to the Assignment and Acceptance
dated as of March 5, 1998, among NationsBank, N.A., and NationsBridge
L.L.C., as Assignors, and Wrap Two & Co., as Assignee, the Borrower and
you hereby agree to waive Section 8.07(a) of the Credit Agreement
requiring that the amount of any Commitments being assigned pursuant to an
Assignment and Acceptance be at least $3,500,000.
Other than the sections of this Letter Amendment and Waiver referred
to in the immediately succeeding sentence, this Letter Amendment and Waiver
shall become effective as of the date first above written when, and only when,
the Administrative Agent shall have
<PAGE> 105
8
received (a) counterparts of this Letter Amendment and Waiver executed by the
undersigned and the Required Lenders or, as to any of the Lenders, advice
satisfactory to the Administrative Agent that such Lender has executed this
Letter Amendment and Waiver, (b) the consent attached hereto executed by each
Loan Party (other than the Borrower) and (c) duly executed UCC financing
statements naming the Borrower and the Parent as debtors in such jurisdictions
as the Administrative Agent shall have requested. Sections I(a), (b), (c), (d)
and (g), II(b) and (d) and III(a), (b), (c), (d), (e) and (g) of this Letter
Amendment and Waiver shall become effective as of the date first above written
when, and only when, on or before May 15, 1998, (x) the conditions set forth in
clauses (a), (b) and (c) of the immediately preceding sentence shall have been
satisfied, (y) the High Yield Date shall have occurred and (z) the warrants
issued pursuant to the Second Warrant Agreement have been redeemed or
repurchased. This Letter Amendment and Waiver is subject to the provisions of
Section 8.01 of the Credit Agreement.
The Credit Agreement, the Notes and each of the other Loan
Documents, except to the extent of the waivers specifically provided above, and
as specifically amended by this Letter Amendment and Waiver, are and shall
continue to be in full force and effect and are hereby in all respects ratified
and confirmed. Without limiting the generality of the foregoing, the Collateral
Documents and all of the Collateral described therein do and shall continue to
secure the payment of all Obligations of the Loan Parties under the Loan
Documents, in each case as amended by this Letter Amendment and Waiver. The
execution, delivery and effectiveness of this Letter Amendment and Waiver shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any Lender or any Agent, under any of the Loan Documents, nor
constitute a waiver of any provision of the Loan Documents. Nothing in this
Letter Amendment and Waiver shall affect the rights of the parties to the Credit
Agreement or the other Loan Documents except as expressly provided in Sections
I, II and III.
If you agree to the terms and provisions of this Letter Amendment
and Waiver, please evidence such agreement by executing a counterpart of this
Letter Amendment and Waiver. Please send at least one executed signature page to
this Letter Amendment and Waiver by telecopier to Philip R. Strauss at (212)
848-7179 and at least five original signature pages to this Letter Amendment and
Waiver to Shearman & Sterling, 599 Lexington Ave., New York, NY 10022,
Attention: Philip R. Strauss.
This Letter Amendment and Waiver may be executed in any number of
counterparts and by different 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. Delivery of an executed
counterpart of a signature page to this Letter Amendment and Waiver by
telecopier shall be effective as delivery of a manually executed counterpart of
this Letter Amendment and Waiver.
<PAGE> 106
9
This Letter Amendment and Waiver shall be governed by, and construed
in accordance with, the laws of the State of New York.
Very truly yours,
APC HOLDING, INC. (to be renamed
Indesco International, Inc.)
By /s/
_________________________
Title:
Agreed as of the date first above written:
NATIONSBRIDGE, L.L.C.,
individually and as Administrative Agent
By /s/
______________________________
Title:
NATIONSCREDIT COMMERCIAL
CORPORATION,
individually and as Collateral Agent
By /s/
______________________________
Title:
<PAGE> 107
BANKBOSTON, N.A.
By /s/
______________________________
Title:
<PAGE> 108
BHF-BANK AKTIENGESELLSCHAFT
By /s/
______________________________
Title:
By /s/
______________________________
Title:
<PAGE> 109
CREDITANSTALT CORPORATE
FINANCE, INC.
By /s/
______________________________
Title:
<PAGE> 110
TORONTO DOMINION (TEXAS), INC.
By /s/
______________________________
Title:
<PAGE> 111
WRAP TWO & CO.
By /s/
______________________________
Title:
<PAGE> 112
SALKELD & CO
By /s/
______________________________
Title:
<PAGE> 113
CREDIT AGRICOLE INDOSUEZ
By /s/
______________________________
Title:
By /s/
______________________________
Title:
<PAGE> 114
PAM CO. CAYMAN LTD.
By: Protective Asset Management
Company, as Collateral Manager
By /s/
______________________________
Title:
<PAGE> 115
NATIONSBANK, N.A. CREDIT
DERIVATIVES, RE: HARCH
By /s/
______________________________
Title:
<PAGE> 116
NATIONSBANK, N.A. CREDIT
DERIVATIVES, RE: SHENKMAN
By /s/
______________________________
Title:
<PAGE> 117
TCW LEVERAGED INCOME TRUST, L.P.
By: TCW Advisers (Bermuda) Ltd., as
General Partner
By /s/
---------------------------
Title:
By: TCW Investment Management
Company, as Investment Adviser
By /s/
--------------------------
Title:
<PAGE> 118
CONTINENTAL ASSURANCE COMPANY
SEPARATE ACCOUNT (E)
By: TCW Asset Management Company,
as Attorney-in-Fact
By /s/
_____________________________
Title:
<PAGE> 119
CONSENT
Dated as of February 4, 1998
Each of the undersigned, each a Grantor or Guarantor under the
Security Agreement and/or the Subsidiary Guaranty and/or the Parent Guaranty,
each dated or dated as of February 4, 1998 (collectively, the "Agreements") and
in favor of the Administrative Agent, hereby consents to the foregoing Letter
Amendment and Waiver and hereby confirms and agrees that (a) notwithstanding the
effectiveness of such Letter Amendment and Waiver, the Agreements are, and shall
continue to be, in full force and effect and are hereby ratified and confirmed
in all respects, and (b) the Collateral Documents to which each Grantor and/or
Guarantor is a party and all collateral described therein do, and shall continue
to, secure the payment of all of the Secured Obligations (in each case, as
defined therein). Nothing in this Consent shall affect the rights of the parties
to the Credit Agreement or the other Loan Documents except as expressly provided
in Sections I, II and III of such Letter Amendment and Waiver.
AFA HOLDINGS CO. (to be
renamed Indesco Holdings Co.)
By /s/
_______________________
Title:
AFA PRODUCTS, INC.
By /s/
_______________________
Title
CONTINENTAL ACQUISITION
CORP.
By /s/
_______________________
Title:
<PAGE> 120
ANNEX A
to
Letter Amendment and Waiver No. 1
Schedule 4.01(a)
Parent Ownership
[see attached]
<PAGE> 121
SCHEDULE 4.01(a)
OWNERSHIP OF AFA HOLDINGS CO.
<TABLE>
<CAPTION>
Shareholder Ownership Shareholder Ownership
- ----------- --------- ---------------------
<S> <C> <C>
Ariel Gratch 10.95% 109.50 Shares
Yehochai Schneider 10.95% 109.50 Shares
AFA International Limited 51.1% 511.00 Shares
Waldock Limited 9.5% 95.00 Shares
(warrant)
NationsCredit Commercial 17.5% 175.00 Shares
Corporation (warrant) -------------
1000 Shares
</TABLE>
* Does not take account of issuance of "contingent" warrants to NationsBank
for 196.138 shares of common stock (15% ownership).
* On a fully diluted basis.
* Does not take account of issuance by the Parent of shares of its common
stock and/or stock options and/or stock appreciation rights representing
in the aggregate approximately 10% of the outstanding capital stock of the
Parent on a fully diluted basis, pursuant to a permitted Stock Plan of the
Parent under Section 7(a) of the Parent Guaranty.
<PAGE> 122
ANNEX B
to
Letter Amendment and Waiver No. 1
Exhibit A to the Parent Guaranty
[see attached]
<PAGE> 123
INDESCO INTERNATIONAL, INC.
LETTER AMENDMENT NO. 2
Dated as of February 4, 1998
To the Lender Parties party to the
Credit Agreement referred to
below, to NationsBridge, L.L.C.,
as Administrative Agent, and
NationsCredit Commercial
Corporation, as Collateral Agent
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of February 4, 1998 among
Indesco International, Inc. (formerly known as APC Holding, Inc.), a Delaware
corporation (the "Borrower"), the banks, financial institutions and other
institutional lenders party thereto, NationsCredit Commercial Corporation, as
collateral agent, and NationsBridge, L.L.C., as administrative agent, as amended
by Letter Amendment and Waiver No.1 dated as of February 4, 1998 (said Agreement
as so amended being the "Credit Agreement"). Capitalized terms used and not
otherwise defined in this Letter Amendment ("Letter Amendment") have the
meanings assigned to such terms in the Credit Agreement.
The definition of "Related Documents" contained in Section 1.01 of
the Credit Agreement is, effective as of the date of this Letter Amendment,
amended by adding immediately after the reference to "Second Warrant
Agreement,":
"the warrants to purchase 525,000 shares of the Parent's Class
B common stock issued to Afa International Limited and the warrants
to purchase 350,000 shares of the Parent's Class B common stock
issued to Ariel Gratch,".
<PAGE> 124
2
The definition of "Subordinated Notes" contained in Section 1.01 of
the Credit Agreement is, effective as of the date of this Letter Amendment,
amended in full to read as follows:
"'Subordinated Notes' means (a) the subordinated promissory
notes dated July 29, 1997 made by the Parent to Afa International
Limited in the principal amount of $1,000,000 and to Waldock Limited
in the principal amount of $2,000,000 and (b) after the issuance
thereof, (i) the subordinated promissory note made by the Parent to
Afa International Limited in the principal amount of $1,500,000,
which note may be prepayable at any time in cash or by the issuance
of warrants for 525,000 shares of Class B common stock of the
Parent, and which note shall otherwise be in form and substance
satisfactory to the Administrative Agent and (ii) the subordinated
promissory note made by the Parent to Ariel Gratch in the principal
amount of $1,000,000, which note may be prepayable at any time in
cash or by the issuance of warrants for 350,000 shares of Class B
common stock of the Parent, subject, however, to the terms of the
Loan Documents, and which note shall otherwise be in form and
substance satisfactory to the Administrative Agent, in each case as
such notes may be amended, supplemented or otherwise modified from
time to time in accordance with their terms, to the extent permitted
in accordance with the Loan Documents."
Clause (vii) of Section 7(b) of the Parent Guaranty is, effective as
of the date of this Letter Amendment, hereby amended in full to read as follows:
"(vii) after the High Yield Date, if the Borrower is permitted
to declare and pay cash dividends to the Parent for such purpose,
the Parent may prepay all or a portion of the Subordinated Notes in
accordance with the terms thereof, in an amount not to exceed 50% of
the Excess Cash Flow for the immediately preceding Fiscal Year;
provided, however, that notwithstanding the foregoing limitations,
so long as no Default shall have occurred and be continuing, with
respect to the Subordinated Notes to be issued in the amounts of
$1,500,000 and $1,000,000 on April 23, 1998 to Afa International
Limited and to Ariel Gratch, respectively, the Guarantor may elect
to prepay such notes through the issuance of warrants to purchase
525,000 shares and 350,000 shares, respectively, of the Guarantor's
Class B common stock; provided that such warrants, and the terms of
such warrants shall provide that such warrants, may not be redeemed
or purchased by the Guarantor at any time until all Advances then
outstanding have been prepaid, and all other amounts then due and
payable under the Credit Agreement have been paid in full and all
Commitments have been terminated and
<PAGE> 125
3
the holders of such warrants shall have no right to cause the
Guarantor to redeem or purchase such warrants as a result of such
prepayments or termination;"
This Letter Amendment shall become effective as of the date first
above written when, and only when, the Administrative Agent shall have received
(a) counterparts of this Letter Amendment executed by the undersigned and the
Required Lenders or, as to any of the Lenders, advice satisfactory to the
Administrative Agent that such Lender has executed this Letter Amendment and (b)
the consent attached hereto executed by each Loan Party (other than the
Borrower). This Letter Amendment is subject to the provisions of Section 8.01 of
the Credit Agreement.
The Credit Agreement, the Notes and each of the other Loan
Documents, as specifically amended by this Letter Amendment, are and shall
continue to be in full force and effect and are hereby in all respects ratified
and confirmed. Without limiting the generality of the foregoing, the Collateral
Documents and all of the Collateral described therein do and shall continue to
secure the payment of all Obligations of the Loan Parties under the Loan
Documents, in each case as amended by this Letter Amendment. The execution,
delivery and effectiveness of this Letter Amendment shall not, except as
expressly provided herein, operate as a waiver of any right, power or remedy of
any Lender or any Agent, under any of the Loan Documents, nor constitute a
waiver of any provision of the Loan Documents.
If you agree to the terms and provisions of this Letter Amendment,
please evidence such agreement by executing a counterpart of this Letter
Amendment. Please send at least one executed signature page to this Letter
Amendment by telecopier to Philip R. Strauss at (212) 848-7179 and at least five
original signature pages to this Letter Amendment to Shearman & Sterling, 599
Lexington Ave., New York, NY 10022, Attention: Philip R. Strauss.
This Letter Amendment may be executed in any number of counterparts
and by different 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. Delivery of an executed counterpart of a
signature page to this Letter Amendment by telecopier shall be effective as
delivery of a manually executed counterpart of this Letter Amendment.
[The Rest of this Page Intentionally Left Blank]
<PAGE> 126
This Letter Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
Very truly yours,
INDESCO INTERNATIONAL, INC.
(Formerly known as APC Holding, Inc.)
By /s/
_________________________
Title:
Agreed as of the date first above written:
NATIONSBRIDGE, L.L.C.,
individually and as Administrative Agent
By /s/
_________________________
Title:
NATIONSCREDIT COMMERCIAL
CORPORATION,
individually and as Collateral Agent
By /s/
_________________________
Title:
<PAGE> 127
BANKBOSTON, N.A.
By /s/
_________________________
Title:
<PAGE> 128
BHF-BANK AKTIENGESELLSCHAFT
By /s/
_________________________
Title:
By /s/
_________________________
Title:
<PAGE> 129
CREDITANSTALT CORPORATE
FINANCE, INC.
By /s/
_________________________
Title:
<PAGE> 130
TORONTO DOMINION (TEXAS), INC.
By /s/
_________________________
Title:
<PAGE> 131
WRAP TWO & CO.
By /s/
_________________________
Title:
<PAGE> 132
SALKELD & CO
By /s/
_________________________
Title:
<PAGE> 133
CREDIT AGRICOLE INDOSUEZ
By /s/
_________________________
Title:
By /s/
_________________________
Title:
<PAGE> 134
PAM CO. CAYMAN LTD.
By: Protective Asset Management
Company, as Collateral Manager
By /s/
_________________________
Title:
<PAGE> 135
NATIONSBANK, N.A. CREDIT
DERIVATIVES, RE: HARCH
By /s/
_________________________
Title:
<PAGE> 136
NATIONSBANK, N.A. CREDIT
DERIVATIVES, RE: SHENKMAN
By /s/
_________________________
Title:
<PAGE> 137
TCW LEVERAGED INCOME TRUST, L.P.
By: TCW Advisers (Bermuda) Ltd., as
General Partner
By /s/
______________________________
Title:
By: TCW Investment Management
Company, as Investment Adviser
By /s/
____________________________
Title:
<PAGE> 138
CONTINENTAL ASSURANCE COMPANY
SEPARATE ACCOUNT (E)
By: TCW Asset Management Company,
as Attorney-in-Fact
By /s/
_____________________________
Title:
<PAGE> 139
CONSENT
Dated as of February 4, 1998
Each of the undersigned, each a Grantor or Guarantor under the
Security Agreement and/or the Subsidiary Guaranty and/or the Parent Guaranty,
each dated or dated as of February 4, 1998 (collectively, the "Agreements") and
in favor of the Administrative Agent, hereby consents to the foregoing Letter
Amendment and Waiver and hereby confirms and agrees that (a) notwithstanding the
effectiveness of such Letter Amendment and Waiver, the Agreements are, and shall
continue to be, in full force and effect and are hereby ratified and confirmed
in all respects, and (b) the Collateral Documents to which each Grantor and/or
Guarantor is a party and all collateral described therein do, and shall continue
to, secure the payment of all of the Secured Obligations (in each case, as
defined therein). Nothing in this Consent shall affect the rights of the parties
to the Credit Agreement or the other Loan Documents except as expressly provided
in Sections I, II and III of such Letter Amendment and Waiver.
INDESCO HOLDINGS CO.
(Formerly AFA Holdings Co.)
By /s/
_______________________
Title:
AFA PRODUCTS, INC.
By /s/
_______________________
Title
CONTINENTAL ACQUISITION
CORP.
By /s/
_______________________
Title:
<PAGE> 1
Exhibit 10.2
EXECUTION COPY
SUBSIDIARY GUARANTY
Dated as of February 4, 1998
From
THE GUARANTORS NAMED HEREIN
and
THE ADDITIONAL GUARANTORS REFERRED TO HEREIN,
as Guarantors,
in favor of
THE SECURED PARTIES REFERRED TO IN
THE CREDIT AGREEMENT REFERRED TO HEREIN
<PAGE> 2
T A B L E O F C O N T E N T S
Section Page
1. Guaranty; Limitation of Liability....................................... 1
2. Guaranty Absolute....................................................... 2
3. Waivers and Acknowledgments............................................. 3
4. Subrogation............................................................. 3
5. Payments Free and Clear of Taxes, Etc................................... 4
6. Representations and Warranties.......................................... 5
7. Covenants............................................................... 6
8. Amendments, Etc......................................................... 6
9. Notices, Etc............................................................ 6
10. No Waiver; Remedies..................................................... 6
11. Right of Set-off........................................................ 6
12. Indemnification......................................................... 7
13. Continuing Guaranty; Assignments under the Credit Agreement............. 7
14. Execution in Counterparts............................................... 8
15. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc.................. 8
Exhibit A - Guaranty Supplement
<PAGE> 3
Exhibit 10.2
SUBSIDIARY GUARANTY
SUBSIDIARY GUARANTY dated as of February 4, 1998 made by the Persons
listed on the signature pages hereof under the caption "Subsidiary Guarantors"
and the Additional Guarantors (as defined in Section 8(b)) (such Persons so
listed and the Additional Guarantors being, collectively, the "Guarantors"), in
favor of the Secured Parties (as defined in the Credit Agreement referred to
below).
PRELIMINARY STATEMENT.
APC Holding, Inc., a Delaware corporation (the "Borrower"), has
entered into a Credit Agreement dated as of February 4, 1998 (said Agreement, as
it may hereafter be amended, supplemented or otherwise modified from time to
time, being the "Credit Agreement"; the capitalized terms defined therein and
not otherwise defined herein being used herein as therein defined) with certain
Lender Parties party thereto, NationsCredit Commercial Corporation
("NationsCredit"), as Collateral Agent, and NationsBridge, L.L.C.
("NationsBridge"), as Administrative Agent for the Lender Parties. Each
Guarantor may receive a portion of the proceeds of the Advances from time to
time. It is a condition precedent to the making of Advances by the Lenders under
the Credit Agreement and will derive substantial direct and indirect benefit
from the transactions contemplated by the Credit Agreement. It is a condition
precedent to the making of Advances, the issuance of Letters of Credit by the
Issuing Bank under the Credit Agreement and the entry by the Hedge Banks into
Bank Hedge Agreements, if any, with the Borrower from time to time that each
Guarantor shall have executed and delivered this Guaranty.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lender Parties to make Advances and to issue Letters of Credit under
the Credit Agreement and the Hedge Banks to enter into Bank Hedge Agreements, if
any, with the Borrower from time to time, each Guarantor, jointly and severally
with each other Guarantor, hereby agrees as follows:
Section 1. Guaranty; Limitation of Liability. (a) Each Guarantor,
jointly and severally, hereby absolutely, unconditionally and irrevocably
guarantees the punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all Obligations of each other Loan Party now or
hereafter existing under the Loan Documents, whether for principal, interest,
fees, expenses or otherwise (such Obligations being the "Guaranteed
Obligations"), and agrees to pay any and all expenses (including counsel fees
and expenses) incurred by the Administrative Agent or any other Secured Party in
enforcing any rights under this Guaranty and the other Loan Documents. Without
limiting the generality of the foregoing, each Guarantor's liability shall
extend to all amounts that constitute part of the Guaranteed Obligations and
would be owed by any other Loan Party to the Administrative Agent or any other
Secured Party under the Loan Documents but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving such Loan Party.
(b) Each Guarantor, and by its acceptance of this Guaranty, the
Administrative Agent and each other Secured Party, hereby confirms that it is
the intention of all such parties that this Guaranty not constitute a fraudulent
transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or
state law to the extent applicable to this Guaranty. To effectuate the foregoing
intention, the Administrative Agent, the other Secured Parties and the
Guarantors hereby irrevocably agree that the Obligations of each Guarantor under
this Guaranty shall be limited to the maximum amount as will, after giving
effect to such maximum amount and all other contingent and fixed liabilities of
such Guarantor (other than guaranties of such Guarantor in respect of
subordinated debt) that are relevant under such laws, and after giving effect to
any collections from, rights to receive contribution from or payments made by or
on behalf of any other Guarantor in respect of the Obligations of such other
Guarantor under this Guaranty or any other guaranty, result in the Obligations
of such Guarantor under this Guaranty not
<PAGE> 4
2
constituting a fraudulent transfer or conveyance. For purposes hereof,
"Bankruptcy Law" means Title 11, U.S. Code, or any similar Federal or state law
for the relief of debtors.
(c) Each Guarantor agrees that in the event any payment shall be
required to be made to the Secured Parties under this Guaranty or the Parent
Guaranty or any other guaranty, such Guarantor will contribute, to the maximum
extent permitted by law, such amounts to each other Guarantor and Parent and
each other guarantor so as to maximize the aggregate amount paid to the Secured
Parties under the Loan Documents.
Section 2. Guaranty Absolute. Each Guarantor guarantees that the
Guaranteed Obligations will be paid strictly in accordance with the terms of the
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 of the
Administrative Agent or any other Secured Party with respect thereto. The
Obligations of each Guarantor under this Guaranty are independent of the
Guaranteed Obligations or any other Obligations of any other Loan Party under
the Loan Documents, and a separate action or actions may be brought and
prosecuted against each Guarantor to enforce this Guaranty, irrespective of
whether any action is brought against the Borrower or any other Loan Party or
whether the Borrower or any other Loan Party is joined in any such action or
actions. The liability of each Guarantor under this Guaranty shall be
irrevocable, absolute and unconditional irrespective of, and each Guarantor
hereby irrevocably waives any defenses it may now or hereafter have in any way
relating to, any or all of the following:
(a) any lack of validity or enforceability of any Loan Document or
any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations or any other
Obligations of any other Loan Party under the Loan Documents, or any other
amendment or waiver of or any consent to departure from any Loan Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to the Borrower or any
of its Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of any
Collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed
Obligations;
(d) any manner of application of Collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any Collateral for all or any of the Guaranteed Obligations
or any other Obligations of any other Loan Party under the Loan Documents
or any other assets of any other Loan Party or any of its Subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of any Loan Party or any of its Subsidiaries;
(f) any failure of any Secured Party to disclose to the Borrower or
any Guarantor any information relating to the financial condition,
operations, properties or prospects of any other Loan Party now or in the
future known to any Secured Party (each Guarantor waiving any duty on the
part of the Secured Parties to disclose such information);
(g) the failure of any other Person to execute this Guaranty or any
other guaranty or agreement or the release or reduction of liability of
any Guarantor or other guarantor or surety with respect to the Guaranteed
Obligations; or
<PAGE> 5
3
(h) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any
representation by the Administrative Agent or any other Secured Party that
might otherwise constitute a defense available to, or a discharge of, the
Borrower, any Guarantor or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by any Secured Party or any other Person upon the
insolvency, bankruptcy or reorganization of the Borrower or any other Loan Party
or otherwise, all as though such payment had not been made.
Section 3. Waivers and Acknowledgments. (a) Each Guarantor hereby
waives promptness, diligence, notice of acceptance, presentment, demand for
performance, protest, notice of non-performance, default, acceleration, protest
or dishonor and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that the Administrative Agent
or any other Secured Party protect, secure, perfect or insure any Lien or any
property subject thereto or exhaust any right or take any action against any
Loan Party or any other Person or any Collateral.
(b) Each Guarantor hereby waives any right to revoke this Guaranty,
and acknowledges that this Guaranty is continuing in nature and applies to all
Guaranteed Obligations, whether existing now or in the future.
(c) Each Guarantor hereby waives (i) any defense arising by reason
of any claim or defense based upon an election of remedies by the Administrative
Agent or the other Secured Parties which in any manner impairs, reduces,
releases or otherwise adversely affects the subrogation, reimbursement,
exoneration, contribution or indemnification rights of such Guarantor or any
other rights of such Guarantor to proceed against any of the other Loan Parties,
any other guarantor or any other Person or any Collateral and (ii) any defense
based on any right of set-off or counterclaim against or in respect of the
Obligations of such Guarantor under this Guaranty.
(d) Each Guarantor acknowledges that the Administrative Agent may,
without notice to or demand upon such Guarantor and without affecting the
liability of each Guarantor under this Guaranty, foreclose under any Mortgage by
nonjudicial sale, and such Guarantor hereby waives any defense to the recovery
by the Administrative Agent and the other Secured Parties against such Guarantor
of any deficiency after such nonjudicial sale and any defense or benefits that
may be afforded by applicable law.
(e) Each Guarantor acknowledges that it will receive substantial
direct and indirect benefits from the financing arrangements contemplated by the
Loan Documents and that the waivers set forth in Section 2 and this Section 3
are knowingly made in contemplation of such benefits.
Section 4. Subrogation. No Guarantor will exercise any rights that
it may now or hereafter acquire against the Borrower or any other insider
guarantor that arise from the existence, payment, performance or enforcement of
such Guarantor's Obligations under this Guaranty or any other Loan Document,
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution or indemnification and any right to participate in any
claim or remedy of the Administrative Agent or any other Secured Party against
the Borrower or any other insider guarantor or any Collateral, whether or not
such claim, remedy or right arises in equity or under contract, statute or
common law, including, without limitation, the right to take or receive from the
Borrower or any other insider guarantor, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or security on
account of such claim, remedy or right, unless and until all of the Obligations
and all other amounts payable under this Guaranty shall have been paid in full
in cash, all Bank Hedge
<PAGE> 6
4
Agreements, if any, shall have expired or terminated and the Commitments shall
have expired or terminated. If any amount shall be paid to any Guarantor in
violation of the preceding sentence at any time prior to the latest of (i) the
payment in full in cash of the Guaranteed Obligations and all other amounts
payable under this Guaranty, (ii) the Termination Date and (iii) the latest date
of expiration or termination of all Bank Hedge Agreements, if any, such amount
shall be held in trust for the benefit of the Administrative Agent and the other
Secured Parties and shall forthwith be paid to the Administrative Agent to be
credited and applied to the Guaranteed Obligations and all other amounts payable
under this Guaranty, whether matured or unmatured, in accordance with the terms
of the Loan Documents, or to be held as Collateral for any Guaranteed
Obligations or other amounts payable under this Guaranty thereafter arising. If
(i) any Guarantor shall make payment to the Administrative Agent or any other
Secured Party of all or any part of the Guaranteed Obligations, (ii) all of the
Guaranteed Obligations and all other amounts payable under this Guaranty shall
be paid in full in cash, (iii) the Termination Date shall have occurred and (iv)
all Bank Hedge Agreements, if any, shall have expired or terminated, the
Administrative Agent and the other Secured Parties will, at such Guarantor's
request and expense, execute and deliver to such Guarantor appropriate
documents, without recourse and without representation or warranty, necessary to
evidence the transfer by subrogation to such Guarantor of an interest in the
Guaranteed Obligations resulting from such payment by such Guarantor.
Section 5. Payments Free and Clear of Taxes, Etc. (a) Any and all
payments made by any Guarantor hereunder shall be made, in accordance with
Section 2.11 of the Credit Agreement, free and clear of and without deduction
for any and all present or future Taxes. If any Guarantor shall be required by
law to deduct any Taxes from or in respect of any sum payable hereunder to the
Administrative Agent or any other Secured Party, (i) the sum payable by such
Guarantor shall be increased as may be necessary so that after such Guarantor
and the Administrative Agent have made all required deductions (including
deductions applicable to additional sums payable under this Section 5) the
Administrative Agent or such other Secured Party (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) such Guarantor shall make all such deductions and (iii) such
Guarantor shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law.
(b) In addition, each Guarantor agrees to pay any present or future
Other Taxes that arise from any payment made hereunder or from the execution,
delivery or registration of, performance under, or otherwise with respect to
this Guaranty.
(c) Each Guarantor will indemnify the Administrative Agent and each
other Secured Party for, and hold them harmless against, the full amount of
Taxes and Other Taxes, and for the full amount of taxes of any kind imposed by
any jurisdiction on amounts payable under this Section 5, imposed on or paid by
the Administrative Agent or such other Secured Party (as the case may be) and
any liability (including penalties, additions to tax, interest and expenses)
arising therefrom or with respect thereto. This indemnification shall be made
within 30 days from the date the Administrative Agent or such other Secured
Party (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes by or on
behalf of any Guarantor, such Guarantor will furnish to the Administrative
Agent, at its address referred to in Section 8.02 of the Credit Agreement, the
original or a certified copy of a receipt evidencing such payment. In the case
of any payment hereunder by or on behalf of any Guarantor through an account or
branch outside the United States or by or on behalf of such Guarantor by a payor
that is not a United States person, if such Guarantor determines that no Taxes
are payable in respect thereof, such Guarantor shall furnish, or shall cause
such payor to furnish, to the Administrative Agent, at such address, an opinion
of counsel acceptable to the Administrative Agent stating that such payment is
exempt from Taxes. For purposes of subsections (d) and (e) of this Section 5,
the terms "United
<PAGE> 7
5
States" and "United States person" shall have the meanings specified in Section
7701 of the Internal Revenue Code.
(e) Upon the reasonable request in writing of any Guarantor, each
Secured Party organized under the laws of a jurisdiction outside the United
States shall, on or prior to the date of its execution and delivery of the
Credit Agreement, in the case of each Initial Lender or the Initial Issuing
Bank, as the case may be, and on the date of the Assignment and Acceptance or
other agreement pursuant to which it becomes a Secured Party, in the case of
each other Secured Party, and from time to time thereafter upon the reasonable
request in writing by any Guarantor (but only so long thereafter as such Secured
Party remains lawfully able to do so), provide the Administrative Agent and such
Guarantor with two original Internal Revenue Service forms 1001 or 4224. If the
forms provided by a Secured Party at the time such Secured Party first becomes a
party to the Credit Agreement indicate a United States interest withholding tax
rate in excess of zero, withholding tax at such rate shall be considered
excluded from Taxes unless and until such Secured Party provides the appropriate
forms certifying that a lesser rate applies, whereupon withholding tax at such
lesser rate only shall be considered excluded from Taxes for periods governed by
such forms; provided, however, that, if at the date of the Assignment and
Acceptance pursuant to which a Secured Party assignee becomes a party to the
Credit Agreement, the Secured Party assignor was entitled to payments under
subsection (a) in respect of United States withholding tax with respect to
interest paid at such date, then, to such extent, the term "Taxes" shall include
(in addition to withholding taxes that may be imposed in the future or other
amounts otherwise includable in Taxes) United States withholding tax, if any,
applicable with respect to the Secured Party assignee on such date. If any form
or document referred to in this subsection (e) requires the disclosure of
information, other than information necessary to compute the tax payable and
information required on the date hereof by Internal Revenue Service form 1001 or
4224, that the applicable Secured Party reasonably considers to be confidential,
such Secured Party shall give notice thereof to the applicable Guarantor and
shall not be obligated to include in such form or document such confidential
information.
(f) For any period with respect to which a Secured Party has failed
to provide any Guarantor following such Guarantor's request therefor pursuant to
subsection (e) above with the appropriate form described in subsection (e) above
(other than if such failure is due to a change in law occurring after the date
on which a form originally was required to be provided or if such form otherwise
is not required under subsection (e) above), such Secured Party shall not be
entitled to indemnification under subsection (a) or (c) of this Section 5 with
respect to Taxes imposed by the United States; provided, however, that should a
Secured Party become subject to Taxes because of its failure to deliver a form
required hereunder, such Guarantor shall take such steps as such Secured Party
shall reasonably request to assist such Secured Party to recover such Taxes.
(g) Without prejudice to the survival of any other agreement of any
Guarantor hereunder or under any other Loan Document, the agreements and
obligations of each Guarantor contained in this Section 5 and in Section 12
shall survive the payment in full of the Guaranteed Obligations and all other
amounts payable under this Guaranty.
Section 6. Representations and Warranties. (a) Each Guarantor hereby
makes each representation and warranty made in the Loan Documents by the
Borrower with respect to such Guarantor.
(b) There are no conditions precedent to the effectiveness of this
Guaranty that have not been satisfied or waived.
(c) Each Guarantor has, independently and without reliance upon the
Administrative Agent or any other Secured Party and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Guaranty, and such Guarantor has established
adequate means of obtaining from any other Loan Parties on a continuing basis
information pertaining to, and is now and on a
<PAGE> 8
6
continuing basis will be completely familiar with, the financial condition,
operations, properties and prospects of such other Loan Parties.
Section 7. Covenants. Each Guarantor covenants and agrees that, so
long as any part of the Guaranteed Obligations shall remain unpaid, any Letter
of Credit shall be outstanding, any Lender Party shall have any Commitment or
any Bank Hedge Agreement shall be in effect, such Guarantor will perform or
observe, and cause each of its Subsidiaries to perform or observe, all of the
terms, covenants and agreements that the Loan Documents state that the Borrower
is to cause such Guarantor or such Subsidiaries to perform or observe.
Section 8. Amendments, Etc. (a) No amendment or waiver of any
provision of this Guaranty and no consent to any departure by any Guarantor
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Administrative Agent and the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by all of the Secured Parties
(other than any Lender Party that is, at such time, a Defaulting Lender), (a)
reduce or limit the liability of such Guarantor hereunder or release any
Guarantor hereunder, (b) postpone any date fixed for payment hereunder or (c)
change the number of Secured Parties required to take any action hereunder.
(b) Upon the execution and delivery by any Person of a guaranty
supplement in substantially the form of Exhibit A hereto (each, a "Guaranty
Supplement"), (i) such Person shall be referred to as an "Additional Guarantor"
and shall be and become a Guarantor hereunder and each reference in this
Guaranty to a "Guarantor" shall also mean and be a reference to such Additional
Guarantor and each reference in any other Loan Document to a "Subsidiary
Guarantor" shall also mean and be a reference to such Additional Guarantor and
(ii) each reference herein and in any other Loan Document to the "Subsidiary
Guaranty" shall mean and be a reference to this Subsidiary Guaranty as
supplemented by such Guaranty Supplement.
Section 9. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed or delivered
to it, if to any Guarantor, addressed to it at the address listed for such
Guarantor on the signature pages hereof (or in the applicable Guaranty
Supplement), if to any Agent or any Lender Party, at its address specified in
the Credit Agreement, if to any Hedge Bank, at its address specified in the Bank
Hedge Agreement to which it is a party, or as to any party at such other address
as shall be designated by such party in a written notice to each other party.
All such notices and other communications shall, when mailed, telegraphed,
telecopied or telexed, be effective when deposited in the mail, delivered to the
telegraph company, transmitted by telecopier or confirmed by telex answerback,
respectively. Delivery by telecopier of an executed counterpart of any amendment
or waiver of any provision of this Guaranty shall be effective as delivery of a
manually executed counterpart thereof.
Section 10. No Waiver; Remedies. No failure on the part of the
Administrative Agent or any other Secured Party to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 11. Right of Set-off. Upon (a) the occurrence and during the
continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 of the Credit Agreement to
authorize the Administrative Agent to declare the Notes due and payable pursuant
to the provisions of said Section 6.01, each Lender Party and each of its
respective 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
<PAGE> 9
7
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender Party or such Affiliate to or for
the credit or the account of any Guarantor against any and all of the
Obligations of such Guarantor now or hereafter existing under this Guaranty,
whether or not such Lender Party shall have made any demand under this Guaranty
and although such Obligations may be unmatured. Each Lender Party agrees
promptly to notify such Guarantor 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 Party and
its respective Affiliates under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) that such
Lender Party and its respective Affiliates may have.
Section 12. Indemnification. (a) Without limitation on any other
Obligations of any Guarantor or remedies of the Secured Parties under this
Guaranty, each Guarantor shall, to the fullest extent permitted by law,
indemnify, defend and save and hold harmless the Administrative Agent and each
of the other Secured Parties from and against, and shall pay on demand, any and
all claims, losses, liabilities, damages, costs, expenses and charges
(including, without limitation, reasonable fees, disbursements and other charges
of counsel) that may be incurred by or asserted or awarded against the
Administrative Agent or such Secured Party as a result of any failure of any
Guaranteed Obligations to be the legal, valid and binding obligations of any
Loan Party enforceable against such Loan Party in accordance with their terms.
(b) Each Guarantor hereby also severally agrees that neither the
Administrative Agent nor any of the other Secured Parties shall have any
liability (whether direct or indirect, in contract, tort or otherwise) to any of
the Guarantors or any of their respective Affiliates or any of their respective
officers, directors, employees, attorneys and agents, and each Guarantor hereby
severally agrees not to assert any claim against the Administrative Agent or any
of the other Secured Parties on any theory of liability, for special, indirect,
consequential or punitive damages arising out of or otherwise relating to the
Facilities, the actual or proposed use of the proceeds of the Advances or the
Letters of Credit, the Loan Documents or any of the transactions contemplated
thereby.
(c) Without prejudice to the survival of any of the other agreements
of any of the Guarantors under this Guaranty or any of the other Loan Documents,
the agreements and obligations of each of the Guarantors contained in Section
1(a) (with respect to enforcement expenses), the last sentence of Section 2(a),
Section 5 and this Section 12 shall survive the payment in full of the
Guaranteed Obligations and all of the other amounts payable under this Guaranty.
Section 13. Continuing Guaranty; Assignments under the Credit
Agreement. This Guaranty is a continuing guaranty and shall (a) remain in full
force and effect until the latest of (i) the payment in full in cash of the
Guaranteed Obligations and all other amounts payable under this Guaranty, (ii)
the Termination Date and (iii) the expiration or termination of all Bank Hedge
Agreements, if any, (b) be binding upon each Guarantor, its successors and
assigns and (c) inure to the benefit of and be enforceable by the Administrative
Agent and the other Secured Parties and their successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), any
Secured Party may assign or otherwise transfer all or any portion of its rights
and obligations under the Credit Agreement (including, without limitation, all
or any portion of its Commitments, the Advances owing to it and the Note or
Notes held by it) to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to such Secured
Party herein or otherwise, in each case as and to the extent provided in Section
8.07 of the Credit Agreement. No Guarantor shall have the right to assign its
rights hereunder or any interest herein without the prior written consent of the
Secured Parties.
Section 14. Execution in Counterparts. This Guaranty may be executed
in any number of counterparts and by different 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.
Delivery of
<PAGE> 10
8
an executed counterpart of a signature page to this Guaranty by telecopier shall
be effective as delivery of a manually executed counterpart of this Guaranty.
Section 15. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc.
(a) This Guaranty shall be governed by, and construed in accordance with, the
laws of the State of New York.
(b) Each Guarantor hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of any New York
State court or federal court of the United States of America sitting in New York
City, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Guaranty or any of the other Loan Documents
to which it is or is to be a party, or for recognition or enforcement of any
judgment, and each Guarantor hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted by law,
in such federal court. Each Guarantor 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 Guaranty shall affect any right that any party may otherwise
have to bring any action or proceeding relating to this Guaranty or any of the
other Loan Documents to which it is or is to be a party in the courts of any
jurisdiction.
(c) Each Guarantor irrevocably and unconditionally waives, 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 Guaranty or any of the other Loan Documents
to which it is or is to be a party in any New York State or federal court. Each
Guarantor 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.
<PAGE> 11
(d) EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT
OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE
ADVANCES OR THE ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY OTHER SECURED PARTY
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
AFA PRODUCTS, INC.
By /s/
________________________________
Title:
Address:
135 Pine Street
Forest City, North Carolina 28043
Attention: ________________________
CONTINENTAL ACQUISITION CORP.
By /s/
________________________________
Title:
Address:
950 Third Avenue
New York, New York 10022
Attention: ________________________
<PAGE> 12
Exhibit A
FORM OF GUARANTY SUPPLEMENT
_______, ____
NationsBridge, L.L.C., as Administrative Agent
100 North Tryon Street
Charlotte, North Carolina 28255
Attention: _________
Credit Agreement dated as of February 4, 1998 among APC Holding,
Inc., a Delaware corporation (the "Borrower"), the Lender Parties
party to the Credit Agreement, NationsCredit Commercial Corporation
("NationsCredit"), as Collateral Agent, and NationsBridge, L.L.C.
("NationsBridge"), as Administrative Agent
Ladies and Gentlemen:
Reference is made to the above-captioned Credit Agreement and to the
Subsidiary Guaranty referred to therein (such Subsidiary Guaranty, as in effect
on the date hereof and as it may hereafter be amended, supplemented or otherwise
modified from time to time, together with this Guaranty Supplement, being the
"Subsidiary Guaranty"). The capitalized terms defined in the Subsidiary Guaranty
or in the Credit Agreement and not otherwise defined herein are used herein as
therein defined.
The undersigned, jointly and severally with the other Guarantors,
hereby absolutely, unconditionally and irrevocably guarantees the punctual
payment when due, whether at stated maturity, by acceleration or otherwise, of
all Obligations (as defined in the Credit Agreement) of each other Loan Party
now or hereafter existing under the Loan Documents, whether for principal,
interest, fees, expenses or otherwise and agrees to pay any and all expenses
(including counsel fees and expenses) incurred by the Administrative Agent or
any other Secured Party in enforcing any rights under the Subsidiary Guaranty
and any other Loan Documents on the terms and subject to the limitations set
forth in the Subsidiary Guaranty as if it were an original party thereto. On and
after the date hereof, each reference in the Subsidiary Guaranty to "Guarantor"
shall also mean and be a reference to the undersigned.
The undersigned hereby agrees to be bound as a Guarantor by all of
the terms and provisions of the Subsidiary Guaranty to the same extent as each
other Guarantor.
This Guaranty Supplement shall be governed by, and construed in
accordance with, the laws of the State of New York.
<PAGE> 13
3
THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE ADVANCES
OR THE ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY OTHER SECURED PARTY IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
Very truly yours,
[NAME OF ADDITIONAL GUARANTOR]
By _____________________________
Title:
Address:
<PAGE> 1
EXHIBIT 10.3
EXHIBIT D TO THE
CREDIT AGREEMENT AS
SEPARATELY EXECUTED
SECURITY AGREEMENT
Dated February 4, 1998
from
THE PERSONS LISTED ON THE SIGNATURE PAGES HEREOF,
as Grantors
to
NATIONSCREDIT COMMERCIAL CORPORATION,
as Collateral Agent
<PAGE> 2
TABLE OF CONTENTS
Section Page
- ------- ----
1. Grant of Security.................................................... 2
2. Security for Obligations............................................. 5
3. Grantors Remain Liable............................................... 5
4. Delivery and Control of Security Collateral,
Account Collateral, Agreement Collateral and
Receivables......................................................... 5
5. Maintaining the Cash Collateral Account and the
L/C Cash Collateral Account......................................... 6
6. Investing of Amounts in the Cash Collateral Account,
the L/C Cash Collateral Account, the
Company Account and the Escrow Account.............................. 7
7. Establishment and Maintenance of the Pledged Accounts................ 7
8. Release of Amounts................................................... 7
9. Representations and Warranties....................................... 8
10. Further Assurances................................................... 10
11. As to Equipment and Inventory........................................ 11
12. Insurance............................................................ 11
13. As to Receivables and Related Contracts.............................. 12
14. Voting Rights; Dividends; Etc........................................ 13
15. As to the Assigned Agreements........................................ 14
16. Transfers and Other Liens; Additional Shares......................... 14
17. Collateral Agent Appointed Attorney-in-Fact.......................... 15
18. Collateral Agent May Perform......................................... 15
19. The Collateral Agent's Duties, Etc................................... 15
20. Remedies............................................................. 16
21. Registration Rights.................................................. 17
22. Indemnity and Expenses............................................... 18
23. Amendments; Waivers; Etc............................................. 18
24. Addresses for Notices................................................ 18
25. Continuing Security Interest; Assignments............................ 19
26. Release and Termination.............................................. 19
27. Security Interest Absolute........................................... 19
28. Execution in Counterparts............................................ 20
29. The Mortgages........................................................ 20
30. Governing Law........................................................ 20
<PAGE> 3
ii
Schedules
Schedule I - Initial Pledged Shares, Initial Pledged Debt and
Pledged Security Entitlements
Schedule II - Assigned Agreements
Schedule III - Locations of Equipment and Inventory
Schedule IV - Trade Names
Schedule V - Pledged Accounts
Exhibits
Exhibit A - Form of Pledged Account Letter
Exhibit B - Form of Consent and Agreement
Exhibit C - Form of Security Agreement Supplement
<PAGE> 4
Exhibit 10.3
SECURITY AGREEMENT
SECURITY AGREEMENT dated February 4, 1998 made by the Persons listed
on the signature pages hereof and the Additional Grantors (as defined in Section
23(b)) (such Persons so listed and the Additional Grantors being, collectively,
the "Grantors") to NationsCredit Commercial Corporation ("NationsCredit"), as
collateral agent (the "Collateral Agent") for the Secured Parties (as defined in
the Credit Agreement referred to below).
PRELIMINARY STATEMENTS.
(1) APC Holding, Inc., a Delaware corporation (the "Borrower"), has
entered into a Credit Agreement dated as of February 4, 1998 (said Agreement, as
it may hereafter be amended, supplemented or otherwise modified from time to
time, being the "Credit Agreement") with certain Lender Parties party thereto,
the Collateral Agent and NationsBridge, L.L.C. ("NationsBridge"), as
administrative agent. Capitalized terms used herein and not otherwise defined
are used herein as defined in the Credit Agreement.
(2) It is a condition precedent to the making of Advances and the
issuance of Letters of Credit by the Lender Parties under the Credit Agreement
and the entry by the Hedge Banks into Bank Hedge Agreements, if any, with the
Borrower from time to time that each Grantor shall have granted the assignment
and security interest and made the pledge and assignment contemplated by this
Agreement.
(3) Each Grantor is the owner (a) of the shares of stock set forth
opposite such Grantor's name in Part I of Schedule I hereto and issued by the
corporations indicated therein and (b) of the indebtedness set forth opposite
such Grantor's name in Part II of Schedule I hereto and issued by the obligors
indicated therein and (c) of the security entitlements (the "Pledged Security
Entitlements") described in Part III of Schedule I hereto and with respect to
the financial assets described, and the securities intermediary named, and the
securities account referred to, therein.
(4) The Borrower has opened a cash collateral account (the "Cash
Collateral Account") with NationsBank at its office at 100 North Tryon Street,
Charlotte, NC 28255, Attention: Corporate Credit Services, Account No.
375-100-8840, in the name of the Borrower but under the sole control and
dominion of the Collateral Agent and subject to the terms of this Agreement.
(5) The Borrower has opened a cash collateral account (the "L/C Cash
Collateral Account") with NationsBank at its office at 100 North Tryon Street,
Charlotte, NC 28255, Attention: Corporate Credit Services, Account No.
375-100-8853, in the name of the Borrower but under the sole control and
dominion of the Collateral Agent and subject to the terms of this Agreement.
(6) The Borrower has opened a deposit account (the "Company
Account") with NationsBank at its office at 100 North Tryon Street, Charlotte,
NC 28255, Attention: Corporate Credit Services, Account No. 375-100-8866, in the
name of the Borrower but under the sole control and dominion of the Collateral
Agent and subject to the terms of this Agreement and the Capital Contribution
Agreement.
(7) The Borrower has opened a deposit account (the "Escrow Account")
with NationsBank at its office at 100 North Tryon Street, Charlotte, NC 28255,
Attention: Corporate Credit Services, Account No. 375-100-8879, in the name of
the Borrower but under the sole control and dominion of the Collateral Agent and
subject to the terms of this Agreement and the Escrow Agreement.
<PAGE> 5
2
(8) Each Grantor will derive substantial direct and indirect benefit
from the transactions contemplated by the Credit Agreement.
(9) Unless otherwise defined in this Agreement or in the Credit
Agreement, terms defined in Article 8 or 9 of the Uniform Commercial Code in
effect in the State of New York ("N.Y. Uniform Commercial Code") are used in
this Agreement as such terms are defined in such Article 8 or 9.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lender Parties to make Advances and to issue Letters of Credit under
the Credit Agreement and to induce the Hedge Banks to enter into Bank Hedge
Agreements, if any, with the Borrower from time to time, each Grantor hereby
agrees with the Collateral Agent for the ratable benefit of the Secured Parties
as follows:
SECTION 1. Grant of Security. Each Grantor hereby assigns and
pledges to the Collateral Agent for the ratable benefit of the Secured Parties,
and hereby grants to the Collateral Agent for the ratable benefit of the Secured
Parties a security interest in, the following, in each case, as to each type of
property described below, whether now owned or hereafter acquired by such
Grantor, wherever located and whether now or hereafter existing (the
"Collateral"):
(a) All of the following (the "Security Collateral"):
(i) the shares of stock set forth opposite such Grantor's name
in Part I of Schedule I hereto and issued by the corporations
indicated therein (collectively referred to herein as the "Initial
Pledged Shares", and together with the shares referred to in clause
(v) below, the "Pledged Shares"), together with the certificates, if
any, representing such Initial Pledged Shares and all dividends,
cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of such Initial Pledged Shares; provided, however, that,
in respect of shares of stock entitled to vote in any foreign
Subsidiary, such assignment, grant or pledge, shall be limited to
and include only an assignment grant or pledge of such number of
shares in such foreign Subsidiary as, in the aggregate, possesses
voting power equal to 66% of the votes entitled to be cast by all
holders of common stock of such foreign Subsidiary at any
shareholders' meeting thereof;
(ii) the indebtedness (whether or not evidenced by
instruments) set forth opposite such Grantor's name in Part II of
Schedule I hereto and issued by the obligors indicated therein
(collectively referred to herein as the "Initial Pledged Debt", and
together with the indebtedness referred to in clause (vi) below, the
"Pledged Debt") and the instruments (if any) evidencing such Initial
Pledged Debt, all security therefor and all interest, cash,
instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of such Initial Pledged Debt;
(iii) the Pledged Security Entitlements and all dividends,
interest, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such Pledged Security Entitlements; and
(iv) all additional shares of stock of any issuer of any
Initial Pledged Shares or of any other Loan Party or any Subsidiary
of any Loan Party or of any other Person from time to time acquired
by such Grantor in any manner, together with the certificates, if
any, representing such additional shares and all dividends, cash,
instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of such shares; provided, however, that, in respect of
shares of stock entitled to vote
<PAGE> 6
3
in any foreign Subsidiary, such assignment, grant or pledge, shall
be limited to and include only an assignment grant or pledge of such
number of shares in such foreign Subsidiary as, in the aggregate,
possesses voting power equal to 66% of the votes entitled to be cast
by all holders of common stock of such foreign Subsidiary at any
shareholders' meeting thereof;
(v) all additional indebtedness from time to time owed to such
Grantor by any obligor of the Initial Pledged Debt (whether or not
evidenced by instruments) and all additional indebtedness owed to
such Grantor by any other obligor, the instruments evidencing such
indebtedness (if any), all security therefor and all interest, cash,
instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of such indebtedness; and
(vi) All other investment property (including, without
limitation, all (A) securities, whether certificated or
uncertificated, (B) security entitlements, as defined in Section
8-102(a)(17) of the N.Y. Uniform Commercial Code or, in the case of
any U.S. Treasury book-entry securities, as defined in 31 C.F.R.
Section 357.2, or, in the case of any U.S. federal agency book-entry
securities, as defined in the corresponding U.S. federal regulations
governing such book-entry securities, (C) securities accounts, (D)
commodity contracts and (E) commodity accounts) in which such
Grantor has or acquires from time to time any right, title or
interest in any manner, and the certificates or instruments, if any,
representing or evidencing such investment property, and all
dividends, interest, distributions, value, cash, instruments and
other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
investment property;
(b) All of the following (collectively, the "Account Collateral"):
(i) the Cash Collateral Account, all funds held therein and
all certificates and instruments, if any, from time to time
representing or evidencing the Cash Collateral Account;
(ii) the L/C Cash Collateral Account, all funds held therein
and all certificates and instruments, if any, from time to time
representing or evidencing the L/C Cash Collateral Account;
(iii) the Company Account, all funds held therein and all
certificates and instruments, if any, from time to time representing
or evidencing the Company Account;
(iv) the Escrow Account, all funds held therein and all
certificates and instruments, if any, from time to time representing
or evidencing the Escrow Account;
(v) all Pledged Accounts (as hereinafter defined), all funds
held therein and all certificates and instruments, if any, from time
to time representing or evidencing the Pledged Accounts;
(vi) all other deposit accounts of such Grantor, all funds
held therein and all certificates and instruments, if any, from time
to time representing or evidencing such deposit accounts;
(vii) all Collateral Investments (as hereinafter defined) from
time to time and all certificates and instruments, if any, from time
to time representing or evidencing the Collateral Investments;
<PAGE> 7
4
(viii) all notes, certificates of deposit, deposit accounts,
checks and other instruments from time to time hereafter delivered
to or otherwise possessed, or required to be delivered to or
otherwise possessed, by the Collateral Agent for or on behalf of
such Grantor, including, without limitation, those delivered to or
possessed in substitution for or in addition to any or all of the
then existing Account Collateral; and
(ix) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the then
existing Account Collateral;
(c) All of such Grantor's right, title and interest in and to all
equipment in all of its forms, wherever located, now or hereafter existing
(including, but not limited to, all (i) furniture, furnishings, trade
fixtures, machinery and appliances, (ii) production, manufacturing,
distribution, selling, data processing, computer and office equipment and
(iii) trucks and other vehicles), fixtures and all parts thereof and all
accessions and additions thereto, parts and appurtenances thereof,
substitutions therefor and replacements thereof (any and all such
equipment, fixtures, accessions, additions, parts, appurtenances,
substitutions and replacements being the "Equipment");
(d) All of such Grantor's right, title and interest in and to all
inventory in all of its forms, wherever located, now or hereafter existing
(including, but not limited to, (i) all raw materials and work in process
therefor, finished goods thereof and materials used or consumed in the
manufacture, production or preparation thereof, (ii) goods in which such
Grantor has an interest in mass or a joint or other interest or right of
any kind (including, without limitation, goods in which such Grantor has
an interest or right as consignee) and (iii) goods that are returned to or
repossessed or stopped in transit by such Grantor), and all accessions
thereto and products thereof and documents therefor (any and all such
inventory, accessions, products and documents being the "Inventory");
(e) All of such Grantor's right, title and interest in and to all
accounts, contract rights, chattel paper, instruments, deposit accounts
and general intangibles and all other obligations of any kind, now or
hereafter existing, whether or not arising out of or in connection with
the sale or lease of goods or the rendering of services and whether or not
earned by performance (including, without limitation, any rights with
respect to workers' compensation or other deposits made by such Grantor
and any rights to receive tax refunds or other refunds, reimbursements and
payments from any federal, state or local government or any political
subdivision, agency or instrumentality thereof), and all rights now or
hereafter existing in and to all security agreements, leases and other
contracts securing or otherwise relating to any such accounts, contract
rights, chattel paper, instruments, deposit accounts, general intangibles
or obligations (any and all such accounts, contract rights, chattel paper,
instruments, deposit accounts, general intangibles and obligations, to the
extent not referred to in clause (a), (b), (f) or (g) of this Section 1,
being the "Receivables", and any and all such leases, security agreements
and other contracts, to the extent not referred to in clause (f) of this
Section 1, being the "Related Contracts");
(f) All of such Grantor's right, title and interest in and to each
of the agreements, if any, listed on Schedule II hereto, and each Hedge
Agreement to which such Grantor is now or may hereafter become a party, in
each case as such agreements may be amended, supplemented or otherwise
modified from time to time (collectively, the "Assigned Agreements"),
including, without limitation, (i) all rights of such Grantor to receive
moneys due and to become due under or pursuant to the Assigned Agreements,
(ii) all rights of such Grantor to receive proceeds of any insurance,
indemnity, warranty or guaranty with respect to the Assigned Agreements,
(iii) claims of such Grantor for damages arising out of or for breach of
or default under the Assigned Agreements and (iv) the right of such
Grantor to
<PAGE> 8
5
terminate the Assigned Agreements, to perform thereunder and to compel
performance and otherwise exercise all remedies thereunder (all such
Collateral being the "Agreement Collateral");
(g) All general intangibles of such Grantor (other than general
intangibles for money due or to become due to the extent covered by
Section 1(e) above), including, but not limited to, (i) all partnership,
corporate and other interests in and to any Person (other than any
Security Collateral) and (ii) all governmental permits, licenses (and any
subsequent renewals thereof), franchises, registrations, authorizations
and approvals; and
(h) All proceeds of any and all of the foregoing Collateral
(including, without limitation, proceeds that constitute property of the
types described in clauses (a) through (g) of this Section 1 and, to the
extent not otherwise included, all (i) payments under insurance (whether
or not the Collateral Agent is the loss payee thereof), or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or otherwise
with respect to any of the foregoing Collateral, and (ii) cash.
SECTION 2. Security for Obligations. This Agreement secures, in the
case of each Grantor, the payment of all Obligations of such Grantor now or
hereafter existing under the Loan Documents, whether direct or indirect,
absolute or contingent, including any extensions, modifications, substitutions,
amendments and renewals thereof, whether for principal (including reimbursement
for amounts drawn under Letters of Credit), interest, premiums, penalties, fees,
indemnifications, contract causes of action, costs, expenses or otherwise (all
such Obligations secured hereby being the "Secured Obligations"). Without
limiting the generality of the foregoing, this Agreement secures, as to each
Grantor, the payment of all amounts that constitute part of the Secured
Obligations of such Grantor and that would be owed by any Loan Party to the
Secured Parties under the Loan Documents but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving such Loan Party.
SECTION 3. Grantors Remain Liable. Anything contained herein to the
contrary notwithstanding, (a) each Grantor shall remain liable under the
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 the
Collateral Agent of any of its rights hereunder shall not release any Grantor
from any of its duties or obligations under the contracts and agreements
included in the Collateral, and (c) no Secured Party shall have any obligation
or liability under the contracts and agreements included in the Collateral by
reason of this Agreement or any other Loan Document, nor shall any Secured Party
be obligated to perform any of the obligations or duties of any Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
SECTION 4. Delivery and Control of Security Collateral, Account
Collateral, Agreement Collateral and Receivables. (a) All certificates or
instruments representing or evidencing any Security Collateral, Account
Collateral, Agreement Collateral or Receivables (and, to the extent requested by
the Collateral Agent, any other Collateral) shall be delivered to and held by or
on behalf of the Collateral Agent pursuant hereto and shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance satisfactory to
the Collateral Agent. The Collateral Agent shall have the right, upon the
occurrence and during the continuance of an Event of Default, at any time in its
discretion and without notice to such Grantor, to transfer to or to register in
the name of the Collateral Agent or any of its nominees any or all of the
Security Collateral and Account Collateral, subject only to the revocable rights
specified in Section 14(a). In addition, the Collateral Agent shall have the
right at any time to exchange certificates or instruments representing or
evidencing the Security Collateral or Account Collateral for certificates or
instruments of smaller or larger denominations.
<PAGE> 9
6
(b) With respect to any Security Collateral that constitutes a
security and is not represented or evidenced by a certificate or an instrument,
each Grantor shall cause the issuer thereof either (i) to register the
Collateral Agent as the registered owner of such security or (ii) to agree in
writing with such Grantor and the Collateral Agent that such issuer will comply
with instructions with respect to such security originated by the Collateral
Agent without further consent of such Grantor, such agreement to be in form and
substance satisfactory to the Collateral Agent.
(c) With respect to any Security Collateral that constitutes a
security entitlement, such Grantor shall cause the securities intermediary with
respect to such security entitlement either (i) to identify in its records the
Collateral Agent as having such security entitlement against such securities
intermediary or (ii) to agree in writing with such Grantor and the Collateral
Agent that such securities intermediary will comply with entitlement orders
(that is, notifications communicated to such securities intermediary directing
transfer or redemption of the financial asset to which such Grantor has a
security entitlement) originated by the Collateral Agent without further consent
of such Grantor, such agreement to be in form and substance satisfactory to the
Collateral Agent.
(d) With respect to any Security Collateral that constitutes a
commodity contract, each Grantor shall cause the commodity intermediary with
respect to such commodity contract to agree in writing with such Grantor and the
Collateral Agent that such commodity intermediary will apply any value
distributed on account of such commodity contract as directed by the Collateral
Agent without further consent of such Grantor, such agreement to be in form and
substance satisfactory to the Collateral Agent.
(e) With respect to any Security Collateral that constitutes a
securities account or a commodity account, each Grantor will, in the case of a
securities account, comply with subsection (c) of this Section 4 with respect to
all security entitlements carried in such securities account and, in the case of
a commodity account, comply with subsection (d) of this Section 4 with respect
to all commodity contracts carried in such commodity account.
SECTION 5. Maintaining the Cash Collateral Account and the L/C Cash
Collateral Account. So long as any Advance shall remain unpaid, any Letter of
Credit shall be outstanding or any Bank Hedge Agreement shall be in effect or
any Lender Party shall have any Commitment under the Credit Agreement:
(a) The Borrower will maintain the Cash Collateral Account, the L/C
Cash Collateral Account, the Company Account and the Escrow Account with
NationsCredit.
(b) It shall be a term and condition of each of the Cash Collateral
Account, the L/C Cash Collateral Account, the Company Account and the
Escrow Account, notwithstanding any term or condition to the contrary in
any other agreement relating to the Cash Collateral Account, the L/C Cash
Collateral Account, the Company Account or the Escrow Account, as the case
may be, and except as otherwise provided by the provisions of Section 8
and Section 20, that no amount (including interest on Collateral
Investments) shall be paid or released to or for the account of, or
withdrawn by or for the account of, the Borrower or any other Person from
the Cash Collateral Account, the L/C Cash Collateral Account, the Company
Account or the Escrow Account, as the case may be.
The Cash Collateral Account, the L/C Cash Collateral Account, the Company
Account and the Escrow Account shall be subject to such applicable laws, and
such applicable regulations of the Board of Governors of the Federal Reserve
System and of any other appropriate banking or governmental authority, as may
now or hereafter be in effect.
<PAGE> 10
7
SECTION 6. Investing of Amounts in the Cash Collateral Account, the
L/C Cash Collateral Account, the Company Account and the Escrow Account. If
requested by the Borrower, the Collateral Agent will, subject to the provisions
of Sections 8 and 20, from time to time (a) invest amounts on deposit in the
Cash Collateral Account, the L/C Cash Collateral Account, the Company Account
and the Escrow Account in such Cash Equivalents in the name of the Collateral
Agent or as to which all action required by Section 10 shall have been taken as
the Borrower may select and the Collateral Agent may approve and (b) invest
interest paid on the Cash Equivalents referred to in clause (a) above, and
reinvest other proceeds of any such Cash Equivalents that may mature or be sold,
in each case in such Cash Equivalents in the name of the Collateral Agent or as
to which all actions required by Section 10 shall have been taken as the
Borrower may select and the Collateral Agent may approve (the Cash Equivalents
referred to in clauses (a) and (b) above being collectively "Collateral
Investments"). Interest and proceeds that are not invested or reinvested in
Collateral Investments as provided above shall be deposited and held in the Cash
Collateral Account, the L/C Cash Collateral Account, the Company Account or the
Escrow Account, as the case may be.
SECTION 7. Establishment and Maintenance of the Pledged Accounts. So
long as any Advance shall remain unpaid, any Letter of Credit shall be
outstanding, any Bank Hedge Agreement shall be in effect or any Lender Party
shall have any Commitment under the Credit Agreement, within 30 days after the
Closing Date (or such later date as the Collateral Agent and the Borrower shall
agree):
(a) Each Grantor shall maintain pledged deposit accounts ("Pledged
Accounts") only with banks ("Pledged Account Banks") that have entered
into letter agreements with such Grantor and the Collateral Agent, which
letter agreements shall be in substantially the form of Exhibit A hereto
or otherwise in form and substance satisfactory to such Grantor and the
Collateral Agent ("Pledged Account Letters").
(b) Each Grantor (i) shall immediately instruct each Person
obligated at any time to make any payment to such Grantor (an "Obligor")
to make such payment to a Pledged Account or to the Cash Collateral
Account and (ii) shall pay to the Collateral Agent for deposit in the Cash
Collateral Account, at the end of each Business Day, all proceeds of
Collateral and all other cash of the Loan Parties in excess of $250,000 in
the aggregate.
(c) Each Grantor shall instruct each Pledged Account Bank with which
it maintains a Pledged Account to transfer to the Cash Collateral Account,
at the end of each Business Day, in same day funds, an amount equal to the
credit balance of the Pledged Account in such Pledged Account Bank.
(d) Upon any termination of any Pledged Account Letter or other
agreement with respect to the maintenance of a Pledged Account by any
Grantor or any Pledged Account Bank, the applicable Grantor shall
immediately notify all Obligors that were making payments to such Pledged
Account to make all future payments to another Pledged Account with
respect to which a Pledged Account Letter is then in effect or to the Cash
Collateral Account. Each Grantor agrees to terminate any or all Pledged
Accounts and Pledged Account Letters upon request by the Collateral Agent.
SECTION 8. Release of Amounts. (a) So long as no Default under
Section 6.01(a) or (f) of the Credit Agreement or Event of Default shall have
occurred and be continuing, the Collateral Agent will pay and release to the
Borrower or at its order or, at the request of the Borrower, apply to the
Obligations of the Borrower under the Loan Documents, such amount, if any, as is
then on deposit in the Cash Collateral Account or the L/C Cash Collateral
Account, as the case may be, provided, however, that with respect to amounts
deposited in the L/C Cash Collateral Account pursuant to Section 2.06(b)(iv) of
the Credit Agreement, such amounts shall be released only to the extent
permitted by the terms of such Section.
<PAGE> 11
8
(b) The Collateral Agent may pay, release and withdraw amounts on
deposit in, and make deposits to, the Company Account as required or permitted
by, and in accordance with, the Capital Contribution Agreement, provided that,
if a Default under Section 6.01(a) or (f) of the Credit Agreement or an Event of
Default shall have occurred and be continuing, the Collateral Agent may only
pay, release or withdraw amounts on deposit in the Company Account if such
amounts are deposited directly and immediately into the Escrow Account.
(c) So long as no Default under Section 6.01(a) or (f) of the Credit
Agreement or Event of Default shall have occurred and be continuing, the
Collateral Agent may pay, release and withdraw amounts on deposit in, and make
deposits to, the Escrow Account as required or permitted by, and in accordance
with, the Escrow Agreement.
SECTION 9. Representations and Warranties. Each Grantor represents
and warrants as follows:
(a) Such Grantor is the legal and beneficial owner of the Collateral
of such Grantor free and clear of any Lien, claim, option or right of
others, except for the liens and security interests created under this
Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of such Collateral (including, without
limitation, accounts and general intangibles relating to the Collateral)
or listing such Grantor or any of its Subsidiaries or any trade name of
such Grantor or any of its Subsidiaries as debtor is on file in any
recording office, except such as may have been filed in favor of the
Collateral Agent relating to the Loan Documents.
(b) The Pledged Shares owned by such Grantor have been duly
authorized and validly issued and are fully paid and non-assessable. The
Pledged Debt held by such Grantor has been duly authorized, authenticated
or issued and delivered, is the legal, valid and binding obligation of the
issuers thereof, is evidenced by one or more promissory notes (which notes
have been delivered to the Collateral Agent) and is not in default.
(c) The Initial Pledged Shares owned by such Grantor constitute the
percentage of the issued and outstanding shares of stock of the issuers
thereof indicated on Schedule I hereto. The Initial Pledged Debt
constitutes all of the outstanding indebtedness owed to such Grantor by
the issuers thereof as of the Closing Date.
(d) All of the investment property owned by such Grantor on the date
hereof is listed on Schedule I hereto. Such Grantor does not maintain any
securities accounts, maintain any commodity accounts, nor does it own or
is it otherwise a party to, any commodity contract.
(e) All of the Equipment and Inventory of such Grantor are located
at the places specified in Schedule III hereto. The chief place of
business and chief executive office of such Grantor and the office where
such Grantor keeps its records concerning the Receivables, and the
original copies of each Assigned Agreement and all originals of all
Related Contracts and all chattel paper, if any, that evidence Receivables
(other than those delivered to the Collateral Agent), are located at the
address set forth on the signature pages hereto beneath such Grantor's
name. Such Grantor has delivered to the Collateral Agent the originals of
all agreements, certificates or instruments representing or evidencing any
Collateral and all security therefor and guaranties thereof, in each case
to the extent that the delivery thereof to the Collateral Agent is
required under Section 4 above. None of the Receivables or Agreement
Collateral is evidenced by a promissory note or other instrument that is
required to be delivered to the Collateral Agent hereunder and has not
been so delivered.
<PAGE> 12
9
(f) Such Grantor has exclusive possession and control of the
Equipment and Inventory of such Grantor.
(g) The Assigned Agreements to which such Grantor is a party, true
and complete copies of which have been furnished to each Lender Party,
have been duly authorized, executed and delivered by all parties thereto,
have not been amended or otherwise modified, are in full force and effect
and are binding upon and enforceable against all parties thereto in
accordance with their terms. There exists no default under any Assigned
Agreement to which such Grantor is a party by such Grantor or, to the best
of such Grantor's knowledge, any other party thereto. Each party to any
Assigned Agreement (other than any Assigned Agreement which does not
prohibit the assignment thereof) to which such Grantor is a party (other
than such Grantor) has executed and delivered to such Grantor a consent,
in substantially the form of Exhibit B hereto or otherwise in form and
substance satisfactory to the Collateral Agent, to the assignment of the
Agreement Collateral to the Collateral Agent for the benefit of the
Secured Parties pursuant to this Security Agreement.
(h) Such Grantor has no Pledged Accounts or other deposit accounts
other than, in the case of the Borrower, the Cash Collateral Account and
the Escrow Account, in the case of the Parent, the Company Account, and,
in each case, the Pledged Accounts of such Grantor listed on Schedule V
hereto. Each Grantor has instructed all existing Obligors to make all
payments to a Pledged Account or the Cash Collateral Account.
(i) This Agreement, the pledge of the Security Collateral pursuant
hereto and the pledge and assignment of the Account Collateral pursuant
hereto create in favor of the Collateral Agent for the benefit of the
Secured Parties a valid and perfected first priority security interest in
the Collateral of such Grantor, securing the payment of the Secured
Obligations of such Grantor, and all filings and other actions necessary
or desirable to perfect and protect such security interest have been duly
taken.
(j) Such Grantor has no trade names except as set forth on Schedule
IV hereto; such trade names were adopted in good faith; and, to the best
of such Grantor's knowledge, there exist no adverse claims against such
trade names as of the Closing Date.
(k) No consent of any other Person and no authorization, approval or
other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person, except for the
authorizations, approvals, actions, notices and filings listed on Schedule
4.01(d) to the Credit Agreement, all of which have been duly obtained,
taken, given or made and are in full force and effect, is required (i) for
the grant by such Grantor of the assignment and security interest granted
hereby, for the pledge by such Grantor of any Security Collateral
hereunder or for the execution, delivery or performance of this Agreement
by such Grantor, (ii) for the perfection or maintenance of the pledge,
assignment and security interest created hereunder (including the first
priority nature of such pledge, assignment and security interest), except
for the filing of financing and continuation statements under the Uniform
Commercial Code and the filing of the Intellectual Property Security
Agreement in the United States Patent and Trademark Office and in the
United States Copyright Office, which financing statements and
Intellectual Property Security Agreement will have been duly filed within
the time period specified therefor in Section 5.01(o) of the Credit
Agreement or (iii) by or on behalf of any Loan Party for the exercise by
the Collateral Agent of its voting or other rights provided for in this
Agreement or the remedies in respect of the Collateral pursuant to this
Agreement, except as may be required in connection with the disposition of
any portion of the Security Collateral by laws affecting the offering and
sale of securities generally or in the case of foreign Subsidiaries,
requirements imposed by local laws in connection with foreclosures and
transfers of securities in connection therewith.
<PAGE> 13
10
(l) The Inventory that has been produced by such Grantor or any of
its Subsidiaries has been produced by such Grantor or such Subsidiaries in
compliance with all requirements of the Fair Labor Standards Act.
(m) There are no conditions precedent to the effectiveness of this
Agreement that have not been satisfied or waived.
(n) Such Grantor has, independently and without reliance upon any
Secured Party and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement, and such Grantor has established adequate means of obtaining
from any other Loan Parties on a continuing basis information pertaining
to, and is now and on a continuing basis will be completely familiar with,
the financial condition, operations, properties and prospects of such
other Loan Parties.
SECTION 10. Further Assurances. (a) Each Grantor agrees that from
time to time, at the expense of such Grantor, such Grantor will promptly execute
and deliver, and use its best efforts to cause to be executed and delivered, all
further instruments and documents (including, without limitation, any consents,
waivers or other action by any Subsidiary of such Grantor or any holder of
common stock in, or director or officer of, such Subsidiary) and take all
further action (including amending the constitutive documents of such Grantor or
any Subsidiary of such Grantor), that the Collateral Agent believes may be
necessary or desirable, or that the Collateral Agent may reasonably request, in
order to perfect and protect any pledge, assignment or security interest granted
or purported to be granted hereby or to enable the Collateral Agent to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, each Grantor will: (i) upon
the request of the Collateral Agent, mark conspicuously each document included
in the Inventory of such Grantor and each chattel paper, Related Contract and
Assigned Agreement of such Grantor included in the Collateral, and each of its
records pertaining to the Collateral, with a legend, in form and substance
satisfactory to the Collateral Agent, indicating that such document, chattel
paper, Related Contract, Assigned Agreement or other Collateral is subject to
the security interest granted hereby, (ii) if any Collateral shall be evidenced
by a promissory note or other instrument, deliver and pledge to the Collateral
Agent for the benefit of the Secured Parties hereunder such note or instrument
duly indorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Collateral Agent,
(iii) deliver and pledge to the Collateral Agent for the benefit of the Secured
Parties hereunder certificates representing the Pledged Shares accompanied by
undated stock powers executed in blank and evidence that all other action that
the Collateral Agent may deem necessary or desirable in order to perfect and
protect the liens and security interests created under this Agreement has been
taken and (iv) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as the Collateral Agent may request, in order to perfect and
preserve the pledge, assignment and security interests granted or purported to
be granted hereunder.
(b) Each Grantor hereby authorizes the Collateral Agent to file one
or more financing or continuation statements, and amendments thereto, relating
to all or any part of the Collateral without the signature of such Grantor where
permitted by law. A photocopy or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
(c) Each Grantor will furnish to the Collateral Agent from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the Collateral Agent
may reasonably request, all in reasonable detail.
<PAGE> 14
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(d) The Borrower will furnish to the Collateral Agent, at any time
within six months prior to the fifth anniversary of the Closing Date, an opinion
of counsel acceptable to the Required Lenders to the effect that all financing
or continuation statements have been filed, and all other action has been taken,
to perfect and validate continuously from the date hereof the pledge, assignment
and security interests granted hereunder (excluding, in the case of perfection,
any Collateral in which a security interest may not be perfected by the filing
of a financing statement under the Uniform Commercial Code of any jurisdiction).
SECTION 11. As to Equipment and Inventory. Each Grantor shall:
(a) Keep the Equipment and Inventory of such Grantor (other than
Inventory sold in the ordinary course of business) at the places therefor
specified in Section 9(e) or, upon 30 days' prior written notice to the
Collateral Agent, at such other places in jurisdictions where all action
required by Section 10 shall have been taken with respect to such
Equipment and Inventory.
(b) Cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual and shall
forthwith, or in the case of any loss or damage to any of such Equipment
as soon as practicable after the occurrence thereof, make or cause to be
made all repairs, replacements and other improvements in connection
therewith that are necessary or desirable to such end. The Borrower shall
promptly furnish to the Collateral Agent a statement respecting any loss
or damage to any Equipment which involves loss or damage exceeding
$250,000 in the aggregate during any Fiscal Year for all of the Grantors,
taken as a whole.
(c) Pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Equipment and
Inventory; provided, however, that no Grantor shall be required to pay or
discharge any such tax, assessment charge or levy that is being contested
in good faith by proper proceedings and as to which appropriate reserves
are being maintained, unless and until any Lien resulting therefrom
attaches to its property and becomes enforceable against its other
creditors. In producing Inventory, such Grantor will comply with all
requirements of the Fair Labor Standards Act.
SECTION 12. Insurance. (a) Each Grantor shall, at its own expense,
maintain insurance with respect to the Equipment and Inventory in such amounts,
against such risks, in such form and with such insurers, as shall be
satisfactory to the Collateral Agent from time to time. Each policy for
liability insurance and the life insurance policies required to be entered into
pursuant to Section 3.01(n)(xvi) of the Credit Agreement shall provide for all
losses to be paid on behalf of the Collateral Agent and such Grantor as their
interests may appear, and each policy for property damage insurance shall
provide for all losses (except for losses of less than $250,000 per occurrence)
to be paid directly to the Collateral Agent. Each such policy shall in addition
(i) name such Grantor and the Collateral Agent as insured parties thereunder
(without any representation or warranty by or obligation upon the Collateral
Agent) as their interests may appear, (ii) contain the agreement by the insurer
that any loss thereunder shall be payable to the Collateral Agent
notwithstanding any action, inaction or breach of representation or warranty by
such Grantor, (iii) provide that there shall be no recourse against the
Collateral Agent for payment of premiums or other amounts with respect thereto
and (iv) provide that at least 10 days' prior written notice of cancellation or
of lapse shall be given to the Collateral Agent by the insurer. Each Grantor
shall, if so requested by the Collateral Agent, deliver to the Collateral Agent
original or duplicate policies of such insurance and, as often as the Collateral
Agent may reasonably request, a report of a reputable insurance broker with
respect to such insurance. Further, each Grantor shall, at the request of the
Collateral Agent, duly exercise and deliver instruments of assignment of such
insurance
<PAGE> 15
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policies to comply with the requirements of Section 10 and cause the insurers to
acknowledge notice of such assignment.
(b) In case of any loss involving damage to Equipment or Inventory
of any Grantor, such Grantor shall make or cause to be made the necessary
repairs to or replacements of such Equipment or Inventory, and any proceeds of
insurance properly received by or released to such Grantor shall be used by such
Grantor, except as otherwise required or permitted hereunder or by the Credit
Agreement, to pay or as reimbursement for the costs of such repairs or
replacements.
(c) So long as no Event of Default shall have occurred and shall be
continuing, all insurance payments received by the Collateral Agent in
connection with any loss, damage or destruction of any Inventory or Equipment
shall be released by the Collateral Agent to the applicable Grantor for the
repair, replacement or restoration thereof. To the extent that (i) the amount of
any such insurance payments exceeds the cost of any such repair, replacement or
restoration, or (ii) such insurance payments are not otherwise required by the
applicable Grantor to complete any such repair, replacement or restoration
required hereunder, the Collateral Agent shall not be required to release the
amount thereof to such Grantor and may hold or continue to hold such amount in
the Cash Collateral Account as additional security for the Secured Obligations
of such Grantor (except that any such amount shall be released by the Collateral
Agent to such Grantor if no Event of Default has occurred and is then
continuing). If an Event of Default has occurred and is continuing, the
Collateral Agent may elect, in its sole and absolute discretion, to release any
such insurance payments for the purposes set forth in the first sentence of this
subparagraph (c), or to hold such insurance payments as additional Collateral
hereunder or apply the same as specified in the Credit Agreement.
SECTION 13. As to Receivables and Related Contracts. (a) Each
Grantor shall keep its chief place of business and chief executive office and
the office where it keeps its records concerning the Collateral of such Grantor,
and the originals of all Assigned Agreements, Related Contracts and all chattel
paper that evidences or constitutes Receivables (to the extent not required to
be delivered to the Collateral Agent hereunder), at the location therefor
specified in Section 9(e) or, upon 30 days' prior written notice to the
Collateral Agent, at such other locations in a jurisdiction where all actions
required by Section 10 shall have been taken with respect to the Collateral.
Each Grantor will hold and preserve such records, Assigned Agreements, Related
Contracts and chattel paper and will permit representatives of the Collateral
Agent at any time during normal business hours to inspect and make abstracts
from such records and other documents.
(b) Except as otherwise provided in this subsection (b), such
Grantor shall continue to collect, at its own expense, all amounts due or to
become due such Grantor under the Receivables and Related Contracts. In
connection with such collections, such Grantor may take (and, at the Collateral
Agent's direction, shall take) such action as such Grantor or the Collateral
Agent may deem necessary or advisable to enforce collection of the Receivables
and the Related Contracts; provided, however, that the Collateral Agent shall
have the right upon the occurrence and during the continuance of a Default and
upon written notice to the Borrower of its intention to do so, to notify the
Obligors under any Receivables or Related Contracts of the assignment of such
Receivables or Related Contracts to the Collateral Agent and to direct such
Obligors to make payment of all amounts due or to become due to such Grantor
thereunder directly to the Collateral Agent and, upon such notification and at
the expense of such Grantor, to enforce collection of any such Receivables or
Related Contracts, and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as such Grantor might have
done. After receipt by such Grantor of the notice from the Collateral Agent
referred to in the proviso to the preceding sentence, (i) all amounts and
proceeds (including instruments) received by such Grantor in respect of the
Receivables or the Related Contracts shall be received in trust for the benefit
of the Collateral Agent hereunder, shall be segregated from other funds of such
Grantor and shall be forthwith paid over to the Collateral Agent in the same
form as so received (with any necessary indorsement) to
<PAGE> 16
13
be deposited in the Cash Collateral Account and applied as provided by Section
20(b), and (ii) such Grantor shall not adjust, settle or compromise the amount
or payment of any Receivable or Related Contract, release wholly or partly any
Obligor thereon, or allow any credit or discount thereon. Anything contained
herein to the contrary notwithstanding, such Grantor shall not permit or agree
to subordination of its rights to payment under any of the Receivables to any
other indebtedness or obligations of the Obligor thereof.
SECTION 14. Voting Rights; Dividends; Etc. (a) So long as no Default
under Section 6.01(a) or (f) of the Credit Agreement or Event of Default shall
have occurred and be continuing:
(i) Each Grantor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Security Collateral of such
Grantor or any part thereof for any purpose not inconsistent with the
terms of this Agreement or the other Loan Documents; provided, however,
that no Grantor shall exercise or refrain from exercising any such right
if, in the Collateral Agent's reasonable judgment, such action would have
a material adverse effect on the value of the Security Collateral or any
part thereof.
(ii) Each Grantor shall be entitled to receive and retain, and use
and commingle with its own funds free and clear of the Liens imposed under
this Agreement, any and all dividends, interest paid and other
distributions in respect of the Security Collateral of such Grantor if and
to the extent that the payment thereof is not otherwise prohibited by the
terms of the Loan Documents; provided, however, that any and all
(A) dividends and interest paid or payable other than in cash
in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange
for, any Security Collateral,
(B) dividends and other distributions paid or payable in cash
in respect of any Security Collateral in connection with a partial
or total liquidation or dissolution or in connection with a
reduction of capital, capital surplus or paid-in-surplus,
(C) cash paid, payable or otherwise distributed in respect of
principal of, or in redemption of, or in exchange for, any Security
Collateral, and
(D) cash dividends paid or payable in violation of the terms
of the Credit Agreement,
shall be, and shall be forthwith delivered to the Collateral Agent to hold
as, Security Collateral and shall, if received by any Grantor, be received
in trust for the benefit of the Collateral Agent, be segregated from the
other property or funds of such Grantor and be forthwith delivered to the
Collateral Agent as Security Collateral in the same form as so received
(with any necessary indorsement).
(iii) The Collateral Agent shall execute and deliver (or cause to be
executed and delivered) to each Grantor all such proxies and other
instruments as such Grantor may reasonably request for the purpose of
enabling such Grantor to exercise the voting and other rights that it is
entitled to exercise pursuant to paragraph (i) above and to receive the
dividends or interest payments that it is authorized to receive and retain
pursuant to paragraph (ii) above.
<PAGE> 17
14
(b) Upon the occurrence and during the continuance of any Default
under Section 6.01(a) or (f) of the Credit Agreement or Event of Default:
(i) All rights of each Grantor (A) to exercise or refrain from
exercising the voting and other consensual rights that it would otherwise
be entitled to exercise pursuant to Section 14(a)(i) shall, upon notice to
such Grantor by the Collateral Agent, cease, and (B) to receive the
dividends, interest and other distributions that it would otherwise be
authorized to receive and retain pursuant to Section 14(a)(ii) shall
automatically cease, and all such rights shall thereupon become vested in
the Collateral Agent, which shall thereupon have the sole right to
exercise or refrain from exercising such voting and other consensual
rights and to receive and hold as Security Collateral such dividends,
interest and other distributions.
(ii) All dividends, interest and other distributions that are
received by any Grantor contrary to the provisions of paragraph (i) of
this Section 14(b) shall be received in trust for the benefit of the
Collateral Agent, shall be segregated from other funds of such Grantor and
shall be forthwith paid over to the Collateral Agent as Security
Collateral in the same form as so received (with any necessary
indorsement).
SECTION 15. As to the Assigned Agreements. (a) Each Grantor shall at
its expense:
(i) perform and observe all the terms and provisions of the Assigned
Agreements to be performed or observed by it, maintain the Assigned
Agreements to which it is a party in full force and effect, enforce the
Assigned Agreements in accordance with the terms thereof, in each case to
the extent required under the Credit Agreement, and take all such action
to such end as may be requested from time to time by the Collateral Agent
to the extent required under the Credit Agreement; and
(ii) furnish to the Collateral Agent promptly upon receipt thereof
copies of all notices, requests and other documents received by such
Grantor under or pursuant to the Assigned Agreements to which it is a
party, and from time to time (A) furnish to the Collateral Agent such
information and reports regarding the Assigned Agreements and such other
Collateral of such Grantor as the Collateral Agent may reasonably request,
and (B) upon request of the Collateral Agent make to each other party to
any Assigned Agreement to which it is a party such demands and requests
for information and reports or for action as such Grantor is entitled to
make thereunder to the extent required under the Credit Agreement or, in
the case of any Bank Hedge Agreement to which such Grantor is a party,
only so long as an Event of Default shall have occurred and be continuing.
(b) Each Grantor agrees that it shall not cancel or terminate any
Assigned Agreement to which it is a party or consent to or accept any
cancellation or termination thereof, amend or otherwise modify any such Assigned
Agreement or give any consent, waiver or approval thereunder, waive any default
under or breach of any such Assigned Agreement, or take any other action in
connection with any such Assigned Agreement, in each case that would impair in
any material respect the value of the interest or rights of such Grantor
thereunder or that would impair in any material respect the interests or rights
of any Secured Party.
(c) Each Grantor hereby consents on its behalf and on behalf of its
Subsidiaries to the assignment and pledge to the Collateral Agent for the
ratable benefit of the Lender Parties of each Assigned Agreement to which it is
a party by any other Grantor hereunder.
SECTION 16. Transfers and Other Liens; Additional Shares. (a) Each
Grantor agrees that it shall not (i) sell, assign (by operation of law or
otherwise) or otherwise dispose of, or grant any option with
<PAGE> 18
15
respect to, any of the Collateral of such Grantor (other than sales,
assignments, options and other dispositions permitted under the terms of the
Credit Agreement) or (ii) create or suffer to exist any Lien upon or with
respect to any of the Collateral of such Grantor, except for the Liens created
under the Collateral Documents or permitted by the Credit Agreement.
(b) Each Grantor agrees that it shall (i) cause each issuer of the
Pledged Shares owned by such Grantor not to issue any stock or other securities
in addition to or in substitution for the Pledged Shares issued by such issuer,
except to such Grantor, and (ii) subject to the provisos in Sections 1(a)(i) and
1(a)(v), pledge hereunder, immediately upon its acquisition (directly or
indirectly) thereof, any and all additional shares of stock or other securities
of each issuer of any Pledged Shares.
SECTION 17. Collateral Agent Appointed Attorney-in-Fact. Each
Grantor hereby irrevocably appoints the Collateral Agent such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor or otherwise, from time to time in the Collateral
Agent's discretion, to take, upon the occurrence and during the continuance of
an Event of Default, any action and to execute any instrument that the
Collateral Agent may deem necessary or advisable to accomplish the purposes of
this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be paid to the
Collateral Agent pursuant to Section 12,
(b) to ask for, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral,
(c) to receive, indorse and collect any drafts or other instruments,
documents and chattel paper in connection with clause (a) or (b) above,
and
(d) to file any claims or take any action or institute any
proceedings that the Collateral Agent may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce compliance
with the terms and conditions of any Assigned Agreement or the rights of
the Collateral Agent with respect to any of the Collateral.
SECTION 18. Collateral Agent May Perform. If any Grantor fails to
perform any agreement contained herein, the Collateral Agent may, but without
any obligation to do so and without further notice, itself perform, or cause
performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by such Grantor under Section
22.
SECTION 19. The Collateral Agent's Duties, Etc. The powers conferred
on the Collateral Agent hereunder are solely to protect its and the other
Secured Parties' interest in the Collateral and shall not impose any duty upon
it to exercise any such powers. Except for the safe custody and reasonable care
of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Collateral Agent shall have no duty as to any
Collateral, as to ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Security Collateral, whether or not the Collateral Agent or any other Secured
Party has or is deemed to have knowledge of such matters, or as to the taking of
any necessary steps to preserve rights against any parties or any other rights
pertaining to any Collateral. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any Collateral in
its possession if such Collateral is accorded treatment substantially equal to
that which it accords its own property. Anything contained herein to the
contrary notwithstanding, the Collateral Agent may from time to time, when the
Collateral Agent reasonably deems it to be necessary, appoint one or
<PAGE> 19
16
more subagents (each a "Subagent") for the Collateral Agent hereunder with
respect to all or any part of the Collateral. In the event that the Collateral
Agent so appoints any Subagent with respect to any Collateral, (1) the
assignment and pledge of such Collateral and the security interest granted in
such Collateral by each Grantor hereunder shall be deemed for purposes of this
Security Agreement to have been made to such Subagent for the ratable benefit of
the Lender Parties, as security for the Secured Obligations of such Grantor, (2)
such Subagent shall automatically be vested with all rights, powers, privileges,
interests and remedies of the Collateral Agent hereunder with respect to such
Collateral, and (3) the term "Collateral Agent," when used herein in relation to
any rights, powers, privileges, interests and remedies of the Collateral Agent
with respect to such Collateral, shall include such Subagent; provided, however,
that no such Subagent shall be authorized to take any action with respect to any
such Collateral unless and except to the extent expressly authorized in writing
by the Collateral Agent.
SECTION 20. Remedies. If any Event of Default shall have occurred
and be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party upon
default under the N.Y. Uniform Commercial Code, whether or not the Code
applies to the affected Collateral, and also may (i) require any Grantor
to, and each Grantor hereby agrees that it will at its expense and upon
request of the Collateral Agent forthwith, assemble all or part of the
Collateral as directed by the Collateral Agent and make it available to
the Collateral Agent at a place and time to be designated by the
Collateral Agent which is reasonably convenient to both parties; (ii)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the
Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Collateral Agent may deem
commercially reasonable; (iii) occupy any premises owned or leased by any
Grantor where the Collateral or any part thereof is assembled or located
for a reasonable period in order to effectuate its rights and remedies
hereunder or under law, without obligation to such Grantor in respect of
such occupation; and (iv) exercise any and all rights and remedies of any
Grantor under or in connection with the Assigned Agreements, the
Receivables and the Related Contracts or otherwise in respect of the
Collateral, including, without limitation, any and all rights of such
Grantor to demand or otherwise require payment of any amount under, or
performance of any provision of, the Assigned Agreements, the Receivables
and the Related Contracts. Each Grantor agrees that, to the extent notice
of sale shall be required by law, at least ten days' notice to such
Grantor of the time and place of any public sale or the time after which
any private sale is to be made shall constitute reasonable notification.
The Collateral Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Collateral Agent may
adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
(b) Any cash held by the Collateral Agent as Collateral and all cash
proceeds received by the Collateral Agent in respect of any sale of,
collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Collateral Agent, be held by the
Collateral Agent as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to the Collateral Agent
pursuant to Section 22) in whole or in part by the Collateral Agent in
accordance with clause (e) below or as otherwise permitted or required by
the Credit Agreement. Any surplus of such cash or cash proceeds held by
the Collateral Agent and remaining after payment in full of all the
Secured Obligations shall be paid over to the Grantor or to whomsoever may
be lawfully entitled to receive such surplus.
<PAGE> 20
17
(c) All payments received by any Grantor under or in connection with
any Assigned Agreement or otherwise in respect of the Collateral shall be
received in trust for the benefit of the Collateral Agent and the other
Secured Parties, shall be segregated from other funds of such Grantor and
shall be forthwith paid over to the Collateral Agent in the same form as
so received (with any necessary indorsement).
(d) The Collateral Agent may, without notice to the Borrower except
as required by law and at any time or from time to time, charge, set-off
and otherwise apply all or any part of the Secured Obligations against the
Cash Collateral Account, the L/C Cash Collateral Account, the Company
Account and the Escrow Account or any part thereof, in accordance with
clause (e) below.
(e) Any cash or cash proceeds referred to in Section 20(b), any
charge, set-off or other application referred to in Section 20(d) and any
other Collateral or proceeds thereof to be applied by the Collateral Agent
to the Secured Obligations shall be applied on the following order of
priority:
(i) first, to payment of any amounts payable to the Collateral
Agent pursuant to Section 22,
(ii) second, ratably to (A) the Term A Facility and to the
installments thereof in inverse order of maturity and (B) the
Revolving Credit Facility as set forth in Section 2.06(b)(v) of the
Credit Agreement,
(iii) third, to the Term B Facility and to the installments
thereof in inverse order of maturity, and
(iv) fourth, ratably to all other Secured Obligations.
SECTION 21. Registration Rights. So long as the High Yield Date
shall not have occurred, if the Collateral Agent shall determine to exercise its
right to sell all or any of the Security Collateral pursuant to Section 20, such
Grantor agrees that, upon request of the Collateral Agent, such Grantor will, at
its own expense:
(a) execute and deliver, and cause each issuer of the Security
Collateral contemplated to be sold and the directors and officers thereof
to execute and deliver, all such instruments and documents, and do or
cause to be done all such other acts and things, as may be necessary or,
in the opinion of the Collateral Agent, advisable to register such
Security Collateral under the provisions of the Securities Act of 1933 (as
amended from time to time, the "Securities Act"), to cause the
registration statement relating thereto to become effective and to remain
effective for such period as prospectuses are required by law to be
furnished and to make all amendments and supplements thereto and to the
related prospectus that, in the opinion of the Collateral Agent, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and
Exchange Commission applicable thereto;
(b) use its best efforts to qualify the Security Collateral under
the state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Security Collateral, as
requested by the Collateral Agent;
(c) cause each such issuer to make available to its security
holders, as soon as practicable, an earnings statement that will satisfy
the provisions of Section 11(a) of the Securities Act;
<PAGE> 21
18
(d) provide the Collateral Agent with such other information and
projections as may be necessary or, in the opinion of the Collateral
Agent, advisable to enable the Collateral Agent to effect the sale of such
Security Collateral; and
(e) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Security Collateral or any part thereof
valid and binding and in compliance with applicable law.
The Collateral Agent is authorized, in connection with any sale of the Security
Collateral pursuant to Section 20, to deliver or otherwise disclose to any
prospective purchaser of the Security Collateral (i) any registration statement
or prospectus, and all supplements and amendments thereto, prepared pursuant to
clause (a) above, (ii) any information and projections provided to it pursuant
to clause (d) above and (iii) any other information in its possession relating
to the Security Collateral.
SECTION 22. Indemnity and Expenses. (a) Each Grantor agrees to
defend, protect, indemnify and hold harmless each Secured Party from and against
any and all claims, losses and liabilities growing out of or resulting from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting from such Secured Party's gross
negligence or willful misconduct as determined by a final judgment of a court of
competent jurisdiction.
(b) Each Grantor will upon demand pay to the Collateral Agent the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that the Collateral Agent
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 of such Grantor, (iii) the
exercise or enforcement of any of the rights of the Collateral Agent or any
other Secured Party against such Grantor, or (iv) the failure by such Grantor to
perform or observe any of the provisions hereof.
SECTION 23. Amendments; Waivers; Etc. (a) No amendment or waiver of
any provision of this Agreement, and no consent to any departure by any Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Collateral Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No failure on the part of the Collateral Agent to exercise, and no delay
in exercising, any right hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right.
(b) Upon the execution and delivery by any Person of a security
agreement supplement in substantially the form of Exhibit C hereto (each a
"Security Agreement Supplement"), (i) such Person shall be referred to as an
"Additional Grantor" and shall be and become a Grantor and each reference in
this Agreement to "Grantor" shall also mean and be a reference to such
Additional Grantor, and (ii) the annexes attached to each Security Agreement
Supplement shall be incorporated into and become a part of and supplement
Schedules I, II, III, IV and V hereto, and the Collateral Agent may attach such
annexes as supplements to such Schedules; and each reference to such Schedules
shall mean and be a reference to such Schedules as supplemented pursuant hereto.
SECTION 24. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic or telex communication) and, if to any Grantor, mailed, telecopied,
telegraphed, telexed or delivered to it, addressed to it at the address listed
for such Grantor on the signature pages hereof, and if to the Collateral Agent,
mailed, telecopied, telegraphed, telexed or
<PAGE> 22
19
delivered to it, addressed to it at the address of the Collateral Agent
specified in the Credit Agreement, or as to any party at such other address as
shall be designated by such party in a written notice to each other party
complying as to delivery with the terms of this Section 24. All such notices and
other communications shall, when mailed, telegraphed, telecopied or telexed,
respectively, be effective when deposited in the mails, delivered to the
telegraph company, transmitted by telecopier or confirmed by telex answerback,
respectively. Delivery by telecopier of an executed counterpart of any amendment
or waiver of any provision of this Agreement or of any Supplement or Schedule
hereto shall be effective as delivery of a manually executed counterpart
thereof.
SECTION 25. Continuing Security Interest; Assignments. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the latest of the cash payment
in full of the Secured Obligations, the Termination Date and the termination or
expiration of all Bank Hedge Agreements, if any, (b) be binding upon each
Grantor, its successors and assigns and (c) inure, together with the rights and
remedies of the Collateral Agent hereunder, to the benefit of the Secured
Parties and their respective successors, transferees and assigns. Without
limiting the generality of the foregoing clause (c), any Lender Party may assign
or otherwise transfer all or any portion of its rights and obligations under the
Credit Agreement (including, without limitation, all or any portion of its
Commitments, the Advances owing to it and the Note or Notes held by it) to any
other Person and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Lender Party herein or otherwise, in
each case as provided in Section 8.07 of the Credit Agreement. No Grantor shall
have the right to assign its rights hereunder or any interest herein without the
prior written consent of the Secured Parties.
SECTION 26. Release and Termination. (a) Upon any sale, lease,
transfer or other disposition of any item of Collateral in accordance with the
terms of the Loan Documents (other than sales of Inventory in the ordinary
course of business), the Collateral Agent will, at any Grantor's expense,
execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to evidence the release of such item of Collateral from the
assignment and security interest granted hereby; provided, however, that (i) at
the time of such request and such release no Event of Default shall have
occurred and be continuing, (ii) the Borrower shall have delivered to the
Collateral Agent, at least ten Business Days prior to the date of the proposed
release, a written request for release describing the item of Collateral and the
terms of the sale, lease, transfer or other disposition in reasonable detail,
including the price thereof and any expenses in connection therewith, together
with a form of release for execution by the Collateral Agent and a certification
by the Borrower to the effect that the transaction is in compliance with the
Loan Documents and as to such other matters as the Collateral Agent may request
and (iii) the proceeds of any such sale, lease, transfer or other disposition
required to be applied in accordance with Section 2.06(b) of the Credit
Agreement shall be paid to, or in accordance with the instructions of, the
Collateral Agent at the closing.
(b) Upon the latest of the cash payment in full of the Secured
Obligations, the Termination Date and the termination or expiration of all
Letters of Credit and all Bank Hedge Agreements, if any, the pledge, assignment
and security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the Borrower. Upon any such termination, the
Collateral Agent will, at the Borrower's expense, execute and deliver to the
Borrower such documents as the Borrower shall reasonably request to evidence
such termination.
SECTION 27. Security Interest Absolute. The Obligations of each
Grantor hereunder are independent of the Obligations of any other Loan Party
under the Loan Documents, and a separate action or actions may be brought or
prosecuted against each Grantor whether action is brought against any other Loan
Party or whether any other Loan Party is joined in any such action or actions.
All rights of the Collateral Agent and security interests hereunder, and all
obligations of each Grantor hereunder, shall be absolute and
<PAGE> 23
20
unconditional, irrespective of, and each Grantor hereby irrevocably waives any
defenses it may now or hereafter have in any way relating to, any or all of the
circumstances described in the Guaranties or any other circumstance that might
constitute a discharge available to, or a discharge of, the Borrower or any
Guarantor.
This Agreement shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the Secured Obligations is
rescinded or must otherwise be returned by any Secured Party or by any other
Person upon the insolvency, bankruptcy or reorganization of any Loan Party or
otherwise, all as though such payment had not been made.
SECTION 28. Execution in Counterparts. This Agreement may be
executed in any number of 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. Delivery of an executed counterpart of a signature page
to this Agreement by telecopier shall be effective as delivery of a manually
executed counterpart of this Agreement.
SECTION 29. The Mortgages. In the event that any of the Collateral
hereunder is also subject to a valid and enforceable Lien under the terms of any
Mortgage and the terms of such Mortgage are inconsistent with the terms of this
Agreement, then with respect to such Collateral, the terms of such Mortgage
shall be controlling in the case of fixtures and leases, letting and licenses
of, and contracts and agreements relating to the lease of real property, and the
terms of this Agreement shall be controlling in the case of all other
Collateral.
<PAGE> 24
SECTION 30. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, except to the
extent that the validity or perfection of the security interest 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.
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
APC HOLDING, INC.
By /s/ Ariel Gratch
_______________________________
Title:
Address of Chief Executive Office:
950 Third Avenue
New York, New York 10022
Attention: Ariel Gratch
_______________________
AFA HOLDINGS CO.
By /s/ Ariel Gratch
_______________________________
Title:
Address of Chief Executive Office:
950 Third Avenue
New York, New York 10022
Attention: Ariel Gratch
________________________
AFA PRODUCTS, INC.
By /s/ Ariel Gratch
_______________________________
Title:
Address of Chief Executive Office:
135 Pine Street
Forest City, North Carolina 28043
Attention: Ariel Gratch
________________________
<PAGE> 25
22
CONTINENTAL ACQUISITION CORP.
By /s/ Ariel Gratch
_______________________________
Title:
Address of Chief Executive Office:
950 Third Avenue
New York, New York 10022
Attention: Ariel Gratch
<PAGE> 26
SCHEDULE I
INITIAL PLEDGED SHARES, PLEDGED DEBT AND OTHER INVESTMENT PROPERTY
Part I - Initial Pledged Shares
<TABLE>
<CAPTION>
====================================================================================================
Percentage
of
Stock Certificate Number Outstanding
Stock Issuer Class of Stock Par Value No(s) of Shares Shares
-------------- --------- ------- --------- -------
====================================================================================================
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
====================================================================================================
</TABLE>
Part II - Initial Pledged Debt
<TABLE>
<CAPTION>
=============================================================================================
Original
Principal
Debt Issuer Description of Debt Debt Certificate No(s). Final Maturity Amount
----------- ------------------- ----------------------- -------------- ------
=============================================================================================
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
=============================================================================================
</TABLE>
<PAGE> 27
Part III - Other Investment Property
<TABLE>
<CAPTION>
==============================================================================================
Securities
Issuer of Description of Securities Intermediary Account
Financial Asset Financial Asset (name and address) (number and location)
==============================================================================================
<S> <C> <C> <C>
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<PAGE> 28
SCHEDULE II
ASSIGNED AGREEMENTS
1. Asset Purchase Agreement dated as of January 14, 1998, between
Continental Acquisition Corp., as purchaser, and Contico
International, Inc., as seller.
2. Capital Contribution Agreement dated as of February 4, 1998, by and
among the Parent, the Borrower, the Investors named therein,
NationsBridge and the Collateral Agent.
3. Capital Escrow Agreement dated as of February 4, 1998 among the
Borrower, the Parent, NMS and NationsCredit.
<PAGE> 29
SCHEDULE III
LOCATIONS OF EQUIPMENT AND INVENTORY
<PAGE> 30
SCHEDULE IV
TRADE NAMES
<PAGE> 31
SCHEDULE V
PLEDGED ACCOUNTS
<PAGE> 32
EXHIBIT A TO THE
SECURITY AGREEMENT
FORM OF PLEDGED ACCOUNT LETTER
_______________, ____
[Name and address
of Pledged Account Bank]
[Name of the Grantor]
Ladies and Gentlemen:
Reference is made to [lockbox no. __________ into which certain
monies, instruments and other properties are deposited from time to time and]
deposit account no. __________ (collectively, the "Pledged Account") maintained
with you by ____________________ (the "Grantor"). Pursuant to the Security
Agreement dated February 4, 1998 (as amended, supplemented or otherwise modified
from time to time, the "Security Agreement"), the Grantor has granted to
NationsCredit Commercial Corporation ("NationsCredit"), as collateral agent
(together with any successor collateral agent, the "Collateral Agent") for the
Secured Parties referred to in the Credit Agreement dated as of February 4, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement") with APC Holding, Inc., as Borrower, certain Lender Parties party
thereto, the Collateral Agent and NationsBridge, L.L.C., as administrative
agent, a security interest in certain property of the Grantor, including, among
other things, the following (the "Account Collateral"): the Pledged Account, all
funds held therein and all certificates and instruments, if any, from time to
time representing or evidencing the Pledged Account, all interest, dividends,
cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the then
existing Account Collateral and all proceeds of any and all of the foregoing
Account Collateral and, to the extent not otherwise included, all (i) payments
under insurance (whether or not the Collateral Agent is the loss payee thereof),
or any indemnity, warranty or guaranty, payable by reason of loss or damage to
or otherwise with respect to any of the foregoing Account Collateral and (ii)
cash. It is a condition to the continued maintenance of the Pledged Account with
you that you agree to this letter agreement.
By signing this letter agreement, you acknowledge notice of, and
consent to the terms and provisions of, the Security Agreement and confirm to
the Collateral Agent that the description of the Pledged Account set forth on
Schedule V of the Security Agreement is correct and that you have received no
notice of any other pledge or assignment of the Pledged Account. Further, you
hereby agree with the Collateral Agent that:
(a) Notwithstanding anything to the contrary in any other agreement
relating to the Pledged Account, the Pledged Account is and will be
subject to the terms and conditions of the Security Agreement, will be
maintained solely for the benefit of the Collateral Agent, will be
entitled "NationsCredit Commercial Corporation, as Collateral Agent, Re:
[name of the Grantor]" and will be subject to written instructions only
from an officer of the Collateral Agent.
<PAGE> 33
2
(b) You will collect mail from the Pledged Account on each of your
business days at times that coincide with the delivery of mail thereto.
(c) You will follow your usual operating procedures for the handling
of any remittance received in the Pledged Account that contains
restrictive endorsements, irregularities (such as a variance between the
written and numerical amounts), undated or postdated items, missing
signatures, incorrect payees, etc.
(d) You will endorse and process all eligible checks and other
remittance items not covered by paragraph (c) and deposit such checks and
remittance items in the Pledged Account.
(e) You will maintain a record of all checks and other remittance
items received in the Pledged Account and, in addition to providing the
Grantor with photostats, vouchers, enclosures, etc. of such checks and
remittance items on a daily basis, furnish to the Collateral Agent a
monthly statement of the Pledged Account, to be transmitted to the
Collateral Agent at: 1 Canterbury Green, P.O. Box 12013, Stamford, CT
06912-0013, Attention: Alan Pagnotta.
(f) You will transfer, in same day funds, on each of your business
days, all amounts collected from the Pledged Account on such day to the
following account (the "Cash Collateral Account"):
[Name of the Grantor]
APC Holding, Inc.
Account No. 375-100-8840
100 North Tryon Street
Charlotte, NC 28255
Attention: Corporate Credit Services
Each such transfer of funds shall neither comprise only part of a
remittance nor reflect the rounding off of any funds so transferred.
(g) All transfers referred to in paragraph (f) above shall be made
by the undersigned irrespective of, and without deduction for, any
counterclaim, defense, recoupment or set-off and shall be final, and the
undersigned will not seek to recover from the Collateral Agent for any
reason any such payment once made.
(h) All service charges and fees with respect to the Pledged Account
shall be payable by the Grantor, and deposited checks returned for any
reason shall not be charged to the Pledged Account.
(i) The Collateral Agent shall be entitled to exercise any and all
rights of the Grantor in respect of the Pledged Account in accordance with
the terms of the Security Agreement, and the undersigned shall comply in
all respects with such exercise.
This letter agreement shall be binding upon you and your successors
and assigns and shall inure to the benefit of the Collateral Agent, the Lender
Parties and their successors, transferees and assigns. You may terminate this
letter agreement only upon thirty days' prior written notice to the Grantor and
the Collateral Agent. Upon such termination you shall close the Pledged Account
and transfer all funds in the Pledged Account to the Cash Collateral Account.
After any such termination, you shall nonetheless remain obligated promptly to
transfer to the Cash Collateral Account all funds and other property received in
respect of the Pledged Account.
<PAGE> 34
3
This letter agreement shall be governed by and construed in
accordance with the laws of the State of New York.
Very truly yours,
[NAME OF GRANTOR]
By ______________________________
Title:
NATIONSCREDIT COMMERCIAL
CORPORATION, as Collateral Agent
By ______________________________
Title:
Acknowledged and agreed to as of
the date first above written:
[NAME OF PLEDGED ACCOUNT BANK]
By ______________________________
Title:
<PAGE> 35
EXHIBIT B TO THE SECURITY AGREEMENT
FORM OF CONSENT AND AGREEMENT
The undersigned hereby acknowledges notice of, and consents to the
terms and provisions of, the Security Agreement dated February 4, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Security
Agreement", the terms defined therein being used herein as therein defined) from
APC Holding, Inc. (the "Borrower") and certain other parties thereto (together
with the Borrower, the "Grantors") to NationsCredit Commercial Corporation, as
collateral agent (the "Collateral Agent") for the Secured Parties referred to
therein, and hereby agrees with the Collateral Agent that:
(a) Upon written notice from the Collateral Agent, the undersigned
will make all payments to be made by it under or in connection with the
__________ Agreement dated _______________, 19__ (the "Assigned
Agreement") between the undersigned and _____________ directly to the Cash
Collateral Account or otherwise in accordance with the instructions of the
Collateral Agent.
(b) All payments referred to in paragraph (a) above shall be made by
the undersigned irrespective of, and without deduction for, any
counterclaim, defense, recoupment or set-off and shall be final, and the
undersigned will not seek to recover from any Secured Party for any reason
any such payment once made.
(c) The Collateral Agent shall be entitled to exercise any and all
rights and remedies of the Borrower under the Assigned Agreement in
accordance with the terms of the Security Agreement, and the undersigned
shall comply in all respects with such exercise.
(d) The undersigned will not, without the prior written consent of
the Collateral Agent, (i) cancel or terminate the Assigned Agreement or
consent to or accept any cancellation or termination thereof or (ii) amend
or otherwise modify the Assigned Agreement.
Each of the undersigned acknowledges and agrees that its obligations
under this Consent and Agreement and the Assigned Agreement or the Assigned
Agreements to which it is a party shall not be affected by any impossibility,
illegality, impracticability, frustration of purpose, force majeure, act of
government, the bankruptcy or insolvency of the Borrower, the Parent or any
other Loan Party, the failure or refusal of the undersigned to perform its
obligations hereunder, any dispute, set-off, counterclaim or any other defense
or right which the undersigned has or may have that might have the effect of
releasing the undersigned from such obligations (other than performance of such
obligations).
This Consent and Agreement shall be binding upon the undersigned and
its successors and assigns, and shall inure, together with the rights and
remedies of the Collateral Agent hereunder, to the benefit of the Collateral
Agent, the other Secured Parties and their successors, transferees and assigns.
This Consent and Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned has duly executed this Consent
and Agreement as of the date set opposite its name below.
Dated: _______________, ____ [NAME OF OBLIGOR]
By ________________________________
Title:
<PAGE> 36
EXHIBIT C TO THE SECURITY AGREEMENT
FORM OF SECURITY AGREEMENT SUPPLEMENT
NationsCredit Commercial Corporation,
as Collateral Agent
under the Credit Agreement
referred to below
1 Canterbury Green
P.O. Box 12013
Stamford, CT 06912-0013
[Date]
Attention: ____________________
Security Agreement dated February 4, 1998
made by APC Holding, Inc. and the other Grantors
parties thereto to NationsCredit Commercial Corporation, as Collateral Agent
Ladies and Gentlemen:
Reference is made to the above-captioned Security Agreement (such
Security Agreement, as in effect on the date hereof and as it may hereafter be
amended, modified or otherwise supplemented from time to time, being the
"Security Agreement"). The terms defined in the Security Agreement (or in the
Credit Agreement referred to therein) and not otherwise defined herein are used
herein as therein defined.
The undersigned hereby agrees, as of the date first above written,
to become a Grantor under the Security Agreement as if it were an original party
thereto and agrees that each reference in the Security Agreement to "Grantor"
shall also mean and be a reference to the undersigned.
The undersigned hereby assigns and pledges to the Collateral Agent
for the ratable benefit of the Secured Parties, and hereby grants to the
Collateral Agent for the ratable benefit of the Secured Parties as security for
the Secured Obligations a lien on and security interest in, all of the right,
title and interest of the undersigned, whether now owned or hereafter acquired,
in and to the Collateral owned by the undersigned, including, but not limited
to, the property listed on Annex I hereto. Schedules I, II, III, IV and V to the
Security Agreement are hereby supplemented by Annexes I, II, III, IV and V
hereto, respectively. The undersigned hereby certifies that such Annexes have
been prepared by the undersigned in substantially the form of Schedules I, II,
III, IV and V to the Security Agreement and are accurate and complete as of the
date hereof.
The undersigned hereby makes each representation and warranty set
forth in Section 9 of the Security Agreement (as supplemented by the attached
Annexes) to the same extent as each other Grantor and hereby agrees to be bound
as a Grantor by all of the terms and provisions of the Security Agreement to the
same extent as each other Grantor.
<PAGE> 37
2
This Security Agreement Supplement shall be governed by, and construed in
accordance with, the laws of the State of New York.
Very truly yours,
[NAME OF ADDITIONAL
GRANTOR]
By _____________________________
Title:
Address of Chief Executive
Office and for Notices:
[Address]
<PAGE> 1
Exhibit 10.4
EXHIBIT I TO THE
CREDIT AGREEMENT
INTELLECTUAL PROPERTY SECURITY AGREEMENT
Dated as of February 4, 1998
From
THE PERSONS LISTED ON THE SIGNATURE PAGES HEREOF,
as Grantors
to
NATIONSCREDIT COMMERCIAL CORPORATION,
as Collateral Agent
<PAGE> 2
TABLE OF CONTENTS
Section Page
- ------- ----
1. Grant of Security..................................................... 1
2. Security for Obligations............................................. 3
3. Grantors Remain Liable................................................ 3
4. Representations and Warranties........................................ 4
5. Further Assurances.....................................................6
6. Transfers and Other Liens..............................................8
7. Collateral Agent Appointed Attorney-in-Fact............................8
8. Collateral Agent May Perform...........................................9
9. The Collateral Agent's Duties......................................... 9
10. Remedies.............................................................. 9
11. Indemnity and Expenses............................................... 11
12. Amendments; Waivers; Etc............................................. 11
13. Addresses for Notices................................................ 12
14. Continuing Security Interest; Assignments............................ 12
15. Release and Termination.............................................. 13
16. Security Interest Absolute............................................13
17. Execution in Counterparts.............................................14
18. Governing Law........................................................ 14
<PAGE> 3
SCHEDULES
Schedule I - Patents and Patent Applications
Schedule II - Trademark Registrations and Applications
Schedule III - Copyright Registrations and Applications
Schedule IV - Licenses
Schedule V - Third Party Claims/Pending Litigation/Unauthorized Uses
EXHIBITS
Exhibit A - Form of Intellectual Property Security Agreement Supplement
<PAGE> 4
INTELLECTUAL PROPERTY SECURITY AGREEMENT
INTELLECTUAL PROPERTY SECURITY AGREEMENT dated as of February 4,
1998, made by the Persons listed on the signature pages hereof and the
Additional Grantors (as defined in Section 12(b)) (such Persons so listed and
the Additional Grantors being, collectively, the "Grantors") to NationsCredit
Commercial Corporation ("NationsCredit"), as collateral agent (the "Collateral
Agent") for the Secured Parties (as defined in the Credit Agreement referred to
below).
PRELIMINARY STATEMENTS.
(1) APC Holding, Inc., a Delaware corporation (the "Borrower"), has
entered into a Credit Agreement dated as of February 4, 1998 (said Agreement,
as it may hereafter be amended, supplemented or otherwise modified from time to
time, being the "Credit Agreement") with certain Lender Parties party thereto,
the Collateral Agent and NationsBridge, L.L.C. ("NationsBridge"), as
administrative agent. Capitalized terms used herein and not otherwise defined
are used herein as defined in the Credit Agreement.
(2) It is a condition precedent to the making of Advances and the
issuance of Letters of Credit by the Lender Parties under the Credit Agreement
and the entry by the Hedge Banks into the Bank Hedge Agreements, if any, with
the Borrower from time to time that each Grantor shall have assigned and granted
the security interest contemplated by this Agreement.
(3) Each Grantor will derive substantial direct and indirect benefit
from the transactions contemplated by the Credit Agreement.
(4) Unless otherwise defined in this Agreement or in the Credit
Agreement, terms defined in Article 8 or 9 of the Uniform Commercial Code in
effect in the State of New York ("N.Y. Uniform Commercial Code") are used in
this Agreement as such terms are defined in such Article 8 or 9.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lender Parties to make Advances and to issue Letters of Credit under
the Credit Agreement and to induce the Hedge Banks to enter into Bank Hedge
Agreements, if any, with the Borrower from time to time, each Grantor hereby
agrees with the Collateral Agent for the ratable benefit of the Secured Parties
as follows:
SECTION 1. Grant of Security. Each Grantor hereby assigns and grants
to the Collateral Agent for the ratable benefit of the Secured Parties a
security interest in all of such Grantor's right, title and interest in and to
the following, whether now owned or hereafter acquired by such Grantor and
whether now or hereafter existing (collectively, the "Intellectual Property
Collateral"):
<PAGE> 5
(a) all patents, patent applications and patentable inventions,
including, without limitation, each patent and patent application
identified in Schedule I attached hereto and made a part hereof, and
including without limitation (i) all inventions and improvements described
and claimed therein, (ii) the right to sue or otherwise recover for any
and all past, present and future infringements and misappropriations
thereof, (iii) all income, royalties, damages and other payments now and
hereafter due and/or payable with respect thereto (including, without
limitation, payments under all licenses entered into in connection
therewith, and damages and payments for past and future infringements
thereof), and (iv) all rights corresponding thereto throughout the world
and all reissues, divisions, continuations, continuations-in-part,
provisionals, substitutes, renewals, and extensions thereof, all
improvements thereon and all other rights of any kind whatsoever of such
Grantor accruing thereunder or pertaining thereto (the "Patents");
(b) all trademarks, service marks, trade names, trade dress or other
indicia of trade origin, trademark and service mark registrations, and
applications for trademark or service mark registrations and any renewals
thereof, including, without limitation, each registration and application
identified in Schedule II attached hereto and made a part hereof, and
including without limitation (i) the right to sue or otherwise recover for
any and all past, present and future infringements and misappropriations
thereof, (ii) all income, royalties, damages and other payments now and
hereafter due and/or payable with respect thereto (including, without
limitation, payments under all licenses entered into in connection
therewith, and damages and payments for past or future infringements
thereof), and (iii) all rights corresponding thereto throughout the world
and all other rights of any kind whatsoever of such Grantor accruing
thereunder or pertaining thereto, together in each case with the goodwill
of the business connected with the use of, and symbolized by, each such
trademark, service mark, trade name, trade dress or other indicia of trade
origin (the "Trademarks");
(c) all copyrights, whether statutory or common law, and whether or
not the underlying works of authorship have been published, and all works
of authorship and other intellectual property rights therein, all
copyrights of works based on, incorporated in, derived from or relating to
works covered by such copyrights, all right, title and interest to make
and exploit all derivative works based on or adopted from works covered by
such copyrights, and all copyright registrations and copyright
applications, and any renewals or extensions thereof, including, without
limitation, each copyright registration and copyright application, if any,
identified in Schedule III attached hereto and made a part hereof, and
including, without limitation, (i) the right to print, publish and
distribute any of the foregoing, (ii) the right to sue or otherwise
recover for any and all past, present and future infringements and
misappropriations thereof, (iii) all income, royalties, damages and other
payments now and hereafter due and/or payable with respect thereto
(including, without limitation, payments under all licenses entered into
in connection therewith, and damages and payments for past or future
infringements thereof), and (iv) all rights corresponding thereto
throughout the
- 2 -
<PAGE> 6
world and all other rights of any kind whatsoever of such Grantor accruing
thereunder or pertaining thereto (the "Copyrights");
(d) all license agreements with any other person in connection with
any of the Patents, Trademarks or Copyrights, or such other person's
patents, trade names, trademarks, service marks or copyrights, whether
such Grantor is a licensor or licensee under any such license agreement,
including, without limitation, the license agreements listed on Schedule
IV attached hereto and made a part hereof, subject, in each case, to the
terms of such license agreements, including, without limitation, terms
requiring consent to a grant of a security interest, and any right to
prepare for sale, sell and advertise for sale, all Inventory (as defined
in the Security Agreement) now or hereafter owned by such Grantor and now
or hereafter covered by such licenses (the "Licenses"); and
(e) all proceeds of any and all of the foregoing Intellectual
Property Collateral (including, without limitation, proceeds that
constitute property of the types described in clauses (a) - (d) of this
Section 1) and, to the extent not otherwise included, all (i) payments
under insurance (whether or not the Collateral Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the foregoing
Intellectual Property Collateral, and (ii) cash.
SECTION 2. Security for Obligations. This Agreement secures, in the
case of each Grantor, the payment of all of the Obligations of such Grantor now
or hereafter existing under the Loan Documents, whether direct or indirect,
absolute or contingent, including any extensions, modifications, substitutions,
amendments or renewals thereof, whether for principal (including reimbursement
for amounts drawn under Letters of Credit), interest, premiums, penalties, fees,
indemnifications, contract causes of action, costs, expenses or otherwise (all
such Obligations secured hereby being the "Secured Obligations"). Without
limiting the generality of the foregoing, this Agreement secures, as to each
Grantor, the payment of all amounts that constitute part of the Secured
Obligations of such Grantor and that would be owed by any Loan Party to the
Secured Parties under the Loan Documents but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving such Loan Party.
SECTION 3. Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in the Intellectual Property 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 the
Collateral Agent of any of its rights hereunder shall not release any Grantor
from any of its duties or obligations under the contracts and agreements
included in the Intellectual Property Collateral, and (c) no Secured Party shall
have any obligation or liability under the contracts and agreements included in
the Intellectual Property Collateral by reason of this Agreement or any other
Loan Document, nor shall any Secured
- 3 -
<PAGE> 7
Party be obligated to perform any of the obligations or duties of any Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
SECTION 4. Representations and Warranties. Each Grantor represents
and warrants as to itself and its Intellectual Property Collateral as follows:
(a) Such Grantor is the legal and beneficial owner of the entire
right, title and interest in and to the Intellectual Property Collateral
of such Grantor free and clear of any Lien, claim, option or right of
others, except for the liens and security interests created by this
Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of such Intellectual Property Collateral
or listing such Grantor or any of its Subsidiaries or any trade name of
such Grantor or any of its Subsidiaries as debtor is on file in any
recording office (including, without limitation, the United States Patent
and Trademark Office and the United States Copyright Office), except such
as may have been filed in favor of the Collateral Agent relating to the
Loan Documents.
(b) Set forth in Schedule I opposite the name of such Grantor is a
complete and accurate list of all patents and all patent applications
owned by such Grantor. Set forth in Schedule II opposite the name of such
Grantor is a complete and accurate list of all trademark and service mark
registrations and all trademark and service mark applications owned by
such Grantor. Set forth in Schedule III opposite the name of such Grantor
is a complete and accurate list of all copyright registrations and
copyright applications owned by such Grantor. Set forth in Schedule IV
opposite the name of such Grantor is a complete and accurate list of all
Licenses owned by such Grantor in which such Grantor is (i) a licensor
with respect to any of the Patents, Trademarks or Copyrights, or (ii) a
licensee of any other person's patents, trade names, trademarks, service
marks or copyrights. Such Grantor has made all necessary filings and
recordations to protect and maintain its interest in the patents, patent
applications, trademark and service mark registrations, trademark and
service mark applications, copyright registrations, copyright applications
and Licenses set forth in Schedules I, II, III and IV.
(c) Each patent, patent application, trademark or service mark
registration, trademark or service mark application, copyright
registration and copyright application of such Grantor set forth in
Schedules I, II and III is subsisting and has not been adjudged invalid,
unregistrable or unenforceable, in whole or in part, and is valid,
registrable and enforceable. Each License of such Grantor identified in
Schedule IV is validly subsisting and has not been adjudged invalid or
unenforceable, in whole or in part, and is valid and enforceable. Such
Grantor is not aware of any uses of any item of Intellectual Property
Collateral which could be expected to lead to such item becoming invalid
or unenforceable, including unauthorized uses by third parties and uses
which were not supported by the goodwill of the business connected with
such Intellectual Property Collateral.
- 4 -
<PAGE> 8
(d) Such Grantor has not made a previous assignment, transfer or
agreement constituting a present or future assignment, transfer or
encumbrance of any of the Intellectual Property Collateral. Such Grantor
has not granted any license (other than those listed on Schedule IV
hereto), release, covenant not to sue, or non-assertion assurance to any
person with respect to any part of the Intellectual Property Collateral.
(e) Such Grantor has used proper statutory notice in connection with
its use of each patent, each registered trademark and service mark and
each copyright contained in Schedules I, II and III.
(f) This Agreement creates in favor of the Collateral Agent for the
benefit of the Secured Parties a valid and perfected first priority
security interest in the Intellectual Property Collateral of such Grantor,
securing the payment of the Secured Obligations of such Grantor, and all
filings and other actions necessary or desirable to perfect and protect
such security interest have been duly taken.
(g) No consent of any other Person and no authorization, approval or
other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person, except for the
authorizations, approvals, actions, notices and filings listed on Schedule
4.01(d) to the Credit Agreement, all of which have been duly obtained,
taken, given or made and are in full force and effect, is required (i) for
the assignment and grant by such Grantor of the security interest assigned
and granted hereby or for the execution, delivery or performance of this
Agreement by such Grantor, (ii) for the perfection or maintenance of the
security interest created hereunder (including the first priority nature
of such security interest), except for the filing of financing and
continuation statements under the Uniform Commercial Code, and the filing
and recordal of the Intellectual Property Security Agreement with the
United States Patent and Trademark Office and the United States Copyright
Office, which financing statements and Intellectual Property Security
Agreement will have been duly filed within the time period specified
therefor in Section 5.01(o) of the Credit Agreement or (iii) by or on
behalf of any Loan Party for the exercise by the Collateral Agent of its
rights provided for in this Agreement or the remedies in respect of the
Intellectual Property Collateral pursuant to this Agreement.
(h) Except for the Licenses set forth in Schedule IV, there are no
claims that are likely to be made by any third party relating to any item
of Intellectual Property Collateral.
(i) No claim has been made and is continuing or threatened that any
item of Intellectual Property Collateral is invalid or unenforceable or
that the use by such Grantor of any Intellectual Property Collateral does
or may violate the rights of any Person. There is currently no
infringement or unauthorized use of any item of Intellectual Property
Collateral.
- 5 -
<PAGE> 9
(j) Such Grantor has taken all necessary steps to use consistent
standards of quality in the manufacture, distribution and sale of all
products sold and the provision of all services provided under or in
connection with any of the Trademarks and has taken all reasonably
necessary steps to ensure that all licensed users of any of the Trademarks
use such consistent standards of quality.
SECTION 5. Further Assurances. (a) Each Grantor agrees that from
time to time, at the expense of such Grantor, such Grantor will promptly execute
and deliver, and use its best efforts to cause to be executed and delivered, all
further instruments and documents (including, without limitation, any consents,
waivers or other action by any Subsidiary of such Grantor or any holder of
common stock in, or director or officer of, such Subsidiary), and take all
further action (including amending the Constitutive Documents of such Grantor or
any Subsidiary of such Grantor), that the Collateral Agent believes may be
necessary or desirable, or that the Collateral Agent may reasonably request, in
order to perfect and protect any security interest assigned and granted or
purported to be assigned and granted hereby or to enable the Collateral Agent to
exercise and enforce its rights and remedies hereunder with respect to any part
of the Intellectual Property Collateral. Without limiting the generality of the
foregoing, each Grantor will execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices, as may
be necessary or desirable, or as the Collateral Agent may request, in order to
perfect and preserve the security interest assigned and granted or purported to
be assigned and granted hereunder.
(b) Each Grantor hereby authorizes the Collateral Agent to file one
or more financing or continuation statements, and amendments thereto, relating
to all or any part of the Intellectual Property Collateral without the signature
of such Grantor where permitted by law. A photocopy or other reproduction of
this Agreement or any financing statement covering the Intellectual Property
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
(c) Each Grantor will furnish to the Collateral Agent from time to
time statements and schedules further identifying and describing the
Intellectual Property Collateral and such other reports in connection with the
Intellectual Property Collateral as the Collateral Agent may reasonably request,
all in reasonable detail.
(d) Each Grantor agrees that, should it obtain an ownership interest
in any patent, patent application, patentable invention, trademark, service
mark, trade name, trade dress, other indicia of trade origin, trademark or
service mark registration, trademark or service mark application, copyright,
work of authorship, copyright registration, copyright application or license,
which is not now a part of the Intellectual Property Collateral, (i) the
provisions of Section 1 shall automatically apply thereto, (ii) any such patent,
patent application, patentable invention, trademark, service mark, trade name,
trade dress, indicia of trade origin, trademark or service mark registration or
trademark or service mark
- 6 -
<PAGE> 10
application (together with the goodwill of the business connected with the use
of same and symbolized by same), copyright, work of authorship, copyright
registration, copyright application or license shall automatically become part
of the Intellectual Property Collateral, and (iii) with respect to any ownership
interest in any patent, patent application, trademark or service mark
registration, trademark or service mark application, copyright registration,
copyright application or license that such Grantor should obtain, it shall give
prompt written notice thereof to the Collateral Agent in accordance with Section
13 hereof. Each Grantor authorizes the Collateral Agent to modify this Agreement
by amending Schedules I, II, III and IV (and will cooperate with the Collateral
Agent in effecting any such amendment) to include any patent, patent
application, trademark or service mark registration, trademark or service mark
application, copyright registration, copyright application or license which
becomes part of the Intellectual Property Collateral under this Section.
(e) With respect to each patent, patent application, trademark or
service mark registration, trademark or service mark application, copyright
registration, copyright application and License, such Grantor agrees to take all
necessary steps, including, without limitation, in the United States Patent and
Trademark Office, the United States Copyright Office or in any court, to (i)
maintain each such patent, trademark or service mark registration, copyright
registration and License of such Grantor, and (ii) pursue each such patent
application, trademark or service mark application, and copyright application
now or hereafter included in the Intellectual Property Collateral of such
Grantor, including, without limitation, the filing of responses to office
actions issued by the United States Patent and Trademark Office and the United
States Copyright Office, the filing of applications for renewal or extension,
the filing of affidavits under Sections 8 and 15 of the United States Trademark
Act, the filing of divisional, continuation, continuation-in-part and substitute
applications, the filing of applications for re-issue, renewal or extensions,
the payment of maintenance fees, and the participation in interference,
reexamination, opposition, cancellation, infringement and misappropriation
proceedings. Each Grantor agrees to take corresponding steps with respect to
each new or acquired patent, patent application, trademark or service mark
registration, trademark or service mark application, copyright registration,
copyright application or License to which it is now or later becomes entitled.
Any expenses incurred in connection with such activities shall be borne by such
Grantor. No Grantor shall, without the written consent of the Collateral Agent,
discontinue use of or otherwise abandon any patent or patentable invention,
trademark or service mark, or copyright identified in Schedules I, II and III,
or abandon any right to file an application for letters patent, trademark or
service mark registration, or copyright registration, or abandon any pending
application for a letters patent, trademark or service mark registration, or
copyright registration identified in Schedules I, II and III.
(f) Each Grantor agrees to notify the Collateral Agent promptly and
in writing if it learns (i) that any item of the Intellectual Property
Collateral may be determined to have become abandoned or dedicated or (ii) of
any adverse determination or the institution of any proceeding (including,
without limitation, the institution of any proceeding in the United
- 7 -
<PAGE> 11
States Patent and Trademark Office or any court) regarding any item of the
Intellectual Property Collateral.
(g) In the event that any Grantor becomes aware that any item of the
Intellectual Property Collateral is infringed or misappropriated by a third
party, such Grantor shall promptly notify the Collateral Agent and shall take
such actions as such Grantor or the Collateral Agent deems reasonable and
appropriate under the circumstances to protect such Intellectual Property
Collateral, including, without limitation, suing for infringement or
misappropriation and for an injunction against such infringement or
misappropriation. Any expense incurred in connection with such activities shall
be borne by such Grantor.
(h) Each Grantor shall continue to use proper statutory notice in
connection with its use of each of its patents, registered trademarks and
service marks, and copyrights contained in Schedules I, II and III.
(i) Each Grantor shall take all steps which it or the Collateral
Agent deems reasonable and appropriate under the circumstances to preserve and
protect each item of its Intellectual Property Collateral, including, without
limitation, maintaining the quality of any and all products or services used or
provided in connection with any of the Trademarks, consistent with the quality
of the products and services as of the date hereof, and taking all steps
necessary to ensure that all licensed users of any of the Trademarks use such
consistent standards of quality.
SECTION 6. Transfers and Other Liens. Each Grantor agrees that it
shall not (i) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, any item of the Intellectual
Property Collateral of such Grantor (other than sales, assignments, options and
other dispositions permitted under the terms of the Credit Agreement) or (ii)
create or suffer to exist any Lien upon or with respect to any of the
Intellectual Property Collateral of such Grantor, except for the Liens created
under the Collateral Documents or permitted by the Credit Agreement.
SECTION 7. Collateral Agent Appointed Attorney-in-Fact. Each Grantor
hereby irrevocably appoints the Collateral Agent such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor or otherwise, from time to time in the Collateral
Agent's discretion, to take, upon the occurrence and during the continuance of
an Event of Default, any action and to execute any instrument that the
Collateral Agent may deem necessary or advisable to accomplish the purposes of
this Agreement, including, without limitation:
(a) to ask for, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Intellectual Property Collateral,
- 8 -
<PAGE> 12
(b) to receive, indorse and collect any drafts or other instruments,
documents and chattel paper in connection with clause (a) above, and
(c) to file any claims or take any action or to institute any
proceedings that the Collateral Agent may deem necessary or desirable for
the collection of any payments relating to any of the Intellectual
Property Collateral or otherwise to enforce the rights of the Collateral
Agent with respect to any item of the Intellectual Property Collateral.
SECTION 8. Collateral Agent May Perform. If any Grantor fails to
perform any agreement contained herein, the Collateral Agent may, but without
any obligation to do so and without further notice, itself perform, or cause
performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by such Grantor under Section
11(b).
SECTION 9. The Collateral Agent's Duties. The powers conferred on
the Collateral Agent hereunder are solely to protect its and the other Secured
Parties' interest in the Intellectual Property Collateral and shall not impose
any duty upon it to exercise any such powers. Except for the safe custody and
reasonable care of the certificates of registration for any of the Trademarks
and Copyrights, the letters patent for any of the Patents and any License in its
possession and the accounting for moneys actually received by it hereunder, the
Collateral Agent shall have no duty as to any Intellectual Property Collateral,
whether or not the Collateral Agent or any other Secured Party has or is deemed
to have knowledge of such matters, or as to the taking of any necessary steps to
preserve rights against any parties or any other rights pertaining to any
Intellectual Property Collateral. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the certificates of
registration for any of the Trademarks and Copyrights, the letters patent for
any of the Patents and any License in its possession if such certificates of
registration, letters patent and licenses are accorded treatment substantially
equal to that which it accords its own property. Anything contained herein to
the contrary notwithstanding, the Collateral Agent may from time to time, when
the Collateral Agent reasonably deems it to be necessary, appoint one or more
subagents (each a "Subagent") for the Collateral Agent hereunder with respect to
all or any part of the Intellectual Property Collateral. In the event that the
Collateral Agent so appoints any Subagent with respect to any Intellectual
Property Collateral, (1) the security interest assigned and granted in such
Intellectual Property Collateral by each Grantor hereunder shall be deemed for
purposes of this Intellectual Property Security Agreement to have been made to
such Subagent for the ratable benefit of the Lender Parties, as security for the
Secured Obligations of such Grantor, (2) such Subagent shall automatically be
vested with all rights, powers, privileges, interests and remedies of the
Collateral Agent hereunder with respect to such Intellectual Property
Collateral, and (3) the term "Collateral Agent," when used herein in relation to
any rights, powers, privileges, interests and remedies of the Collateral Agent
with respect to such Intellectual Property Collateral, shall include such
Subagent; provided, however, that no such Subagent shall be authorized to take
any action with respect to any such Intellectual Property
- 9 -
<PAGE> 13
Collateral unless and except to the extent expressly authorized in writing by
the Collateral Agent.
SECTION 10. Remedies. If any Event of Default shall have occurred
and be continuing:
(a) The Collateral Agent may exercise in respect of the Intellectual
Property Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party upon default under the N.Y. Uniform Commercial Code, whether
or not the N.Y. Uniform Commercial Code applies to the affected
Intellectual Property Collateral, and also may (i) require any Grantor to,
and each Grantor hereby agrees that it will at its expense and upon
request of the Collateral Agent forthwith, assemble all or part of the
documents and things embodying all or any part of the Intellectual
Property Collateral as directed by the Collateral Agent and make them
available to the Collateral Agent at a place and time to be designated by
the Collateral Agent which is reasonably convenient to both parties and
(ii) without notice, except as specified below, sell the Intellectual
Property Collateral or any part thereof in one or more parcels at public
or private sale, at any of the Collateral Agent's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms as
the Collateral Agent may deem commercially reasonable. In the event of any
sale, assignment, or other disposition of any of the Intellectual Property
Collateral of any Grantor, the goodwill of the business connected with and
symbolized by any Trademarks subject to such disposition shall be
included, and such Grantor shall supply to the Collateral Agent or its
designee such Grantor's know-how and expertise, and documents and things
embodying the same, relating to the manufacture, distribution, advertising
and sale of products or the provision of services relating to any
Intellectual Property Collateral subject to such disposition, and such
Grantor's customer lists and other records and documents relating to such
Intellectual Property Collateral and to the manufacture, distribution,
advertising and sale of such products and services. Each Grantor agrees
that, to the extent notice of sale shall be required by law, at least ten
days' notice to such Grantor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute
reasonable notification. The Collateral Agent shall not be obligated to
make any sale of Intellectual Property Collateral regardless of notice of
sale having been given. The Collateral Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(b) All cash proceeds received by the Collateral Agent in respect of
any sale of, collection from, or other realization upon, all or any part
of the Intellectual Property Collateral may, in the discretion of the
Collateral Agent, be held by the Collateral Agent as collateral for,
and/or then or at any time thereafter applied (after payment of any
amounts payable to the Collateral Agent pursuant to Section 11) in whole
or in part by the Collateral Agent in accordance with clause (d) below or
as
- 10 -
<PAGE> 14
otherwise permitted or required by the Credit Agreement. Any surplus of
such cash or cash proceeds held by the Collateral Agent and remaining
after payment in full of all of the Secured Obligations shall be paid over
to the Grantors or to whomsoever may be lawfully entitled to receive such
surplus.
(c) All payments received by any Grantor under or in respect of the
Intellectual Property Collateral shall be received in trust for the
benefit of the Collateral Agent and the other Secured Parties, shall be
segregated from other funds of such Grantor and shall be forthwith paid
over to the Collateral Agent in the same form as so received (with any
necessary indorsement).
(d) Any cash or cash proceeds referred to in Section 10(b) and any
other proceeds of any Intellectual Property Collateral to be applied by
the Collateral Agent to the Secured Obligations shall be applied on the
following order of priority:
(i) first, to payment of any amounts payable to the Collateral
Agent pursuant to Section 11,
(ii) second, ratably to (A) the Term A Facility and to the
installments thereof in inverse order of maturity and (B) the
Revolving Credit Facility as set forth in Section 2.06(b)(ii) of the
Credit Agreement,
(iii) third, to the Term B Facility and to the installments
thereof in inverse order of maturity, and
(iv) fourth, ratably to all other Secured Obligations.
SECTION 11. Indemnity and Expenses. (a) Each Grantor agrees to
defend, protect, indemnify and hold harmless each Secured Party from and against
any and all claims, losses and liabilities growing out of or resulting from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting from such Secured Party's gross
negligence or willful misconduct as determined by a final judgment of a court of
competent jurisdiction.
(b) Each Grantor will upon demand pay to the Collateral Agent the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that the Collateral Agent
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 Intellectual Property Collateral of such
Grantor, (iii) the exercise or enforcement of any of the rights of the
Collateral Agent or any other Secured Party against such Grantor, or (iv) the
failure by any Grantor to perform or observe any of the provisions hereof.
- 11 -
<PAGE> 15
SECTION 12. Amendments; Waivers; Etc. (a) No amendment or waiver of
any provision of this Agreement, and no consent to any departure by any Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Collateral Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No failure on the part of the Collateral Agent to exercise, and no delay
in exercising, any right hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right.
(b) Upon the execution and delivery by any Person of a supplement to
this Agreement in substantially the form of Exhibit A hereto (each an
"Intellectual Property Security Agreement Supplement"), (i) such Person shall be
referred to as an "Additional Grantor" and shall be and become a Grantor, and
each reference in this Agreement to a "Grantor" shall also mean and be a
reference to such Additional Grantor, (ii) the annexes attached to each
Intellectual Property Security Agreement Supplement shall be incorporated into
and become a part of and supplement the Schedules I, II, III, IV and V hereto,
and the Collateral Agent may attach such annexes as supplements to such
Schedules; and each reference to such Schedules shall mean and be a reference to
such Schedules as supplemented pursuant hereto.
SECTION 13. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic or telex communication) and, if to any Grantor, mailed, telecopied,
telegraphed, telexed or delivered to it, addressed to it at the address listed
for such Grantor on the signature pages hereof, and if to the Collateral Agent,
mailed, telecopied, telegraphed, telexed or delivered to it, addressed to it at
the address of the Collateral Agent specified in the Credit Agreement, or as to
any party at such other address as shall be designated by such party in a
written notice to each other party complying as to delivery with the terms of
this Section. All such notices and other communications shall, when mailed,
telecopied, telegraphed or telexed, respectively, be effective when deposited in
the mails, transmitted by telecopier, delivered to the telegraph company or
confirmed by telex answerback, respectively. Delivery by telecopier of an
executed counterpart of any amendment or waiver of any provision of this
Agreement or of any Supplement or Schedule hereto shall be effective as delivery
of a manually executed counterpart thereof.
SECTION 14. Continuing Security Interest; Assignments. This
Agreement shall create a continuing security interest in the Intellectual
Property Collateral and shall (a) remain in full force and effect until the
latest of the cash payment in full of the Secured Obligations, the Termination
Date and the termination or expiration of all Bank Hedge Agreements, if any, (b)
be binding upon each Grantor, its successors and assigns and (c) inure, together
with the rights and remedies of the Collateral Agent hereunder, to the benefit
of the Secured Parties and their respective successors, transferees and assigns.
Without limiting the generality of the foregoing clause (c), any Lender Party
may assign or otherwise transfer all or any portion of its rights and
obligations under the Credit Agreement
- 12 -
<PAGE> 16
(including, without limitation, all or any portion of its Commitments, the
Advances owing to it and the Note or Notes held by it) to any other Person and
such other Person shall thereupon become vested with all the benefits in respect
thereof assigned and granted to such Lender Party herein or otherwise, in each
case as provided in Section 8.07 of the Credit Agreement. No Grantor shall have
the right to assign its rights hereunder or any interest herein without the
prior written consent of the Secured Parties.
SECTION 15. Release and Termination. (a) Upon any sale, lease,
transfer or other disposition of any item of Intellectual Property Collateral in
accordance with the terms of the Loan Documents (other than sales of Inventory
in the ordinary course of business), the Collateral Agent will, at any Grantor's
expense, execute and deliver to such Grantor such documents as such Grantor
shall reasonably request to evidence the release of such item of Intellectual
Property Collateral from the security interest assigned and granted hereby;
provided, however, that (i) at the time of such request and such release no
Default shall have occurred and be continuing, (ii) such Grantor shall have
delivered to the Collateral Agent, at least ten Business Days prior to the date
of the proposed release, a written request for release describing the item of
Intellectual Property Collateral and the terms of the sale, lease, transfer or
other disposition in reasonable detail, including the price thereof and any
expenses in connection therewith, together with a form of release for execution
by the Collateral Agent and a certification by such Grantor to the effect that
the transaction is in compliance with the Loan Documents and as to such other
matters as the Collateral Agent may request and (iii) the proceeds of any such
sale, lease, transfer or other disposition required to be applied in accordance
with Section 2.06(b) of the Credit Agreement shall be paid to, or in accordance
with the instructions of, the Collateral Agent at the closing.
(b) Upon the latest of the cash payment in full of the Secured
Obligations, the Termination Date and the termination or expiration of all
Letters of Credit and all Bank Hedge Agreements, if any, the security interest
assigned and granted hereby shall terminate and all rights to the Intellectual
Property Collateral shall revert to the appropriate Grantor. Upon any such
termination, the Collateral Agent will, at the appropriate Grantor's expense,
execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to evidence such termination.
SECTION 16. Security Interest Absolute. The Obligations of each
Grantor hereunder are independent of the Obligations of any other Loan Party
under the Loan Documents, and a separate action or actions may be brought and
prosecuted against each Grantor to enforce this Agreement, irrespective of
whether any action is brought against any other Loan Party or whether any other
Loan Party is joined in any such action or actions. All rights of the Collateral
Agent and the security interests hereunder, and all obligations of each Grantor
hereunder, shall be absolute and unconditional, irrespective of, and each
Grantor hereby irrevocably waives any defenses it may now or hereafter have in
any way relating to, any or all of the circumstances described in the Guaranties
or any other circumstance that might constitute a discharge available to, or a
discharge of, the Borrower or any Guarantor.
- 13 -
<PAGE> 17
This Agreement shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the Secured Obligations is
rescinded or must otherwise be returned by any Secured Party or by any other
Person upon the insolvency, bankruptcy or reorganization of any Loan Party or
otherwise, all as though such payment had not been made.
SECTION 17. Execution in Counterparts. This Agreement may be
executed in any number of 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. Delivery of an executed counterpart of a signature page
to this Agreement by telecopier shall be effective as delivery of a manually
executed counterpart of this Agreement.
SECTION 18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, except to the
extent that the validity or perfection of the security interest hereunder, or
remedies hereunder, in respect of any particular item of the Intellectual
Property Collateral are governed by the laws of a jurisdiction other than the
State of New York.
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
APC HOLDING, INC.
By: /s/ Ariel Gratch
_____________________________________
Title: Vice Chairman
Address of Chief Executive Office:
Attention: _______________
AFA HOLDINGS CO.
By: /s/ Ariel Gratch
_____________________________________
Title: Vice Chairman
Address of Chief Executive Office:
- 14 -
<PAGE> 18
Attention: _______________
- 15 -
<PAGE> 19
AFA PRODUCTS, INC.
By: /s/ Ariel Gratch
_____________________________________
Title: Vice Chairman
Address of Chief Executive Office:
Attention:
CONTINENTAL ACQUISITION CORP.
By: /s/ Ariel Gratch
_____________________________________
Title: Vice Chairman
Address of Chief Executive Office:
Attention:
Agreed and consented to as of
the date first above written:
NATIONSCREDIT COMMERCIAL CORPORATION
By: /s/ Alan J. Pagnotta
_____________________________
Title: Vice President
- 16 -
<PAGE> 20
STATE OF )
) ss.:
COUNTY OF )
On the ____ day of February, 1998, before me personally came
______________ to me known, who, being by me duly sworn, did depose and say he
resides at
______________________________________________________________________ and that
he is the ____________ of APC HOLDING, INC., the corporation described in and
which executed the above instrument; that he has been authorized to execute said
instrument on behalf of said corporation; and that he signed said instrument on
behalf of said corporation pursuant to said authority.
________________________
Notary Public
[Notarial Seal]
STATE OF )
) ss.:
COUNTY OF )
On the ____ day of February, 1998, before me personally came
______________ to me known, who, being by me duly sworn, did depose and say he
resides at
______________________________________________________________________ and that
he is the ____________ of AFA HOLDINGS CO., the corporation described in and
which executed the above instrument; that he has been authorized to execute said
instrument on behalf of said corporation; and that he signed said instrument on
behalf of said corporation pursuant to said authority.
________________________
Notary Public
[Notarial Seal]
<PAGE> 21
STATE OF )
) ss.:
COUNTY OF )
On the ____ day of February, 1998, before me personally came
______________ to me known, who, being by me duly sworn, did depose and say he
resides at
______________________________________________________________________ and that
he is the ____________ of AFA PRODUCTS, INC., the corporation described in and
which executed the above instrument; that he has been authorized to execute said
instrument on behalf of said corporation; and that he signed said instrument on
behalf of said corporation pursuant to said authority.
________________________
Notary Public
[Notarial Seal]
STATE OF )
) ss.:
COUNTY OF )
On the ____ day of February, 1998, before me personally came
______________ to me known, who, being by me duly sworn, did depose and say he
resides at
______________________________________________________________________ and that
he is the ____________ of CONTINENTAL ACQUISITION CORP., the corporation
described in and which executed the above instrument; that he has been
authorized to execute said instrument on behalf of said corporation; and that he
signed said instrument on behalf of said corporation pursuant to said authority.
________________________
Notary Public
[Notarial Seal]
<PAGE> 22
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of February, 1998, before me personally came
___________________________________________ to me known, who, being by me duly
sworn, did depose and say he resides at
_________________________________________
____________________________________________________________ and that he is the
_______________________ of NATIONSCREDIT COMMERCIAL CORPORATION, the corporation
described in and which executed the above instrument; that he has been
authorized to execute said instrument on behalf of said corporation; and that he
signed said instrument on behalf of said corporation pursuant to said authority.
________________________
Notary Public
[Notarial Seal]
<PAGE> 23
SCHEDULE I
to
Intellectual Property Security Agreement
Patents and Patent Applications
<PAGE> 24
SCHEDULE II
to
Intellectual Property Security Agreement
Trademark Registrations and Applications
<PAGE> 25
SCHEDULE III
to
Intellectual Property Security Agreement
Copyright Registrations and Applications
<PAGE> 26
SCHEDULE IV
to
Intellectual Property Security Agreement
Licenses
<PAGE> 27
SCHEDULE V
to
Intellectual Property Security Agreement
Third Party Claims/Pending Litigation/Unauthorized Uses
<PAGE> 28
EXHIBIT A
FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT SUPPLEMENT
NationsCredit Commercial Corporation, as Collateral Agent
under the Credit Agreement
referred to below
[Address]
[Date]
Attention: _______________________
Intellectual Property Security Agreement dated as of February __, 1998
made by APC Holding, Inc. and the other Grantors
parties thereto to NationsCredit Commercial Corporation, as Collateral Agent
Ladies and Gentlemen:
Reference is made to the above-captioned Intellectual Property
Security Agreement (such Intellectual Property Security Agreement, as in effect
on the date hereof and as it may hereafter be amended, modified or otherwise
supplemented from time to time, being the "Intellectual Property Security
Agreement"). The terms defined in the Intellectual Property Security Agreement
(or in the Credit Agreement referred to therein) and not otherwise defined
herein are used herein as therein defined.
The undersigned hereby agrees, as of the date first above written,
to become a Grantor under the Intellectual Property Security Agreement as if it
were an original party thereto and agrees that each reference in the
Intellectual Property Security Agreement to "Grantor" shall also mean and be a
reference to the undersigned.
The undersigned hereby assigns and grants to the Collateral Agent
for the ratable benefit of the Secured Parties as security for the Secured
Obligations a lien on and security interest in, all of the right, title and
interest of the undersigned, whether now owned or hereafter acquired, in and to
all of the Intellectual Property Collateral owned by the
<PAGE> 29
undersigned, whether now or hereafter existing, including, but not limited to,
the property listed on the Annexes hereto. Schedules I, II, III, IV and V to the
Intellectual Property Security Agreement are hereby supplemented by Annexes I,
II, III, IV and V hereto, respectively. The undersigned hereby certifies that
such Annexes have been prepared by the undersigned in substantially the same
form of Schedules I, II, III, IV and V to the Intellectual Property Security
Agreement and are accurate and complete as of the date hereof.
The undersigned hereby makes each representation and warranty set
forth in Section 4 of the Intellectual Property Security Agreement (as
supplemented by the attached Annexes) to the same extent as each other Grantor
and hereby agrees to by bound as a Grantor by all of the terms and provisions of
the Intellectual Property Security Agreement to the same extent as each other
Grantor.
This Intellectual Property Security Agreement Supplement shall be
governed by, and construed in accordance with, the laws of the State of New
York.
Very truly yours,
[NAME OF ADDITIONAL GRANTOR]
By ________________________________
Title:
Address of Chief Executive Office and for
Notices:
[Address]
<PAGE> 1
Exhibit 10.5
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT, dated as of February 4, 1998 (the
"Agreement"), between Indesco International, Inc., a Delaware corporation (the
"Company") with an address at c/o Gratch Jacobs & Brozman, P.C., 950 Third
Avenue, 11th Floor, New York, New York 10022, and Gadraz, Inc. ("Gadraz"), a
Delaware corporation having an address at 1500 E. Tropicana Avenue, Suite 125,
Las Vegas, Nevada 89119.
INTRODUCTION:
A. The Company is in need of, and desires to retain, Gadraz to provide it
with certain management and financial consulting services.
B. Gadraz is prepared to provide the Company with certain management and
financial consulting services, as more particularly described herein.
The parties agree as follows:
1. Management Duties. From time to time as shall be requested by the Board
of Directors of the Company during the Term (as defined in Section 3 hereof),
Gadraz will advise the Company on matters relating to strategic and financial
planning, and in that connection will provide such financial and administrative
services as shall be reasonably necessary.
2. Management Fee.
2.1 General. For services to be rendered by Gadraz to the Company
pursuant to this Agreement, Gadraz shall be paid a management fee at the rate of
Three Hundred Thousand Dollars ($300,000) per annum during the Term, to be paid
in quarterly installments of $75,000 each, in arrears, on the last day of April,
July, October and January during the Term, with such quarterly installment
payments to begin on April 30, 1998 and the last such quarterly installment
payment to be made on July 29, 2008, subject to renewal of the Term of this
Agreement in accordance with Section 3 hereof.
2.2 Prohibited Payments. Gadraz and the Company acknowledge and
agree that no payment shall be paid or be payable
<PAGE> 2
under this Agreement (a "Prohibited Payment") at such time as (i) an Event of
Default (as such term is defined under the Credit Agreement, dated as of
February 4, 1998, among the Company, the lenders referred to therein and
NationsCredit Commercial Corporation, as Agent, as the same may be amended,
modified, supplemented, restated, extended or refinanced from time to time) has
occurred and is continuing, or (b) such payment is otherwise prohibited under
any agreement to which the Company is a party. Gadraz further agrees that it
shall return to the Company any payment made in contravention of the preceding
sentence and until so returned the same shall be held in trust by Gadraz for the
benefit of the Company. Notwithstanding the foregoing, any such Prohibited
Payment shall nevertheless continue to accrue and its payment shall be deferred
until such time as, and to the extent that, the foregoing payment restrictions
lapse, whereupon such Prohibited Payment, to the extent that it may be paid,
shall be immediately due and payable to Gadraz.
3. Term. The initial term of this Agreement shall commence on the date
hereof and shall expire on July 29, 2008 (the "Term"). The Term of this
Agreement shall be automatically renewed for two successive five-year periods
unless either Gadraz, on the one hand, or the Company, on the other hand,
notifies the other, within six (6) months of the expiration of the existing
Term, of its intention not to renew the Term of this Agreement.
4. Miscellaneous
4.1 Entire Agreement. This Agreement embodies the entire agreement
and understanding between the parties hereto relating to the subject matter
hereof and may not be changed orally, but only by an instrument in writing
signed by both parties.
4.2 Assignment. Gadraz shall be entitled to assign its rights and
duties hereunder to a corporation or other entity controlled by or affiliated
with it.
4.3 Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been given when delivered, if delivered in person or telecopied
(subject to confirmation of the telecopy receipt), or three (3) business days
following the mailing thereof, if mailed by first-class mail, postage prepaid,
certified or registered with return receipt requested addressed to each party
hereto at their respective addresses set forth in the first paragraph hereof, or
at any such other address or addresses as either party may designate by means of
notice given in accordance with this Section.
2
<PAGE> 3
4.4 Headings. The headings of the Sections of this Agreement have
been inserted for convenience only and shall not modify, define, limit or expand
the express provisions of this Agreement.
4.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the substantive laws of the State of New York, without regard
to the provisions for choice of law thereunder.
4.6 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future law effective during
the term hereof, such provision shall be fully severable, this Agreement shall
be construed and enforced as if such illegal, invalid or unenforceable provision
had never been a part hereof, and the remaining provisions of this Agreement
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom, provided that
such remaining provisions do not increase the obligations or liability of either
party hereto.
4.7 Binding Nature. This Agreement shall be binding upon the parties
hereto and their respective legal representatives, successors and assigns.
4.8 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 document.
INDESCO INTERNATIONAL, INC.
By: /s/ L.H. Dixey, Jr.
_________________________________
Name: L.H. Dixey, Jr.
_______________________________
Title: Vice President
______________________________
GADRAZ, INC.
By: /s/ Yehochai Schneider
_________________________________
Name: Yehochai Schneider
_______________________________
Title: President
______________________________
3
<PAGE> 1
Exhibit 10.6
EXECUTIVE EMPLOYMENT AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT, dated as of February 4, 1998, by and
between Indesco International, Inc., a Delaware corporation with an address at
950 Third Avenue, 11th Floor, New York, New York 10022, (the "Company"), and
Ariel Gratch, an individual residing at 40 East 88th Street, New York, New York
10128 ("Executive").
INTRODUCTION
A. The Executive is presently employed by the Company and is presently
serving the Company as President and Chief Executive Officer.
B. The Company and the Executive wish to enter into an employment
agreement on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements of the parties herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
EMPLOYMENT; TERM; DUTIES
1.1. Employment. The Company hereby employs the Executive upon the
terms and conditions hereinafter set forth, and the Executive hereby accepts
such employment.
1.2. Term. The employment of the Executive hereunder shall be for a
period (the "Term") of five (5) years commencing on the date hereof and ending
at the close of business on February 3, 2003, unless further extended or sooner
terminated as hereinafter provided. The Term of this Agreement shall be
automatically renewed for two successive five-year periods, unless either the
Executive, on the one hand, or the Company, on the other hand, notifies the
other, within six (6) months of the expiration of the existing Term, of his or
its intention not to renew the Term of this Agreement.
<PAGE> 2
1.3. Duties. During the Term, the Executive shall serve as the
President and Chief Executive Officer of the Company, and shall be responsible
for the general management of the affairs of the Company and its subsidiaries.
The Executive shall devote such time as is reasonably necessary for the
performance of his duties hereunder. In carrying out his duties under this
Agreement, the Executive shall report to the Board of Directors of the Company.
ARTICLE II
COMPENSATION
2.1. Compensation. For services rendered by the Executive hereunder
and all covenants and conditions undertaken by him pursuant to this Agreement,
the Company shall pay, and the Executive shall accept, as base compensation, a
base salary (the "Base Salary") of Five Hundred Thousand Dollars ($500,000) per
annum, payable in accordance with the regular payroll practices of the Company,
but no less frequently than twice a month.
2.2. Bonus. The Company shall pay the Executive an annual bonus
("Bonus") to be determined in accordance with the formula set forth on Exhibit A
and payable on the dates set forth therein; provided, however, that the
Executive shall be paid a minimum guaranteed Bonus of $200,000 per year.
2.3. Deductions. The Company shall deduct from the Base Salary and
Bonus any federal, state or local withholding taxes, social security
contributions and any other amounts which may be required to be deducted or
withheld by the Company pursuant to any federal, state or local laws, rules or
regulations.
ARTICLE III
BENEFITS; VACATION; EXPENSES; FRINGE BENEFITS
3.1. Health and Other Plans. During the Term, the Executive shall be
entitled to participate in such profit sharing, pension, group life, health,
accident, disability or hospitalization employee benefit and insurance plans as
the Company may make available to its executive officers as a group on the same
basis as such executive officers are entitled to participate, all pursuant to
the terms and conditions of such plans as the same may, from time to time, be
amended.
3.2. Vacation. During each twelve month period during the Term, the
Executive shall be entitled to four (4) weeks of
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<PAGE> 3
paid vacation to be taken at times determined by the Executive which do not
unreasonably interfere with the performance of the Executive's duties hereunder.
3.3. Expenses. During the Term, the Executive shall be entitled to
incur reasonable expenses in the performance of his duties and the Company shall
promptly reimburse him for all business expenses incurred in connection
therewith, in accordance with Company policy in effect from time to time.
3.4. Fringe Benefits. During the Term, the Executive shall be
entitled to participate in any of the Company's fringe benefits in accordance
with the terms and conditions of such arrangements as are in effect from time to
time for the Company's executives.
3.5. Automobile. During the Term, the Company shall make available
to the Executive the use of a Company automobile on such terms as are in effect
from time to time for the Company's executives.
ARTICLE IV
TERMINATION; DEATH; DISABILITY
4.1. Termination With Cause.
(a) In addition to any other remedies available to it at law,
in equity or as set forth in this Agreement, the Company shall have the right to
terminate the employment of the Executive under this Agreement for Cause (as
hereinafter defined). As used herein, "Cause" shall mean:
(i) a felony conviction involving moral turpitude; or
(ii) the Executive's engagement in conduct that
constitutes willful gross neglect or willful gross misconduct in carrying
out his duties under this Agreement, resulting, in either case, in
material economic harm to the Company, unless the Executive believed in
good faith that such act or failure to act was in the best interests of
the Company.
(b) In the event the Company terminates the Executive's
employment for Cause, he shall be entitled to:
(i) his Base Salary through the date of the termination
of his employment; and
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<PAGE> 4
(ii) any amounts earned, accrued or owing to the
Executive under this Agreement but not yet paid.
4.2. Termination Without Cause.
(a) In the event the Executive's employment is terminated
without Cause, the Executive shall be entitled to:
(i) his Base Salary through the date of termination of
the Executive's employment;
(ii) his Base Salary, at the annualized rate in effect
on the date of termination of the Executive's employment, for a period of
thirty-six (36) months following such termination or until the end of the
Term, whichever is longer; provided that, at the Executive's option, the
Company shall pay him the present value of such Base Salary continuation
payments in a lump sum (using as the discount rate the Applicable Federal
Rate for short-term Treasury obligations as published by the Internal
Revenue Service for the month in which such termination occurs);
(iii) his Bonuses for the remainder of the Term (but in
no event less than $200,000 per year), payable as and when such Bonuses
would have been payable to the Executive had his employment with the
Company not been terminated under this Section 4.2.;
(iv) any amounts earned, accrued or owing to the
Executive under this Agreement but not yet paid;
(v) continued participation in all medical, dental,
hospitalization and life insurance coverage and in other employee benefit
plans or programs in which he was participating on the date of the
termination of his employment until the earlier of:
(A) the end of the period during which he is
receiving Base Salary continuation payments (or in respect of which
a lump-sum severance payment is made);
(B) the date, or dates, he receives equivalent
coverage and benefits under the plans and programs of a subsequent
employer (such coverage and benefits to be determined on a
coverage-by-coverage, or benefit-by-benefit, basis); provided that
(x) if the Executive is precluded from continuing his participation
in any employee benefit plan or program as provided in this clause
(v) of this Section 4.2, he shall be provided with the after-tax
economic
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<PAGE> 5
equivalent of the benefits provided under the plan or program in
which he is unable to participate for the period specified in this
clause (v) of this Section 4.2, (y) the economic equivalent of any
benefit foregone shall be deemed to be the lowest cost that would be
incurred by the Executive in obtaining such benefit himself on an
individual basis, and (z) payment of such after-tax economic
equivalent shall be made quarterly in advance; and
(vi) other or additional benefits in accordance with
applicable plans and programs of the Company.
4.3. Voluntary Termination. In the event of a termination of
employment by the Executive on his own initiative other than a termination due
to death or Disability, the Executive shall have the same entitlements as
provided in Section 4.1 above for a termination for Cause. A voluntary
termination under this Section 4.3 shall be effective upon 30 days prior written
notice to the Company and shall not be deemed a breach of this Agreement.
4.4. Death; Disability.
(a) Termination Due to Death. In the event the Executive's
employment is terminated due to his death, his estate or his beneficiaries, as
the case may be, shall be entitled to:
(i) his Base Salary for a period of thirty-six (36)
months following the date of death or until the end of the Term, whichever
is longer;
(ii) the Bonus for the year in which the Executive's
death occurred (but in no event less than $200,000), payable as and when
such Bonus would have been payable to the executive but for his death; and
(iii) any amounts earned, accrued or owing to the
Executive under this Agreement but not yet paid; and
(iv) other or additional benefits in accordance with
applicable plans and programs of the Company.
(b) Termination Due to Disability. In the event the
Executive's employment is terminated due to his Disability, as hereinafter
defined, he shall be entitled in such case to the following (but in no event
less than the benefits due him under the then current disability program of the
Company):
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<PAGE> 6
(i) an amount equal to 50% of Base Salary, at the annual
rate in effect at termination of his employment, for a period ending with
the end of the month in which he becomes 65, less the amount of any
disability benefits provided to the Executive by the Company (other than
benefits attributable to the Executive's own contributions) under any
disability plan;
(ii) the Bonus for the year in which the Executive's
Disability occurred (but in no event less than $200,000), payable as and
when such Bonus would have been payable to the Executive but for the
termination of this Agreement on account of his Disability;
(iii) any amounts earned, accrued or owing to the
Executive under this Agreement but not yet paid; and
(iv) other or additional benefits in accordance with
applicable plans and programs of the Company.
In no event shall a termination of the Executive's employment for
Disability occur unless the party terminating his employment gives written
notice to the other party in accordance with Section 6.2 below.
For the purposes of this Agreement, "Disability" shall mean the
Executive's inability to substantially perform his duties and responsibilities
under this Agreement for a period of 180 consecutive days during the Term, as
confirmed in writing by an approved medical doctor. For this purpose, an
"approved medical doctor" shall mean a medical doctor jointly selected by the
Company and the Executive. If the parties cannot agree on a medical doctor, each
party shall select a medical doctor and the two doctors shall jointly select a
third, who shall be the approved medical doctor for this purpose.
4.5. No Mitigation; No Offset. In the event of any termination of
employment under this Article IV, the Executive shall be under no obligation to
seek other employment and there shall be no offset against amounts due the
Executive under this Agreement on account of any remuneration attributable to
any subsequent employment that he may obtain, except as specifically provided in
this Article IV.
4.6 Nature of Payments. Any amounts due under this Article IV are in
the nature of severance payments considered to be reasonable by the Company and
are not in the nature of a penalty.
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<PAGE> 7
ARTICLE V
NON-DISCLOSURE, ETC.
5.1. Non-Disclosure. The Executive acknowledges that he will acquire
during the Term Confidential Information (as defined below) regarding the
business of the Company and its subsidiaries. Accordingly, the Executive agrees
that, without the written consent of the Board of Directors of the Company, the
Executive will not, at any time during the Term or thereafter, disclose or
furnish to any other person, firm or corporation or otherwise use any
Confidential Information, except in the course of the proper performance of his
duties hereunder or as required by law or governmental order. For this purpose,
Confidential Information shall mean non-public information concerning the
financial data, business strategies, product development (and proprietary
product data including processes, techniques or procedures used by the Company),
customer lists, marketing plans, and other proprietary information concerning
the Company and its subsidiaries, except for specific items which have become
publicly available as a result of the Executive's breach of this Agreement.
5.2 Return of Property. At the expiration or earlier termination of
the Term, the Executive shall return to the Company or its successors or
assigns, as the case may be, all documents and papers relating to the Company or
its affiliates, including any Confidential Information.
5.3. Inventions. All processes, technologies and inventions
(collectively, "Inventions"), including new improvements, ideas, discoveries,
trademarks and trade names, conceived, developed, invented, made or found by the
Executive, alone or with others, during his employment by the Company, whether
or not patentable and whether or not conceived, developed, invented, made or
found on the Company's time or with the use of the Company's facilities or
materials, shall be the property of the Company and shall be promptly and fully
disclosed by the Executive to the Company. The Executive shall perform all
necessary acts (including, without limitations, executing and delivering any
confirmatory assignments, documents or instruments requested by the Company) to
vest title to any such Invention in the Company and to enable the Company, at
its expense, to secure and maintain domestic and/or foreign patents, trademarks,
service marks or any other rights for such Inventions.
5.4. Reasonable Restrictions. The Executive acknow- ledges that the
foregoing restrictions are reasonable and necessary for the protection of the
Company and its business. If any of the foregoing restrictions is determined by
a court of
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<PAGE> 8
competent jurisdiction to be too broad so as to be unenforceable, such provision
shall be deemed to have been modified to be only so broad as is enforceable.
5.5. Breach of Provisions. In the event the Executive shall breach
any of the provisions of this Article V, or in the event that any such breach is
threatened by the Executive, in addition to and without limiting or waiving any
other remedies available to the Company at law or in equity, the Company shall
be entitled to seek immediate injunctive relief in any court, domestic or
foreign, having the capacity to grant such relief, to restrain any such breach
or threatened breach and to enforce the provisions of this Article V. The
Executive acknowledges and agrees that there is no adequate remedy at law for
any such breach or threatened breach and, in the event that any action or
proceeding is brought seeking injunctive relief, the Executive shall not use as
a defense thereto that there is an adequate remedy at law and any such possible
defense is hereby expressly waived.
ARTICLE VI
MISCELLANEOUS
6.1. Binding Effect; Successors; Survivorship.
(a) This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors, heirs (in the case of
the Executive) and assigns. No rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company, except that such rights
or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or the sale or
liquidation of all or substantially all of the assets of the Company, provided
that the assignee or transferee is the successor to all or substantially all of
the assets of the Company and such assignee or transferee assumes the
liabilities, obligations and duties of the Company, as contained in this
Agreement, either contractually or as a matter of law. The Company further
agrees that, in the event of a sale of assets or liquidation as described in the
preceding sentence, it shall take whatever action is legally permissible in
order to cause such assignee or transferee to expressly assume the liabilities,
obligations and duties of the Company hereunder. No rights or obligations of the
Executive under this Agreement may be assigned or transferred by the Executive
other than his rights to compensation and benefits, which may be transferred
only by will or operation of law, except as provided in this Section 6.1.
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<PAGE> 9
(b) The respective rights and obligations of the parties
hereunder shall survive any termination of the Executive's employment to the
extent necessary to preserve the parties' respective rights and obligations
under this Agreement.
(c) The Executive shall be entitled, to the extent permitted
under any applicable law, to select and change a beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder following the Executive's
death by giving the Company written notice thereof. In the event of the
Executive's death or a judicial determination of his incompetence, reference in
this Agreement to the Executive shall be deemed, where appropriate, to refer to
his beneficiary, estate or other legal representative.
6.2. Notices. Any notice provided for herein shall be in writing and
shall be deemed to have been given or made (i) when received, if delivered in
person or sent by telecopier and confirmed in writing within three (3) days
thereafter, or (ii) five (5) days following the mailing thereof, if mailed by
first class registered or certified mail, postage prepaid, return receipt
requested, to the address of the other party set forth below (or to such other
address as may be specified by notice given in accordance with this Section
6.2):
(a) If to the Company, to:
Indesco International, Inc.
950 Third Avenue
New York, NY 10022
Attention: ___________________
Telecopier No.: (___) ___-____
(b) If to the Executive, to:
Mr. Ariel Gratch
40 East 88th Street
New York, NY 10128
Telecopier No.: (212) 289-4850
6.3. Waiver. A waiver by a party hereto of a breach of any term,
covenant or condition of this Agreement by the other party hereto shall not
operate or be construed as a waiver of any other or subsequent breach by such
party of the same or any other term, covenant or condition hereof. No waiver,
modification, change or amendment of any provision of this Agreement shall be
valid unless in writing and signed by the party against whom such claimed
waiver, modification, change or amendment is sought to be enforced.
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<PAGE> 10
6.4. Indemnification.
(a) The Company shall, to the full extent permitted by law,
pay directly, or if direct payment is not lawful, indemnify the Executive
against and hold him harmless from, all expense, liability and loss (including,
without limitation, judgments, settlements (whether or not approved by court),
fines, taxes, penalties and fees and disbursements of counsel) imposed upon or
incurred by the Executive in connection with or resulting from any action, suit,
proceeding, investigation or claim ("Proceeding"), whether civil, criminal,
administrative, legislative or other, or any appeal relating thereto, that is
brought or threatened in which the Executive is made a party or is otherwise
involved by reason of his being or having been, at any time during the term of
this Agreement, a director, officer, employee or agent of the Company or any
affiliate of the Company and whether or not the basis of such Proceeding is
alleged action or inaction in an official capacity for the Company or any
affiliate or in any other capacity.
(b) The Company shall, to the full extent permitted by law,
pay directly, or if not lawful, indemnify the Executive against and pay to him,
in advance of final disposition of any such Proceeding, as and when incurred,
the actual costs and expenses (including, without limitation, fees and
disbursements of counsel) of the Executive arising from the investigation,
preparation and/or defense of such Proceeding.
(c) To the extent that any action is required by law to be
taken by the Company prior to, or to authorize, indemnification of the
Executive, the Company agrees that it shall promptly and fairly take all such
actions.
(d) The Executive's right of indemnification hereunder shall
be in addition to any rights to which the Executive may otherwise be entitled
under the Certificate of Incorporation or by-laws of the Company.
(e) The Company agrees to continue and maintain a directors'
and officers' liability insurance policy covering the executive to the extent
the Company provides coverage for its other executive officers.
6.5. Entire Agreement. This Agreement sets forth the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements between the parties.
6.6. Severability. Should any portion, word, clause, phrase,
sentence or paragraph of this Agreement be declared void or unenforceable, such
portion shall be considered independent
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<PAGE> 11
and severable from the remainder, the validity of which shall remain unaffected.
6.7. Applicable Law. This Agreement shall be governed by and
construed in accordance with the substantive laws of the State of New York
without giving effect to principles thereof relating to conflicts of law.
6.8. Titles. The titles of the Articles and Sections of this
Agreement are inserted for convenience and ease of reference only and shall not
affect or modify the meaning of any of the terms, covenants or conditions of
this Agreement.
6.9. Resolution of Disputes. Any disputes arising under or in
connection with this Agreement shall, at the election of the Executive or the
Company, be resolved by binding arbitration, to be held in New York, New York in
accordance with the rules and procedures of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof. Costs of the arbitration or
litigation, including, without limitation, reasonable attorneys' fees of both
parties, shall be borne by the Company. Pending the resolution of any
arbitration or court proceeding, the Company shall continue payment of all
amounts due the Executive under this Agreement and all benefits to which the
Executive is entitled at the time the dispute arises.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
INDESCO INTERNATIONAL, INC.
By: /s/ L.H. Dixey, Jr.
_________________________________
Name: L.H. Dixey, Jr.
_______________________________
Title: Vice President, CFO, Treasurer,
and Secretary
______________________________
/s/ Ariel Gratch
_____________________________________
ARIEL GRATCH
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<PAGE> 12
EXHIBIT A
Executive Bonus Payment
1. The Executive shall be paid a minimum guaranteed bonus of
$200,000 per year (the "Guaranteed Bonus").
2. In addition to the Guaranteed Bonus, the Executive shall be paid
additional annual bonus payments as follows:
(a) For each fiscal year (or portion thereof) of the Company
during the Term, the Executive shall be entitled to an annual cash bonus
("Additional Bonus") equal to seven and one-half percent (7.5%) of the amount,
if any, by which the consolidated EBITDA of the Company and all of its
subsidiaries ("Consolidated EDITDA") for such year exceeds Consolidated EBITDA
for the immediately preceding fiscal year.
(b) With respect to the Company's fiscal year ended December
31, 1997, Consolidated EBITDA shall mean $28,600,000, representing the pro forma
combined Consolidated EBITDA for the year ended December 31, 1997, assuming that
the acquisitions of the Company's subsidiaries, AFA Products, Inc., Continental
Sprayers, Inc. and Polytek B.V., occurred on January 1, 1997 for income
statement purposes.
(c) The determination of Consolidated EBITDA shall be made by
the Company's independent accounting firm.
3. Each Guaranteed Bonus and Additional Bonus shall be paid to the
Executive in cash no later than 90 days after the end of the fiscal year to
which it relates.
<PAGE> 1
Exhibit 10.7
INDESCO TAX SHARING AGREEMENT
TAX SHARING AGREEMENT (the "Tax Sharing Agreement"), made as of the
first day of the fiscal year of Indesco Holdings Co., a Delaware corporation
formerly known as AFA Holdings Co. ("Parent"), beginning on August 1, 1997 (the
"Effective Date"), by and among Parent, Indesco International, Inc., a Delaware
corporation formerly known as APC Holding, Inc. ("International"), Continental
Sprayers International, Inc., a Delaware corporation formerly known as
Continental Acquisition Corp. ("Continental"), and Afa Products, Inc., a
Delaware corporation ("Afa Products"). International is a direct subsidiary and
Continental and Afa Products are indirect subsidiaries of Parent includable in
the consolidated federal income tax return of the affiliated group (within the
meaning of Section 1504 of the Internal Revenue Code of 1986, as amended (the
"Code")) of which Parent is the common parent for all or part of the 52-53 week
taxable year of the Indesco Group that begins on January 1, 1998 and ends on
January 2, 1999.
Parent and, for as long as they are members of an affiliated group
(within the meaning of Code Section 1504) with Parent, International,
Continental and Afa Products, together with corporations that subsequently
become includable in such group, are referred to collectively as the "Parent
Group" and members of the Parent Group other than Parent are referred to as
"Indesco Subsidiaries".
International and, for as long as Continental and Afa Products would
be members of an affiliated group of which International is the common parent if
International were not owned by a corporation with which it is affiliated within
the meaning of Code Section 1504, Continental and Afa Products, together with
corporations that subsequently would be members of such a group that are made
parties to this Tax Sharing Agreement pursuant to Section 1.5 below, are
referred to collectively as the "International Group" and individually as
"International Subsidiaries".
A consolidated federal income tax return of an affiliated group
(within the meaning of Section 1504 of the Code) of which Parent is the common
parent that includes at least one International Subsidiary is referred to below
as a "Consolidated Return". For purposes of this Tax Sharing Agreement, "tax"
includes any applicable interest, penalties and additions to tax.
<PAGE> 2
The term "Credit Agreement" shall mean the credit agreement, dated
February 4, 1998, among APC Holding, Inc., as Borrower, and the Initial Lenders
named therein, and Nationscredit Commercial Corporation, as Collateral Agent and
as Initial Issuing Bank, and Nationsbridge, L.L.C., as Administrative Agent. The
term "Indenture" shall mean the indenture, dated April 23, 1998, among Indesco
International, Inc., Indesco's domestic Restricted Subsidiaries, and Norwest
Bank Minnesota, National Association, as trustee.
Parent and the International Subsidiaries wish to provide (i) for
tax sharing payments between the International Subsidiaries and Parent as
provided herein and (ii) for payment by Parent of the consolidated federal
income tax liability of the Parent Group.
In consideration of the foregoing, and of the mutual covenants and
promises contained herein, Parent and the International Subsidiaries agree as
follows:
1. General Provisions
1.1 Each International Subsidiary agrees to join with Parent
in the filing of a Consolidated Return for any taxable year for which Parent
files a Consolidated Return that includes such International Subsidiary.
1.2 Each International Subsidiary hereby irrevocably
designates Parent as its agent for the purpose of taking any and all action
necessary or incidental to the filing of Consolidated Returns. Each
International Subsidiary agrees, in connection with any tax matter, promptly to
furnish Parent with any and all information requested by Parent, to cooperate
with Parent in filing any return or consent or in seeking any refund or ruling
and to take any other action Parent requests, including, without limitation,
making elections and requesting extensions of time within which to file tax
returns.
1.3 Any reasonable fees and expenses for legal, accounting and
other professional services ("Parent Group Return Fees") rendered in connection
with the preparation of a Consolidated Return shall be allocated among the
members of the Parent Group in proportion to the ratio of (i) each member's
gross revenue for the taxable year with respect to which the Fees are paid to
(ii) the total gross revenue of all of the Parent Group for such taxable year.
Any Fees arising from the administration of this Agreement shall be allocated
among Parent and the International Subsidiaries in proportion to the ratio of
(i) Parent's and each International Subsidiary's gross revenue for the taxable
year with respect to which the Fees are paid to (ii) the total gross revenue of
Parent and all of the International Subsidiaries for such taxable year.
2
<PAGE> 3
1.4 Each International Subsidiary shall cooperate fully with
Parent in any tax audit, controversy or other administrative or legal proceeding
relating to a Consolidated Return or other tax matter (an "Audit"). Expenses of
any such Audit that involves International Subsidiaries, to the extent not
allocated under Section 1.3 above, shall be allocated among the members of the
Parent Group in proportion to the ratio of (i) the sum, if positive, of net
reductions of deduction and loss and net increases of income and gain for each
member of the Parent Group as a result of the Audit for the taxable year or
years involved in the Audit to (ii) the total of the amounts described in the
preceding clause (i) for all members of the Parent Group for such taxable year
or years or, if there is no member of the Parent Group for which the amount
described in clause (i) is a positive number, in proportion to the ratio of (i)
each member of the Parent Group's gross revenue for the taxable year or years
involved in the Audit to (ii) the total gross revenue of the Parent Group for
such taxable year or years. Parent shall have sole discretion and control, to be
exercised in good faith, as to the undertaking, conduct, settlement or other
disposition of any Audit arising out of or related to this Tax Sharing
Agreement, any Consolidated Return or any other tax matter.
1.5 Parent shall cause each United States corporation that is
or becomes a member of the same affiliated group (within the meaning of Section
1504 of the Code) as International and Parent, and that guarantees any of the
obligations of International under the Credit Agreement or the Indenture, to
become a party to this agreement.
1.6 Parent will pay the consolidated federal income tax
liability, including payments of estimated tax, of the Parent Group for each
taxable year (and any portion thereof). Parent will defend, indemnify and hold
harmless each member of the International Group from and against any liability
for federal income taxes, provided such member has paid all amounts required to
be paid by such member under this Agreement.
2. Payments
2.1 For each taxable year, each International Subsidiary
shall, at the times specified herein, pay to Parent the amount determined in
accordance with Section 3 below (defined in Section 3 below as a "Tax Sharing
Payment").
For each quarter of each taxable year, at least three business
days before the date on which a payment of estimated federal income tax would,
if owed, be made by Parent under Code Section 6655 (an "Estimated Tax Payment
Date"), each International Subsidiary shall pay to Parent the amount that such
3
<PAGE> 4
International Subsidiary would owe if the International Group's estimated tax
liability were determined in the same manner that the International Group
Separate Tax Liability is determined under Section 3 below and such
International Subsidiary's share of such estimated tax liability were determined
in the same manner that its Tax Sharing Payment is determined pursuant to
Section 3 below.
At least three days before the due date, without extension, of
the Consolidated Return for each taxable year (a "Return Payment Date"), each
International Subsidiary shall pay to Parent any portion of its Tax Sharing
Payment for such taxable year that was not previously paid to Parent pursuant to
the previous paragraph.
2 2.2 Any underpayment of a Tax Sharing Payment that an
International Subsidiary owes to Parent shall be added to the payment otherwise
required to be made by such International Subsidiary to Parent on the Estimated
Tax Payment Date or Return Payment Date next following the date on which the
amount of the underpayment first becomes reasonably ascertainable.
If the aggregate payments made by an International Subsidiary
under Section 2.1 above for a taxable year exceed the amount determined to be
the International Subsidiary's Tax Sharing Payment for such taxable year, the
overpayment shall be repaid to the International Subsidiary within 60 days after
the Return Payment Date.
3. Computation of Tax Sharing Payments
For each taxable year, Parent shall, in good faith, determine
the aggregate amount that would be owed by the International Group as federal
income tax if the International Group were not affiliated with the Parent Group
but instead were a separate affiliated group (within the meaning of Section 1504
of the Code), of which International was the common parent, that filed a
consolidated federal income tax return for such taxable year that included only
the members of the International Group, taking into account all of the
provisions of the Code and Treasury Regulations thereunder and computed, to the
extent applicable, in accordance with the actual elections, accounting methods,
conventions and other determinations made or used in preparing Parent's original
or, if an amended return is filed, Parent's Amended Consolidated Return (the
amount determined under this paragraph is referred to as the "International
Group Separate Tax Liability"). In computing the International Group Separate
Tax Liability, the International Group shall be entitled to take into account
the carryover and carryback of losses and credits of the International Group,
but only to the extent such
4
<PAGE> 5
losses and credits arose in a taxable period during which this Tax Sharing
Agreement applied, and after taking into account any and all limitations on the
use of such losses and credits imposed under the Code and the Treasury
Regulations thereunder.
For each taxable year, Parent shall, in good faith determine
the federal income tax that would be owed by each member of the International
Group if it were not a member of the International Group, but instead were a
stand-alone corporation filing its own federal income tax return, taking into
account all provisions of the Code and Treasury Regulations thereunder and
computed, to the extent applicable, in accordance with the actual elections,
accounting methods, conventions and other determinations made or used in
preparing Parent's original or, if an amended return is filed, Parent's Amended
Consolidated Return, (the amount determined under this paragraph is referred to
as the "International Subsidiary Separate Tax Liability"). In computing the
International Subsidiary Separate Tax Liability, an International Subsidiary
shall be entitled to take into account the carryover and carryback of losses and
credits of the International Subsidiary, but only to the extent such losses and
credits arose in a taxable period during which this Tax Sharing Agreement
applied, and after taking into account any and all limitations on the use of
such losses and credits imposed under the Code and the Treasury Regulations
thereunder.
The "Tax Sharing Payment" of each International Subsidiary
shall be an amount equal to the product of the International Group Separate Tax
Liability and a fraction the numerator of which is the International Subsidiary
Separate Tax Liability of the International Subsidiary and the denominator of
which is the sum of the International Subsidiary Separate Tax Liabilities of all
of the International Subsidiaries.
In no event shall the International Group or an International
Subsidiary be entitled (i) to a payment from Parent or from another Indesco
Subsidiary on account of the utilization by Parent or the other Indesco
Subsidiary of a loss, credit or other tax attribute, or a carryover or carryback
of a loss, credit or other tax attribute, of the International Group or the
International Subsidiary or (ii) except as provided in this Section 3 or in
Section 4.2 below, to any reduction of the International Group Separate Tax
Liability on account of a carryover or carryback of a loss, credit or other tax
attribute of the International Group or International Subsidiary.
5
<PAGE> 6
4. Adjustments
4.1 Any adjustment to the income, deduction or credit of an
International Subsidiary occurring after a Consolidated Return has been filed
for a taxable year, whether by reason of an amended return, a claim for refund,
a carryback or an audit (an "Adjustment") shall be given effect, as soon as the
amount of the Adjustment becomes reasonably ascertainable, by redetermining the
International Subsidiary's Tax Sharing Payment for such taxable year as if the
Adjustment had been part of the original determination hereunder.
Any interest and penalties that are owed to a taxing
authority in connection with an Adjustment shall be allocated among the
International Subsidiaries in proportion to the increases in their Tax Sharing
Payments as a result from the Adjustment, as determined by Parent. Each
International Subsidiary whose Tax Sharing Payment is increased by an Adjustment
promptly shall pay to Parent the amount of such increase together with the
International Subsidiary's allocable share of any interest and penalties.
Any decrease in the Tax Sharing Payment of an
International Subsidiary, as a result of an Adjustment or a carryback described
in Section 4.2 below, shall be repaid to the International Subsidiary as soon as
practicable after Parent has received any refund or reduction in tax liability
to which it is entitled as a result of the Adjustment and after the
determinations required to be made hereunder to determine the decrease in the
International Subsidiary's Tax Sharing Payment for the taxable year have been
made.
4.2 If the International Group has a net operating or a net
capital loss for a taxable year, determined in the manner that the International
Group Separate Tax Liability is determined under Section 3 above, the loss shall
be carried back and deducted in the carryback period prescribed by Code Section
172 or 1212, as the case may be, and, to the extent of the loss remaining after
it is carried back to prior taxable years not covered by this Tax Sharing
Agreement, shall be carried back to and deducted in computing the International
Group Separate Tax Liability for prior taxable years covered by this Tax Sharing
Agreement, but only in the manner and to the extent that the loss would have
been carried back and deducted under Code Section 172 had it constituted a net
operating loss deduction or Code Section 1212 had it constituted a net capital
loss deduction, as such provisions would have applied to a separate consolidated
return of the International Group, taking into account any and all limitations
on the use of such losses imposed by the Code and the Treasury Regulations
thereunder.
6
<PAGE> 7
Adjustments to the International Group Separate Tax
Liability for a taxable year covered by this Tax Sharing Agreement, as a result
of the carryback of a loss pursuant to this Section 4.2, shall be taken into
account as an Adjustment in the manner provided in Section 4.1 above. The
principles of this Section 4.2 shall be similarly applied to excess credits for
any taxable year covered by this Tax Sharing Agreement.
5. State Taxes
5.1 Each International Subsidiary agrees, at the request of
Parent, to join with Parent in a consolidated, combined or unitary state or
local income, franchise, net worth or like tax return (a "Combined Return") for
any taxable year for which Parent determines that it or an Indesco Subsidiary is
permitted or required to file a Combined Return that is permitted or required to
include such International Subsidiary.
5.2 Parent shall pay or cause to be paid the tax liability
reported on a Combined Return and will defend, indemnify and hold harmless each
member of the International Group from and against any liability for taxes
reported on such Combined Return, provided such member has paid all amounts
required to be paid by such member under this Agreement.
5.3 Each International Subsidiary that is included in a
Combined Return shall pay to Parent the amount of state and local income,
franchise, net worth and like tax that would have been payable by such
International Subsidiary if it had not been included in the Combined Return, but
instead had filed on a separate basis (the "Separate State and Local Tax
Liability"); provided, however, that if such Subsidiary is required to be
included in a Combined Return and, but for such requirement, a prudent business
person would not have elected to include such Subsidiary in the Combined Return,
it shall pay to Parent the greater of (i) its Separate State and Local Tax
Liability or (ii) the amount that bears the same ratio to the total tax
liability shown on the Combined Return as such Subsidiary's taxable income
apportioned to the state or local tax jurisdiction with which the Combined
Return is filed bears to the total taxable income apportioned to such
jurisdiction reported on the Combined Return.
5.4 Except as otherwise provided in this section 5, the
principles of this agreement that apply with respect to federal taxes also shall
apply with respect to state taxes.
7
<PAGE> 8
6. Determinations in Good Faith. Parent shall act in good faith in
taking any action and in making any determinations and computations that Parent
is required to make hereunder.
7. Disputes. In the event of a disagreement between Parent and an
International Subsidiary with respect to any calculation, payment or other
determination required to be made pursuant to this Agreement, the determination
of Parent's independent tax counsel or independent accounting firm of nationally
recognized standing shall, in the absence of manifest error, be conclusive and
binding on the parties hereto.
8. Effectiveness and Termination. This Agreement shall be effective
with respect to (i) any taxable year of Parent that ends after the Effective
Date in which there is filed a Consolidated Return or a Combined Return and (ii)
any taxable year of an International Subsidiary in which the International
Subsidiary is included in a Consolidated Return or a Combined Return, provided
that this Agreement shall not terminate as to any such taxable year prior to
termination of the Credit Agreement and Indenture. This Agreement shall remain
in effect with respect to a former International Subsidiary after the former
International Subsidiary is no longer a member of the Parent Group, but only
with respect to taxable years in which the former International Subsidiary was a
member of the Parent Group or was included in a Consolidated Return or a
Combined Return.
9. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original and all of which, taken together,
shall constitute one agreement.
10. Governing Law. This Tax Sharing Agreement shall be governed by
the laws applicable to contracts entered into and to be fully performed within
the State of New York by residents thereof.
11. Successors and Assigns. This Tax Sharing Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
8
<PAGE> 9
12. Miscellaneous. No amendment or waiver of this Tax Sharing
Agreement shall be effective unless and until such amendment or waiver is
submitted to and approved by the Administrative Agent, as defined in the Credit
Agreement, as provided in ss.5.03(s) of the Credit Agreement, and until consent
of the Trustee is obtained pursuant to the Indenture.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the day and year first above written.
INDESCO HOLDINGS CO. INDESCO INTERNATIONAL, INC.
By: /s/ Ariel Gratch, President By: /s/ Ariel Gratch, Vice Chairman
__________________________ ____________________________
CONTINENTAL SPRAYERS INTERNATIONAL, INC.
By: /s/ L.H. Dixey, Jr., Vice AFA PRODUCTS, INC.
President
__________________________
By: /s/ L.H. Dixey, Jr., CFO
____________________________
9
<PAGE> 1
EXHIBIT 12
RATIO OF EARNINGS TO FIXED CHARGES
EARNINGS:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income before provision for taxes.................. 1,901 2,876 1,152 2,277 1,306
Interest........................................... 4,526 4,275 4,489 4,289 4,178
Rental expense interest factor..................... 187 238 146 138 177
--------- --------- --------- --------- ---------
Earnings...................................... 6,614 7,389 5,787 6,704 5,661
========= ========= ========= ========= =========
FIXED CHARGES:
Interest........................................... 4,526 4,275 4,489 4,289 4,178
Rental expense interest factor..................... 187 238 146 138 177
--------- --------- --------- --------- ---------
Fixed charges................................. 4,713 4,513 4,635 4,427 4,355
========= ========= ========= ========= =========
Ratio of earnings to fixed charges................. 1.4 1.6 1.3 1.5 1.3
</TABLE>
- ---------------
Footnote:
The data above sets forth the ratio of earnings to fixed charges of AFA and
Polytek on a combined basis for each of the years in the five-year period ended
December 31, 1997. The data for each of the years in the three-year period ended
December 31, 1997, are derived from the audited historical financial statements
of AFA Holdings Co. (the Company's parent) and WTI, Inc. and Subsidiaries (the
predecessor of AFA Holdings Co.) included elsewhere in this Prospectus. The data
for each of the years in the two-year period ended December 31, 1994 have been
derived from the financial records of WTI, Inc. and Subsidiaries.
<PAGE> 1
EXHIBIT 21
<TABLE>
<S> <C>
Subsidiaries of Indesco International, Inc.
1. Continental Sprayers International, Inc. Delaware
2. AFA Products, Inc. Delaware
3. AFA Polytek B.V. The Netherlands
Subsidiaries of Continental Sprayers International,
Inc.
1. Continental Acquisitions (U.K.) LTD. United Kingdom
2. Continental Sprayers de Mexico, S.A. de C.V. Mexico
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of
our report dated March 5, 1998, on our audits of the financial statements of Afa
Holdings Co. and Subsidiaries, and our report on our audits of the financial
statements of W.T.I., Inc. and Subsidiaries. We also consent to the reference to
our Firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Charlotte, North Carolina
May 12, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of
our report dated March 16, 1998, on our audits of the balance sheet of Indesco
International, Inc. We also consent to the reference to our Firm under the
caption "Experts."
COOPERS & LYBRAND L.L.P.
New York, New York
May 12, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of
our report dated March 12, 1998, on our audits of the financial statements of
Continental Sprayers and Affiliates. We also consent to the reference to our
Firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
St. Louis, Missouri
May 12, 1998
<PAGE> 1
Exhibit 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
/ / CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b) (2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
-----------------------------
INDESCO INTERNATIONAL, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 13-3987915
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
950 THIRD AVENUE
NEW YORK, NY 10022
(Address of principal executive offices) (Zip code)
-----------------------------
9 -3/4% SENIOR SUBORDINATED NOTES DUE 2008
(Title of the indenture securities)
<PAGE> 2
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
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. Foreign Trustee. Not applicable.
Item 16. List of Exhibits. List below all exhibits filed as a part of
this Statement of Eligibility. Norwest Bank
incorporates by reference into this Form T-1
the exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the
trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of
the trustee to commence business issued June
28, 1872, by the Comptroller of the Currency
to The Northwestern National Bank of
Minneapolis.*
b. A copy of the certificate of the Comptroller
of the Currency dated January 2, 1934,
approving the consolidation of The
Northwestern National Bank of Minneapolis
and The Minnesota Loan and Trust Company of
Minneapolis, with the surviving entity being
titled Northwestern National Bank and Trust
Company of Minneapolis.*
c. A copy of the certificate of the Acting
Comptroller of the Currency dated January
12, 1943, as to change of corporate title of
Northwestern National Bank and Trust Company
of Minneapolis to Northwestern National Bank
of Minneapolis.*
<PAGE> 3
d. A copy of the letter dated May 12, 1983 from
the Regional Counsel, Comptroller of the
Currency, acknowledging receipt of notice of
name change effective May 1, 1983 from
Northwestern National Bank of Minneapolis to
Norwest Bank Minneapolis, National
Association.*
e. A copy of the letter dated January 4, 1988
from the Administrator of National Banks for
the Comptroller of the Currency certifying
approval of consolidation and merger
effective January 1, 1988 of Norwest Bank
Minneapolis, National Association with
various other banks under the title of
"Norwest Bank Minnesota, National
Association."*
Exhibit 3. A copy of the authorization of the trustee to
exercise corporate trust powers issued January 2,
1934, by the Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b)
of the Act.
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.
* Incorporated by reference to exhibit number 25 filed with registration
statement number 33-66026.
** Incorporated by reference to exhibit number 25 filed with registration
statement number 333-47427.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 11th day of April 1998.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Jane Y. Schweiger
---------------------
Jane Y. Schweiger
Corporate Trust Officer
<PAGE> 5
EXHIBIT 6
April 11, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Jane Y. Schweiger
---------------------
Jane Y. Schweiger
Corporate Trust Officer
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
INDESCO INTERNATIONAL, INC.
TO TENDER FOR EXCHANGE 9 3/4% SENIOR SUBORDINATED NOTES DUE 2008
PURSUANT TO THE PROSPECTUS DATED , 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998 UNLESS EXTENDED (THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
IF YOU DESIRE TO ACCEPT THE EXCHANGE OFFER, THIS LETTER OF TRANSMITTAL
SHOULD BE COMPLETED, SIGNED, AND SUBMITTED TO THE EXCHANGE AGENT:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Overnight Delivery: By Hand Delivery:
Norwest Bank Minnesota, N.A. Norwest Bank Minnesota, Norwest Bank Minnesota,
Corporate Trust Operations N.A. N.A.
P.O. Box 1517 Corporate Trust Services Northstar East Building
Minneapolis, MN 55480-1517 Sixth and Marquette Avenue 608 Second Avenue South,
Minneapolis, MN 55479-0113 12th Floor
Corporate Trust Services
Minneapolis, MN
</TABLE>
Facsimile Transmission
Number:
(For Eligible Institutions Only)
(612) 667-4927
Confirm Receipt of Facsimile
by Telephone:
(612) 667-9764
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION VIA
FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY. FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY
ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT.
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1998 (as it may be supplemented and amended from time to time, the
"Prospectus") of Indesco International, Inc., a Delaware corporation
("Company"), and this Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the Company's offer (the "Exchange Offer") to exchange
$1,000 in principal amount of its 9 3/4% Senior Subordinated Notes due 2008 (the
"New Notes"), which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement, for each
$1,000 in principal amount of its outstanding 9 3/4% Senior Subordinated Notes
due 2008 (the "Old Notes"), of which $145,000,000 aggregate principal amount is
outstanding. Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus.
The undersigned hereby tenders the Notes described in Box 1 below (the
"Tendered Notes") pursuant to the terms and conditions described in the
Prospectus and this Letter of Transmittal. The undersigned is the
<PAGE> 2
registered owner of all the Tendered Notes and the undersigned represents that
it has received from each beneficial owner of the Tendered Notes ("Beneficial
Owners") a duly completed and executed form of "Instruction to Registered Holder
and/or Book-Entry Transfer Facility Participant from Beneficial Owner"
accompanying this Letter of Transmittal, instructing the undersigned to take the
action described in this Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of the Tendered
Notes, the undersigned hereby exchanges, assigns and transfers to, or upon the
order of, the Company all right, title, and interest in, to and under the
Tendered Notes.
Please issue the New Notes exchanged for Tendered Notes in the name(s) of
the undersigned. Similarly, unless otherwise indicated under "SPECIAL DELIVERY
INSTRUCTIONS" below (see Box 3), please send or cause to be sent the
certificates for the New Notes (and accompanying documents, as appropriate) to
the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned with
respect to the Tendered Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(i) deliver the Tendered Notes to the Company or cause ownership of the Tendered
Notes to be transferred to, or upon the order of, the Company, on the books of
the registrar for the Notes and deliver all accompanying evidences of transfer
and authenticity to, or upon the order of, the Company upon receipt by the
Exchange Agent, as the undersigned's agent, of the New Notes to which the
undersigned is entitled upon acceptance by the Company of the Tendered Notes
pursuant to the Exchange Offer, and (ii) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Tendered Notes, all in
accordance with the terms of the Exchange Offer.
The undersigned understands that tenders of Notes pursuant to the
procedures described under the caption "The Exchange Offer" in the Prospectus
and in the instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Exchange Offer, subject only to withdrawal of such tenders on the terms set
forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal of
Tenders." All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and any Beneficial Owner(s), and
every obligation of the undersigned or any Beneficial Owner(s) hereunder shall
be binding upon the heirs, representatives, successors, and assigns of the
undersigned and such Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign, and transfer the Tendered
Notes and that the Company will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges, encumbrances, and adverse
claims when the Tendered Notes are acquired by the Company as contemplated
herein. The undersigned and each Beneficial Owner will, upon request, execute
and deliver any additional documents reasonably requested by the Company or the
Exchange Agent as necessary or desirable to complete and give effect to the
transactions contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the New Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being acquired by
the undersigned and any Beneficial Owner(s) in the ordinary course of business
of the undersigned and any Beneficial Owner(s), (ii) the undersigned and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, (iii) except as otherwise disclosed in
writing herewith, neither the undersigned nor any Beneficial Owner is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company,
and (iv) the undersigned and each Beneficial Owner acknowledge and agree that
any person participating in the Exchange Offer with the intention or for the
purpose of distributing the Exchange Notes must comply with the registration and
prospectus delivery requirements of the Securities Act of 1933,
2
<PAGE> 3
as amended (together with the rules and regulations promulgated thereunder, the
"Securities Act") in connection with a secondary resale of the New Notes
acquired by such person and cannot rely on the position of the Staff of the
Securities and Exchange Commission (the "Commission") set forth in the no-action
letters that are discussed in the section of the Prospectus entitled "The
Exchange Offer." In addition, by accepting the Exchange Offer, the undersigned
hereby (i) represents and warrants that, if the undersigned or any Beneficial
Owner of the Notes is a Participating Broker-Dealer, such Participating
Broker-Dealer acquired the Notes for its own account as a result of
market-making activities or other trading activities and has not entered into
any arrangement or understanding with the Company or any "affiliate" of the
Company (within the meaning of Rule 405 under the Securities Act) to distribute
the New Notes to be received in the Exchange Offer, and (ii) acknowledges that,
by receiving New Notes for its own account in exchange for Notes, where such
Notes were acquired as a result of market-making activities or other trading
activities, such Participating Broker-Dealer will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such New
Notes.
Holders of Notes that are tendering by book-entry transfer to the Exchange
Agent's account at DTC can execute the tender through the DTC Automated Tender
Offer Program ("ATOP"), for which the transaction will be eligible. DTC
participants that are accepting the Exchange Offer must transmit their
acceptance to DTC, which will verify the acceptance and execute a book-entry
delivery to the Exchange Agent's DTC account. DTC will then send an Agent's
Message to the Exchange Agent for its acceptance. DTC participants may also
accept the Exchange Offer prior to the Expiration Date by submitting a Notice of
Guaranteed Delivery through ATOP.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
"USE OF GUARANTEED DELIVERY" BELOW (Box 4).
[ ] CHECK HERE IF TENDERED 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 "USE OF BOOK-ENTRY TRANSFER" BELOW (Box 5).
[ ] CHECK HERE IF YOU ARE A PARTICIPATING BROKER-DEALER WHO ACQUIRED THE NOTES
FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING
ACTIVITIES AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND
10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO (Box 7).
3
<PAGE> 4
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
BOX 1
DESCRIPTION OF NOTES TENDERED
(Attach additional signed pages, if necessary)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED NOTE HOLDER(S), CERTIFICATE AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
EXACTLY AS NAME(S) APPEAR(S) ON NOTE CERTIFICATE(S) NUMBER(S) OF AMOUNT REPRESENTED AMOUNT
(PLEASE FILL IN, IF BLANK) NOTES* BY CERTIFICATE(S) TENDERED**
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Total
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of Notes. All
other tenders must be in integral multiples of $1,000 of principal amount.
Unless otherwise indicated in this column, the principal amount of all Note
Certificates identified in this Box 1 or delivered to the Exchange Agent
herewith shall be deemed tendered. See Instruction 4.
BOX 2
BENEFICIAL OWNER(S)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF TENDERED NOTES
BENEFICIAL OWNER OF TENDERED NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
=================================================================================================================
</TABLE>
4
<PAGE> 5
BOX 3
- ------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
TO BE COMPLETED ONLY IF EXCHANGE NOTES EXCHANGED FOR NOTES AND UNTENDERED
NOTES ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE
UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE
Mail New Note(s) and any untendered Notes to:
Name(s):
------------------------------------------------------
(PLEASE PRINT)
Address:
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------
TAX IDENTIFICATION OR SOCIAL SECURITY NO.
------------------------------------------------------
BOX 4
------------------------------------------------------
USE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 2)
TO BE COMPLETED ONLY IF NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
------------------------------------------------------
Window Ticket No. (if any):
---------------------------
Date of Execution of Notice of Guaranteed Delivery:
------------------------------------------------------
Name of Institution that Guaranteed Delivery:
------------------------------------------------------
If Delivered by Book-Entry Transfer:
Account Number with DTC:
------------------------
Transaction Code Number:
-----------------------
- ------------------------------------------------------
BOX 5
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 2)
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-ENTRY
TRANSFER.
Name of Tendering Institution:
- ------------------------------------------------------------------------------
Account Number:
- ------------------------------------------------------------------------------
Transaction Code Number:
- ------------------------------------------------------------------------------
5
<PAGE> 6
BOX 6
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
X
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
(SIGNATURE OF REGISTERED HOLDER(S) OR AUTHORIZED SIGNATORY)
Note: The above lines must be signed by the registered holder(s) of Notes as
their name(s) appear(s) on the Notes or by person(s) authorized to become
registered holder(s) (evidence of such authorization must be transmitted with
this Letter of Transmittal). 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. See Instruction 5.
Name(s):
- --------------------------------------------------------------------------------
Capacity:
- --------------------------------------------------------------------------------
Street Address:
- --------------------------------------------------------------------------------
-------------------------------------------------------------------
(ZIP CODE)
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Tax Identification or Social Security Number:
- --------------------------------------------------------------------------------
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 5)
Authorized Signature
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Title:
- --------------------------------------------------------------------------------
Name of Firm:
- --------------------------------------------------------------------------------
(MUST BE AN ELIGIBLE INSTITUTION AS DEFINED IN INSTRUCTION 2)
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(ZIP CODE)
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Dated:
- ---------------------------
6
<PAGE> 7
BOX 7
BROKER-DEALER STATUS
[ ] Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities. If this box is checked, regardless of whether you are tendering
by book-entry transfer through ATOP, an executed copy of this Letter of
Transmittal must be received within three NYSE trading days after the
Expiration Date by , facsimile
.
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
EXCHANGE AGENT'S NAME: NORWEST BANK MINNESOTA NATIONAL ASSOCIATION
- ----------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX
FORM W-9 AT RIGHT AND CERTIFY BY SIGNING AND DATING ---------------------------------
DEPARTMENT OF THE TREASURY BELOW Social Security Number
INTERNAL REVENUE SERVICE or
---------------------------------
Employer Identification Number
---------------------------------------------------------------------------------
PAYER'S REQUEST FOR PART 2 -- CERTIFICATION -- Under penalties of perjury, I certify that:
TAXPAYER IDENTIFICATION (1) The number shown on this form is my correct Taxpayer Identification Number (or
NUMBER ("TIN") I am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding either because 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 the IRS
has notified me that I am no longer subject to backup withholding.
---------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross PART 3 --
out item (2) above if you have been notified Awaiting TIN [ ]
by the IRS that you are currently subject to
backup withholding because of underreporting
interest or dividends on your tax return.
However, if after being notified by the IRS
that you were subject to backup withholding
you received another notification from the
IRS that you are no longer subject to backup
withholding, do not cross out such item (2).
- ----------------------------------------------------------------------------------------------------------------------
Signature Date
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. 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 Administrative Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable payments made to me will be withheld, but that such amounts
will be refunded to me if I then provide a Taxpayer Identification Number within
60 days.
__________________________________________________ __________________ , 1998
Signature Date
7
<PAGE> 8
INDESCO INTERNATIONAL, INC.
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Notes. This Letter of
Transmittal is to be completed by registered holders of Notes if certificates
representing such Notes are to be forwarded herewith pursuant to the procedures
set forth in the Prospectus under "The Exchange Offer -- Procedures for
Tendering," unless delivery of such certificates is to be made by book-entry
transfer to the Exchange Agent's account maintained by DTC through ATOP. For a
holder to properly tender Notes pursuant to the Exchange Offer, a properly
completed and duly executed copy of this Letter of Transmittal, including
Substitute Form W-9, and any other documents required by this Letter of
Transmittal must be received by the Exchange Agent at its address set forth
herein, and either (i) certificates for Tendered Notes must be received by the
Exchange Agent at its address set forth herein, or (ii) such Tendered Notes must
be transferred pursuant to the procedures for book-entry transfer described in
the Prospectus under the caption "The Exchange Offer -- Procedures for
Tendering" (and a confirmation of such transfer received by the Exchange Agent),
in each case prior to 5:00 p.m., New York City time, on the Expiration Date. The
method of delivery of certificates for Tendered Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the tendering holder and the delivery will be deemed made
only when actually received by the Exchange Agent. If delivery is by mail,
registered mail with return receipt requested, properly insured, is recommended.
Instead of delivery by mail, it is recommended that the holder use an overnight
or hand delivery service. In all cases, sufficient time should be allowed to
assure timely delivery. No Letter of Transmittal or Tendered Notes should be
sent to the Company. Neither the Company nor the Exchange Agent is under any
obligation to notify any tendering holder of the Company's acceptance of
Tendered Notes prior to the closing of the Exchange Offer.
2. Guaranteed Delivery Procedures. If a registered holder desires to
tender Notes pursuant to the Exchange Offer and (a) certificates representing
such tendered Notes are not immediately available, (b) time will not permit such
holder's Letter of Transmittal, certificates representing such Tendered Notes
and all other required documents to reach the Exchange Agent on or prior to the
Expiration Date, or (c) the procedures for book-entry transfer cannot be
completed on or prior to the Expiration Date, such holder may nevertheless
tender such Tendered Notes with the effect that such tender will be deemed to
have been received on or prior to the Expiration Date if the procedures set
forth below and in the Prospectus under "The Exchange Offer -- Guaranteed
Delivery Procedures" (including the completion of Box 4 above) are followed.
Pursuant to such procedures, (i) the tender must be made by or through an
Eligible Institution (as defined), (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by the Company
herewith, or an Agent's Message with respect to a guaranteed delivery that is
accepted by the Company, must be received by the Exchange Agent on or prior to
the Expiration Date, and (iii) the certificates for the Tendered Notes, in
proper form for transfer (or a Book-Entry Confirmation of the transfer of such
Tendered Notes to the Exchange Agent's account at DTC as described in the
Prospectus), together with a Letter of Transmittal (or manually signed facsimile
thereof) properly completed and duly executed, with any required signature
guarantees and any other documents required by the Letter of Transmittal or a
properly transmitted Agent's Message, must be received by the Exchange Agent
within three New York Stock Exchange trading days after the date of execution of
the Notice of Guaranteed Delivery. Any holder who wishes to tender Notes
pursuant to the guaranteed delivery procedures described above must ensure that
the Exchange Agent receives the Notice of Guaranteed Delivery relating to such
tendered Notes prior to 5:00 p.m., New York City time, on the Expiration Date.
Failure to complete the guaranteed delivery procedures outlined above will not,
of itself, affect the validity or effect a revocation of any Letter of
Transmittal form properly completed and executed by an Eligible Holder who
attempted to use the guaranteed delivery process.
3. Beneficial Owner Instructions to Registered Holders. Only a holder in
whose name Tendered Notes are registered on the books of the registrar (or the
legal representative or attorney-in-fact of such registered
8
<PAGE> 9
holder) may execute and deliver this Letter of Transmittal. Any Beneficial Owner
of Tendered Notes who is not the registered holder must arrange promptly with
the registered holder to execute and deliver this Letter of Transmittal on his
or her behalf through the execution and delivery to the registered holder of the
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" form accompanying this Letter of Transmittal.
4. Partial Tenders. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes held by the holder is tendered, the tendering holder should fill
in the principal amount tendered in the column labeled "Aggregate Principal
Amount Tendered" of the box entitled "Description of Notes Tendered" (see Box 1)
above. The entire principal amount of Notes delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Notes held by the holder is not tendered, then Notes for
the principal amount of Notes not tendered and Exchange Notes issued in exchange
for any Notes tendered and accepted will be sent to the holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, as soon as practicable following the
Expiration Date,
5. Signatures on the Letter of Transmittal; Bond Powers and Endorsements;
Guarantee of Signatures. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Notes, the signature must correspond with
the name(s) as written on the face of the Tendered Notes without alteration,
enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two joint owners, all
such owners must sign this Letter of Transmittal. If any Tendered Notes are held
in different names, it will be necessary to complete, sign and submit as many
separate copies of the Letter of Transmittal as there are different names in
which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and Exchange Notes issued in exchange therefor are to be issued
(and any untendered principal amount of Notes is to be reissued) in the name of
the registered holder(s), then such registered holder(s) need not and should not
endorse any Tendered Notes, nor provide a separate bond power. In any other
case, such registered holder(s) must either properly endorse the Tendered Notes
or a properly completed separate bond power with this Letter of Transmittal,
with the signature(s) on the endorsement or bond power guaranteed by a Medallion
Signature Guarantor (as defined below).
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such Tendered Notes must be endorsed
or accompanied by appropriate bond powers, in each case, signed as the name(s)
of the registered holder(s) appear(s) on the Tendered Notes, with the
signature(s) on the endorsement or bond power guaranteed by a Medallion
Signature Guarantor.
If this Letter of Transmittal or any Tendered Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorney-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
he submitted with this Letter of Transmittal.
Signatures on this Letter of Transmittal must be guaranteed by a recognized
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program or the Stock Exchange Medallion
Program (each a "Medallion Signature Guarantor"), unless the Tendered Notes are
tendered (i) by a registered holder of Tendered Notes (or by a participant in
DTC whose name appears on a security position listing as the owner of such
Tendered Notes) who has not completed Box 3 ("Special Delivery Instructions") on
this Letter of Transmittal, or (ii) for the account of a member firm of a
registered national securities exchange, a member of the National Association of
Securities Dealers, Inc. ("NASD") or a commercial bank or trust company having
an office or correspondent in the United States (each of the foregoing being
referred to as an "Eligible Institution"). If the Tendered Notes are registered
in the name of a person other than the signor of the Letter of Transmittal or if
Notes not tendered are to be returned to a person other than the registered
holder, then the Signature on this Letter of Transmittal accompanying the
Tendered
9
<PAGE> 10
Notes must be guaranteed by a Medallion Signature Guarantor as described above.
Beneficial owners whose Notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee if they desire to tender such
Notes.
6. Special Delivery Instructions. Tendering holders should indicate in
Box 3 the name and address to which the Exchange Notes and/or substitute Notes
for principal amounts not tendered or not accepted for exchange are to be sent,
if different from the name and address of the person signing this Letter of
Transmittal. In the case of issuance in a different name, the taxpayer
identification or social security number of the person must also be indicated.
7. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Tendered Notes pursuant to the Exchange Offer. If,
however, a transfer tax is imposed for any reason other than the transfer and
exchange of Tendered Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or on any
other person) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with this
Letter of Transmittal, the amount of such transfer taxes will be billed directly
to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter of
Transmittal.
8. Tax Identification Number. Federal income tax law requires that the
holder(s) of any Tendered Notes which are accepted for exchange must provide the
Exchange Agent (as payor) with its correct taxpayer identification number
("TIN"), which, in the case of a holder who is an individual, is his or her
social security number. If the Exchange Agent is not provided with the correct
TIN, the holder may be subject to backup withholding and a $50 penalty imposed
by the Internal Revenue Service. (If withholding results in an over-payment of
taxes, a refund may be obtained.) Certain holders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
To prevent backup withholding, each holder of Tendered Notes must provide
such holder's correct TIN by completing the Substitute Form W-9 set forth
herein, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN), and that (i) the holder has not been notified by the Internal
Revenue Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) if previously so notified,
the Internal Revenue Service has notified the holder that such holder is no
longer subject to backup withholding. If the Tendered Notes are registered in
more than one name or are not in the name of the actual owner, consult the
"Guidelines for Certification of Taxpayer IdentificatIon Number on Substitute
Form W-9" for information on which TIN to report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligation regarding backup
withholding.
9. Validity of Tenders. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of Tendered
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the right to
reject any and all Notes not validly tendered or any Notes the Company's
acceptance of which would, in the opinion of the Company or its counsel, be
unlawful. The Company also reserves the right to waive any conditions of the
Exchange Offer or defects or irregularities in tenders of Notes as to any
ineligibility of any holder who seeks to tender Notes in the Exchange Offer. The
interpretation of the terms and conditions of the Exchange Offer (including this
Letter of Transmittal and the instructions hereto) by the Company shall be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Notes must be cured within such time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give notification of defects or irregularities with
respect to tenders of Notes, nor shall any of them incur any liability for
failure to give such notification. Tenders of Notes will not be deemed to have
been made until such defects or irregularities have been cured or waived. Any
Notes received by the Exchange
10
<PAGE> 11
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 this Letter of
Transmittal, as soon as practicable following the Expiration Date.
10. Waiver of Conditions. The Company reserves the absolute right to
amend, waive or modify any of the conditions in the Exchange Offer in the case
of any Tendered Notes.
11. No Conditional Tender. No alternative, conditional, irregular, or
contingent tender of Notes or transmittal of this Letter of Transmittal will be
accepted.
12. Mutilated, Lost, Stolen or Destroyed Notes. Any tendering holder
whose Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated herein for further instructions.
13. Requests for Assistance or Additional Copies. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address
indicated herein. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
14. Acceptance of Tendered Notes and Issuance of Exchange Notes; Return of
Notes. Subject to the terms and conditions of the Exchange Offer, the Company
will accept for exchange all validly tendered Notes as soon as practicable after
the Expiration Date and will issue Exchange Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the Company shall be
deemed to have accepted Tendered Notes when, as and if the Company has given
written or oral notice (immediately followed in writing) thereof to the Exchange
Agent. If any Tendered Notes are not exchanged pursuant to the Exchange Offer
for any reason, such unexchanged Notes will be returned, without expense, to the
undersigned at the address shown in Box 1 or at a different address as may be
indicated herein under "Special Delivery Instructions" (Box 3).
15. Withdrawal. Tenders may be withdrawn only pursuant to the procedures
set forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal
of Tenders."
11
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
IN RESPECT OF
9 3/4% SENIOR SUBORDINATED NOTES DUE 2008
OF
INDESCO INTERNATIONAL, INC.
PURSUANT TO THE PROSPECTUS DATED , 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED ("THE EXPIRATION DATE").
As set forth in the Prospectus dated , 1998 (as it may be
supplemented and amended from time to time, the "Prospectus") of Indesco
International, Inc. (the "Company") under "The Exchange Offer -- Guaranteed
Delivery Procedures," and in the Instructions to the related Letter of
Transmittal (the "Letter of Transmittal"), this form, or one substantially
equivalent hereto, or an Agent's Message relating to the guaranteed delivery
procedures, must be used to accept the Company's offer (the "Exchange Offer") to
exchange any and all of its outstanding 9 3/4% Senior Subordinated Notes due
2008 (the "Old Notes"), for new 9 3/4% Senior Subordinated Notes due 2008 (the
"New Notes"), if time will not permit the Letter of Transmittal, certificates
representing such Notes and other required documents to reach the Exchange
Agent, or the procedures for book-entry transfer cannot be completed, on or
prior to the Expiration Date (as defined).
This form must be delivered by an Eligible Institution (as defined herein)
by mail or hand delivery or transmitted via facsimile to the Exchange Agent as
set forth above. If a signature on the Letter of Transmittal is required to be
guaranteed by a Medallion Signature Guarantor under the instructions thereto,
such signature guarantee must appear in the applicable space provided in the
Letter of Transmittal. This form is not to be used to guarantee signatures.
Questions and requests for assistance and requests for additional copies of
the Prospectus may be directed to the Exchange Agent at the address above.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Overnight Delivery: By Hand Delivery:
Norwest Bank Minnesota, N.A. Norwest Bank Minnesota, Norwest Bank Minnesota,
Corporate Trust Operations N.A. N.A.
P.O. Box 1517 Corporate Trust Services Northstar East Building
Minneapolis, MN 55480-1517 Sixth and Marquette Avenue 608 Second Avenue South,
Minneapolis, MN 55479-0113 12th Floor
Corporate Trust Services
Minneapolis, MN
</TABLE>
Facsimile Transmission
Number:
(For Eligible Institutions Only)
(612) 667-4927
Confirm Receipt of Facsimile
by Telephone:
(612) 667-9764
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION VIA FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE VALID DELIVERY.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal (receipt of which is hereby acknowledged), the principal amount of
the Notes specified below pursuant to the guaranteed delivery procedures set
forth in the Prospectus under "The Exchange Offer -- Guaranteed Delivery
Procedures" and in Instruction 2 to the Letter of Transmittal. The undersigned
hereby authorizes the Exchange Agent to deliver this Notice of Guaranteed
Delivery to the Company with respect to the Notes tendered pursuant to the
Exchange Offer.
The undersigned understands that Notes will be exchanged only after timely
receipt by the Exchange Agent of (i) such Notes, or a Book-Entry Confirmation,
and (ii) a Letter of Transmittal (or a manually signed facsimile thereof),
including by means of an Agent's Message, of the transfer of such Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility, with respect to
such Notes, properly completed and duly executed, with any signature guarantees
and any other documents required by the Letter of Transmittal within three New
York Stock Exchange, Inc. trading days after the execution hereof. The
undersigned also understands that the method of delivery of this Notice of
Guaranteed Delivery and any other required documents to the Exchange Agent is at
the election and sole risk of the holder, and the delivery will be deemed made
only when actually received by the Exchange Agent.
The undersigned understands that tenders of Notes will be accepted only in
principal amounts equal to $1,000 or integral multiples thereof. The undersigned
also understands that tenders of Notes may be withdrawn at any time prior to the
Expiration Date.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and every obligation of the undersigned under
this Notice of Guaranteed Delivery shall be binding upon the heirs, executors,
administrators, trustees in bankruptcy, personal and legal representatives,
successors and assigns of the undersigned.
All capitalized terms used herein but not defined herein shall have the
meanings ascribed to them in the Prospectus.
2
<PAGE> 3
PLEASE SIGN AND COMPLETE
Principal Amount of Notes Tendered:
-------------------------------------------------------------------
Name(s) of Registered Holder(s):
----------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Certificate No.(s) of Notes (if available):
--------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Area Code and Telephone No.:
--------------------------------------------------------------------------
If Notes will be delivered by book-entry transfer, provide the following
information:
Signature(s) of Registered Holder(s)
or Authorized Signatory:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DTC Account No.:
- --------------------------------------------------------------------------------
Date:
- --------------------------------------------------------------------------------
THIS NOTICE OF GUARANTEED DELIVERY MUST BE SIGNED BY THE HOLDER(S) EXACTLY AS
THEIR NAME(S) APPEAR(S) ON CERTIFICATE(S) FOR NOTES OR ON A SECURITY POSITION
LISTING AS THE OWNER OF NOTES, OR BY PERSON(S) AUTHORIZED TO BECOME HOLDER(S) BY
ENDORSEMENTS AND DOCUMENTS TRANSMITTED WITH THIS NOTICE OF GUARANTEED DELIVERY
WITHOUT ALTERATION, ENLARGEMENT OR ANY CHANGE WHATSOEVER. 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
PROVIDE THE FOLLOWING INFORMATION.
Please print name(s) and address(es)
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity:
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3
<PAGE> 4
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of the Securities Transfer Agents Medallion
Program, the Stock Exchange Medallion Program or the New York Stock Exchange,
Inc. Medallion Signature Program (each, an "Eligible Institution"), hereby (i)
represents that the above-named persons are deemed to own the Notes tendered
hereby within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended ("Rule 14e-4"), (ii) represents that such
tender of Notes complies with Rule 14e-4 and (iii) guarantees that the Notes
tendered hereby are in proper form for transfer (pursuant to the procedures set
forth in the Prospectus under "The Exchange Offer -- Guaranteed Delivery
Procedures"), and that the Exchange Agent will receive (a) such Notes, or a
Book-Entry Confirmation of the transfer of such Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility and (b) a properly completed and
duly executed Letter of Transmittal or facsimile thereof (or Agent's message)
with any required signature guarantees and any other documents required by the
Letter of Transmittal within three New York Stock Exchange, Inc. trading days
after the date of execution hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Exchange Agent and must deliver the Letter of Transmittal and
Notes to the Exchange Agent within the time period shown herein. Failure to do
so could result in a financial loss to such Eligible Institution.
Name of Firm:
- --------------------------------------------------------------------------------
Authorized Signature:
- --------------------------------------------------------------------------------
Title:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Zip Code)
Area Code and Telephone Number:
---------------------------------------------------------------------
Dated:
- ------------------------------------ , 1998
DO NOT SEND NOTES WITH THIS FORM. NOTES SHOULD BE SENT TO THE EXCHANGE AGENT
TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL.
4
