As filed with the Securities and Exchange Commission on April 14, 2000
Registration No. 333-56817
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Brand Scaffold Services, Inc.
(Exact Name of Registrant as Specified in Its Charter)
-----------------------
Delaware 735915 133909681
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(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification Number)
incorporation or Code Number)
organization)
15450 South Outer Highway 40, #270
Chesterfield, Missouri 63017
(636) 519-1000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
John M. Monter
Chief Executive Officer and President
15450 South Outer Highway 40, #270
Chesterfield, Missouri 63017
(636) 519-1000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-----------------------
Copies to:
Joseph P. Hadley
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
-----------------------
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_| __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| __________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
-----------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement contains a prospectus which is to be used by
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJSC") in connection with
offers and sales in market-making transactions at negotiated prices relating to
prevailing market prices at the time of sale.
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<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED APRIL 14, 2000
PROSPECTUS
BRAND LOGO
BRAND SCAFFOLD SERVICES, INC.
10 1/4% Senior Notes Due 2008
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This prospectus is to be used by Donaldson, Lufkin & Jenrette Securities
Corporation in connection with offers and sales in market-making transactions at
negotiated prices related to prevailing market prices at the time of sale.
Donaldson, Lufkin & Jenrette Securities Corporation may act as principal or
agent in such transactions and has no obligation to make a market in the notes,
and may discontinue its market-making activities any time without notice, in its
sole discretion. If Donaldson, Lufkin & Jenrette Securities Corporation conducts
any market-making activities, it may be required to deliver a "market-making
prospectus" when effecting offers and sales in the notes because of the equity
ownership of affiliates of Donaldson, Lufkin & Jenrette Securities Corporation.
Certain affiliates of Donaldson, Lufkin & Jenrette Securities Corporation hold
in the aggregate a 64.4% equity interest in us. We will not receive the proceeds
of the sale of such notes.
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The Company:
o We are the largest North American provider of industrial scaffolding
rental, erection, dismantlement and design services.
o Our executive offices are located at:
Brand Scaffold Services, Inc.
15450 South Outer Highway 40, #270
Chesterfield, MO 63017
(636) 519-1000
Market for Trading:
o There is currently no established market for trading of the notes.
Terms of the Notes:
o Maturity
The notes will mature on February 15, 2008.
o Interest Payment
Interest on the notes is payable semiannually on February 15 and August 15
of each year.
o Optional Redemption
We may redeem some or all of the notes at any time on or after February 15,
2003 at the prices set forth in this prospectus.
Before February 15, 2001, we may redeem up to 35% of the principal amount
of the notes at the prices set forth in this prospectus with the proceeds
of certain types of offerings of equity in our company that we make.
o Change of Control
You may require us to repurchase the notes upon the occurrence of certain
change of control events, at the prices set forth in this prospectus.
o Ranking
The notes are general senior unsecured obligations and rank pari passu with
all of our existing and future senior unsecured indebtedness and all of our
other obligations. The notes are effectively subordinated to all existing
and future liabilities of our subsidiaries. In addition, the notes are
effectively subordinated to all existing and future senior secured
indebtedness, including a bank facility which is secured by a pledge of
substantially all of our and our subsidiaries' assets and is also
guaranteed by our U.S. subsidiaries.
As of December 31, 1999:
o our subsidiaries had no outstanding
indebtedness (other than intercompany debt
and certain capital lease obligations);
o $157.4 million of indebtedness was
outstanding under the bank facility;
o we had $15.4 million in availability under the
bank facility; and
o we had no indebtedness junior to the notes.
---------------------------------------------
This investment involves risks. See "Risk Factors" beginning on page 11.
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Neither the SEC nor any state securities commission has determined if this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
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The date of this Prospectus is April __, 2000
<PAGE>
TABLE OF CONTENTS
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Page
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Prospectus Summary............................................................3
Risk Factors.................................................................11
Use of Proceeds..............................................................17
Capitalization...............................................................18
Selected Consolidated Financial Data.........................................19
Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................21
Business.....................................................................27
Management...................................................................33
Principal Stockholders.......................................................38
Certain Relationships and Related Transactions...............................40
Description of Bank Facility.................................................41
Description of Preferred Stock...............................................43
Description of Notes.........................................................45
Market-Making Activities of DJLSC............................................71
Legal Matters................................................................71
Independent Public Accountants...............................................71
Available Information........................................................71
Index to Consolidated Financial Statements..................................F-1
2
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PROSPECTUS SUMMARY
Because this is a summary, it does not contain all the information that may
be important to you. You should read the entire prospectus, including the
financial statements and related notes, before making an investment decision.
Unless we indicate otherwise, the words "Company," "Brand," "we," "our," "ours"
and "us" mean Brand Scaffold Services, Inc. together with its subsidiaries.
Unless we indicate otherwise, references to industry size and statistics
contained in this prospectus are derived from information provided by Cook,
Holmlund & Co., Inc.
Overview
We are the largest North American provider of industrial scaffolding
services. Our services facilitate access to tall structures for on-going
maintenance, turnarounds (major maintenance projects which require the complete
or partial shutdown of a facility) and capital projects, principally in the
refining, petrochemical, chemical, utility and pulp and paper industries. Our
turnkey services include equipment rental, labor for the erection and
dismantlement of scaffolding and scaffolding design services. We deliver our
services through an extensive field service organization of approximately 4,200
employees in 30 field offices located throughout the United States and two in
Canada. We also provide scaffolding services to the commercial market (primarily
nonresidential construction) and sell a small amount of scaffolding. For the
year ended December 31, 1999, we generated revenues of $218.9 million and a net
loss of $1.9 million.
Approximately 79%, 83% and 80% of our 1999, 1998 and 1997 revenues,
respectively, were attributable to on-going maintenance, turnarounds and capital
projects of industrial facilities. We typically provide our on-going maintenance
services under long-term contracts; the duration of these contracts ranges
between one and five years. Turnarounds occur every one to four years depending
on the industry and the type of turnaround being performed. Although some
turnarounds may be postponed for a period of time, they are a necessary
component of maintaining industrial facilities and are required to ensure the
safe and efficient operation of such facilities. We believe that the necessity
for on-going maintenance and turnarounds provides us with a stable, recurring
revenue base.
Our main customers include major integrated oil companies, independent
refiners, large chemical companies, utilities and large engineering and
construction firms. Our largest customer, Exxon Corporation, accounted for
approximately 13%, 15% and 17% of our revenues in the years ended December 31,
1999, 1998 and 1997, respectively. The loss of this customer could have a
material adverse effect on us. It is unclear what effect the announced mergers
and consolidations in the oil industry (such as the merger between Exxon
Corporation and Mobil Corporation and between British Petroleum P.L.C. and Amoco
Corporation) and the paper industry will have on us.
We believe our position as the largest supplier of industrial scaffolding
services provides us with a number of competitive advantages including:
o the ability to offer national coverage to large customers;
o the ability to provide required personnel and scaffolding to process
major turnarounds and unanticipated plant outages;
o higher asset use through the shifting of assets across regions and
across our large customer base;
o purchasing leverage with scaffolding manufacturers; and
o comprehensive safety training programs which have resulted in an
accident incident rate which is well below the industry average and
have enabled us to reduce insurance costs and accident-related
expenses.
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Our size also enables us to maintain our own trucking fleet and to provide
a design department that specializes in the custom design of industrial
scaffolding, which we use to minimize the amount of scaffolding used and to
maximize labor efficiency, thereby providing us with a competitive advantage.
The Industry
The scaffolding services industry consists of the industrial market and the
commercial market, each of which requires different types of scaffolding
equipment and levels of expertise. Industrial applications generally require
systems scaffolding, which is highly versatile, can be quickly erected and
dismantled, is capable of conforming to irregularly shaped structures and
requires a higher level of skill to erect and dismantle. Commercial applications
generally require frame and brace scaffolding which is not as versatile as
systems scaffolding and requires a lower level of expertise.
Industrial Market. The North American industrial scaffolding market is
approximately $650 million and is serviced predominantly by scaffolding
specialists such as Brand. We estimate that the top six scaffolding specialists
service almost 70% of the total industrial market. Industrial customers use
scaffolding for on-going maintenance, turnarounds and capital projects. Among
industrial applications, maintenance represents approximately 50% and
turnarounds represent approximately 35% of the market. Since turnarounds may
require the complete shutdown of a facility (which may lose up to $1 million of
revenues per day during a turnaround), speed and reliability are key customer
considerations. Safety is another important consideration for industrial
customers as scaffolding contractor accident incidents are counted against a
facility's safety record and may cause increases in both insurance premiums and
attention by the Occupational Safety and Health Administration ("OSHA").
Commercial Market. The North American commercial scaffolding market is
approximately $725 million. Commercial scaffolding is used primarily in
nonresidential construction and renovation projects. Commercial applications are
generally characterized by regularly shaped structures with few contoured or
angled surfaces. Due to the simple shapes required, commercial jobs generally
utilize frame and brace scaffolding, a less versatile type of equipment which is
not suited to industrial applications. Commercial scaffolding requires a less
skilled work force and has historically been less focused on safety issues.
These factors combine to make the commercial market highly fragmented with low
barriers to entry.
Business Strategy
We have developed a business strategy which we believe will enable us to
profitably increase future revenues and cash flow. The key components of this
strategy are:
Leverage existing strengths. Our existing strengths include longstanding
customer relationships, extensive equipment resources, significant labor
capacity and an industry-leading safety record. These strengths have enabled us
to gain our current market share and to expand our business. We intend to
utilize these strengths to retain our maintenance contracts and to aggressively
pursue turnarounds and capital projects with our existing customers and to
expand scaffolding services to such customers' other facilities.
Target underpenetrated industrial segments. Due to our leading market
position and extensive service infrastructure, we have the capacity to service
several industries in which, due to limited historical focus, we have had a
relatively low market share. These include the chemical, utilities and pulp and
paper industries. To increase our penetration in these markets, we have expanded
our sales force, initiated incentive and training programs and created a sales
management function to target opportunities and monitor the effectiveness of the
sales force.
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Pursue complementary acquisitions. We intend to pursue complementary
acquisitions where significant consolidation savings and economies of scale can
be achieved. The scaffolding industry is characterized by single-office or
regional companies, many of which are undercapitalized and have limited
scaffolding inventories. We intend to focus our acquisition strategy on
companies which have long-term contracts or an expertise in a certain industry
or scaffolding application.
Expand our commercial scaffolding operations. We intend to use our existing
infrastructure to expand our position in the commercial market. To increase our
penetration of the commercial market, we have targeted large-scale new
construction and renovation projects, which require relatively complex
scaffolding. We believe our industry-leading safety record provides us with a
competitive advantage in pursuing these commercial scaffolding market
opportunities in the future. In November 1996, OSHA enacted stricter regulations
regarding training and safety in the commercial scaffolding industry. As a
result, safety has become a key consideration for commercial customers.
Company History and Structure
On September 30, 1996, DLJ Merchant Banking Partners, L.P. and certain of
its affiliates ("DLJMB") and Carlisle-Brand Investors, L.P. ("Carlisle")
acquired indirectly, through a series of mergers, an 80.1% equity interest in
the Company from WMI Technologies, Inc. ("WMI"). As a result of the acquisition,
we became a wholly owned subsidiary of DLJ Brand Holdings, Inc. ("Holdings"), in
which DLJMB, Carlisle and Rust Industrial Services Inc. ("Rust Industrial"), a
majority owned subsidiary of WMI, hold equity interests. In connection with the
acquisition, DLJ Capital Funding, Inc. ("DLJ Capital") and Bank of America
National Trust and Savings Association ("BofA") provided us $190.0 million of
financing (the "Bank Facility"), comprised of senior secured term loans and a
revolving loan facility. As of December 31, 1999, DLJMB and Carlisle owned 64.4%
and 9.2%, respectively, of Holdings. See "Principal Stockholders."
We are a Delaware corporation. Our executive offices are located at 15450
South Outer Highway 40, #270, Chesterfield, Missouri 63017, and our telephone
number is (636) 519-1000.
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SUMMARY DESCRIPTION OF THE NOTES
Notes...................... 10 1/4% Senior Notes due 2008
Principal Amount........... $130,000,000
Maturity Date.............. February 15, 2008
Interest Payment Dates..... February 15 and August 15 of each year
Optional Redemption ....... We may redeem some or all of the notes on or after
February 15, 2003, at the redemption prices set
forth elsewhere in this prospectus. In addition,
prior to February 15, 2001, we may redeem up to 35%
of the principal amount of the notes at the
redemption prices set forth elsewhere in this
prospectus with the proceeds from certain equity
offerings in our company that we make. See
"Description of Notes--Optional Redemption."
Mandatory Redemption....... Except as set forth herein, we are not required to
make mandatory redemption or sinking fund payments
with respect to the notes.
Ranking of the Notes ...... The notes are general senior unsecured obligations
and rank pari passu with all of our existing and
future senior unsecured indebtedness and all of our
other obligations. The notes are effectively
subordinated to all existing and future liabilities
of our subsidiaries, including trade payables.
In addition, the notes are effectively subordinated
to existing and future senior secured indebtedness,
including a bank facility, which is secured by a
pledge of substantially all of our and our
subsidiaries' assets and is also guaranteed by our
U.S. subsidiaries.
As of December 31, 1999:
o our subsidiaries had no outstanding indebtedness
other than intercompany indebtedness and certain
capital lease obligations;
o $157.4 million of indebtedness was outstanding
under the bank facility;
o we had $15.4 million in unused senior secured
borrowing capacity under the bank facility;
o we had outstanding approximately $27.4 million
in aggregate principal amount of senior
indebtedness, all of which was secured
indebtedness; and
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o we had the ability to incur up to $30 million in
senior indebtedness based upon the covenants
with which we must comply. See "Description of
Notes--General."
Change of Control.......... You may require us to repurchase the notes upon the
occurrence of certain change of control events, at
the prices set forth in this prospectus. However,
our ability to repurchase the notes may be limited
by contractual obligations existing at the time
proposed for repurchase. Also, we may not have
sufficient money to repurchase the notes. See
"Description of Notes--Change of Control" and "Risk
Factors--Possible Inability to Repurchase Notes
Upon a Change of Control - We may not have the
ability to raise the funds necessary to finance the
change of control offer required by the notes."
Certain Covenants.......... The indenture governing the notes contains
covenants limiting our ability and our
subsidiaries' ability to:
o pay dividends or make certain other payments;
o make certain investments;
o incur additional indebtedness;
o permit liens;
o incur dividend and other payment restrictions
affecting subsidiaries;
o enter into consolidation, merger, conveyance,
lease or transfer transactions;
o make asset sales, enter into transactions with
certain affiliates; and
o engage in unrelated lines of business.
In addition, the indenture imposes restrictions on
the ability of our subsidiaries to issue
guarantees. These covenants are subject to certain
exceptions and qualifications. See "Description of
Notes--Certain Covenants" and "--Consolidation,
Merger, Conveyance, Lease or Transfer."
7
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RISK FACTORS
Prospective investors in the notes should carefully consider the factors
discussed in detail elsewhere in this prospectus under the caption "Risk
Factors."
8
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SUMMARY FINANCIAL DATA
The following table presents summary historical financial data of Brand,
after the acquisition by DLJMB and Carlisle of a majority of our common stock
(the "Acquisition"), for the years ended December 31, 1997, 1998 and 1999.
The summary historical financial data as of the years ended December 31,
1997, 1998 and 1999, has been derived from the audited financial statements of
Brand. You should read the financial data set forth below in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and related notes included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
Brand
-------------------------------------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1997 1998 1999
------------- ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C>
Income Statement Data: (1)
Revenue................................ $160,660 $205,304 $218,916
Operating Expenses..................... 122,638 157,673 171,630
-------- -------- --------
Gross Profit......................... 38,022 47,631 47,286
Selling and Administrative Expenses.... 25,840 29,568 31,550
Nonrecurring Start-up Expenses......... 2,498 -- --
-------- -------- --------
Operating Income....................... 9,684 18,063 15,736
Interest Expense....................... 15,422 17,728 17,758
Interest Income........................ (397) (249) (159)
Other Expense, Net (2)................. -- -- --
-------- -------- --------
Pretax Income (Loss)................. (5,341) 584 (1,863)
Provision for Income Tax............... -- -- --
Extraordinary Loss..................... -- 4,329 --
-------- -------- --------
Net Income (Loss).................... $(5,341) $(3,745) $(1,863)
======== ======== ========
Other Data: (1)
EBITDA (3)............................. $22,009 $34,572 $39,505
Cash Flow from Operations.............. 11,983 26,753 21,148
Depreciation and Amortization.......... 13,294 17,234 24,491
Cash Interest Expense (4).............. 14,453 17,003 17,036
Capital Expenditures................... 9,720 14,831 19,642
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends (5)......... .5x .8x .7x
</TABLE>
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<TABLE>
<CAPTION>
Brand
-------------------------------------
At December 31,
-------------------------------------
1997 1998 1999
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Balance Sheet Data: (1)
Working Capital...................................................... $4,207 $12,080 $5,553
Total Assets......................................................... 197,543 211,060 210,872
Long-term Debt (including current portion and revolving loan)........ 154,250 158,500 157,460
Notes Payable and Capital Lease Obligation
(including current portion)........................................ -- 5,007 4,402
14.5% Senior Exchangeable Preferred Stock............................ 31,140 35,907 41,404
Stockholder's Equity (Deficit)....................................... (5,176) (14,483) (20,968)
</TABLE>
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(1) The Acquisition had a significant impact on our financial position and
results of operations. Consequently, the financial data for and as of dates
prior to the Acquisition may not be directly comparable to corresponding
information for and as of dates after the Acquisition.
(2) Since the Acquisition, we have not separately classified other income and
expense and have included it in selling and administrative expenses because
such amounts have been immaterial.
(3) EBITDA is defined as earnings before interest income, cash interest
expense, income taxes, depreciation and amortization. EBITDA is commonly
used to analyze companies on the basis of operating performance, leverage
and liquidity. EBITDA is not intended to represent cash flows for the
period, nor has it been presented as an alternative to operating income as
an indicator of operating performance and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
(4) Cash interest expense represents total interest expense less amortization
of deferred financing fees of $772,000, $725,000 and $969,000 for the years
ended December 31, 1999, 1998 and 1997, respectively.
(5) For the purposes of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends, earnings represent income (loss)
before income taxes plus fixed charges. Fixed charges consist of interest
expense on all indebtedness plus the interest portion of rental expense on
noncancelable leases, amortization of debt issuance costs and accretion of
preferred stock dividends.
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RISK FACTORS
In addition to the other matters described in this prospectus, you should
carefully consider the risks described below before making an investment
decision.
This prospectus includes forward-looking statements that involve a number
of risks and uncertainties. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including the risks faced by us described below and elsewhere in this
prospectus. Given these uncertainties, you are cautioned not to place undue
reliance on such forward-looking statements. We disclaim any obligation to
update any factors or to publicly announce the results of any revisions to any
of the forward-looking statements contained in this prospectus to reflect future
events or developments.
Substantial Leverage -- Our substantial indebtedness could adversely affect the
financial health of the Company and prevent us from fulfilling our obligation to
service our current indebtedness.
We are highly leveraged. As of December 31, 1999, our total indebtedness
was $157.4 million, of which $130 million constitutes senior debt outstanding.
Our estimated annual payment obligation for 2000 with respect to our
indebtedness is comprised of approximately $6 million of principal payments and
$17 million of interest payments. Our payment obligation for 1999 consisted of
$5 million of principal payments and $16.2 million of interest payments.
Our substantial indebtedness could have important consequences to you. For
example, it could:
o limit our ability to fund future working capital, capital
expenditures, acquisitions and other general corporate activities;
o require us to dedicate a substantial portion of our operating cash
flow to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund other areas of our business; and
o limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate.
Our borrowings under the Bank Facility are at floating rates of interest,
which could result in higher interest expense in the event of an increase in
interest rates. Further, our management's business decisions will be limited by
covenants contained in the Bank Facility and the indenture under which the notes
were issued.
Ability to Service Debt -- To service our indebtedness, we will require a
significant amount of cash. Our ability to generate cash depends on many factors
beyond our control.
Our ability to pay interest on the notes and to satisfy our other debt
obligations will depend upon our future operating performance and our ability to
obtain additional debt or equity financing. Prevailing economic conditions and
financial, business and other factors, many of which are beyond our control,
will affect our ability to make these payments. In addition, our access to
payments and advances from our subsidiaries in amounts and at times sufficient
to fund our debt obligations, including payments on the notes, will affect our
ability to make these payments. If in the future we cannot generate sufficient
cash from operations to make scheduled payments on the notes or to meet our
other obligations, we will need to refinance, obtain additional financing or
sell assets. We cannot assure you that our business will generate cash flow, or
that we will be able to obtain funding, sufficient to satisfy our debt service
requirements, including payments on the notes.
Restrictive Covenants -- Our debt agreements contain provisions which restrict
the business decisions that may be made by our management.
Among other things, the operating and financial restrictions and covenants
contained in our debt agreements restrict, condition or prohibit us from:
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o incurring additional indebtedness;
o creating liens on our assets;
o making certain asset dispositions;
o entering into transactions with affiliates;
o merging or consolidating with any other person; or
o selling, assigning, transferring, leasing, conveying or otherwise
selling certain of our assets.
In addition, the Bank Facility contains financial and operating covenants
and prohibitions, including requirements that we maintain certain financial
ratios and use a portion of excess cash flow and proceeds of assets sales to
repay indebtedness under the Bank Facility.
The operating and financial restrictions and covenants in our existing debt
agreements and any future financing agreements may adversely affect our ability
to finance future operations or capital needs or to engage in other business
activities. A breach of any of these restrictions or covenants could cause a
default under other debt. A significant portion of our indebtedness then may
become immediately due and payable. We are not certain whether we would have, or
be able to obtain, sufficient funds to make these accelerated payments.
We have previously sought and obtained waivers and consents from the
lenders under the Bank Facility. We may be required to seek waivers or consents
in the future. We cannot assure that these waivers or consents will be granted.
See "Description of Bank Facility."
Subordination -- Your right to receive payments on the notes is junior to our
existing current and future senior indebtedness.
The notes are effectively subordinated to all current and future senior
secured indebtedness, including indebtedness under the Bank Facility, to the
extent of any pledged assets. Our obligations under the Bank Facility are
secured by a pledge of substantially all of our and our subsidiaries' assets. In
the event of a bankruptcy, liquidation or reorganization of the Company, our
assets would be available to pay obligations on the notes only after all
indebtedness under the Bank Facility has been paid in full. There may not be
sufficient assets remaining to make any payments on the notes. The indebtedness
under the Bank Facility will become due prior to the time principal obligations
under the notes become due. Our U.S. subsidiaries have issued guarantees under
the Bank Facility. As of December 31, 1999, we had $157.4 million of
indebtedness outstanding. In addition, as of December 31, 1999, we had $15.4
million in unused senior secured borrowing capacity under the Bank Facility.
Dependence on Subsidiaries -- The notes will effectively rank junior to our
subsidiaries' liabilities.
Our subsidiaries conduct substantially all of our operations. Therefore,
our ability to make required principal and interest payments with respect to our
indebtedness, including the notes, depends on the earnings of our subsidiaries
and on our ability to receive funds from our subsidiaries through dividends or
other payments. Our subsidiaries are not obligated or required to make any
payments on the notes, or to make funds available to us for payment on the notes
or otherwise. Furthermore, the notes will effectively be subordinated to all
outstanding indebtedness and other liabilities and commitments (including trade
payables and operating lease obligations) of our
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subsidiaries. Our right to receive assets of any of our subsidiaries upon their
liquidation or reorganization (and the consequent right of holders of notes to
participate in those assets) will be effectively subordinated to the claims of
that subsidiary's creditors, except to the extent that we are recognized as a
creditor of the subsidiary. If we are recognized as a creditor of the
subsidiary, our claims will still be subordinate to any security interest in the
subsidiary's assets and any of the subsidiary's indebtedness senior to that
which we hold. As of December 31, 1999, our subsidiaries had no indebtedness
outstanding other than intercompany indebtedness and certain capital lease
obligations.
Effects of Seasonality and Cyclicality -- There are seasonal fluctuations in
demand for our services. Further, we have experienced a degree of cyclicality in
the market we service.
The market for industrial scaffolding services experiences seasonal
fluctuations in demand. In particular, because of high demand for gasoline for
automobiles during the summer, most refineries prefer to close down for
turnarounds during the spring and fall. Similar patterns are evidenced for
utilities.
We may be able to take advantage of differing seasonal patterns in other
markets we service, such as the commercial scaffolding market, but seasonality
may still lead to:
o low inventory use during periods of low demand;
o an inability to service all of our customers during periods of
high demand;
o price fluctuations; and
o periods of low cash flow.
Historically, the market for industrial scaffolding services has
experienced a degree of cyclicality. In particular, demand for nonresidential
construction and capital projects is highly cyclical. In addition, when refining
products are in high demand or the price of pulp is high, refineries and pulp
and paper mills often delay turnarounds. It does not appear that any areas of
our business exhibit a significant degree of counter-cyclicality that would
offset these effects. This cyclicality could have a material adverse effect on
us.
Concentration of Customers -- Losing certain customers could materially affect
our revenues.
Our top ten customers accounted for approximately 35% of total revenues
during 1999. Our largest customer, Exxon Corporation, accounted for
approximately 13%, 15% and 17% of our revenues in the years ended December 31,
1999, 1998 and 1997, respectively. The loss of any of these customers could have
a material adverse effect on us.
Competition -- We cannot assure that we will be able to maintain our current
market share.
We currently face competition from other existing scaffolding services
providers, including entities providing substantially similar services, some of
which have significantly greater resources than we do. We also compete with
larger engineering and construction firms. While we believe that we currently
have a strong position in the industrial scaffolding market, we cannot assure
that we will be able to increase or maintain our market share.
Dependence on Labor -- Decreases in the labor force or increases in the cost of
labor could materially affect the Company.
Our business has a high labor content and, as a result, our financial
performance is affected by the availability of qualified personnel and the cost
of labor. In recent years, unemployment rates have reached unusually low levels
leading to lower availability of labor and to wage inflation. In particular, the
supply of labor has been low relative to demand in the Gulf Coast Region, in
which we have significant operations. While we have been successful in hiring
workers for our projects and we do not believe that the reduced availability of
labor has had a material adverse effect
13
<PAGE>
on our financial performance, we cannot assure that sufficient labor will be
available in the future or that the cost of labor will not rise, either of which
could have an adverse effect on the Company.
Approximately 24% of our employees are represented by labor unions. We
cannot assure that strikes or other types of conflicts with unions or personnel
will not arise or that we will not become a target for further union organizing
activity. Since our business has a high labor content, any such activity could
have a material adverse effect on the Company.
Dependence on Certain Industries -- Our performance depends upon the stability
of a small group of industries.
Our financial performance is dependent upon the continued viability and
financial stability of our customers, which are in turn substantially dependent
on the viability and financial stability of the oil, petrochemical, chemical,
utilities, pulp and paper and construction industries. In addition, many of our
customers are affected by general economic conditions. The factors affecting
these industries in general, and our customers in particular, could have a
material adverse effect on the Company.
Dependence on Key Personnel -- Losing certain employees could materially affect
the Company.
Our continued success depends to a large extent upon the continued services
of our senior management and certain individuals with critical client
relationships. The loss of the services of any of these employees could have a
material adverse effect on the Company. We do not maintain "key man" insurance
with respect to any individuals.
Acquisition Strategy -- There are various risks associated with our plan to
acquire other scaffolding providers.
We intend to expand our business by acquiring other scaffolding providers.
We cannot assure that:
o suitable acquisition candidates will be available;
o acquisitions can be completed on reasonable terms;
o we will successfully integrate the operations of any acquired entity;
or
o we will have the ability to raise the funds necessary to make
acquisitions.
Some of the risks associated with this acquisition strategy include
problems inherent in integrating new businesses such as a potential loss of
customers and key personnel and a potential disruption in operations. In
addition, acquisitions may be limited by restrictions contained in our debt
agreements.
Possible Inability to Repurchase Notes Upon a Change of Control -- We may not
have the ability to raise the funds necessary to finance the change of control
offer required by the notes.
Upon the occurrence of certain specific kinds of change of control events,
you will have the right to require us to repurchase some or all of the notes at
a price equal to 101% of the principal amount of the notes, plus accrued and
unpaid interest, if any, to the date of purchase. However, our ability to make
the repurchase may be limited by the terms of our and our subsidiaries' then
existing contractual obligations. Furthermore, under the Bank Facility, the
occurrence of certain specific kinds of change of control events would
constitute an event of default, possibly causing acceleration of all payments
required under the Bank Facility. We may not have sufficient funds to make the
required repurchase, and we cannot assure that we would be able to obtain such
resources. If we fail to repurchase all of the notes tendered for purchase, such
failure will constitute an event of default under the indenture.
14
<PAGE>
With respect to the sale of assets referred to in the definition of "Change
of Control" as it applies to the notes, the phrase "all or substantially all" as
used in such definition varies according to the facts and circumstances of the
subject transaction, has no clearly established meaning under the relevant law
and is subject to judicial interpretation. Accordingly, in certain circumstances
there may be a degree of uncertainty in determining whether a particular
transaction would involve a disposition of "all or substantially all" of the
assets of a person and therefore it may be unclear whether a change of control
has occurred and whether the notes are subject to an offer to repurchase.
The change of control provision may not necessarily protect you in the
event of certain important corporate events, including a reorganization,
restructuring, merger or other similar transaction involving the Company that
may adversely affect you. This is because such events 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. Except as described under "Description of Notes--Change
of Control," the indenture does not contain provisions that permit you to
require us to repurchase or redeem the notes in the event of a takeover,
recapitalization or similar transaction.
Fraudulent Transfer Statutes -- In certain circumstances, fraudulent transfer
laws may permit a court to take action detrimental to you.
Federal or state fraudulent transfer laws permit a court, if it makes
certain findings, to
o avoid all or a portion of our obligations to you;
o subordinate our obligations to you to other existing and future
indebtedness, entitling other creditors to be paid in full before any
payment is made on the notes; and
o take other action detrimental to you, including, in certain
circumstances, invalidating the notes.
In that event, there would be no assurance that you would ever be repaid.
Under federal and state fraudulent transfer laws, in order to take any of
the actions described above, courts will typically need to find that, at the
time the notes were issued, we:
(a) issued the notes with the intent of hindering, delaying or defrauding
current or future creditors; or
(b) received less than fair consideration or reasonably equivalent value
for incurring the indebtedness represented by the notes and
(1) were insolvent or were rendered insolvent by reason of the issuance
of the notes,
(2) were engaged, or about to engage, in a business or transaction for
which our assets were unreasonably small; or
(3) intended to incur, or believed (or should have believed) we would
incur, debts beyond our ability to pay as such debts mature (as all
of the foregoing terms are defined in or interpreted under such
fraudulent transfer statutes),
Different jurisdictions define "insolvency" differently. However, we
generally would be considered insolvent at the time we incurred the indebtedness
constituting the notes if (a) the fair market value (or fair saleable value) of
our assets is less than the amount required to pay our total existing debts and
liabilities (including the probable liability on contingent liabilities) as they
become absolute or matured or (b) we were incurring debts beyond our ability to
pay as such debts mature. We cannot assure you as to what standard a court would
apply in order to determine whether we were "insolvent" as of the date the notes
were issued, and we cannot assure you that, regardless of the method of
valuation, a court would not determine that we were insolvent on that date. Nor
can we assure you that a
15
<PAGE>
court would not determine, regardless of whether we were insolvent on the date
the notes were issued, that the payments constituted fraudulent transfers on
another ground.
Lack of Trading Market for the Notes -- We cannot assure that an active trading
market will develop for the notes.
There is no established trading market for the notes, and we cannot assure
you about the future development of a market for the notes or your ability to
sell the notes or the price at which you may be able to sell your notes. If such
market were to develop, the notes could trade at prices that may be higher or
lower than their initial offering price depending on many factors, including
prevailing interest rates, our operating results and the market for similar
securities. Although it is not obligated to do so, Donaldson, Lufkin & Jenrette
Securities Corporation currently makes a market in the notes. Any such
market-making activity may be discontinued at any time, for any reason, without
notice at the sole discretion of Donaldson, Lufkin & Jenrette Securities
Corporation. No assurance can be given as to the liquidity of or the trading
market for the notes.
16
<PAGE>
USE OF PROCEEDS
This prospectus is delivered in connection with the sale of the notes by
Donaldson, Lufkin & Jenrette Securities Corporation in market-making
transactions. We will not receive any of the proceeds from such transactions.
17
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company as of December 31, 1999. This table should be read in conjunction
with the consolidated financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of December 31, 1999
-----------------------
(Dollars in thousands)
<S> <C>
Long-term Debt (including current portion):
Bank Facility
Term Facilities......................................... 23,500
Revolving Facility(1)................................... 3,960
10 1/4% Senior Notes due 2008........................... 130,000
-------
Total Long-term Debt.................................... 157,460
14.5% Senior Exchangeable Preferred;
1,250,000 shares authorized; 1,042,460 shares issued(2).. 41,404
Stockholder's Deficit...................................... (20,968)
-------
Total Capitalization.................................... 177,896
=======
</TABLE>
- -------------------
(1) The Company has $10.6 million of letters of credit outstanding to cover
insurance commitments for the policy year ended December 31, 1999.
(2) The Company's 14.5% Senior Exchangeable Preferred Stock due 2008, par value
$0.01 per share (the "14.5% Preferred Stock"), has an initial liquidation
preference of $25.00 per share. Dividends accrete to the liquidation value
at the rate of 14.5% per annum until the later of September 30, 2001 and
the first date upon which cash dividends are permitted under the terms of
the Company's then outstanding indebtedness. The Company is required to
redeem the 14.5% Preferred Stock on March 31, 2008. See "Description of
Preferred Stock."
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents (i) selected historical financial data of Rust
as of and for the year ended December 31, 1995, and for the nine months ended
September 30, 1996, and (ii) selected historical financial data of Brand, for
the three months ended December 31, 1996, and the years ended December 31, 1997,
1998 and 1999. The selected historical financial data as of and for the year
ended December 31, 1995, and for the nine months ended September 30, 1996 has
been derived from the audited financial statements of Rust. The selected
historical financial data as of and for the three months ended December 31,
1996, and the years ended December 31, 1997, 1998 and 1999, has been derived
from the audited financial statements of Brand. The financial data set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Company's financial
statements and notes thereto included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Rust Brand
--------------------------- ------------------------------------------------------------
Nine Months Three Months
Year Ended Ended Ended Year Ended Year Ended Year Ended
December September December 31, December December December
31, 1995 30, 1996 1996 31, 1997 31, 1998 31, 1999
---------- ----------- ------------ ---------- ---------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data: (1)
Revenue................................ $193,829 $124,769 $44,412 $160,660 $205,304 $218,916
Operating Expenses..................... 138,968 89,073 34,170 122,638 157,673 171,630
-------- -------- ---------- ---------- ---------- ----------
Gross Profit......................... 54,861 35,696 10,242 38,022 47,631 47,286
Selling and Administrative Expenses.... 25,807 15,825 4,743 25,840 29,568 31,550
Nonrecurring Start-up Expenses......... -- -- -- 2,498 -- --
-------- -------- ---------- ---------- ---------- ----------
Operating Income....................... 29,054 19,871 5,499 9,684 18,063 15,736
Interest Expense....................... 9,444 7,872 4,504 15,422 17,728 17,758
Interest Income........................ (1,012) (482) (195) (397) (249) (159)
Other Expense, Net (2)................. 853 708 -- -- -- --
-------- -------- ---------- ---------- ---------- ----------
Pretax Income (Loss)................. 19,769 11,773 1,190 (5,341) 584 (1,863)
Provision for Income Tax............... 8,300 4,813 525 -- -- --
Extraordinary Loss................... -- -- -- -- 4,329 --
Net Income (Loss).................... $11,469 $6,960 $665 $(5,341) $(3,745) $(1,863)
======== ======== ========== ========== ========== ==========
Other Data: (1)
EBITDA (3)............................. $36,803 $25,832 $8,398 $22,009 $34,572 $39,505
Cash Flow from Operations.............. 35,587 28,478 4,966 11,983 26,753 21,148
Depreciation and Amortization.......... 8,602 6,669 3,567 13,294 17,234 24,491
Cash Interest Expense (4).............. 9,444 7,872 3,836 14,453 17,003 17,036
Capital Expenditures................... 8,602 1,810 208 9,720 14,831 19,642
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends (5)........ 3.0x 2.4x 1.2x .5x .8x .7x
</TABLE>
<TABLE>
<CAPTION>
Rust Brand
-------- -------------------------------------------
At December 31,
-------------------------------- -------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data: (1)
Working Capital................................................ $30,227 $12,656 $4,207 $12,080 $5,553
Total Assets................................................... 178,201 204,266 197,543 211,060 210,872
Long-Term Debt (including current portion and revolving loan).. -- 158,000 154,250 158,500 157,460
Notes payable and capital lease obligation (including current
portion)...................................................... -- -- -- 5,007 4,402
14.5% Senior Exchangeable Preferred Stock...................... -- 25,906 31,140 35,907 41,404
Stockholder's Equity (Deficit)................................. 141,374 4,247 (5,176) (14,483) (20,968)
</TABLE>
19
<PAGE>
(1) The Acquisition had a significant impact on our financial position and
results of operations. Consequently, the financial data for and as of dates
prior to the Acquisition may not be directly comparable to corresponding
information for and as of dates after the Acquisition.
(2) Since the Acquisition, we have not separately classified other income and
expense and have included it in selling and administrative expenses because
such amounts have been immaterial.
(3) EBITDA is defined as earnings before interest income, cash interest
expense, income taxes, depreciation and amortization. EBITDA is commonly
used to analyze companies on the basis of operating performance, leverage
and liquidity. EBITDA is not intended to represent cash flows for the
period, nor has it been presented as an alternative to operating income as
an indicator of operating performance and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
(4) Cash interest expense represents total interest expense less amortization
of deferred financing fees of $772,000, $725,000 and $969,000, for the
years ended December 31, 1999, 1998 and 1997, respectively.
(5) For the purposes of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends, earnings represent income (loss)
before income taxes plus fixed charges. Fixed charges consist of interest
expense on all indebtedness plus the interest portion of rental expense on
noncancelable leases, amortization of debt issuance costs and accretion of
preferred stock dividends.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto included herewith.
Overview
The Company is the largest North American provider of industrial
scaffolding services which facilitate access to tall structures for maintenance,
turnarounds and capital projects, principally in the refining, petrochemical,
chemical, utility and pulp and paper industries. The Company provides turnkey
services which include equipment rental, labor for the erection and
dismantlement of the scaffolding and scaffolding design services. The Company
also provides scaffolding services to the commercial market (primarily
nonresidential construction) and sells a small amount of scaffolding.
In April 1999, the Company acquired the operating assets of Philip Scaffold
Corporations ("Philip") for a purchase price of $875,000. Philip operates out of
Denver and Grand Junction, Colorado and is an industrial scaffold operation with
its major customers being power companies and refineries. In August 1999, the
Company acquired the stock of Scaffold-Jax, Inc. for a purchase price of $1.2
million ($1.0 million in cash and $200,000 in a note to be paid two years after
closing). There was no excess cost of assets acquired over the amounts assigned
to net tangible assets at the date of acquisition. Scaffold-Jax, Inc. is a
Jacksonville, Florida based company and services both the industrial and
commercial market.
Approximately 79%, 83% and 80% of the Company's 1999, 1998 and 1997
revenues, respectively, were attributable to on-going maintenance, turnarounds
and capital projects of industrial facilities. The Company typically provides
on-going maintenance services under long-term contracts; the duration of these
contracts is usually one and five years. Turnarounds typically occur every one
to four years depending on the industry and the type of turnaround being
performed. Although some turnarounds may be postponed for a period of time, they
are a necessary component of maintaining industrial facilities and are required
to ensure the safe and efficient operation of such facilities. While the
postponement of scheduled turnarounds causes fluctuations in the Company's
quarterly and annual results, the Company believes the necessity for on-going
maintenance and turnarounds provides a stable, recurring revenue base.
Revenues from capital projects, which represented approximately 11%, 18%
and 14% of 1999, 1998 and 1997 revenues, respectively, result from new plant
construction, plant expansions and modifications. Capital projects can and have
had material impacts on the Company's results of operations.
Commercial scaffolding revenues, which represented approximately 21%, 14%
and 15% of 1999, 1998 and 1997 revenues, respectively, are related to the level
of nonresidential construction and renovation. Demand for commercial scaffolding
services has recently been high due to the recent strength in the commercial
construction industry. In 1997, the Company increased its penetration of the
commercial market, by opening four new offices.
In November 1997, the Company implemented a cost reduction program that
reduced its annual operating overhead and selling, general and administrative
expenses by approximately $5.3 million. The major initiatives included (i)
eliminating 63 administrative and support positions and consolidating certain
administrative functions, (ii) restructuring and renegotiating benefits
programs, (iii) renegotiating the Company's insurance premiums to reflect
continued improvements in its safety record, (iv) negotiating company-wide
procurement contracts in order to take advantage of volume pricing, and (v)
implementing a new management information system to improve inventory
utilization and reduce equipment transportation expenses. The Company recorded a
one-time expense in the fourth quarter of 1997 of $437,000 to reflect severance
and other expenses of the cost reduction program.
In connection with the Acquisition, WMI agreed to pay the Company a
quarterly fee of $725,000 for transition services for three years beginning on
December 31, 1996. Such payments continued through September 30, 1999. In
addition, WMI agreed to pay for all historical accident-related claims in which
the accident occurred prior to the
21
<PAGE>
Acquisition. Because cash expenditures related to accidents are paid out over
time but accident-related expenses are accrued in the period in which the
accident occurs, the Company has a significant non-cash claims expense ($2.6
million in 1999, $2.6 million in 1998 and $2.9 million in 1997) which it
anticipates will decline over time.
The Company's business is seasonal. End-use industries such as the refining
and utility industries experience increased demand for their products during the
summer months. Consequently, turnarounds are generally scheduled during the
first and fourth quarters of the year.
The following discussion of results of operations is presented for the
years ended December 31, 1999, 1998 and 1997.
Results of Operations
The following tables set forth, for the periods indicated, certain
operating data expressed in dollar amounts and as a percentage of revenue:
Summary of Historical Financial Results
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Income Statement Data:
Revenue................................... $218,916 $205,304 $160,660
Operating Expenses........................ 171,630 157,673 122,638
-------- -------- --------
Gross Profit............................. 47,286 47,631 38,022
Selling and Administrative Expenses....... 31,550 29,568 25,840
Nonrecurring Start-up Expenses............ -- -- 2,498
-------- -------- --------
Operating Income.......................... 15,736 18,063 9,684
Interest Expense.......................... 17,758 17,728 15,422
Interest Income........................... (159) (249) (397)
-------- -------- --------
Pre-Tax Income (Loss).................... (1,863) 584 (5,341)
Provision for Income Tax.................. -- -- --
Extraordinary loss on debt extinguishment. -- 4,329 --
-------- -------- --------
Net Income (Loss)........................ $(1,863) $(3,745) $(5,341)
======== ======== ========
Other Data:
EBITDA.................................... $39,505 $34,572 $22,009
</TABLE>
22
<PAGE>
<TABLE>
Summary of Historical Financial Results as a Percentage of Revenue
<CAPTION>
Brand
----------------------------------------
Year Ended December 31,
----------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Income Statement Data:
Revenue......................................... 100.0% 100.0% 100.0%
Operating Expenses.............................. 78.4 76.8 76.3
---- ---- ----
Gross Profit................................... 21.6 23.2 23.7
Selling and Administrative Expenses............. 14.4 14.4 16.1
Nonrecurring Start-up Expenses.................. -- -- 1.6
---- ---- ----
Operating Income................................ 7.2 8.8 6.0
Interest Expense................................ 8.1 8.6 9.6
Interest Income................................. 0.0 (0.1) (0.2)
Pre-Tax Income (Loss).......................... (0.9) 0.3 (3.3)
Provision for Income Tax........................ -- -- --
Extraordinary loss on debt extinguishment....... -- 2.1 --
---- ---- ----
Net Income (Loss).............................. (0.9)% (1.8)% (3.3)%
==== ==== ====
Other Data:
EBITDA.......................................... 18.0% 16.8% 13.7%
</TABLE>
Year Ended December 31, 1999 as Compared to Year Ended December 31, 1998
Revenue. Revenue for the year ended December 31, 1999, increased 6.6% to
$218.9 million from $205.3 million for the same period in 1998. Labor revenue
increased 6.1% to $158.5 million for the year ended December 31, 1999, as
compared to the same period in 1998. Rental revenue increased 9.0% to $54.7
million for the year ended December 31, 1999, as compared to the same period in
1998. The increase in revenues was primarily attributable to a full year of
contributions from 1998 acquisitions, 1999 acquisition contributions, and to
increased activity in our commercial scaffolding divisions. The increase in
rental revenue is also attributable to a stronger move into the commercial
market.
Gross Profit. Gross profit for the year ended December 31, 1999, decreased
0.7% to $47.3 million from $47.6 million for the same period in 1998. Labor
gross profit (labor revenue less labor cost) increased 14.3% to $28.3 million
for the year ended December 31, 1999, as compared to the same period in 1998.
Gross profit as a percentage of revenue for the year ended December 31, 1999,
decreased to 21.6% from 23.2% for the same period in 1998. This decrease was
primarily due to a $6.8 million increase in depreciation expense for scaffolding
equipment from 1998 to 1999. Depreciable lives of steel scaffold were changed
from 25 years to 20 years in January 1998 and wood plank was changed from 7
years to 2 years in July 1998. Increased capital purchases over the past two
years also contributed to the increase in depreciation expense.
Selling and Administrative Expenses. Selling and administrative expenses
for the year ended December 31, 1999, increased 6.7% to $31.6 million from $29.6
million for the same period in 1998. Selling and administrative expenses as a
percentage of revenue for the year ended December 31, 1999, remained constant at
14.4% for the same period in 1998. The increase in selling and administrative
expenses resulted from the additional expenses assumed with the acquired
companies. Also, we added eight new salespeople during 1999, increasing our
selling and administrative expenses.
Operating Income. Operating income for the period ended December 31, 1999,
decreased to $15.7 million from $18.1 million for the same period in 1998. The
decrease in operating income is directly related to the increase in depreciation
expense and overhead expenses from 1998 to 1999.
23
<PAGE>
Interest Expense. Interest expense for the year ended December 31, 1999,
increased 0.2% to $17.8 million from $17.7 million for the same period in 1998.
The increase was mainly due to a higher weighted average interest rate on all
outstanding debt. For 1999 and 1998, the weighted average interest rate was 9.9%
and 9.8%, respectively.
Extraordinary Items. There are no extraordinary items to report for the
year ended December 31, 1999.
Net Loss. Net loss (before accretion of preferred stock dividends) improved
to $1.9 million loss from $3.7 million loss for the same period in 1998.
Year Ended December 31, 1998 as Compared to Year Ended December 31, 1997
Revenue. Revenue for the year ended December 31, 1998, increased 27.8% to
$205.3 million from $160.7 million for the same period in 1997. Labor revenue
increased 33.2% to $149.4 million for the year ended December 31, 1998, as
compared to the same period in 1997. Rental revenue increased 22.7% to $50.0
million for the year ended December 31, 1998, as compared to the same period in
1997. The increase in revenues was primarily attributable to increased activity
in the industrial scaffolding market, and to a lesser extent, attributable to
the acquisitions made in 1998. Increased turnaround and capital maintenance
activity and unplanned utility outages in the U.S. Gulf Coast as well as utility
plant renovation, maintenance work and an increase in refinery turnarounds in
the northern part of the country, resulted in a positive variance for the year.
Gross Profit. Gross profit for the year ended December 31, 1998, increased
25.3% to $47.6 million from $38.0 million for the same period in 1997. Labor
gross profit (labor revenue less labor cost) increased 40.2% to $24.8 million
for the year ended December 31, 1998, as compared to the same period in 1997.
Gross profit as a percentage of revenue for the year ended December 31, 1998,
decreased to 23.2% from 23.7% for the same period in 1997. This decrease was
primarily due to a higher mix of labor revenue to total revenue for the period.
Labor profit margins are lower than rental and sale profit margins. Much of the
increased revenue was from industrial projects requiring a high percentage of
labor, thus causing overall profit margins to be lower.
Selling and Administrative Expenses. Selling and administrative expenses
for the year ended December 31, 1998, increased 14.7% to $29.6 million from
$25.8 million for the same period in 1997. Selling and administrative expenses
as a percentage of revenue for the year ended December 31, 1998, decreased to
14.4% from 16.1% for the same period in 1997. For the year ended December 31,
1998, the savings realized from a cost reduction program implemented in 1997
were offset by a $4.0 million increase in payroll expense.
Operating Income. As a result of the above, operating income for the period
ended December 31, 1998, increased to $18.1 million from $9.7 million for the
same period in 1997. The operating income results from 1997 were affected by
certain nonrecurring start-up expenses incurred by the Company as a result of
the Company's efforts to establish itself as a stand-alone entity.
Interest Expense. Interest expense for the year ended December 31, 1998,
increased 15.0% to $17.7 million from $15.4 million for the same period in 1997.
The increase was mainly due to a higher weighted average interest rate on all
outstanding debt. For 1998 and 1997, the weighted average interest rate was 9.8%
and 8.9%, respectively.
Extraordinary Item. The extraordinary item for the year ended December 31,
1998, was $4.3 million that represented the writeoff of the pro rata share of
deferred financing costs related to the portion of the debt repaid with proceeds
from the original issuance by the Company of the 10 1/4% Senior Notes in
February 1998.
Net Loss. Net loss (before accretion of preferred stock dividends) improved
to $3.7 million loss from $5.3 million loss for the same period in 1997.
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Liquidity and Capital Resources
The Company has historically utilized internal cash flow from operations
and borrowings under the Bank Facility to fund its operations, capital
expenditures, and working capital requirements. As of December 31, 1999, the
Company had working capital of $5.6 million including cash and cash equivalents
of $0.24 million.
Historically, the principal uses of cash have been capital expenditures
(primarily scaffolding) and working capital. The Company has also used cash to
repay term loans for which payments amounted to $8.3 million in 1997. In
February 1998, $119.8 million of the term loans were repaid with proceeds from
the original offering of the notes and $500,000 in payments were made in June
1998. The Company paid $6.3 million in interest relating to the notes in August
1998. Additionally the Company paid approximately $6.7 million in interest
relating to the notes in February 1999 and $6.7 million in interest relating to
the notes in August 1999.
For the years ended December 31, 1999, 1998 and 1997, cash provided by
operating activities was $21.1 million, $26.8 million and $12.0 million,
respectively.
The Company's capital expenditure requirements are comprised of maintenance
and expansion expenditures. Net capital expenditures for the Company were $19.6
million, $14.8 million and $9.7 million, for the years ended December 31, 1999,
1998 and 1997, respectively.
Borrowings under the revolving loan facility are governed by a borrowing
base equal to 85% of eligible accounts receivable. A $15.0 million sub-facility
is available for the issuance of letters of credit. In addition, in March 1999,
the Company amended the Credit Agreement to allow additional borrowings of $10.0
million for ongoing working capital and general corporate needs. As of December
31, 1999, the Company had $22.6 million in unused senior secured borrowing
capacity under the Bank Facility. The interest rate on each loan facility under
the Bank Facility is variable. During the year ended December 31, 1999, the
interest rate on loans outstanding under the term loan facility was an annual
dollar-weighted rate of 9.9%. Total payments for interest and principal by the
Company under the Bank Facility in 1997 were $14.1 million and $8.3 million,
respectively. During the year ended December 31, 1998, total payments for
interest were $11.5 million. During the year ended December 31, 1998, $121.3
million of the term loans were repaid of which $119.8 million was from the
proceeds of the original 10 1/4% Senior Note offering. During the year ended
December 31, 1999, total payments for interest were $16.2 million and $5.0
million of the term loans were repaid.
The Bank Facility contains financial and operating covenants, including
among other things, that the Company maintain certain financial ratios and
satisfy certain financial tests, and imposes limitations on the Company's
ability to make capital expenditures, to incur indebtedness and to pay
dividends. The Company was in compliance with the loan covenants at December 31,
1999.
In March 1999, the Company secured a $30 million Term B Loan commitment to
enable it to make future acquisitions. Certain provisions contained in the
credit agreement governing the Bank Facility were amended to eliminate a
requirement that revolving loans be periodically reduced. Also, certain of the
covenants contained in the credit agreement were amended to permit the Company
to incur certain additional indebtedness, engage in a broader range of business,
make certain additional investments and capital expenditures and reinvest asset
disposition proceeds within 180 days, rather than prepay the term loan
facilities with such proceeds.
Net Operating Losses
At December 31, 1999, the Company had net operating loss carryforwards,
resulting primarily from depreciation timing differences, of $88.7 million, for
federal income tax purposes. As a result of such loss carryforwards, cash paid
for income taxes in 1999 was minimal. The Company does not expect to expend cash
for taxes in the next several years.
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Effect of Inflation; Seasonality
Inflation has not generally been a material factor affecting the Company's
business. In recent years, the cost of scaffolding equipment has remained
relatively stable due to competitive pressures within the industry. The
Company's general operating expenses, such as salaries, employee benefits and
facilities costs are subject to normal inflationary pressures.
The operations of the Company are generally subject to seasonal
fluctuations coinciding with the spring and fall turnaround schedules of its
major customers.
Accounting Standard Not Yet Implemented
In June 1998, the Financial Accounting Standards Board (FASB) adopted SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value and that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting. SFAS No.
133 is effective for fiscal years beginning after June 15, 2000. The Company has
not yet quantified the impacts of adopting SFAS No. 133 on its consolidated
financial statements nor has it determined the timing or method of its adoption
of SFAS No. 133. However, SFAS No. 133 could increase volatility in earnings and
other comprehensive income.
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BUSINESS
Overview
The Company is the largest North American provider of industrial
scaffolding rental, erection, dismantlement and design services. The Company's
services facilitate access to tall structures for on-going maintenance,
turnarounds and capital projects, principally in the refining, petrochemical,
chemical, utility and pulp and paper industries. The Company's turnkey services
include equipment rental (accounting for approximately 25%, 24% and 25% of total
revenue for the years 1999, 1998 and 1997, respectively), labor for the erection
and dismantlement of the scaffolding (accounting for approximately 72%, 73% and
70% of total revenue for the years 1999, 1998 and 1997, respectively) and
scaffolding design services. The Company delivers its services through an
extensive field service organization of approximately 4,200 employees in 30
field offices located throughout the United States and two in Canada. The
Company also provides scaffolding services to the commercial market (primarily
nonresidential construction) and sells a small amount of scaffolding. For the
year ended December 31, 1999, the Company generated revenues and a net loss of
$218.9 million and $1.9 million, respectively. See "Selected Consolidated
Financial Data."
Approximately 79%, 83% and 80% of the Company's 1999, 1998 and 1997
revenues, respectively, were attributable to on-going maintenance, turnarounds
and capital projects of industrial facilities. The Company typically provides
on-going maintenance services under long-term contracts; the duration of these
contracts ranges between one and five years. Turnarounds occur every one to four
years depending on the industry and the type of turnaround being performed.
Although some turnarounds may be postponed for a period of time, they are a
necessary component of maintaining industrial facilities and are required to
ensure the safe and efficient operation of such facilities. The Company believes
that the necessity for on-going maintenance and turnarounds provides it with a
stable, recurring revenue base.
The Company believes its position as the largest supplier of industrial
scaffolding provides it with a number of competitive advantages including (i)
the ability to offer national coverage to large customers, (ii) the ability to
provide required personnel and scaffolding to process major turnarounds and
unanticipated plant outages, (iii) higher asset use through the shifting of
assets across regions and across its large customer base, (iv) purchasing
leverage with scaffolding manufacturers, and (v) comprehensive safety training
programs which have resulted in an accident rate which is well below the
industry average and have enabled the Company to reduce insurance costs and
accident-related expenses. The Company's size also enables it to maintain its
own trucking fleet and to provide a design department that specializes in the
custom design of industrial scaffolding, which the Company uses to minimize the
amount of scaffolding used and to maximize labor efficiency thereby providing
the Company with a competitive advantage.
Business Strategy
The Company has developed a business strategy which it believes will enable
it to profitably grow future revenue and cash flow. The key components of this
strategy are:
Leverage existing strengths. The Company's existing strengths include
long-standing customer relationships, extensive equipment resources, significant
labor capacity and an industry-leading safety record. These strengths have
enabled the Company to gain its current market share and to expand its business.
The Company will utilize these strengths to retain its maintenance contracts and
to aggressively pursue turnarounds and capital projects with its existing
customers and to expand scaffolding services to such customers' other
facilities.
Target underpenetrated industrial segments. Due to the Company's leading
market position and extensive service infrastructure, the Company has the
capacity to service several industries in which, due to limited historical
focus, the Company has had a relatively low market share. These include the
chemical, utilities and pulp and paper industries. To increase its penetration
in these markets, the Company has expanded its sales force, initiated incentive
and training programs and created a sales management function to target
opportunities and monitor the effectiveness of the sales force.
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Pursue complementary acquisitions. The Company intends to pursue
complementary acquisitions where significant consolidation savings and economies
of scale can be achieved. The scaffolding industry is characterized by
single-office or regional companies, many of which are undercapitalized and have
limited scaffolding inventories. The Company intends to focus its acquisition
strategy on companies which have long-term contracts or an expertise in a
certain industry or scaffolding application.
Expand its commercial scaffolding operations. The Company intends to
utilize its existing infrastructure to expand its position in the commercial
market. To increase its penetration of the commercial market, the Company has
targeted large-scale new construction and renovation projects, which require
relatively complex scaffolding. The Company believes its industry-leading safety
record provides it with a competitive advantage in pursuing these commercial
scaffolding market opportunities in the future. In November 1996, OSHA enacted
stricter regulations regarding training and safety in the commercial scaffolding
industry. As a result, safety has become a key consideration for commercial
customers.
The Industrial Scaffolding Market
Overview
The North American industrial scaffolding market represents approximately
$650 million of the $1.5 billion scaffolding market. Industrial customers
generally require systems scaffolding, which is highly versatile, can be quickly
erected and dismantled, is capable of conforming to irregularly shaped
structures and requires a higher level of skill to erect and dismantle.
Principal end-use industries and their estimated percent of the total industrial
market for 1999 were: (i) refineries-36%; (ii) petrochemical and chemical
plants-24%; (iii) utilities-19%; (iv) pulp and paper mills-13%; and (v) other
industrial users including aerospace, ship building and other miscellaneous
industrial applications-8%. Scaffolding is used by industrial customers for
on-going maintenance, turnarounds and capital projects. Since turnarounds may
require the complete shutdown of a facility, speed and reliability are key
customer considerations. Safety is another important consideration for
industrial customers. The industrial scaffolding market is fragmented and is
serviced predominantly by scaffolding specialists such as the Company.
End-Use Industries
The primary end-use industries for both the Company and the industrial
scaffolding market in general are refineries, petrochemical and chemical plants,
utilities, pulp and paper mills and other industries such as the aerospace, ship
building and certain miscellaneous industries.
Refining Industry. The refining industry, the Company's and the industrial
scaffolding market's largest end-use industry, accounted for approximately 36%
of the 1999 industrial scaffolding market and represented approximately 36% of
the Company's revenues for 1999. A maintenance contract at a refinery generates
between $250,000 and $2.0 million of scaffolding revenues annually, depending on
the size of the refinery and the scope of the contract (i.e., rentals and labor
or rental only). A major turnaround typically generates between $2.0 and $4.0
million of revenues to the scaffolding services provider, while a minor
turnaround typically generates in excess of $1.0 million. Turnarounds are
essential at refineries as the failure to overhaul equipment may ultimately
jeopardize the safe and efficient operation of a plant. Capital projects include
greenfield construction, plant expansions, restoration of mothballed refineries,
upgrading the heavy crude capability of refineries and compliance with new
environmental regulations. Capital projects have generated as much as $24.1
million in scaffolding revenues for the Company on a single project.
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It is not likely that any refineries will be closed permanently in the near
future, due to high exit barriers caused by strict environmental laws which make
it prohibitively expensive to abandon a refinery. In addition, refineries are
generally run at full capacity due to the high fixed costs, and therefore
maintenance operations are not significantly affected by demand.
Petrochemical and Chemical. The petrochemical and chemical industries
accounted for approximately 24% of domestic industrial scaffolding revenues and
represented approximately 15% of the Company's total revenues for 1999. The
petrochemical and chemical industries also use scaffolding services primarily
for maintenance and turnarounds, as well as capital projects. Engineering and
construction firms often provide on-going general maintenance at facilities
which they originally constructed. As part of such maintenance services,
engineering and construction firms either erect their own scaffolding or, to a
lesser extent, subcontract such services out to scaffolding specialists such as
the Company. The turnaround schedules of petrochemical and chemical plants
generally are similar to refineries, but depending on the type of chemical being
produced at a plant, turnarounds may be more frequent. Turnarounds at
petrochemical and chemical plants typically generate revenues between $1.0 and
$2.0 million.
Utilities. The utility industry accounted for approximately 19% of
industrial scaffolding revenues and represented approximately 11% of the
Company's revenues for 1999. Since plant maintenance has historically been
incorporated into a utility's rate base, utilities have maintained regular
turnaround schedules. A turnaround at a utility typically generates $75,000 to
$175,000 in scaffolding revenues; however, turnarounds may generate
substantially more revenues depending on the extent of a project. Scaffolding
services for on-going maintenance are often completed in-house.
Pulp and Paper. The pulp and paper industry accounted for approximately 13%
of industrial scaffolding revenues and represented approximately 2% of the
Company's revenues for 1999. Scaffolding services for on-going maintenance are
generally provided in-house. A turnaround at a major facility can generate
scaffolding revenues in excess of $1.0 million while a small facility will
typically generate revenues of $50,000 to $100,000.
Industrial Scaffolding Job Types
Industrial uses for scaffolding services include on-going maintenance,
turnarounds and capital projects.
On-going Maintenance. On-going maintenance work is typically performed
under long-term contracts which range between one and five years. On-going
maintenance represented approximately 50% of the total industrial scaffolding
market in 1999. On-going maintenance contracts often cover planned outages,
whereby typically one or a few devices in the plant are taken down for a short
period of time. Performance and customer relationships at all levels are
critical to maintaining these contracts. Having a maintenance contract in place
is an important competitive advantage when seeking future turnaround or
emergency scaffolding jobs.
Turnarounds. Turnarounds are major equipment overhauls which involve
shutting down all or a significant portion of a plant. Turnarounds represented
approximately 35% of the total industrial scaffolding market in 1999.
Turnarounds occur on a regular basis, typically every one to two years for minor
turnarounds and every four years for major turnarounds. However, turnarounds are
often delayed during periods of high operating profit for end users, but they
eventually must be completed. Though contracts for planned turnarounds are
typically bid out, the scaffold specialist with the maintenance contract is
frequently awarded the turnaround contract. Contracts for emergency outages due
to an explosion or natural disaster are generally handled by the contractor who
can mobilize a large amount of equipment and labor most effectively.
Capital Projects. Capital projects represented approximately 15% of the
industrial scaffolding market in 1999; however, this type of revenue is
cyclical. For instance, a single project has generated $24.1 million in revenues
and certain clean fuel acts resulted in $8.6 million of revenues. The amount of
revenues from capital projects fluctuates from year to year, depending on the
fundamentals of the end users, but can contribute significantly to the Company's
revenues.
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A majority of the capital projects in the 1990s have been related to
reactivation of mothballed refineries and compliance with the clean air acts in
California. Plant expansions require two to three years to construct and
generally produce several million dollars of scaffolding revenues. The Company
believes that at least ten companies, including several of its customers, are
currently planning major plant expansions.
The Commercial Scaffolding Market
The $725 million commercial scaffolding market is characterized by few
national and many regional competitors. Commercial scaffolding is used primarily
in nonresidential construction and renovation. Commercial applications are
generally characterized by regularly shaped structures with few contoured or
angled surfaces. Due to the simple shapes required, commercial jobs generally
utilize frame and brace scaffolding, a less versatile type of equipment which is
not suited to industrial applications. Commercial scaffolding requires a less
skilled work force and has historically been less focused on safety issues.
These factors combine to make the commercial market highly fragmented with low
barriers to entry. In November 1996, OSHA enacted stricter regulations regarding
training and safety in the commercial scaffolding industry. As a result, safety
has become a key consideration for commercial customers.
Equipment
The Company maintains a substantial inventory of scaffolding at its 32
field offices as well as at customer sites throughout the United States and in
Canada. In order to maximize profitability, the Company monitors asset
utilization daily and can quickly move scaffolding between sites. The Company's
size and national coverage gives it a significant advantage in this respect. The
type of scaffolding used by the Company for a project depends on a number of
factors, including the preference of local tradespeople based on their
familiarity with a particular type of scaffolding and the availability in the
customer's inventory of a particular kind of scaffolding which the client has
requested that the Company utilize. The Company utilizes three types of
scaffolding: systems, tube and clamp and frame and brace. The Company also
offers Sky Climber motorized scaffolding.
Systems scaffolding consists of interlocking horizontal, vertical and
platform pieces which can be assembled and dismantled quickly and with less
labor than the other types of scaffolding. Systems scaffolding is very versatile
because its pieces can be connected in a variety of ways to conform to the
contours of the area in which the scaffolding is required. For this reason,
systems scaffolding is particularly well-suited for refineries which contain
pipes and vessels around which the scaffolding must be erected.
Tube and clamp scaffolding offers similar versatility to systems
scaffolding and thus can be used in similar applications. However, tube and
clamp scaffolding must be bolted together with clamps and is therefore more
difficult and time consuming to assemble. Tube and clamp scaffolding was the
predecessor to and is generally being superceded by systems scaffolding.
Frame and brace scaffolding generally uses pre-constructed pieces
consisting of vertical supports and platforms and is predominantly used for
commercial projects. Frame and brace scaffolding may be assembled and dismantled
quickly but does not offer the versatility of systems or tube and clamp
scaffolding.
Motorized scaffolding consists of motors, platforms and rigging equipment
and the rigging is performed by either the Company or the customer. The Company
sells, rents and provides maintenance services for motorized scaffolding under
the "Sky Climber" brand name. The majority of Sky Climber customers are
commercial users such as painters, window washers, waterproofers, building
restorers and construction companies.
Competition
The Company is the largest North American provider of industrial
scaffolding services with an approximately 28% market share and 1999 industrial
scaffolding revenues that were larger than the industrial scaffolding revenues
for its three largest competitors combined. In 1999, the next five largest
scaffolding specialists after the Company, Aluma Systems USA, Inc., Safway Steel
Products, Patent Construction Systems, Interstate Scaffolding, Inc. and
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BET, accounted for approximately 27% of the total market, engineering and
construction firms accounted for approximately 23% and numerous small, thinly
capitalized, local competitors accounted for approximately 24%. Engineering and
construction firms often subcontract scaffolding services to scaffolding
specialists including the Company.
Safety
Safety is an important consideration in the selection and continued
employment of a scaffolding services provider. The Company maintains workforce
expertise through extensive internal and external training and safety programs.
The Company believes that its highly skilled workforce translates into lower
accident rates that benefit both the Company and its customers through lower
insurance and accident-related expenses. The Company has the best safety record
of any scaffolding company in the United States. The Company's rate of total
OSHA recordable injuries per 200,000 man hours was 2.0 for the year ended
December 31, 1998, and 1.75 for the year ended December 31, 1999 as compared to
an industry average (according to National Safety Council 1999 accident
statistics) for the year ended December 31, 1999 of 10.67. Compensation plans
for the Company's project managers have been designed to include incentives to
reduce the numbers of accidents, lost work days and lost time rates.
Sales and Marketing
The Company's selling organization consists of 47 sales team members. These
individuals are located throughout the Company's network of service locations.
Each sales team member reports to the respective Division Manager, who is
responsible for managing day-to-day sales activities.
The Company's sales force is charged with identifying and pursuing target
accounts, estimating and bidding on work, closing the sale and coordinating the
initial work relationship with the Company's broader operating team. In 1997,
the Company established a National Sales Manager position, which is charged with
the development and implementation of an overall sales reporting program.
As identified through its strategic planning process, the Company has
developed a comprehensive database of all potential scaffolding opportunities
and a sales plan for each of its Divisions. Using this customer database as a
foundation, the most promising target accounts are then assigned to individual
sales team members. The sales plans consist of two interactive elements. The
broader element is an assessment of the market segments that exist within a
given territory and the identification of those segments that offer the best
opportunity for growth in the territory. The more focused element is the
identification of the individual customer accounts that make up the local
population of each of the target market segments. Annual incremental revenue
goals are established for each sales team member, and actual sales results will
be tracked using the several databases that are being installed.
Customers
Brand's primary customers include large oil refineries and petrochemical
plants. The Company's top ten customers account for over one third of 1999
revenues. The Company's ten largest customers, when measured by 1999 revenue to
the Company, were Exxon Corporation, Arco, Mobil Corporation, Texaco Inc.,
Phillips, Citgo Petroleum Corporation, Lyondell Petrochemical Company, DuPont,
Houston Lighting & Power Company and Shell Oil. Exxon, the Company's largest
customer, accounted for approximately 13% of the Company's 1999 revenues. The
Company has contractual relationships with all of its primary customers. Each of
these contracts contains terms and conditions specific to each customer and are
cancellable by either party by 30 day written notification. Because the
contracts are entered into on a project-by-project basis and typically have a
defined scope of work, they do not have minimum purchase requirements. The
percentage of total Company revenues accounted for by each customer varies
greatly from year to year.
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Property
The Company operates facilities in 33 locations (32 field offices and one
headquarters location). The Company owns two locations in Canada, two in Texas,
one in Alabama and one in Louisiana. The Company leases its remaining 26
facilities as well as one site used for its corporate headquarters. The
Company's facilities typically include a small office, warehouse and yard and
range in size from 2,000 to 40,000 square feet under roof with yards from half
an acre to more than four acres. The Company's headquarters are located in a
9,500 square foot facility in Chesterfield, Missouri. The Company's facilities
are concentrated near its customers to minimize transportation costs, to shorten
lead times and to strengthen oversight and project management abilities.
Employees
As of December 31, 1999, the Company employed approximately 4,200 full-time
employees, of which 24% were represented by a labor union. The Company cannot
assure that strikes or other types of conflicts with unions or personnel will
not arise or that it will not become a target for further union organizing
activity. Since the Company's business has a high labor content, any such
activity could have a material adverse effect on the Company. The Company
believes that it has a good relationship with its employees.
The Company's business has a high labor content and, as a result, its
financial performance is affected by the availability of qualified personnel and
the cost of labor. In recent years, unemployment rates have reached unusually
low levels leading to lower availability of labor and to wage inflation. In
particular, the supply of labor has been low relative to demand in the Gulf
Coast Region, in which it has significant operations. While the Company has been
successful in hiring workers for its projects and it does not believe that the
reduced availability of labor has had a material adverse effect on its financial
performance, the Company cannot assure that sufficient labor will be available
in the future or that the cost of labor will not rise, either of which could
have an adverse effect on the Company.
Insurance
The Company maintains standard insurance for commercial general liability,
workers compensation and automobile liability, as well as, specialty insurance
coverage for directors' and officers' liability, wrongful employment practices,
commercial crime, architects' and engineers' liability and an umbrella liability
through several insurers.
Litigation
The Company is not party to litigation which, in the opinion of the
Company's management, could have a material adverse effect on the Company's
financial position, results of operations or liquidity.
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MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information with respect to
directors and executive officers of the Company. Each director and officer holds
office until a successor is elected and qualified or until his earlier death,
resignation or removal.
Name Age Position and Offices
---- --- --------------------
David L. Jaffe 41 Chairman of the Board
John M. Monter 52 Chief Executive Officer, President and Director
Ian R. Alexander 53 Chief Financial Officer, Vice President, Finance
David R. Cichy 49 Vice President, Operations--Northern Region
Raymond L. Edwards 46 Vice President, Administration and Secretary
Guy S. Huelat 38 Vice President, Resource Management
James "Marty" McGee 43 Vice President, Operations--Southeast Region
Scott M. Robinson 52 Vice President, Operations--Southwest Region
Robert Bonczek 54 Director
James S. Carlisle 57 Director
Donald R. Chappel 48 Director
Vincent Langone 56 Director
Karl R. Wyss 59 Director
David L. Jaffe, Chairman of the Board: Mr. Jaffe joined DLJ Merchant
Banking, Inc. ("DLJMB, Inc.") in 1984 and became a Managing Director in 1995. He
has been Chairman of the Board of the Company since the Acquisition. He has 15
years experience in investing private equity capital, in mergers and
acquisitions and in structuring and arranging financing for leveraged
transactions. Mr. Jaffe also serves on the board of directors of Duane Reade,
Inc. (NYSE:DRD), OSF Holdings Inc., (TSX:OSF), Shoppers Drug Mart Inc., Target
Media Partners and Terra Nova Group (NYSE:TNA) and previously served as a
director of Cambridge Industries Group, Inc., NACOLAH Corp., Pharmaceutical Fine
Chemicals S.A., EZ Buy and EZ Sell Recycler Corporation and OHA Financial, Inc.
He also serves as a director and a member of the Executive Committee of Project
A.L.S., a non-profit organization funding directed research for treatments of
Amyotrophic Lateral Sclerosis (Lou Gehrig's disease).
John M. Monter, Chief Executive Officer, President and Director: Mr. Monter
has served as a director, Chief Executive Officer and President since the
Acquisition. Prior to joining the Company at the time of the Acquisition, Mr.
Monter held a variety of corporate and operating assignments at Cooper
Industries, Inc. ("Cooper") where he began his career in 1977. Mr. Monter was
President of the Bussmann Division of Cooper, which manufactures electrical
overcurrent fuses, from 1992 to 1996.
Ian R. Alexander, Chief Financial Officer, and Vice President, Finance:
Prior to joining the Company as Chief Financial Officer, and Vice President,
Finance in April 1998, Mr. Alexander had a variety of assignments with BP Oil
Company from 1973 until 1993 in Europe, Africa and the U.S.A. He then became
Chief Financial Officer and Executive Vice President of Purina Mills, Inc. until
it was sold to Koch Industries in March 1998.
David R. Cichy, Vice President, Operations-- Northern Region: Mr. Cichy was
appointed Vice President, Operations--Northern Region in 1996. Beginning in
1978, Mr. Cichy served in various construction management functions with Rust
Industrial including Vice President, Resource Management from 1993 to 1996.
Raymond L. Edwards, Vice President, Administration and Secretary: Mr.
Edwards joined the Company in his current role in November 1996. Prior to
joining the Company, he held a variety of management positions, most recently,
with Cooper from 1984 to 1996, including Vice President, Human Resources from
1990 to 1996.
Guy S. Huelat, Vice President, Resource Management: Mr. Huelat joined the
Company in January 1997 in his current position. Prior to joining the Company,
Mr. Huelat was a Plant Manager from 1989 to 1994 and a
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Materials Manager from 1994 to 1996 at Cooper. From 1996 to 1997, he was
Director of Logistics for Planning and Customer Service for Kimble Glass, Inc.
James "Marty" McGee, Vice President, Operations -- Southeast Region: Mr.
McGee has held his current position since the Acquisition. From 1993 until the
Acquisition, Mr. McGee held various Region Management positions with Rust
Industrial and Waste Management Technologies (WMX). Mr. McGee has been with the
Company in various management positions since 1981 including President, Southern
Regional Scaffolding in 1993, Southern Region Manager in 1994 and Vice
President, Southern Operations for WMX Services group (29 locations, 5 different
Rust companies), from 1995 to 1996.
Scott M. Robinson, Vice President, Operations -- Southwest Region: Mr.
Robinson joined the Company as Vice President, Marketing in March 1997 and in
December of 1997 he assumed the position of Vice President, Operations - Central
Region. In January 1998 he took over his current assignment over the Southwest
Region. Prior to joining the Company, Mr. Robinson held various positions at
Cooper, including Vice President, Sales from 1993 to 1997 and Vice President,
Marketing from 1987 to 1993.
Robert Bonczek, Director: Mr. Bonczek has been President and a director of
AspenTree Capital, a private money management firm since 1991, and has been a
director of the Company since the Acquisition. He is a legal consultant to
Wilmer, Cutler and Pickering. Mr. Bonczek is a director of DCV, Inc. He is also
serving as Acting Chief Administrative Officer and Acting CFO for Trimeris,
Inc., a NASDAQ listed biotech company.
James S. Carlisle, Director: Mr. Carlisle has been Chief Executive Officer
of Carlisle Enterprises, LLC, a private equity investment firm engaged in the
acquisition and management of leveraged buyout companies since 1989, and has
been a director of the Company since the Acquisition.
Donald R. Chappel, Director: Mr. Chappel has been a director of the Company
since 1999. Mr. Chappel was Executive Vice President and Chief Financial Officer
of Waste Management, Inc. from August, 1999 through February, 2000, when he
resigned to pursue other opportunities. Prior to his most recent position, Mr.
Chappel was Senior Vice President - Operations and Administration since the
consummation of the WM Holdings Merger in July 1998. Prior thereto, Mr. Chappel
held several positions at WM Holdings, including serving as Acting Chief
Financial Officer since October, 1997, Vice President - Financial Services since
November, 1996 and Vice President and Controller (North American operations)
since August 1995. From 1991 to July, 1995, Mr. Chappel was Vice President and
Controller - West and Mountain Areas of Waste Management of North America, Inc.,
and from July to August, 1995 served as Vice President and Controller of
Chemical Waste Management, Inc. Prior thereto he had served as Vice President
and Controller - WMI Urban Services, beginning in June, 1987 when he joined WM
Holdings.
Vincent P. Langone, Director: Mr. Langone has been a director of the
Company since the Acquisition. Mr. Langone has been Chairman, President and
Chief Executive Officer of Formica Corporation since May 1998. From 1995 to
1997, Mr. Langone served as President of Interbuild International, Inc., which
provides operational management and general consulting services. Mr. Langone is
a director of United Retail Group and Summit Bank. From 1989 to 1995, Mr.
Langone served as Chairman, President and Chief Executive Officer of Formica
Corporation.
Karl R. Wyss, Director: Mr. Wyss is a Managing Director of DLJMB, Inc. and
has been a director of the Company since the Acquisition. Prior to joining
DLJMB, Inc. in 1993, he was Chairman and Chief Executive Officer of Lear Siegler
Inc. from 1989 to 1993. He serves on the boards of CommVault Systems, Inc., EZ
Buy & EZ Sell Recycler Corp., Localiza Rent A Car S.A., OSF, Inc., Mallory
Limitada, Pharmaceutical Fine Chemicals, S.A. and Von Hoffman Press, Inc.
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<PAGE>
Compensation of Directors
Directors of the Company do not receive cash compensation for serving as
directors; however, in March 1997, pursuant to Holdings' Stock Option Plan for
Outside Directors, directors who were not employees of Holdings, the Company or
any of their institutional shareholders, were each awarded options (the
"Director Options") to purchase 40,000 shares of the common stock of Holdings,
which options vested in March 1999.
Compensation Committee and Insider Interlocks
Compensation of the Company's management is determined by a committee
comprised of Messrs. Jaffe, Monter and Wyss. Mr. Monter is the Chief Executive
Officer and President of the Company. In March 1997, Mr. Monter purchased
386,406 newly-issued shares of the common stock of Holdings and 17,500
newly-issued shares of 14.5% Preferred Stock for an aggregate purchase price of
$823,905. In connection with such purchase, Holdings extended Mr. Monter a
recourse loan of $167,000, which matures in March 2002 (subject to prepayment in
the event any shares are disposed of prior to such time) and bears interest at a
rate of 7.03% per annum. The loan is secured by a pledge of the shares
purchased.
Messrs. Jaffe and Wyss are Managing Directors of DLJMB, Inc., the general
partner of DLJMB. Pursuant to a shareholders agreement dated as of September 30,
1996 between DLJMB, Carlisle, Rust, the Company, Holdings and certain other
individuals, Holdings' board consists of seven members, up to five of whom are
nominated by DLJMB. In addition, the shareholders agreement provides for certain
rights of first refusal in favor of DLJMB, certain rights and obligations on the
part of shareholders to participate in transfers of shares by DLJMB and
preemptive rights for DLJMB under certain circumstances. The shareholders
agreement further provides that DLJMB has the right, subject to certain
conditions, to request that Holdings register securities that they own under the
Securities Act, and to participate in other registrations of Holdings' and the
Company's securities, in each case at Holdings' expense.
In addition, the shareholders agreement provides for certain advisory
relationships and the payment of management advisory fees. For five years after
the date of the agreement, Donaldson, Lufkin & Jenrette Securities Corporation
("DLJSC"), an affiliate of DLJMB, Inc., is engaged as the exclusive financial
and investment banking advisor for Holdings, on customary terms. Pursuant to the
shareholders agreement, DLJMB, Inc. receives an annual advisory fee of $250,000
from Holdings. DLJSC received customary fees in connection with the original
underwriting, purchase and placement of the 10 1/4 Senior Notes.
DLJ Capital, the Syndication Agent and a lender under the Bank Facility, is
an affiliate of DLJMB. For a description of the Bank Facility, see "Description
of Bank Facility." The proceeds from the original sale of the 10 1/4 Senior
Notes were used to repay indebtedness under the Bank Facility, $1.6 million of
which was owed to DLJ Capital on the date of the 10 1/4 Senior Note offering. In
connection with an amendment to the existing Bank Facility, the Company will pay
customary fees to DLJ Capital, as the Syndication Agent and as a lender under
the Bank Facility.
Executive Compensation
The following table sets forth the compensation earned by the Chief
Executive Officer and the six other most highly paid executive officers for
services rendered in 1999.
35
<PAGE>
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation Awards
----------------------------------- -----------------------------
Securities All
Other Underlying Other
Salary Bonus Compensation Options/SARs Compensation
Names and Principal Position ($) ($) ($) (#) ($)
- ---------------------------- ------- ------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
John M. Monter, Chief Executive
Officer.................... 375,000 283,263 14,452 - 1,600 (1)
Ian Alexander, Chief Financial
Officer.................... 180,253 136,157 - - 1,600 (1)
Raymond L. Edwards, Vice
President, Administration.. 149,406 112,856 - - 1,600 (1)
Guy Huelat, Vice President,
Resource Management........ 133,494 102,172 - - 1,600 (1)
Scott Robinson, Vice President
Operations - Southwest
Region..................... 148,408 40,000 1,454 - 1,600 (1)
Dave Cichy, Vice President
Operations - Northern
Region..................... 127,123 133,269 6,058 - 1,600 (1)
James McGee, Vice President
Operations - Southeast
Region..................... 140,005 106,567 - - 1,600 (1)
</TABLE>
- ------------------
(1) Represents the Company's matching 401(k) contributions.
Stock Option Grants in Last Fiscal Year.
No stock options were granted in the year ending December 31, 1999.
The following table summarizes options exercised during the last fiscal
year under the Restricted Stock Purchase Agreement and the value of options for
persons named in the Summary Compensation Table.
Name RSO Granted RSO Vested RSO Exercised
- ---- ----------- ---------- -------------
John M. Monter......... 437,500 175,000 87,500
James "Marty" McGee.... 42,000 16,800 8,400
Raymond L. Edwards..... 42,000 16,800 8,400
Scott Robinson......... 40,000 16,000 8,000
Guy Huelat............. 42,000 16,800 8,400
David Cichy............ 40,000 16,000 8,000
For each one-year period ending on December 31, the annual vesting
opportunity will be the achievement of the annual operating budget and/or
financial targets approved by the Board of Directors of the Company.
Employment Agreement
Mr. Monter entered into an employment agreement with the Company on June 1,
1999, pursuant to which he serves as President and Chief Executive Officer. The
employment agreement terminates on March 31, 2003, and provides for an annual
salary of not less than $375,000. Mr. Monter is also eligible for a bonus of up
to 120% of his base salary. The Company undertakes to pay up to $2,000 of
premiums annually under Mr. Monter's life insurance policy. In the event the
Company terminates Mr. Monter's employment without cause or he becomes disabled,
he is
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<PAGE>
entitled to his (i) base salary through the date of termination, earned bonus
for prior fiscal year but not yet paid, and any unreimbursed business expenses;
(ii) base salary through the last day of the 24th month following the date of
termination ("the Severance Period"); (iii) continued coverage under the
Company's welfare benefits for up to the end of the Severance Period or such
time as he is eligible to receive comparable welfare benefits, and in the case
of termination without cause, a bonus equal to $12,500 multiplied by the number
of months remaining in the Severance Period. Any unvested stock options held by
Mr. Monter shall vest upon a change in control of the Company. As a part of the
employment agreement, Mr. Monter has entered into covenants prohibiting him from
competing with the Company, working for any of the Company's competitors or
using proprietary information for a twelve-month period following his departure
from the Company.
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<PAGE>
PRINCIPAL STOCKHOLDERS
All of the issued and outstanding common stock of the Company is held by
Holdings (and pledged to secure the Bank Facility). The following table sets
forth certain information with respect to the beneficial ownership of the common
stock of Holdings as of December 31, 1999 by (i) each person or group known to
the Company who beneficially owns more than five percent of the common stock of
Holdings and (ii) all directors and executive officers of the Company as a
group:
<TABLE>
<CAPTION>
Number of Percentage
Shares of of
Name and Address of Beneficial Owner Common Stock Class
------------------------------------ ------------ ----------
<S> <C> <C>
DLJ Merchant Banking Partners, L.P. and related investors(1)........ 8,762,500 64.4%
Rust Industrial Services, Inc.(2)
3003 Butterfield Road
Oakbrook, IL 60521................................................. 2,487,500 18.3%
Carlisle-Brand Investors, L.P.(3)
7777 Fay Avenue
La Jolla, California 92037......................................... 1,250,000 (4) 9.2%
David L. Jaffe(5)
DLJ Merchant Banking Partners, Inc.
277 Park Avenue
New York, New York 10172........................................... -- --
Karl R. Wyss(5)
DLJ Merchant Banking Partners, Inc.
277 Park Avenue
New York, New York 10172........................................... -- --
James S. Carlisle(6)
Carlisle Enterprises
7777 Fay Avenue
La Jolla, California 92037......................................... -- --
All directors and officers as a group(5)(6)......................... 1,097,773 (7) 8.1%
</TABLE>
- -------------------
(1) Consists of shares held by DLJMB, DLJ Offshore Partners, C.V. ("Offshore"),
DLJ Merchant Banking Funding, Inc. ("Funding") and DLJ International
Partners, C.V. ("International"), each of which is affiliated with DLJSC.
See "Certain Relationships and Related Transactions." The address of each
of DLJMB and Funding is 277 Park Avenue, New York, New York 10172. The
address of each of Offshore and International is John B. Gorsivaweg 6,
Willemstad, Curacao, Netherland Antilles. As a general partner of DLJMB,
Offshore and International, DLJMB, Inc. may be deemed to beneficially own
indirectly all of the shares held by DLJMB, Offshore and International, and
as the parent of each of DLJ Merchant Banking, Inc. and Funding, Donaldson,
Lufkin & Jenrette, Inc. may be deemed to beneficially own indirectly all of
the shares held by DLJMB, Offshore, International and Funding. Donaldson,
Lufkin & Jenrette, Inc. is a majority owned subsidiary of The Equitable
Companies Incorporated. The address of DLJ Merchant Banking, Inc. and
Donaldson, Lufkin & Jenrette, Inc. is 277 Park Avenue, New York, New York
10172.
(2) Rust Industrial is a wholly owned subsidiary of Rust International, Inc.
("RII") which is majority owned by WMI. As a result, WMI and RII may be
deemed to beneficially own all of the shares held by Rust Industrial. The
address for each of WMI and RII is 1001 Fannin, Houston, TX 77002.
(3) As the general partner of Carlisle, Carlisle Group, L.P. ("Carlisle Group")
may be deemed to beneficially own indirectly all of the shares held by
Carlisle. As the general partner of Carlisle Group, Carlisle Enterprises,
LLC
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<PAGE>
may be deemed to beneficially own indirectly all of the shares held by
Carlisle. The address of Carlisle Group and Carlisle Enterprises, LLC is
7777 Fay Avenue, La Jolla, California 92037.
(4) Does not include (i) 47,500 shares issuable upon the exercise of currently
exercisable options held by Carlisle Group and (ii) up to 871,250 shares
issuable upon exercise of options held by Carlisle Group.
(5) Messrs. Jaffe and Wyss are officers of DLJ Merchant Banking, Inc., an
affiliate of DLJMB and DLJSC. Share data shown for such individuals
excludes shares shown as held by DLJMB and related investors, as to which
such individuals disclaim beneficial ownership.
(6) Mr. Carlisle is a managing partner of Carlisle Enterprises, LLC, the sole
general partner of the sole general partner of Carlisle. Share data shown
for Mr. Carlisle excludes shares shown as held by Carlisle, as to which Mr.
Carlisle disclaims beneficial ownership.
(7) Does not include shares which may be purchased upon exercise of Director
Options or options awarded pursuant to the Company's employee benefit
plans.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the shareholders agreement dated as of September 30, 1996
between DLJMB, Carlisle, Rust, the Company, Holdings and certain other
individuals, Holdings' board consists of seven members: up to five nominated by
DLJMB, one nominated by Carlisle and one nominated by Rust Industrial. The
shareholders agreement also provides for certain restrictions on transfers of
Holdings' common stock. In addition, the shareholders agreement provides for
certain rights of first refusal in favor of DLJMB, certain rights and
obligations on the part of shareholders to participate in transfers of shares by
DLJMB and preemptive rights for DLJMB, Carlisle and Rust Industrial under
certain circumstances. The shareholders agreement further provides that DLJMB,
Carlisle and Rust Industrial each have the right, subject to certain conditions,
to request that Holdings register securities that they own under the Securities
Act, and to participate in other registrations of Holdings' and the Company's
securities, in each case at Holdings' expense.
The shareholders agreement provides for certain advisory relationships and
the payment of management advisory fees. For five years after the date of the
agreement, DLJSC is engaged as the exclusive financial and investment banking
advisor for Holdings, on customary terms. Pursuant to the shareholders
agreement, DLJMB, Inc., the sole general partner of DLJMB, and Carlisle Group,
the sole general partner of Carlisle, each receive an annual advisory fee of
$250,000 from Holdings. DLJSC received customary fees in connection with the
original underwriting, purchase and placement of the notes.
Holdings has entered into a stock option agreement with Carlisle Group. The
stock option agreement gives Carlisle Group the right to acquire up to 918,750
shares of the common stock of Holdings for $1.00 per share. The exact number of
shares that may be acquired pursuant to the stock option agreement depends upon
Holdings' financial performance, equity financings by Holdings and other
factors. Carlisle Group's rights under the stock option agreement vest
progressively throughout the term of the agreement. The stock option agreement
will terminate on or, under certain circumstances, before September 30, 2006.
DLJ Capital, the Syndication Agent and a lender under the Bank Facility, is
an affiliate of DLJMB and DLJSC. For a description of the Bank Facility, see
"Description of Bank Facility." The proceeds from the original sale of the notes
was used to repay indebtedness under the Bank Facility, $1.6 million of which
was owed to DLJ Capital. In connection with an amendment to the existing Bank
Facility, the Company paid customary fees to DLJ Capital, as the Syndication
Agent and as a lender under the Bank Facility.
In connection with the Acquisition, WMI and the Company entered into a
transition services agreement. Pursuant to such agreement, WMI paid the Company
a fee for transition services of $725,000 quarterly. The first such payment was
made on December 31, 1996 and such payments continued through September 30,
1999. In addition, the Company provides computer support to WMI and receives a
payment of $75,000 per month for such service.
In March 1997, certain officers and employees of the Company purchased a
total of 878,364 newly-issued shares of Holdings' common stock for $1 per share
and 42,832 shares of 14.5% preferred stock for $25 per share. In connection with
such purchases, Holdings extended recourse loans to executive officers in the
aggregate amount of $341,000. In July 1999, Holdings extended recourse loans to
the members of the Brand advisory team (John Monter, Ian Alexander, Raymond
Edwards, Guy Huelat, Scott Robinson, David Cichy and James McGee) in the amount
of $515,000, and received cash in the amount of $129,000, both of which were
used as consideration for the exercise of certain stock options of Holdings'
common stock. The 1997 and 1999 loans earn interest at 7.03% and 5.22%
respectively and mature in 2002 and 2006, respectively. These loans are secured
by 643,500 shares owned by such officers and employees.
40
<PAGE>
DESCRIPTION OF BANK FACILITY
Although all of the material elements of the Credit Agreement are stated
herein, the following summary does not purport to be complete and is qualified
in its entirety by the Credit Agreement, copies of which may be obtained upon
request from the Company.
The Company entered into a credit agreement (the "Credit Agreement")
relating to the Bank Facility, with DLJ Capital, as Syndication Agent, and BofA,
as Administrative Agent, on September 30, 1996, which Credit Agreement was
amended on November 21, 1997 and February 20, 1998, amended and restated as of
March 17, 1999 and supplemented by an additional Term-B Loan Addendum on March
9, 2000. As so amended, amended and restated and supplemented, the Bank Facility
includes, after giving effect to amortization payments through December 31,
1999, $58.0 million of senior secured credit facilities. A $30.0 million senior
secured revolving loan facility (the "Revolving Facility") is available to the
Company for working capital and other general corporate purposes. This facility
matures on September 30, 2002. Borrowings under the Revolving Facility are
governed by a borrowing base equal to 85% of eligible accounts receivable. A
$15.0 million sub-facility of the Revolving Facility is available for the
issuance of letters of credit. The issuance of letters of credit constitutes
usage under the Revolving Facility and reduces availability of the Revolving
Facility dollar for dollar. Interest on loans under the Revolving Facility is
determined by a leverage-based pricing grid. A commitment fee is payable on the
unused portion of the Revolving Facility at a rate also determined by a
leverage-based pricing grid.
In addition, the Bank Facility, as amended, amended and restated and
supplemented, includes two term loan facilities. The first term loan facility
was fully drawn at the closing of the bank facility (the "Bank Closing") in the
amount of $160.0 million to partially fund the Acquisition. $130.0 million of
such Term Facility was repaid with the proceeds of the original issuance by the
Company of the notes, leaving $30.0 of loans outstanding under this facility, of
which $6.5 million has been repaid through December 31, 1999 in regularly
scheduled amortization payments. Interest on loans under this term loan facility
is determined by a leverage-based pricing grid. The portion of such term loan
facility that remained outstanding after such repayment had an average life of
3.05 years at the Bank Closing Date. This term loan facility has and will
amortize quarterly in amounts aggregating $1.5 million in 1998, $5.0 million in
1999, $6.0 million in 2000, $8.5 million in 2001 and $9.0 million in 2002, with
a final maturity of September 30, 2002.
A second term loan facility was added to the Bank Facility on March 15,
2000. This second term loan facility is in the amount of $5.0 million and was
fully drawn on March 15, 2000. Interest on loans under this facility is also
determined by a leveraged-based pricing grid. This term loan facility amortizes
quarterly in amounts aggregating $50,000 in each of 2000, 2001 and 2002 and
$4.85 million in 2003, with a final maturity of September 30, 2003.
Loans outstanding under the Bank Facility are required to be prepaid from
100% of the net proceeds from debt issuances, 100% of the net proceeds from
certain asset sales that are not reinvested in the Company's business within a
specified period, 50% of the net proceeds from certain issuances of equity
securities and 75% of the Company's consolidated annual excess cash flow.
The Bank Facility is secured by (i) a first priority perfected lien on all
material tangible and intangible assets of the Company and its U.S.
subsidiaries, (ii) a first priority pledge of all notes evidencing intercompany
indebtedness owed to the Company or its U.S. subsidiaries and (iii) a first
priority pledge of 100% of the capital stock of the Company and all of its U.S.
subsidiaries and 65% of the capital stock of all of its non-U.S. subsidiaries.
The Bank Facility is also supported by guarantees from Holdings and all U.S.
subsidiaries of the Company.
The Credit Agreement contains the following financial covenants, which are
computed quarterly on a rolling four-quarter basis: (i) maximum leverage
(ranging from 5.25:1 as of December 31, 1999, decreasing thereafter to 4.50:1 on
December 31, 2001 and thereafter); (ii) minimum interest coverage (ranging from
1.80:1 as of December 31, 1999 increasing thereafter up to 2.10:1 at December
31, 2001 and thereafter); (iii) minimum fixed charge coverage (ranging from
1.0:1 as of December 31, 1999 increasing thereafter up to 1.10:1 at December 31,
2001 and thereafter); (iv) minimum net worth (equal to $20 million plus an
amount equal to 50% of cumulative positive net income from January 1, 1998 to
the end of the fiscal quarter most recently ended on or prior to such date of
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<PAGE>
determination); and (v) maximum capital expenditures (not in excess of $10.0
million in any fiscal year, with the ability to carry forward up to $5.0 million
to the next succeeding fiscal year to the extent the amount of capital
expenditures permitted to be made in any fiscal year exceeds the amount actually
made in such fiscal year, in addition to an aggregate amount not in excess of
$5.0 million in any fiscal year used to acquire industrial scaffolding, with the
ability to carry forward up to $2.5 million to the next succeeding fiscal year
to the extent the amount of capital expenditures permitted to be made in any
fiscal year to acquire industrial scaffolding exceeds the amount actually made
in such fiscal year). In addition, the Credit Agreement restricts the Company's
ability, among other things, to (i) incur debt, sale-leasebacks and contingent
liabilities; (ii) pay dividends, make distributions or repurchase stock; (iii)
incur liens; (iv) sell assets other than in the ordinary course of business; (v)
make investments or acquisitions; (vi) consummate mergers, consolidations or
combinations; or (vii) engage in transactions with affiliates. As of December
31, 1999 the Company was in compliance with the covenants under the Credit
Agreement.
42
<PAGE>
DESCRIPTION OF PREFERRED STOCK
The Company is authorized to issue 1,250,000 shares of the 14.5% Senior
Exchangeable Preferred Stock due 2008, par value $0.01, of which 1,042,460 are
issued and outstanding. The following is a summary of the principal terms of the
14.5% Preferred Stock, which is governed by the Certificate of Designations,
Preferences and Rights relating thereto (the "Certificate of Designations").
Each share of 14.5% Preferred Stock has an initial liquidation preference
of $25.00 per share, plus accrued and unpaid dividends. The 14.5% Preferred
Stock ranks senior to all classes or series of equity securities of the Company.
The holders of the 14.5% Preferred Stock are entitled to receive dividends,
when, as and if declared by the Board at the rate of 14.5% per annum. Dividends
on the 14.5% Preferred Stock accrete to the liquidation value of the 14.5%
Preferred Stock until the later of (i) September 30, 2001 (the "Fifth
Anniversary") and (ii) the first date on which dividends on the 14.5% Preferred
Stock would be permitted to be paid in cash pursuant to the terms of the
Company's then outstanding indebtedness (such later date, the "Cash Pay Date").
The Company is restricted from declaring dividends on other securities and from
redeeming or repurchasing certain junior securities unless full cumulative
dividends have been paid on the 14.5% Preferred Stock.
After September 30, 2001, the Company may, at its option, redeem any or all
outstanding shares of 14.5% Preferred Stock at a price of 107.25% of the
liquidation value in 2001 declining annually ratably to 100% in 2004 and
thereafter. In the event of a Change of Control (as defined in the Certificate
of Designations), the Company is required to make an offer to redeem all shares
of 14.5% Preferred Stock at a redemption price equal to 101% of the liquidation
value. In addition, the Company is required to redeem all shares of 14.5%
Preferred Stock on March 31, 2008 at a price equal to the liquidation value at
such date.
The holders of 14.5% Preferred Stock voting as a class are entitled to
elect two directors if and whenever (i) six consecutive quarterly dividends
after the Fifth Anniversary have not been paid in full, (ii) the Company has not
redeemed the 14.5% Preferred Stock on March 31, 2008, (iii) the Company has not
offered to redeem the 14.5% Preferred Stock in a timely manner following a
change of control event, (iv) dividends have been paid on other securities or
junior securities have been redeemed or repurchased while full cumulative
dividends have not been paid on the 14.5% Preferred Stock or (v) the Company's
Certificate of Incorporation has been amended in a manner adverse to the holders
of 14.5% Preferred Stock without such holder's consent.
Exchange Debentures
Subject to certain conditions, the Company may, at its option, issue 14.5%
Junior Subordinated Exchange Debentures due 2008 ("Exchange Debentures") in
exchange for any or all outstanding shares of 14.5% Preferred Stock, at an
exchange ratio of $1.00 of liquidation value of 14.5% Preferred Stock for $1.00
principal amount of Exchange Debentures. On and after the date of any exchange,
dividends will cease to accrue on the 14.5% Preferred Stock and all rights of
holders of the 14.5% Preferred Stock shall cease.
The Exchange Debentures, if issued, will be issued pursuant to an indenture
(the "Exchange Indenture") and will be limited in amount to the aggregate
liquidation value of the 14.5% Preferred Stock outstanding at the time of the
exchange. The Exchange Debentures will mature on March 31, 2008. The Exchange
Debentures will pay interest at an effective annual rate of 14.5%, payable
quarterly. Prior to the Cash Pay Date, interest will be payable in additional
Exchange Debentures.
The Exchange Debentures will be general unsecured obligations of the
Company and will be subordinated in right of payment to the prior payment of all
indebtedness of the Company that is not expressly made pari passu with or junior
to the Exchange Debentures.
After September 30, 2001, the Company would be allowed, at its option, to
redeem any or all outstanding Exchange Debentures at a price of 107.25%, in
2001, of the principal amount thereof, plus accrued and unpaid interest,
declining annually ratably to 100% in 2004 and thereafter. In the event of a
Change of Control, the
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<PAGE>
Company would be required to make an offer to redeem all of the Exchange
Debentures at a redemption price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest thereon.
The Exchange Indenture would contain covenants that, among other things,
would limit the ability of the Company to make certain payments and to merge,
consolidate or sell substantially all of its assets.
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<PAGE>
DESCRIPTION OF NOTES
General
The 10 1/4% Senior Notes due 2008 (the "Notes") have been registered under
the Securities Act of 1933, as amended, and were issued in exchange for the 10
1/4% Senior Notes due 2008 (the "Old Notes") issued by the Company on February
25, 1998. The Notes were issued under an indenture, dated as of February 25,
1998 (the "Indenture") by and between the Company and U.S. Trust Company of
Texas, N.A., as trustee under the Indenture (the "Trustee"). The Notes are
subject to the terms stated in the Indenture and to the terms made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). Holders of the Notes are referred to the Indenture and
the Trust Indenture Act for a statement of those terms. Although all of the
material elements of the Notes and the Indenture are stated herein, the
statements and definitions of terms under this caption relating to the Notes and
the Indenture described below are summaries and do not purport to be complete.
Such summaries make use of certain terms defined in the Indenture and are
qualified in their entirety by express reference to the Indenture. Copies of the
Indenture are available as set forth under "--Additional Information." Certain
terms used herein are defined below under "--Certain Definitions."
The Notes represent general senior unsecured obligations of the Company and
rank pari passu with all existing and future senior unsecured Indebtedness and
other obligations of the Company. The Notes are effectively subordinated to all
existing and future liabilities of the Company's subsidiaries, including trade
payables. As of December 31, 1999, the Company's subsidiaries had no outstanding
Indebtedness other than intercompany Indebtedness and certain capital lease
obligations. In addition, the Notes are effectively subordinated to existing and
future senior secured Indebtedness, including the Bank Facility, which is
secured by a pledge of substantially all of the assets of the Company and its
subsidiaries and is also guaranteed by the Company's U.S. subsidiaries. As of
December 31, 1999, $157.4 million of Indebtedness was outstanding under the Bank
Facility. In addition, as of December 31, 1999, the Company had $15.4 million in
unused senior secured borrowing capacity under the Bank Facility. Further, as of
December 31, 1999, the Company had outstanding approximately $130 million in
aggregate principal amount of senior Indebtedness, including approximately $27.4
million of secured Indebtedness.
Principal, Maturity and Interest
The Notes are limited in aggregate principal amount to $130.0 million,
mature on February 15, 2008, and bear interest at 10 1/4% per annum from the
Issue Date or from the most recent interest payment date to which interest has
been paid or provided for. Interest on the Notes is payable semi-annually in
arrears on February 15 and August 15 of each year to the Persons in whose names
such Notes are registered at the close of business on the February 1 or August 1
immediately preceding such interest payment date. Interest will be calculated on
the basis of a 360-day year consisting of twelve 30-day months.
The Notes may be presented or surrendered for payment of principal,
premium, if any, interest and Liquidated Damages, if any, and for registration
of transfer or exchange, at the office or agency of the Company within the City
and State of New York, maintained for such purpose. In addition, in the event
the Notes do not remain in book-entry form, interest may be paid, at the option
of the Company, by check mailed to the registered holders of the Notes at the
respective addresses as set forth on the Note Register. Until otherwise
designated by the Company, the Company's office or agency in New York will be
the office of the Trustee maintained for such purpose. The Notes will be issued
only in fully registered form, without coupons, in denominations of $1,000 and
integral multiples thereof. No service charge will be made for any registration
of transfer or exchange or redemption of Notes, but the Company or Trustee may
require in certain circumstances payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.
Optional Redemption
Except as provided in the next paragraph, the Notes are not redeemable at
the option of the Company prior to February 15, 2003. On or after such date, the
Notes will be redeemable at the option of the Company, in whole at any time or
in part from time to time, at the following prices (expressed in percentages of
the principal amount), if
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redeemed during the 12 months beginning February 15 of the years indicated
below, in each case together with interest accrued to the redemption date
(subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date) plus Liquidated
Damages, if any:
Year Percentage
- ---- ----------
2003.................................... 105.125%
2004.................................... 103.417%
2005.................................... 101.708%
2006 and thereafter..................... 100.000%
Notwithstanding the foregoing, at any time during the first 36 months after
the Issue Date, the Company may, at its option, redeem up to a maximum of 35% of
the aggregate principal amount of the Notes with the net cash proceeds of one or
more Qualified Equity Offerings at a redemption price equal to 110 1/4% of the
principal amount thereof, plus accrued and unpaid interest thereon to the
redemption date plus Liquidated Damages, if any; provided, that each such
redemption shall occur within 90 days of the closing of the related Qualified
Equity Offering.
If fewer than all the Notes are redeemed, selection for redemption will be
made by the Trustee in accordance with the principal stock exchange, if any, on
which the Notes are listed, or, if the Notes are not so listed, on a pro rata
basis, by lot or by any other means which the Trustee determines to be fair and
appropriate.
Mandatory Redemption
Except as set forth below under "--Change of Control" and "--Certain
Covenants--Limitation on Asset Sales," the Company is not required to make
mandatory redemption or sinking fund payments with respect to the Notes.
Change of Control
Upon the occurrence of a Change of Control, each holder will have the right
to require the Company to repurchase all of such holder's Notes in whole or in
part (the "Change of Control Offer") at a purchase price (the "Change of Control
Purchase Price") in cash equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the Change of
Control Payment Date (as defined below), plus Liquidated Damages, if any, on the
terms described below.
Within 30 days following any Change of Control, the Company or the Trustee
(at the expense of the Company) will mail a notice to each holder and to the
Trustee stating, among other things, (i) that a Change of Control has occurred
and a Change of Control Offer is being made as provided for in the Indenture,
and that, although holders are not required to tender their Notes, all Notes
that are timely tendered will be accepted for payment; (ii) the Change of
Control Purchase Price and the repurchase date, which will be no earlier than 30
days and no later than 60 days after the date such notice is mailed (the "Change
of Control Payment Date"); (iii) that any Note accepted for payment pursuant to
the Change of Control Offer (and duly paid for on the Change of Control Payment
Date) will cease to accrue interest after the Change of Control Payment Date;
and (iv) the instructions and any other information necessary to enable holders
to tender their Notes and have such Notes purchased pursuant to the Change of
Control Offer. The Company will comply with any applicable tender offer rules
(including, without limitation, any applicable requirements of Rule 14e-1 under
the Exchange Act) in the event that the Change of Control Offer is triggered
under the circumstances described herein.
The existence of the holders' rights to require, subject to certain
conditions, the Company to repurchase 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 source of funds for the repurchase of Notes upon a Change
of Control will be the Company's cash or cash generated from operations or other
sources, including borrowings or sales of assets; however, a "Change in Control"
(as defined in the Bank Facility) constitutes an event of default thereunder
that alleviates the lenders from any obligation to make loans and allows them to
accelerate the Indebtedness outstanding thereunder. There can be no assurance
that sufficient funds will be available at the time of any Change of Control to
repay all amounts
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owing under such other Indebtedness or to make the required payments of the
Notes. In the event that a Change of Control Offer occurs at a time when the
Company does not have sufficient available funds to pay the Change of Control
Purchase Price for all Notes timely tendered pursuant to such offer or at a time
when the Company is prohibited from purchasing the Notes (and the Company is
unable either to obtain the consent of the holders of the relevant Indebtedness
or to repay such Indebtedness), an Event of Default would occur under the
Indenture. In addition, one of the events that constitutes a Change of Control
under the Indenture is a sale, conveyance, transfer or lease of all or
substantially all of the assets of the Company or the Company and the
Subsidiaries, taken as a whole. The Indenture is governed by New York law, and
there is no established quantitative definition under New York law of
"substantially all" of the assets of a corporation. Accordingly, if the Company
or its Subsidiaries were to engage in a transaction in which it or they disposed
of less than all of the assets of the Company or the Company and its
Subsidiaries taken as a whole, as applicable, a question or interpretation could
arise as to whether such disposition was of "substantially all" of its assets
and whether the Company was required to make a Change of Control Offer.
The Company is not required to make a Change of Control Offer upon a Change
of Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in the
Indenture applicable to a Change of Control Offer made by the Company and
repurchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the holders to require the
Company to repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar restructuring. The provisions of the Indenture may
not afford holders protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction affecting the
Company that may adversely affect holders because (i) 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 require the Company to make a Change of Control Offer or (ii) such
transactions may include an actual shift in voting power or beneficial ownership
to a Permitted Holder which is excluded under the definition of Change of
Control from the amount of shares involved in determining whether or not the
transaction involves a shift of the magnitude required to trigger the
provisions. A transaction involving the management of the Company or its
Affiliates, or a transaction involving a recapitalization of the Company, will
result in a Change of Control only if it is the type of transaction specified in
such definition.
Certain Covenants
Set forth below are certain covenants contained in the Indenture.
Transactions with Affiliates. Subsequent to the Issue Date, the Company
will not, and will not permit any Subsidiary to, directly or indirectly, enter
into or permit to exist any transaction or series of related transactions
(including, but not limited to, the purchase, sale or exchange of Property, the
making of any Investment, the giving of any guarantee or the rendering of any
service with any Affiliate of the Company, other than transactions between or
among the Company, and any Subsidiaries) unless (i) such transaction or series
of related transactions is on terms no less favorable to the Company or such
Subsidiary than those that could be obtained in a comparable arm's length
transaction with a Person that is not such an Affiliate and (ii) (a) with
respect to a transaction or series of related transactions that has a Fair
Market Value in excess of $500,000 but less than $5.0 million, the Company
delivers an Officer's Certificate to the Trustee certifying that such
transaction or series of related transactions complies with clause (i) above;
(b) with respect to a transaction or series of related transactions that has a
Fair Market Value equal to or in excess of $5.0 million but less than $10.0
million, the transaction or series of related transactions is approved by a
majority of the Board of Directors of the Company (including a majority of the
disinterested directors), which approval is set forth in a Board Resolution
certifying that such transaction or series of transactions complies with clause
(i) above; or (c) with respect to a transaction or series of related
transactions that has a Fair Market Value equal to or in excess of $10.0
million, the Company shall have received an opinion as to the fairness to the
Company or such Subsidiary from a financial point of view issued by an
investment banking firm of national standing. The foregoing provisions shall not
be applicable to (i) reasonable and customary compensation, indemnification and
other benefits paid or made available to an officer, director or employee of the
Company or a Subsidiary for services rendered in such person's capacity as an
officer, director or employee (including reimbursement or advancement of
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reasonable out-of-pocket expenses and provisions of directors' and officers'
liability insurance) or agreements providing therefor, (ii) transactions between
the Company or its Subsidiaries on the one hand, and DLJSC or its Affiliates on
the other hand, involving the provision of financial, consulting or underwriting
services by DLJSC or its Affiliates; provided that the fees payable to DLJSC or
its Affiliates do not exceed the usual and customary fees of DLJSC and its
Affiliates for similar services, (iii) any payments made, or transactions
entered into, by the Company or its Subsidiaries pursuant to or in accordance
with the Shareholders Agreement, the Acquisition Agreements or the Bank Facility
or (iv) the making of any Restricted Payment otherwise permitted by the
Indenture.
Limitation on Restricted Payments. The Company will not, and will not
permit any Subsidiary to, make any Restricted Payment, unless at the time of and
after giving pro forma effect to the proposed Restricted Payment, (a) no Default
shall have occurred and be continuing (or would result therefrom), (b) the
Company could incur at least $1.00 of additional Indebtedness under the tests
described in the first sentence under the caption "--Certain
Covenants--Limitation on Indebtedness" and (c) the aggregate amount of all
Restricted Payments declared or made on or after the Issue Date by the Company
or any Subsidiary shall not exceed the sum of (i) 50% (or if such Consolidated
Net Income shall be a deficit, minus 100% of such deficit) of the aggregate
Consolidated Net Income accrued during the period beginning on the first day of
the fiscal quarter in which the Issue Date falls and ending on the last day of
the fiscal quarter ending immediately prior to the date of such proposed
Restricted Payment, plus (ii) an amount equal to the aggregate Qualified
Proceeds received by the Company, subsequent to the Issue Date, from
contributions to the Company's capital or the issuance or sale (other than to a
Subsidiary) of shares of its Capital Stock (excluding Redeemable Stock, but
including Capital Stock issued upon the exercise of options, warrants or rights
to purchase Capital Stock (other than Redeemable Stock) of the Company) and the
liability (expressed as a positive number) as expressed on the face of a balance
sheet in accordance with GAAP in respect of any Indebtedness of the Company or
any of its Subsidiaries, or the carrying value of Redeemable Stock, which has
been converted into, exchanged for or satisfied by the issuance of shares of
Capital Stock (other than Redeemable Stock) of the Company, subsequent to the
Issue Date, plus (iii) 100% of the net reduction in Restricted Investments,
subsequent to the Issue Date, in any Person, resulting from payments of interest
on Indebtedness, dividends, repayments of loans or advances, or other transfers
of Property (but only to the extent such interest, dividends, repayments or
other transfers of Property are not included in the calculation of Consolidated
Net Income), in each case to the Company or any Subsidiary from any Person
(including, without limitation, from Unrestricted Subsidiaries) or from
redesignations of Unrestricted Subsidiaries as Subsidiaries (valued in each case
as provided in the definition of "Investments"), not to exceed in the case of
any Person the amount of Restricted Investments previously made by the Company
or any Subsidiary in such Person and in each such case which was treated as a
Restricted Payment.
The foregoing provisions will not prevent (A) the payment of any dividend
on Capital Stock of any class within 60 days after the date of its declaration
if at the date of declaration such payment would be permitted by the Indenture;
(B) any Restricted Payment made in exchange for Capital Stock of the Company
(other than Redeemable Stock), or out of the Qualified Proceeds from the
substantially concurrent issuance or sale (other than to a Subsidiary) of
Capital Stock of the Company (other than Redeemable Stock), provided that the
Qualified Proceeds from such sale are excluded from computations under clause
(c) (ii) above to the extent that such proceeds are applied to purchase or
redeem such Capital Stock or Subordinated Indebtedness; (C) so long as no
Default shall have occurred and be continuing or should occur as a consequence
thereof, any repurchase, redemption payment, defeasance, acquisition or other
retirement for value of Subordinated Indebtedness of the Company or a Subsidiary
solely in exchange for, or out of the Qualified Proceeds from the substantially
concurrent sale of, new Subordinated Indebtedness of the Company or a
Subsidiary, so long as such Subordinated Indebtedness is permitted under the
covenant described under "--Limitation on Indebtedness" and (x) is subordinated
to the Notes at least to the same extent as the Subordinated Indebtedness so
exchanged, purchased or redeemed, (y) has a stated maturity later than the
stated maturity of the Subordinated Indebtedness so exchanged, purchased or
redeemed and (z) has an Average Life at the time incurred that is greater than
the remaining Average Life of the Subordinated Indebtedness so exchanged,
purchased or redeemed; (D) payments to Holdings to fund payments made or to be
made by Holdings for the benefit of the Company or any Subsidiary of the
Company, including, without limitation, the payment of management and other
professional fees, whether pursuant to the Shareholders Agreement or otherwise,
and the payment of taxes; (E) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of Holdings, the Company or any
Subsidiary of the Company held by any future, present or former employee,
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consultant or director of the Company (or any of its Subsidiaries) pursuant to
any management equity subscription agreement or stock option plan or agreement
or any other management or employee benefit plan or agreement in effect as of
the Issue Date; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed (x) $1.5 million
in any calendar year (with unused amounts in any calendar year being carried
over for two succeeding calendar years subject to a maximum (without giving
effect to clause (y) below) of $3.0 million in any calendar year) plus (y) the
aggregate cash proceeds received by the Company during such calendar year from
any issuance of Equity Interests by the Company to members of management of the
Company or its Subsidiaries; (F) repurchases of Equity Interests deemed to occur
upon exercise of stock options if such Equity Interests represent a portion of
the exercise price of such options; (G) payments in accordance with or pursuant
to the terms of any Permitted Refinancing Indebtedness or any Permitted
Subsidiary Refinancing Indebtedness; (H) payments to redeem, or to avoid the
issuance of, fractional shares of Capital Stock of the Company; (I) the payment
of dividends by a Subsidiary on any class of common stock of such Subsidiary if
such dividend is paid pro rata to all holders of such class of common stock; (J)
the repurchase of any class of common stock of a Subsidiary if such repurchase
is made pro rata with respect to such class of common stock; and (K) other
Restricted Payments not to exceed $3.0 million. Restricted Payments permitted to
be made as described in the first sentence of this paragraph will be excluded in
calculating the amount of Restricted Payments thereafter.
For purposes of this covenant, if a particular Restricted Payment involves
a non-cash payment, including a distribution of assets, then such Restricted
Payment shall be deemed to be an amount equal to the cash portion of such
Restricted Payment, if any, plus an amount equal to the Fair Market Value of the
non-cash portion of such Restricted Payment.
Limitation on Indebtedness. The Company will not, and will not permit any
Subsidiary to, directly or indirectly, incur any Indebtedness (including
Acquired Indebtedness), unless after giving pro forma effect to the incurrence
of such Indebtedness, the Consolidated Interest Coverage Ratio for the
Determination Period preceding the Transaction Date is at least 2.25 to 1.0.
Notwithstanding the foregoing, the Company or any Subsidiary may incur Permitted
Indebtedness. Any Indebtedness of a Person existing at the time at which such
Person becomes a Subsidiary (whether by merger, consolidation, acquisition or
otherwise) shall be deemed to be incurred by such Subsidiary at the time at
which it becomes a Subsidiary.
Limitations on Dividends and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not permit any Subsidiary, directly
or indirectly, to create, enter into any agreement with any Person or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind which by its terms restricts the ability of any
Subsidiary to (a) pay dividends, in cash or otherwise, or make any other
distributions on its Capital Stock to the Company or any Subsidiary, (b) pay any
Indebtedness owed to the Company or any Subsidiary, (c) make loans or advances
to the Company or any Subsidiary or (d) transfer any of its Property or assets
to the Company or any Subsidiary except any encumbrance or restriction contained
in any agreement or instrument:
(i) existing on the Issue Date;
(ii) relating to any Property or assets acquired after the Issue Date, so
long as such encumbrance or restriction relates only to the Property or assets
so acquired and is not and are not created in anticipation of such acquisition;
(iii) relating to any Acquired Indebtedness of any Subsidiary at the date
on which such Subsidiary was acquired by the Company or any Subsidiary (other
than Indebtedness incurred in anticipation of such acquisition);
(iv) effecting a refinancing of Indebtedness incurred pursuant to an
agreement referred to in the foregoing clauses (i) through (iii), so long as the
encumbrances and restrictions contained in any such refinancing agreement are no
more restrictive than the encumbrances and restrictions contained in such
agreements;
(v) constituting customary provisions restricting subletting or assignment
of any lease of the Company or any Subsidiary or provisions in license
agreements or similar agreements that restrict the assignment of such agreement
or any rights thereunder;
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(vi) constituting restrictions on the sale or other disposition of any
Property securing Indebtedness as a result of a Permitted Lien on such Property;
(vii) constituting any temporary encumbrance or restriction with respect to
a Subsidiary pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock of, or Property and
assets of, such Subsidiary; or
(viii) arising pursuant to applicable law.
Limitation on Asset Sales. The Company will not engage in, and will not
permit any Subsidiary to engage in, any Asset Sale unless (a) except in the case
of (i) an Asset Sale resulting from the requisition of title to, seizure or
forfeiture of any Property or assets or any actual or constructive total loss or
an agreed or compromised total loss or (ii) a Bargain Purchase Contract, the
Company or such Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the Fair Market Value of the Property;
(b) at least 75% of such consideration consists of Cash Proceeds (or the
assumption of Indebtedness of the Company or such Subsidiary relating to the
Capital Stock or Property or asset that was the subject of such Asset Sale and
the unconditional release of the Company or such Subsidiary from such
Indebtedness); and (c) the Company delivers to the Trustee an Officer's
Certificate certifying that such Asset Sale complies with clauses (a) and (b).
The Company or such Subsidiary, as the case may be, may apply the Net Available
Proceeds from each Asset Sale (x) to the acquisition of Replacement Assets, or
(y) to repurchase or repay Senior Debt.
Any Net Available Proceeds from any Asset Sale that are not used to so
acquire Replacement Assets or to repurchase or repay Senior Debt within 270 days
after consummation of the relevant Asset Sale shall constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million,
the Company shall within 60 days thereafter make a pro rata offer (an "Asset
Sale Offer") to purchase from all holders an aggregate principal amount of Notes
equal to the Excess Proceeds, at a price in cash (the "Asset Sale Offer Purchase
Price") equal to 100% of the outstanding principal thereof plus accrued
interest, if any, to the purchase date, plus Liquidated Damages, if any, in
accordance with the procedures set forth in the Indenture. Upon completion of
such Asset Sale Offer, the amount of Excess Proceeds shall be reset to zero and
the Company may use any remaining amount for general corporate purposes.
The Company will comply with any applicable tender offer rules (including,
without limitation, any applicable requirements of Rule 14e-1 under the Exchange
Act) in the event that an Asset Sale Offer is required under the circumstances
described herein.
Limitation on Sale and Lease-Back Transactions. The Company will not, and
will not permit any Subsidiary to, directly or indirectly, enter into, assume,
guarantee or otherwise become liable with respect to any Sale and Lease-Back
Transaction unless (i) the proceeds from such Sale and Lease-Back Transaction
are at least equal to the Fair Market Value of such Property being transferred
and (ii) the Company or such Subsidiary would have been permitted to enter into
such transaction under the covenants described in "--Certain
Covenants--Limitation on Indebtedness" and "--Certain Covenants--Limitation on
Liens," and "--Certain Covenants--Limitation on Subsidiary Indebtedness and
Preferred Stock."
Limitation on Liens. The Company will not, and will not permit any
Subsidiary to, directly or indirectly, create, affirm, incur, assume or suffer
to exist any Liens of any kind other than Permitted Liens on or with respect to
any Property or assets of the Company or such Subsidiary or any interest therein
or any income or profits therefrom, whether owned at the Issue Date or
thereafter acquired, without effectively providing that the Notes shall be
secured equally and ratably with (or prior to) the Indebtedness so secured for
so long as such obligations are so secured.
Subsidiary Guarantees. (a) The Indenture provides that the Company will not
permit any Subsidiary to guarantee the payment of any Indebtedness of the
Company or any Indebtedness of any other Subsidiary, in each case except for
Indebtedness described in clause (b) of the definition of "Permitted
Indebtedness" (in each case, the "Guaranteed Indebtedness") unless (i) if such
Subsidiary is not a Guarantor, such Subsidiary simultaneously executes and
delivers a supplemental indenture to the Indenture providing for a Subsidiary
Guarantee of payment of the Notes
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by such Subsidiary, (ii) if the Notes or the Subsidiary Guarantee (if any) of
such Subsidiary are subordinated in right of payment to the Guaranteed
Indebtedness, the Subsidiary Guarantee under the supplemental indenture shall be
subordinated to such Subsidiary's guarantee with respect to the Guaranteed
Indebtedness substantially to the same extent as the Notes or the Subsidiary
Guarantee are subordinated to the Guaranteed Indebtedness under the Indenture,
(iii) if the Guaranteed Indebtedness is by its express terms subordinated in
right of payment to the Notes or the Subsidiary Guarantee (if any) of such
Subsidiary, any such guarantee of such Subsidiary with respect to the Guaranteed
Indebtedness shall be subordinated in right of payment to such Subsidiary's
Subsidiary Guarantee with respect to the Notes substantially to the same extent
as the Guaranteed Indebtedness is subordinated to the Notes or the Subsidiary
Guarantee (if any) of such Subsidiary, (iv) such Subsidiary waives and will and
not in any manner whatsoever claim or take the benefit or advantage of, any
rights of reimbursement, indemnity or subrogation or any other rights against
the Company or any other Subsidiary as a result of any payment by such
Subsidiary under its Subsidiary Guarantee, and (v) such Subsidiary shall deliver
to the Trustee an opinion of counsel to the effect that (A) such Subsidiary
Guarantee of the Notes has been duly executed and authorized and (B) such
Subsidiary Guarantee of the Notes constitutes a valid, binding and enforceable
obligation of such Subsidiary, except insofar as enforcement thereof may be
limited by bankruptcy, insolvency or similar laws (including, without
limitation, all laws relating to fraudulent transfers) and except insofar as
enforcement thereof is subject to general principles of equity.
(b) Notwithstanding the foregoing and the other provisions of the
Indenture, any Subsidiary Guarantee by a Subsidiary of the Notes shall provide
by its terms that it shall 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 Capital Stock in, or all or
substantially all the assets of, such Subsidiary (which sale, exchange or
transfer is not prohibited by the Indenture) or (ii) the release or discharge of
the guarantee which resulted in the creation of such Subsidiary Guarantee,
except a discharge or release by or as a result of payment under such guarantee.
Unrestricted Subsidiaries. The Indenture provides that the Company may
designate a subsidiary (including a newly formed or newly acquired subsidiary)
of the Company or any of its Subsidiaries as an Unrestricted Subsidiary;
provided that at the time of such designation such Subsidiary (i) has no
Indebtedness other than Non-Recourse Indebtedness; (ii) is not party to any
agreement, contract, arrangement or understanding with the Company or any
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Subsidiary than those that might be obtained at the time from Persons who are
not Affiliates of the Company; (iii) is a Person with respect to which neither
the Company nor any of its Subsidiaries has any direct or indirect obligation
(a) to subscribe for additional Equity Interests or (b) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels, of operating results; and (iv) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of the
Company or any of its Subsidiaries. Notwithstanding any provisions of this
covenant, all subsidiaries of an Unrestricted Subsidiary will be Unrestricted
Subsidiaries.
The Indenture further provides that the Company will not, and will not
permit any of its Subsidiaries to, take any action or enter into any transaction
or series of transactions that would result in a Person (other than a newly
formed subsidiary having no outstanding Indebtedness (other than Indebtedness to
the Company or a Subsidiary) at the date of determination) becoming a Subsidiary
(whether through an acquisition, the redesignation of an Unrestricted Subsidiary
or otherwise) unless, after giving effect to such action, transaction or series
of transactions on a pro forma basis, (i) the Company could incur at least $1.00
of additional Indebtedness pursuant to the first sentence of "--Certain
Covenants--Limitation on Indebtedness" and (ii) no Default or Event of Default
would occur.
Subject to the preceding paragraphs, an Unrestricted Subsidiary may be
redesignated as a Subsidiary. The designation of a subsidiary as an Unrestricted
Subsidiary or the designation of an Unrestricted Subsidiary as a Subsidiary in
compliance with the preceding paragraphs shall be made by the Board of Directors
pursuant to a Board Resolution delivered to the Trustee and shall be effective
as of the date specified in such Board Resolution, which shall not be prior to
the date such Board Resolution is delivered to the Trustee. Any Unrestricted
Subsidiary shall become a Subsidiary if it incurs any Indebtedness other than
Non-Recourse Indebtedness. If at any time Indebtedness of an Unrestricted
Subsidiary which was Non-Recourse Indebtedness no longer so qualifies, such
Indebtedness shall be deemed to have been incurred when such Non-Recourse
Indebtedness becomes Indebtedness.
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Limitations on Line of Business. The Indenture provides that neither the
Company nor any of its Subsidiaries will directly or indirectly engage to any
substantial extent in any line or lines of business activity other than a
Related Business.
Reports. The Indenture provides that the Company shall file with the
Commission the annual reports, quarterly reports and other documents which the
Company would have been required to file with the Commission pursuant to such
Section 13(a) or 15(d) or any successor provision thereto whether or not the
Company were subject thereto, such documents to be filed with the Commission on
or prior to the respective dates (the "Required Filing Dates") by which the
Company would have been required to file them. The Company shall also (whether
or not it is required to file reports with the Commission), within 30 days of
each Required Filing Date, transmit by mail to all holders of Notes, as their
names and addresses appear in the applicable Security Register, without cost to
such holders or Persons, and file with the Trustee, (i) all quarterly and annual
financial information that is substantially equivalent to that which 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 Result of Operations" section
and, with respect to the annual information only, a report thereon by the
Company's certified independent accountants and (ii) all reports that are
substantially equivalent to those that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports.
Consolidation, Merger, Conveyance, Lease or Transfer
The Company will not, in any transaction or series of transactions,
consolidate with or merge into any other Person (other than a merger of a
Subsidiary into the Company in which the Company is the continuing corporation
or a merger for purposes of reincorporation in another State of the United
States or the District of Columbia or a merger with a Person that owns 100% of
the Capital Stock of the Company), or sell, convey, assign, transfer, lease or
otherwise dispose of all or substantially all of the Property and assets of the
Company and the Subsidiaries, taken as a whole, to any Person, unless:
(i) either (a) the Company shall be the continuing corporation or (b) the
corporation (if other than the Company) formed by such consolidation or into
which the Company is merged, or the Person which acquires, by sale, assignment,
conveyance, transfer, lease or disposition, all or substantially all of the
Property and assets of the Company and the Subsidiaries, taken as a whole (such
corporation or Person, the "Surviving Entity"), shall be a corporation organized
and validly existing under the laws of the United States of America, any
political subdivision thereof or any state thereof or the District of Columbia,
and shall expressly assume, by a supplemental indenture, the due and punctual
payment of the principal of (and premium, if any) and interest (and Liquidated
Damages, if any) on all the Notes and the performance of the Company's covenants
and obligations under the Indenture;
(ii) immediately before and after giving effect to such transaction or
series of transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), no Event of Default or
Default shall have occurred and be continuing or would result therefrom; and
(iii) immediately after giving effect to any such transaction or series of
transactions on a pro forma basis as if such transaction or series of
transactions had occurred on the first day of the Determination Period, the
Company (or the Surviving Entity if the Company is not continuing) would be
permitted to incur $1.00 of additional Indebtedness pursuant to the test
described in the first sentence under the caption "--Certain
Covenants--Limitation on Indebtedness."
The provision of clause (iii) shall not apply to (a) a merger between the
Company and a wholly owned Subsidiary of a wholly owned Subsidiary of Holdings
created for the purpose of holding the Capital Stock of the Company, (b) a
merger between the Company and a wholly owned Subsidiary or (c) a merger between
the Company and an Affiliate incorporated solely for the purpose of
reincorporating the Company in another State of the United States or the
District of Columbia so long as, in each case, the amount of Indebtedness of the
Company and its Subsidiaries is not increased thereby.
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In connection with any consolidation, merger, continuance, transfer of
assets or other transactions contemplated by this provision, the Company shall
deliver, or cause to be delivered, to the Trustee, in form and substance
reasonably satisfactory to the Trustee, an Officer's Certificate and an opinion
of counsel, each stating that such consolidation, merger, continuance, sale,
assignment, conveyance or transfer and the supplemental indenture in respect
thereto comply with the provisions of the Indenture and that all conditions
precedent in the Indenture relating to such transactions have been complied
with.
Upon any transaction or series of transactions that are of the type
described in, and are effected in accordance with, the foregoing paragraphs, the
Surviving Entity shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture and the Notes with the
same effect as if such Surviving Entity had been named as the Company in the
Indenture; and when a Surviving Person duly assumes all of the obligations and
covenants of the Company pursuant to the Indenture and the Notes, except in the
case of a lease, the predecessor Person shall be relieved of all such
obligations.
Events of Default
Each of the following is an "Event of Default" under the Indenture:
(a) default in the payment of interest on any Note issued pursuant to the
Indenture when the same becomes due and payable, and the continuance of such
default for a period of 30 days;
(b) default in the payment of the principal of (or premium, if any, or
Liquidated Damages, if any, on) any Note issued pursuant to the Indenture at its
Maturity, whether upon optional redemption, required repurchase (including
pursuant to a Change of Control Offer or an Asset Sale Offer) or otherwise or
the failure to make an offer to purchase any such Note as required;
(c) the Company fails to comply with any of its covenants or agreements
contained in "--Change of Control," "--Certain Covenants--Limitation on
Restricted Payments," "--Certain Covenants--Limitation on Asset Sales,"
"--Certain Covenants--Limitation on Indebtedness" or "--Consolidation, Merger,
Conveyance, Lease or Transfer";
(d) default in the performance, or breach, of any covenant or warranty of
the Company in the Indenture (other than a covenant or warranty addressed in
clause (a), (b) or (c) above) and continuance of such Default or breach for a
period of 30 days after written notice thereof has been given to the Company by
the Trustee or to the Company and the Trustee by holders of at least 25% of the
aggregate principal amount at Stated Maturity of the outstanding Notes;
(e) Indebtedness of the Company or any Subsidiary is not paid when due
within the applicable grace period, if any, or is accelerated by the holders
thereof and, in either case, the principal amount of such unpaid or accelerated
Indebtedness exceeds $5.0 million;
(f) the entry by a court of competent jurisdiction of one or more final
judgments against the Company or any Subsidiary in an uninsured or unindemnified
aggregate amount in excess of $5.0 million which is not discharged, waived,
appealed, stayed, bonded or satisfied for a period of 60 consecutive days;
(g) the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Company or any Significant
Subsidiary in an involuntary case or proceeding under U.S. bankruptcy laws, as
now or hereafter constituted, or any other applicable Federal, state, or foreign
bankruptcy, insolvency, or other similar law or (ii) a decree or order adjudging
the Company or any Significant Subsidiary as bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company or any Significant Subsidiary under
U.S. bankruptcy laws, as now or hereafter constituted, or any other applicable
Federal, state or foreign bankruptcy, insolvency, or similar law, or appointing
a custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or any Significant Subsidiary or of any
substantial part of the Property or assets of the Company or any Significant
Subsidiary, or ordering the winding up or liquidation of the affairs of the
Company or any Significant Subsidiary, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in effect for a
period of 60 consecutive days; or
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(h) (i) the commencement by the Company or any Significant Subsidiary of a
voluntary case or proceeding under U.S. bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal, state or foreign bankruptcy,
insolvency or other similar law or of any other case or proceeding to be
adjudicated as bankrupt or insolvent; or (ii) the consent by the Company or any
Significant Subsidiary to the entry of a decree or order for relief in respect
of the Company or any Significant Subsidiary in an involuntary case or
proceeding under U.S. bankruptcy laws, as now or hereafter constituted, or any
other applicable Federal, state, or foreign bankruptcy, insolvency or other
similar law or to the commencement of any bankruptcy or insolvency case or
proceeding against the Company or any Significant Subsidiary; or (iii) the
filing by the Company or any Significant Subsidiary of a petition or answer or
consent seeking reorganization or relief under U.S. bankruptcy laws, as now or
hereafter constituted, or any other applicable Federal, state or foreign
bankruptcy, insolvency or other similar law; or (iv) the consent by the Company
or any Significant Subsidiary to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or of any substantial part of the Property or assets of
the Company or any Significant Subsidiary or of any substantial part of the
Property or assets of the Company or any Significant Subsidiary, or the making
by the Company or any Significant Subsidiary of an assignment for the benefit of
creditors; or (v) the admission by the Company or any Significant Subsidiary in
writing of its inability to pay its debts generally as they become due; or (vi)
the taking of corporate action by the Company or any Significant Subsidiary in
furtherance of any such action.
If any Event of Default (other than an Event of Default specified in clause
(g) or (h) above) occurs and is continuing, then and in every such case the
Trustee or the holders of not less than 25% of the outstanding aggregate
principal amount at Stated Maturity of the Notes, may declare the principal
amount at Stated Maturity, premium, if any, and any accrued and unpaid interest
on all such Notes then outstanding to be immediately due and payable by a notice
in writing to the Company (and to the Trustee if given by holders of such
Notes), and upon any such declaration all amounts payable in respect of the
Notes will become and be immediately due and payable. If any Event of Default
specified in clause (g) or (h) above occurs, the principal amount at Stated
Maturity, premium, if any, and any accrued and unpaid interest on the Notes then
outstanding shall become immediately due and payable without any declaration or
other act on the part of the Trustee or any holder of such Notes. In the event
of a declaration of acceleration because an Event of Default set forth in clause
(e) above has occurred and is continuing, such declaration of acceleration shall
be automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (e) shall be remedied or cured or waived by
the holders of the relevant Indebtedness within 30 days after such event of
default; provided that no judgment or decree for the payment of the money due on
the Notes has been obtained by the Trustee as provided in the Indenture. Under
certain circumstances, the holders of a majority in principal amount at Stated
Maturity of the outstanding Notes by notice to the Company and the Trustee may
rescind an acceleration and its consequences.
The holders of a majority in aggregate principal amount at Stated Maturity
of the Notes then outstanding by notice to the Trustee may on behalf of the
holders of all such Notes waive any existing Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, premium, if any, on, Liquidated Damages, if any, on or the
principal of, such Notes. Subject to the provisions of the Indenture relating to
the duties of the Trustee, the Trustee is under no obligation to exercise any of
its rights or powers under the Indenture at the request, order or direction of
any of the holders, unless such holders have offered to such Trustee reasonable
security or indemnity. Subject to the provisions of the Indenture and applicable
law, the holders of a majority in aggregate principal amount at Stated Maturity
of the Notes at the time outstanding 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 upon the Trustee.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required within five
Business Days after becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement describing such Default or Event of Default,
its status and what action the Company is taking or proposes to take with
respect thereto.
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Amendment, Supplement and Waiver
The Company and the Trustee may, at any time and from time to time, without
notice to or consent of any holder, enter into one or more indentures
supplemental to the Indenture (a) to evidence the succession of another Person
to the Company and the assumption by such successor of the covenants and
Obligations of the Company under the Indenture and contained in the Notes, (b)
to add to the covenants of the Company, for the benefit of the holders, or to
surrender any right or power conferred upon the Company by the Indenture, (c) to
add any additional Events of Default, (d) to provide for uncertificated Notes in
addition to or in place of certificated Notes, (e) to evidence and provide for
the acceptance of appointment under the Indenture by the successor Trustee, (f)
to secure the Notes, (g) to provide for any guarantee of the Notes by any
Subsidiary, and (h) to cure any ambiguity, to correct or supplement any
provision in the Indenture which may be inconsistent with any other provision
therein or to add any other provisions with respect to matters or questions
arising under the Indenture; provided that such actions will not adversely
affect the interests of the holders in any material respect.
With the consent of the holders of not less than a majority in principal
amount at Stated Maturity of the outstanding Notes (including consents obtained
in connection with a tender offer or exchange offer for the Notes), the Company
and the Trustee may enter into one or more indentures supplemental to the
Indenture for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of the Indenture or of modifying in any
manner the rights of the holders; provided, however, that no such supplemental
indenture will, without the consent of the holders of not less than two-thirds
in principal amount at Stated Maturity of the Notes, modify the Obligations of
the Company to make offers to purchase Notes upon a Change of Control or from
the proceeds of Asset Sales; provided, further, that no such supplemental
indenture will, 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
premium, if any, or Liquidated Damages, if any), or the interest thereon that
would be due and payable upon Maturity thereof, or change the place of payment
where, or the coin or currency in which, any Note or any premium, Liquidated
Damages or interest thereon is payable, or impair the right to institute suit
for the enforcement of any such payment on or after the Stated Maturity thereof,
(b) reduce the percentage in principal amount at Stated Maturity of the
Outstanding Notes, the consent of whose Holders is necessary for any such
supplemental indenture or required for any waiver of compliance with certain
provisions of the Indenture, or certain Defaults thereunder, (c) subordinate in
right of payment, or otherwise subordinate, the Notes to any other Indebtedness
or (d) modify any of the provisions of this paragraph (except to increase any
percentage set forth herein).
The holders of not less than a majority in principal amount at Stated
Maturity of the outstanding Notes may on behalf of the holders of all the Notes
waive any past Default or Event of Default under the Indenture and its
consequences, except a Default or Event of Default (a) in the payment of the
principal of (or premium, if any) or interest (or Liquidated Damages, if any) on
any Note or (b) in respect of a covenant or provision hereof which under the
proviso to the prior paragraph cannot be modified or amended without the consent
of the holder of each outstanding Note affected.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the Company
or any Guarantor, as such, shall have any liability for any obligations of the
Company or any Guarantor under the Notes, the Subsidiary Guarantees, 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. 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.
Satisfaction and Discharge of the Indenture; Defeasance
The Company may terminate its obligations under the Notes and the Indenture
when (i) either (A) all outstanding Notes have been delivered to the Trustee for
cancellation or (B) all such Notes not therefore delivered to the Trustee for
cancellation have become due and payable, will become due and payable within one
year or are to be
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called for redemption within one year under irrevocable arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name and at the expense of the Company, and the Company has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of
(premium, if any, and Liquidated Damages, if any, on) and interest to the date
of deposit or Maturity or date of redemption; (ii) the Company has paid or
caused to be paid all sums then due and payable by the Company under the
Indenture; and (iii) the Company has delivered an Officers' Certificate and an
opinion of counsel relating to compliance with the conditions set forth in the
Indenture.
The Company, at its election, shall (a) be deemed to have paid and
discharged its debt on the Notes and the Indenture shall cease to be of further
effect as to all outstanding Notes (except as to (i) rights of registration of
transfer, substitution and exchange of Notes, (ii) the Company's right of
optional redemption, (iii) rights of holders to receive payments of principal
of, premium, if any, interest and Liquidated Damages, if any, on the Notes (but
not the Change of Control Purchase Price or the Asset Sale Offer Purchase Price)
and any rights of the holders with respect to such amounts, (iv) the rights,
obligations and immunities of the Trustee under the Indenture, and (v) certain
other specified provisions in the Indenture) or (b) cease to be under any
obligation to comply with certain restrictive covenants that are described in
the Indenture, after the irrevocable deposit by the Company with the Trustee, in
trust for the benefit of the holders, at any time prior to the Stated Maturity
of the Notes, of (A) money in an amount, (B) U.S. Government Obligations which
through the payment of interest and principal will provide, not later than one
Business Day before the due date of payment in respect of such Notes, money in
an amount, or (C) a combination thereof sufficient to pay and discharge the
principal of, premium, if any on, interest and Liquidated Damages, if any, on,
such Notes then outstanding on the dates on which any such payments are due in
accordance with the terms of the Indenture and of such Notes. Such defeasance or
covenant defeasance shall be deemed to occur only if certain conditions are
satisfied, including, among other things, delivery by the Company to the Trustee
of an opinion of outside counsel acceptable to the Trustee to the effect that
(i) such deposit, defeasance and discharge will not be deemed, or result in, a
taxable event for federal income tax purposes with respect to the holders; and
(ii) the Company's deposit will not result in the trust or such Trustee being
subject to regulation under the Investment Company Act of 1940.
Certain Definitions
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any capitalized terms used herein for which no definition
is provided.
"Acquired Indebtedness" means, with respect to any specified Person,
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a subsidiary of such specified Person,
but excluding Indebtedness which is extinguished, retired or repaid in
connection with such other Person merging with or into or becoming a subsidiary
of such specified Person.
"Acquisition Agreements" means (i) that certain Amended and Restated
Transaction Agreement, dated as of September 18, 1996, among DLJ Merchant
Banking Partners, L.P., DLJ International Partners, C.V., DLJ Offshore Partners,
C.V., DLJ Merchant Banking Funding, Inc., Carlisle Enterprises, L.P., DLJ Brand
Holdings, Inc., Brand Scaffold Services, Inc., Brand Scaffold Builders, Inc.,
Brand Scaffold Rental & Erection, Inc., 702569 Alberta Ltd., Rust International
Inc., Rust Industrial Services Inc., Rust Scaffold Services Inc., Rust Scaffold
Builders Inc. and Rust Scaffold Rental & Erection Inc., as amended, restated,
supplemented or otherwise modified from time to time and (ii) each other
agreement (other than the Shareholders Agreement) entered into by, between or
among any one or more of the foregoing and one or more other person, as the case
may be, pursuant to or in connection with the transactions contemplated by such
Amended and Restated Transaction Agreement, each as amended, restated,
supplemented or otherwise modified from time to time.
"Affiliate" of any specified Person means another Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
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(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that beneficial ownership of 20% or more of the Voting Stock of a Person shall
be deemed to be control.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
or other disposition (including, without limitation, by way of merger or
consolidation or by means of a Sale and Lease-Back Transaction) by the Company
or any Subsidiary to any Person other than the Company or a Subsidiary of (i)
any Capital Stock of any Subsidiary (except for directors' qualifying shares or
certain minority interests sold to other Persons solely due to local law
requirements that there be more than one stockholder, but which are not in
excess of what is required for such purpose), or (ii) any other Property or
assets of the Company or any Subsidiary, in the case of either clause (i) or
(ii), whether in a single transaction or a series of related transactions (A)
that have a Fair Value in excess of $500,000 or (B) for net proceeds in excess
of $500,000. Notwithstanding the foregoing, the following shall not constitute
Asset Sales: (i) sales of obsolete, worn out, lost, damaged or shortage
equipment in the ordinary course of business or other assets that, in the
Company's reasonable judgment, are no longer used or useful in the conduct of
the business of the Company and its Subsidiaries), (ii) any scaffolding rental
contract or other lease of Property or other assets entered into by the Company
or any Subsidiary in the ordinary course of business, other than any Bargain
Purchase Contract, (iii) a Restricted Payment or Restricted Investment permitted
under "--Certain Covenants--Limitation on Restricted Payments," (iv) a Change of
Control, (v) a consolidation, merger, continuance or the disposition of all or
substantially all of the assets of the Company and the Subsidiaries, taken as a
whole in compliance with the provision of the Indenture described in
"--Consolidation, Merger, Conveyance, Lease or Transfer," (vi) any trade or
exchange by the Company or any Subsidiary of Property or assets for Replacement
Assets owned or held by another Person, provided that (x) the Fair Value of the
Property or assets traded or exchanged by the Company or such Subsidiary
(including cash or cash equivalents to be delivered by the Company or such
Subsidiary) is reasonably equivalent to the Fair Value of the Replacement Assets
(together with cash or cash equivalents to be received by the Company or such
Subsidiary) or other assets. An Asset Sale shall include the requisition of
title to, seizure of or forfeiture of any Property or assets, or any actual or
constructive total loss or an agreed or compromised total loss of any Property
or assets.
"Attributable Indebtedness" in respect of a Sale and Lease-Back Transaction
means, at any date of determination, the present value (discounted at the
interest rate borne by the Notes, compounded annually) of the total obligations
of the lessee for rental payments during the remaining term of the lease (or to
the first date on which the lessee is permitted to terminate such lease without
the payment of a penalty) included in such Sale and Lease-Back Transaction
(including any period for which such lease has been extended).
"Average Life" means, as of any date, with respect to any debt security,
the quotient obtained by dividing (i) the sum of the products of (x) the number
of years from such date to the date of each scheduled principal payment
(including any sinking fund or mandatory redemption payment requirements) of
such debt security multiplied in each case by (y) the amount of such principal
payment by (ii) the sum of all such principal payments.
"Bank Facility" means all financing provided to, or Indebtedness incurred
by, the Company pursuant to that certain Credit Agreement, dated as of September
30, 1996, among Brand Scaffold Services, Inc., as the borrower, various
financial institutions, as the lenders, DLJ Capital Funding, Inc., as the
syndication agent, Bank of America Illinois, as the letter of credit issuer, and
Bank of America National Trust & Savings Association, as the administrative
agent, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case as
amended by that certain First Amendment to the Credit Agreement, dated as of
November 21, 1996, and by that certain Second Amendment to the Credit Agreement,
dated as of February 19, 1998, and as amended and restated as of March 17, 1999
and as supplemented on March 9, 2000, and as further amended, modified, renewed,
refunded, replaced, refinanced from time to time, including any agreement
extending the maturity of or refinancing or refunding all or any portion of the
Indebtedness thereunder or increasing the amount that may be borrowed under such
agreement or any successor agreement, whether or not among the same parties.
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"Bargain Purchase Contract" means a scaffolding rental contract or lease
that provides for acquisition of Property by the other party to such agreement
during or at the end of the term thereof for less than Fair Market Value thereof
at the time such right to acquire such Property is granted.
"Capital Lease Obligation" means, at any time as to any Person with respect
to any Property leased by such Person as lessee, the amount of the liability
with respect to such lease that would be required at such time to be capitalized
and accounted for as a capital lease on the balance sheet of such Person
prepared in accordance with GAAP.
"Capital Stock" in any Person means any and all shares, interests,
partnership interests, participations or other equivalents in the equity
interest (however designated) in such Person and any rights (other than debt
securities convertible into an equity interest), warrants or options to acquire
any equity interest in such Person.
"Cash Equivalents" means (i) Government Securities, (ii) any certificate of
deposit maturing not more than 365 days after the date of acquisition issued by,
or time deposit of, an Eligible Institution or any lender under the Bank
Facility, (ii) commercial paper maturing not more than 365 days after the date
of acquisition of an issuer (other than an Affiliate of the Company) with a
rating, at the time as of which any investment therein is made, or "A-3" (or
higher) according to S&P or "P-2" (or higher) according to Moody's or carrying
an equivalent rating by a nationally recognized rating agency if both of the two
named rating agencies cease publishing ratings of investments, (iv) any bankers
acceptances or money market deposit accounts issued by an Eligible Institution
and (v) any fund investing exclusively in investments of the types described in
clauses (i) through (iv) above.
"Cash Proceeds" means, with respect to any Asset Sale by any Person, the
aggregate consideration received for such Asset Sale by such Person in the form
of cash or cash equivalents (including any amounts of insurance or other
proceeds received in connection with an Asset Sale of the type described in the
last sentence of the definition thereof), including payments in respect of
deferred payment obligations when received in the form of cash or cash
equivalents (except to the extent that such obligations are financed or sold
with recourse to such Person or any subsidiary thereof).
"Change of Control" means (i) a determination by the Company that any
Person or group (as defined in Section 13(d)(3) or 14(d)(2) of the Exchange Act)
has become the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act) of more than 50% of the Voting Stock of the Company other than Permitted
Holders; (ii) the Company is merged with or into or consolidated with another
corporation and immediately after giving effect to the merger or consolidation,
more than 50% of the outstanding voting securities entitled to vote generally in
the election of directors or persons who serve similar functions of the
surviving or resulting entity are then beneficially owned (within the meaning of
Rule 13d-3 of the Exchange Act) in the aggregate by Persons other than (x) the
stockholders of the Company immediately prior to such merger or consolidation,
or (y) if the record date has been set to determine the stockholders of the
Company entitled to vote on such merger or consolidation, the stockholders of
the Company as of such a record date; (iii) the Company, either individually or
in conjunction with one or more Subsidiaries, sells, conveys, transfers or
leases, or the Subsidiaries sell, convey, transfer or lease, all or
substantially all of the assets of the Company or 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 a Subsidiary); (iv) the liquidation or dissolution of the Company; or (v)
the first day on which a majority of the individuals who constitute the Board of
Directors of the Company are not Continuing Directors.
"Consolidated Interest Coverage Ratio" means as of the date of the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio (the "Transaction Date"), the ratio of the aggregate amount of
EBITDA to aggregate Consolidated Interest Expense of the Company and its
consolidated Subsidiaries for the four fiscal quarters for which financial
information in respect thereof is available immediately prior to the applicable
Transaction Date (the "Determination Period"); provided that if the Company or
any of its consolidated Subsidiaries is a party to any Interest Swap Obligation
that would have the effect of changing the interest rate on any Indebtedness of
the Company or any of its consolidated Subsidiaries for such four-quarter period
(or a portion thereof), the resulting rate shall be used for such four-quarter
period or portion thereof; provided, further, that in the event that the Company
or any of its Subsidiaries incurs, assumes, guarantees, redeems or repays any
Indebtedness
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(other than Indebtedness under the Revolving Loan) subsequent to the
commencement of the Determination Period but on or prior to the Transaction
Date, then the Consolidated Interest Coverage Ratio shall be calculated giving
pro forma effect to such incurrence, assumption, guarantee, redemption or
repayment of Indebtedness, as if the same had occurred at the beginning of the
Determination Period; provided, further, that if the transaction giving rise to
the need to calculate the Consolidated Interest Coverage Ratio would have the
effect of increasing or decreasing EBITDA in the future and if such increase or
decrease is readily quantifiable and is attributable to such transaction, EBITDA
shall be calculated on a pro forma basis as if such transaction had occurred on
the first day of the Determination Period and if, during the Determination
Period, (x) the Company or any of its consolidated Subsidiaries shall have
engaged in any Asset Sale, EBITDA for such period shall be reduced by an amount
equal to the EBITDA (if positive), or increased by an amount equal to the EBITDA
(if negative), directly attributable to the assets which are the subject of such
Asset Sale for such period calculated on a pro forma basis as if such Asset Sale
and any related retirement of Indebtedness had occurred on the first day of such
period or (y) after the Issue Date, the Company or any of its consolidated
Subsidiaries shall have acquired any material assets or business, whether
through the acquisition of the Capital Stock of such business or otherwise,
other than in the ordinary course of business, EBITDA and Consolidated Interest
Expense shall be calculated on a pro forma basis as if such acquisition had
occurred on the first day of such period.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication (A) the sum of (i) the aggregate amount of cash and
non-cash interest expense (including capitalized interest) of such Person and
its subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP in respect of Indebtedness (including, without limitation,
(w) net costs associated with Interest Swap Obligations (including any
amortization of discounts), (x) the interest portion of any deferred payment
obligation calculated in accordance with the effective interest method, (y) all
accrued interest and (z) all commissions, discounts and other fees and charges
owed with respect to letters of credit, bankers acceptances or similar
facilities) paid or accrued, or scheduled to be paid or accrued, during such
period; (ii) dividends on Redeemable Stock of such Person (and Preferred Stock
or Redeemable Stock of its subsidiaries if paid to a Person other than such
Person or its subsidiaries) declared and payable in cash; (iii) the portion of
any rental obligation of such Person or its subsidiaries in respect of any
Capital Lease Obligation allocable to interest expense in accordance with GAAP;
(iv) the portion of any rental obligation of such Person or its subsidiaries in
respect of any Sale and Lease-Back Transaction allocable to interest expense
(determined as if such were treated as a Capital Lease Obligation); and (v) to
the extent any debt of any other Person is guaranteed by such Person or any of
its subsidiaries, the aggregate amount of interest paid, accrued or scheduled to
be paid or accrued, by such other Person during such period attributable to any
such debt, less (B) to the extent included in (A) above, amortization or
write-off of deferred financing costs of such Person and its subsidiaries during
such period and any charge related or any premium or penalty paid in connection
with redeeming or retiring any Indebtedness of such Person and its subsidiaries
prior to its stated maturity, in the case of both (A) and (B) above, after
elimination of intercompany accounts among such Person and its subsidiaries and
as determined in accordance with GAAP. For purposes of clause (ii) above,
dividend requirements attributable to any Preferred Stock or Redeemable Stock
shall be deemed to be an amount equal to the amount of dividend requirements on
such Preferred Stock or Redeemable Stock times a fraction, the numerator of
which is the amount of such dividend requirements, and the denominator of which
is one minus the applicable combined federal, state, local and foreign income
tax rate of the Company and its Subsidiaries (expressed as a decimal), on a
consolidated basis, for the fiscal year immediately preceding the date of the
transaction giving rise to the need to calculate Consolidated Interest Expense.
"Consolidated Net Income" of any Person means, for any period, the
aggregate net income (or net loss, as the case may be) of such Person and its
subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom, without duplication,
(i) any net income of any Unrestricted Subsidiary, except that the Company's or
any Subsidiary's interest in the net income of such Unrestricted Subsidiary for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash or cash equivalents actually distributed by such
Unrestricted Subsidiary during such period to the Company or a Subsidiary as a
dividend or other distribution, (ii) gains and losses, net of taxes, from Asset
Sales or reserves relating thereto, (iii) the net income of any Person that is
not a subsidiary or that is accounted for by the equity method of accounting
which shall be included only to the extent of the amount of dividends or
distributions paid to such Person or its subsidiaries, (iv) items classified as
extraordinary, unusual or non-recurring (other than the tax benefit, if any, of
the utilization of net operating loss carryforwards or alternative minimum tax
credits), (v) the
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net income of any Person acquired by such specified Person or any of its
subsidiaries in a pooling-of-interests transaction for any period prior to the
date of such acquisition, (vi) any gain or loss, net of taxes, realized on the
termination of any employee pension benefit plan, (vii) the net income of any
subsidiary of such specified Person to the extent that the transfer to that
Person of that income is not at the time permitted, directly or indirectly, by
any means (including by dividend, distribution, advance or loan or otherwise),
or by operation of the terms of its charter or any agreement with a Person other
than with such specified Person, instrument held by a Person other than by such
specified Person, judgment, decree, order, statute, law, rule or governmental
regulations applicable to such subsidiary or its stockholders, except for any
dividends or distributions actually paid by such subsidiary to such Person,
(viii) the portion of the WMI Payments not included in net income, (ix) gains or
losses associated with non-cash compensations items, including, without
limitation, the vesting of options to purchase shares of Capital Stock of the
Company or Holdings, (x) amortization of fees incurred in connection with any
financing by the Company, (xi) one-time write-offs of intangibles related to the
transactions comprising or incidental to the Offering, (xii) gains or losses
associated with the cumulative effect of a change in accounting principles and
(xiii) with regard to a non-Subsidiary, any aggregate net income (or loss) in
excess of such Person's or such subsidiary's pro rata share of such
non-Subsidiary's net income (or loss).
"Consolidated Net Worth" of any Person means, as of any date, the sum of
the Capital Stock and additional paid-in capital plus retained earnings (or
minus accumulated deficit) of such Person and its subsidiaries on a consolidated
basis at such date, each item determined in accordance with GAAP, less amounts
attributable to Redeemable Stock of such Person or any of its subsidiaries.
"Continuing Director" means an individual who (i) is a member of the Board
of Directors of the Company and (ii) either (A) was a member of the Board of
Directors of the Company on the Issue Date or (B) whose nomination for election
or election to the Board of Directors of the Company was approved by vote of at
least a majority of the directors then still in office who were either directors
on the Issue Date or whose election or nomination for election was previously so
approved.
"Currency Hedge Obligations" means, at any time as to any Person, the
obligations of such Person at such time which were incurred in the ordinary
course of business pursuant to any foreign currency exchange agreement, option
or future contract or other similar agreement or arrangement designed to protect
against or manage such Person's or any of its subsidiaries' exposure to
fluctuations in foreign currency exchange rates.
"Default" means any event, act or condition the occurrence of which is, or
after notice or the passage of time or both would be, an Event of Default.
"Determination Period" has the meaning specified under the definition of
"Consolidated Interest Coverage Ratio."
"EBITDA" means, with respect to any Person for any period, the Consolidated
Net Income of such Person for such period, plus (minus) to the extent reflected
in the income statement of such Person for such period from which Consolidated
Net Income is determined, without duplication, (i) Consolidated Interest
Expense, (ii) income tax expense, (iii) depreciation expense, (iv) amortization
expense, (v) any charge related to any premium or penalty paid in connection
with redeeming or retiring any Indebtedness prior to its stated maturity, (vi)
prior to January 1, 1999, the product of (A) the Pro Forma Cost Reductions and
(B) a fraction the numerator of which is the number of days between the
transaction date giving rise to this calculation and January 1, 1998, inclusive,
and the denominator of which is 365, (vii) the one-time write-off of merger
expenses incurred in connection with any acquisition consummated after the Issue
Date, (viii) the one-time write-off of severance costs associated with the cost
reduction program implemented by the Company in the fourth quarter of 1997, (ix)
Non-Cash Claims and (x) any other non-cash charges (revenues) to the extent
deducted from (or added to) Consolidated Net Income except for any non-cash
charges (revenues) that represent accruals of, or reserves for, cash
disbursements to be made in any future accounting period.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus not less than $100.0 million or its equivalent in
foreign currency, whose short-term debt is rated "A-3" or higher according to
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Standard & Poor's Ratings Group ("S&P") or "P-2" or higher according to Moody's
Investor Services, Inc. ("Moody's") or carrying an equivalent rating by a
nationally recognized rating agency if both of the two named rating agencies
cease publishing ratings of investments.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Fair Market Value" means, with respect to consideration received or to be
received pursuant to any transaction by any Person, the fair market value of
such consideration as determined in good faith by the Board of Directors of the
Company.
"Fair Value" means, with respect to any asset or Property, the price which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction.
"GAAP" means, at any date, United States generally accepted accounting
principles, consistently applied, as set forth in the opinions of the Accounting
Principles Board of the American Institute of Certified Public Accountants
("AICPA") and statements of the Financial Accounting Standards Board, or in such
other statements by such other entity as may be designated by the AICPA, that
are applicable to the circumstances as of the date of determination; provided,
however, that all calculations made for purposes of determining compliance with
the provisions set forth in the Indenture shall utilize GAAP in effect at the
Issue Date.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the Untied States of America is
pledged.
"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.
"Guarantor" means any Subsidiary that shall have guaranteed, pursuant to a
supplemental indenture and the requirements therefor set forth in the Indenture,
the payment of all principal of, and interest and premium, if any, and
Liquidated Damages, if any, on the Notes and all other amounts payable under the
Notes or the Indenture, which guarantee shall be subordinate to all Senior Debt
and pari passu with or senior to all other Indebtedness of such Subsidiary.
"Holdings" means DLJ Brand Holdings, Inc., a Delaware corporation.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, suffer to exist, incur (by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or obligation on the balance sheet of
such Person (and "incurrence," "incurred," "incurrable" and "incurring" shall
have meanings correlative to the foregoing); provided that a change in GAAP that
results in an obligation of such Person that exists at such time becoming
Indebtedness shall not be deemed an incurrence of such Indebtedness.
Indebtedness of a Person which is outstanding at the time it becomes a
Subsidiary shall be deemed to have been incurred at the time at which it becomes
a Subsidiary.
"Indebtedness" as applied to any Person means, at any time, without
duplication, whether recourse is to all or a portion of the assets of such
Person, and whether or not contingent, (i) any obligation of such Person for
borrowed money; (ii) any obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, including, without limitation,
any such obligations incurred in connection with acquisition of Property, assets
or businesses, excluding accounts payable made in the ordinary course of
business which are not more than 90 days overdue or which are being contested in
good faith and by appropriate proceedings; (iii) any obligation of such Person
for all or any part of the purchase price of Property or for the cost of
Property constructed or of
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improvements thereto (including any obligation under or in connection with any
letter of credit related thereto), other than accounts payable incurred in
respect of Property and services purchased in the ordinary course of business
which are no more than 90 days overdue or which are being contested in good
faith and by appropriate proceedings; (iv) any obligation of such Person upon
which interest charges are customarily paid (other than accounts payable
incurred in the ordinary course of business which are not more than 90 days
overdue or which are being contested in good faith and by appropriate
proceedings); (v) any obligation of such Person under conditional sale or other
title retention agreements relating to purchased Property; (vi) any obligation
of such Person issued or assumed as the deferred purchase price of Property
(other than accounts payable incurred in the ordinary course of business which
are no more than 90 days overdue or which are being contested in good faith and
by appropriate proceedings); (vii) any Capital Lease Obligation or Attributable
Indebtedness pursuant to any Sale and Lease-Back Transaction of such Person;
(viii) any obligation of any other Person secured by (or for which the obligee
thereof has an existing right, contingent or otherwise, to be secured by) any
Lien on Property owned or acquired, whether or not any obligation secured
thereby has been assumed, by such Person; (ix) any obligation of such Person in
respect of any letter of credit supporting any obligation of any other Person;
(x) the maximum fixed repurchase price of any Redeemable Stock of such Person
(or if such Person is a subsidiary, any Preferred Stock of such Person); (xi)
the notional amount of any Interest Swap Obligation or Currency Hedge Obligation
of such Person at the time of determination; and (xii) any obligation which is
in economic effect a guarantee, regardless of its characterization (other than
an endorsement in the ordinary course of business), with respect to any
Indebtedness of another Person, to the extent guaranteed. For purposes of the
preceding sentence, the maximum fixed repurchase price of any Redeemable Stock
or subsidiary Preferred Stock that does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Redeemable Stock or
subsidiary Preferred Stock as if such Redeemable Stock or subsidiary Preferred
Stock were repurchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture; provided, however, that if such Redeemable
Stock or subsidiary Preferred Stock is not then permitted to be repurchased, the
repurchase price shall be the book value of such Redeemable Stock or subsidiary
Preferred Stock. The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional obligations as
described above and the maximum liability of any guarantees at such date;
provided that for purposes of calculating the amount of any non-interest bearing
or other discount security, such Indebtedness shall be deemed to be the
principal amount thereof that would be shown on the balance sheet of the issuer
dated such date prepared in accordance with GAAP but that such security shall be
deemed to have been incurred only on the date of the original issuance thereof.
"Interest Swap Obligation" means, with respect to any Person, the
obligation of such Person pursuant to any interest rate swap agreement, interest
rate cap, collar or floor agreement or other similar agreement or arrangement
designed to protect against or manage such Person's or any of its subsidiaries'
exposure to fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct, indirect or
contingent investment in another Person, whether by means of a share purchase,
capital contribution, loan, advance (other than advances to employees for moving
and travel expenses, drawing accounts and similar expenditures in the ordinary
course of business) or similar credit extension constituting Indebtedness of
such other Person, and any guarantee of Indebtedness of any other Person;
provided that the term "Investment" shall not include any transaction involving
the purchase or other acquisition (including by way of merger) of Property
(including Capital Stock) by the Company or any Subsidiary in exchange for
Capital Stock (other than Redeemable Stock) of the Company. The amount of any
Person's Investment shall be the original cost of such Investment to such
Person, plus the cost of all additions thereto paid by such Person, and minus
the amount of any portion of such Investment repaid to such Person in cash as a
repayment of principal or a return of capital, as the case may be, but without
any other adjustments for increases or decreases in value, or write-ups,
writedowns, or write-offs with respect to such Investment. In determining the
amount of any Investment involving a transfer of any Property or assets other
than cash, such Property or assets shall be valued at its Fair Value at the time
of such transfer as determined in good faith by the board of directors (or
comparable body) of the Person making such transfer. The Company shall be deemed
to make an "Investment" in the amount of the Fair Value of the Assets of a
Subsidiary at the time such Subsidiary is designated an Unrestricted Subsidiary.
"Issue Date" means the date on which the Old Notes were first authenticated
and delivered under the Indenture.
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"Lien" means any mortgage, pledge, hypothecation, charge, assignment,
deposit arrangement, encumbrance, security interest, lien (statutory or other),
or preference, priority or other security or similar agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
agreement to give or grant a Lien or any lease, conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing).
"Maturity" means the date on which the principal of a Note becomes due and
payable as provided therein or in the Indenture, whether at the Stated Maturity
or the Change of Control Payment Date or purchase date established pursuant to
the terms of the Indenture for an Asset Sale Offer or by declaration of
acceleration, call for redemption or otherwise.
"Net Available Proceeds" means, (a) as to any Asset Sale (other than a
Bargain Purchase Contract), the Cash Proceeds therefrom, net of all legal and
title expenses, commissions and other fees and expenses incurred, and all
Federal, state, foreign, recording and local taxes payable as a consequence of
such Asset Sale, net of all payments made to any Person other than the Company
or a Subsidiary on any Indebtedness which is secured by such assets, in
accordance with the terms of any Lien upon or with respect to such assets, or
which must by its terms, or in order to obtain a necessary consent to such Asset
Sale, or by applicable law, be repaid out of the proceeds from such Asset Sale
and, as for any Asset Sale by a Subsidiary, net of the equity interest in such
Cash Proceeds of any holder of Capital Stock of such Subsidiary (other than the
Company, any other Subsidiary or any Affiliate of the Company or any such other
Subsidiary) and (b) as to any Bargain Purchase Contract, an amount equal to (i)
that portion of the rental or other payment stream arising under a Bargain
Purchase Contract that represents an amount in excess of the Fair Market Value
of the rental or other payments with respect to the pertinent Property or other
asset and (ii) the Cash Proceeds from the sale of such Property or other asset,
net of the amount set forth in clause (a) above, in each case as and when
received.
"Non-Cash Claims" means the non-cash portion of general liability, auto
liability, worker's compensation or post-retirement health insurance and related
benefits expense.
"Non-Recourse Indebtedness" means Indebtedness or that portion of
Indebtedness of an Unrestricted Subsidiary as to which (a) neither the Company
nor any other Subsidiary (other than an Unrestricted Subsidiary) (i) provides
credit support including any undertaking, agreement or instrument which would
constitute Indebtedness or (ii) is directly or indirectly liable for such
Indebtedness and (b) no default with respect to such Indebtedness (including any
rights which the holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any
holder of any other Indebtedness of the Company or its other Subsidiaries to
declare a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
"Obligations" means, with respect to any Indebtedness, any obligation
thereunder, including, without limitation, principal, premium and interest
(including post petition interest thereon), penalties, fees, costs, expenses,
indemnifications, reimbursements, damages and other liabilities.
"Officer's Certificate" means a certificate signed by the Chairman of the
Board, a Vice Chairman of the Board, the President, the Chief Executive Officer,
the Chief Operating Officer, or a Vice President, the Chief Financial Officer,
the Chief Accounting Officer, the Controller, the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of the Company or a
Subsidiary and delivered to the Trustee, which shall comply with the Indenture.
"Permitted Holders" means DLJ Merchant Banking Partners, L.P. and Carlisle
Enterprises, L.P., and their respective Affiliates.
"Permitted Indebtedness" means (a) Indebtedness of the Company under the
Notes; (b) Indebtedness (and any guarantee thereof) under one or more credit or
revolving credit facilities with a bank or syndicate of banks or financial
institutions or other lenders, including the Bank Facility, as such may be
amended, modified, revised, extended, replaced, or refunded from time to time,
in an aggregate principal amount at any one time outstanding not
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to exceed $80.0 million, less any amounts derived from Asset Sales and applied
to the required permanent reduction of Senior Debt under such credit facilities
as contemplated by the "Limitation on Asset Sales" covenant; (c) Indebtedness of
the Company or any Subsidiary under Interest Swap Obligations; provided that (i)
such Interest Swap Obligations are related to payment obligations on
Indebtedness otherwise permitted under the covenants described in "--Certain
Covenants--Limitation on Indebtedness" and (ii) the notional principal amount of
such Interest Swap Obligations does not exceed the principal amount of the
Indebtedness to which such Interest Swap Obligations relate; (d) Indebtedness of
the Company or any Subsidiary under Currency Hedge Obligations; provided that
(i) such Currency Hedge Obligations are related to payment obligations on
Indebtedness otherwise permitted under the covenants described in "--Certain
Covenants--Limitation on Indebtedness" or to the foreign currency cash flows
reasonably expected to be generated by the Company and the Subsidiaries and (ii)
the notional principal amount of such Currency Hedge Obligations does not exceed
the principal amount of the Indebtedness and the amount of the foreign currency
cash flows to which such Currency Hedge Obligations relate; (e) Indebtedness of
the Company or any Subsidiary outstanding on the Issue Date; (f) Indebtedness of
the Company or any Subsidiary in respect of bid performance bonds, surety bonds,
appeal bonds and letters of credit or similar arrangements issued for the
account of the Company or any Subsidiary, in each case in the ordinary course of
business and other than for an obligation for money borrowed; (g) Indebtedness
of the Company to a Subsidiary and Indebtedness of a Subsidiary to the Company;
provided that upon any subsequent issuance or transfer of any Capital Stock or
any other event which results in any such Subsidiary ceasing to be a Subsidiary,
as the case may be, or any other subsequent transfer of any such Indebtedness
(except to the Company or a Subsidiary), such Indebtedness shall be deemed, in
each case, to be incurred and shall be treated as an incurrence for purposes of
the "Limitation on Indebtedness" covenants at the time the Subsidiary in
question ceased to be a Subsidiary or such Indebtedness is so transferred; (h)
Subordinated Indebtedness of the Company to an Unrestricted Subsidiary for money
borrowed; (i) Indebtedness of the Company in connection with a purchase of the
Notes pursuant to a Change of Control Offer; provided that the aggregate
principal amount of such Indebtedness does not exceed 101% of the aggregate
principal amount at Stated Maturity of the Notes purchased pursuant to such
Change of Control Offer; provided, further, that such Indebtedness (A) has an
Average Life equal to or greater than the remaining Average Life of the Notes
and (B) does not mature prior to one day following the Stated Maturity of the
Notes; (j) Permitted Refinancing Indebtedness; (l) Acquired Indebtedness not to
exceed an aggregate of $5.0 million at any one time outstanding; (m) Permitted
Subsidiary Refinancing Indebtedness; and (n) additional Indebtedness in an
aggregate principal amount not in excess of $10.0 million at any one time
outstanding. So as to avoid duplication in determining the amount of Permitted
Indebtedness under any clause of this definition, guarantees permitted to be
incurred pursuant to the Indenture of, or obligations permitted to be incurred
pursuant to the Indenture in respect of letters of credit supporting,
Indebtedness otherwise included in the determination of such amount shall not
also be included.
"Permitted Investments" means (a) certificates of deposit, bankers
acceptances, time deposits, Eurocurrency deposits and similar types of
Investments routinely offered by commercial banks with final maturities of one
year or less issued by commercial banks organized in the United States having
capital and surplus in excess of $300.0 million; (b) commercial paper issued by
any corporation, if such commercial paper has credit ratings of at least "A-l"
or its equivalent by S&P and at least "P-I" or its equivalent by Moody's; (c)
U.S. Government Obligations with a maturity of five years or less; (d)
repurchase obligations for instruments of the type described in clause (c) with
any bank meeting the qualifications specified in clause (a) above; (e) shares of
money market mutual or similar funds having assets in excess of $100.0 million;
(f) payroll advances in the ordinary course of business; (g) other advances and
loans to officers and employees of the Company or any Subsidiary, so long as the
aggregate principal amount of such advances and loans does not exceed $1.0
million at any one time outstanding; (h) Investments represented by that portion
of the proceeds from Asset Sales that is not required to be Cash Proceeds by the
covenant described in "--Certain Covenants--Limitation on Asset Sales"; (i)
Investments made by the Company in its Subsidiaries (or any Person that will be
a Subsidiary or is merged with or into the Company or a Subsidiary of the
Company as a result of such Investment) or by a Subsidiary in the Company or in
one or more Subsidiaries (or any Person that will be a Subsidiary as a result of
such Investment); (j) Investments in stock, obligations or securities received
in settlement of debts owing to the Company or any Subsidiary as a result of
bankruptcy or insolvency proceedings or upon the foreclosure, perfection or
enforcement of any Lien in favor of the Company or any Subsidiary, in each case
as to debt owing to the Company or any Subsidiary that arose in the ordinary
course of business of the Company or any such Subsidiary; (k) certificates of
deposit, bankers acceptances, time deposits, Eurocurrency deposits and similar
types of Investments routinely offered by commercial banks organized in the
United States with final maturities of
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one year or less and in an aggregate amount not to exceed $5.0 million at any
one time outstanding with a commercial bank organized in the United States
having capital and surplus in excess of $50.0 million; (l) Canadian and other
foreign bank deposits and cash equivalents in jurisdictions where the Company or
its Subsidiaries are then actively conducting business; (m) Interest Swap
Obligations with respect to any Indebtedness that is permitted by the terms of
the Indenture to be outstanding; (n) Currency Hedge Obligations; provided that
such Currency Hedge Obligations constitute Permitted Indebtedness permitted by
clause (d) of the definition thereof; and (o) Investments in prepaid expenses,
negotiable instruments held for collection and lease, utility, worker's
compensation and performance and other similar deposits in the ordinary course
of business."Permitted Liens" means (a) Liens in existence on the Issue Date;
(b) Liens created for the benefit of the Notes; (c) Liens on Property of a
Person existing at the time such Person is merged or consolidated with or into
the Company or a Subsidiary (and not incurred as a result of, or in anticipation
of, such transaction); provided that any such Lien relates solely to such
Property; (d) Liens on Property existing at the time of the acquisition thereof
(and not incurred as a result of, or in anticipation of such transaction);
provided that any such Lien relates solely to such Property; (e) Liens incurred
or pledges and deposits made in connection with worker's compensation,
unemployment insurance and other social security benefits, statutory
obligations, bid, surety or appeal bonds, performance bonds or other obligations
of a like nature incurred in the ordinary course of business; (f) Liens imposed
by law or arising by operation of law, including, without limitation,
landlords', mechanics', carriers', warehousemen's, materialmen's, suppliers' and
vendors' Liens and Liens for master's and crew's wages and other similar
maritime Liens, and incurred in the ordinary course of business for sums not
delinquent or being contested in good faith, if such reserves or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made with respect thereof; (g) zoning restrictions, easements, licenses,
covenants, reservations, restrictions on the use of real property and defects,
irregularities and deficiencies in title to real property that do not,
individually or in the aggregate, materially affect the ability of the Company
or any Subsidiary to conduct its business presently conducted; (h) Liens for
taxes or assessments or other governmental charges or levies not yet due and
payable, or the validity of which is being contested by the Company or a
Subsidiary in good faith and by appropriate proceedings upon stay of execution
or the enforcement thereof and for which adequate reserves in accordance with
GAAP or other appropriate provision has been made; (i) Liens to secure
Indebtedness incurred for the purpose of financing all or a part of the purchase
price or construction cost of Property acquired or constructed after the Issue
Date; provided that (1) the principal amount of Indebtedness secured by such
Liens shall not exceed 100% of the lesser of cost or Fair Market Value of the
Property so acquired or constructed plus transaction costs related thereto, (2)
such Liens shall not encumber any other assets or Property of the Company or any
Subsidiary (other than the proceeds thereof and accessions and upgrades thereto)
and (3) such Liens shall attach to such Property no later than 120 days after
the date of the completion of the construction or acquisition of such Property;
(j) Liens securing Capital Lease Obligations; (k) Liens to secure any extension,
renewal, refinancing or refunding (or successive extensions, renewals,
refinancings or refundings), in whole or in part, of any Indebtedness secured by
Liens referred to in the foregoing clauses (a), (c) and (d); provided, further,
that such Lien does not extend to any other Property of the Company or any
Subsidiary and the principal amount of the Indebtedness secured by such Lien is
not increased; (l) any rental or lease; (m) leases or subleases of real property
to other Persons; (n) Liens securing Permitted Indebtedness described in clause
(b) of the definition thereof; (o) judgment liens not giving rise to an Event of
Default so long as any appropriate legal proceedings which may have been
initiated for the review of such judgment shall not have been finally terminated
or the period within which such proceeding may be initiated shall not have
expired; (p) rights of off-set of banks and other Persons; (q) Liens in favor of
the Company or any Guarantor; (r) Liens existing on the Property of an
Unrestricted Subsidiary at the time it becomes a Subsidiary; (s) Liens securing
Indebtedness under one or more credit or revolving credit facilities with a bank
or syndicate of banks or financial institutions or other lenders or securing any
permitted refinancing of any such Indebtedness; and (t) other Liens not to
exceed an aggregate of $1.5 million at any one time outstanding.
"Permitted Refinancing Indebtedness" means Indebtedness of the Company or
any Subsidiary, incurred in exchange for, or the net proceeds of which are used
to renew, extend, refinance, refund or repurchase, outstanding Indebtedness of
the Company or such Subsidiary; provided that (i) if the Indebtedness being
renewed, extended, refinanced, refunded or repurchased is pari passu with or
subordinated in right of payment (without regard to its being secured) to the
Notes, then such new Indebtedness is pari passu with or subordinated in right of
payment (without regard to its being secured) to, as the case may be, the Notes
at least to the same extent as the Indebtedness being renewed, extended,
refinanced, refunded or repurchased, (ii) such new Indebtedness is scheduled to
mature at the same time or later than the Indebtedness being renewed, extended,
refinanced, refunded or repurchased, (iii) such
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<PAGE>
new Indebtedness has an Average Life at the time such Indebtedness is incurred
that is equal to or greater than the Average Life of the Indebtedness being
renewed, extended, refinanced, refunded or repurchased, and (iv) such new
Indebtedness is in aggregate principal amount (or, if such Indebtedness is
issued at a price less than the principal amount thereof, the aggregate amount
of gross proceeds therefrom is) equal to or less than the aggregate principal
amount then outstanding of the Indebtedness being renewed, extended, refinanced,
refunded or repurchased (or if the Indebtedness being renewed, extended,
refinanced, refunded or repurchased was issued at a price less than the
principal amount thereof, then not in excess of the amount of liability in
respect thereof determined in accordance with GAAP) plus the amount of
reasonable fees, expenses, and premium, if any, incurred by the Company or such
Subsidiary in connection therewith.
"Permitted Subsidiary Refinancing Indebtedness" means Indebtedness of any
Subsidiary, incurred in exchange for, or the net proceeds of which are used to
renew, extend, refinance, refund or repurchase, outstanding Indebtedness of such
Subsidiary which outstanding Indebtedness was incurred in accordance with, or is
otherwise permitted by, the terms of clauses (e), (f) or (g) of the definition
of Permitted Indebtedness; provided that (i) such new Indebtedness is scheduled
to mature at the same time or later than the Indebtedness being renewed,
extended, refinanced, refunded or repurchased, (ii) such new Indebtedness has an
Average Life at the time such Indebtedness is incurred that is equal to or
greater than the Average Life of the Indebtedness being renewed, extended,
refinanced, refunded or repurchased, and (iii) such new Indebtedness is in an
aggregate principal amount (or, if such Indebtedness is issued at a price less
than the principal amount thereof, the aggregate amount of gross proceeds
therefrom is) equal to or less than the aggregate principal amount then
outstanding of the Indebtedness being renewed, extended, refinanced, refunded or
repurchased (or if the Indebtedness being renewed, extended, refinanced,
refunded or repurchased was issued at a price less than the principal amount
thereof, then not in excess of the amount of liability in respect thereof
determined in accordance with GAAP) plus the amount of reasonable fees,
expenses, and premium, if any, incurred by the Company or such Subsidiary in
connection therewith.
"Person" means any individual, corporation, limited liability company,
partnership, limited partnership, limited liability partnership, joint venture,
incorporated or unincorporated association, joint stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.
"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends and/or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person, to shares of
Capital Stock of at least one other class of such Person.
"Pro Forma Cost Reductions" means the pro forma effect of the cost
reduction program implemented by the Company in the fourth quarter of 1997,
including (i) eliminating 63 administrative and support positions and
consolidating certain administrative functions, (ii) restructuring and
renegotiating benefits programs, (iii) renegotiating the Company's insurance
premiums to reflect continued improvements in its safety record, (iv)
negotiating company-wide procurement contracts in order to take advantage of
volume pricing and (v) implementing a new management information system to
improve inventory utilization and reduce equipment transportation expenses.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, excluding Capital Stock in any other Person.
"Qualified Equity Offering" means an offering of Capital Stock (other than
Redeemable Stock) of the Company for cash, whether pursuant to an effective
registration statement under the Securities Act or pursuant to an exemption from
registration under the Securities Act.
"Qualified Proceeds" means any of the following or any combination of the
following: (i) cash, (ii) Cash Equivalents, (iii) assets that are used or useful
in a Related Business and (iv) the Capital Stock of any Person engaged in a
Related Business, if, in connection with the receipt by the Company or any
Subsidiary of the Company of such Capital Stock, (a) such Person becomes a
Subsidiary of the Company or any Subsidiary of the Company or
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<PAGE>
(b) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or any Subsidiary of the Company.
"Redeemable Stock" means, with respect to any Person, any equity security
that by its terms or otherwise is required to be redeemed, or is redeemable at
the option of the holder thereof, at any time prior to one day following the
Stated Maturity of the Notes or is exchangeable into Indebtedness of such Person
or any of its subsidiaries.
"Related Business" means the scaffolding rental, erection and dismantlement
business or any business related to the provision of industrial maintenance
services and activities incidental to any of the foregoing and any business
related or ancillary to any of the foregoing.
"Replacement Asset" means a Property or asset that is used or is useful in
a Related Business.
"Restricted Investment" means any Investment in any Person, including an
Unrestricted Subsidiary or the designation of a Subsidiary as an Unrestricted
Subsidiary, other than a Permitted Investment.
"Restricted Payment" means to (i) declare or pay any dividend on, or make
any distribution in respect of, or purchase, redeem, retire or otherwise acquire
for value, any Capital Stock of the Company or any Affiliate of the Company, or
warrants, rights or options to acquire such Capital Stock, other than (x)
dividends payable solely in the Capital Stock (other than Redeemable Stock) of
the Company or such Affiliate, as the case may be, or in warrants, rights or
options to acquire such Capital Stock and (y) dividends or distributions by a
Subsidiary to the Company or to a Subsidiary; (ii) make any principal payment
on, or redeem, repurchase, defease (including an in-substance or legal
defeasance) or otherwise acquire or retire for value (including pursuant to
mandatory repurchase covenants), prior to any scheduled principal payment,
scheduled sinking fund payment or other stated maturity, Indebtedness of the
Company or any Subsidiary which is subordinated (whether pursuant to its terms
or by operation of law) in right of payment to the Notes; or (iii) make any
Restricted Investment in any Person.
"Sale and Lease-Back Transaction" means, with respect to any Person, any
direct or indirect arrangement pursuant to which Property is sold or transferred
by such Person or a subsidiary of such Person and is thereafter leased back from
the purchaser or transferee thereof by such Person or one of its subsidiaries.
"Senior Debt" means any Indebtedness incurred by the Company other than
Subordinated Indebtedness.
"Shareholders Agreement" means that certain Amended and Restated
Shareholders Agreement, dated as of September 30, 1996, among DLJ Merchant
Banking Partners, L.P., DLJ International Partners, C.V., DLJ Offshore Partners,
C.V., DLJ Merchant Banking Funding, Inc., Carlisle-Brand Investors, L.P., Rust
Industrial Services Inc., DLJ Brand Holdings, Inc., Brand Scaffold Services,
Inc. and certain individuals party thereto, as amended, supplemented or
otherwise modified from time to time.
"Significant Subsidiary" means a Subsidiary that is a "significant
subsidiary" as defined in Rule 1-02(w) of Regulation S-X under the Securities
Act and the Exchange Act.
"Stated Maturity" when used with respect to a Note or any installment of
interest thereon, means 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.
"Subordinated Indebtedness" means any Indebtedness of the Company that is
subordinated in right of payment to the Notes, as the case may be, and does not
mature prior to one year following the Stated Maturity of the Notes.
"Subsidiary" or "subsidiary" means, (i) with respect to any Person other
than the Company, (x) any corporation more than 50% of the outstanding Voting
Stock of which is owned, directly or indirectly, by such Person, or by one or
more other subsidiaries of such Person, or by such Person and one or more other
subsidiaries of such Person, (y) any general partnership, joint venture or
similar entity, more than 50% of the outstanding partnership or similar interest
of which is owned, directly or indirectly, by such Person, or by one or more
other
67
<PAGE>
subsidiaries of such Person, or by such Person and one or more other
subsidiaries of such Person and any limited partnership of which such Person or
any subsidiary of such Person is a general partner; and (ii) with respect to the
Company, a subsidiary of the Company other than an Unrestricted Subsidiary.
"Transaction Date" has the meaning specified within the definition of
Consolidated Interest Coverage Ratio.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged; (ii) 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 under
clauses (i) or (ii) above, are not callable or redeemable at the option of the
issuers thereof; or (iii) depository receipts issued by a bank or trust company
as custodian with respect to any such U.S. Government Obligations or a specific
payment of interest on or principal of any such U.S. Government Obligation held
by such custodian for the account of the holder of a Depository receipt;
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such Depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation evidenced by such Depository receipt.
"Unrestricted Subsidiary" means any subsidiary of the Company that the
Company has classified as an Unrestricted Subsidiary and that has not been
reclassified as a Subsidiary pursuant to the terms of the Indenture.
"Voting Stock" means with respect to any Person, securities of any class or
classes of Capital Stock in such Person entitling the holder thereof (whether at
all times or at the times that such class of Capital Stock has voting power by
reason of the happening of any contingency) to vote in the election of members
of the board of directors or comparable body of such Person.
"WMI Payments" means all payments received by the Company pursuant to that
certain Transitional Services Agreement, dated as of September 30, 1996, by and
among Brand Scafford Services, Inc., WMI Technologies Inc., Rust International
Inc. and Rust Industrial Services, Inc., as amended, supplemented or otherwise
modified from time to time.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The holders of a majority in principal amount of the then outstanding 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. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent person in the
conduct of such person's own affairs. Subject to such provisions, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request of any holder of Notes, unless such holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
Additional Information
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to Brand Scaffold Services, Inc., 15450 South Outer
Highway 40, #270, Chesterfield, Missouri 63017, Attention: Chief Financial
Officer.
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<PAGE>
Book-Entry; Delivery; Form and Transfer
All Notes are represented by one or more notes in global form (the "Global
Exchange Notes"), which have been deposited with, or on behalf of, DTC and
registered in the name of DTC or its nominee.
Holders of Notes who elect to take physical delivery of their certificates
instead of holding their interest through the Global Exchange Note (collectively
referred to herein as the "Non-Global Holders") will be issued in registered
form a certificated Note ("Certificated Exchange Note"). Upon the transfer of
any Certificated Exchange Note initially issued to a Non-Global Holder, such
Certificated Exchange Note will, unless the transferee requests otherwise or the
Global Exchange Note has previously been exchanged in whole for Certificated
Exchange Notes, be exchanged for an interest in the Global Exchange Note.
Global Exchange Notes
DTC will credit, on its book-entry registration and transfer system
interests in the Global Exchange Note to the accounts of institutions that have
accounts with DTC (including Euroclear and Clearstream Banking, societe anonyme)
("participants"). Ownership of beneficial interests in the Global Exchange Note
will be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests in the Global Exchange Note will
be shown on, and the transfer of that ownership will be effected only through,
records maintained by DTC (with respect to participants' interests) for the
Global Exchange Note, or by participants or persons that hold interests through
participants (with respect to beneficial interests of persons other than
participants). The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and laws may impair the ability to transfer or pledge
beneficial interests in the Global Exchange Note.
So long as DTC, or its nominee, is the registered holder of any Global
Exchange Notes, DTC or such nominee, as the case may be, will be considered the
sole legal owner and holder of such Notes represented by such Global Exchange
Notes for all purposes under the Indenture and the Notes. Except as set forth
below, owners of beneficial interests in Global Exchange Notes will not be
entitled to have such Global Exchange Notes represented thereby registered in
their names, will not receive or be entitled to receive physical delivery of
certificates representing Notes in definitive, fully registered form bearing a
legend containing the applicable restrictions on transfers ("Definitive Notes")
in exchange therefor and will not be considered to be the owners or holders of
such Global Exchange Notes represented thereby for any purpose under the Notes
or the Indenture. The Company understands that under existing industry
practice, in the event an owner of a beneficial interest in a Global Exchange
Note desires to take any action that DTC, as the holder of such Global Exchange
Note, is entitled to take, DTC would authorize the participants to take such
action, and that the participants would authorize beneficial owners owning
through such participants to take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
Any payment of principal, interest or Liquidated Damages due on the Notes
on any interest payment date or at maturity will be made available by the
Company to the Trustee by such date. As soon as possible thereafter, the
Trustee will make such payments to DTC or its nominee, as the case may be, as
the registered owner of the Global Exchange Notes representing such Notes in
accordance with existing arrangements between the Trustee and DTC.
The Company expects that DTC or its nominee, upon receipt of any payment
of principal, interest or Liquidated Damages in respect of the Global Exchange
Notes, will credit immediately the accounts of the related participants with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Exchange Note as shown on the records of
DTC. The Company also expects that payment by participants to owners of
beneficial interests in the Global Exchange Notes held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name," and will be the responsibility of such
participants.
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None of the Company, the Trustee, or any payment agent for the Global
Exchange Notes will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in any of the Global Exchange Notes or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests or for
other aspects of the relationship between DTC and its participants or the
relationship between such participants and the owners of beneficial interests
in the Global Exchange Notes owning through such participants.
As long as the Notes are represented by a Global Exchange Note, DTC's
nominee will be the holder of the Notes and therefore will be the only entity
that can exercise a right to repayment or repurchase of the Notes. See
"Description of Notes--Change of Control." Notice by participants, or by owners
of beneficial interests in a Global Exchange Note held through such
participants, of the exercise of the option to elect repayment of beneficial
interests in Notes represented by a Global Exchange Note must be transmitted to
DTC in accordance with its procedures on a from required by DTC and provided to
participants. In order to ensure that DTC's nominee will timely exercise a
right to repayment with respect to a particular Note, the beneficial owner of
such Note must instruct the broker or other participant to exercise a right to
repayment. Different firms have cut-off times for accepting instructions from
their customers and, accordingly, each beneficial owner should consult the
broker or other participant through which it holds an interest in a Note in
order to ascertain the cut-off time by which such an instruction must be given
in order for timely notice to be delivered to DTC. The Company will not be
liable for any delay in delivery of notices of the exercise of the option to
elect repayment.
Unless and until exchanged in whole or in part for Notes in definitive
form in accordance with the terms of the Notes, the Global Exchange Notes may
not be transferred except as a whole by DTC to a nominee of DTC, or by a
nominee of DTC to DTC or another nominee of DTC, or by DTC or any such nominee
to a successor of DTC or a nominee of each successor.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Exchange Notes among its participants, it
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Trustee nor the
Company will have any responsibility for the performance by DTC or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations. The Company and the Trustee
may conclusively rely on, and shall be protected in relying on, instructions
from DTC for all purposes.
Definitive Notes
The Global Exchange Note shall be exchangeable for corresponding
Certificated Exchange Notes registered in the name of persons other than DTC or
its nominee if (A) DTC (i) notifies the Company that it is unwilling or unable
to continue as DTC for any of the Global Exchange Notes or (ii) at any time
ceases to be a clearing agency registered under the Exchange Act, (B) there
shall have occurred and be continuing an Event of Default (as defined in the
Indenture) with respect to the Notes or (C) the Company executes and delivers
to the Trustee an order that the Global Exchange Notes shall be so
exchangeable. Any Definitive Notes will be issued only in fully registered form
and shall be issued without coupons in denominations of $1,000 and integral
multiples thereof. Any Definitive Notes issued in exchange for a Global
Exchange Note will be registered in such names and in such denominations as DTC
shall request.
The Clearing System
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of participants and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of participants, thereby eliminating
the need for physical movement of securities certificates. DTC's participants
include securities brokers and dealers (which may include DLJSC), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's book-entry system is also available to others such as banks,
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brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, whether directly or indirectly.
Settlement
Investors holding their Notes through DTC will follow settlement practices
applicable to United States corporate debt obligations. The Indenture requires
that payments in respect of Notes (including principal, premium, interest and
Liquidated Damages) be made by wire transfer of same-day 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.
MARKET-MAKING ACTIVITIES OF DLJSC
This prospectus is to be used by DLJSC in connection with offers and sales
of the Notes in market-making transactions at negotiated prices related to
prevailing market prices at the time of sale. DLJSC may act as principal or
agent in such transactions. There can be no assurance that DLJSC will continue
to act in such capacities. DLJSC has no obligation to make a market in the
Notes, and may discontinue its market-making activities at any time without
notice, at its sole discretion.
DLJMB, an affiliate of DLJSC, holds together with its affiliates, in the
aggregate, a 64.4% equity interest in the Company. DLJSC acted as an initial
purchaser in connection with the original offering of the notes by the Company.
The Company will receive no portion of the proceeds from the sales of
Notes in market-making transactions. The Company has agreed to indemnify DLJSC
against certain liabilities, including civil liabilities under the Securities
Act or to contribute to payments DLJSC may be required to make in respect
thereof.
LEGAL MATTERS
The validity of the Notes was passed upon for the Company by Davis Polk &
Wardwell.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated balance sheets of Brand as of December 31, 1999 and 1998,
and the related consolidated statements of operations, stockholder's equity and
cash flows for each of the three years in the period ended December 31, 1999
included in this prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as stated in their reports appearing herein.
AVAILABLE INFORMATION
The Company files reports, proxy statements and other information with the
Commission. You may also read and copy any document the Company files at the
Commission's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for more information about the
public reference room and their copy charges. The Commission maintains a web
site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission.
The Company has filed a registration statement on Form S-1 (of which this
prospectus is a part) with the Commission under the Securities Act with respect
to the Notes. This prospectus does not contain all the information set forth in
the registration statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. You should review our
registration statement and the exhibits thereto.
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INDEX TO FINANCIAL STATEMENTS
Brand Scaffold Services, Inc. and Subsidiaries:
Report of Independent Public Accountants................................ F-2
Consolidated Statements of Operations for the years ended December 31,
1999, 1998, and 1997................................................. F-3
Consolidated Balance Sheets as of December 31, 1999 and 1998............ F-4
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998, and 1997................................................. F-5
Consolidated Statements of Stockholder's Equity (Deficit) for the years
ended December 31, 1999, 1998, and 1997.............................. F-6
Notes to Consolidated Financial Statements.............................. F-9
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Brand Scaffold Services, Inc.:
We have audited the accompanying consolidated balance sheets of Brand
Scaffold Services, Inc. (a Delaware corporation) and subsidiaries as of December
31, 1999 and 1998, and the related consolidated statements of operations,
stockholder's equity (deficit) and cash flows for each of the three years in the
period ended December 31, 1999. 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 auditing standards generally
accepted in the United States. 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 financial position of Brand Scaffold Services,
Inc. and subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
ARTHUR ANDERSEN LLP
St. Louis, Missouri
March 10, 2000
F-2
<PAGE>
BRAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenue.................................................. $218,916 $205,304 $160,660
Operating expenses....................................... 171,630 157,673 122,638
-------- -------- --------
Gross profit............................................ 47,286 47,631 38,022
Selling and administrative expenses...................... 31,550 29,568 25,840
Nonrecurring start-up expenses........................... - - 2,498
-------- -------- --------
Operating income........................................ 15,736 18,063 9,684
Interest expense......................................... 17,758 17,728 15,422
Interest income.......................................... (159) (249) (397)
-------- -------- --------
Income (loss) before provision for income tax........... (1,863) 584 (5,341)
Provision for income tax................................. - - -
-------- -------- --------
Income (loss) before extraordinary loss................. (1,863) 584 (5,341)
Extraordinary loss on debt extinguishment................ - 4,329 -
-------- -------- --------
Net income (loss)....................................... (1,863) (3,745) (5,341)
Less- Accretion of preferred stock dividends............ (5,497) (4,767) (4,172)
-------- -------- --------
Net loss applicable to common stock..................... $(7,360) $(8,512) $(9,513)
======== ======== ========
</TABLE>
The accompanying notes to financial statements are an integral part
of these statements.
F-3
<PAGE>
BRAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except per share amounts)
<TABLE>
<CAPTION>
December 31,
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................................... $244 $3,125
Trade accounts receivable, net of allowance for doubtful accounts of $770 in 1999 and
$812 in 1998............................................................................... 37,346 31,485
Costs and estimated earnings in excess of billings or uncompleted contracts.................. 1,786 2,056
Note receivable from WMIS, current portion................................................... -- 2,175
Notes receivable, current portion............................................................ 194 132
Other current assets......................................................................... 3,225 3,192
-------- --------
Total current assets....................................................................... 42,795 42,165
-------- --------
Property and equipment:
Land......................................................................................... 1,652 1,633
Buildings.................................................................................... 2,829 2,284
Vehicles and other equipment................................................................. 17,634 11,281
Scaffolding equipment........................................................................ 184,152 172,970
Leasehold improvements....................................................................... 704 853
-------- --------
Total property and equipment, at cost...................................................... 206,971 189,021
Less- Accumulated depreciation and amortization.............................................. 45,118 27,421
-------- --------
Total property and equipment, net.......................................................... 161,853 161,600
-------- --------
Other assets:
Deferred financing costs, net................................................................ 4,779 5,350
Notes receivable, net of current portion..................................................... 477 759
Other assets................................................................................. 968 1,186
-------- --------
Total other assets......................................................................... 6,224 7,295
-------- --------
Total assets............................................................................... $210,872 $211,060
======== ========
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
Current liabilities:
Revolving loan............................................................................... $3,960 $--
Current maturities of long-term debt......................................................... 6,000 5,000
Current portion notes payable and capital lease obligations.................................. 903 831
Accounts payable and accrued expenses........................................................ 25,648 23,454
Billings in excess of costs and estimated earnings on uncompleted contracts.................. 731 800
-------- --------
Total current liabilities.................................................................. 37,242 30,085
-------- --------
Long-term debt................................................................................ 147,500 153,500
-------- --------
Notes payable and capital lease obligations................................................... 3,499 4,176
-------- --------
Deferred income taxes......................................................................... 2,195 1,875
-------- --------
14.5% senior exchangeable preferred stock, $0.01 par value, 1,250,000 shares authorized,
1,042,460 issued and outstanding............................................................. 41,404 35,907
-------- --------
Stockholder's equity (deficit):
Common stock, $0.01 par value, 100 shares authorized, issued and
outstanding................................................................................... -- --
Paid-in capital.............................................................................. 19,369 18,525
Receivables from sale of Holdings' common stock.............................................. (822) (336)
Predecessor basis adjustment................................................................. (13,038) (13,038)
Cumulative translation adjustment............................................................ (851) (1,368)
Accumulated deficit.......................................................................... (25,626) (18,266)
-------- --------
Total stockholders' equity (deficit)....................................................... (20,968) (14,483)
-------- --------
Total liabilities and stockholder's equity (deficit)....................................... $210,872 $211,060
======== ========
</TABLE>
The accompanying notes to financial statements are an integral part
of these statements.
F-4
<PAGE>
BRAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................................ $(1,863) $(3,745) $(5,341)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Deferred income tax provision.......................................... 29 (42) (167)
Depreciation and amortization.......................................... 24,491 17,234 13,294
Extraordinary loss on debt extinguishment.............................. -- 4,329 --
Changes in operating assets and liabilities:
Trade accounts receivable, net....................................... (5,861) (7,813) (1,513)
Costs and estimated earnings in excess of billings on
uncompleted contracts.............................................. 270 89 109
Notes receivable..................................................... 220 253 1,973
Scaffolding equipment................................................ 4,140 4,264 4,540
Accounts payable and accrued expenses................................ 2,194 7,940 15
Billings in excess of costs and estimated earnings on
uncompleted contracts.............................................. (69) 54 109
Other.................................................................. (2,403) 4,190 (1,036)
------- ------- -------
Net cash provided by operating activities.......................... 21,148 26,753 11,983
------- ------- -------
Cash flows from investing activities:
Purchase of property and equipment....................................... (23,452) (25,519) (14,733)
Receipts on note receivable from WMIS.................................... 2,175 2,700 2,200
Proceeds from sales of property and equipment other than
scaffolding............................................................ 55 43 37
Payments for acquisitions................................................ (1,875) (2,100) --
------- ------- -------
Net cash used for investing activities............................. (23,097) (24,876) (12,496)
------- ------- -------
Cash flows from financing activities:
Proceeds from long-term debt............................................. -- 130,000 --
Payments of long-term debt............................................... (5,000) (121,250) (8,250)
Borrowings (payments) of revolving loans................................. 3,960 (4,500) 4,500
Payments on notes payable and capital lease obligations.................. (605) (438) --
Debt issuance financing costs............................................ -- (4,829) --
Issuance of preferred stock.............................................. -- -- 1,062
Capital contribution from Holdings....................................... 713 48 537
------- ------- -------
Net cash used for financing activities............................. (932) (969) (2,151)
------- ------- -------
Increase (decrease) in cash and cash equivalents.......................... (2,881) 908 (2,664)
Cash and cash equivalents, beginning of period............................ 3,125 2,217 4,881
------- ------- -------
Cash and cash equivalents, end of period.................................. $244 $3,125 $2,217
======= ======= =======
Supplemental cash flow disclosures:
Interest paid............................................................ $16,008 $11,469 $14,138
Income taxes paid........................................................ -- -- 113
Noncash transactions:
Paid in-kind accretion of preferred stock dividends...................... $5,497 $4,767 $4,172
Receipt of scaffolding as payment in lieu of cash on accounts
receivable............................................................. -- -- 422
Purchase of equipment with capital lease................................. 600 3,800 --
</TABLE>
The accompanying notes to financial statements are an integral part
of these statements.
F-5
<PAGE>
<TABLE>
BRAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
(in thousands except share amounts)
<CAPTION>
Receivables
Common Stock from Sale of
------------ Holding's Predecessor Cumulative
Paid in Common Basis Accumulated Translation Comprehensive
Shares Dollars Capital Stock Adjustment Deficit Adjustment Total Income (Loss)
------ ------- ------- ----- ---------- ------- ---------- ----- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31,
1996 100 -- 17,604 -- (13,308) (241) (78) 4,247
Comprehensive
income (loss):
Net income
(loss) -- -- -- -- -- (5,341) -- (5,341) (5,341)
Translation
adjustment (447)
----
-- -- -- -- -- -- (447) (447)
Comprehensive $(5,788)
=======
(loss)
Paid-in-kind
accretion of
preferred
dividends -- -- -- -- -- (4,172) -- (4,172)
Capital
contribution
from DLJ
Brand
Holdings, Inc. -- -- 873 -- -- -- -- 873
Issuance of
promissory
notes from
officers and
employees -- -- -- (336) -- -- -- (336)
---- ---- ------ ---- ------ ----- ---- -----
Balance,
December 31,
1997 100 -- 18,477 (336) (13,038) (9,754) (525) (5,176)
---- ---- ------ ---- ------ ----- ---- -----
</TABLE>
(Continued on following page)
F-6
<PAGE>
BRAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT) (Continued)
(in thousands except share amounts)
<TABLE>
<CAPTION>
Receivables
Common Stock from Sale of
------------ Additional Holding's Predecessor Cumulative
Paid in Common Basis Accumulated Translation Comprehensive
Shares Dollars Capital Stock Adjustment Deficit Adjustment Total Income (Loss)
------ ------- ------- ----- ---------- ------- ---------- ----- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31,
1997 100 $-- $18,477 $(336) $(13,038) $(9,754) $(525) $(5,176)
Comprehensive
income (loss):
Net income
(loss) -- -- -- -- -- (3,745) -- (3,745) (3,745)
Translation
adjustment (843)
-- -- -- -- -- -- (843) (843)
Comprehensive $(4,588)
(loss)
Capital
contribution
from DLJ
Brand
Holdings, Inc. -- -- 48 -- -- -- -- 48
Paid-in-kind
accretion of
preferred
dividends -- -- -- -- -- (4,767) -- (4,767)
Balance,
December 31,
1998 100 $-- $18,525 $(336) $(13,038) $(18,266) $(1,368) $(14,483)
</TABLE>
(Continued on following page)
F-7
<PAGE>
BRAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
(in thousands except share amounts)
<TABLE>
<CAPTION>
Receivables
Common Stock from Sale of
------------ Additional Holding's Predecessor Cumulative
Paid in Common Basis Accumulated Translation Comprehensive
Shares Dollars Capital Stock Adjustment Deficit Adjustment Total Income (Loss)
------ ------- ------- ----- ---------- ------- ---------- ----- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31,
1998 100 $-- $18,525 $(336) $(13,038) $(18,266) $(1,368) $(14,483)
Comprehensive
income (loss):
Net income
(loss) -- -- -- -- -- (1,863) -- (1,863) (1,863)
Translation
adjustment (517)
-------
-- -- -- -- -- -- (517) (517)
Comprehensive $(1,346)
=======
(loss)
Paid-in-capital
from Stock
options -- -- 131 -- -- -- -- 131
Issuance of
promissory
notes from
officers and
employees -- -- -- (486) -- -- -- (486)
--- --- ------- ----- -------- -------- ----- --------
Capital
contribution
from DLJ
Brand
Holdings, Inc. -- -- 713 -- -- -- -- 713
Paid-in-kind
accretion of
preferred
dividends -- -- -- -- -- (5,497) -- (5,497)
Balance,
December 31, 100 $-- $19,369 $(822) $(13,038) $(25,626) $(851) $(20,968)
=== === = ======= ===== ======== ======== ===== ========
1999
</TABLE>
The accompanying notes to financial statements are an integral
part of this statement.
F-8
<PAGE>
BRAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands except share data)
1. ORGANIZATION AND BUSINESS:
Brand Scaffold Services, Inc. (a Delaware corporation) and its subsidiaries
(the "Company") are 100% owned by DLJ Brand Holdings, Inc. ("Holdings").
Holdings is owned 64.4% by Donaldson, Lufkin & Jenrette, Inc. ("DLJ"), 9.2% by
Carlisle Enterprises, L.P. ("Carlisle"), 18.3% by Rust International Inc. ("Rust
International") through its wholly owned subsidiary, Rust Industrial Services
Inc. ("RIS") and 8.1% by the directors, officers and employees of the Company.
Rust International is a subsidiary of Waste Management Industrial Services, Inc.
("WMIS").
The Company believes it operates in one segment. The Company provides
scaffolding services primarily to refining, chemical, petrochemical, pulp and
paper, and utility industries, and to a lesser extent and general commercial
clients. Scaffolding services are typically provided in connection with
periodic, routine cleaning and maintenance of refineries, chemical plants and
utilities, as well as for new construction projects. The Company provides
personnel to erect and dismantle scaffolding structures, transport scaffolding
to project sites and supervise and manage such activities. In addition, the
Company rents and occasionally sells scaffolding that is classified as property
and equipment on the consolidated balance sheets. The Company maintains a
substantial inventory of scaffolding in the United States and Canada.
The Company's services are not rendered to or dependent on any single
customer within the industrial or commercial markets and, therefore, the Company
does not believe that a material concentration of credit risk exists, except
that one customer accounted for 13%, 15% and 17% of revenue for the years ended
December 31, 1999, 1998, and 1997, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying financial statements are prepared on a consolidated basis
and include those assets, liabilities, revenues and expenses directly
attributable to the operations of the Company. All significant intercompany
balances and transactions have been eliminated.
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, the
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.
Revenue Recognition
The Company recognizes contract revenue on the percentage-of-completion
basis with losses recognized in full when identified. Changes in project
performance and conditions, estimated profitability and final contract
settlements may result in future revisions to costs and income. Substantially
all of the Company's contracts are completed in less than six months. Other
revenues are recognized when the services are performed.
Rental and Sales of Scaffolding
For the years ended December 31, 1999, 1998 and 1997 revenues from the
rental of scaffolding were $54,653, $50,137 and $40,847 respectively.
The Company periodically sells scaffolding to third parties, primarily to
its rental customers. The Company recognizes revenue for the proceeds of such
sales and records as operating expense the net book value of the
F-9
<PAGE>
scaffolding. Net book value is determined, assuming the oldest scaffolding is
sold first, as the Company maintains inventory records on a group basis.
Revenues and gross profit from sales of scaffolding were $5,731 and $1,591,
respectively, for the year ended December 31, 1999, $5,757 and $1,493,
respectively, for the year ended December 31, 1998, and $7,714 and $3,174,
respectively, for the year ended December 31, 1997.
Cash and Cash Equivalents
The Company considers all short-term deposits purchased with original
maturities of three months or less to be cash equivalents.
Property and Equipment
Property and equipment (including major repairs and improvements that
extend the useful life of the asset) are capitalized and stated at cost.
Ordinary maintenance and repairs of equipment are charged to expense. The cost
of property and equipment is depreciated over the estimated useful lives on the
straight-line method as follows:
Buildings 10 to 30 years
Vehicles and other equipment 3 to 8 years
Scaffolding equipment 2 to 20 years
Leasehold improvements Life of the applicable lease or ife of the
improvement, whichever is shorter
For the years ended December 31, 1999, 1998 and 1997, depreciation and
amortization expense was $23,769, $16,509, and $12,325 respectively.
Deferred Financing Costs
The Company deferred financing costs of $6,624 which is being amortized
over the life of the Credit Agreement. In 1998, the Company recorded an
extraordinary loss of $4.3 million to write off deferred financing costs related
to the early extinguishment of debt. For the years ended December 31, 1999, 1998
and 1997, amortization expense was $722, $725, and $969 respectively.
Accumulated amortization was $700 and $924, as of December 31, 1999 and 1998,
respectively. In connection with the February 1998 issuance of senior notes, the
Company incurred financing fees and expenses of $4.8 million, which were
deferred and are being amortized over 10 years.
Derivative Financial Instruments
The Company uses an interest rate collar to hedge its exposure to interest
rate fluctuations. The collar has the effect of establishing a maximum and a
minimum interest rate on a portion of the Company's underlying variable rate
debt obligations. The maximum and minimum interest rates associated with the
interest rate collar are 8.50% and 5.69%, respectively. In 1998, the Company
recorded an expense of $599 related to this interest rate collar.
Asset Impairment
If facts and circumstances suggest that a long-lived asset may be impaired,
the carrying value is reviewed. If this review indicates that the value of the
asset will not be recoverable, as determined based on projected undiscounted
cash flows related to the asset over its remaining life, the carrying value of
the asset is reduced to its estimated fair value.
Foreign Operations
The assets and liabilities of the Company's wholly owned foreign
subsidiary, Brand Scaffold Services of Canada, Inc. are translated at the rates
of exchange in effect on the balance sheet date while income statement accounts
are translated at the average exchange rate in effect during the period. The
resulting translation adjustments
F-10
<PAGE>
are charged or credited to the cumulative translation adjustment account
included in stockholder's equity (deficit). Revenue from the Canadian operation
and scaffolding equipment in Canada are less than 10% of the consolidated totals
for the Company.
3. NOTES RECEIVABLE:
Notes receivable result from scaffolding sales. As of December 31, 1999,
and 1998, $671 and $891 of such notes maturing in 2 to 4 years were outstanding
with interest rates ranging from 8.5% to 9.0%, and 9.75% to 11.00% respectively.
4. INCOME TAXES:
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Deferred income taxes are
not provided on undistributed earnings of the Company's foreign subsidiary
because those earnings are considered to be permanently invested. If the
reinvested earnings were to be remitted, the U. S. income taxes under current
law would be immaterial.
For the years ended December 31, 1999, 1998 and 1997, such provision
consisted of a deferred domestic tax (benefit) of ($29), ($238) and ($287),
current foreign tax (benefit) expense of ($29), $42 and $167, and deferred
foreign tax expense of $58, $196 and $120, respectively.
The reconciliation of the statutory federal income tax (benefit) expense on
the Company's pretax income (loss) to the actual provision for income taxes for
the years ended December 31, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------- -------
<S> <C> <C> <C>
Statutory federal income taxes ........ $(633) $(1,333) $(1,869)
State and local taxes, net of federal . (95) (251) (174)
Foreign taxes ......................... 7 54 287
Valuation allowance ................... 604 1,240 1,918
Other ................................. 117 290 (162)
----- ------- -------
Provision for income tax .............. $ -- $ -- $ --
===== ======= =======
</TABLE>
The components of the net deferred income tax liability as of
December 31, 1999 and 1998, are as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Deferred tax assets:
Accrued liabilities ........... 4,877 4,274
Property and equipment ........ 1,001 1,670
Net operating loss carryforward 35,491 34,401
Valuation allowance ........... (8,940) (8,336)
-------- --------
Deferred tax assets ........... $ 32,429 $ 32,009
-------- --------
Deferred tax liabilities:
Note receivable from WMIS ..... $-- $ (870)
Property and equipment ........ (34,624) (33,014)
-------- --------
Deferred tax liabilities ...... (34,624) (33,884)
-------- --------
Deferred income tax asset, net $ (2,195) $ (1,875)
======== ========
</TABLE>
The Company is required to record a valuation allowance when it is more
likely than not that some portion or all of the deferred income tax assets will
not be realized. As of December 31, 1999, the valuation allowance of
F-11
<PAGE>
$8,940 was recorded, which increased $604 for the year ended December 31, 1999.
As of December 31, 1998, a valuation allowance of $8,336 was recorded, which
increased $1,240 for the year ended December 31, 1998.
At December 31, 1999, the Company had net operating loss carryforwards, for
federal income tax purposes, of $88,729 which expire in various years between
2011 and 2018.
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
The major components of accounts payable and accrued expenses as of
December 31, 1999 and 1998, are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Accounts payable ....................................... $ 3,896 $ 4,024
Payroll and related accruals ........................... 6,137 6,419
Workers compensation and health benefit liabilities .... 8,947 6,304
Accrued interest ....................................... 5,230 5,128
Other .................................................. 1,438 1,579
------- -------
$25,648 $23,454
======= =======
</TABLE>
6. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS:
Notes payable and capital lease obligations as of December 31,
1999 and 1998, are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Notes payable .......................................... $ 935 $ 1,375
Capital lease obligations .............................. 3,467 3,632
------- -------
4,402 5,007
Less- Current portion .................................. 903 831
------- -------
$ 3,499 $ 4,176
======= =======
</TABLE>
Notes payable consist of several promissory notes with interest rates of
8.5%. Future principal payments total $283 for 2000, $283 for 2001, $283 for
2002 and $86 for 2003.
7. DEBT AND BORROWING ARRANGEMENTS:
At December 31, 1999 and 1998, long-term debt consisted of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Term loans ............................................. $27,460 $28,500
10-1/4% Senior Notes ................................... 130,000 130,000
------- -------
157,460 158,500
Less- Current portion .................................. 9,960 5,000
------- -------
Long-term debt ........................................ $147,500 $153,500
======== ========
</TABLE>
In 1996, in connection with the Acquisition, the Company entered into a
Credit Agreement which provided for Term Loan Commitments under Senior Secured
Credit facilities totaling $160 million, and a Revolving Loan Commitment
totaling $30 million. In February 1998, the Company issued $130 million of
10-1/4% Senior Notes due February 2008. The offering was underwritten by DLJ.
The proceeds of this offering were used to repay $120 million of the Term Loans
outstanding under the Credit Agreement. In addition, in February 1998, the
Company amended the Credit Agreement to reduce the total facility to $60
million. In March 1999, the Company also secured a $30 million Term B Loan
commitment to enable the company to make further acquisitions. This amendment
F-12
<PAGE>
included revisions to certain covenant requirements. In connection with the
Credit Agreement, the Company incurred administrative and commitment fees,
included in interest expense, of $183, $208, and $216 for the years ended
December 31, 1999, 1998 and 1997.
Maturities of long-term debt as of December 31, 1999, are as follows:
Year
- -----
2000 ................................................................. $ 6,000
2001 ................................................................. 8,500
2002 ................................................................. 12,960
2003 ................................................................. --
2004 ................................................................. --
Thereafter ........................................................... 130,000
--------
$ 157,460
========
Interest rates are determinable under the Credit Agreement based upon
certain market "Base Rates" or LIBOR, plus an "Applicable Margin" of between
1.75% to 3.5%. The Applicable Margins for Tranche B and Tranche C loans are
fixed while those for Tranche A loans ($23,500, $28,500, and $51,000 as of
December 31, 1999, 1998, and 1997, respectively), vary based, generally, on
earnings performance. The average interest rate under Term Loans in effect
during the years ended December 31, 1999, 1998 and 1997, was 9.87%, 9.80%, and
8.90%, respectively. Interest expense on the Term Loans and the Senior Notes for
the years ended December 31, 1999, 1998 and 1997, was $15,499, $17,060, and
$13,984, respectively.
Revolving loan commitments equal an amount based upon an eligible borrowing
base, as defined, with a maximum available limit of $30 million. The loan
expires September 30, 2002, and interest rates are based on certain market "Base
Rate" or LIBOR plus a margin of between 1.75% and 3.5% (generally based on
earnings performance). At December 31, 1999 and 1998, the available borrowing
base (which is net of outstanding borrowings) was $12,654, and $16,244,
respectively. As of December 31, 1999 and 1998, amounts borrowed under the
revolving loan were $3,960 and $-0-, respectively. Any borrowings under the
revolving loan commitment in excess of $10 million must be repaid once per year,
in accordance with the Credit Agreement. Interest expense on the revolving loan
for the years ended December 31, 1999, 1998 and 1997, was $509, $100, and $119
respectively.
Substantially all assets of the Company are pledged as collateral for the
Credit Agreement. In addition, the Company is required to comply with various
affirmative and negative covenants in the Credit Agreement, including financial
covenants requiring certain levels of net worth to be maintained and the
achievement of certain financial ratios. The Company was in compliance with the
various affirmative and negative covenants at December 31, 1999.
As part of the Acquisition, the Company issued a Subordinated Note (the
Subordinated Note) to Rust International totaling $14.5 million due 2008. The
Subordinated Note was recorded at its fair value of $4.8 million, assuming an
effective interest rate of 18% per annum. On September 30, 1996, Holdings
assumed all obligations under the Subordinated Note by making a capital
contribution to the Company of $4.8 million, which is included in paid-in
capital of the Company. Because Holdings has no revenue generating activities,
other than its ownership of the Company, it is likely that the Company's cash
flows will service all or part of Holding's obligation under the Subordinated
Note. Subject to certain conditions, Holdings has the option of paying interest,
calculated annually, through the issuance of additional Subordinated Notes in
lieu of cash. Additionally, based on Holdings' financial performance, the
Subordinated Note's interest and principal payments may be delayed or
accelerated. The fair market value of the Subordinated Note is approximately
$6.2 million and $7.0 million as of December 31, 1999 and 1998, respectively. No
principal or interest cash payments were made during 1999 or 1998.
F-13
<PAGE>
8. LEASE OBLIGATIONS:
The Company leases a portion of its operating and office facilities under
operating leases. For the years ended December 31, 1999, 1998 and 1997, rent
expense was $1,735, $1,538, and $1,334, respectively.
The Company leases certain scaffolding equipment under capital leases. The
net book value of the scaffolding equipment under capital lease was $3,398 as of
December 31, 1999. The future minimum lease payments under noncancelable leases
as of December 31, 1999, are as follows:
<TABLE>
<CAPTION>
Capital Operating
Year Leases Leases
- ---- ------ ------
<S> <C> <C>
2000............................................ 1,069 1,763
2001............................................ 1,069 1,640
2002............................................ 1,069 1,292
2003............................................ 858 760
2004............................................ -- 408
Thereafter...................................... -- 453
------ ------
Total minimum lease payments................... $4,065 $6,316
Less- Imputed interest component................ 598
------
Present value of net minimum lease payments.... $3,467
======
</TABLE>
9. COMMITMENTS AND CONTINGENCIES:
In the ordinary course of conducting its business, the Company becomes
involved in various pending claims and lawsuits. These primarily relate to
employee matters. The outcome of these matters is not presently determinable,
however, in the opinion of management, based on the advice of legal counsel, the
resolution of these matters is not anticipated to have a material adverse effect
on the financial position or results of operations of the Company.
The Company has available Letter of Credit Commitments in an amount not to
exceed $15 million, of which $9,530, $8,000 and $6,751 was outstanding with a
bank at December 31, 1999, 1998 and 1997, respectively. For the years ended
December 31, 1999, 1998 and 1997, the Company paid fees related to such
commitments (included in interest expense) of $285, $216, and $134,
respectively.
10. SENIOR EXCHANGEABLE PREFERRED STOCK:
The Company has authorized 1,250,000 shares and has issued and outstanding
1,042,460 of Senior Exchangeable Preferred Stock (the "Senior Preferred Stock").
The Senior Preferred Stock is mandatorily redeemable on March 31, 2008, at a
redemption price equal to aggregate liquidation value plus unpaid dividends. The
liquidation value of each share of Senior Preferred Stock is $25 at issuance.
Dividends are calculated quarterly on the liquidation value of such shares at
14.5% annually. For the five-year period ended September 30, 2001, such
dividends accrete on a compounded basis and increase the liquidation value.
Dividends are payable in cash subsequent to this date. For the years ended
December 31, 1999, 1998 and 1997, dividends of $5,497, $4,767, and $4,172 were
accreted. As a result, the loss attributable to common stockholders for the
years ended December 31, 1999, 1998 and 1997, was $7,360, $8,512, and $9,513,
respectively.
The Senior Preferred Stock carries no voting rights, but its holders have
certain defined rights upon certain events occurring. In the event of a change
in control of the Company, each holder of Senior Preferred Stock will have the
right to require the Company to repurchase its shares at 101% of the liquidation
value. The Company may redeem the Senior Preferred Stock at certain premiums to
the liquidation value at any time after September 30, 2001. Additionally, at the
option of the Company, the Senior Preferred Stock is exchangeable into 14.5%
Subordinated Exchange Debentures due 2008, under certain conditions.
F-14
<PAGE>
11. STOCKHOLDER'S EQUITY (DEFICIT):
The Company has authorized, issued and outstanding 100 shares of $.01 par
common stock. All of the common stock of the Company is owned by Holdings.
12. PARENT COMPANY TRANSACTIONS:
Holdings has authorized 15,000,000 shares and issued and outstanding
13,383,123 shares of $.01 par common stock.
As part of the Acquisition, on September 30, 1996, Holdings and Carlisle
agreed upon a grant of options to Carlisle (the "Carlisle Options") to acquire
918,750 shares of Holdings' common stock. The Carlisle Options fall into three
categories, each with different vesting terms: time based, performance based,
and path dependent (for which vesting is contingent upon certain measurements of
the value of the Company). Substantially all of the value of the Carlisle
Options was considered a cost of the Acquisition and pushed down to the
Company's financial statements.
In 1999, 1998 and 1997, Holdings made a capital contribution to the Company
of $713, $48, and $873, respectively, representing cash and notes received by
the Company from the sale of Holdings' common stock to certain directors,
officers and employees of the Company. At December 31, 1999 and 1998 certain
officers and employees of the Company have outstanding promissory recourse notes
in the aggregate amount of $822 and $336, respectively, which were issued to the
Company as consideration for a portion of the above Holdings' common stock.
These notes earn interest at a rate between 5.22% and 7.03% and mature between
2002 and 2006. These notes are secured by 643,500 shares owned by such officers
and employees.
In 1997, the Board of Directors of Holdings approved a stock option plan
for key employees of the Company. During 1998 and 1997, Holdings granted certain
employees options to acquire 109,000 and 963,500 shares of Holding's common
stock, respectively. The options were granted with an exercise price of $1.00
per share which management believes approximated the fair value of Holdings'
common stock at the date of grant. The options vest over a maximum of ten years
and a minimum of five years provided certain performance criteria are met.
Unvested options are subject to forfeiture, upon employee termination, as
defined. Additionally, any shares acquired upon exercise are subject to
repurchase rights of the Company upon termination of employment, as defined.
Upon a change of control, as defined, all unvested options will vest. The
weighted average exercise price for the options outstanding in 1999, 1998 and
1997 is $1.00.
Stock option transactions under the plan for 1999, 1998 and 1997 are
summarized below:
Number of Shares
--------------------------------
1999 1998 1997
--------- --------- ---------
Options outstanding at beginning of year. 1,013,500 963,500 --
Options granted.......................... -- 109,000 963,500
Options canceled......................... 98,000 59,000 --
Options exercised........................ 645,700 -- --
Options outstanding at end of year....... 269,800 1,013,500 963,500
Exercisable at end of year............... 160,020 364,300 0
The Company adopted the disclosure-only provisions under SFAS 123
"Accounting for Stock Based Compensation" ("SFAS 123"). The Company accounts for
employee stock options under APB Opinion 25, as permitted under generally
accepted accounting principles. Accordingly, no compensation cost has been
recognized in the accompanying financial statements related to these options.
Had compensation cost for these options been determined consistent with SFAS
123, the Company's net loss would reflect the following for the year ended
December 31:
F-15
<PAGE>
Net Loss 1999 1998 1997
- -------- ------- ------- -------
As reported $(1,863) $(3,745) $(5,341)
Pro forma (1,916) (3,786) (5,384)
The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions for 1998 and 1997; dividend yield of 0%, expected volatility of 0%,
risk-free interest rate of 6.5% and an expected life of seven years. The fair
value of the options granted in 1998 and 1997 was $.44 and $.45 per option,
respectively.
In accordance with the Shareholder's Agreement of Holdings, in the event
any shareholder desires to transfer any shares of Holdings to a third party
prior to September 30, 2001, such shareholders must first offer such shares to
the other shareholders. Also, certain shareholders engaged in a transfer of
shares to a third party have the right to compel the other shareholders to sell
a proportionate share of their holdings to the third party, as defined.
13. RELATED-PARTY TRANSACTIONS:
Certain shareholders of Holdings receive a quarterly Management Advisory
Fee in return for management, advisory and other services rendered. Such fees
totaled $500, $500 and $500, for the years ended December 31, 1999, 1998 and
1997, respectively.
In connection with the Acquisition, the Company entered into a Transitional
Services Agreement with WMIS and Rust International. In consideration of certain
services to be rendered by the Company and the licenses and preferred customer
status granted by the Company, WMIS paid to the Company $725 per quarter through
September 30, 1999 ($8.7 million in total). The Company recorded $7,438 as a
note receivable from WMIS in purchase accounting. The balance of $1,263 was
being accounted for as a reduction to the Company's operating expenses in the
period the aforementioned services are provided. For the years ended December
31, 1999 and 1998, the Company received $2,175 and $2,900, respectively. For the
years ended December 31, 1999, 1998 and 1997 operating expenses were reduced by
$0, $200 and $700, respectively. In addition, the company provides computer
support to WMIS and receives payment of $75 per month for such services.
14. EMPLOYEE BENEFIT PLAN:
In 1997, the Company established the Brandshare 401(k) Savings Plan and
Profit Sharing Plan. Substantially all employees are eligible to participate in
the Plan. Participants may elect to defer 2% to 15% of their salary. The
Company, at its sole discretion, may make matching contributions to the Plan.
For the years ended December 31, 1999, 1998 and 1997, the Company expensed $359,
$345, and $318 respectively, for contributions to the Plan.
15. FAIR VALUES OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and Cash Equivalents--The carrying amounts approximate fair value.
Notes Receivable--The fair value of notes receivable are based on
discounted future cash flows at current interest rates.
Revolving Loan--The carrying amounts of the borrowings under the Credit
Agreement approximate their fair value because such borrowings carry variable
interest rates.
Term Loans-The carrying amounts of the term loans approximate their fair
value because such loans carry variable interest rates.
Senior Notes-The fair value of the senior notes is based on market rates
obtained from dealers.
F-16
<PAGE>
14.5% Senior Exchangeable Preferred Stock--The liquidation approximate
fair value.
The carrying amounts and fair values of the Company's financial instruments
at December 31, 1999 and 1998, are as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- -----------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
--------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Cash and cash equivalents......................... $244 $244 $3,125 $3,125
Notes receivable.................................. 671 671 891 891
Revolving loan.................................... 3,960 3,960 -- --
Term loans........................................ 23,500 23,500 28,500 28,500
Senior notes...................................... 130,000 118,300 130,000 123,500
Notes payable and capital lease obligations....... 4,402 4,402 5,007 5,007
14.5% Senior exchangeable preferred stock......... 41,404 29,189 35,907 35,902
</TABLE>
16. ACQUISITIONS:
In August 1999, the Company acquired the stock of Scaffold-Jax, Inc. for a
purchase price of $1.2 million, ($1.0 million in cash and $200 in a note to be
paid two years after closing). There was no excess cost of assets acquired over
the amounts assigned to net tangible assets at the date of acquisition.
Scaffold-Jax, Inc. is a Jacksonville, Florida based company and services both
the industrial and commercial market.
In April 1999, the Company acquired the operating assets of Philip Scaffold
Corporations ("Philip") for a purchase price of $875. Philip operates out of
Denver and Grand Junction, Colorado and is an industrial scaffold operation with
its major customers being power companies and refineries.
In October 1998, the Company acquired the operating assets of The Brook
Company, Ltd. ("Brook") for a purchase price net of cash acquired of $3.1
million ($1.7 million of cash and $1.4 million in notes payable). There was no
excess cost of assets acquired over the amounts assigned to net tangible assets
at the date of the acquisition. Brook is a New Orleans based specialty provider
of temporary structures and enclosures for the special events market.
In September 1998, the Company acquired the operating assets of Scaffold
Rental and Erection ("SRE") for a purchase price net of cash acquired, of $4.2
million ($400 of cash and $3.8 million in notes payable and capital lease
obligations). The excess cost of assets acquired over the amounts assigned to
net tangible assets at the date of acquisition was $100. SRE is an Atlanta based
company that provides scaffolding services to industrial customers primarily in
the southeastern states.
17. ACCOUNTING STANDARD NOT YET IMPLEMENTED:
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value and that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting. SFAS No.
133 is effective for fiscal years beginning after June 15, 2000. The Company has
not yet quantified the impacts of adopting SFAS No. 133 on its consolidated
financial statements nor has it determined the timing or method of its adoption
of SFAS No. 133. However, SFAS No. 133 could increase volatility in earnings and
other comprehensive income.
F-17
<PAGE>
<TABLE>
<S> <C>
========================================================= =========================================================
We have not authorized any dealer, salesperson
or other person to give you written information [LOGO]
other than this prospectus or to make
representations as to matters not stated in this BRAND SCAFFOLD
prospectus. You must not rely on unauthorized SERVICES, INC.
information. This prospectus is not an offer to sell
these securities or our solicitation of your offer to
buy the securities in any jurisdiction where that 10 1/4% Senior Notes due 2008
would not be permitted or legal. Neither the
delivery of this prospectus nor any sales made
hereunder after the date of this prospectus shall
create an implication that the information contained
herein or the affairs of the Company have not
changed since the date hereof. ------------------------------------
----------------------
PROSPECTUS
TABLE OF CONTENTS
------------------------------------
Page
----
Prospectus Summary..................................2
Risk Factors.......................................10
Use of Proceeds....................................16
Capitalization.....................................17
Selected Consolidated Financial Data...............18
Management's Discussion and Analysis of
Financial Condition and Results of Operations...20
Business...........................................26
Management.........................................32
Principal Stockholders.............................37
Certain Relationships and Related Transactions.....39
Description of Bank Facility.......................40
Description of Preferred Stock.....................42
Description of Notes...............................44
Market-Making Activities of DJLSC..................70
Legal Matters......................................70 April __, 2000
Independent Public Accountants.....................70
Available Information..............................70
Index to Consolidated Financial Statements........F-1
========================================================= =========================================================
</TABLE>
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following is an itemization of all estimated expenses expected to be
incurred by the Company in connection with the distribution of the securities
registered hereby.
Legal fees and expenses.....................................$ 35,000
Accounting fees and expenses................................$ 35,000
---------
Total..................................................$ 70,000
=========
Item 14. Indemnification of Directors and Officers
Under the Delaware General Corporation Law (the "DGCL"), directors,
officers, employees and other individuals may be indemnified against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with specified actions, suits or proceedings, whether civil,
criminal, administrative or investigative (other than a derivative action) if
they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the Company and, with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful. A similar standard of care is applicable in the case of a
derivative action, except that indemnification only extends to expenses
(including attorneys' fees) incurred in connection with the defense or
settlement of such an action, and the DGCL requires court approval before there
can be any indemnification of expenses where the person seeking indemnification
has been found liable to the Company.
The Company's Certificate of Incorporation, as amended, provides in effect
for the indemnification by the Company of each director and officer of the
Company to the fullest extent permitted by applicable law.
If the DGCL is amended to further expand the indemnification permitted to
directors, officers, employees or agents of the Company, then the Company shall
indemnify such persons to the fullest extent permitted by the DGCL, as so
amended.
Item 15. Recent Sale of Unregistered Securities
None.
Item 16. Exhibits
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
*3.1 -- Certificate of Incorporation of the Registrant
*3.2 -- Certificate of Amendment of Certificate of Incorporation of the Registrant
*3.3 -- Amended and Restated By-Laws of Brand Scaffold Services, Inc.
*4.1 -- Amended and Restated Certificate of Designations, Preferences and Rights of 14.5% Senior
Exchangeable Preferred Stock due 2008 (the "Preferred Stock")
*4.2 -- Amended and Restated Shareholders Agreement dated as of September 30, 1996 among DLJ
Merchant Banking Partners, L.P., DLJ International Partners, C.V., DLJ Offshore Partners,
C.V., DLJ Merchant Banking Funding, Inc., Carlisle-Brand Investors, L.P., Rust Industrial
Services Inc., DLJ Brand Holdings, Inc. ("Holdings"), Brand Scaffold Services, Inc. and
Certain Individuals
II-1
<PAGE>
Exhibit No. Description
----------- -----------
*4.3 -- Stock Option Agreement dated as of March 4, 1997 between Holdings and Carlisle Group, L.P.
*4.4 -- Indenture dated as of February 25, 1998 between the Company, and U.S. Trust Company of
Texas, N.A., as Trustee, relating to the Company's 10 1/4% Senior Notes due 2008 (the "Notes")
*4.5 -- Registration Rights Agreement, dated as of February 25, 1998, between the Company and
Donaldson Lufkin & Jenrette Securities Corporation ("DLJSC"), as initial purchaser, relating
to the Notes
*4.6 -- Registration Rights Agreement dated as of March 2, 1998 by and between the Company and
DLJSC, relating to the Preferred Stock
*5 -- Opinion of Davis Polk & Wardwell, Counsel of the Registrant, regarding the validity of the
notes
*10.1 -- Credit Agreement dated as of September 30, 1996, among Brand Scaffold Services, Inc., the
Banks party thereto, DLJ Capital, as Syndication Agent, and Bank of America, as
Administrative Agent (the "Credit Agreement")
*10.2 -- Purchase Agreement dated as of February 25, 1998, by and between the Company and DLJSC,
as initial purchaser, relating to the Notes
*10.3 -- The Amended and Restated Transaction Agreement dated as of September 18, 1996 among
DLJ Merchant Banking Partners, L.P., DLJ International Partners, C.V., DLJ Offshore
Partners, C.V., DLJ Merchant Banking Funding, Inc., Carlisle Enterprises, L.P., Holdings, the
Company, Brand Scaffold Builders, Inc., Brand Scaffold Rental & Erection, Inc. 702569
Alberta Ltd., Rust International Inc., Rust Industrial Services Inc., Rust Scaffold Services Inc.,
Rust Scaffold Builders Inc., and Rust Scaffold & Erection Inc.
**10.4 -- Employment Agreement dated as of June 1, 1999 between the Company and John M. Monter
*10.5 -- Employment Agreement dated as of July 29, 1996 between the Company and James "Marty"
McGee
*10.6 -- Employment Agreement dated as of July 29, 1996 between the Company and Ronald W.
Moore
*10.7 -- Employment Agreement dated as of July 29, 1996 between the Company and Otto K. Knoll
*10.8 -- Offer Letter dated as of March 30, 1998 addressed to Ian R. Alexander
**10.9 -- The Credit Agreement as amended and restated as of March 17, 1999
**10.10 -- The Additional Term B Loan Addendum dated March 9, 2000 to the Credit Agreement
**12 -- Statement of Computation of Ratio of Earnings to Fixed Charges
*21 -- Subsidiaries of the Registrant
**23.1 -- Consent of Arthur Andersen LLP, independent public accountants
*23.2 -- Consent of Davis Polk & Wardwell, counsel to the Registrant (included in Exhibit 5)
*24 -- Powers of Attorney
*25 -- Statement of Eligibility of U.S. Trust Company of Texas, N.A.
**27 -- Financial Data Schedule
*99.1 -- Form of Letter of Transmittal
*99.2 -- Form of Notice of Guaranteed Delivery
II-2
<PAGE>
Exhibit No. Description
----------- -----------
*99.3 -- Form of Instruction to Registered Holder and/or Book-Entry Transfer Facility Participant from
Owner of Old Notes
*99.4 -- Form of Letter to Clients of Depository Trust Company Participants
*99.5 -- Form of Letter to Registered Holders and Depository Trust Company Participants
</TABLE>
- --------------
* Previously filed with the SEC.
** Filed herewith.
(b) Schedules
All supplementary schedules relating to the Registration Statement are
omitted because they are not required or because the required information, where
material, is contained in the Financial Statements.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the
II-3
<PAGE>
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 of 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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Chesterfield, State of Missouri, April 14, 2000.
BRAND SCAFFOLD SERVICES, INC.
April 14, 2000
By: /s/ Ian R. Alexander
---------------------------------------
Ian R. Alexander
Chief Financial Officer,
Vice President, Finance
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John M. Monter Director, Chief Executive Officer and President April 14, 2000
---------------------------- (Principal Executive Officer)
John M. Monter
/s/ Ian R. Alexander Chief Financial Officer, Vice President, Finance April 14, 2000
---------------------------- (Principal Financial Officer and
Ian R. Alexander Principal Accounting Officer)
April 14, 2000
---------------------------- Chairman of the Board
David L. Jaffe
* Director April 14, 2000
----------------------------
Robert Bonczek
* Director April 14, 2000
----------------------------
James S. Carlisle
Director April 14, 2000
----------------------------
Donald R. Chappel
* Director April 14, 2000
----------------------------
Vincent Langone
Director April 14, 2000
----------------------------
Karl R. Wyss
*By: /s/ Ian R. Alexander April 14, 2000
----------------------------
Ian R. Alexander
as Attorney-in-Fact
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
*3.1 -- Certificate of Incorporation of the Registrant
*3.2 -- Certificate of Amendment of Certificate of Incorporation of the Registrant
*3.3 -- Amended and Restated By-Laws of Brand Scaffold Services, Inc.
*4.1 -- Amended and Restated Certificate of Designations, Preferences and Rights of 14.5% Senior
Exchangeable Preferred Stock due 2008 (the "Preferred Stock")
*4.2 -- Amended and Restated Shareholders Agreement dated as of September 30, 1996 among DLJ
Merchant Banking Partners, L.P., DLJ International Partners, C.V., DLJ Offshore Partners,
C.V., DLJ Merchant Banking Funding, Inc., Carlisle-Brand Investors, L.P., Rust Industrial
Services Inc., DLJ Brand Holdings, Inc. ("Holdings"), Brand Scaffold Services, Inc. and
Certain Individuals
*4.3 -- Stock Option Agreement dated as of March 4, 1997 between Holdings and Carlisle Group, L.P.
*4.4 -- Indenture dated as of February 25, 1998 between the Company, and U.S. Trust Company of
Texas, N.A., as Trustee, relating to the Company's 10 1/4% Senior Notes due 2008 (the "Notes")
*4.5 -- Registration Rights Agreement, dated as of February 25, 1998, between the Company and
Donaldson Lufkin & Jenrette Securities Corporation ("DLJSC"), as initial purchaser, relating
to the Notes
*4.6 -- Registration Rights Agreement dated as of March 2, 1998 by and between the Company and
DLJSC, relating to the Preferred Stock
*5 -- Opinion of Davis Polk & Wardwell, Counsel of the Registrant, regarding the validity of the
notes
*10.1 -- Credit Agreement dated as of September 30, 1996, among Brand Scaffold Services, Inc., the
Banks party thereto, DLJ Capital, as Syndication Agent, and Bank of America, as
Administrative Agent
*10.2 -- Purchase Agreement dated as of February 25, 1998, by and between the Company and DLJSC,
as initial purchaser, relating to the Notes
*10.3 -- The Amended and Restated Transaction Agreement dated as of September 18, 1996 among
DLJ Merchant Banking Partners, L.P., DLJ International Partners, C.V., DLJ Offshore
Partners, C.V., DLJ Merchant Banking Funding, Inc., Carlisle Enterprises, L.P., Holdings, the
Company, Brand Scaffold Builders, Inc., Brand Scaffold Rental & Erection, Inc. 702569
Alberta Ltd., Rust International Inc., Rust Industrial Services Inc., Rust Scaffold Services Inc.,
Rust Scaffold Builders Inc., and Rust Scaffold & Erection Inc.
**10.4 -- Employment Agreement dated as of June 1, 1999 between the Company and John M. Monter
*10.5 -- Employment Agreement dated as of July 29, 1996 between the Company and James "Marty"
McGee
*10.6 -- Employment Agreement dated as of July 29, 1996 between the Company and Ronald W.
Moore
*10.7 -- Employment Agreement dated as of July 29, 1996 between the Company and Otto K. Knoll
*10.8 -- Offer Letter dated as of March 30, 1998 addressed to Ian R. Alexander
**10.9 -- The Credit Agreement as amended and restated as of March 17, 1999
**10.10 -- The Additional Term B Loan Addendum dated March 9, 2000 to the Credit Agreement
**12 -- Statement of Computation of Ratio of Earnings to Fixed Charges
<PAGE>
Exhibit No. Description
----------- -----------
*21 -- Subsidiaries of the Registrant
**23.1 -- Consent of Arthur Andersen LLP, independent public accountants
*23.2 -- Consent of Davis Polk & Wardwell, counsel to the Registrant (included in Exhibit 5)
*24 -- Powers of Attorney
*25 -- Statement of Eligibility of U.S. Trust Company of Texas, N.A.
**27 -- Financial Data Schedule
*99.1 -- Form of Letter of Transmittal
*99.2 -- Form of Notice of Guaranteed Delivery
*99.3 -- Form of Instruction to Registered Holder and/or Book-Entry Transfer Facility Participant from
Owner of Old Notes
*99.4 -- Form of Letter to Clients of Depository Trust Company Participants
*99.5 -- Form of Letter to Registered Holders and Depository Trust Company Participants
</TABLE>
- -------------------
* Previously filed with the SEC.
** Filed herewith.
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of June 1, 1999, by and between Brand
Scaffold Services, Inc., a Delaware corporation (the "Company") and John M.
Monter ("Executive").
WHEREAS, the Company employs Executive as its President and Chief
Executive Officer; and
WHEREAS, Company and Executive previously entered into an Employment
Agreement dated as of October 1, 1996; and
WHEREAS, the Company and Executive desire to continue the Executive's
employment by the Company and to enter into a new agreement (the "Agreement")
embodying the terms of Executive's future employment;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Employment Term. Executive's continued employment by the Company shall
be for a period which shall commence on April 1, 1999, and shall terminate on
March 31, 2003 (the "Expiration Date"). The period commencing as of March 31,
1999, and ending on the Expiration date is hereinafter referred to as the
"Employment Term". Notwithstanding the foregoing, the Employment Term shall
terminate in any and all events upon the termination of Executive's employment
hereunder.
2. Positions. During the Employment Term, executive shall serve as
President and Chief Executive Officer. Executive shall report directly to the
Board of Directors of the Company (the "Board") and shall have such duties and
authority commensurate with such position as shall be determined from time to
time by the Board. Executive shall devote such substantially all of his
business time and best efforts to the performance of his duties hereunder and
shall not engage in any other business, profession or occupation for
compensation or otherwise.
3. Base Salary. During the Employment Term, the Company shall pay
Executive a base salary (the "Base Salary") at the annual rate of not less than
$375,000, payable in arrears, in accordance with the usual payment practices of
the Company. Executive's Base Salary shall be subject to periodic review by the
<PAGE>
Compensation Committee of the Company, not less frequently than annually,
beginning January 1, 2000.
4. Bonus.
(a) With respect to each fiscal year in the Employment Term, Executive
shall be eligible for a bonus of up to 120% of his Base Salary (the "Annual
Bonus") to be determined annually in accordance with the Company's annual bonus
plan, as earned through the achievement of certain profitability and
performance objectives which are annually developed by the Executive and the
Compensation Committee of the Board of Directors (the "Bonus Plan").
(b) Any Bonus payable hereunder shall be paid at or about the same
time bonuses are paid to the Company's other senior executives and, in the case
of the Annual Bonus, in accordance with the terms of the Bonus Plan.
5. Employee Benefits. During the Employment Term, Executive shall be
entitled to participate on a basis no less favorable than other senior
executives of the Company in all retirement, welfare benefit, incentive
compensation, perquisite and other plans and arrangements of the Company
applicable to senior executives of the Company, as in effect from time to time.
In addition, the Company shall assume the obligation to pay premiums in an
amount up to $2,000 annually under Executive's life insurance policy with First
Colony (No. 2619072) having a face amount of $600,000. Executive shall be
reimbursed on a monthly basis for the lease of an automobile in an amount not
to exceed $775/month and Executive shall be reimbursed on a monthly basis for
the then- current monthly dues and assessments as charged by Executive's
country club.
6. Business Expenses. During the Employment Term, the Company shall
reimburse such of Executive's travel, entertainment and other business expenses
as are reasonably and necessarily incurred by Executive during the Employment
Term in the performance of his duties hereunder, in accordance with the
Company's policies as in effect from time to time.
7. Upon a termination of the employment Term prior to the Expiration Date,
Executive shall be entitled to the payments described in this Section 7.
(a) For Cause by the Company by Executive. The Employment Term may be
terminated prior to its scheduled expiration by the Company for Cause (as
defined below) or by Executive for any reason.
2
<PAGE>
If the Employment Term is terminated by the Company for Cause or by
Executive for any reason, Executive shall be entitled to receive his Base
salary through the date of termination, any Bonus that has been earned in
accordance with Section 4 for a prior fiscal year but not yet paid and any
unreimbursed business expenses, payable promptly following the later of the
date of such termination and the date on which the appropriate documentation is
provided.
All other benefits following termination of the Employment Term pursuant
to this Section 7(a) shall be determined in accordance with the plans, policies
and practices of the Company.
(b) Death. The Employment Term shall terminate prior to the Expiration
Date upon Executive's death. If the Employment Term is terminated prior to the
Expiration Date by reason of death. Executive's estate shall receive (i) the
amounts described under Section 7(a) and (ii) continued payment of Base Salary
through the first anniversary of the date of death.
All other benefits following termination of the Employment Term pursuant
to this Section 7(b) shall be determined in accordance with the plans, policies
and practices of the Company. Provided, in the event of the death of Executive,
the provisions of Section 5(f)(i)(B) of the DLJ Brand Holdings, Inc. Stock
Option Plan in effect as of the date of execution of this Agreement shall be of
no effect and neither DLJ Brand Holdings, Inc. nor its successors or designee
shall have the absolute right to acquire any shares owned or acquired by
Executive, his spouse or lineal descendants and any trust the beneficiaries of
which consist only of such Executive's spouse or lineal descendants.
Notwithstanding the foregoing, any such shares shall remain subject to the
terms and conditions of the Amended and Restated Shareholders Agreement dated
as of September 30, 1996 among DLJ Merchant Banking Partners, L.P.; DLJ
International partners, C.V.; DLJ Offshore Partners, C.V.; DLJ Merchant Banking
Funding, Inc.; Carlisle-Brand Investors, L.P.; Rust Industrial Services, Inc.;
DLJ Brand Holdings, Inc.; brand Scaffold Services, Inc.; and Certain
Individuals.
(c) Disability; by the Company without Cause. The Employment Term
shall terminate prior to the Expiration Date, at the Company's election, if
Executive incurs a Disability (as defined below). In addition, the Employment
Term may be terminated prior to the Expiration date by the Company without
Cause.
If the Employment Term is terminated prior to the Expiration date by
reason of Disability or by the Company without Cause, subject to Executive's
continued compliance with the covenants set forth in Section 10, Executive
shall receive (i) the amounts described under Section 7(a); (ii) continued
payment of
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Base salary through the last day of the 24th month following the date of
termination (the "Severance Period"); (iii) continued coverage under the
Company's welfare benefit arrangements as in effect from time to time through
the earlier of (A) the end of the Severance Period, and (B) such time as
Executive is eligible to receive comparable welfare benefits from a subsequent
employer; and (iv) in the case of a termination by the Company without Cause, a
Bonus payment equal to $12,500 multiplied by the number of months remaining in
the Severance period, payable at the time bonuses are paid to the Company's
other senior executives.
All other benefits following termination of the Employment Term pursuant
to this Section 7(c) shall be determined in accordance with the plans, policies
and practices of the Company. Provided, in the event of the disability of
Executive, the provisions of Section 6(f)(i)(B) of the DLJ Brand Holdings, Inc.
Stock Option Plan in effect as of the date of execution of this Agreement shall
be of no effect and neither DLJ Brand Holdings, Inc. nor its successor or
designee shall have the absolute right to acquire any shares owned or acquired
by Executive, his spouse and lineal descendants or any trust the beneficiaries
of which consist only of such Executive, the Executive's spouse or lineal
descendants. Notwithstanding the foregoing, any such shares shall remain
subject to the terms and conditions of the Amended and Restated Shareholders
Agreement dated as of September 30, 1996 among DLJ Merchant Banking Partners,
L.P.; DLJ International Partners, C.V.; DLJ Offshore Partners, C.V.; DLJ
Merchant Banking Funding, Inc.; Carlisle-Brand Investors, L.P.; Rust Industrial
Services, Inc.; DLJ Brand Holdings, Inc.; Brand Scaffold Services, Inc.; and
Certain Individuals.
(d) Definitions. For purposes of this Section 7, the following terms
shall have the following meanings:
(i) "Cause" shall mean:
(A) Executive's willful and continued failure
substantially to perform his duties under the Agreement
(other than as a result of total or partial incapacity due to
physical or mental illness);
(B) An act or acts on Executive's part constituting
a felony under the laws of the United States or any other
state thereof or any other jurisdiction in which the Company
conducts business;
(C) Executive's being under the influence of illegal
drugs or alcohol while performing his duties hereunder;
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(D) Any other act or omission which is materially
injurious to the financial condition or business reputation
of the Company or any of its affiliates; or
(E) Executive's breach of the provisions of
Section 10.
For purposes of this definition, no act or failure to act shall be
deemed "willful" unless effected by Executive not in good faith and without a
reasonable belief that such action or failure to act was in or not opposed to
the Company's best interests.
(ii) "Disability" shall mean Executive's inability, as a
result of physical or mental illness, to perform the duties of the
position(s) specified in Section 2 for a period of 90 consecutive days
or for an aggregate of 90 days in any twelve consecutive month period.
Any question as to the existence of the Disability of Executive as to
which Executive and the Company cannot agree shall be determined in
writing by a qualified independent physician selected by the Company
and reasonably acceptable to Executive. The determination of
Disability made in writing to the Company and Executive shall be final
and conclusive for all purposes of the Agreement.
(e) Notice of Termination. Any purported termination of the Employment
Term prior to its scheduled expiration by the Company or by Executive shall be
communicated by written notice of termination to the other party hereto. For
purposes of this Agreement a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination under the provision so indicated.
(f) Release. Any payments by the Company to Executive under this
Section 7 or in connection with any dispute arising under or in connection with
this Agreement or relating to Executive's employment with the Company (including
payments pursuant to arbitration as provided for in Section 13(l) hereof will be
contingent upon the execution by Executive of a release of any claims Executive
may have against the Company, its affiliates or any successor to the Company,
such release to be in a form satisfactory to the Company in its sole discretion.
8. Change of Control. In the event of a change of control of 51% or more
of the common stock of the Company, other than a sale into the public markets,
Executive shall have the option to terminate his employment with the
5
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Company and to receive for a period of 24 months following his termination (a)
the Executive's then-current monthly salary; (b) a monthly bonus of $30,000;
and (c) all Employee Benefits described in Section (5) of this Agreement.
9. Change of Job Responsibilities. In the event of a change of control of
51% or more of the common stock of the Company, other than a sale into the
public markets, if Executive's job responsibilities are changed from those
described in Section (2) of this Agreement, Executive shall have the option to
terminate his employment with the Company and to receive for a period ending on
the last day of the 24th month following the Executive's termination or the
Expiration Date, whichever is later, (a) the Executive's then-current monthly
salary; (b) a monthly bonus of $30,000; and (c) all Employee Benefits as
described in Section (5) of this Agreement.
10. Non-Competition/Confidential Information.
(a) Executive acknowledges and recognizes the highly competitive nature
of the businesses of the Company and its affiliates and accordingly agrees that
during the Employment Term and through the later of the Expiration Date and the
first anniversary of the date of termination of employment.
(i) Executive will not directly or indirectly engage in any
business which is in competition with any line of business conducted
by the Company or its affiliates (including without limitation by
performing or soliciting the performance of services for any person
who is a customer or client of the Company or any of its affiliates)
whether such engagement is as an officer, director, proprietor,
employee, partner, investor (other than as holder of less than 1% of
the outstanding capital stock of a publicly traded corporation),
consultant, advisor, agent, sales representative or other participant,
in any geographic area in which the Company or any of its affiliates
conducted any such competing line of business.
(ii) Executive will not directly or indirectly assist others
in engaging in any of the activities in which Executive is prohibited
from engaging in by clause (i) above.
(b) Executive will not directly or indirectly induce any employee of
the Company or any of its affiliates to engage in any activity in which
Executive is prohibited to engage by paragraph (a) above or to terminate his
employment with the Company or any of its affiliates, and will not directly or
indirectly employ or offer employment to any person who was employed by the
Company or any of its affiliates unless such person shall have ceased to be
6
<PAGE>
employed by the Company or any of its affiliates for a period of at least 12
months.
(c) Executive will not at any time (whether during or after his
employment with the Company) disclose or use for his own benefit or purposes or
the benefit or purposes of any other person, firm, partnership, joint venture,
association, corporation or other business organization, entity or enterprise
other than the Company and any of its subsidiaries or affiliates, any trade
secrets, information, data, or other confidential information relating to
customers, development programs, costs, marketing, trading, investment sales
activities, promotion, credit and financial data, manufacturing processes,
financing methods, plans, or the business and affairs of the Company generally
or of any subsidiary or affiliate of the Company, provided that the foregoing
shall not apply to information which is not unique to the Company or which is
generally known to the industry or the public other than as a result of
Executive's breach of this covenant. Executive agrees that upon termination of
his employment with the Company for any reason, he will return to the Company
immediately all memoranda, books, papers, plans, information, letters and other
data, and all copies thereof or therefrom, in any way relating to the business
of the Company and its affiliates, except that he may retain personal notes,
notebooks and diaries. Executive further agrees that he will not retain or use
for his account at any time any trade names, trademark or other proprietary
business designation used or owned in connection with the business of the
Company or its affiliates.
11. Specific Performance and Other Remedies. Executive acknowledges and
agrees that the Company has no adequate remedy at law for a breach or
threatened breach of any of the provisions of Section 10 and, in recognition of
this fact, Executive agrees that, in the event of such a breach or threatened
breach, in addition to any remedies at law, the Company, without posting any
bond and without notice to the Executive, shall be entitled to obtain equitable
relief in the form of specific performance, temporary restraining order,
temporary or permanent injunction or any other equitable remedy which may then
be available. Nothing in this Agreement shall be construed as prohibiting the
Company from pursuing any other remedies at law or in equity that it may have
or any other rights that it may have under any other agreement.
12. Stock Option Plan. Notwithstanding anything to the contrary in the
Stock Option Plan to be adopted by the Company, any options granted to
Executive under such Stock Option Plan shall vest upon a Change of Control (as
defined in such Stock Option Plan) of the Company.
13. Miscellaneous.
7
<PAGE>
(a) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without reference to
principles of conflict of laws.
(b) Entire Agreement/Amendments. This Agreement, the Minimum
Expectations, the Stretch Objectives and any other performance and
superperformance criteria to be established by the Compensation Committee
pursuant to Section 4, the Stock Option Plan to be adopted by the Company and
any award agreements entered into under the Stock Option Plan, the Key Employee
Stock Purchase Plan to be adopted by the Company and any award agreements
entered under the Purchase Plan and the provisions of any employee plan or
arrangement maintained from time to time by the Company in which Executive
participates contain the entire understanding of the parties with respect to
the employment of Executive by the Company and supersede any prior agreements
between the Company and Executive. There are no restrictions, agreements,
promises, warranties, covenants or undertakings between the parties with
respect to the subject matter herein other than those expressly set forth
herein and therein. No provision in his Agreement may be amended unless such
amendment is agreed to in writing.
(c) Continuation of Employment. Unless the parties otherwise agree in
writing, continuation of Executive's employment with the Company beyond the
Expiration Date shall be deemed an employment at will and shall not be deemed
to extend any of the provisions of this Agreement.
(d) No Waiver. The failure of a party to insist upon strict adherence
to any term of this Agreement on any occasion shall not be considered a waiver
of such party's right or deprive such party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement. No
waiver by either party of any breach by the other party of any condition or
provision contained in this Agreement to be performed by such other party shall
be deemed a waiver of a similar or dissimilar condition or provision at the
same or any prior or subsequent time. Any waiver must be in writing and signed
by the Executive or the Company, as the case may be.
(e) Severability. It is expressly understood and agreed that although
Executive and the Company consider the restrictions contained in Section 10 to
be reasonable, if a final judicial determination is made by a court of
competent jurisdiction that the time or territory restriction in Section 10 or
any other restriction contained in Section 10 is an unenforceable restriction
against Executive, such provision shall not be rendered void but shall be
deemed amended to apply to such maximum time and territory, if applicable, or
otherwise to such maximum extent as such court may judicially determine or
indicate to be
8
<PAGE>
enforceable. Alternatively, if any court of competent jurisdiction finds that
any restriction contained in Section 10 is unenforceable, and such restriction
cannot be amended so as to make it enforceable, such finding shall not affect
the enforceability of any of the other restrictions contained herein. In the
event that any one or more of the other provisions of this Agreement shall be
or become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not be affected thereby.
(f) Assignment. This Agreement shall not be assignable by either party
without the consent of the other party.
(g) Successors. This Agreement shall inure to the benefit of and be
binding upon the personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees of the parties hereto.
The Executive shall be entitled to select (and change, to the extent permitted
under any applicable law) 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.
(h) Communications. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when faxed or delivered or two business
days after being mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed (i) to the Executive at his
address then appearing in the personnel records of the Company and; (ii) to the
Company at the Company's then current headquarters, with a copy to the
Company's _________; or (iii) to such other address as either party may have
furnished to the other in writing in accordance herewith, with such notice of
change of address being effective only upon receipt.
(i) Withholding Taxes. The Company may withhold from any and all
amounts payable under this Agreement such Federal, state, local and any other
applicable taxes as may be required to be withheld pursuant to any applicable
law or regulation.
(j) Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of Executive's employment to the extent
necessary to assure the agreed preservation of such rights and obligations.
9
<PAGE>
(k) Representations. Each party represents and warrants to the other
than he or it is fully authorized and empowered to enter into this Agreement
and that the performance of his or its obligations under this Agreement will
not violate any agreement between him or it and any other person or entity.
(l) Arbitration. The parties agree that all disputes arising under or
in connection with this Agreement, and any and all claims by the Executive
relating to his employment with the Company, including any claims of
discrimination arising under Title VII of the Civil Rights Act of 1964, as
amended, the Age Discrimination in Employment Act, the Americans with
Disabilities Act or any similar federal, state or local law will be submitted
to arbitration in the County and State of New York to the American Arbitration
Association ("AAA") under its rules then prevailing for the type of claim in
issue. The parties each hereby specifically submit to the personal jurisdiction
of any federal or state court located in the County and State of New York for
any such action and further agree that service of process may be made within or
without the State of New York by giving notice in the manner provided herein.
In any action or proceeding relating to this Agreement, the parties agree
that no damages other than compensatory damages shall be sought or claimed by
either party and each party waives any claim, right or entitlement to punitive,
exemplary, statutory or consequential damages, or any other damages, and each
relevant arbitral panel is specifically divested of any power to award any
damages in the nature of punitive, exemplary, statutory or consequential
damages, or any other damages of any kind or nature in excess of compensatory
damages.
(m) Fees and Expenses. In the event of a dispute by the Company or
Executive as to the validity or enforceability of, or liability under, any
provision of this Agreement and with respect to any claims arising in
connection with Executive's employment with the Company, each party shall pay
its own legal fees and expenses incurred in connection with such dispute or
claim.
(n) Counterparts. This Agreement may be signed in counterparts, each
of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
(o) Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement. Any reference
to the Executive in the masculine gender herein is for convenience and is not
intended to express any preference by the Company for executives of any gender.
10
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
John M. Monter
BRAND SCAFFOLD SERVICE, INC.
By:
---------------------------------
Name:
Title:
11
[CONFORMED COPY]
U.S. $60,000,000
AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of March 17, 1999,
(amending and restating the Credit Agreement,
dated as of September 30, 1996, and amended as of
November 21, 1996 and February 20, 1998)
among
BRAND SCAFFOLD SERVICES, INC.,
as the Borrower,
VARIOUS FINANCIAL INSTITUTIONS,
as the Lenders,
DLJ CAPITAL FUNDING, INC.,
as the Syndication Agent for the Lenders,
and
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION,
as Swing Line Lender, the Issuer and the Administrative Agent for the Lenders.
ARRANGED BY
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
and
BA SECURITIES, INC.
<PAGE>
TABLE OF CONTENTS
Section Page
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ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms....................................................3
1.2. Use of Defined Terms............................................35
1.3. Cross-References................................................35
1.4. Accounting and Financial Determinations.........................35
ARTICLE II
COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES,
NOTES AND LETTERS OF CREDIT
2.1. Commitments.....................................................36
2.1.1. Term Loan Commitments...........................................36
2.1.2. Revolving Loan Commitment and Swing Line Loan Commitment........37
2.1.3. Letter of Credit Commitment.....................................38
2.1.4. Lenders Not Permitted or Required To Make the Loans.............38
2.1.5. Issuer Not Permitted or Required to Issue Letters of Credit.....39
2.2. Reduction of the Commitment Amounts.............................39
2.2.1. Optional........................................................39
2.2.2. Mandatory.......................................................39
2.3. Borrowing Procedures and Funding Maintenance....................40
2.3.1. Term Loans and Revolving Loans..................................40
2.3.2. Swing Line Loans................................................40
2.4. Continuation and Conversion Elections...........................42
2.5. Funding.........................................................42
2.6. Issuance Procedures.............................................43
2.6.1. Other Lenders' Participation....................................43
2.6.2. Disbursements; Conversion to Revolving Loans....................44
2.6.3. Reimbursement...................................................44
2.6.4. Deemed Disbursements............................................45
2.6.5. Nature of Reimbursement Obligations.............................45
2.7. Notes...........................................................46
2.8. Registered Notes................................................46
<PAGE>
Section Page
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ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
3.1. Repayments and Prepayments; Application.........................47
3.1.1. Repayments and Prepayments......................................47
3.1.2. Application.....................................................51
3.2. Interest Provisions.............................................52
3.2.1. Rates...........................................................52
3.2.2. Post-Maturity Rates.............................................52
3.2.3. Payment Dates...................................................53
3.3. Fees............................................................53
3.3.1. Commitment Fee..................................................53
3.3.2. Agents' and Arrangers' Fees.....................................54
3.3.3. Letter of Credit Fee............................................54
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
4.1. LIBO Rate Lending Unlawful......................................54
4.2. Deposits Unavailable............................................55
4.3. Increased LIBO Rate Loan Costs, etc.............................55
4.4. Funding Losses..................................................55
4.5. Increased Capital Costs.........................................56
4.6. Taxes...........................................................56
4.7. Payments, Computations, etc.....................................58
4.8. Sharing of Payments.............................................59
4.9. Setoff..........................................................60
4.10. Mitigation......................................................60
4.11. Replacement of Lenders..........................................60
ARTICLE V
CONDITIONS TO RESTATEMENT
EFFECTIVENESS AND CREDIT EXTENSIONS
5.1. Effectiveness...................................................61
5.1.1. Execution of Counterparts.......................................61
5.1.2. Affirmation and Consent.........................................61
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Section Page
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5.1.3. Borrowing Base Certificate......................................61
5.1.4. Payment of Fees and Expenses....................................61
5.2. All Credit Extensions...........................................61
5.2.1. Compliance with Warranties, No Default, etc.....................62
5.2.2. Credit Extension Request........................................62
5.3.2. Delivery of Notes...............................................62
5.3.3. Additional Term-B Loan Commitment Addendum......................63
5.3.4. Opinion of Counsel..............................................63
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1. Organization, etc...............................................63
6.2. Due Authorization, Non-Contravention, etc.......................63
6.3. Government Approval, Regulation, etc............................64
6.4. Validity, etc...................................................64
6.5. Financial Information...........................................65
6.6. No Material Adverse Change......................................65
6.7. Litigation, Labor Controversies, etc............................65
6.8. Subsidiaries....................................................65
6.9. Ownership of Properties.........................................65
6.10. Taxes...........................................................66
6.11. Pension and Welfare Plans.......................................66
6.12. Environmental Warranties........................................66
6.13. Regulations U and X.............................................67
6.14. Accuracy of Information.........................................67
6.15. Solvency........................................................68
6.16. Senior Notes....................................................68
6.17. Year 2000.......................................................69
ARTICLE VII
COVENANTS
7.1. Affirmative Covenants...........................................69
7.1.1. Financial Information, Reports, Notices, etc....................69
7.1.2. Compliance with Laws, etc.......................................71
7.1.3. Maintenance of Properties.......................................72
7.1.4. Insurance.......................................................72
7.1.5. Books and Records...............................................72
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Section Page
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7.1.6. Environmental Covenant..........................................72
7.1.7. Future Subsidiaries.............................................73
7.1.8. Future Leased Property and Future Acquisitions of Real
Property; Future Acquisition of Other Property................74
7.1.9. Use of Proceeds, etc............................................75
7.1.10. [Intentionally Omitted].........................................75
7.1.11. Borrower Pledge Agreement.......................................75
7.1.12. Year 2000.......................................................75
7.2. Negative Covenants..............................................75
7.2.1. Business Activities.............................................76
7.2.2. Indebtedness....................................................76
7.2.3. Liens...........................................................77
7.2.4. Financial Condition.............................................78
7.2.5. Investments.....................................................79
7.2.6. Restricted Payments, etc........................................81
7.2.7. Capital Expenditures, etc.......................................83
7.2.8. Consolidation, Merger, etc......................................83
7.2.9. Asset Dispositions, etc.........................................84
7.2.10. Modification of Certain Agreements..............................85
7.2.11. Transactions with Affiliates....................................85
7.2.12. Negative Pledges, Restrictive Agreements, etc...................85
7.2.13. Stock of Subsidiaries...........................................86
7.2.14. Sale and Leaseback..............................................86
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Listing of Events of Default....................................86
8.1.1. Non-Payment of Obligations......................................86
8.1.2. Breach of Warranty..............................................86
8.1.3. Non-Performance of Certain Covenants and Obligations............86
8.1.4. Non-Performance of Other Covenants and Obligations..............86
8.1.5. Default on Other Indebtedness...................................87
8.1.6. Judgments.......................................................87
8.1.7. Pension Plans...................................................87
8.1.8. Change in Control...............................................87
8.1.9. Bankruptcy, Insolvency, etc.....................................87
8.1.10. Impairment of Security, etc.....................................88
8.1.11. Seller Note Redemption..........................................89
8.2. Action if Bankruptcy, etc.......................................89
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Section Page
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8.3. Action if Other Event of Default................................89
ARTICLE IX
THE AGENTS
9.1. Actions.........................................................89
9.2. Funding Reliance, etc...........................................90
9.3. Exculpation.....................................................91
9.4. Successor.......................................................91
9.5. Credit Extensions by each Agent.................................92
9.6. Credit Decisions................................................92
9.7. Copies, etc.....................................................92
9.8. The Syndication Agent, the Administrative Agent
and the Issuer................................................92
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1. Waivers, Amendments, etc........................................93
10.2. Notices.........................................................94
10.3. Payment of Costs and Expenses...................................94
10.4. Indemnification.................................................95
10.5. Survival........................................................96
10.6. Severability....................................................97
10.7. Headings........................................................97
10.8. Execution in Counterparts.......................................97
10.9. Governing Law; Entire Agreement.................................97
10.10. Successors and Assigns..........................................97
10.11. Sale and Transfer of Loans and Notes; Participations
in Loans and Notes............................................97
10.11.1. Assignments.....................................................98
10.11.2. Participations.................................................100
10.11.3. Assignment of Registered Notes.................................101
10.12. Other Transactions.............................................101
10.13. Forum Selection and Consent to Jurisdiction....................101
10.14. Waiver of Jury Trial...........................................102
10.15. Confidentiality................................................102
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SCHEDULE I - Disclosure Schedule
SCHEDULE II - Lender's Percentages
SCHEDULE III - Lender's Notice Information
EXHIBIT A-1 - Form of Revolving Note
EXHIBIT A-2 - Form of Term-A Note
EXHIBIT A-3 - Form of Term-B Note
EXHIBIT A-4 - Form of Swing Line Note
EXHIBIT A-5 - Form of Registered Note
EXHIBIT B-1 - Form of Borrowing Request
EXHIBIT B-2 - Form of Issuance Request
EXHIBIT B-3 - Form of Borrowing Base Certificate
EXHIBIT C - Form of Continuation/Conversion Notice
EXHIBIT D - [Intentionally Omitted]
EXHIBIT E - Form of Compliance Certificate
EXHIBIT F-1 - Form of Borrower Security Agreement
EXHIBIT F-2 - Form of Subsidiary Security Agreement
EXHIBIT G-1 - Form of Holdco Pledge Agreement
EXHIBIT G-2 - Form of Borrower Pledge Agreement
EXHIBIT G-3 - Form of Subsidiary Pledge Agreement
EXHIBIT H - Form of Subsidiary Guaranty
EXHIBIT I - Form of Perfection Certificate
EXHIBIT J - Form of Lender Assignment Agreement
EXHIBIT K - [Intentionally Omitted]
EXHIBIT L - Form of Seller Note
EXHIBIT M - Form of Assumption Agreement
EXHIBIT N - Form of Affirmation and Consent
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<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of March 17, 1999,
amending and restating the Credit Agreement (as defined below), is among Brand
Scaffold Services, Inc., a Delaware corporation (the "Borrower"), the various
financial institutions as are or may become parties hereto (collectively, the
"Lenders"), DLJ CAPITAL FUNDING, INC. ("DLJ"), as syndication agent (the
"Syndication Agent") for the Lenders, and BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION ("BofA"), as Swing Line Lender, letter of credit issuer (the
"Issuer") and as administrative agent (the "Administrative Agent") for the
Lenders (the Syndication Agent and the Administrative Agent are sometimes
referred to herein as the "Agents").
W I T N E S S E T H:
WHEREAS, the Borrower is a wholly-owned Subsidiary (such capitalized
term, and other terms used herein, to have the meanings provided in Section 1.1)
of DLJ Brand Holdings, Inc., a Delaware corporation ("Holdco");
WHEREAS, DLJ Merchant Banking Partners, L.P., DLJ International
Partners, C.V., DLJ Offshore Partners, C.V., DLJ Merchant Banking Funding, Inc.
and Carlisle-Brand Investors, L.P. (collectively, the "Purchasers") acquired
(the "Acquisition") an 80.1% beneficial common equity interest in Rust Scaffold
Services Inc., a Delaware corporation ("Rust"), from Rust Industrial Services,
Inc., a Delaware corporation (the "Seller"), with the Seller retaining a 19.9%
beneficial common equity interest in Rust, through a merger (the "Merger") of
Rust with and into the Borrower (with the Borrower being the surviving
corporation of the Merger);
WHEREAS, in connection with the Acquisition and the Merger and,
pursuant to the Acquisition Documents, on the Closing Date (i) the Borrower
issued to the Purchasers 80.1% of the Borrower's Preferred Stock for gross cash
proceeds of not less than $20,025,000 (the "Preferred Stock Sale") and (ii)
Holdco issued to the Purchasers and their affiliates 80.1% of the common stock
of Holdco for gross cash proceeds of not less than $10,012,500, which cash
proceeds were contributed by Holdco to the Borrower (collectively, the "Equity
Issuance and Contribution");
WHEREAS, in connection with the Merger, and as a portion of the merger
consideration paid to the Seller on the Closing Date, (i) Holdco issued to the
Seller 19.9% of Holdco's common stock (valued at no less than $2,487,500), (ii)
the Borrower issued to the Seller 19.9% of the Borrower's Preferred Stock
(valued at no less than $4,975,000) and (iii) the Borrower issued to the Seller
a subordinated note (the "Seller Note") in the original
<PAGE>
aggregate principal amount of $14,500,000 (with the Borrower's obligations under
and in respect of the Seller Note being assumed by Holdco and the Borrower
thereupon being released from all such obligations);
WHEREAS, in connection with the Acquisition and to provide for the
ongoing working capital and general corporate needs of the Borrower and its
Subsidiaries, the Borrower, the various financial institutions (the "Original
Lenders") parties thereto on the Closing Date, the Syndication Agent and the
Administrative Agent entered into the Credit Agreement, dated as of September
30, 1996 (as heretofore modified and supplemented and in effect from time to
time, the "Credit Agreement") pursuant to which the Original Lenders provided to
the Borrower on the terms and conditions set forth therein
(a) term loans (the "Term-A Loans", the "Original Term-B
Loans" and the "Term-C Loans") made on the Closing Date in an original
principal amount of $60,000,000 (in the case of Term-A Loans),
$60,000,000 (in the case of Original Term-B Loans) and $40,000,000 (in
the case of Term-C Loans);
(b) a Revolving Loan Commitment (including availability for
Letters of Credit) pursuant to which Borrowings of Revolving Loans, in
a maximum aggregate principal amount (together with all Letter of
Credit Outstandings) not to exceed $30,000,000 could be made to the
Borrower from time to time on and subsequent to the Closing Date but
prior to the Revolving Loan Commitment Termination Date;
(c) a Letter of Credit Commitment pursuant to which the Issuer
would issue, pursuant to the terms and conditions of the Credit
Agreement, Letters of Credit from time to time on and subsequent to the
Closing Date but prior to the Revolving Loan Commitment Termination
Date in a maximum aggregate Stated Amount at any one time outstanding
not to exceed $15,000,000 (provided, that the aggregate outstanding
principal amount of Revolving Loans and Letter of Credit Outstandings
at any time could not exceed the then existing Revolving Loan
Commitment Amount);
WHEREAS, the Borrower subsequently applied Net Debt Proceeds from the
issuance of its Senior Notes to prepay in full all Original Term-B Loans and
Term-C Loans outstanding on the Second Amendment Effective Date as well as a
portion of the then aggregate outstanding principal amount of Term-A Loans;
WHEREAS, in order to provide for the ongoing working capital and
general corporate needs of the Borrower and its Subsidiaries, the Borrower
desires to amend and restate in its entirety the Credit Agreement to, among
other things,
(a) permit the Borrower to obtain from certain of the Lenders
and/or other financial institutions not presently a party to this
Agreement that are satisfactory to the
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<PAGE>
Agents and the Issuer the ability to request an Additional Term-B Loan
Commitment pursuant to which a single Borrowing of Additional Term-B
Loans in a maximum aggregate principal amount not to exceed $30,000,000
may be made to the Borrower subsequent to the Restatement Effective
Date; and
(b) obtain from certain of the Lenders a Swing Line Loan
Commitment pursuant to which Borrowings of Swing Line Loans in an
aggregate outstanding principal amount not to exceed $5,000,000 will be
made on and subsequent to the Restatement Effective Date but prior to
the Revolving Loan Commitment Termination Date (provided, that the
aggregate outstanding principal amount of such Swing Line Loans,
together with Revolving Loans and Letter of Credit Outstandings, at any
time shall not exceed the then existing Revolving Loan Commitment
Amount);
with all the proceeds of such Credit Extensions to be used for the purposes set
forth in Section 7.1.9;
WHEREAS, all Loans and Obligations shall continue to be and shall be
fully guaranteed pursuant to the Holdco Pledge Agreement and the Subsidiary
Guaranty and fully secured by, among other things, the Holdco Pledge Agreement,
the Borrower Pledge Agreement, the Subsidiary Pledge Agreement, the Borrower
Security Agreement and the Subsidiary Security Agreement; and
WHEREAS, the Lenders are willing, on the terms and subject to the
conditions hereinafter set forth (including Article V), to (i) amend and restate
in its entirety the Credit Agreement in accordance with the terms hereof and
(ii) extend such Swing Line Loan Commitment and make Swing Line Loans to the
Borrower pursuant to such Commitments;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Account" means any account (as that term is defined in Section 9-106
of the UCC) of the Borrower or any of its wholly-owned U.S. Subsidiaries arising
from the sale or lease of goods or the rendering of services.
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<PAGE>
"Account Debtor" is defined in clause (b) of the definition of
"Eligible Account".
"Acquisition" is defined in the second recital.
"Acquisition Documents" means each of the Material Documents and all
other agreements, documents, instruments, certificates, filings, consents,
approvals, board of directors resolutions and opinions furnished pursuant to or
in connection with the Acquisition, the Merger, the Preferred Stock Sale and the
Equity Issuance and Contribution and the transactions contemplated hereby and
thereby, each as amended, supplemented, amended and restated or otherwise
modified from time to time as permitted in accordance with the terms hereof or
of any other Loan Document.
"Additional Term-B Loan" is defined in clause (b) of Section 2.1.1.
"Additional Term-B Loan Commitment" is defined in clause (b) of Section
2.1.1.
"Additional Term-B Loan Commitment Addendum" is defined in clause (b)
of Section 2.1.1.
"Administrative Agent" is defined in the preamble and includes each
other Person as shall have subsequently been appointed as the successor
Administrative Agent pursuant to Section 9.4.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power
(a) to vote 15% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or
managing general partners; or
(b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"Agents" means, collectively, the Administrative Agent and the
Syndication Agent.
"Agreement" means, on any date, this Credit Agreement as originally in
effect on the Closing Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
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<PAGE>
"Alternate Base Rate" means, for any day and with respect to all Base
Rate Loans, the higher of: (a) 0.50% per annum above the latest Federal Funds
Rate; and (b) the rate of interest in effect for such day as publicly announced
from time to time by the Administrative Agent in San Francisco, California, as
its "reference rate". (The "reference rate" is a rate set by the Administrative
Agent based upon various factors including the Administrative Agent's costs and
desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate.) Any change in the reference rate announced by the
Administrative Agent shall take effect at the opening of business on the day
specified in the public announcement of such change.
"Amendment No. 2" means the Second Amendment to Credit Agreement, dated
as of February 20, 1998, among the Borrower, each of the entities identified as
Consenting Obligors on the signature pages thereto, the Lenders, the Issuer and
the Agents.
"Annualized" means (i) with respect to the end of the first Fiscal
Quarter of the Borrower to occur after the Closing Date, the applicable amount
for such Fiscal Quarter multiplied by four, (ii) with respect to the second
Fiscal Quarter of the Borrower to occur after the Closing Date, the applicable
amount for such Fiscal Quarter and the immediately preceding Fiscal Quarter
multiplied by two, and (iii) with respect to the third Fiscal Quarter of the
Borrower to occur after the Closing Date, the applicable amount for such Fiscal
Quarter and the immediately preceding two Fiscal Quarters multiplied by one and
one-third.
"Applicable Commitment Fee" means, at all times during the applicable
periods set forth below, (i) from the Closing Date through (and including) the
end of the second Fiscal Quarter following the Closing Date, 1/2 of 1% per
annum, and (ii) thereafter, by reference to the Leverage Ratio and at the
applicable percentage per annum set forth below under the column entitled
"Applicable Commitment Fee":
Applicable
Leverage Ratio Commitment Fee
-------------- --------------
greater than or
equal to 2.50:1 0.500%
less than 2.50:1 0.375%
The Leverage Ratio used to compute the Applicable Commitment Fee shall
be the Leverage Ratio set forth in the Compliance Certificate most recently
delivered by the Borrower to the Administrative Agent pursuant to clause (c) of
Section 7.1.1; changes in the Applicable Commitment Fee resulting from a change
in the Leverage Ratio shall become effective upon delivery by the Borrower to
the Administrative Agent of a new Compliance Certificate pursuant to clause (c)
of Section 7.1.1. If the Borrower shall fail to deliver a Compliance
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<PAGE>
Certificate within the number of days after the end of any Fiscal Quarter as
required pursuant to clause (c) of Section 7.1.1 (without giving effect to any
grace period), the Applicable Commitment Fee from and including the first day
after the date on which such Compliance Certificate was required to be delivered
to but not including the date the Borrower delivers to the Administrative Agent
a Compliance Certificate shall conclusively equal the highest Applicable
Commitment Fee set forth above.
"Applicable Margin" means at all times during the applicable periods
set forth below,
(a) with respect to the unpaid principal amount of each Term-B
Loan, the Applicable Margin established pursuant to clause (b) of
Section 2.1.1;
(b) with respect to the unpaid principal amount of each
Revolving Loan, each Swing Line Loan and each Term-A Loan maintained as
a Base Rate Loan, (i) from the Closing Date through (and including) the
end of the second Fiscal Quarter following the Closing Date, 1.75% per
annum, and (ii) thereafter, at the applicable percentage per annum set
forth below under the column entitled "Applicable Margin for Base Rate
Loans"; and
(c) with respect to the unpaid principal amount of each
Revolving Loan and each Term-A Loan maintained as a LIBO Rate Loan, (i)
from the Closing Date through (and including) the end of the second
Fiscal Quarter following the Closing Date, 2.75% per annum, and (ii)
thereafter, by reference to the Leverage Ratio and at the applicable
percentage per annum set forth below under the column entitled
"Applicable Margin for LIBO Rate Loans":
For Revolving Loans and Term-A Loans:
-------------------------------------
Applicable Applicable
Margin For Base Margin For LIBO
Leverage Ratio Rate Loans Rate Loans
-------------- ---------- ----------
greater than or equal to 3.00:1 1.75% 2.75%
less than 3.00:1 and greater
than or equal to 2.50:1 1.25% 2.25%
less than 2.50:1 and greater
than or equal to 2.00:1 0.75% 1.75%
less than 2.00:1 0.50% 1.50%
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<PAGE>
The Leverage Ratio used to compute the Applicable Margin for Swing Line
Loans, Revolving Loans and Term-A Loans shall be the Leverage Ratio set forth in
the Compliance Certificate most recently delivered by the Borrower to the
Administrative Agent pursuant to clause (c) of Section 7.1.1; changes in the
Applicable Margin for Swing Line Loans, Revolving Loans and Term-A Loans
resulting from a change in the Leverage Ratio shall become effective upon
delivery by the Borrower to the Administrative Agent of a new Compliance
Certificate pursuant to clause (c) of Section 7.1.1. If the Borrower shall fail
to deliver a Compliance Certificate within the number of days after the end of
any Fiscal Quarter as required pursuant to clause (c) of Section 7.1.1 (without
giving effect to any grace period), the Applicable Margin for Swing Line Loans,
Revolving Loans and Term-A Loans from and including the first day after the date
on which such Compliance Certificate was required to be delivered to but not
including the date the Borrower delivers to the Administrative Agent a
Compliance Certificate shall conclusively equal the highest Applicable Margin
for Swing Line Loans, Revolving Loans and Term-A Loans set forth above.
"Arrangers" means each of Donaldson, Lufkin & Jenrette Securities
Corporation, a Delaware corporation, and BA Securities, Inc., a Delaware
corporation.
"Assignee Lender" is defined in Section 10.11.1.
"Assignor Lender" is defined in Section 10.11.1.
"Assumption Agreement" means the Assumption Agreement executed and
delivered by Holdco, the Borrower and the Seller on the Closing Date in respect
of Holdco's assumption of all obligations under and in respect of the Seller
Note, substantially in the form of Exhibit M hereto, as amended, supplemented,
amended and restated or otherwise modified from time to time.
"Authorized Officer" means, relative to any Obligor, those of its
officers whose signatures and incumbency shall have been certified to the
Administrative Agent and the Lenders pursuant to Section 5.1.2.
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"BofA" is defined in the preamble.
"Borrower" is defined in the preamble.
"Borrower Pledge Agreement" means the Pledge Agreement executed and
delivered by an Authorized Officer of the Borrower on the Closing Date or
pursuant to clause (b) of Section
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<PAGE>
7.1.7, substantially in the form of Exhibit G-2 hereto, as amended,
supplemented, amended and restated or otherwise modified from time to time.
"Borrower Security Agreement" means the Security Agreement executed and
delivered by an Authorized Officer of the Borrower on the Closing Date,
substantially in the form of Exhibit F-1 hereto, as amended, supplemented,
amended and restated or otherwise modified from time to time.
"Borrowing" means Loans of the same type and, in the case of LIBO Rate
Loans, having the same Interest Period made by the relevant Lenders on the same
Business Day and pursuant to the same Borrowing Request in accordance with
Section 2.1.
"Borrowing Base Amount" means, at any time, an amount equal to the sum
of (i) the Net Asset Value of all Eligible Accounts at such time as determined
in accordance with the definition of "Net Asset Value" plus (ii) the Overadvance
Sublimit, as certified by the Borrower to the Lenders in the most recently
delivered Borrowing Base Certificate, including the Borrowing Base Certificate
delivered on the Restatement Effective Date pursuant to Section 5.1.3.
"Borrowing Base Certificate" means a certificate duly completed and
executed by the president, chief executive officer, treasurer, assistant
treasurer, controller, chief accounting or financial Authorized Officer of the
Borrower, substantially in the form of Exhibit B-3 hereto.
"Borrowing Request" means a loan request and certificate duly executed
by an Authorized Officer of the Borrower, substantially in the form of Exhibit
B-1 hereto.
"Business Day" means any day which is neither a Saturday or Sunday nor
a legal holiday on which banks are authorized or required to be closed in New
York City, Chicago, Illinois, San Francisco, California, and on which dealings
in Dollars are carried on in the London interbank market.
"Canadian Sub Note" is defined in the Transaction Agreement.
"Capital Expenditures" means for any period, the sum, without
duplication, of (i) the aggregate amount of all expenditures of the Borrower and
its Subsidiaries for fixed or capital assets made during such period which, in
accordance with GAAP, would be classified as capital expenditures, and (ii) to
the extent not included in clause (i) above, the aggregate amount of all
Capitalized Lease Liabilities incurred during such period by the Borrower and
its Subsidiaries, net of an amount equal to the aggregate amount of sales of
scaffolding in the ordinary course of business by the Borrower and its
Subsidiaries during such period; provided, that Capital Expenditures shall not
include Investments made under clause (i) of Section 7.2.5.
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<PAGE>
"Capitalized Lease Liabilities" means, without duplication, all
monetary obligations of the Borrower or any of its Subsidiaries under any
leasing or similar arrangement which, in accordance with GAAP, would be
classified as capitalized leases, and, for purposes of this Agreement and each
other Loan Document, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP, and the stated maturity
thereof shall be the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease may be terminated
by the lessee without payment of a penalty.
"Capital Stock" means, with respect to any Person, (i) any and all
shares, interests, participations or other equivalents of or interests in
(however designated) corporate stock, including, without limitation, shares of
preferred or preference stock of such Person, (ii) all partnership interests
(whether general or limited) in such Person, (iii) all membership interests or
limited liability company interests in such Person, and (iv) all other equity or
ownership interests in such Person of any other type.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one
year after such time, issued directly by the United States of America
or any agency thereof or guaranteed by the United States of America or
any agency thereof;
(b) commercial paper, maturing not more than nine months from
the date of issue, which is issued by
(i) a corporation (other than an Affiliate of any
Obligor) organized under the laws of any state of the United
States or of the District of Columbia and rated at least A-l
by S&P or P-l by Moody's, or
(ii) any Lender (or its holding company);
(c) any time deposit, certificate of deposit or bankers
acceptance, maturing not more than one year after such time, maintained
with or issued by either
(i) a commercial banking institution (including U.S.
branches of foreign banking institutions) that is a member of
the Federal Reserve System and has a combined capital and
surplus and undivided profits of not less than $500,000,000,
or
(ii) any Lender;
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<PAGE>
(d) short-term tax-exempt securities rated not lower than
MIG-1/1+ by either Moody's or S&P with provisions for liquidity or
maturity accommodations of 183 days or less;
(e) any money market or similar fund the assets of which are
comprised exclusively of any of the items specified in clauses (a)
through (d) above and as to which withdrawals are permitted at least
every 90 days; or
(f) any interest bearing account in Canadian dollars
maintained with a Schedule A Bank in Canada.
"Casualty Event" means the damage, destruction or condemnation, as the
case may be, of property of the Borrower or any of its Subsidiaries.
"Casualty Proceeds" means, with respect to any Casualty Event, the
amount of any insurance proceeds or condemnation awards received by the Borrower
or any of its Subsidiaries in connection with such Casualty Event, but excluding
any proceeds or awards required to be paid to a creditor (other than the
Lenders) which holds a first-priority Lien permitted by Section 7.2.3 on the
property which is the subject of such Casualty Event.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Certificate of Merger" means the Certificate of Merger of Rust
Scaffold Services Inc. into Brand Scaffold Services, Inc., as filed with the
Secretary of State of Delaware on September 30, 1996.
"Change in Control" means
(i) the failure of Holdco at any time to own, free and clear
of all Liens and encumbrances (other than Liens of the type permitted
under clauses (a), (c) and (f) of Section 7.2.3), all right, title and
interest in 100% of the Capital Stock of the Borrower other than the
Preferred Stock, and to have the right to elect a majority of the Board
of Directors of the Borrower;
(ii) the failure of the Purchasers at any time to own, free
and clear of all Liens and encumbrances (other than Liens of the type
permitted under clauses (a), (c) and (f) of Section 7.2.3), all right,
title and interest in at least 51% (on a fully diluted basis) of the
Capital Stock of Holdco;
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<PAGE>
(iii) the failure of the Purchasers at any time to have the
right to elect a majority of the Board of Directors of Holdco; and
(iv) any "Change of Control", as such term is defined in the
Senior Note Indenture, that would result in a default or event of
default under the Senior Note Indenture.
"Closing Date" means the date of the initial Credit Extension, which
occurred on September 30, 1996.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" means, as the context may require, (i) a Lender's Letter
of Credit Commitment, Revolving Loan Commitment or Additional Term-B Loan
Commitment or (ii) the Swing Line Lender's Swing Line Loan Commitment.
"Commitment Amount" means, as the context may require, the Letter of
Credit Commitment Amount, the Revolving Loan Commitment Amount, the Swing Line
Loan Commitment Amount or the Term-B Loan Commitment Amount.
"Commitment Letter" means the commitment letter, dated September 19,
1996, among DLJ Merchant Banking Funding, Inc., the Arrangers and the Agents
including all annexes and exhibits thereto.
"Commitment Termination Date" means, as the context may require, the
Revolving Loan Commitment Termination Date or the Term-B Loan Commitment
Termination Date.
"Commitment Termination Event" means
(a) the occurrence of any Event of Default described in
clauses (b) through (d) of Section 8.1.9 with respect to any Obligor
(other than immaterial Subsidiaries); or
(b) the occurrence and continuance of any other Event of
Default and either
(i) the declaration of the Loans to be due and
payable pursuant to Section 8.3, or
(ii) in the absence of such declaration, the giving
of notice by the Administrative Agent, acting at the direction
of the Required Lenders, to the Borrower that the Commitments
have been terminated.
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<PAGE>
"Compliance Certificate" means a certificate duly completed and
executed by the chief financial Authorized Officer of the Borrower,
substantially in the form of Exhibit E hereto.
"Contingent Liability" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person.
The amount of any Person's obligation under any Contingent Liability shall
(subject to any limitation set forth therein) be deemed to be the outstanding
principal amount (or maximum principal amount, if larger) of the debt,
obligation or other liability guaranteed thereby.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of Exhibit C hereto.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower, are treated as a single employer under Section 414(b) or 414(c) of the
Code or Section 4001 of ERISA.
"Credit Agreement" is defined in the fifth recital.
"Credit Extension" means, as the context may require,
(a) the making of a Loan by a Lender; or
(b) the issuance of any Letter of Credit, or the extension of
any Stated Expiry Date of any previously issued Letter of Credit, by
the Issuer.
"Credit Extension Request" means, as the context may require, any
Borrowing Request or Issuance Request.
"Current Assets" means, on any date, without duplication, all assets
(other than cash and other than receivables arising from the $2,900,000 per
annum payment from WMX Technologies, Inc. and its Subsidiaries to the Borrower
pursuant to the Transitional Services Agreement) which, in accordance with GAAP,
would be included as current assets on a consolidated balance sheet of the
Borrower and its Subsidiaries at such date as current assets (excluding,
however, amounts due and to become due from Affiliates of the Borrower which
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have arisen from transactions which are other than arm's-length and in the
ordinary course of its business).
"Current Liabilities" means, on any date, without duplication, all
amounts which, in accordance with GAAP, would be included as current liabilities
on a consolidated balance sheet of the Borrower and its Subsidiaries at such
date, excluding current maturities of Indebtedness.
"Debt" means, without duplication, the outstanding principal amount of
all Indebtedness of the Borrower and its Subsidiaries of the types referred to
in clauses (a), (b), (c) and (to the extent that the applicable indebtedness is
of the type described in any such clause (a), (b), or (c)) (e) of the definition
of "Indebtedness" or any Contingent Liability in respect of any of the foregoing
types of Indebtedness.
"Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would, unless cured or
waived, constitute an Event of Default.
"Delayed Draw Date" means the date of the Borrowing of Additional
Term-B Loans.
"Disbursement" is defined in Section 2.6.2.
"Disbursement Date" is defined in Section 2.6.2.
"Disbursement Due Date" is defined in Section 2.6.2.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrower with the written consent of the Required Lenders.
"DLJ" is defined in the preamble.
"Dollar" and the sign "$" mean lawful money of the United States.
"EBITDA" means, for any applicable period, the sum (without
duplication) for the Borrower and its Subsidiaries on a consolidated basis of
(a) Net Income,
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plus
- ----
(b) the amount deducted, in determining Net Income,
representing depreciation and amortization,
plus
- ----
(c) the amount deducted, in determining Net Income,
representing income taxes (whether paid or deferred),
plus
- ----
(d) the amount deducted, in determining Net Income,
representing Interest Expense,
plus
- ----
(e) an amount equal to the amount of all non-cash charges
deducted in determining Net Income,
plus
- ----
(f) to the extent not included in determining Net Income, the
$2.9 million per annum payment to the Borrower from WMX Technologies,
Inc. and its Subsidiaries pursuant to the Transitional Services
Agreement, and any other payments from WMX Technologies, Inc. and its
Subsidiaries pursuant to the Transitional Services Agreement,
plus
- ----
(g) to the extent not included in determining Net Income or in
clause (e) or (f) above, for the purpose of calculating the Fixed
Charge Coverage Ratio, the Interest Coverage Ratio and the Leverage
Ratio in respect of the first three Fiscal Quarters after the Closing
Date, the Annualized amount of (i) the $2,900,000 per annum payment to
the Borrower from WMX Technologies, Inc. and its Subsidiaries pursuant
to the Transitional Services Agreement and (ii) the non-cash portion of
general liability, auto liability, workers' compensation or
post-retirement health, insurance and related benefits expense,
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plus
- ----
(h) to the extent deducted, in determining Net Income, up to
$2,500,000 of charges incurred in the 1997 Fiscal Year and designated
as "non-recurring startup costs",
minus
- -----
(i) an amount equal to the amount of all non-cash credits
included in determining Net Income,
minus
- -----
(j) to the extent not deducted in determining Net Income, cash
expenditures actually paid in connection with general liability, auto
liability, workers' compensation or post-retirement health, insurance
and related benefits.
"Eligible Account" means, with respect to the Borrower and any of its
U.S. wholly- owned Subsidiaries, at the time of any determination thereof, any
Account as to which each of the following requirements has been fulfilled to the
reasonable satisfaction of the Administrative Agent:
(a) the Borrower or such Subsidiary owns such Account free and
clear of all Liens other than any Lien in favor of the Administrative
Agent and the Lenders granted pursuant to this Agreement or another
Loan Document or permitted by Sections 7.2.3(d) and (g) (and, other
than in the case of Accounts referred to in clause (d) below, the
Administrative Agent shall have a first-priority (other than inchoate
statutory Liens otherwise permitted by Section 7.2.3) perfected Lien on
such Account);
(b) such Account is a legal, valid, binding and enforceable
obligation of the Person obligated under such Account (the "Account
Debtor");
(c) such Account is not subject to any bona fide dispute,
setoff, counterclaim or other claim or defense on the part of the
Account Debtor or any other Person denying liability under such
Account; provided, however, that any such Account shall constitute an
Eligible Account to the extent it is not subject to any such dispute,
setoff, counterclaim or other claim or defense;
(d) except for Accounts in an aggregate amount not to exceed
$1,000,000 at any one time, for which the Account Debtor is the
government of the United States or an instrumentality thereof, the
Borrower or such Subsidiary has the full and unqualified
-15-
<PAGE>
right to assign and grant a Lien in such Account to the Administrative
Agent, for its benefit and that of the Lenders, as security for the
Obligations;
(e) such Account is evidenced by an invoice rendered to the
Account Debtor (which shall include computer records) or is reflected
by computer records maintained by the Borrower or such Subsidiary
evidencing such Account and is not evidenced by any instrument or
chattel paper (as the terms "instrument" and "chattel paper" are
defined in Section 9-105 of the UCC), unless such instrument or chattel
paper has been delivered to the Administrative Agent;
(f) such Account arose from the sale of goods or services by
the Borrower or such Subsidiary in the ordinary course of the
Borrower's or such Subsidiary's business, and such goods or services
have been shipped or delivered (in the case of goods) or rendered in
full (in the case of services) to the Account Debtor for such Account;
(g) with respect to such Account, no Account Debtor is
(i) an Affiliate of the Borrower or any of its
Subsidiaries (other than Accounts in an aggregate amount not
to exceed $2,500,000 as to which WMX Technologies, Inc. or any
of its Subsidiaries is the Account Debtor), or
(ii) the subject of any reorganization, bankruptcy,
receivership, custodianship, insolvency or other condition
analogous with respect to such Account Debtor to those
described in clauses (a) through (d) of Section 8.1.9;
(h) such Account is not outstanding more than 90 (or, in the
case of Accounts the original terms of which do not require payment
prior to 60 days after the billing date thereof, 120; provided such
Accounts do not exceed $5,000,000 in the aggregate) days past the
original billing date (which date, if such Account arose from the sale
of goods, shall not be later than seven days from the date of the
shipment of the Inventory giving rise to such Account) for such
Account;
(i) such Account is not an Account owing by an Account Debtor
having, at the time of any determination of Eligible Accounts, in
excess of 10% of the aggregate outstanding amount of all of such
Account Debtor's Accounts (other than any Accounts which are the
subject of bona fide disputes between such Account Debtor and the
Borrower or such Subsidiary, as the case may be) outstanding more than
90 (or, in the case of Accounts the original terms of which do not
require payment prior to 60 days after the billing date thereof, 120;
provided such Accounts do not exceed $5,000,000 in the aggregate) days
past the original invoice date with respect thereto;
-16-
<PAGE>
(j) with respect to the Account Debtor under such Account,
neither the Borrower nor any such Subsidiary is indebted to such
Account Debtor, unless the Borrower or such Subsidiary and such Account
Debtor have entered into an agreement whereby the Account Debtor is
prohibited from exercising any right of setoff with respect to the
Accounts of the Borrower or such Subsidiary; provided, that in any
event, if such an agreement prohibiting setoff rights is not delivered
by the Account Debtor, then only up to the amount that the Borrower or
such Subsidiary is indebted to such Account Debtor shall be excluded as
an Eligible Account pursuant to this clause; and
(k) such Account arises from a sale to an Account Debtor
located within the United States, Puerto Rico or Canada, unless the
Account Debtor's obligations (or that portion of such obligations which
is acceptable to the Administrative Agent) with respect to a sale to an
Account Debtor not located within the United States, Puerto Rico or
Canada are secured by a letter of credit, guaranty or eligible bankers'
acceptance having terms, and from such issuers and confirmation banks,
as are acceptable to the Administrative Agent.
"Environmental Laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules and regulations (including consent
decrees and administrative orders) relating to public health and safety and
protection of the environment.
"Equity Issuance and Contribution" is defined in the third recital.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" is defined in Section 8.1.
"Excess Cash Flow" means, for any applicable period, the excess
(if any), of
(a) EBITDA for such applicable period;
over
- ----
(b) the sum, without duplication (for such applicable period)
of
(i) the cash portion of Interest Expense (net of
interest income) for such applicable period;
-17-
<PAGE>
plus
----
(ii) scheduled payments and optional and mandatory
prepayments, to the extent actually made, of the principal
amount of the Term Loans or any other term Debt (including
Capitalized Lease Liabilities) and mandatory prepayments of
the principal amount of the Revolving Loans pursuant to
clauses (b) or (g) of Section 3.1.1 in connection with a
reduction of the Revolving Loan Commitment Amount, in each
case for such applicable period, excluding, however, for all
purposes of this clause (ii) all prepayments made with Net
Debt Proceeds received in respect of the Senior Notes;
plus
----
(iii) all federal, state and foreign income taxes
actually paid in cash by the Borrower and its Subsidiaries for
such applicable period;
plus
----
(iv) Capital Expenditures actually made during such
applicable period pursuant to clauses (a) and (b) of Section
7.2.7 (excluding Capital Expenditures constituting Capitalized
Leases and by way of the incurrence of Indebtedness permitted
pursuant to Section 7.2.2(b)(ii) to a vendor of any assets
permitted to be acquired pursuant to Section 7.2.7 to finance
the acquisition of such assets);
plus
----
(v) the amount of the net increase (or minus in the
case of a net decrease), of Current Assets over Current
Liabilities of the Borrower and its Subsidiaries for such
applicable period;
plus
----
(vi) Investments permitted and actually made pursuant
to clauses (d) and (i) of Section 7.2.5 during such applicable
period;
plus
----
(vii) Restricted Payments permitted and actually made
pursuant to clause (e)(i) or (e)(ii) of Section 7.2.6 during
such applicable period.
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal
-18-
<PAGE>
Reserve Bank of New York (including any such successor, "H.15(519)") on the
preceding Business Day opposite the caption "Federal Funds (Effective)"; or, if
for any relevant day such rate is not so published on any such preceding
Business Day, the rate for such day will be the arithmetic mean as determined by
the Administrative Agent of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by
each of three leading brokers of Federal funds transactions in New York City
selected by the Administrative Agent.
"Fee Letter" means the confidential fee letter, dated as of September
19, 1996, among DLJ Merchant Banking Funding, Inc., the Arrangers and the
Agents.
"Fiscal Quarter" means any calendar quarter.
"Fiscal Year" means any calendar year.
"Fixed Charge Coverage Ratio" means, at the end of any Fiscal Quarter,
the ratio computed for the period consisting of such Fiscal Quarter and the
three immediately prior Fiscal Quarters of
(a) EBITDA for all such Fiscal Quarters (less any Restricted
Payments made pursuant to clause (e)(i) of Section 7.2.6 during such
Fiscal Quarters).
to
- --
(b) the sum (without duplication) of
(i) Capital Expenditures actually made during all
such Fiscal Quarters pursuant to clauses (a) and (b) of
Section 7.2.7 (excluding Capital Expenditures constituting
Capitalized Leases and by way of the incurrence of
Indebtedness permitted pursuant to Section 7.2.2(b)(ii) to a
vendor of any assets permitted to be acquired pursuant to
Section 7.2.7 to finance the acquisition of such assets);
plus
----
(ii) the cash portion of Interest Expenses (net of
interest income) for all such Fiscal Quarters, provided that
for the first three Fiscal Quarters after the Closing Date
Interest Expense shall be determined on an Annualized basis;
plus
----
(iii) all scheduled payments of principal, to the
extent actually made, of the Term Loans and other term Debt
(including the principal portion of any
-19-
<PAGE>
Capital Lease Liabilities) during all such Fiscal Quarters,
provided that for the first three Fiscal Quarters after the
Closing Date such payments shall be determined on an
Annualized basis;
plus
----
(iv) Restricted Payments made during all such Fiscal
Quarters in accordance with clause (f) of Section 7.2.6.
"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"GAAP" is defined in Section 1.4.
"Guaranty and Non-Competition Agreement" is defined in the Transaction
Agreement.
"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or
toxic chemical, material or substance within the meaning of any other
applicable federal, state or local law, regulation, ordinance or
requirement (including consent decrees and administrative orders)
relating to or imposing liability or standards of conduct concerning
any hazardous, toxic or dangerous waste, substance or material, all as
amended or hereafter amended.
"Hedging Obligations" means, with respect to any Person, all
liabilities of such Person under interest rate swap agreements, interest rate
cap agreements and interest rate collar agreements, and all other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or currency exchange rates.
"herein", "hereof", "hereto", "hereunder" and similar terms contained
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document, as the case may be, as a whole and not to any particular
Section, paragraph or provision of this Agreement or such other Loan Document.
-20-
<PAGE>
"Holdco" is defined in the first recital.
"Holdco Pledge Agreement" means the Holdco Pledge Agreement executed
and delivered by an Authorized Officer of Holdco on the Closing Date,
substantially in the form of Exhibit G-1 hereto, as amended, supplemented,
amended and restated or otherwise modified from time to time.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial statement
of any Obligor, any qualification or exception to such opinion or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of
matters relevant to such financial statement; or
(c) which relates to the treatment or classification of any
item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of which
would be to cause such Obligor to be in default of any of its
obligations under Section 7.2.4.
"including" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement and each
other Loan Document, the parties hereto agree that the rule of ejusdem generis
shall not be applicable to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money or for
the deferred purchase price of property or services (exclusive of
deferred purchase price arrangements in the nature of open accounts
payable owed to suppliers on normal terms in connection with the
purchase of goods and services in the ordinary course of business) and
all obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
(c) all Capitalized Lease Liabilities;
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<PAGE>
(d) net liabilities of such Person under all Hedging
Obligations;
(e) whether or not so included as liabilities in accordance
with GAAP, all indebtedness (excluding prepaid interest thereon)
secured by a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or other title
retention agreements), whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse; provided, however,
that, to the extent such Indebtedness is limited in recourse to the
assets securing such Indebtedness, the amount of such Indebtedness
shall be limited to the fair market value of such assets; and
(f) all Contingent Liabilities of such Person in respect of
any of the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer (to the extent such Person is liable for
such Indebtedness).
"Indemnified Liabilities" is defined in Section 10.4.
"Indemnified Parties" is defined in Section 10.4.
"Initial Public Offering" means for any Person, any sale of the Capital
Stock of such Person to the public pursuant to an initial, primary offering
registered under the Securities Act of 1933.
"Interest Coverage Ratio" means, at the end of any Fiscal Quarter, the
ratio computed for the period consisting of such Fiscal Quarter and each of the
three immediately prior Fiscal Quarters of:
(a) EBITDA (for all such Fiscal Quarters)
to
- --
(b) the cash portion of Interest Expense (for all such Fiscal
Quarters, provided that for the first three Fiscal Quarters after the
Closing Date Interest Expense shall be determined on an Annualized
basis).
"Interest Expense" means, for any applicable period, the aggregate
consolidated interest expense of the Borrower and its Subsidiaries for such
applicable period, as determined in accordance with GAAP, including the portion
of any payments made in respect of Capitalized Lease Liabilities allocable to
interest expense, but excluding (to the extent included in interest expense)
up-front fees and expenses incurred in connection with the Transaction.
-22-
<PAGE>
"Interest Period" means, as to any LIBO Rate Loan, the period
commencing on the Borrowing date of such Loan or on the date on which the Loan
is converted into or continued as a LIBO Rate Loan, and ending on the date one,
two, three or six months thereafter as selected by the Borrower in its Borrowing
Request or its Conversion/Continuation Notice; provided, however, that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall be
extended to the following Business Day unless the result of
such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period
shall end on the preceding Business Day;
(ii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest
Period;
(iii) no Interest Period for any Loan shall extend
beyond the Stated Maturity Date for such Loan;
(iv) no Interest Period applicable to a Term Loan or
portion thereof shall extend beyond any date upon which is due
any scheduled principal payment in respect of the Term Loans
unless the aggregate principal amount of Term Loans
represented by Base Rate Loans, or by LIBO Rate Loans having
Interest Periods that will expire on or before such date,
equals or exceeds the amount of such principal payment; and
(v) there shall be no more than ten Interest Periods
in effect at any one time.
"Investment" means, relative to any Person,
(a) any loan or advance made by such Person to any other
Person (excluding commission, travel and similar advances to officers
and employees made in the ordinary course of business); and
(b) any ownership or similar interest held by such Person in
any other Person.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made by
the transfer or exchange of property
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<PAGE>
other than cash, be deemed to have been made in an original principal or capital
amount equal to the fair market value of such property at the time of such
transfer or exchange.
"Issuance Request" means a Letter of Credit request and certificate
duly executed by an Authorized Officer of the Borrower, substantially in the
form of Exhibit B-2 hereto.
"Issuer" means, collectively, BofA in its individual capacity hereunder
as issuer of the Letters of Credit and any Lender as may be designated by the
Borrower (and agreed to by the Agents and such Lender) in its individual
capacity as the issuer of Letters of Credit.
"Lender Assignment Agreement" means a Lender Assignment Agreement
substantially in the form of Exhibit J hereto.
"Lenders" is defined in the preamble.
"Letter of Credit" is defined in Section 2.1.3.
"Letter of Credit Commitment" means, with respect to the Issuer, the
Issuer's obligation to issue Letters of Credit pursuant to Section 2.1.3 and,
with respect to each of the other Lenders that has a Revolving Loan Commitment,
the obligation of each such Lender to participate in such Letters of Credit
pursuant to Section 2.6.1.
"Letter of Credit Commitment Amount" means, on any date, a maximum
amount of $15,000,000, as such amount may be reduced from time to time pursuant
to Section 2.2.
"Letter of Credit Outstandings" means, on any date, an amount equal to
the sum of
(a) the then aggregate amount which is undrawn and available
under all issued and outstanding Letters of Credit,
plus
- ----
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations in respect of such Letters of Credit.
"Leverage Ratio" means, at the end of any Fiscal Quarter, the ratio of
(a) total Debt of the Borrower and its Subsidiaries
outstanding at such time;
-24-
<PAGE>
to
- --
(b) EBITDA for the period of four consecutive Fiscal Quarters
most recently ended on or prior to such date.
"LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans,
the rate of interest per annum determined by the Administrative Agent to be the
arithmetic mean (rounded upward to the next 1/16th of 1%) of the rates of
interest per annum at which dollar deposits in the approximate amount of the
amount of the Loan to be made or continued as, or converted into, a LIBO Rate
Loan by the Administrative Agent and having a maturity comparable to such
Interest Period would be offered to the Administrative Agent in the London
interbank market at its request at approximately 11:00 a.m. (London time) two
Business Days prior to the commencement of such Interest Period.
"LIBO Rate Loan" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any Interest
Period, the rate of interest per annum (rounded upwards to the next 1/16 of 1%)
determined by the Administrative Agent as follows:
LIBO Rate LIBO Rate
= -------------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate
Loans will be adjusted automatically as to all LIBO Rate Loans then outstanding
as of the effective date of any change in the LIBOR Reserve Percentage.
"LIBOR Office" means, relative to any Lender, the office of such Lender
designated as such on Schedule III hereto or designated in the Lender Assignment
Agreement or such other office of a Lender as designated from time to time by
notice from such Lender to the Borrower and the Administrative Agent, whether or
not outside the United States, which shall be making or maintaining LIBO Rate
Loans of such Lender hereunder.
"LIBOR Reserve Percentage" means, relative to any Interest Period for
LIBO Rate Loans, the percentage (expressed as a decimal, rounded upward to the
next 1/100th of 1%) in effect on such day (whether or not applicable to any
Lender) under regulations issued from time to time by the F.R.S. Board for
determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with respect to
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<PAGE>
Eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the F.R.S. Board).
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property, or any filing or recording of any
instrument or document in respect of the foregoing, to secure payment of a debt
or performance of an obligation or any other priority or preferential treatment
of any kind or nature whatsoever that has the practical effect of creating a
security interest in property.
"Loan" means, as the context may require, a Revolving Loan, a Swing
Line Loan, a Term-A Loan or a Term-B Loan, of any type.
"Loan Document" means this Agreement, the Notes, the Additional Term-B
Loan Commitment Addendum (upon the execution and delivery thereof), the Letters
of Credit, each Borrowing Base Certificate, the Fee Letter, each Pledge
Agreement, the Subsidiary Guaranty, each Mortgage (upon execution and delivery
thereof), each Security Agreement, each Patent Security Agreement, and each
other agreement, document or instrument delivered in connection with this
Agreement or any other Loan Document, whether or not specifically mentioned
herein or therein.
"Material Adverse Effect" means (a) a material adverse effect on the
financial condition, operations, assets, business or properties of the Borrower
and its Subsidiaries, taken as a whole, (b) a material impairment of the ability
of the Borrower or any other Obligor to perform its respective material
obligations under the Loan Documents to which it is or will be a party, or (c)
an impairment of the validity or enforceability of, or a material impairment of
the rights, remedies or benefits available to the Issuer, the Agents, the
Arrangers or the Lenders under, this Agreement or any other Loan Document.
"Material Documents" means the Transaction Agreement, the Transitional
Services Agreement, the Seller Note, the certificate of incorporation of the
Borrower (as amended), the Shareholders Agreement, the Guaranty and
Non-Competition Agreement, the Canadian Sub Note, the Senior Note Indenture and
the Senior Notes, each as amended, supplemented, amended and restated or
otherwise modified from time to time as permitted in accordance with the terms
hereof or of any other Loan Document.
"Merger" is defined in the second recital.
"Moody's" means Moody's Investors Services, Inc.
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<PAGE>
"Mortgage" means, collectively, each Mortgage or Deed of Trust executed
and delivered pursuant to the terms of this Agreement, including Sections
7.1.8(b) or 7.1.12, in form and substance reasonably satisfactory to the Agents.
"Net Asset Value" means, at any time of any determination, 85% of an
amount equal to (x) the book value of all Eligible Accounts as reflected on the
books of the Borrower and its Subsidiaries in accordance with GAAP, net of (y)
all credits, discounts and allowances (and net of all unissued credits in the
form of competitive allowances or otherwise) in respect of such Eligible
Accounts.
"Net Debt Proceeds" means, with respect to the incurrence, sale or
issuance by the Borrower or any of its Subsidiaries of any Debt (other than Debt
permitted by Section 7.2.2), the excess of:
(a) the gross cash proceeds received by the Borrower or any
of its Subsidiaries from such incurrence, sale or issuance,
over
- ----
(b) all reasonable and customary underwriting commissions and
legal, investment banking, brokerage and accounting and other
professional fees, sales commissions and disbursements and all other
reasonable fees, expenses and charges, in each case actually incurred
in connection with such incurrence, sale or issuance.
"Net Disposition Proceeds" means, with respect to any sale, transfer or
other disposition of any assets of the Borrower or any of its Subsidiaries
(other than sales permitted pursuant to Section 7.2.9(a)), the excess of
(a) the gross cash proceeds received by the Borrower or any of
its Subsidiaries from any such sale, transfer or other disposition and
any cash payments received in respect of promissory notes or other
non-cash consideration delivered to the Borrower or such Subsidiary in
respect thereof,
less
- ----
(b) the sum of
(i) all reasonable and customary fees and expenses
with respect to legal, investment banking, brokerage and
accounting and other professional fees, sales commissions and
disbursements and all other reasonable fees, expenses and
charges, in each case actually incurred in connection with
such sale, transfer or other disposition,
-27-
<PAGE>
(ii) all taxes and other governmental costs and
expenses actually paid or estimated by the Borrower (in good
faith) to be payable in cash in connection with such sale,
transfer or other disposition, and
(iii) payments made by the Borrower or any of its
Subsidiaries to retire Indebtedness (other than the Loans) of
the Borrower or any of its Subsidiaries where payment of such
Indebtedness is required in connection with such sale,
transfer or other disposition;
provided, however, that if, after the payment of all taxes with respect to such
sale, transfer or other disposition, the amount of estimated taxes, if any,
pursuant to clause (b)(ii) above exceeded the tax amount actually paid in cash
in respect of such sale, transfer or other disposition, the aggregate amount of
such excess shall be immediately payable, pursuant to clause (c) of Section
3.1.1, as Net Disposition Proceeds.
"Net Equity Proceeds" means with respect to the sale or issuance by the
Borrower or Holdco to any Person of any of its stock or any warrants or options
with respect to its stock or the exercise of any such warrants or options after
the Closing Date (other than pursuant to (i) capital contributions (from other
than an Initial Public Offering) which are concurrently contributed to the
Borrower, (ii) any subscription agreement, incentive plan or similar arrangement
with any officer, employee or director of Holdco, the Borrower or any Subsidiary
of the Borrower, (iii) any loan by the Borrower or Holdco to such officer,
employee or director solely for the purpose of purchasing such shares pursuant
to Section 7.2.5(h), or (iv) proceeds from the sale of any Capital Stock to any
officer, director or employee of the Borrower, its Subsidiaries or Holdco in an
aggregate amount not to exceed $2,000,000 after the Closing Date) the excess of:
(a) the gross cash proceeds received by Holdco or the
Borrower from such sale, exercise or issuance,
over
----
(b) all reasonable and customary underwriting commissions and
legal, investment banking, brokerage and accounting and other
professional fees, sales commissions and disbursements and all other
reasonable fees, expenses and charges, in each case actually incurred
in connection with such sale or issuance.
"Net Income" means, for any period, the net income of the Borrower and
its Subsidiaries for such period on a consolidated basis, excluding
extraordinary gains.
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<PAGE>
"Net Worth" means the consolidated net worth of the Borrower and its
Subsidiaries including, to the extent not otherwise included in net worth under
GAAP, the Preferred Stock and unpaid dividends thereon.
"Non-U.S. Lender" means any Lender (including each Assignee Lender)
that is not (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any state thereof, or (iii) an estate or trust that is subject
to U.S. Federal income taxation regardless of the source of its income.
"Non-U.S. Subsidiary" means a Subsidiary of the Borrower that is not a
U.S. Subsidiary.
"Note" means, as the context may require, a Revolving Note, a
Registered Note, a Term-A Note, a Term-B Note, or a Swing Line Note.
"Obligations" means all obligations (monetary or otherwise) of the
Borrower and each other Obligor arising under or in connection with this
Agreement, the Notes, each Letter of Credit and each other Loan Document, and
Hedging Obligations (in respect of the Loans) owed to a Lender or an Affiliate
thereof (unless the Lender or such Affiliate otherwise agrees).
"Obligor" means the Borrower or any other Person (other than any Agent,
any Issuer, any Arranger or any Lender) obligated under any Loan Document.
"Organic Document" means, relative to any Obligor, its certificate of
incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements to which such Obligor is a party applicable to any of its
authorized shares of Capital Stock.
"Original Lenders" is defined in the fifth recital.
"Original Term-B Loans" is defined in clause (a) of the fifth recital.
"Overadvance Sublimit" means, at any time from and including the
Restatement Effective Date and at all times thereafter, $10,000,000.
"Participant" is defined in Section 10.11.2.
"Patent Security Agreement" means any Patent Security Agreement
executed and delivered by any Obligor in substantially the form of Exhibit A to
any Security Agreement, as amended, supplemented, amended and restated or
otherwise modified.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
entity.
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"Pension Plan" means a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which the
Borrower or any corporation, trade or business that is, along with the Borrower,
a member of a Controlled Group, has or within the prior six years has had any
liability, including any liability by reason of having been a substantial
employer within the meaning of section 4063 of ERISA at any time during the
preceding five years, or by reason of being deemed to be a contributing sponsor
under section 4069 of ERISA.
"Percentage" means, relative to any Lender, the applicable percentage
relating to Term-A Loans, Term-B Loans or Revolving Loans, as the case may be,
as set forth opposite its name on Schedule II hereto under the applicable column
heading or set forth in Lender Assignment Agreement(s) under the applicable
column heading, as such percentage may be adjusted from time to time pursuant to
Lender Assignment Agreement(s) executed by such Lender and its Assignee
Lender(s) and delivered pursuant to Section 10.11. A Lender shall not have any
Commitment to make Revolving Loans, Term-A Loans or Term-B Loans (as the case
may be) if its percentage under the respective column heading is zero.
"Perfection Certificate" means the Perfection Certificate executed and
delivered by an Authorized Officer of the Borrower on the Closing Date,
substantially in the form of Exhibit I hereto, as amended, supplemented, amended
and restated or otherwise modified from time to time.
"Person" means any natural person, corporation, partnership, firm,
association, trust, government, governmental agency, limited liability company
or any other entity, whether acting in an individual, fiduciary or other
capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Pledge Agreement" means, as the context may require, the Borrower
Pledge Agreement, the Holdco Pledge Agreement or the Subsidiary Pledge
Agreement.
"Preferred Stock" means the Borrower's Senior Exchangeable
Preferred Stock.
"Preferred Stock Sale" is defined in the third recital.
"Pro Forma Balance Sheet" means the pro forma consolidated balance
sheet of the Borrower and its Subsidiaries, as of August 31, 1996, certified and
delivered by the chief financial or accounting Authorized Officer of the
Borrower on the Closing Date.
"Purchasers" is defined in the second recital.
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"Quarterly Payment Date" means the last day of each of March, June,
September and December, or, if any such day is not a Business Day, the next
succeeding Business Day, commencing with December 31, 1996.
"Redemption" is defined in Section 7.2.6.
"Refunded Swing Line Loans" is defined in clause (b) of Section 2.3.2.
"Register" is defined in clause (b) of Section 2.8.
"Registered Note" means a promissory note of the Borrower payable to
any Registered Noteholder, in the form of Exhibit A-5 hereto (as such promissory
note may be amended, endorsed or otherwise modified from time to time),
evidencing the aggregate Indebtedness of the Borrower to such Lender resulting
from outstanding Term Loans, and also means all other promissory notes accepted
from time to time in substitution therefor or renewal thereof.
"Registered Noteholder" means any Lender that has been issued a
Registered Note.
"Reimbursement Obligation" is defined in Section 2.6.3.
"Release" means a "release", as such term is defined in CERCLA.
"Replacement Notice" is defined in Section 4.11.
"Replacement Lender" is defined in Section 4.11.
"Required Lenders" means, at any time,
(a) prior to the date of the making of the Term-B Loans
hereunder, Lenders having at least 51% of the sum of the Revolving Loan
Commitments, the Additional Term-B Loan Commitments and the outstanding
principal amount of Term-A Loans; and
(b) on and after the date of the making of the Term-B Loans
hereunder, Lenders holding at least 51% of the Total Exposure Amount.
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect
from time to time.
"Restatement Effective Date" means the date when all of the conditions
set forth in Section 5.1 shall have been satisfied.
"Restricted Payments" is defined in Section 7.2.6.
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"Revolving Loan" is defined in Section 2.1.2.
"Revolving Loan Commitment" is defined in clause (a) of Section 2.1.2.
"Revolving Loan Commitment Amount" means, on any date, $30,000,000, as
such amount may be reduced from time to time pursuant to Section 2.2.
"Revolving Loan Commitment Termination Date" means the earliest of
(a) the sixth anniversary of the Closing Date;
(b) the date on which the Revolving Loan Commitment Amount is
terminated in full or reduced to zero pursuant to Section 2.2; and
(c) the date on which any Commitment Termination Event
occurs.
"Revolving Note" means a promissory note of the Borrower payable to any
Lender, substantially in the form of Exhibit A-1 hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of the Borrower to such Lender resulting from
outstanding Revolving Loans, and also means all other promissory notes accepted
from time to time in substitution therefor or renewal thereof.
"Rust" is defined in the second recital.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc.
"Second Amendment Effective Date" means the date of effectiveness of
Amendment No. 2 pursuant to the terms thereof.
"Security Agreement" means, as the context may require, the Borrower
Security Agreement or the Subsidiary Security Agreement.
"Seller" is defined in the second recital.
"Seller Note" is defined in the fourth recital.
"Senior Note Indenture" means the Indenture entered into by and between
the Borrower and the trustee named therein, as in effect on the Second Amendment
Effective Date and as the same may be amended or otherwise modified from time to
time in accordance with the terms hereof and thereof.
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"Senior Notes" means the Borrower's senior unsecured notes due 2008, as
in effect on the Second Amendment Effective Date and as the same may be amended
or otherwise modified from time to time in accordance with the terms hereof and
thereof.
"Shareholders Agreement" is defined in the Transaction Agreement.
"Solvent" means, 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 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 as such debts and liabilities mature, and
(d) such Person is not engaged in business or a transaction, and such person 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.
"Stated Amount" of each Letter of Credit means the total amount
available to be drawn under such Letter of Credit upon the issuance thereof as
reduced in accordance with the terms thereof.
"Stated Expiry Date" is defined in Section 2.6.
"Stated Maturity Date" means, (a) in the case of any Revolving Loan or
Term-A Loan, the sixth anniversary of the Closing Date and (b) in the case of
any Term-B Loan, the Stated Maturity Date established pursuant to clause (b) of
Section 2.1.1.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other business entity of which more than 50% of the outstanding
Capital Stock (or other ownership interest) having ordinary voting power to
elect a majority of the board of directors, managers or other voting members of
the governing body of such entity (irrespective of whether at the time Capital
Stock (or other ownership interests) of any other class or classes of such
entity shall or might have voting power upon the occurrence of any contingency)
is at the time directly or indirectly owned by such Person, by such Person and
one or more other Subsidiaries of such Person, or by one or more other
Subsidiaries of such Person.
"Subsidiary Guarantor" means, on the Closing Date, each U.S. Subsidiary
of the Borrower, and thereafter, each U.S. Subsidiary of the Borrower that is
required, pursuant to clause (a) of Section 7.1.7, to execute and deliver a
supplement to the Subsidiary Guaranty.
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"Subsidiary Guaranty" means the Guaranty executed and delivered by each
Subsidiary Guarantor pursuant to the terms of this Agreement, substantially in
the form of Exhibit H hereto, as amended, supplemented, amended and restated or
otherwise modified from time to time.
"Subsidiary Pledge Agreement" means the Pledge Agreement executed and
delivered by certain Subsidiaries of the Borrower pursuant to the terms of this
Agreement, as amended, supplemented, amended and restated or otherwise modified
from time to time.
"Subsidiary Security Agreement" means the Security Agreement executed
and delivered by certain U.S. Subsidiaries of the Borrower pursuant to the terms
of this Agreement, substantially in the form of Exhibit F-2 hereto, as amended,
supplemented, amended and restated or otherwise modified from time to time.
"Swing Line Lender" means BofA in its capacity as Swing Line Lender
hereunder.
"Swing Line Loan" is defined in clause (b) of Section 2.1.2.
"Swing Line Loan Commitment" is defined in clause (b) of Section 2.1.2.
"Swing Line Loan Commitment Amount" means, on any date, $5,000,000, as
such amount may be reduced from time to time pursuant to Section 2.2.
"Swing Line Note" means a promissory note of the Borrower payable to
the Swing Line Lender, in the form of Exhibit A-4 hereto (as such promissory
note may be amended, endorsed or otherwise modified from time to time),
evidencing the aggregate Indebtedness of the Borrower to the Swing Line Lender
resulting from outstanding Swing Line Loans, and also means all other promissory
notes accepted from time to time in substitution therefor or renewal thereof.
"Syndication Agent" is defined in the preamble and includes each other
Person as shall have subsequently been appointed as the successor Syndication
Agent by the predecessor Syndication Agent and the Borrower.
"Taxes" is defined in Section 4.6.
"Term-A Loans" is defined in clause (a) of the fifth recital.
"Term-A Note" means a promissory note of the Borrower payable to the
order of any Lender, in the form of Exhibit A-2 hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of the Borrower to such Lender resulting from
outstanding Term-A Loans, and also means all other promissory notes accepted
from time to time in substitution therefor or renewal thereof.
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"Term-B Loan Commitment Amount" means the aggregate amount of all
Additional Term-B Loan Commitments established pursuant to clause (b) of Section
2.1.1.
"Term-B Loan Commitment Termination Date" means the Term-B Loan
Commitment Termination Date established pursuant to clause (b) of Section 2.1.1.
"Term-B Loans" means the Additional Term-B Loans, if any.
"Term-B Note" means a promissory note of the Borrower payable to the
order of any Lender, in the form of Exhibit A-3 hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of the Borrower to such Lender resulting from
outstanding Term-B Loans, and also means all other promissory notes accepted
from time to time in substitution therefor or renewal thereof.
"Term-C Loans" is defined in clause (a) of the fifth recital.
"Term Loans" means, collectively, the Term-A Loans and the Term-B
Loans.
"Total Exposure Amount" means, on any date of determination, the then
outstanding principal amount of all Term Loans and the then effective Revolving
Loan Commitment Amount.
"Tranche" means, as the context may require, the Loans constituting
Term-A Loans, Term-B Loans, Revolving Loans or Swing Line Loans.
"Transaction" means the Acquisition, the Merger, the Equity Issuance
and Contribution, the Preferred Stock Sale, the execution of this Agreement and
the making of the initial Credit Extension, and any and all transactions
relating to any of the foregoing.
"Transaction Agreement" means the Amended and Restated Transaction
Agreement, dated as of September 18, 1996, among DLJ Merchant Banking Partners,
L.P., DLJ International Partners, C.V., DLJ Offshore Partners, C.V., DLJ
Merchant Banking Funding, Inc., Carlisle Enterprises, L.P., Holdco, the
Borrower, certain Subsidiaries of the Borrower, the Seller, Rust International
Inc., Rust and certain Subsidiaries of Rust, as amended, supplemented, amended
and restated or otherwise modified from time to time as permitted hereby or by
any other Loan Document.
"Transitional Services Agreement" means the Transitional Services
Agreement, dated as of September 30, 1996, among the Borrower, WMX Technologies,
Inc., Rust International Inc. and the Seller, as amended, supplemented, amended
and restated or otherwise modified from time to time as permitted hereby or by
any other Loan Document.
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"type" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of New York.
"United States" or "U.S." means the United States of America, its fifty
states and the District of Columbia.
"U.S. Subsidiary" means any Subsidiary of the Borrower that is
incorporated or organized in or under the laws of the United States or any state
thereof.
"Waiver" means an agreement in favor of the Agents for the benefit of
the Lenders in form and substance reasonably satisfactory to the Agents.
"Welfare Plan" means a "welfare plan", as such term is defined in
section 3(1) of ERISA, and to which the Borrower has any liability.
"wholly-owned Subsidiary" shall mean, with respect to any Person, any
Subsidiary of such Person all of the Capital Stock (and all rights and options
to purchase such Capital Stock) of which, other than directors' qualifying
shares, are owned, beneficially and of record, by such Person and/or one or more
wholly-owned Subsidiaries of such Person.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and in
each other Loan Document, notice and other communication delivered from time to
time in connection with this Agreement or any other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise specified, references
in this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in any
Article, Section or definition to any clause are references to such clause of
such Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations.
(a) Unless otherwise specified, all accounting terms used
herein or in any other Loan Document shall be interpreted, all
accounting determinations and computations hereunder or thereunder
(including under Section 7.2.4) shall be made, and all financial
statements required to be delivered hereunder or thereunder shall be
prepared, in accordance with those generally accepted accounting
principles ("GAAP"), as in effect
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on December 31, 1995, applied in the preparation of the audited
financial statements referred to in Section 7.1.13.
(b) For purposes of computing the Fixed Charge Coverage Ratio,
Interest Coverage Ratio and Leverage Ratio as of the end of any Fiscal
Quarter, (i) EBITDA for the period of four Fiscal Quarters ending at
the end of such Fiscal Quarter shall include (x) EBITDA for such period
of four Fiscal Quarters (determined without regard to this clause (b))
plus (y) with respect to any business or assets that have been acquired
by the Borrower or any of its Subsidiaries, including through mergers
or consolidations, after the first day of such period of four Fiscal
Quarters and prior to the end of such period, EBITDA of such business
or assets for the period from the first day of such period of four
Fiscal Quarters until the date of such acquisition, (ii) the
acquisition of any business or assets that has been made by the
Borrower or any of its Subsidiaries, including through mergers or
consolidations and including any related financing transactions after
the first day of the applicable period of four Fiscal Quarters and on
or prior to the end of such period, shall give pro forma effect to
financing transactions in connection with the acquisition of such
business or assets, as if such acquisition had occurred at the
beginning of the applicable period of four Fiscal Quarters and (iii)
EBITDA and expenses attributable to discontinued operations as
determined in accordance with GAAP, and operations, businesses and
assets disposed of prior to the end of such period of four Fiscal
Quarters, shall be excluded. For purposes of the foregoing clause (i),
EBITDA attributable to any business or assets acquired by the Borrower
or any Subsidiary (including, without limitation, any cost savings and
the like resulting from such acquisition) shall be calculated on a pro
forma basis for the applicable period of four Fiscal Quarters in
accordance with Regulation S- X promulgated under the Securities Act of
1933, as amended.
ARTICLE II
COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES,
NOTES AND LETTERS OF CREDIT
SECTION 2.1. Commitments. On the terms and subject to the conditions
of this Agreement (including Sections 2.1.4, 2.1.5 and Article V),
(a) each Lender severally agrees to the continuation of Term-A
Loans and to make Loans (other than Swing Line Loans) pursuant to the
Commitments, and the Swing Line Lender agrees to make Swing Line Loans
pursuant to the Swing Line Loan Commitment, in each case as described
in this Section 2.1; and
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(b) each Issuer severally agrees that it will issue Letters of
Credit pursuant to Section 2.1.3, and each other Lender that has a
Revolving Loan Commitment severally agrees that it will purchase
participation interests in such Letters of Credit pursuant to Section
2.6.1.
SECTION 2.1.2. Term Loan Commitments.
(a) Each of the parties hereto acknowledges and agrees that
the Term-A Loans shall continue as Term Loans for all purposes under
this Agreement and the other Loan Documents. No amounts paid or prepaid
with respect to Term-A Loans may be reborrowed.
(b) In addition, at any time that no Default has occurred and
is continuing, and subject to compliance by the Borrower with the terms
of Section 5.3 (which includes, among other things, obtaining the
consent of the Lenders holding 51% of the outstanding Term-A Loans and
the Revolving Loan Commitments to the Borrowing of Additional Term-B
Loans on the Delayed Draw Date), the Borrower may notify the Agents
that the Borrower is requesting that, on the terms and subject to the
conditions contained in this Agreement, the Lenders and/or other
financial institutions not then a party to this Agreement that are
satisfactory to the Agents and the Issuer provide up to an aggregate
amount of $30,000,000 in additional term loan commitments (with the
commitment of each such Lender and/or other financial institution
described in this clause (b) herein referred to as its "Additional
Term-B Loan Commitment"). Upon receipt of such notice, the Syndication
Agent shall use its best commercially reasonable efforts to arrange for
the Lenders or other financial institutions to provide such Additional
Term-B Loan Commitments; provided that the Syndication Agent will first
offer each of the Lenders that then has Term-A Loans outstanding a pro
rata portion of any such Additional Term-B Loan Commitment.
Alternatively, any Lender may commit to provide the full amount of the
requested Additional Term-B Loan Commitments and then offer portions of
such Additional Term-B Loan Commitment to the Lenders having Term-A
Loans outstanding, pro rata in proportion to their Term-A Loans
outstanding. Nothing contained in this clause (b) or otherwise in this
Agreement is intended to commit any Lender or any Agent to provide any
portion of any such Additional Term-B Loan Commitments. If and to the
extent that any Lenders and/or other financial institutions agree, in
their sole discretion, to provide any such Additional Term-B Loan
Commitments and make additional term loans (relative to such Lender
and/or financial institution, its "Additional Term-B Loans"), (i)
subject to the next sentence, the amount, amortization, Applicable
Margin, Stated Maturity Date and Term-B Loan Commitment Termination
Date of the Additional Term-B Loan Commitments agreed to be so provided
shall be established, (ii) the Percentages of the respective Lenders in
respect of the Additional Term-B Loan Commitments shall be set forth on
Schedule II hereto, (iii) at such time and in such manner as the
Borrower and
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the Syndication Agent shall agree, each Lender that has a Percentage in
excess of zero of the Additional Term-B Loan Commitments will make its
Additional Term-B Loan to the Borrower in an amount not to exceed such
Lender's Percentage with respect to the Additional Term-B Loan
Commitments in accordance with Section 2.3.1 and (iv) the Borrower
shall execute and deliver any Term-B Notes or other amendments or
modifications to this Agreement or any other Loan Document as the
Agents may reasonably request. The terms and conditions applicable to
such Additional Term-B Loan Commitment shall be set forth in an
addendum to this Agreement (the "Additional Term-B Loan Commitment
Addendum") among the Borrower, one or more Lenders and/or other
financial institutions and the Agents, in form and substance reasonably
satisfactory to the Agents, but in no event shall (i) the Term-B Loan
Commitment Amount thereunder exceed $30,000,000, (ii) the annual
amortization installments thereunder prior to the Stated Maturity Date
for Term-A Loans exceed 1% of the aggregate amount of the Additional
Term-B Loans borrowed on the Delayed Draw Date and (iii) the Stated
Maturity Date for Term-B Loans set forth therein be earlier than one
year after the Stated Maturity Date for Term-A Loans. In no event shall
any Commitment Amount or the Percentage of any Lender be increased
without the written consent of such Lender. Proceeds of any Additional
Term-B Loans shall be available for working capital and general
corporate purposes of the Borrower and its Subsidiaries and for
Investments to the extent permitted to be made pursuant to clause (i)
of Section 7.2.5. No amounts paid or prepaid with respect to Additional
Term-B Loans may be reborrowed.
SECTION 2.1.3. Revolving Loan Commitment and Swing Line Loan
Commitment. Subject to compliance by the Borrower with the terms of Section
2.1.4, 5.2 and (in the case of Swing Line Loans only) 5.1, the Revolving Loans
and Swing Line Loans will be made as set forth below:
(a) From time to time on any Business Day occurring
concurrently with (or after) the Closing Date but prior to the
Revolving Loan Commitment Termination Date, each Lender that has a
Percentage of the Revolving Loan Commitment in excess of zero will make
loans (relative to such Lender, its "Revolving Loans") to the Borrower
equal to such Lender's Percentage of the aggregate amount of the
Borrowing of the Revolving Loans requested by the Borrower to be made
on such day. The Commitment of each Lender described in this clause (a)
is herein referred to as its "Revolving Loan Commitment". On the terms
and subject to the conditions hereof, the Borrower may from time to
time borrow, prepay and reborrow Revolving Loans.
(b) From time to time on any Business Day occurring
concurrently with (or after) the Restatement Effective Date but prior
to the Revolving Loan Commitment Termination Date, the Swing Line
Lender will make a loan (a "Swing Line Loan") to the Borrower equal to
the principal amount of the Swing Line Loan requested by the
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Borrower to be made on such day. The Commitment of the Swing Line
Lender described in this clause (b) is herein referred to as its "Swing
Line Loan Commitment". On the terms and subject to the conditions
hereof, the Borrower may from time to time borrow, prepay and reborrow
Swing Line Loans.
SECTION 2.1.4. Letter of Credit Commitment. Subject to compliance by
the Borrower with the terms of Section 2.1.5 and Section 5.2, from time to time
on any Business Day occurring concurrently with (or after) the Closing Date but
prior to the Revolving Loan Commitment Termination Date, the Issuer will
(a) issue one or more standby or performance letters of credit
(each referred to as a "Letter of Credit") for the account of the
Borrower in the Stated Amount requested by the Borrower on such day; or
(b) extend the Stated Expiry Date of an existing standby or
performance Letter of Credit previously issued hereunder to a date not
later than the earlier of (x) the Revolving Loan Commitment Termination
Date and (y) one year from the date of such extension.
SECTION 2.1.5. Lenders Not Permitted or Required To Make the Loans. No
Lender shall be permitted or required to, and the Borrower shall not request
that any Lender to, make
(a) any Additional Term-B Loan if, after giving effect
thereto, the aggregate original principal amount of all Additional
Term-B Loans of such Lender would exceed such Lender's Percentage of
the Term-B Loan Commitment Amount;
(b) any Revolving Loan if, after giving effect thereto, the
aggregate outstanding principal amount of all the Revolving Loans of
such Lender, together with such Lender's Percentage of the aggregate
amount of all Letter of Credit Outstandings, and such Lender's
Percentage of the outstanding principal amount of all Swing Line Loans,
would exceed such Lender's Percentage of the lesser of (x) the
Revolving Loan Commitment Amount and (y) the then existing Borrowing
Base Amount; or
(c) any Swing Line Loan if, after giving effect thereto, the
aggregate outstanding principal amount of all Swing Line Loans would
exceed the Swing Line Loan Commitment Amount.
SECTION 2.1.6. Issuer Not Permitted or Required to Issue Letters of
Credit. No Issuer shall be permitted or required to issue any Letter of Credit
if, after giving effect thereto, (a) the aggregate amount of all Letter of
Credit Outstandings would exceed the Letter of Credit Commitment Amount or (b)
the sum of the aggregate amount of all Letter of Credit Outstandings plus the
aggregate principal amount of all Revolving Loans and Swing Line
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Loans then outstanding would exceed the lesser of (x) the Revolving Loan
Commitment Amount and (y) the then existing Borrowing Base Amount.
SECTION 2.2. Reduction of the Commitment Amounts. The Commitment
Amounts are subject to reductions from time to time pursuant to this Section
2.2.
SECTION 2.2.1. Optional. The Borrower may, from time to time on any
Business Day occurring after the time of the initial Credit Extension hereunder,
voluntarily reduce the Letter of Credit Commitment Amount or the Revolving Loan
Commitment Amount; provided, however, that all such reductions shall require at
least three Business Days' prior notice to the Administrative Agent and be
permanent, and any partial reduction of any Commitment Amount shall be in a
minimum amount of $1,000,000 and in an integral multiple of $500,000. Any such
reduction of the Revolving Loan Commitment Amount which reduces the Revolving
Loan Commitment Amount below the Letter of Credit Commitment Amount or the Swing
Line Loan Commitment Amount shall result in an automatic and corresponding
reduction of the Letter of Credit Commitment Amount or the Swing Line Loan
Commitment Amount, as the case may be (as directed by the Borrower in a notice
to the Administrative Agent delivered together with the notice of such voluntary
reduction in the Revolving Loan Commitment Amount), to an aggregate amount not
in excess of the Revolving Loan Commitment Amount, as so reduced, without any
further action on the part of the Issuer or the Swing Line Lender.
SECTION 2.2.2. Mandatory. Following the prepayment in full of the Term
Loans, the Revolving Loan Commitment Amount shall, without any further action,
automatically and permanently be reduced on the date the Term Loans would
otherwise have been required to be prepaid on account of any Net Disposition
Proceeds, Net Debt Proceeds, Excess Cash Flow, Net Equity Proceeds or Casualty
Proceeds, in an amount equal to the amount by which the Term Loans would
otherwise have been required to be prepaid if Term Loans had been outstanding.
Any such reduction of the Revolving Loan Commitment Amount which reduces the
Revolving Loan Commitment Amount below the Letter of Credit Commitment Amount
shall result in an automatic and corresponding reduction of the Letter of Credit
Commitment Amount (as directed by the Borrower in a notice to the Administrative
Agent) to an aggregate amount not in excess of the Revolving Loan Commitment
Amount, as so reduced, without any further action on the part of the Issuer.
SECTION 2.3. Borrowing Procedures and Funding Maintenance. Loans (other
than Swing Line Loans) shall be made by the Lenders in accordance with Section
2.3.1, and Swing Line Loans shall be made by the Swing Line Lender in accordance
with Section 2.3.2.
SECTION 2.3.1. Term Loans and Revolving Loans. By delivering a
Borrowing Request to the Administrative Agent on or before 12:00 noon, New York
time, on a Business Day, the Borrower may from time to time irrevocably request,
on not less than one Business Day's notice (in the case of Base Rate Loans) or
three Business Days' notice (in the case of
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LIBO Rate Loans) nor more than five Business Days' notice (in the case of any
Loans), that a Borrowing be made, in the case of LIBO Rate Loans, in a minimum
amount of $1,000,000 and an integral multiple of $500,000, and in the case of
Base Rate Loans, in a minimum amount of $500,000 and an integral multiple
thereof, or, in either case, in the unused amount of the applicable Commitment.
No Borrowing Request shall be required, and the minimum aggregate amounts
specified under this Section 2.3.1 shall not apply, in the case of Revolving
Loans made under clause (b) of Section 2.3.2 to refund Refunded Swing Line Loans
or deemed made under Section 2.6.2 in respect of unreimbursed Disbursements. On
the terms and subject to the conditions of this Agreement, each Borrowing shall
be comprised of the type of Loans, and shall be made on the Business Day,
specified in such Borrowing Request. On or before 11:00 a.m., New York time, on
such Business Day each Lender shall deposit with the Administrative Agent same
day funds in an amount equal to such Lender's Percentage of the requested
Borrowing. Such deposit will be made to an account which the Administrative
Agent shall specify from time to time by notice to the Lenders. To the extent
funds are received from the Lenders, the Administrative Agent shall make such
funds available to the Borrower by wire transfer to the accounts the Borrower
shall have specified in its Borrowing Request. No Lender's obligation to make
any Loan shall be affected by any other Lender's failure to make any Loan.
SECTION 2.3.2. Swing Line Loans. (a) By telephonic notice, promptly
followed (within one Business Day) by the delivery of a confirming Borrowing
Request, to the Swing Line Lender on or before 1:00 p.m., New York City time, on
the Business Day the proposed Swing Line Loan is to be made, the Borrower may
from time to time irrevocably request that a Swing Line Loan be made by the
Swing Line Lender in a minimum principal amount of $50,000 or any larger
integral multiple of $10,000. All Swing Line Loans shall be made as Base Rate
Loans and shall not be entitled to be converted into LIBO Rate Loans. The
proceeds of each Swing Line Loan shall be made available by the Swing Line
Lender, by 2:00 p.m., New York City time, on the Business Day telephonic notice
is received by it as provided in this clause (a), to the Borrower by wire
transfer to the account the Borrower shall have specified in its notice
therefor.
(b) If any Default shall occur and be continuing, each Lender with a
Revolving Loan Commitment (other than the Swing Line Lender) irrevocably agrees
that it will, at the request of the Swing Line Lender and upon notice from the
Administrative Agent, unless such Swing Line Loan shall have been earlier
repaid, make a Revolving Loan (which shall initially be funded as a Base Rate
Loan) in an amount equal to such Lender's Percentage in respect of the Revolving
Loans of the aggregate principal amount of all such Swing Line Loans then
outstanding (such outstanding Swing Line Loans hereinafter referred to as the
"Refunded Swing Line Loans"); provided, that the Swing Line Lender shall not
request, and no Lender with a Revolving Loan Commitment shall make, any Refunded
Swing Line Loan if, after giving effect to the making of such Refunded Swing
Line Loan, the sum of all Swing Line Loans and Revolving Loans made by such
Lender, plus such Lender's Percentage of the
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aggregate amount of all Letter of Credit Outstandings, would exceed such
Lender's Percentage of the then existing Revolving Loan Commitment Amount. On or
before 12:00 noon (New York time) on the first Business Day following receipt by
each Lender of a request to make Revolving Loans as provided in the preceding
sentence, each such Lender with a Revolving Loan Commitment shall deposit in an
account specified by the Swing Line Lender the amount so requested in same day
funds and such funds shall be applied by the Swing Line Lender to repay the
Refunded Swing Line Loans. At the time the aforementioned Lenders make the above
referenced Revolving Loans, the Swing Line Lender shall be deemed to have made,
in consideration of the making of the Refunded Swing Line Loans, a Revolving
Loan in an amount equal to the Swing Line Lender's Percentage in respect of the
Revolving Loans of the aggregate principal amount of the Refunded Swing Line
Loans. Upon the making (or deemed making, in the case of the Swing Line Lender)
of any Revolving Loans pursuant to this clause (b), the amount so funded shall
become outstanding under such Lender's Revolving Note and shall no longer be
owed under the Swing Line Note. All interest payable with respect to any
Revolving Loans made (or deemed made, in the case of the Swing Line Lender)
pursuant to this clause (b) shall be appropriately adjusted to reflect the
period of time during which the Swing Line Lender had outstanding Swing Line
Loans in respect of which such Revolving Loans were made. Each Lender's
obligation (in the case of Lenders with a Revolving Loan Commitment) to make the
Revolving Loans referred to in this clause (b) shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, (i) any set-off, counterclaim, recoupment, defense or other right
which such Lender may have against the Swing Line Lender, the Borrower or any
other Person for any reason whatsoever; (ii) the occurrence or continuance of
any Default; (iii) any adverse change in the condition (financial or otherwise)
of the Borrower; (iv) the acceleration or maturity of any Loans or the
termination of any Commitment after the making of any Swing Line Loan; (v) any
breach of this Agreement or any other Loan Document by the Borrower or any
Lender; or (vi) any other circumstance, happening or event whatsoever, whether
or not similar to any of the foregoing.
(c) In the event that the Borrower or any other Obligor is subject to
any bankruptcy or insolvency proceedings as provided in Section 8.1.9, or if for
any other reason Revolving Loans cannot be made or are unavailable, each Lender
with a Revolving Loan Commitment shall acquire without recourse or warranty an
undivided participation interest equal to such Lender's Percentage in respect of
the Revolving Loans of any Swing Line Loan otherwise required to be repaid by
such Lender pursuant to the preceding clause by paying to the Swing Line Lender
on the date on which such Lender would otherwise have been required to make a
Revolving Loan in respect of such Swing Line Loan pursuant to the preceding
clause, in same day funds, an amount equal to such Lender's Percentage in
respect of the Revolving Loans of such Swing Line Loan, and no Revolving Loans
shall be made by such Lender pursuant to the preceding clause. From and after
the date on which any Lender purchases an undivided participation interest in a
Swing Line Loan pursuant to this clause, the Swing Line Lender shall distribute
to such Lender (appropriately adjusted, in the case of interest payments, to
reflect
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the period of time during which such Lender's participation interest is
outstanding and funded) its ratable amount of all payments of principal and
interest in respect of such Swing Line Loan in like funds as received; provided,
however, that in the event such payment received by the Swing Line Lender is
required to be returned to the Borrower, such Lender shall return to the Swing
Line Lender the portion of any amounts which such Lender had received from the
Swing Line Lender in like funds.
SECTION 2.4. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Administrative Agent on or before 12:00
noon, New York time, on a Business Day, the Borrower may from time to time
irrevocably elect, on not less than one Business Day's notice (in the case of a
conversion of LIBO Rate Loans to Base Rate Loans) or three Business Days' notice
(in the case of a continuation of LIBO Rate Loans or a conversion of Base Rate
Loans into LIBO Rate Loans) nor more than five Business Days' notice (in the
case of any Loans) that all, or any portion in an aggregate minimum amount of
$1,000,000 and an integral multiple of $500,000, in the case of the continuation
of, or conversion into, LIBO Rate Loans, or an aggregate minimum amount of
$500,000 and an integral multiple thereof, in the case of the conversion into
Base Rate Loans, be, in the case of Base Rate Loans, converted into LIBO Rate
Loans or, in the case of LIBO Rate Loans, be converted into Base Rate Loans or
continued as LIBO Rate Loans (in the absence of delivery of a
Continuation/Conversion Notice with respect to any LIBO Rate Loan at least three
Business Days before the last day of the then current Interest Period with
respect thereto, such LIBO Rate Loan shall, on such last day, automatically
convert to a Base Rate Loan); provided, however, that (x) each such conversion
or continuation shall be pro rated among the applicable outstanding Loans of the
relevant Lenders, and (y) no portion of the outstanding principal amount of any
Loans may be continued as, or be converted into, LIBO Rate Loans when any
Default has occurred and is continuing.
SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBO Rate Loans hereunder by causing one
of its foreign branches or Affiliates (or an international banking facility
created by such Lender) to make or maintain such LIBO Rate Loan, so long as such
action does not result in increased costs to the Borrower; provided, however,
that such LIBO Rate Loan shall nonetheless be deemed to have been made and to be
held by such Lender, and the obligation of the Borrower to repay such LIBO Rate
Loan shall nevertheless be to such Lender for the account of such foreign
branch, Affiliate or international banking facility; and provided, further,
however, that, except for purposes of determining whether any such increased
costs are payable by the Borrower, such Lender shall cause such foreign branch,
Affiliate or international banking facility to comply with the applicable
provisions of clause (b) of Section 4.6 with respect to such LIBO Rate Loan. In
addition, the Borrower hereby consents and agrees that, for purposes of any
determination to be made for purposes of Section 4.1, 4.2, 4.3 or 4.4, it shall
be conclusively assumed that each Lender elected to fund all LIBO Rate Loans by
purchasing Dollar deposits in its LIBOR Office's interbank eurodollar market.
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SECTION 2.6. Issuance Procedures. By delivering to the Administrative
Agent an Issuance Request on or before 12:00 noon, New York time, on a Business
Day, the Borrower may, from time to time irrevocably request, on not less than
three nor more than ten Business Days' notice (or such shorter or longer notice
as may be acceptable to the Issuer), in the case of an initial issuance of a
Letter of Credit, and not less than three nor more than ten Business Days'
notice (unless a shorter or longer notice period is acceptable to the Issuer)
prior to the then existing Stated Expiry Date of a Letter of Credit, in the case
of a request for the extension of the Stated Expiry Date of a Letter of Credit,
that the Issuer issue, or extend the Stated Expiry Date of, as the case may be,
an irrevocable Letter of Credit on behalf of the Borrower (whether issued for
the account of or on behalf of the Borrower or any of its Subsidiaries) in such
form as may be requested by the Borrower and approved by the Issuer, solely for
the purposes described in Section 7.1.9. Notwithstanding anything to the
contrary contained herein or in any separate application for any Letter of
Credit, the Borrower hereby acknowledges and agrees that it shall be obligated
to reimburse the Issuer upon each Disbursement of a Letter of Credit, and it
shall be deemed to be the obligor for purposes of each such Letter of Credit
issued hereunder (whether the account party on such Letter of Credit is the
Borrower or a Subsidiary of the Borrower). Upon receipt of an Issuance Request,
the Administrative Agent shall promptly notify the Issuer and each Lender
thereof. Each Letter of Credit shall by its terms be stated to expire on a date
(its "Stated Expiry Date") no later than the earlier to occur of (i) the
Revolving Loan Commitment Termination Date or (ii) one year from the date of its
issuance. The Issuer will make available to the beneficiary thereof the original
of each Letter of Credit which it issues hereunder.
SECTION 2.6.1. Other Lenders' Participation. Upon the issuance of each
Letter of Credit issued by the Issuer pursuant hereto, and without further
action, each Lender (other than the Issuer) that has a Revolving Loan Commitment
shall be deemed to have irrevocably purchased from the Issuer, to the extent of
its Percentage in respect of Revolving Loans, and the Issuer shall be deemed to
have irrevocably granted and sold to such Lender a participation interest in
such Letter of Credit (including the Contingent Liability and any Reimbursement
Obligation and all rights with respect thereto), and such Lender shall, to the
extent of its Percentage in respect of Revolving Loans, be responsible for
reimbursing promptly (and in any event within one Business Day) the Issuer for
Reimbursement Obligations which have not been reimbursed by the Borrower in
accordance with Section 2.6.3. In addition, such Lender shall, to the extent of
its Percentage in respect of Revolving Loans, be entitled to receive a ratable
portion of the Letter of Credit fees payable pursuant to Section 3.3.3 with
respect to each Letter of Credit and of interest payable pursuant to Section 3.2
with respect to any Reimbursement Obligation. To the extent that any Lender has
reimbursed the Issuer for a Disbursement as required by this Section, such
Lender shall be entitled to receive its ratable portion of any amounts
subsequently received (from the Borrower or otherwise) in respect of such
Disbursement.
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SECTION 2.6.2. Disbursements; Conversion to Revolving Loans. The Issuer
will notify the Borrower and the Administrative Agent promptly of the
presentment for payment of any drawing under any Letter of Credit issued by the
Issuer, together with notice of the date (the "Disbursement Date") such payment
shall be made (each such payment, a "Disbursement"). Subject to the terms and
provisions of such Letter of Credit and this Agreement, the Issuer shall make
such payment to the beneficiary (or its designee) of such Letter of Credit.
Prior to 12:00 noon, New York time, on the first Business Day following the
Disbursement Date (the "Disbursement Due Date"), the Borrower will reimburse the
Administrative Agent, for the account of the Issuer, for all amounts which the
Issuer has disbursed under such Letter of Credit, together with interest thereon
at the rate per annum otherwise applicable to Revolving Loans (made as Base Rate
Loans) from and including the Disbursement Date to but excluding the
Disbursement Due Date and, thereafter (unless such Disbursement is converted
into a Base Rate Loan on the Disbursement Due Date), at a rate per annum equal
to the rate per annum then in effect with respect to overdue Revolving Loans
(made as Base Rate Loans) pursuant to Section 3.2.2 for the period from the
Disbursement Due Date through the date of such reimbursement; provided, however,
that, if no Default shall have then occurred and be continuing, unless the
Borrower has notified the Administrative Agent no later than one Business Day
prior to the Disbursement Due Date that it will reimburse the Issuer for the
applicable Disbursement, then the amount of the Disbursement shall be deemed to
be a Borrowing of Revolving Loans constituting a Base Rate Loan and following
the giving of notice thereof by the Administrative Agent to the Lenders, each
Lender with a Revolving Loan Commitment (other than the Issuer) will deliver to
the Issuer on the Disbursement Due Date immediately available funds in an amount
equal to such Lender's Percentage of such Borrowing. Each conversion of
Disbursement amounts into Revolving Loans shall constitute a representation and
warranty by the Borrower that on the date of the making of such Revolving Loans
all of the statements set forth in Section 5.2.1 are true and correct.
SECTION 2.6.3. Reimbursement. The obligation (a "Reimbursement
Obligation") of the Borrower under Section 2.6.2 to reimburse the Issuer with
respect to each Disbursement (including interest thereon) not converted into a
Base Rate Loan pursuant to Section 2.6.2, and, upon the failure of the Borrower
to reimburse the Issuer and the giving of notice thereof by the Administrative
Agent to the Lenders, each Lender's (to the extent it has a Revolving Loan
Commitment) obligation under Section 2.6.1 to reimburse the Issuer or fund its
Percentage of any Disbursement converted into a Base Rate Loan, shall be
absolute and unconditional under any and all circumstances and irrespective of
any setoff, counterclaim or defense to payment which the Borrower or such
Lender, as the case may be, may have or have had against the Issuer or any such
Lender, including any defense based upon the failure of any Disbursement to
conform to the terms of the applicable Letter of Credit (if, in the Issuer's
good faith opinion, such Disbursement is determined to be appropriate) or any
non-application or misapplication by the beneficiary of the proceeds of such
Letter of Credit; provided, however, that after paying in full its Reimbursement
Obligation hereunder, nothing herein shall
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adversely affect the right of the Borrower or such Lender, as the case may be,
to commence any proceeding against the Issuer for any wrongful Disbursement made
by the Issuer under a Letter of Credit as a result of acts or omissions
constituting gross negligence or willful misconduct on the part of the Issuer.
SECTION 2.6.4. Deemed Disbursements. Upon the occurrence and during the
continuation of any Event of Default of the type described in clauses (b)
through (d) of Section 8.1.9 with respect to any Obligor (other than immaterial
Subsidiaries) or, with notice from the Administrative Agent acting at the
direction of the Required Lenders, upon the occurrence and during the
continuation of any other Event of Default,
(a) an amount equal to that portion of all Letter of Credit
Outstandings attributable to the then aggregate amount which is undrawn
and available under all Letters of Credit issued and outstanding shall,
without demand upon or notice to the Borrower or any other Person, be
deemed to have been paid or disbursed by the Issuer under such Letters
of Credit (notwithstanding that such amount may not in fact have been
so paid or disbursed); and
(b) upon notification by the Administrative Agent to the
Borrower of its obligations under this Section, the Borrower shall be
immediately obligated to reimburse the Issuer for the amount deemed to
have been so paid or disbursed by the Issuer.
Any amounts so payable by the Borrower pursuant to this Section shall be
deposited in cash with the Administrative Agent and held as collateral security
for the Obligations in connection with the Letters of Credit issued by the
Issuer. At such time as the Events of Default giving rise to the deemed
disbursements hereunder shall have been cured or waived, the Administrative
Agent shall return to the Borrower all amounts then on deposit with the
Administrative Agent pursuant to this Section, together with accrued interest at
the Federal Funds Rate, which have not been applied to the satisfaction of such
Obligations.
SECTION 2.6.5. Nature of Reimbursement Obligations. The Borrower and,
to the extent set forth in Section 2.6.1, each Lender with a Revolving Loan
Commitment, shall assume all risks of the acts, omissions or misuse of any
Letter of Credit by the beneficiary thereof. The Issuer (except to the extent of
its own gross negligence or willful misconduct) shall not be responsible for:
(a) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any Letter of Credit or any document submitted by any
party in connection with the application for and issuance of a Letter
of Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
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(b) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any instrument transferring or assigning or purporting
to transfer or assign a Letter of Credit or the rights or benefits
thereunder or the proceeds thereof in whole or in part, which may prove
to be invalid or ineffective for any reason;
(c) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
(d) errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or
otherwise; or
(e) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a Disbursement under a
Letter of Credit.
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted to the Issuer or any Lender with a Revolving Loan
Commitment hereunder. In furtherance and extension and not in limitation or
derogation of any of the foregoing, any action taken or omitted to be taken by
the Issuer in good faith (and not constituting gross negligence or willful
misconduct) shall be binding upon the Borrower, each Obligor and each such
Lender, and shall not put the Issuer under any resulting liability to the
Borrower, any Obligor or any such Lender, as the case may be.
SECTION 2.7. Notes. Each Lender's Loans under a Commitment shall be
evidenced by a Note payable to the order of such Lender in a maximum principal
amount equal to such Lender's Percentage of the original applicable Commitment
Amount. The Borrower hereby irrevocably authorizes each Lender to make (or cause
to be made) appropriate notations on the grid attached to such Lender's Notes
(or on any continuation of such grid), which notations, if made, shall evidence,
inter alia, the date of, the outstanding principal of, and the interest rate and
Interest Period applicable to the Loans evidenced thereby. Such notations shall
be conclusive and binding on the Borrower absent manifest error; provided,
however, that the failure of any Lender to make any such notations shall not
limit or otherwise affect any Obligations of the Borrower or any other Obligor.
SECTION 2.8. Registered Notes. (a) Any Non-U.S. Lender that could
become completely exempt from withholding of any Taxes in respect of payment of
any interest due to such Non-U.S. Lender under this Agreement if the Notes held
by such Lender were in registered form for U.S. Federal income tax purposes may
request the Borrower (through the Administrative Agent), and the Borrower agrees
(i) to exchange for any Notes held by such Lender, or (ii) to issue to such
Lender on the date it becomes a Lender, promissory notes(s) registered as
provided in clause (b) of this Section 2.8 (each, a "Registered Note", to be in
substantially the form of Exhibit A-6 hereto). Registered Notes may not be
exchanged for Notes that are not Registered Notes.
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(b) The Borrower shall maintain, or cause to be maintained, a register
(the "Register") (which, at the request of the Borrower, shall be kept by the
Administrative Agent on behalf of the Borrower at no extra charge to the
Borrower at the address to which notices to the Administrative Agent are to be
sent under this Agreement) on which it enters the name of the registered owner
of the Non-U.S. Lender's Obligation(s) evidenced by a Registered Note.
(c) The Register shall be available for inspection by the Borrower and
any Lender at any reasonable time upon reasonable prior notice.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments; Application.
SECTION 3.1.1. Repayments and Prepayments. The Borrower shall repay in
full the unpaid principal amount of each Loan upon the Stated Maturity Date
therefor. Prior thereto, the Borrower
(a) may, from time to time on any Business Day, make a
voluntary prepayment, in whole or in part, of the outstanding principal
amount of any
(i) Loans (other than Swing Line Loans); provided,
however, that
(A) any such prepayment of the Term-A Loans
or Term-B Loans shall be made pro rata among Term-A
Loans and Term-B Loans, as applicable, of the same
type and if applicable, having the same Interest
Period of all Lenders that have made such Term-A
Loans or Term-B Loans, and any such prepayment of
Revolving Loans shall be made pro rata among the
Revolving Loans of the same type and, if applicable,
having the same Interest Period of all Lenders that
have made such Revolving Loans;
(B) the Borrower shall comply with Section
4.4 in the event that any LIBO Rate Loan is prepaid
on any day other than the last day of the Interest
Period for such Loan;
(C) all such voluntary prepayments shall
require at least one Business Day's notice in the
case of Base Rate Loans, three Business Days' notice
in the case of LIBO Rate Loans, but no more than five
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Business Days' notice in the case of any Loans, in
each case in writing to the Administrative Agent; and
(D) all such voluntary partial prepayments
shall be, in the case of LIBO Rate Loans, in an
aggregate minimum amount of $1,000,000 and an
integral multiple of $500,000 and, in the case of
Base Rate Loans, in an aggregate minimum amount of
$500,000 and an integral multiple of $500,000; or
(ii) Swing Line Loans, provided that
(A) all such voluntary prepayments shall
require prior telephonic notice to the Swing Line
Lender on or before 1:00 p.m., New York City time, on
the day of such prepayment (such notice to be
confirmed in writing by the Borrower within 24 hours
thereafter); and
(B) all such voluntary partial prepayments
shall be in an aggregate amount of $50,000 and
integral multiples of $10,000 or in the aggregate
principal amount of all Swing Line Loans then
outstanding;
(b) shall, on each date when any reduction in the then
existing Borrowing Base Amount shall become effective, make a mandatory
prepayment of Revolving Loans or Swing Line Loans (or both) and (if
necessary) deposit with the Administrative Agent cash collateral for
Letter of Credit Outstandings, in an aggregate amount equal to the
excess, if any, of the sum of (i) the aggregate outstanding principal
amount of all Revolving Loans and Swing Line Loans and (ii) the
aggregate amount of all Letter of Credit Outstandings over the then
existing Borrowing Base Amount;
(c) shall, no later than one Business Day following the
receipt of any Net Debt Proceeds or thirty (30) Business Days following
the receipt of any Net Disposition Proceeds, in each case by the
Borrower or any of its Subsidiaries (other than pursuant to the
Preferred Stock Sale, the Equity Issuance and Contribution, the
issuance of the Seller Note, the Acquisition, the Merger and the other
transactions contemplated in the Transaction Agreement), deliver to the
Administrative Agent a calculation of the amount of such Net
Disposition Proceeds or Net Debt Proceeds, as the case may be, and,
subject to the proviso below, make a mandatory prepayment of the Term
Loans in an amount equal to 100% of such Net Disposition Proceeds or
Net Debt Proceeds, as the case may be, to be applied as set forth in
Section 3.1.2; provided, however, that, notwithstanding anything to the
contrary in this clause (c), no mandatory prepayment on account of Net
Disposition Proceeds shall be required under this clause if the
Borrower informs the Administrative Agent in writing no later than
thirty (30) Business Days following the receipt of such Net Disposition
Proceeds of its good faith intention to apply such Net Disposition
Proceeds to the replacement of the sold, conveyed or
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transferred assets or property and the Borrower in fact uses such Net
Disposition Proceeds to replace such assets or property within 180 days
following the receipt of such Net Disposition Proceeds, with the amount
of such Net Disposition Proceeds remaining unused after such 180-day
period being applied, on the Business Day following such 180-day
period, to the prepayment of Term Loans pursuant to Section 3.1.2;
(d) shall, no later than five Business Days following the
delivery by the Borrower of its annual audited financial reports
required pursuant to clause (b) of Section 7.1.1 (beginning with the
financial reports delivered in respect of the 1997 Fiscal Year),
deliver to the Administrative Agent a calculation of the Excess Cash
Flow for the prior Fiscal Year and, no later than five Business Days
following the delivery of such calculation, make a mandatory prepayment
of the Term Loans in an amount equal to 75% of the Excess Cash Flow (if
any) for such Fiscal Year, to be applied as set forth in Section 3.1.2;
provided, however, with respect to the calculation and prepayment in
respect of Excess Cash Flow for the 1997 Fiscal Year, such calculation
and prepayment shall include Excess Cash Flow for the period from the
Closing Date through the end of the 1997 Fiscal Year;
(e) shall, concurrently with the receipt of any Net Equity
Proceeds (other than pursuant to the Preferred Stock Sale or the Equity
Issuance and Contribution) by the Borrower or any of its Subsidiaries,
deliver to the Administrative Agent a calculation of the amount of such
Net Equity Proceeds, and no later than five Business Days following the
delivery of such calculation, make a mandatory prepayment of the Term
Loans in an amount equal to 50% of such Net Equity Proceeds to be
applied as set forth in Section 3.1.2;
(f) shall, within 60 days following the receipt by the
Borrower or any of its Subsidiaries of any Casualty Proceeds in excess
of $1,000,000 (individually or in the aggregate over the course of a
Fiscal Year), make a mandatory prepayment of the Term Loans in an
amount equal to 100% of such Casualty Proceeds, to be applied as set
forth in Section 3.1.2; provided, that no mandatory prepayment of
Casualty Proceeds shall be required under this clause if the Borrower
informs the Agents no later than 60 days following the occurrence of
the Casualty Event resulting in such Casualty Proceeds of its or its
Subsidiary's good faith intention to apply such Casualty Proceeds to
the rebuilding or replacement of such damaged, destroyed or condemned
assets or property and in fact uses such Casualty Proceeds to rebuild
or replace the damaged, destroyed or condemned asset or property within
365 days following the receipt of such Casualty Proceeds, with the
amount of Casualty Proceeds unused after such 365 day period being
applied to the Loans pursuant to Section 3.1.2; provided, further,
however, that at any time when any Event of Default shall have occurred
and be continuing or Casualty Proceeds not applied as provided above
shall exceed $5,000,000, such Casualty
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Proceeds will be deposited in an account maintained with the
Administrative Agent for disbursement at the request of the Borrower to
pay for such rebuilding or replacement;
(g) shall, on each date when any reduction in the Revolving
Loan Commitment Amount shall become effective, including pursuant to
Section 2.2 or Section 3.1.2, make a mandatory prepayment of Revolving
Loans and (if necessary) deposit with the Administrative Agent cash
collateral for Letter of Credit Outstandings in an aggregate amount
equal to the excess, if any, of the sum of (i) the aggregate
outstanding principal amount of all Revolving Loans and Swing Line
Loans and (ii) the aggregate amount of all Letter of Credit
Outstandings over the Revolving Loan Commitment Amount as so reduced;
(h) shall, on the Stated Maturity Date and on each Quarterly
Payment Date set forth below or occurring during any period set forth
below, make a scheduled repayment of the aggregate outstanding
principal amount, if any, of all Term-A Loans in an amount equal to the
amount set forth below opposite the Stated Maturity Date or such
Quarterly Payment Date or period, as applicable (as such amounts may
have otherwise been reduced pursuant to this Agreement):
Scheduled
Term A Principal
Quarterly Payment Date Repayment
============================ =======================
March 31, 1998 $0
June 30, 1998 $500,000
September 30, 1998 $500,000
December 31, 1998 $500,000
March 31, 1999 $1,250,000
June 30, 1999 $1,250,000
September 30, 1999 $1,250,000
December 31, 1999 $1,250,000
March 31, 2000 $1,500,000
June 30, 2000 $1,500,000
September 30, 2000 $1,500,000
December 31, 2000 $1,500,000
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Scheduled
Term A Principal
Quarterly Payment Date Repayment
============================ =================
March 31, 2001 $2,000,000
June 30, 2001 $2,000,000
September 30, 2001 $2,000,000
December 31, 2001 $2,500,000
March 31, 2002 $3,000,000
June 30, 2002 $3,000,000
September 30, 2002 $3,000,000
--------------
TOTAL: USD$30,000,000
============================ ==============
(i) [Intentionally Omitted].
(j) [Intentionally Omitted].
(k) shall, immediately upon any acceleration of the Stated
Maturity Date of any Loans or Obligations pursuant to Section 8.2 or
Section 8.3, repay all Loans and provide the Administrative Agent with
cash collateral in an amount equal to the Letter of Credit
Outstandings, unless, pursuant to Section 8.3, only a portion of all
Loans and Obligations are so accelerated (in which case the portion so
accelerated shall be so prepaid or cash collateralized with the
Administrative Agent).
Each prepayment of any Loans made pursuant to this Section shall be
without premium or penalty, except as may be required by Section 4.4. No
prepayment of principal of any Revolving Loans or Swing Line Loans pursuant to
clause (a), (b) or (l) of this Section 3.1.1 shall cause a reduction in the
Revolving Loan Commitment Amount or the Swing Line Loan Commitment Amount, as
the case may be.
SECTION 3.1.2. Application.
(a) Subject to clause (b) below, each prepayment or repayment of
principal of the Loans of any Tranche shall be applied, to the extent of such
prepayment or repayment, first, to the principal amount thereof being maintained
as Base Rate Loans, and second, to the principal amount thereof being maintained
as LIBO Rate Loans.
(b) Each prepayment of Term Loans made pursuant to clauses (a), (c),
(d), (e) and (f) of Section 3.1.1 shall be applied pro rata to the outstanding
principal amount of all Term-A Loans and Term-B Loans (with the amount of such
prepayment of the Term-A Loans and the
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Term-B Loans being applied to the remaining Term-A Loan or Term-B Loan
amortization payments required pursuant to clause (h) of Section 3.1.1 (in the
case of Term-A Loans) and the amortization payment schedule established pursuant
to clause (b) of Section 2.1.1 (in the case of Term-B Loans), in each case pro
rata in accordance with the amount of each such remaining Term Loan amortization
payment), until all such Term-A Loans and Term-B Loans have been paid in full;
provided, however, that if (but only if) the Borrower solicits an election
(which solicitation must be made at least five Business Days prior to any
applicable prepayment and must be made simultaneously to all Lenders with Term-B
Loans outstanding) (i) any Lender that has Term-B Loans outstanding may, by
delivering a notice to the Administrative Agent at least one Business Day prior
to the date that such prepayment is to be made, elect not to have its pro rata
share of Term-B Loans prepaid, and upon any such election the Administrative
Agent shall apply the amount that otherwise would have prepaid such Lender's
Term-B Loans to a mandatory prepayment of the Term-A Loans (until repaid in
full), and then to a reduction in the Revolving Loan Commitment Amount.
SECTION 3.2. Interest Provisions. Interest on the outstanding principal
amount of Loans shall accrue and be payable in accordance with this Section 3.2.
SECTION 3.2.1. Rates. (a) Each Base Rate Loan shall accrue interest on
the unpaid principal amount thereof for each day from and including the day upon
which such Loan was made or converted to a Base Rate Loan to but excluding the
date such Loan is repaid or converted to a LIBO Rate Loan at a rate per annum
equal to the sum of the Alternate Base Rate for such day plus the Applicable
Margin for such Loan on such day. Each Swing Line Loan shall accrue interest on
the unpaid principal amount thereof for each day from and including the day upon
which such Loan was made to but excluding the date such Loan is repaid at a rate
per annum equal to the sum of the then effective Alternate Base Rate plus the
Applicable Margin minus the Applicable Commitment Fee.
(b) Each LIBO Rate Loan shall accrue interest on the unpaid principal
amount thereof for each day during each Interest Period applicable thereto at a
rate per annum equal to the sum of the LIBO Rate (Reserve Adjusted) for such
Interest Period plus the Applicable Margin for such Loan on such day.
All LIBO Rate Loans shall bear interest from and including the first day of the
applicable Interest Period to (but not including) the last day of such Interest
Period at the interest rate determined as applicable to such LIBO Rate Loan.
SECTION 3.2.2. Post-Maturity Rates. After the date any principal amount
of any Loan shall have become due and payable (whether on the Stated Maturity
Date, upon acceleration or otherwise), or any other monetary Obligation (other
than overdue Reimbursement Obligations which shall bear interest as provided in
Section 2.6.2) of the Borrower shall have become due and payable, the Borrower
shall pay, but only to the extent
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permitted by law, interest (after as well as before judgment) on such amounts at
a rate per annum equal to
(a) in the case of any overdue principal of Loans, overdue
interest thereon, overdue commitment fees or other overdue amounts
owing in respect of Loans or other obligations (or the related
Commitments) under a particular Tranche, the rate that would otherwise
be applicable to Base Rate Loans under such Tranche pursuant to Section
3.2.1 plus 2%; and
(b) in the case of overdue monetary Obligations (other than as
described in clause (a)), the Alternate Base Rate plus 3.75%.
SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) on the date of any payment or prepayment, in whole or in
part, of principal outstanding on such Loan, of the unpaid interest
accrued through such date on the principal so paid or prepaid;
(c) with respect to Base Rate Loans, on each Quarterly Payment
Date occurring after the date of the initial Borrowing hereunder;
(d) with respect to LIBO Rate Loans, on the last day of each
applicable Interest Period (and, if such Interest Period shall exceed
three months, at intervals of three months after the first day of such
Interest Period);
(e) with respect to the principal amount of any Base Rate
Loans converted into LIBO Rate Loans on a day when interest would not
otherwise have been payable pursuant to clause (c), on the date of such
conversion; and
(f) on that portion of any Loans the Stated Maturity Date of
which is accelerated pursuant to Section 8.2 or Section 8.3,
immediately upon such acceleration.
Interest accrued on Loans, Reimbursement Obligations or other monetary
Obligations arising under this Agreement or any other Loan Document after the
date such amount is due and payable (whether on the Stated Maturity Date, upon
acceleration or otherwise) shall be payable upon demand.
SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in
this Section 3.3. All such fees shall be non-refundable.
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SECTION 3.3.1. Commitment Fee. The Borrower agrees to pay to the
Administrative Agent for the account of each Lender that has a Revolving Loan
Commitment, for each day during the period (including any portion thereof when
any of the Lenders' Revolving Loan Commitments are suspended by reason of the
Borrower's inability to satisfy any condition of Article V) commencing on the
Closing Date and continuing to but excluding the Revolving Loan Commitment
Termination Date, a commitment fee on such Lender's Percentage of the unused
portion, whether or not then available, of the Revolving Loan Commitment Amount
(net of Letter of Credit Outstandings) for such day at a rate per annum equal to
the Applicable Commitment Fee for such day. Such commitment fees shall be
payable by the Borrower in arrears on each Quarterly Payment Date, commencing
with the first such day following the Closing Date, and on the Revolving Loan
Commitment Termination Date. Any term or provision hereof to the contrary
notwithstanding, commitment fees payable for any period prior to the Closing
Date shall be payable in accordance with the Fee Letter. The making of Swing
Line Loans shall not constitute usage of the Revolving Loan Commitment with
respect to the calculation of commitment fees to be paid by the Borrower to the
Lenders pursuant to this Section 3.3.1.
SECTION 3.3.2. Agents' and Arrangers' Fees. The Borrower agrees to pay
to each of the Agents and the Arrangers, for their own respective accounts, the
non-refundable fees in the amounts and on the dates set forth in the Fee Letter.
SECTION 3.3.3. Letter of Credit Fee. The Borrower agrees to pay to the
Administrative Agent, for the pro rata account of the Issuer and each other
Lender that has a Revolving Loan Commitment, a Letter of Credit fee for each day
on which there shall be any Letters of Credit outstanding on the aggregate
undrawn amount of all Letters of Credit outstanding on such day, at a rate per
annum equal to the Applicable Margin for such day for Revolving Loans that are
maintained as LIBO Rate Loans. The Borrower further agrees to pay to the Issuer
for its own account, for each day on which there shall be any Letters of Credit
outstanding, an issuance fee on the aggregate undrawn amount of all Letters of
Credit outstanding on such day at a rate per annum equal to 1/4 of 1%. All such
fees shall be payable quarterly in arrears on each Quarterly Payment Date and on
the Revolving Loan Commitment Termination Date.
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender shall determine
(which determination shall, upon notice thereof to the Borrower and the Lenders,
be conclusive and binding on the Borrower) that the introduction of or any
change in or in the interpretation of any law, in each case after the date upon
which such Lender shall have become a Lender hereunder, makes it unlawful, or
any central bank or other governmental authority asserts,
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after such date, that it is unlawful, for such Lender to make, continue or
maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan, the
obligations of such Lender to make, continue, maintain or convert any Loans as
LIBO Rate Loans shall, upon such determination, forthwith be suspended until
such Lender shall notify the Administrative Agent that the circumstances causing
such suspension no longer exist (with the date of such notice being the
"Reinstatement Date"), and (i) all LIBO Rate Loans previously made by such
Lender shall automatically convert into Base Rate Loans at the end of the then
current Interest Periods with respect thereto or sooner, if required by such law
or assertion and (ii) all Loans thereafter made by such Lender and outstanding
prior to the Reinstatement Date shall be made as Base Rate Loans, with interest
thereon being payable on the same date that interest is payable with respect to
the corresponding Borrowing of LIBO Rate Loans made by Lenders not so affected.
SECTION 4.2. Deposits Unavailable. If the Administrative Agent shall
have determined that
(a) Dollar deposits in the relevant amount and for the
relevant Interest Period are not available to the Administrative Agent
in its relevant market; or
(b) by reason of circumstances affecting the Administrative
Agent's relevant market, adequate means do not exist for ascertaining
the interest rate applicable hereunder to LIBO Rate Loans,
then, upon notice from the Administrative Agent to the Borrower and the Lenders,
the obligations of all Lenders under Section 2.3 and Section 2.4 to make or
continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall
forthwith be suspended until the Administrative Agent shall notify the Borrower
and the Lenders that the circumstances causing such suspension no longer exist.
SECTION 4.3. Increased LIBO Rate Loan Costs, etc. The Borrower agrees
to reimburse each Lender for any increase in the cost to such Lender of, or any
reduction in the amount of any sum receivable by such Lender in respect of,
making, continuing or maintaining (or of its obligation to make, continue or
maintain) any Loans as, or of converting (or of its obligation to convert) any
Loans into, LIBO Rate Loans (excluding any amounts, whether or not constituting
Taxes, referred to in Section 4.6) arising as a result of any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority that occurs after the date upon which such
Lender became a Lender hereunder. Such Lender shall promptly notify the
Administrative Agent and the Borrower in writing of the occurrence of any such
event, such notice to state, in reasonable detail, the reasons therefor and the
additional amount required fully to compensate such Lender for such increased
cost or reduced amount. Such additional amounts shall be payable by the Borrower
directly to such Lender within five days of its
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receipt of such notice, and such notice shall, in the absence of manifest error,
be conclusive and binding on the Borrower.
SECTION 4.4. Funding Losses. In the event any Lender shall incur any
loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to make, continue or maintain any portion of the principal amount of any Loan
as, or to convert any portion of the principal amount of any Loan into, a LIBO
Rate Loan, but excluding any loss of margin after the date of any such
conversion, repayment, prepayment or failure to borrow, continue or convert) as
a result of
(a) any conversion or repayment or prepayment of the principal
amount of any LIBO Rate Loans on a date other than the scheduled last
day of the Interest Period applicable thereto, whether pursuant to
Section 3.1 or otherwise;
(b) any Loans not being borrowed as LIBO Rate Loans in
accordance with the Borrowing Request therefor; or
(c) any Loans not being continued as, or converted into, LIBO
Rate Loans in accordance with the Continuation/ Conversion Notice
therefor,
then, upon the written notice of such Lender to the Borrower (with a copy to the
Administrative Agent), the Borrower shall, within five days of its receipt
thereof, pay directly to such Lender such amount as will (in the reasonable
determination of such Lender) reimburse such Lender for such loss or expense.
Such written notice (which shall include calculations in reasonable detail)
shall, in the absence of manifest error, be conclusive and binding on the
Borrower.
SECTION 4.5. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority, in each case occurring after the applicable
Lender becomes a Lender hereunder, affects or would affect the amount of capital
required or expected to be maintained by any Lender or any Person controlling
such Lender, and such Lender determines (in its sole and absolute discretion)
that the rate of return on its or such controlling Person's capital as a
consequence of its Commitments, participation in Letters of Credit or the Loans
made by such Lender is reduced to a level below that which such Lender or such
controlling Person could have achieved but for the occurrence of any such
circumstance, then, in any such case upon notice from time to time by such
Lender to the Borrower, the Borrower shall immediately pay directly to such
Lender additional amounts sufficient to compensate such Lender or such
controlling Person for such reduction in rate of return. A statement of such
Lender as to any such additional amount or amounts (including calculations
thereof in reasonable detail) shall, in the absence of manifest error, be
conclusive
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and binding on the Borrower. In determining such amount, such Lender may use any
method of averaging and attribution that it (in its sole and absolute
discretion) shall deem applicable.
SECTION 4.6. Taxes. (a) All payments by the Borrower of principal of,
and interest on, the Loans and all other amounts payable hereunder (including
Reimbursement Obligations and fees)shall be made free and clear of and without
deduction for any present or future income, excise, stamp or franchise taxes and
other taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing authority, but excluding (i) any future income,
excise, stamp or franchise taxes and other similar taxes, fees, duties,
withholding or other charges imposed on either of the Agents as a result of a
present or former connection between the applicable lending office (or office
through which it performs any of its actions as Agent) of such Agent, and any
future income, excise, stamp or franchise taxes and other similar taxes, fees,
duties, withholding or other charges imposed on any Lender as a result of a
present or former connection between the applicable lending office of a Lender,
in each case and the jurisdiction of the governmental authority imposing such
tax or any political subdivision or taxing authority thereof or therein (other
than any such connection arising solely from such Agent or such Lender having
executed, delivered or performed its obligations or received a payment under, or
taken any action to enforce, this Agreement and any Note) or (ii) any future
income, excise, stamp or franchise taxes and other similar taxes, fees, duties,
withholding or other charges to the extent that they are in effect and would
apply as of the date any Person becomes a Lender or Assignee Lender, or as of
the date that any Lender changes its applicable lending office, to the extent
such taxes become applicable as a result of such change (other than a change in
an applicable lending office made pursuant to Section 4.10 below) (such
non-excluded items being called "Taxes"). In the event that any withholding or
deduction from any payment to be made by the Borrower hereunder is required in
respect of any Taxes pursuant to any applicable law, rule or regulation, then
the Borrower will
(i) pay directly to the relevant taxing authority the full
amount required to be so withheld or deducted;
(ii) promptly forward to the Administrative Agent an official
receipt or other documentation reasonably satisfactory to the
Administrative Agent evidencing such payment to such authority; and
(iii) pay to the Administrative Agent for the account of the
Lenders such additional amount or amounts as is necessary to ensure
that the net amount actually received by each Lender will equal the
full amount such Lender would have received had no such withholding or
deduction been required, provided, however, that the Borrower shall not
be required to increase any such amounts payable to any Lender that is
not organized under the laws of the United States or a state thereof if
such Lender fails to comply with the requirements of clause (b) of
Section 4.6.
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Moreover, if any Taxes are directly asserted against either of the Agents or any
Lender with respect to any payment received by such Agents or such Lender
hereunder, such Agents or such Lender may pay such Taxes and the Borrower will
promptly pay to such Person such additional amount (including any penalties,
interest or expenses) as is necessary in order that the net amount received by
such Person (including any Taxes on such additional amount) shall equal the
amount of such Taxes paid by such Person; provided, however, that the Borrower
shall not be obligated to make payment to the Lenders or the Agents (as the case
may be) pursuant to this sentence in respect of interest attributable to any
Taxes, if written demand therefor has not been made by such Lenders or the
Agents within 60 days from the date on which such Lenders or the Agents knew of
the imposition of Taxes by the relevant taxing authority or for any additional
imposition which may arise from the failure of the Lenders or the Agents to
apply payments in accordance with the tax law after the Borrower has made the
payments required hereunder. After the Lenders or the Agents (as the case may
be) learn of the imposition of Taxes, such Lenders and the Agents will act in
good faith to notify the Borrower of its obligations hereunder as soon as
reasonably possible.
If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Administrative Agent, for the account
of the respective Lenders, the required receipts or other required documentary
evidence, the Borrower shall indemnify the Lenders for any incremental Taxes,
interest or penalties that may become payable by any Lender as a result of any
such failure.
(b) Each Non-U.S. Lender shall, (i) on or prior to the date of the
execution and delivery of this Agreement, in the case of each Lender listed on
the signature pages hereof, or, in the case of an Assignee Lender, on or prior
to the date it becomes a Lender, execute and deliver to the Borrower and the
Administrative Agent, two or more (as the Borrower or the Agents may reasonably
request) United States Internal Revenue Service Forms 4224 or Forms 1001 or,
solely if such Lender is claiming exemption from United States withholding tax
under Section 871(h) or 881(c) of the Code with respect to payments of
"portfolio interest", United States Internal Revenue Service Forms W-8 and a
certificate signed by a duly authorized officer of such Lender representing that
such Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code, or such other forms or documents (or successor forms or documents),
appropriately completed, establishing that payments to such Lender are exempt
from withholding or deduction of Taxes; and (ii) deliver to the Borrower and the
Administrative Agent two further copies of any such form or documents on or
before the date that any such form or document expires or becomes obsolete and
after the occurrence of any event requiring a change in the most recent such
form or document previously delivered by it to the Borrower.
(c) If the Borrower determines in good faith that a reasonable basis
exists for contesting the imposition of a Tax with respect to a Lender or either
of the Agents, the relevant Lender or Agent, as the case may be, shall cooperate
(consistent with its internal policy and
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legal and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its sole discretion) with the Borrower
in challenging such Tax at the Borrower's expense if requested by the Borrower.
(d) If a Lender or an Agent shall receive a refund (including any
offset or credits from a taxing authority (as a result of any error in the
imposition of Taxes by such taxing authority) of any Taxes paid by the Borrower
pursuant to subsection 4.6(a) above), such Lender or the Agent (as the case may
be) shall promptly pay the Borrower the amount so received, with interest from
the taxing authority with respect to such refund.
(e) Each Lender and each Agent agrees, to the extent reasonable and
without material cost to it, to cooperate (consistent with its internal policy
and legal and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its sole discretion) with the Borrower
to minimize any amounts payable by the Borrower under this Section 4.6.
SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly
provided, all payments by or on behalf of the Borrower pursuant to this
Agreement, the Notes or any other Loan Document shall be made by the Borrower to
the Administrative Agent for the pro rata account of the Lenders, Agents or
Arrangers, as applicable, entitled to receive such payment. All such payments
required to be made to the Administrative Agent shall be made, without setoff,
deduction or counterclaim, not later than 1:00 p.m., New York time, on the date
due, in same day or immediately available funds, to such account as the
Administrative Agent shall specify from time to time by notice to the Borrower.
Funds received after that time shall be deemed to have been received by the
Administrative Agent on the next succeeding Business Day. The Administrative
Agent shall promptly remit in same day funds to each Lender, Agent or Arranger,
as the case may be, its share, if any, of such payments received by the
Administrative Agent for the account of such Lender, Agent or Arranger, as the
case may be. All interest and fees shall be computed on the basis of the actual
number of days (including the first day but excluding the last day) occurring
during the period for which such interest or fee is payable over a year
comprised of 360 days (or, in the case of interest on a Base Rate Loan, 365 days
or, if appropriate, 366 days). Whenever any payment to be made shall otherwise
be due on a day which is not a Business Day, such payment shall (except as
otherwise required by clause (i) of the definition of the term "Interest
Period") be made on the next succeeding Business Day and such extension of time
shall be included in computing interest and fees, if any, in connection with
such payment.
SECTION 4.8. Sharing of Payments. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any Loan or Reimbursement Obligations (other
than pursuant to the terms of Sections 4.3, 4.4 and 4.5) in excess of its pro
rata share of payments then or therewith obtained by all Lenders entitled
thereto, such Lender shall purchase from the other Lenders such participation in
Credit
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Extensions made by them as shall be necessary to cause such purchasing Lender to
share the excess payment or other recovery ratably with each of them; provided,
however, that if all or any portion of the excess payment or other recovery is
thereafter recovered from such purchasing Lender, the purchase shall be
rescinded and each Lender which has sold a participation to the purchasing
Lender shall repay to the purchasing Lender the purchase price to the ratable
extent of such recovery together with an amount equal to such selling Lender's
ratable share (according to the proportion of (i) the amount of such selling
Lender's required repayment to the purchasing Lender in respect of such
recovery, to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section may, to
the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to Section 4.9) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower in the amount of such
participation. If under any applicable bankruptcy, insolvency or other similar
law, any Lender receives a secured claim in lieu of a setoff to which this
Section applies, such Lender shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of the Lenders entitled under this Section to share in the benefits of any
recovery on such secured claim.
SECTION 4.9. Setoff. Each Lender shall, upon the occurrence of any
Event of Default described in clauses (b) through (d) of Section 8.1.9 with
respect to any Obligor (other than immaterial Subsidiaries) or, with the consent
of the Required Lenders, upon the occurrence of any other Event of Default, to
the fullest extent permitted by law, have the right to appropriate and apply to
the payment of the Obligations then due to it, and (as security for such
Obligations) the Borrower hereby grants to each Lender a continuing security
interest in, any and all balances, credits, deposits, accounts or moneys of the
Borrower then or thereafter maintained with or otherwise held by such Lender;
provided, however, that any such appropriation and application shall be subject
to the provisions of Section 4.8. Each Lender agrees promptly to notify the
Borrower and the Administrative Agent after any such setoff and application made
by such Lender; provided, however, that the failure to give such notice shall
not affect the validity of such setoff and application. The rights of each
Lender under this Section are in addition to other rights and remedies
(including other rights of setoff under applicable law or otherwise) which such
Lender may have.
SECTION 4.10. Mitigation. Each Lender agrees that if it makes any
demand for payment under Sections 4.3, 4.4, 4.5, or 4.6, or if any adoption or
change of the type described in Section 4.1 shall occur with respect to it, it
will use reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions and so long as such efforts would not be disadvantageous
to it, as determined in its sole discretion) to designate a different lending
office if the making of such a designation would reduce or obviate the need for
the Borrower to make payments under Sections 4.3, 4.4, 4.5, or 4.6, or would
eliminate or reduce the effect of any adoption or change described in Section
4.1.
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SECTION 4.11. Replacement of Lenders. Each Lender hereby severally
agrees as set forth in this Section. If any Lender (a "Subject Lender") makes
demand upon the Borrower for (or if the Borrower is otherwise required to pay)
amounts pursuant to Section 4.2, 4.3, 4.5 or 4.6, or gives notice pursuant to
Section 4.1 requiring a conversion of such Subject Lender's LIBO Rate Loans to
Base Rate Loans or suspending such Lender's obligation to make Loans as, or to
convert Loans into, LIBO Rate Loans, the Borrower may, within 90 days of receipt
by the Borrower of such demand or notice (or the occurrence of such other event
causing the Borrower to be required to pay such compensation), as the case may
be, give notice (a "Replacement Notice") in writing to the Agents and such
Subject Lender of its intention to replace such Subject Lender with a financial
institution (a "Replacement Lender") designated in such Replacement Notice. If
the Agents shall, in the exercise of their reasonable discretion and within 30
days of their receipt of such Replacement Notice, notify the Borrower and such
Subject Lender in writing that the designated financial institution is
satisfactory to the Agents (such consent not being required where the
Replacement Lender is already a Lender), then such Subject Lender shall, so long
as no Default or Event of Default shall have occurred and be continuing (and
subject to the payment of any amounts due pursuant to Section 4.4), assign, in
accordance with Section 10.11.1, all of its Commitments, Loans, Notes and other
rights and obligations under this Agreement and all other Loan Documents
(including, without limitation, Reimbursement Obligations) to such designated
financial institution; provided, however, that (i) such assignment shall be
without recourse, representation or warranty and shall be on terms and
conditions reasonably satisfactory to such Subject Lender and such designated
financial institution and (ii) the purchase price paid by such designated
financial institution shall be in the amount of such Subject Lender's Loans and
its applicable Percentage of outstanding Reimbursement Obligations, together
with all accrued and unpaid interest and fees in respect thereof, plus all other
amounts (including the amounts demanded and unreimbursed under Sections 4.2,
4.3, 4.5 and 4.6), owing to such Subject Lender hereunder. Upon the effective
date of an assignment described above, the Borrower shall issue a replacement
Note or Notes, as the case may be, to such designated financial institution or
Replacement Lender, as applicable, and such institution shall become a "Lender"
for all purposes under this Agreement and the other Loan Documents.
ARTICLE V
CONDITIONS TO RESTATEMENT
EFFECTIVENESS AND CREDIT EXTENSIONS
SECTION 5.1. Effectiveness. This Agreement shall become effective upon
the satisfaction of each of the conditions precedent set forth in this Section
5.1.
SECTION 5.1.1. Execution of Counterparts. The Agents shall have
received counterparts of this Agreement, duly executed and delivered on behalf
of each of the
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Borrower, the Swing Line Lender, the Required Lenders and Lenders holding at
least 51% of the Revolving Loan Commitments.
SECTION 5.1.2. Delivery of Swing Line Note. The Agents shall have
received, for the account of the Swing Line Lender, a Swing Line Note, dated on
or prior to the date of delivery thereof, completed in accordance with Section
2.7 and duly executed and delivered by the Borrower.
SECTION 5.1.3. Affirmation and Consent. The Agents shall have received
an affirmation and consent in form set forth as Exhibit N hereto executed and
delivered by an Authorized Officer of Holdco and each U.S. Subsidiary of the
Borrower.
SECTION 5.1.4. Borrowing Base Certificate. The Agents shall have
received, with counterparts for each Lender, a Borrowing Base Certificate
calculated as of December 31, 1998, duly executed (and with all schedules
thereto completed and delivered by an Authorized Officer of the Borrower.
SECTION 5.1.5. Payment of Fees and Expenses. The Administrative Agent
shall have received, for the account of each Lender which shall have delivered
to the Agents a duly executed counterpart of this Agreement by March 17, 1999,
an amendment fee in the amount of .125% of such Lender's Loans and Commitments.
SECTION 5.2. All Credit Extensions. The obligation of each Lender and
the Issuer to make any Credit Extension (including the initial Credit Extension)
shall be subject to the satisfaction of each of the conditions precedent set
forth in this Section 5.2.
SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both before
and after giving effect to any Credit Extension (and the application of the
proceeds thereof) the following statements shall be true and correct:
(a) the representations and warranties set forth in Article VI
and in each other Loan Document shall, in each case, be true and
correct in all material respects with the same effect as if then made
(unless stated to relate solely to an earlier date, in which case such
representations and warranties shall be true and correct in all
material respects as of such earlier date);
(b) in the case of any Credit Extension other than an
Additional Term-B Loan, the sum of (i) the aggregate outstanding
principal amount of all Revolving Loans and Swing Line Loans, plus (ii)
the aggregate amount of all Letter of Credit Outstandings, does not
exceed the lesser of (x) the Revolving Loan Commitment Amount then in
effect and (y) the then applicable Borrowing Base Amount; and
(c) no Default shall have then occurred and be continuing.
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SECTION 5.2.2. Credit Extension Request. The Agents shall have received
a Borrowing Request, if Loans are being requested, or an Issuance Request, if a
Letter of Credit is being issued or extended. Each of the delivery of a
Borrowing Request or Issuance Request and the acceptance by the Borrower of such
Credit Extension shall constitute a representation and warranty by the Borrower
that on the date of such Credit Extension (both immediately before and after
giving effect to such Credit Extension and the application of the proceeds
thereof) the statements made in Section 5.2.1 are true and correct.
SECTION 5.3. Conditions Precedent to Additional Term-B Loans. The
obligation of each Lender with a Percentage of greater than zero with respect to
the Additional Term-B Loan Commitment to make an Additional Term-B Loan on the
Delayed Draw Date shall be subject to the satisfaction of each of the conditions
precedent set forth in Section 5.2 and this Section 5.3.
SECTION 5.3.1. Resolutions, etc. The Agents shall have received from
each Obligor a certificate, dated the Delayed Draw Date, of its Secretary or
Assistant Secretary as to (i) resolutions of its Board of Directors then in full
force and effect authorizing the execution, delivery and performance of each
Loan Document to be executed by it in connection with the Borrowing of
Additional Term-B Loans on the Delayed Draw Date, (ii) the incumbency and
signatures of those of its officers authorized to act with respect to each Loan
Document executed by it in connection with the Borrowing of Additional Term-B
Loans on the Delayed Draw Date and (iii) the full force and validity of each
Organic Document of such Person, upon which certificates each Agent and each
Lender may conclusively rely until it shall have received a further certificate
of the Secretary or Assistant Secretary of such Obligor canceling or amending
such prior certificate.
SECTION 5.3.2. Delivery of Notes. The Agents shall have received, for
the account of each Lender with a Percentage of greater than zero with respect
to the Additional Term-B Loan Commitment, a Term-B Note, dated on or prior to
the Delayed Draw Date, completed in accordance with Section 2.7 and duly
executed and delivered by the Borrower.
SECTION 5.3.3. Consent; Additional Term-B Loan Commitment Addendum. The
Agents shall have received evidence reasonably satisfactory to them of the
consent of the Lenders holding 51% of the outstanding Term-A Loans and the
Revolving Loan Commitments to the Borrowing of Additional Term-B Loans on the
Delayed Draw Date, together with a duly executed Additional Term-B Loan
Commitment Addendum, dated the Delayed Draw Date, setting forth, among other
things, the Term-B Loan Commitment Amount, the Percentage of each Lender and/or
other financial institutions party to such Additional Term-B Loan Commitment
Addendum in respect of such Term-B Loan Commitment Amount and the Applicable
Margin, amortization, Stated Maturity Date and Term-B Loan Commitment
Termination Date of such Additional Term-B Loan Commitments, all in form and
substance reasonably satisfactory to the Agents.
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SECTION 5.3.4. Opinion of Counsel. The Agents shall have received a
legal opinion, dated the Delayed Draw Date and addressed to the Agents and all
Lenders from Davis Polk & Wardwell, special New York counsel to each of the
Obligors, in form and substance reasonably satisfactory to the Agents.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders, the Issuer and the Agents to enter into
this Agreement and to make Credit Extensions hereunder, the Borrower represents
and warrants unto the Agents and each Lender as set forth in this Article VI.
SECTION 6.1. Organization, etc. The Borrower and each of the Borrower's
Subsidiaries (a) is a corporation validly organized and existing and in good
standing to the extent required under the laws of the jurisdiction of its
incorporation, is duly qualified to do business and is in good standing as a
foreign corporation to the extent required under the laws of each jurisdiction
where the nature of its business requires such qualification, except to the
extent that the failure to qualify would not reasonably be expected to result in
a Material Adverse Effect, and (b) has full power and authority and holds all
requisite governmental licenses, permits and other approvals to (i) enter into
and perform its Obligations in connection with the Transaction and under this
Agreement, the Notes and each other Loan Document to which it is a party and
(ii) own and hold under lease its property and to conduct its business
substantially as currently conducted by it except, in the case of this clause
(b)(ii), where the failure could not reasonably be expected to result in a
Material Adverse Effect.
SECTION 6.2. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by the Borrower of this Agreement, the Notes and each
other Loan Document executed or to be executed by it, and the execution,
delivery and performance by each other Obligor of each Loan Document executed or
to be executed by it and the Borrower's and, where applicable, each such other
Obligor's participation in the consummation of the Transaction are within the
Borrower's and each such Obligor's corporate powers, have been duly authorized
by all necessary corporate action, and do not
(a) contravene the Borrower's or any such Obligor's Organic
Documents;
(b) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting the Borrower or any such Obligor, where such contravention,
individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect; or
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(c) result in, or require the creation or imposition of, any
Lien on any of the Borrower's or any other Obligor's properties, except
pursuant to the terms of a Loan Document.
SECTION 6.3. Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person, is required for the due execution,
delivery or performance by the Borrower or any other Obligor of this Agreement,
the Notes or any other Loan Document to which it is a party, or for the
Borrower's and each such other Obligor's participation in the consummation of
the Transaction, except as have been duly obtained or made and are in full force
and effect or those which the failure to obtain or make could not reasonably be
expected to have a Material Adverse Effect. None of the Borrower nor any other
Obligor, nor any of the Borrower's Subsidiaries is an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, or a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
SECTION 6.4. Validity, etc. This Agreement constitutes, and the Notes
and each other Loan Document executed by the Borrower will, on the due execution
and delivery thereof, constitute, the legal, valid and binding obligations of
the Borrower enforceable in accordance with their respective terms; and each
Loan Document executed pursuant hereto by each other Obligor will, on the due
execution and delivery thereof by such Obligor, be the legal, valid and binding
obligation of such Obligor enforceable in accordance with its terms, in each
case with respect to this Section 6.4 subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
SECTION 6.5. Financial Information. The Borrower has delivered to the
Agents and each Lender copies of the following financial statements:
(a) unaudited consolidated profit and loss and cash flow
statements of Rust for the fiscal years ended December 31, 1994 and
December 31, 1995; and
(b) an audited consolidated balance sheet of Rust as of
June 30, 1996.
Each of the financial statements described above has been prepared in accordance
with GAAP consistently applied (in the case of clause (a)) and, in the case of
clause (b), on a basis substantially consistent with the basis used to prepare
the financial statements referred to in clause (a), and present fairly the
consolidated financial condition of the corporations covered thereby as at the
date thereof (in the case of clause (b)) or the results of their operations for
the
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periods then ended (in the case of clause (a)), subject, in the case of clause
(b), to normal year end audit adjustments.
SECTION 6.6. No Material Adverse Change. Since December 31, 1995, there
has been no material adverse change in the financial condition, operations,
assets, business or properties of the Borrower and its Subsidiaries, taken as a
whole (including, for purposes of this Section 6.6, for all periods prior to the
consummation of the Acquisition and the Merger, Rust and its Subsidiaries).
SECTION 6.7. Litigation, Labor Controversies, etc. There is no pending
or, to the knowledge of the Borrower, threatened litigation, action, proceeding,
labor controversy arbitration or governmental investigation affecting any
Obligor, or any of their respective properties, businesses, assets or revenues,
which could reasonably be expected to result in a Material Adverse Effect except
as disclosed in Item 6.7 ("Litigation") of the Disclosure Schedule. No material
adverse development has occurred in any litigation, action, labor controversy,
arbitration or governmental investigation or other proceeding disclosed in Item
6.7 ("Litigation") of the Disclosure Schedule.
SECTION 6.8. Subsidiaries. The Borrower has only those Subsidiaries (i)
which are identified in Item 6.8 ("Existing Subsidiaries") of the Disclosure
Schedule, or (ii) which are permitted to have been acquired in accordance with
Section 7.2.5 or 7.2.8.
SECTION 6.9. Ownership of Properties. Except to the extent that the
failure to do so could not reasonably be expected to have a Material Adverse
Effect, the Borrower and each of its Subsidiaries owns good title to all of its
properties and assets (other than insignificant properties and assets), real and
personal, tangible and intangible, of any nature whatsoever (including patents,
trademarks, trade names, service marks and copyrights), free and clear of all
Liens or material claims (including material infringement claims with respect to
patents, trademarks, copyrights and the like), except as permitted pursuant to
Section 7.2.3.
SECTION 6.10. Taxes. Each of Rust, the Borrower and each of their
respective Subsidiaries has filed all Federal, State and other material tax
returns required by law to have been filed by it and has paid all taxes and
governmental charges thereby shown to be owing, except any such taxes or charges
which are being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books.
SECTION 6.11. Pension and Welfare Plans. During the
twelve-consecutive-month period prior to the date of the execution and delivery
of this Agreement, no Pension Plan has been terminated that has resulted in a
liability to the Borrower of more than $500,000, and no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under section 302(f) of ERISA in excess of $500,000. No condition exists or
event or
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transaction has occurred with respect to any Pension Plan which could reasonably
be expected to result in the incurrence by the Borrower of any material
liability, fine or penalty other than such condition, event or transaction which
would not reasonably be expected to have a Material Adverse Effect. Except as
disclosed in Item 6.11 ("Employee Benefit Plans") of the Disclosure Schedule or
otherwise approved by the Agents (such approval not to be unreasonably withheld
or delayed), since the date of the last financial statement the Borrower has not
increased any contingent liability with respect to any post-retirement benefit
under a Welfare Plan, other than liability for continuation coverage described
in Part 6 of Subtitle B of Title I of ERISA except as would not have Material
Adverse Effect.
SECTION 6.12. Environmental Warranties. Except as set forth in
Item 6.12 ("Environmental Matters") of the Disclosure Schedule or as,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect:
(a) all facilities and property (including underlying
groundwater) owned or leased by the Borrower or any of its Subsidiaries
have been, and continue to be, owned or leased by the Borrower and its
Subsidiaries in compliance with all Environmental Laws;
(b) there have been no past, and there are no pending or
threatened
(i) written claims, complaints, notices or requests
for information received by the Borrower or any of its
Subsidiaries with respect to any alleged violation of any
Environmental Law, or
(ii) written complaints, notices or inquiries to the
Borrower or any of its Subsidiaries regarding potential
liability under any Environmental Law;
(c) to the best knowledge of the Borrower, there have been no
Releases of Hazardous Materials at, on or under any property now or
previously owned or leased by the Borrower or any of its Subsidiaries;
(d) the Borrower and its Subsidiaries have been issued and are
in compliance with all permits, certificates, approvals, licenses and
other authorizations relating to environmental matters and necessary or
desirable for their businesses;
(e) no property now or previously owned or leased by the
Borrower or any of its Subsidiaries is listed or, to the knowledge of
the Borrower or any of its Subsidiaries, proposed for listing (with
respect to owned property only) on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any similar state list of
sites requiring investigation or clean-up;
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(f) to the best knowledge of the Borrower, there are no
underground storage tanks, active or abandoned, including petroleum
storage tanks, on or under any property now or previously owned or
leased by the Borrower or any of its Subsidiaries;
(g) the Borrower and its Subsidiaries have not directly
transported or directly arranged for the transportation of any
Hazardous Material to any location (i) which is listed or to the
knowledge of the Borrower or any of its Subsidiaries, proposed for
listing on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any similar state list, or (ii) which is the subject of
federal, state or local enforcement actions or other investigations;
(h) to the best knowledge of the Borrower, there are no
polychlorinated biphenyls or friable asbestos present in a manner or
condition at any property now or previously owned or leased by the
Borrower or any Subsidiary of the Borrower; and
(i) to the best knowledge of the Borrower, no conditions exist
at, on or under any property now or previously owned or leased by the
Borrower or any of its Subsidiaries which, with the passage of time, or
the giving of notice or both, would give rise to liability under any
Environmental Law.
SECTION 6.13. Regulations U and X. None of Holdco nor the Borrower nor
Rust is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock, and no proceeds of any Credit Extensions
will be used to acquire any equity security of a class which is registered
pursuant to Section 12 of the Securities Exchange Act of 1934 or any "margin
stock". Terms for which meanings are provided in F.R.S. Board Regulation U or X
or any regulations substituted therefor, as from time to time in effect, are
used in this Section with such meanings.
SECTION 6.14. Accuracy of Information. All material factual information
concerning the financial condition, operations or prospects of Holdco, the
Borrower, Rust and their respective Subsidiaries heretofore or contemporaneously
furnished by or on behalf of Holdco or the Borrower in writing to the Agents,
the Issuer, the Arrangers or any Lender for purposes of or in connection with
this Agreement or any transaction contemplated hereby or with respect to the
Transaction is, and all other such factual information hereafter furnished by or
on behalf of Holdco and the Borrower, or any of their respective Subsidiaries to
the Agents, the Issuer, the Arrangers or any Lender will be, taken as a whole,
true and accurate in every material respect on the date as of which such
information is dated or certified and such information is not, or shall not be,
taken as a whole, as the case may be, incomplete by omitting to state any
material fact necessary to make such information not misleading.
Any term or provision of this section to the contrary notwithstanding,
insofar as any of the factual information described above includes assumptions,
estimates, projections or
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opinions, no representation or warranty is made herein with respect thereto;
provided, however, that to the extent any such assumptions, estimates,
projections or opinions are based on factual matters, each of Holdco and the
Borrower has reviewed such factual matters and nothing has come to its attention
in the context of such review which would lead it to believe that such factual
matters were not or are not true and correct in all material respects or that
such factual matters omit to state any material fact necessary to make such
assumptions, estimates, projections or opinions not misleading in any material
respect.
SECTION 6.15. Solvency. The Transaction (including the incurrence of
the initial Credit Extension hereunder, the issuance and assumption of the
Seller Note, the incurrence by the Borrower of the Indebtedness represented by
the Notes and the Seller Note, the execution and delivery by the Subsidiary
Guarantors of the Subsidiary Guaranty and the application of the proceeds of the
Credit Extensions), will not involve or result in any fraudulent transfer or
fraudulent conveyance under the provisions of Section 548 of the Bankruptcy Code
(11 U.S.C. ss.101 et seq., as from time to time hereafter amended, and any
successor or similar statute) or any applicable state law respecting fraudulent
transfers or fraudulent conveyances. On the Closing Date, after giving effect to
the Transaction, each of the Borrower, Holdco and the Subsidiary Guarantors is
Solvent.
SECTION 6.16. Senior Notes. (a) The Senior Notes have been issued and
sold to the initial purchasers thereof on or prior to the Second Amendment
Effective Date in accordance with and pursuant to the Senior Note Indenture and
in compliance with all laws, including the Securities Act of 1933, as amended,
and all other applicable federal and state securities laws. The issuance of the
Senior Notes and the execution of the Senior Note Indenture have been duly
authorized by all necessary corporate action on the part of the Borrower and
each of its Affiliates party thereto and will not require any consent or
approval of any governmental agency or authority that has not been obtained on
or prior to the Second Amendment Date or those which the failure to obtain or
make could not reasonably be expected to have a Material Adverse Effect. The
issuance of the Senior Notes and the execution of the Senior Note Indenture do
not (i) contravene the Borrower's or any such Affiliate's Organic Documents,
(ii) contravene any contractual restriction, law or governmental regulation or
court decree or order binding on or affecting the Borrower or any such
Affiliate, where such contravention, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect or (iii) result in, or
require the creation or imposition of, any Lien on any of the Borrower's or any
such Affiliate's properties.
(b) Each of the Senior Note Indenture and the Senior Notes constitutes
the legal, valid and binding obligation of the Borrower enforceable against the
Borrower in accordance with its terms. The Obligations hereunder and the other
Loan Documents constitute "Permitted Indebtedness" as defined in the Senior Note
Indenture. All Obligations, including those to pay principal of and interest
(including post-petition interest) on the Loans and Reimbursement
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Obligations, and fees and expenses in connection therewith, constitute "Senior
Indebtedness", as defined in the Senior Note Indenture.
SECTION 6.17. Year 2000. Any reprogramming required to permit the
proper functioning, in and following the year 2000, of (i) the Borrower's
computer systems and equipment containing embedded microchips (including systems
and equipment supplied by others or with which Borrower's systems interface) and
the testing of all such systems and equipment, as so reprogrammed, will be
completed by September 30, 1999, except where the failure to do so could not be
reasonably expected to have a Material Adverse Effect. The cost to the Borrower
of such reprogramming and testing and of the reasonably foreseeable consequences
of year 2000 to the Borrower (including, without limitation, reprogramming
errors and the failure of others' systems or equipment) will not result in a
Default or a Material Adverse Effect. Except for such of the reprogramming
referred to in the preceding sentence as may be necessary, the computer and
management information systems of the Borrower and its Subsidiaries are and,
with ordinary course upgrading and maintenance, will continue for the term of
this Agreement to be, sufficient to permit the Borrower to conduct its business
without Material Adverse Effect.
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants. The Borrower agrees with the
Agents, the Issuer and each Lender that, until all Commitments have terminated
and all Obligations have been paid and performed in full, the Borrower will
perform the obligations set forth in this Section 7.1.
SECTION 7.1.1. Financial Information, Reports, Notices, etc. The
Borrower will furnish, or will cause to be furnished, to each Lender, the Issuer
and each Agent copies of the following financial statements, reports, notices
and information:
(a) as soon as available and in any event within 60 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year
of the Borrower (or, if the Borrower is required to file such
information on a Form 10-Q with the Securities and Exchange Commission,
promptly following such filing), a consolidated balance sheet of the
Borrower and its Subsidiaries as of the end of such Fiscal Quarter,
together with the related consolidated statements of profit and loss
and cash flow for such Fiscal Quarter and for the period commencing at
the end of the previous Fiscal Year and ending with the end of such
Fiscal Quarter (it being understood that the foregoing requirement may
be satisfied by delivery of the Borrower's report to the Securities and
Exchange
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Commission on Form 10-Q), certified by the chief financial Authorized
Officer of the Borrower;
(b) as soon as available and in any event within 90 days after
the end of each Fiscal Year of the Borrower (or, if the Borrower is
required to file such information on a Form 10-K with the Securities
and Exchange Commission, promptly following such filing), a copy of the
annual audit report for such Fiscal Year for the Borrower and its
Subsidiaries, including therein a consolidated balance sheet for the
Borrower and its Subsidiaries as of the end of such Fiscal Year,
together with the related consolidated statements of profit and loss
and cash flow of the Borrower and its Subsidiaries for such Fiscal Year
(it being understood that the foregoing requirement may be satisfied by
delivery of the Borrower's report to the Securities and Exchange
Commission on Form 10-K, if any), in each case certified (without any
Impermissible Qualification) by Arthur Anderson LLP or another "Big
Six" firm of independent public accountants, together with a
certificate from such accountants to the effect that, in making the
examination necessary for the signing of such annual report by such
accountants, they have not become aware of any Default that has
occurred and is continuing, or, if they have become aware of such
Default, describing such Default and the steps, if any, being taken to
cure it;
(c) together with the delivery of the financial information
required pursuant to clauses (a) and (b), a Compliance Certificate, in
substantially the form of Exhibit E, executed by the chief financial
Authorized Officer of the Borrower, showing (in reasonable detail and
with appropriate calculations and computations in all respects
satisfactory to the Agents) compliance with the financial covenants set
forth in Section 7.2.4;
(d) as soon as possible and in any event within five Business
Days after obtaining knowledge of the occurrence of each Default, if
such Default is then continuing, a statement of the chief financial
Authorized Officer of the Borrower setting forth details of such
Default and the action which the Borrower has taken and proposes to
take with respect thereto;
(e) as soon as possible and in any event within five Business
Days after (x) the occurrence of any material adverse development with
respect to any litigation, action, proceeding, or labor controversy
described in Section 6.7 and the action which the Borrower has taken
and proposes to take with respect thereto or (y) the commencement of
any labor controversy, litigation, action, proceeding of the type
described in Section 6.7, notice thereof and of the action which the
Borrower has taken and proposes to take with respect thereto;
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(f) promptly after the sending or filing thereof, copies of
all reports and registration statements (other than exhibits thereto
and any registration statement on Form S-8 or its equivalent) which the
Borrower or any of its Subsidiaries files with the Securities and
Exchange Commission or any national securities exchange;
(g) as soon as practicable after the chief financial officer
or the chief executive officer of the Borrower or a member of the
Borrower's Controlled Group becomes aware of (i) formal steps in
writing to terminate any Pension Plan or (ii) the occurrence of any
event with respect to a Pension Plan which, in the case of (i) or (ii),
could reasonably be expected to result in a contribution to such
Pension Plan by (or a liability to) the Borrower or a member of the
Borrower's Controlled Group in excess of $5,000,000, (iii) the failure
to make a required contribution to any Pension Plan if such failure is
sufficient to give rise to a Lien under section 302(f) of ERISA, (iv)
the taking of any action with respect to a Pension Plan which could
reasonably be expected to result in the requirement that the Borrower
furnish a bond to the PBGC or such Pension Plan or (v) any material
increase in the contingent liability of the Borrower with respect to
any post-retirement Welfare Plan benefit, notice thereof and copies of
all documentation relating thereto;
(h) promptly when available and in any event within 45 days
following the last day of each Fiscal Year of the Borrower, financial
projections for the current Fiscal Year, prepared in reasonable detail
by the chief accounting, financial or executive Authorized Officer of
the Borrower;
(i) within 30 days after the end of each calendar month, a
Borrowing Base Certificate that is calculated as of the last day of
such calendar month; and
(j) such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any of its
Subsidiaries as any Lender or the Issuer through the Administrative
Agent may from time to time reasonably request.
SECTION 7.1.2. Compliance with Laws, etc. The Borrower will, and will
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):
(a) the maintenance and preservation of its corporate
existence and qualification as a foreign corporation, except where the
failure to so qualify could not reasonably be expected to have a
Material Adverse Effect; and
(b) the payment, before the same become delinquent, of all
material taxes, assessments and governmental charges imposed upon it or
upon its property except to
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the extent being contested in good faith by appropriate proceedings and
for which adequate reserves in accordance with GAAP shall have been set
aside on its books.
SECTION 7.1.3. Maintenance of Properties. Except to the extent that the
failure to do so could not reasonably be expected to have a Material Adverse
Effect, the Borrower will, and will cause each of its Subsidiaries to, maintain,
preserve, protect and keep its properties (other than insignificant properties)
in good repair, working order and condition (ordinary wear and tear excepted),
and make necessary and proper repairs, renewals and replacements so that its
business carried on in connection therewith may be properly conducted at all
times unless the Borrower determines in good faith that the continued
maintenance of any of its properties is no longer economically desirable.
SECTION 7.1.4. Insurance. The Borrower will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained with responsible insurance
companies insurance with respect to its properties and business against such
casualties and contingencies and of such types and in such amounts as is
customary in the case of similar businesses and with such provisions and
endorsements as the Agents may reasonably request and will, upon request of the
Agents, furnish to the Agents and each Lender a certificate of an Authorized
Officer of the Borrower setting forth the nature and extent of all insurance
maintained by the Borrower and its Subsidiaries in accordance with this Section.
SECTION 7.1.5. Books and Records. The Borrower will, and will cause
each of its Subsidiaries to, keep books and records which accurately reflect in
all material respects all of its business affairs and transactions and permit
the Agents, the Issuer and each Lender or any of their respective
representatives, at reasonable times and intervals, and upon reasonable notice,
to visit all of its offices, to discuss its financial matters with its officers
and, after notice to the Borrower and provision of an opportunity for the
Borrower to participate in such discussion, its independent public accountant
(and the Borrower hereby authorizes such independent public accountant to
discuss the Borrower's financial matters with the Issuer and each Lender or its
representatives whether or not any representative of the Borrower is present, so
long as the Borrower has been afforded a reasonable opportunity to be present)
and to examine, and photocopy extracts from, any of its books or other corporate
records. The cost and expense of each such visit shall be borne by the
applicable Agent or Lender, except that each Agent may make one such visit each
Fiscal Year and the cost and expense thereof shall be borne by the Borrower.
SECTION 7.1.6. Environmental Covenant. The Borrower will and will
cause each of its Subsidiaries to,
(a) use and operate all of its facilities and properties in
compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in
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compliance therewith, and handle all Hazardous Materials in compliance
with all applicable Environmental Laws, in each case except where the
failure to comply with the terms of this clause could not reasonably be
expected to have a Material Adverse Effect;
(b) promptly notify the Agents and provide copies of all
written claims, complaints, notices or inquiries relating to the
condition of its facilities and properties or compliance with
Environmental Laws which relate to environmental matters which would
have, or would reasonably be expected to have, a Material Adverse
Effect, and promptly cure and have dismissed with prejudice any
material actions and proceedings relating to compliance with
Environmental Laws, except to the extent being diligently contested in
good faith by appropriate proceedings and for which adequate reserves
in accordance with GAAP have been set aside on its books; and
(c) provide such information and certifications which the
Agents may reasonably request from time to time to evidence compliance
with this Section 7.1.6.
SECTION 7.1.7. Future Subsidiaries. Upon any Person becoming, after the
Closing Date, a Subsidiary of the Borrower, or upon the Borrower or any
Subsidiary acquiring additional Capital Stock of any existing Subsidiary, the
Borrower shall notify the Agents of such acquisition, and
(a) the Borrower shall promptly cause such Subsidiary to
execute and deliver to the Administrative Agent, with counterparts for
each Lender, a supplement to the Subsidiary Guaranty and a supplement
to the Subsidiary Security Agreement (and, if such Subsidiary owns any
real property, a Mortgage), together with acknowledgment copies of
Uniform Commercial Code financing statements (form UCC-1) executed and
delivered by the Subsidiary naming the Subsidiary as the debtor and the
Administrative Agent as the secured party, or other similar instruments
or documents, filed under the Uniform Commercial Code and any other
applicable recording statutes, in the case of real property, of all
jurisdictions as may be necessary or, in the opinion of the
Administrative Agent, desirable to perfect the security interest of the
Administrative Agent pursuant to the Subsidiary Security Agreement or a
Mortgage, as the case may be (other than the perfection of security
interests in motor vehicles owned as of the date such entity becomes a
Subsidiary); and
(b) the Borrower shall promptly deliver, or cause to be
delivered, to the Administrative Agent under a Pledge Agreement (or a
supplement thereto) certificates (if any) representing all of the
issued and outstanding shares of Capital Stock of such Subsidiary owned
by the Borrower or any Subsidiary of the Borrower, as the case may be,
along with undated stock powers for such certificates, executed in
blank, or, if any securities subject thereto are uncertificated
securities, confirmation and evidence
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satisfactory to the Agents that appropriate book entries have been made
in the relevant books or records of a financial intermediary or the
issuer of such securities, as the case may be, or other appropriate
steps shall have been taken under applicable law resulting in the
perfection of the security interest granted in favor of the
Administrative Agent pursuant to the terms of a Pledge Agreement;
together, in each case, with such opinions, in form and substance and from
counsel satisfactory to the Agents, as the Agents may reasonably require;
provided, however, that notwithstanding the foregoing, no Non-U.S. Subsidiary
shall be required to execute and deliver a Mortgage, a supplement to the
Subsidiary Guaranty or a supplement to the Security Agreement, nor will the
Borrower or any Subsidiary of the Borrower be required to deliver in pledge
pursuant to a Pledge Agreement in excess of 65% of the total combined voting
power of all classes of Capital Stock of a Non-U.S. Subsidiary entitled to vote
in the event that such pledge would result in a material increase in tax or
similar liabilities for the Borrower and its Subsidiaries, on a consolidated
basis.
SECTION 7.1.8. Future Leased Property and Future Acquisitions of Real
Property; Future Acquisition of Other Property. (a) Prior to entering into any
new lease of real property or renewing any existing lease of real property
following the Closing Date, the Borrower shall, and shall cause each of its U.S.
Subsidiaries to, use its (and their) best efforts (which shall not require the
expenditure of cash or the making of any material concessions under the relevant
lease) to deliver to the Administrative Agent a Waiver executed by the lessor of
any real property that is to be leased by the Borrower or such U.S. Subsidiary
for a term in excess of one year in any state which by statute grants such
lessor a "landlord's" (or similar) Lien which is superior to the Administrative
Agent's, to the extent the value of any personal property of the Borrower or its
U.S. Subsidiaries to be held at such leased property exceeds (or it is
anticipated that the value of such personal property will, at any point in time
during the term of such leasehold term, exceed) $5,000,000.
(b) In the event that the Borrower or any of its U.S.
Subsidiaries shall acquire any real property having a value as
determined in good faith by the Administrative Agent in excess of
$2,000,000 in the aggregate, the Borrower or the applicable U.S.
Subsidiary shall, promptly after such acquisition, execute a Mortgage
and provide the Administrative Agent with
(i) evidence of the completion (or satisfactory
arrangements for the completion) of all recordings and filings
of such Mortgage as may be necessary or, in the reasonable
opinion of the Administrative Agent, desirable effectively to
create a valid, perfected first priority Lien, subject to
Liens permitted by Section 7.2.3, against the properties
purported to be covered thereby;
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(ii) mortgagee's title insurance policies in favor of
the Agents and the Lenders in amounts and in form and
substance and issued by insurers, reasonably satisfactory to
the Agents, with respect to the property purported to be
covered by such Mortgage, insuring that title to such property
is marketable and that the interests created by the Mortgage
constitute valid first Liens thereon free and clear of all
defects and encumbrances other than as approved by the Agents,
and such policies shall also include a revolving credit
endorsement and such other endorsements as the Agents shall
request and shall be accompanied by evidence of the payment in
full of all premiums thereon; and
(iii) such other approvals, opinions, or documents
as the Agents may reasonably request.
(c) In accordance with the terms and provisions of the
Security Documents, provide the Agents with evidence of all recordings
and filings as may be necessary or, in the reasonable opinion of the
Administrative Agent, desirable to create a valid, perfected first
priority Lien, subject to the Liens permitted by Section 7.2.3, against
all property acquired after the Closing Date (including motor vehicles
but excluding leases of real property) and not otherwise subject to
Section 7.1.11.
SECTION 7.1.9. Use of Proceeds, etc. The Borrower shall
(a) apply the proceeds of the Loans for working capital and
general corporate purposes (including Investments permitted under
clause (i) of Section 7.2.5) of the Borrower and its Subsidiaries; and
(b) use Letters of Credit only for purposes of supporting
working capital and general corporate purposes of the Borrower and its
Subsidiaries (including, without limitation, insurance, workers'
compensation, performance and surety bonds and the purchase of
inventory and equipment).
SECTION 7.1.10. [Intentionally Omitted]
SECTION 7.1.11. Borrower Pledge Agreement. The Borrower covenants and
agrees that, in its capacity as a Pledged Share Issuer under (and as defined in)
the Holdco Pledge Agreement, it will cooperate in all reasonable respects
necessary to enable the Administrative Agent to exercise its rights and remedies
under the terms of the Holdco Pledge Agreement.
SECTION 7.1.12. Year 2000. The Borrower shall take all action necessary
to assure that its computer based systems are able to effectively process data
including dates on and after January 1, 2000, except where the failure to do so
could not reasonably be expected to have a Material Adverse Effect. At the
request of the Agents or any Lender, the Borrower shall
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provide the Agents or such Lender, as the case may be, with assurance reasonably
acceptable to the Agents or such Lender, as the case may be, of the Borrower's
year 2000 capability.
SECTION 7.2. Negative Covenants. The Borrower agrees with the Agents,
the Issuer and each Lender that, until all Commitments have terminated, all
Letters of Credit have terminated or expired and all Obligations have been paid
and performed in full, the Borrower will perform the obligations set forth in
this Section 7.2.
SECTION 7.2.1. Business Activities. The Borrower will not, and will not
permit any of its Subsidiaries to, engage in any business activity, except
business activities of the type in which the Borrower and its Subsidiaries are
engaged on the Restatement Effective Date, other industrial plant services and
construction services, and such other activities as may be incidental, similar
or related thereto.
SECTION 7.2.2. Indebtedness. The Borrower will not, and will not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist or
otherwise become or be liable in respect of any Indebtedness, other than,
without duplication, the following:
(a) Indebtedness in respect of the Credit Extensions and
other Obligations;
(b) Indebtedness incurred by the Borrower or any of its
Subsidiaries (i) owing to any Person providing financing for the
acquisition of any assets permitted to be acquired pursuant to Section
7.2.7 to finance its acquisition of such assets, (ii) in respect of
Capitalized Lease Liabilities (but only to the extent otherwise
permitted by Section 7.2.7) and (iii) from time to time for general
corporate purposes; provided, that the maximum aggregate amount of all
Indebtedness permitted under this clause (b) shall not at any time
after the Restatement Effective Date exceed $15,000,000;
(c) Hedging Obligations of the Borrower or any of its
Subsidiaries in respect of the Loans;
(d) intercompany Indebtedness of (x) any Subsidiary of the
Borrower owing to the Borrower or any of its Subsidiaries or (y) the
Borrower to any of its Subsidiaries, which Indebtedness
(i) shall be evidenced by one or more promissory
notes in form and substance satisfactory to the Agents which
(except in the case of any such notes held by a Non-U.S.
Subsidiary) have been duly executed and delivered to (and
endorsed to the order of) the Administrative Agent in pledge
pursuant to a Pledge Agreement; and
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(ii) shall not be forgiven or otherwise discharged
for any consideration other than payment (Dollar for Dollar)
in cash unless the Agents otherwise consent;
(e) Indebtedness evidenced by the Senior Notes in an
aggregate principal amount not to exceed $130,000,000;
(f) Indebtedness outstanding on the Restatement Effective Date
and identified in Schedule 7.2.2(f) ("Ongoing Indebtedness") hereto and
refinancings, refundings and replacements thereof; and
(g) unsecured Indebtedness of the Borrower or any of its
Subsidiaries in an aggregate principal amount which, together with the
Indebtedness permitted pursuant to clause (b) hereto, shall not exceed
$20,000,000 at any time outstanding;
provided, however, that no Indebtedness otherwise permitted by clause (b), (d)
(as such clause (d) relates to loans made by the Borrower to Subsidiaries which
are not party to the Subsidiary Guaranty) or (g) may be incurred if, after
giving effect to the incurrence thereof, any Default shall have occurred and be
continuing, and provided, further, however, that all such Indebtedness of the
type described in clause (d)(y) above that is owed to Subsidiaries which are not
party to the Subsidiary Guaranty, shall be subordinated, in writing, to the
Obligations upon terms satisfactory to the Agents.
SECTION 7.2.3. Liens. The Borrower will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any
of its property, revenues or assets, whether now owned or hereafter acquired,
except:
(a) Liens securing payment of the Obligations or any Hedging
Obligations owed to any Lender or any Affiliate of any Lender, granted
pursuant to any Loan Document;
(b) Liens granted to secure payment of Ongoing Indebtedness
permitted and described in clause (f) of Section 7.2.2 or Indebtedness
of the type permitted and described in clause (b) of Section 7.2.2;
(c) Liens for taxes, assessments or other governmental charges
or levies, including Liens pursuant to Section 107(l) of CERCLA or
other similar law, not at the time delinquent or thereafter payable
without penalty or being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books;
(d) Liens of carriers, warehousemen, mechanics, repairmen,
materialmen and landlords or other like liens incurred in the ordinary
course of business for sums not
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overdue for a period of more than 30 days or being diligently contested
in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on its
books;
(e) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or other
forms of governmental insurance or benefits, or to secure performance
of tenders, statutory obligations, insurance obligations, leases and
contracts (other than for borrowed money) entered into in the ordinary
course of business or to secure obligations on surety or appeal bonds;
(f) judgment Liens in existence less than 30 days after the
entry thereof or with respect to which execution has been stayed or the
payment of which is covered in full by a bond or (subject to a
customary deductible) by insurance maintained with responsible
insurance companies;
(g) Liens with respect to recorded minor imperfections of
title and easements, rights-of-way, restrictions, reservations,
permits, servitudes and other similar encumbrances on real property and
fixtures which do not materially detract from the value or materially
impair the use by the Borrower or any such Subsidiary in the ordinary
course of their business of the property subject thereto;
(h) leases or subleases granted by the Borrower or any of its
Subsidiaries to any other Person in the ordinary course of business;
and
(i) Liens in the nature of trustees' Liens granted pursuant to
any indenture governing any Indebtedness permitted by Section 7.2.2, in
each case in favor of the trustee under such indenture and securing
only obligations to pay compensation to such trustee, to reimburse its
expenses and to indemnify it under the terms thereof.
SECTION 7.2.4. Financial Condition.
(a) Net Worth. The Borrower will not permit, as of any date of
determination, Net Worth to be less than an aggregate amount equal to
(i) $20,000,000 plus (ii) an amount equal to 50% of cumulative positive
Net Income from January 1, 1998 to the end of the Fiscal Quarter most
recently ended on or prior to such date of determination.
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(b) Leverage Ratio. The Borrower will not permit the Leverage
Ratio as of the end of any Fiscal Quarter occurring during any period
set forth below to be greater than the ratio set forth opposite such
period:
Period Leverage Ratio
------ --------------
01/01/98 to 6/30/98 6.40:1
07/01/98 to 9/30/98 6.10:1
10/01/98 to 9/30/99 5.70:1
10/01/99 to 9/30/00 5.25:1
10/01/00 to 9/30/01 5.00:1
10/01/01 and thereafter 4.50:1
(c) Interest Coverage Ratio. The Borrower will not permit the
Interest Coverage Ratio as of the end of any Fiscal Quarter occurring
during any period set forth below to be less than the ratio set forth
opposite such period:
Period Interest Coverage Ratio
------ -----------------------
01/01/98 to 6/30/98 1.65:1
07/01/98 to 9/30/98 1.70:1
10/01/98 to 9/30/99 1.75:1
10/01/99 to 9/30/00 1.80:1
10/01/00 to 9/30/01 1.90:1
10/01/01 and thereafter 2.10:1
(d) Fixed Charge Coverage Ratio. The Borrower will not permit
the Fixed Charge Coverage Ratio as of the end of any Fiscal Quarter
occurring during any period set forth below to be less than the ratio
set forth opposite such period:
Period Fixed Charge Coverage Ratio
------ ---------------------------
01/01/98 to 6/30/98 0.80:1
07/01/98 to 9/30/98 0.90:1
10/01/98 to 9/30/01 1.00:1
10/01/01 and thereafter 1.10:1
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SECTION 7.2.5. Investments. The Borrower will not, and will not permit
any of its Subsidiaries to, make, incur, assume or suffer to exist any
Investment in any other Person, except:
(a) Investments existing on the Closing Date and identified in
Item 7.2.5(a) ("Existing Investments") of the Disclosure Schedule and
Investments existing on the Restatement Effective Date and identified
in Schedule 7.2.5(a) ("Ongoing Investments")hereto;
(b) Cash Equivalent Investments;
(c) without duplication, Investments permitted as Indebtedness
pursuant to Section 7.2.2;
(d) without duplication, Investments permitted as Capital
Expenditures pursuant to Section 7.2.7;
(e) Investments by the Borrower in any of its Subsidiaries, or
by any such Subsidiary in any of its Subsidiaries, by way of
contributions to capital;
(f) Investments made by the Borrower or any of its
Subsidiaries, solely with proceeds which have been contributed,
directly or indirectly, to the Borrower or such Subsidiary as cash
equity from holders of the Borrower's common stock for the purpose of
making an Investment identified in a notice to the Agents on or prior
to the date that such capital contribution is made, which Investments
shall result in the Borrower or such Subsidiary acquiring a majority
controlling interest in the Person in which such Investment was made or
increasing any such controlling interest already maintained by it;
(g) Investments to the extent the consideration received
pursuant to clause (b)(i) of Section 7.2.9 is not all cash;
(h) Investments in the form of loans to officers, directors
and employees of the Borrower and its Subsidiaries for the sole purpose
of purchasing Holdco common stock in an aggregate amount at any time
outstanding not to exceed $2,000,000;
(i) Investments made by the Borrower or any of its
Subsidiaries consisting of, or made in connection with, the purchase or
acquisition of all or substantially all the assets, or Capital Stock,
of one or more Persons engaged in the same, similar or related lines of
business to those presently conducted by the Borrower, or of a line of
business (or geographical portion of the assets or a line of business)
of any such Person or Persons, in an aggregate amount not to exceed
$25,000,000 so long as after giving
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effect to any such Investment, (i) the Borrower shall be in pro forma
compliance with the covenants set forth in Section 7.2.4 for the most
recent full Fiscal Quarter immediately preceding the date of such
Investment for which the relevant financial information has been
delivered pursuant to clause (a) or (b) of Section 7.1.1, (ii) an
Authorized Officer of the Borrower shall have delivered a certificate
to the Agents in form and substance satisfactory to the Agents
(including a calculation of the compliance with the covenants set forth
in Section 7.2.4) certifying as to the accuracy of clause (i) above and
(iii) in the case of an acquisition of Capital Stock, the Borrower or
the relevant Subsidiary shall acquire (subject to Section 7.2.1) a
majority controlling interest in the Person in which such Investment
was made or increasing any such controlling interest maintained by it
in such Person; or
(j) Investments made by the Borrower in Holdco on the Closing
Date to the extent necessary to consummate the transactions described
in the recitals hereto;
provided, however, that
(k) any Investment which when made complies with the
requirements of the definition of the term "Cash Equivalent Investment"
may continue to be held notwithstanding that such Investment if made
thereafter would not comply with such requirements;
(l) no Investment otherwise permitted by clause (c) (except to
the extent permitted under Section 7.2.2), (e), (f), (h) or (i) shall
be permitted to be made if, immediately before or after giving effect
thereto, any Default shall have occurred and be continuing.
SECTION 7.2.6. Restricted Payments, etc. On and at all times after
the date hereof:
(a) the Borrower will not declare, pay or make any dividend,
distribution or exchange (in cash, property or obligations) on or in
respect of any shares of any class of Capital Stock (now or hereafter
outstanding) of the Borrower or on any warrants, options or other
rights with respect to any shares of any class of Capital Stock (now or
hereafter outstanding) of the Borrower (other than dividends or
distributions payable in its common stock or warrants to purchase its
common stock or splits or reclassifications of its stock into
additional or other shares of its common stock) or apply, or permit any
of its Subsidiaries to apply, any of its funds, property or assets to
the purchase, redemption, exchange, sinking fund or other retirement
of, or agree or permit any of its Subsidiaries to purchase, redeem or
exchange, any shares of any class of Capital Stock (now or hereafter
outstanding) of the Borrower, warrants, options or other rights with
respect to any shares of any class of Capital Stock (now or hereafter
outstanding) of the Borrower;
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(b) the Borrower will not pay or otherwise reimburse (in cash,
property or obligations) any obligation arising under or in respect of
the Seller Note and will not apply or permit any of its Subsidiaries to
apply any of its funds, property or assets to the purchase, redemption,
exchange, sinking fund or other retirement of the Seller Note;
(c) the Borrower will not, and will not permit any of its
Subsidiaries to, (i) make any payment or prepayment of principal of, or
make any payment of interest on, any Senior Note on any day other than
the stated, scheduled date for such payment or prepayment set forth in
the documents and instruments memorializing such Senior Note, or which
would violate the subordination provisions of such Senior Note, or (ii)
redeem, repurchase or defease any Senior Note; and
(d) the Borrower will not, and will not permit any of its
Subsidiaries to, make any deposit for any of the foregoing purposes
(the foregoing prohibited acts referred to in clause (a), (b) or (c)
above or in this clause (d) are herein collectively referred to as
"Restricted Payments");
provided, however, that,
(e) notwithstanding the provisions of clause (a) above, the
Borrower shall be permitted to make Restricted Payments to Holdco to
the extent necessary to enable Holdco to (i) pay its overhead expenses
in an amount not to exceed $250,000 in the aggregate in any Fiscal
Year, (ii) pay its taxes and (iii) so long as (A) no Default shall have
occurred and be continuing on the date such Restricted Payment is
declared or to be made, nor would a Default result from the making of
such Restricted Payment, (B) after giving effect to the making of such
Restricted Payment the Borrower shall be in pro forma compliance with
the covenants set forth in Section 7.2.4 for the most recent full
Fiscal Quarter immediately preceding the date of the payment of such
Restricted Payment for which the relevant financial information has
been delivered pursuant to clause (a) or clause (b) of Section 7.1.1,
and (C) an Authorized Officer of the Borrower shall have delivered a
certificate to the Agents in form and substance satisfactory to the
Agents (including a calculation of the compliance with the covenants
set forth in Section 7.2.4) certifying as to the accuracy of clauses
(e)(iii)(A) and (e)(iii)(B) above, purchase, redeem, acquire or
otherwise retire for value shares of Capital Stock of Holdco or
Preferred Stock of the Borrower held by directors, officers or
employees of Holdco or the Borrower or any of its Subsidiaries, or
options on any such shares or related stock appreciation rights or
similar securities owned by such directors, officers or employees (or
their estates of beneficiaries under their estates), in all cases only
upon death, disability, retirement, termination of employment or
pursuant to the terms of such stock option plan or any other agreement
under which such shares of Capital Stock, options, related rights or
similar securities were issued (collectively referred to as a
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"Redemption") or to pay principal of, or interest on, notes issued by
Holdco as permitted under Section 5.9(d) of the Holdco Pledge
Agreement, in an aggregate amount, in the case of this clause (e)(iii),
not to exceed $1,500,000 in any Fiscal Year; provided, that the
Borrower can carry forward to each succeeding Fiscal Year the aggregate
amount of Restricted Payments permitted (but not made) pursuant to this
clause (e)(iii) in prior Fiscal Years, with up to a maximum amount of
$3,000,000 over the term of this Agreement of the sum of (I) Restricted
Payments permitted to be made pursuant to this clause (e)(iii) and (II)
the outstanding face amount of notes and other consideration issued by
Holdco pursuant to Section 5.9(d) of the Holdco Pledge Agreement;
(f) notwithstanding the provisions of clause (a) above, the
Borrower shall be permitted to make Restricted Payments to Holdco to
the extent necessary to enable Holdco to (i) pay from and after January
1, 2000, accrued and scheduled interest which is due and payable under
the Seller Note and (ii) pay from and after January 1, 2002, principal
which is due and payable under Section 2 of the Seller Note, so long as
in each case (A) no Default shall have occurred and be continuing on
the date such Restricted Payment is declared or to be made, nor would a
Default result from (or reasonably be expected to result from) the
making of such Restricted Payment, (B) after giving effect to the
making of such Restricted Payment the Borrower shall be in pro forma
compliance with the covenants set forth in Section 7.2.4 for the most
recent full Fiscal Quarter immediately preceding the date of the
payment of such Restricted Payment for which the relevant financial
information has been delivered pursuant to clause (a) or clause (b) of
Section 7.1.1, (C) after giving effect to the making of such Restricted
Payment, the Leverage Ratio on such pro forma basis is no greater than
2:1 for each of the two most recent Fiscal Quarters immediately
preceding the date of payment of such Restricted Payment, and (D) an
Authorized Officer of the Borrower shall have delivered a certificate
to the Agents in form and substance satisfactory to the Agents
(including a calculation of the compliance with the covenants set forth
in Section 7.2.4) certifying as to the accuracy of clauses (f)(A),
(f)(B) and (f)(C) above; and
(g) the Borrower shall be permitted to make Restricted
Payments on the Closing Date of the type required to effect the
transactions described in the recitals hereto.
SECTION 7.2.7. Capital Expenditures, etc. With respect to Capital
Expenditures, the parties covenant and agree as follows:
(a) The Borrower will not, and will not permit any of its
Subsidiaries to, make or commit to make Capital Expenditures in any
Fiscal Year, except Capital Expenditures which do not aggregate in
excess of $20,000,000 in such Fiscal Year; provided, however, that to
the extent the amount of Capital Expenditures permitted to be made in
any Fiscal Year pursuant to this Section exceeds the aggregate amount
of
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Capital Expenditures actually made during such Fiscal Year under this
clause (a) (other than Capital Expenditures permitted pursuant to any
amount carried forward from the prior Fiscal Year pursuant to this
proviso), such excess amount up to $10,000,000 may be carried forward
to (but only to) the next succeeding Fiscal Year (any such amount to be
certified by the Borrower to the Agents in the Compliance Certificate
delivered for the last Fiscal Quarter of such Fiscal Year, and any such
amount carried forward to a succeeding Fiscal Year shall be deemed to
be used prior to the Borrower and its Subsidiaries using the amount of
Capital Expenditures permitted by this Section without giving effect to
such carry-forward).
(b) The parties acknowledge and agree that the permitted
Capital Expenditure level set forth in clause (a) above shall be
exclusive of the amount of Capital Expenditures actually made with cash
capital contributions (other than capital contributions made by the
Borrower in any of its Subsidiaries or by any Subsidiary of the
Borrower in another Subsidiary of the Borrower, except to the extent
the source thereof is a capital contribution from Holdco) after the
Closing Date to the Borrower or any of its Subsidiaries and
specifically identified in a certificate delivered by an Authorized
Officer of the Borrower to the Agents on or about the time such capital
contribution is made.
SECTION 7.2.8. Consolidation, Merger, etc. The Borrower will not, and
will not permit any of its Subsidiaries to, liquidate or dissolve, consolidate
with, or merge into or with, any other corporation, or purchase or otherwise
acquire all or substantially all of the assets of any Person (or of any division
thereof) except
(a) any such Subsidiary may liquidate or dissolve voluntarily
into, and may merge with and into, the Borrower (so long as the
Borrower is the surviving corporation of such combination or merger) or
any other Subsidiary, and the assets or stock of any Subsidiary may be
purchased or otherwise acquired by the Borrower or any other
Subsidiary; provided, that notwithstanding the above, a Subsidiary may
only liquidate or dissolve into, or merge with and into, another
Subsidiary of the Borrower if, after giving effect to such combination
or merger, the Borrower continues to own (directly or indirectly), and
the Administrative Agent continues to have pledged to it pursuant to a
Pledge Agreement, a percentage of the issued and outstanding shares of
Capital Stock (on a fully diluted basis) of the Subsidiary surviving
such combination or merger that is equal to or in excess of the
percentage of the issued and outstanding shares of Capital Stock (on a
fully diluted basis) of the Subsidiary that does not survive such
combination or merger that was (immediately prior to the combination or
merger) owned by the Borrower or pledged to the Administrative Agent;
(b) so long as no Default has occurred and is continuing or
would occur after giving effect thereto, the Borrower or any of its
Subsidiaries may purchase all or
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substantially all of the assets of any Person (or any division thereof)
not then a Subsidiary, or acquire such Person by merger, if permitted
(without duplication) pursuant to Section 7.2.7 or clause (f) or (i) of
Section 7.2.5; and
(c) the Borrower and its Subsidiaries may consummate the
Merger, the Sub One Merger (as defined in the Transaction Agreement),
the Sub Two Merger (as so defined) and the other transactions
contemplated in the Transaction Agreement.
SECTION 7.2.9. Asset Dispositions, etc. The Borrower will not, and will
not permit any of its Subsidiaries to, sell, transfer, lease, contribute or
otherwise convey, or grant options, warrants or other rights with respect to,
all or any part of its assets, whether now owned or hereafter acquired
(including accounts receivable and Capital Stock of Subsidiaries) to any Person,
unless
(a) such sale, transfer, lease, contribution or conveyance of
such assets is (i) in the ordinary course of its business (and does not
constitute a sale, transfer, lease, contribution or other conveyance of
all or a substantial part of the Borrower's and its Subsidiaries'
assets, taken as a whole) or is of obsolete or worn out property, (ii)
permitted by Section 7.2.8, or (iii) between the Borrower and one of
its Subsidiaries or between Subsidiaries of the Borrower; or
(b) (i) such sale, transfer, lease, contribution or conveyance
of such assets is for fair market value and the consideration consists
of no less than 80% in cash, (ii) the Net Disposition Proceeds received
from such assets, together with the Net Disposition Proceeds of all
other assets sold, transferred, leased, contributed or conveyed
pursuant to this clause (b) since the Closing Date, does not exceed
(individually or in the aggregate) $15,000,000 over the term of this
Agreement and (iii) an amount equal to the Net Disposition Proceeds
generated from such sale, transfer, lease, contribution or conveyance
is applied to prepay the Loans pursuant to the terms of Section 3.1.1
and Section 3.1.2.
SECTION 7.2.10. Modification of Certain Agreements. With-out the prior
written consent of the Required Lenders, the Borrower will not, and will not
permit any of its Subsidiaries to, consent to any amendment, supplement,
amendment and restatement, waiver or other modification of any of the terms or
provisions contained in, or applicable to, the Preferred Stock (or any charter
provisions relating thereto) or any Material Document or any schedules, exhibits
or agreements related thereto, in each case which would adversely affect the
rights or remedies of the Lenders, or the Borrower's or any Subsidiary's ability
to perform hereunder or under any Loan Document or which would increase the
purchase price with respect to the Acquisition or, in the case of the
Transaction Agreement, which would increase the Borrower's or any of its
Subsidiaries' obligations or liabilities, contingent or otherwise
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(other than adjustments to the purchase price made pursuant to the terms of the
Transaction Agreement).
SECTION 7.2.11. Transactions with Affiliates. The Borrower will not,
and will not permit any of its Subsidiaries to, enter into, or cause, suffer or
permit to exist any arrangement or contract with any of its other Affiliates
(other than any Obligor or any other Subsidiary of the Borrower) unless such
arrangement or contract is fair and equitable to the Borrower or such Subsidiary
and is an arrangement or contract of the kind which would be entered into by a
prudent Person in the position of the Borrower or such Subsidiary with a Person
which is not one of its Affiliates; provided, however that the Borrower and its
Subsidiaries shall be permitted to enter into and perform their obligations
under the Material Documents to which each is a party as of the Closing Date and
arrangements with DLJ and its Affiliates for underwriting, investment banking
and advisory services on usual and customary terms.
SECTION 7.2.12. Negative Pledges, Restrictive Agreements, etc. The
Borrower will not, and will not permit any of its Subsidiaries to, enter into
any agreement prohibiting
(a) the (i) creation or assumption of any Lien upon its
properties, revenues or assets, whether now owned or hereafter acquired
(other than, in the case of any assets acquired with the proceeds of
any Indebtedness permitted under Section 7.2.2(b)(i) or subject to a
Capitalized Lease permitted under Section 7.2.2(b)(ii), customary
limitations and prohibitions contained in such Indebtedness or
Capitalized Lease), or (ii) ability of the Borrower or any other
Obligor to amend or otherwise modify this Agreement or any other Loan
Document; or
(b) any Subsidiary from making any payments, directly or
indirectly, to the Borrower by way of dividends, advances, repayments
of loans or advances, reimbursements of management and other
intercompany charges, expenses and accruals or other returns on
investments, or any other agreement or arrangement which restricts the
ability of any such Subsidiary to make any payment, directly or
indirectly, to the Borrower.
SECTION 7.2.13. Stock of Subsidiaries. The Borrower will not permit any
Subsidiary to issue any Capital Stock (whether for value or otherwise) to any
Person other than the Borrower or another wholly-owned Subsidiary of the
Borrower.
SECTION 7.2.14. Sale and Leaseback. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any agreement or arrangement with
any other Person providing for the leasing by the Borrower or any of its
Subsidiaries of real or personal property which has been or is to be sold or
transferred by the Borrower or any of its Subsidiaries to such other Person or
to any other Person to whom funds have been or are to be
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advanced by such Person on the security of such property or rental obligations
of the Borrower or any of its Subsidiaries.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the following
events or occurrences described in this Section 8.1 shall constitute an "Event
of Default".
SECTION 8.1.1. Non-Payment of Obligations. (a) The Borrower shall
default in the payment or prepayment of any principal of any Loan when due, or
(b) any Obligor (including the Borrower) shall default (and such default shall
continue unremedied for a period of three Business Days) in the payment when due
of any interest or commitment fee with respect to the Loans or Commitments or of
any other monetary Obligation.
SECTION 8.1.2. Breach of Warranty. Any representation or warranty of
the Borrower or any other Obligor made or deemed to be made hereunder or in any
other Loan Document executed by it or any other writing or certificate
(including the Closing Date Certificate) furnished by or on behalf of the
Borrower or any other Obligor to the Agents, the Issuer, the Arrangers or any
Lender for the purposes of or in connection with this Agreement or any such
other Loan Document (including any certificates delivered pursuant to Article V)
is or shall be incorrect when made in any material respect.
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations.
The Borrower shall default in the due performance and observance of any of its
obligations under Section 7.1.9, 7.1.10, 7.1.12, 7.1.13 or 7.2 (other than
Section 7.2.1).
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations. Any
Obligor shall default in the due performance and observance of any other
agreement contained herein or in any other Loan Document executed by it, and
such default shall continue unremedied for a period of 30 days after notice
thereof shall have been given to the Borrower by the Administrative Agent at the
direction of the Required Lenders.
SECTION 8.1.5. Default on Other Indebtedness. A default shall occur (i)
in the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness, other than Indebtedness
described in Section 8.1.1, of the Borrower or any of its Subsidiaries or Holdco
having a principal amount, individually or in the aggregate, in excess of
$1,000,000, or (ii) a default shall occur in the performance or observance of
any obligation or condition with respect to such Indebtedness having a principal
amount, individually or in the aggregate, in excess of $1,000,000 if the effect
of such default is
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to accelerate the maturity of any such Indebtedness or such default shall
continue unremedied for any applicable period of time sufficient to permit the
holder or holders of such Indebtedness, or any trustee or agent for such
holders, to cause such Indebtedness to become due and payable prior to its
expressed maturity.
SECTION 8.1.6. Judgments. Any judgment or order for the payment of
money in excess of $500,000 (not covered by insurance from a responsible
insurance company that is not denying its liability with respect thereto) shall
be rendered against the Borrower or any of its Subsidiaries or Holdco and remain
unpaid and either
(a) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order; or
(b) there shall be any period of 30 consecutive 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.
SECTION 8.1.7. Pension Plans. Any of the following events shall occur
with respect to any Pension Plan
(a) the termination of any Pension Plan if, as a result of
such termination, the Borrower would be required to make a contribution
to such Pension Plan, or would reasonably expect to incur a liability
or obligation to such Pension Plan, in excess of $2,000,000; or
(b) a contribution failure occurs with respect to any Pension
Plan sufficient to give rise to a Lien under section 302(f) of ERISA in
an amount in excess of $2,000,000.
SECTION 8.1.8. Change in Control. Any Change in Control shall occur.
SECTION 8.1.9. Bankruptcy, Insolvency, etc. The Borrower or any of
its Subsidiaries or any other Obligor shall
(a) become insolvent or generally fail to pay, or admit in
writing its inability or unwillingness to pay, debts as they become
due;
(b) apply for, consent to, or acquiesce in, the appointment of
a trustee, receiver, sequestrator or other custodian for the Borrower
or any of its Subsidiaries or any other Obligor or any property of any
thereof, or make a general assignment for the benefit of creditors;
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(c) in the absence of such application, consent, acquiescence
or assignment, permit or suffer to exist the appointment of a trustee,
receiver, sequestrator or other custodian for the Borrower or any of
its Subsidiaries or any other Obligor or for a substantial part of the
property of any thereof, and such trustee, receiver, sequestrator or
other custodian shall not be discharged within 60 days, provided that
the Borrower, each Subsidiary and each other Obligor hereby expressly
authorizes the Agents, the Issuer and each Lender to appear in any
court conducting any relevant proceeding during such 60-day period to
preserve, protect and defend their rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding, in respect of the Borrower or any
of its Subsidiaries or any other Obligor, and, if any such case or
proceeding is not commenced by the Borrower or such Subsidiary or such
other Obligor, such case or proceeding shall be consented to or
acquiesced in by the Borrower or such Subsidiary or such other Obligor
or shall result in the entry of an order for relief or shall remain for
60 days undismissed, provided that the Borrower, each Subsidiary and
each other Obligor hereby expressly authorizes the Agents, the Issuer
and each Lender to appear in any court conducting any such case or
proceeding during such 60-day period to preserve, protect and defend
their rights under the Loan Documents; or
(e) take any action (corporate or otherwise) authorizing, or
in furtherance of, any of the foregoing.
SECTION 8.1.10. Impairment of Security, etc. Any Loan Document, or any
Lien granted thereunder, shall (except in accordance with its terms), in whole
or in part, terminate, cease to be in full force and effect or cease to be the
legally valid, binding and enforceable obligation of any Obligor party thereto;
the Borrower or any other Obligor shall, directly or indirectly, contest in any
manner the effectiveness, validity, binding nature or enforceability thereof; or
any Lien securing any Obligation shall, in whole or in part, cease to be a
perfected first priority Lien, subject only to those exceptions expressly
permitted by the Loan Documents, except to the extent any event referred to
above (a) relates to assets of the Borrower or any of its Subsidiaries which are
immaterial, (b) results from the failure of the Administrative Agent to maintain
possession of certificates representing securities pledged under any Pledge
Agreement or to file continuation statements under the Uniform Commercial Code
of any applicable jurisdiction or (c) is covered by a lender's title insurance
policy and the relevant insurer promptly after the occurrence thereof shall have
acknowledged in writing that the same is covered by such title insurance policy.
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SECTION 8.1.11. Seller Note Redemption. Any event shall occur which,
under the terms of the Seller Note, shall require Holdco, the Borrower or any of
its Subsidiaries to purchase, redeem or otherwise acquire or offer to purchase,
redeem or otherwise acquire all or any portion of the principal amount of the
Seller Note (other than payments of principal permitted under clause (e)(ii) of
Section 7.2.6); or Holdco, the Borrower or any of its Subsidiaries shall for any
other reason purchase, redeem or otherwise acquire or offer to purchase, redeem
or otherwise acquire, or make any other payments in respect of the principal
amount of the Seller Note (other than payments of principal permitted under
clause (e)(ii) of Section 7.2.6).
SECTION 8.2. Action if Bankruptcy, etc. If any Event of Default
described in clauses (b), (c) and (d) of Section 8.1.9 shall occur with respect
to any Obligor (other than immaterial Subsidiaries) the Commitments (if not
theretofore terminated) shall automatically terminate and the outstanding
principal amount of all outstanding Loans and all other Obligations shall
automatically be and become immediately due and payable, without notice or
demand.
SECTION 8.3. Action if Other Event of Default. If any Event of Default
(other than an Event of Default described in clauses (b), (c) and (d) of Section
8.1.9 with respect to any Obligor (other than immaterial Subsidiaries)) shall
occur for any reason, whether voluntary or involuntary, and be continuing, the
Administrative Agent, upon the direction of the Required Lenders, shall by
notice to the Borrower declare all or any portion of the outstanding principal
amount of the Loans and other Obligations to be due and payable, require the
Borrower to provide cash collateral to be deposited with the Administrative
Agent in an amount equal to the undrawn amount of all Letters of Credit
outstanding and/or declare the Commitments (if not theretofore terminated) to be
terminated, whereupon the full unpaid amount of such Loans and other Obligations
which shall be so declared due and payable shall be and become immediately due
and payable, without further notice, demand or presentment, the Borrower shall
deposit with the Administrative Agent cash collateral in an amount equal to the
undrawn amount of all Letters of Credit outstanding and/or, as the case may be,
the Commitments shall terminate.
ARTICLE IX
THE AGENTS
SECTION 9.1. Actions. Each Lender hereby appoints DLJ as its
Syndication Agent and BofA as its Administrative Agent under and for purposes of
this Agreement, the Notes and each other Loan Document. Each Lender authorizes
the Agents to act on behalf of such Lender under this Agreement, the Notes and
each other Loan Document and, in the absence of other written instructions from
the Required Lenders received from time to time by the Agents (with respect to
which each of the Agents agrees that it will comply, except as otherwise
provided in this Section or as otherwise advised by counsel), to exercise such
powers
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hereunder and thereunder as are specifically delegated to or required of the
Agents by the terms hereof and thereof, together with such powers as may be
reasonably incidental thereto. Each Lender hereby indemnifies (which indemnity
shall survive any termination of this Agreement) the Agents, ratably in
accordance with their respective Term Loans outstanding and Commitments (or, if
no Term Loans or Commitments are at the time outstanding and in effect, then
ratably in accordance with the principal amount of Term Loans held by such
Lender, and their respective Commitments as in effect in each case on the date
of the termination of this Agreement), from and against any and all liabilities,
obligations, losses, damages, claims, costs or expenses of any kind or nature
whatsoever which may at any time be imposed on, incurred by, or asserted
against, either of the Agents in any way relating to or arising out of this
Agreement, the Notes and any other Loan Document, including reasonable
attorneys' fees, and as to which any Agent is not reimbursed by the Borrower or
any other Obligor (and without limiting the obligation of the Borrower or any
other Obligor to do so); provided, however, that no Lender shall be liable for
the payment of any portion of such liabilities, obligations, losses, damages,
claims, costs or expenses which are determined by a court of competent
jurisdiction in a final proceeding to have resulted solely from such Agent's
gross negligence or willful misconduct. The Agents shall not be required to take
any action hereunder, under the Notes or under any other Loan Document, or to
prosecute or defend any suit in respect of this Agreement, the Notes or any
other Loan Document, unless it is indemnified hereunder to its satisfaction. If
any indemnity in favor of either of the Agents shall be or become, in such
Agent's determination, inadequate, the Agent may call for additional
indemnification from the Lenders and cease to do the acts indemnified against
hereunder until such additional indemnity is given.
SECTION 9.2. Funding Reliance, etc. Unless the Administrative Agent
shall have been notified by telephone, confirmed in writing, by any Lender by
5:00 p.m., New York time, on the day prior to a Borrowing that such Lender will
not make available the amount which would constitute its Percentage of such
Borrowing on the date specified therefor, the Administrative Agent may assume
that such Lender has made such amount available to the Administrative Agent and,
in reliance upon such assumption, make available to the Borrower a corresponding
amount. If and to the extent that such Lender shall not have made such amount
available to the Administrative Agent, such Lender severally agrees and the
Borrower agrees to repay the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
the Administrative Agent made such amount available to the Borrower to the date
such amount is repaid to the Administrative Agent, at the interest rate
applicable at the time to Loans comprising such Borrowing.
SECTION 9.3. Exculpation. None of the Agents or any Arranger or the
Issuer nor any of their respective directors, officers, employees or agents
shall be liable to any Lender for any action taken or omitted to be taken by it
under this Agreement or any other Loan Document, or in connection herewith or
therewith, except for its own willful misconduct or gross negligence, nor
responsible for any recitals or warranties herein or therein, nor for the
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effectiveness, enforceability, validity or due execution of this Agreement or
any other Loan Document, nor for the creation, perfection or priority of any
Liens purported to be created by any of the Loan Documents, or the validity,
genuineness, enforceability, existence, value or sufficiency of any collateral
security, nor to make any inquiry respecting the performance by the Borrower of
its obligations hereunder or under any other Loan Document. Any such inquiry
which may be made by any Agent or the Issuer shall not obligate it to make any
further inquiry or to take any action. The Agents and the Issuer shall be
entitled to rely upon advice of counsel concerning legal matters and upon any
notice, consent, certificate, statement or writing which the Agents or the
Issuer, as applicable, believe to be genuine and to have been presented by a
proper Person.
SECTION 9.4. Successor. The Syndication Agent may resign as such upon
one Business Day's notice to the Borrower and the Administrative Agent. The
Administrative Agent may resign as such at any time upon at least 30 days' prior
notice to the Borrower and all Lenders. If the Administrative Agent at any time
shall resign, the Required Lenders may, with the prior consent of the Borrower
(which consent shall not be unreasonably withheld), appoint another Lender as a
successor Administrative Agent which shall thereupon become the Administrative
Agent hereunder. 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 Administrative Agent's giving notice of
resignation, then the retiring Administrative Agent may, on behalf of the
Lenders, appoint a successor Administrative Agent, which shall be one of the
Lenders or a commercial banking institution organized under the laws of the U.S.
(or any State thereof) or a U.S. branch or agency of a commercial banking
institution, and having a combined capital and surplus of at least $500,000,000.
Upon the acceptance of any appointment as Administrative Agent hereunder by a
successor Administrative Agent, such successor Administrative Agent shall be
entitled to receive from the retiring Administrative Agent such documents of
transfer and assignment as such successor Administrative Agent may reasonably
request, and shall thereupon succeed to and become vested with all rights,
powers, privileges and duties of the retiring Administrative Agent, and the
retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Administrative Agent's
resignation hereunder as the Administrative Agent, the provisions of
(a) this Article IX shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was the
Administrative Agent under this Agreement; and
(b) Section 10.3 and Section 10.4 shall continue to inure to
its benefit.
SECTION 9.5. Credit Extensions by each Agent. Each Agent and the Issuer
shall have the same rights and powers with respect to (x) (i) in the case of the
Agents, the Credit Extensions made by it or any of its Affiliates and (ii) in
the case of the Issuer, the Loans made by it or any of its Affiliates, and (y)
the Notes held by it or any of its Affiliates as any other
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Lender and may exercise the same as if it were not an Agent or the Issuer. Each
Agent, the Issuer and each of their respective Affiliates may accept deposits
from, lend money to, and generally engage in any kind of business with the
Borrower or any Subsidiary or Affiliate of the Borrower as if such Agent or
Issuer were not an Agent or Issuer hereunder.
SECTION 9.6. Credit Decisions. Each Lender acknowledges that it has,
independently of each Agent, each Arranger, the Issuer and each other Lender,
and based on such Lender's review of the financial information of the Borrower,
this Agreement, the other Loan Documents (the terms and provisions of which
being satisfactory to such Lender) and such other documents, information and
investigations as such Lender has deemed appropriate, made its own credit
decision to extend its Commitments. Each Lender also acknowledges that it will,
independently of each Agent, each Arranger, the Issuer and each other Lender,
and based on such other documents, information and investigations as it shall
deem appropriate at any time, continue to make its own credit decisions as to
exercising or not exercising from time to time any rights and privileges
available to it under this Agreement or any other Loan Document.
SECTION 9.7. Copies, etc. The Administrative Agent shall give prompt
notice to each Lender of each notice or request required or permitted to be
given to the Administrative Agent by the Borrower pursuant to the terms of this
Agreement (unless concurrently delivered to the Lenders by the Borrower). The
Administrative Agent will distribute to each Lender each document or instrument
received for such Lender's account and copies of all other communications
received by the Administrative Agent from the Borrower for distribution to the
Lenders by the Administrative Agent in accordance with the terms of this
Agreement.
SECTION 9.8. The Syndication Agent, the Administrative Agent and the
Issuer. Notwithstanding anything else to the contrary contained in this
Agreement or any other Loan Document, the Syndication Agent, the Administrative
Agent and the Issuer, each in such capacity, shall have no duties or
responsibilities under this Agreement or any other Loan Document nor any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Syndication Agent, the Administrative
Agent or the Issuer, as applicable, in such capacity except as are explicitly
set forth herein or in the other Loan Documents.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Waivers, Amendments, etc. The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such
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amendment, modification or waiver is in writing and consented to by the Borrower
and each Obligor party thereto and by the Required Lenders; provided, however,
that no such amendment, modification or waiver which would:
(a) modify any requirement hereunder that any particular
action be taken by all the Lenders or by the Required Lenders shall be
effective unless consented to by each Lender;
(b) modify this Section 10.1, or clause (a) of Section 10.10,
change the definition of "Required Lenders", increase any Commitment
Amount or the Percentage of any Lender, reduce any fees described in
Article III, release any material Subsidiary Guarantor from its
obligations under the Subsidiary Guaranty or all or substantially all
of the collateral security (except in each case as otherwise
specifically provided in this Agreement, the Subsidiary Guaranty, a
Security Agreement or a Pledge Agreement) or extend any Commitment
Termination Date shall be made without the consent of each Lender
adversely affected thereby;
(c) extend the due date for, or reduce the amount of, any
scheduled repayment of principal of or interest on or fees payable in
respect of any Loan (or reduce the principal amount of or rate of
interest on or fees payable in respect of any Loan) or any
Reimbursement Obligation (which shall in each case include the
conversion of all or any part of the Obligations into equity of any
Obligor) shall be made without the consent of the holder of the Note
evidencing such Loan or, in the case of a Reimbursement Obligation, the
Issuer owed, and those Lenders participating in, such Reimbursement
Obligation;
(d) affect adversely the interests, rights or obligations of
any Agent, Issuer, Arranger or the Swing Line Lender (in its capacity
as Agent, Issuer, Arranger or Swing Line Lender), unless consented to
by such Agent, Issuer, Arranger or Swing Line Lender, as the case may
be;
(e) (i) change the definition of "Borrowing Base Amount",
"Eligible Account" or "Net Asset Value" (in each case if the effect of
such change would be to require a Lender to make or participate in a
Credit Extension in an amount that is greater than such Lender would
have had to make or participate in immediately prior to such change) or
(ii) have the effect (either immediately or at some later time) of
enabling the Borrower to satisfy a condition precedent to the making of
a Revolving Loan or the issuance of a Letter of Credit without the
consent of Lenders holding at least 51% of the Revolving Loan
Commitments; or
(f) modify clause (a)(i) of Section 3.1.1 or clause (b) of
Section 3.1.2 without the consent of the holders of the Notes
evidencing at least 51% of the aggregate amount
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of Loans outstanding under the Tranche or Tranches affected by such
modification, or, in the case of a modification affecting the Revolving
Loan Commitment Amount, the Lenders holding at least 51% of the
Revolving Loan Commitments.
For purposes of this Section 10.1, the Syndication Agent, in
coordination with the Administrative Agent, shall have primary responsibility,
together with the Borrower, in the negotiation, preparation, and documentation
relating to any amendment, modification or waiver of this Agreement, any other
Loan Document or any other agreement or document related hereto or thereto
contemplated pursuant to this Section.
No failure or delay on the part of any Agent, the Issuer, any Lender or the
holder of any Note in exercising any power or right under this Agreement or any
other Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice to or
demand on the Borrower in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by any Agent, the Issuer,
any Lender or the holder of any Note under this Agreement or any other Loan
Document shall, except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval hereunder shall
require any similar or dissimilar waiver or approval thereafter to be granted
hereunder.
SECTION 10.2. Notices. All notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing or by facsimile and addressed, delivered or transmitted to such party at
its address or facsimile number set forth on Schedule III hereto or, in the case
of a Lender that becomes a party hereto after the date hereof, as set forth in
the Lender Assignment Agreement pursuant to which such Lender becomes a Lender
hereunder or at such other address or facsimile number as may be designated by
such party in a notice to the other parties. Any notice, if mailed and properly
addressed with postage prepaid or if properly addressed and sent by pre-paid
courier service, shall be deemed given when received; any notice, if transmitted
by facsimile, shall be deemed given when transmitted (telephonic confirmation in
the case of facsimile).
SECTION 10.3. Payment of Costs and Expenses. The Borrower agrees to pay
on demand all reasonable expenses of each of the Agents (including the
reasonable fees and out- of-pocket expenses of counsel to the Agents and of
local counsel, if any, who may be retained by counsel to the Agents) in
connection with
(a) the syndication by the Syndication Agent and the Arrangers
of the Loans, the negotiation, preparation, execution and delivery of
this Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from
time to time hereafter be required, whether or not the transactions
contemplated hereby are consummated;
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(b) the filing, recording, refiling or rerecording of each
Mortgage, each Pledge Agreement and each Security Agreement and/or any
Uniform Commercial Code financing statements relating thereto and all
amendments, supplements and modifications to any thereof and any and
all other documents or instruments of further assurance required to be
filed or recorded or refiled or rerecorded by the terms hereof or of
such Mortgage, Pledge Agreement or Security Agreement; and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
The Borrower further agrees to pay, and to save the Agents, the Issuer and the
Lenders harmless from all liability for, any stamp or other similar taxes which
may be payable in connection with the execution or delivery of this Agreement,
the Credit Extensions made hereunder, or the issuance of the Notes or Letters of
Credit or any other Loan Documents. The Borrower also agrees to reimburse each
Agent, the Issuer and each Lender upon demand for all reasonable out-of-pocket
expenses (including reasonable attorneys' fees and legal expenses) incurred by
such Agent, the Issuer or such Lender in connection with (x) the negotiation of
any restructuring or "work-out", whether or not consummated, of any Obligations
and (y) the enforcement of any Obligations.
SECTION 10.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Commitments,
the Borrower hereby, to the fullest extent permitted under applicable law,
indemnifies, exonerates and holds each Agent, the Issuer, each Arranger and each
Lender and each of their respective Affiliates, and each of their respective
partners, officers, directors, employees and agents, and each other Person
controlling any of the foregoing within the meaning of either Section 15 of the
Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act
of 1934, as amended (collectively, the "Indemnified Parties"), free and harmless
from and against any and all actions, causes of action, suits, losses, costs,
liabilities and damages, and expenses actually incurred in connection therewith
(irrespective of whether any such Indemnified Party is a party to the action for
which indemnification hereunder is sought), including reasonable attorneys' fees
and disbursements (collectively, the "Indemnified Liabilities"), incurred by the
Indemnified Parties or any of them as a result of, or arising out of, or
relating to
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Credit
Extension;
(b) the entering into and performance of this Agreement and
any other Loan Document by any of the Indemnified Parties (excluding
any successful action brought by or on behalf of the Borrower as the
result of any failure by any Lender or the Issuer to make any Credit
Extension hereunder);
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(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by the Borrower or any of its
Subsidiaries of all or any portion of the stock or assets of any
Person, whether or not such Agent, the Issuer, such Arranger or such
Lender is party thereto;
(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to
the Borrower's or any of its Subsidiaries' compliance with or liability
under Environmental Law or the Release by the Borrower or any of its
Subsidiaries of any Hazardous Material; or
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission or release from, any real property owned
or operated by the Borrower or any Subsidiary thereof of any Hazardous
Material present on or under such property in a manner giving rise to
liability at or prior to the time the Borrower or such Subsidiary owned
or operated such property (including any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising under any
Environmental Law), regardless of whether caused by, or within the
control of, the Borrower or such Subsidiary,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or willful misconduct. The Borrower and its permitted successors and
assigns hereby waive, release and agree not to make any claim, or bring any cost
recovery action against, any Agent, the Issuer, any Arranger or any Lender under
CERCLA or any state equivalent, or any similar law now existing or hereafter
enacted, except to the extent arising out of the gross negligence or willful
misconduct of any Indemnified Party. It is expressly understood and agreed that
to the extent that any of such Persons is strictly liable under any
Environmental Laws, the Borrower's obligation to such Person under this
indemnity shall likewise be without regard to fault on the part of the Borrower,
to the extent permitted under applicable law, with respect to the violation or
condition which results in liability of such Person. If and to the extent that
the foregoing undertaking may be unenforceable for any reason, the Borrower
hereby agrees to make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law.
SECTION 10.5. Survival. The obligations of the Borrower under Sections
4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the Lenders under
Sections 4.8 and 9.1, shall in each case survive any termination of this
Agreement, the payment in full of all Obligations and the termination of all
Commitments. The representations and warranties made by the Borrower and each
other Obligor in this Agreement and in each other Loan Document shall survive
the execution and delivery of this Agreement and each such other Loan Document.
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SECTION 10.6. Severability. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 10.7. Headings. The various headings of this Agreement and of
each other Loan Document are inserted for convenience only and shall not affect
the meaning or interpretation of this Agreement or such other Loan Document or
any provisions hereof or thereof.
SECTION 10.8. Execution in Counterparts. This Agreement may be executed
by the parties hereto in several counterparts, each of which shall be executed
by the Borrower and each Agent and be deemed to be an original and all of which
shall constitute together but one and the same agreement.
SECTION 10.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE
NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This
Agreement, the Notes and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersede any prior agreements, written or oral, with respect thereto. Upon
the execution and delivery of this Agreement by the parties hereto, all
obligations and liabilities of DLJ Merchant Banking Funding, Inc. under or
relating or with respect to the Commitment Letter shall be terminated and of no
further force or effect.
SECTION 10.10. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that:
(a) the Borrower may not assign or transfer its rights or
obligations hereunder without the prior written consent of each of the
Agents and all Lenders; and
(b) the rights of sale, assignment and transfer of the Lenders
are subject to Section 10.11.
SECTION 10.11. Sale and Transfer of Loans and Notes; Participations in
Loans and Notes. Each Lender may assign, or sell participations in, its Loans
and Commitments to one or more other Persons, on a non pro rata basis (except as
provided below), in accordance with this Section 10.11.
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SECTION 10.11.1. Assignments. Any Lender (the "Assignor Lender"),
(a) with the written consents of the Borrower, the Agents and
(in the case of any assignment of participations in Letters of Credit
or Revolving Loan Commitments) the Issuer and the Swing Line Lender
(which consents shall not be unreasonably delayed or withheld and which
consent, in the case of the Borrower, shall be deemed to have been
given in the absence of a written notice delivered by the Borrower to
the Agents, on or before the fifth Business Day after receipt by the
Borrower of such Lender's request for such consent and which consents
of the Agents and the Issuer and the Swing Line Lender shall not be
required in the case of assignments made by BofA and DLJ or on any of
their Affiliates) may at any time assign and delegate to one or more
commercial banks or other financial institutions, and
(b) with notice to the Borrower, the Agents and (in the case
of any assignment of participations in Letters of Credit or Revolving
Loan Commitments) the Issuer and the Swing Line Lender, but without the
consent of the Borrower, the Agents, the Issuer or the Swing Line
Lender,
may assign and delegate to any of its Affiliates or to any other Lender (each
Person described in either of the foregoing clauses as being the Person to whom
such assignment and delegation is to be made, being hereinafter referred to as
an "Assignee Lender"), all or any fraction of such Lender's total Loans,
participations in Letters of Credit and Letter of Credit Outstandings with
respect thereto and Commitments (which assignment and delegation shall be, as
among Revolving Loan Commitments, Revolving Loans and participations in Letters
of Credit, of a constant, and not a varying, percentage) in a minimum aggregate
amount of the lesser of (i) $1,000,000 (if such assignment and delegation is to
a then existing Lender) or $5,000,000 (if such assignment and delegation is to a
Person not then a Lender) or (ii) the then remaining amount of such Lender's
Loans and Commitments; provided, however, that any such Assignee Lender will
comply, if applicable, with the provisions contained in Section 4.6 and the
Borrower, each other Obligor and the Agents shall be entitled to continue to
deal solely and directly with such Lender in connection with the interests so
assigned and delegated to an Assignee Lender until
(c) written notice of such assignment and delegation, together
with payment instructions, addresses and related information with
respect to such Assignee Lender, shall have been given to the Borrower
and the Agents by such Lender and such Assignee Lender;
(d) such Assignee Lender shall have executed and delivered to
the Borrower and the Agents a Lender Assignment Agreement, accepted by
the Agents; and
(e) the processing fees described below shall have been paid.
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From and after the date that the Agents accept such Lender Assignment Agreement,
(x) the Assignee Lender thereunder shall be deemed automatically to have become
a party hereto and to the extent that rights and obligations hereunder have been
assigned and delegated to such Assignee Lender in connection with such Lender
Assignment Agreement, shall have the rights and obligations of a Lender
hereunder and under the other Loan Documents, and (y) the Assignor Lender, to
the extent that rights and obligations hereunder have been assigned and
delegated by it in connection with such Lender Assignment Agreement, shall be
released from its obligations hereunder and under the other Loan Documents.
Within ten Business Days after its receipt of notice that the Administrative
Agent has received an executed Lender Assignment Agreement, the Borrower shall
execute and deliver to the Administrative Agent (for delivery to the relevant
Assignee Lender) new Notes evidencing such Assignee Lender's assigned Loans and
Commitments and, if the Assignor Lender has retained Loans and Commitments
hereunder, replacement Notes in the principal amount of the Loans and
Commitments retained by the Assignor Lender hereunder (such Notes to be in
exchange for, but not in payment of, those Notes then held by such Assignor
Lender). Each such Note shall be dated the date of the predecessor Notes. The
Assignor Lender shall mark the predecessor Notes "exchanged" and deliver them to
the Borrower. Accrued interest on that part of the predecessor Notes evidenced
by the new Notes, and accrued fees, shall be paid as provided in the Lender
Assignment Agreement. Accrued interest on that part of the predecessor Notes
evidenced by the replacement Notes shall be paid to the Assignor Lender. Accrued
interest and accrued fees shall be paid at the same time or times provided in
the predecessor Notes and in this Agreement. Such Assignor Lender or such
Assignee Lender (but excluding DLJ and its Affiliates and BofA and its
Affiliates and their assignors and assignees) must also pay a processing fee to
the Administrative Agent upon delivery of any Lender Assignment Agreement in the
amount of $3,500, unless such assignment and delegation is by a Lender to its
Affiliate or if such assignment and delegation is by a Lender to the Federal
Reserve Bank, as provided below. Any attempted assignment and delegation not
made in accordance with this Section 10.11.1 shall be null and void. Nothing
contained in this Section 10.11.1 shall prevent or prohibit any Lender from
pledging its rights (but not its obligations to make Loans or participate in
Letters of Credit or Letter of Credit Outstandings) under this Agreement and/or
its Loans and/or its Notes hereunder to a Federal Reserve Bank in support of
borrowings made by such Lender from such Federal Reserve Bank. In the event that
S&P, Moody's or Thompson's BankWatch (or InsuranceWatch Ratings Service, in the
case of Lenders that are insurance companies (or Best's Insurance Reports, if
such insurance company is not rated by Insurance Watch Ratings Service)) shall,
after the date that any Lender with a Commitment to make Revolving Loans or
participate in Letters of Credit becomes a Lender, downgrade the long-term
certificate of deposit rating or long-term senior unsecured debt rating of such
Lender, and the resulting rating shall be below BBB-, Baa3 or C (or BB, in the
case of Lender that is an insurance company (or B, in the case of an insurance
company not rated by InsuranceWatch Ratings Service)) respectively, then the
Issuer or the Borrower (with the consent of the Agents, the Swing Line Lender
and the Issuer) shall have the right, but not the obligation, upon notice to
such Lender and the Agents, to replace such Lender with an
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Assignee Lender in accordance with and subject to the restrictions contained in
this Section, and such Lender hereby agrees to transfer and assign without
recourse (in accordance with and subject to the restrictions contained in this
Section) all its interests, rights and obligations in respect of its Revolving
Loan Commitment under this Agreement to such Assignee Lender; provided, however,
that (i) no such assignment shall conflict with any law, rule and regulation or
order of any governmental authority and (ii) such Assignee Lender shall pay to
such Lender in immediately available funds on the date of such assignment the
principal of and interest and fees (if any) accrued to the date of payment on
the Loans made, and Letters of Credit participated in, by such Lender hereunder
and all other amounts accrued for such Lender's account or owed to it hereunder.
SECTION 10.11.2. Participations. Any Lender may at any time sell to one
or more commercial banks or other Persons (each of such commercial banks and
other Persons being herein called a "Participant") participating interests in
any of the Loans, Commitments, participations in Letters of Credit or Letter of
Credit Outstandings or other interests of such Lender hereunder; provided,
however, that
(a) no participation contemplated in this Section shall
relieve such Lender from its Commitments or its other obligations
hereunder or under any other Loan Document;
(b) such Lender shall remain solely responsible for the
performance of its Commitments and such other obligations;
(c) the Borrower and each other Obligor and the Agents shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement and each
of the other Loan Documents;
(d) no Participant, unless such Participant is an Affiliate of
such Lender, or is itself a Lender, shall be entitled to require such
Lender to take or refrain from taking any action hereunder or under any
other Loan Document, except that such Lender may agree with any
Participant that such Lender will not, without such Participant's
consent, agree to (i) any reduction in the interest rate or amount of
fees that such Participant is otherwise entitled to, (ii) a decrease in
the principal amount, or an extension of the final Stated Maturity
Date, of any Loan in which such Participant has purchased a
participating interest or (iii) a release of all or substantially all
of the collateral security under the Loan Documents or all or
substantially all of the Subsidiary Guarantors under the Subsidiary
Guaranty, in each case except as otherwise specifically provided in a
Loan Document; and
(e) the Borrower shall not be required to pay any amount under
Sections 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4 that is greater than the
amount which it would have been required to pay had no participating
interest been sold.
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The Borrower acknowledges and agrees, subject to clause (e) above, that, to the
fullest extent permitted under applicable law, each Participant, for purposes of
Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 10.3 and 10.4, shall be considered a
Lender.
SECTION 10.11.3. Assignment of Registered Notes. A Registered Note and
the Obligation(s) evidenced thereby may be assigned or otherwise transferred in
whole or in part pursuant to the terms of Section 10.11.1 and only by
registration of such assignment or transfer of such Registered Note and the
Obligation(s) evidenced thereby on the Register (and each Registered Note shall
expressly so provide). Any assignment or transfer of all or part of such
Obligation(s) and the Registered Note(s) evidencing the same shall be registered
on the Register only upon surrender for registration of assignment or transfer
of the Registered Note(s) evidencing such Obligation(s), duly endorsed by (or
accompanied by a written instrument of assignment or transfer duly executed by)
the Registered Noteholder thereof, and thereupon one or more new Registered
Note(s) in the same aggregate principal amount shall be issued to the designated
Assignee Lender, and the old Registered Note shall be returned by the
Administrative Agent to the Borrower marked "cancelled." Prior to the due
presentment for registration of assignment or transfer of any Registered Note,
the Borrower and the Agents shall treat the Person in whose name such
Obligation(s) and the Registered Note(s) evidencing the same is registered as
the owner thereof for the purpose of receiving all payments thereon and for all
other purposes, notwithstanding any notice to the contrary.
SECTION 10.12. Other Transactions. Nothing contained herein shall
preclude any Agent, the Issuer or any other Lender from engaging in any
transaction, in addition to those contemplated by this Agreement or any other
Loan Document, with the Borrower or any of its Affiliates in which the Borrower
or such Affiliate is not restricted hereby from engaging with any other Person.
SECTION 10.13. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENTS, THE
LENDERS, THE ISSUER OR THE BORROWER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY
(TO THE EXTENT PERMITTED UNDER APPLICABLE LAW) IN THE COURTS OF THE STATE OF NEW
YORK, NEW YORK COUNTY OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE
AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, NEW YORK
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COUNTY AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH
LITIGATION. THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF NEW YORK. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER
MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER
HEREBY IRREVOCABLY WAIVES (TO THE EXTENT PERMITTED UNDER APPLICABLE LAW) SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
SECTION 10.14. Waiver of Jury Trial. THE AGENTS, THE ISSUER, THE
LENDERS AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENTS, THE LENDERS OR THE BORROWER.
THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN
DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE AGENTS, THE ISSUER AND THE LENDERS ENTERING INTO THIS
AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
SECTION 10.15. Confidentiality. The Agents, the Issuer, the Arrangers
and the Lenders shall hold all non-public information obtained pursuant to or in
connection with this Agreement or obtained by them based on a review of the
books and records of the Borrower or any of its Subsidiaries in accordance with
their customary procedures for handling confidential information of this nature,
but may make disclosure to any of their examiners, Affiliates, outside auditors,
counsel and other professional advisors in connection with this Agreement or
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as reasonably required by any potential bona fide transferee, participant or
assignee, or in connection with the exercise of remedies under a Loan Document,
or as requested by any governmental agency or representative thereof or pursuant
to legal process; provided, however, that
(a) unless specifically prohibited by applicable law or court
order, each Agent, Issuer, Arranger and Lender shall notify the
Borrower of any request by any governmental agency or representative
thereof (other than any such request in connection with an examination
of the financial condition of such Agent, Issuer, Arranger and Lender
by such governmental agency) for disclosure of any such non- public
information prior to disclosure of such information;
(b) prior to any such disclosure pursuant to this Section
10.15, each Agent, Issuer, Arranger and Lender shall require any such
bona fide transferee, participant and assignee receiving a disclosure
of non-public information to agree in writing
(i) to be bound by this Section 10.15; and
(ii) to require such Person to require any other
Person to whom such Person discloses such non-public
information to be similarly bound by this Section 10.15; and
(c) except as may be required by an order of a court of
competent jurisdiction and to the extent set forth therein, no Lender
shall be obligated or required to return any materials furnished by the
Borrower or any Subsidiary.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
BRAND SCAFFOLD SERVICES, INC.
By: /s/ Ian R. Alexander
----------------------------------
Name: Ian Alexander
Title: Chief Financial Officer
and Vice President
DLJ CAPITAL FUNDING, INC.,
as Syndication Agent and as a Lender
By: /s/ Dana Klein
----------------------------------
Name: Dana F. Klein
Title: Vice President
BANK OF AMERICA NATIONAL
TRUST & SAVINGS
ASSOCIATION, as
Administrative Agent, as
Swing Line Lender, as
Issuer and as a Lender
By: /s/ Daniel T. Rencricca
----------------------------------
Name: Daniel T. Rencricca
Title: Vice President
<PAGE>
LENDERS:
CITY NATIONAL BANK
By: /s/ George Hayrapetian
----------------------------------
Name: George Hayrapetian
Title: Vice President
<PAGE>
COMERICA BANK
By: /s/ Jeffrey E. Peck
----------------------------------
Name: Jeffrey E. Peck
Title: Vice President
<PAGE>
LASALLE NATIONAL BANK
By: /s/ David J. Carney
----------------------------------
Name: David J. Carney
Title: Assistant Vice President
<PAGE>
NATIONSBANK, N.A.
By: /s/ Keith M. Schmelder
----------------------------------
Name: Keith M.Schmelder
Title: Senior Vice President
<PAGE>
VAN KAMPEN PRIME RATE INCOME TRUST
By: /s/ Jeffrey W. Maillet
----------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President &
Director
<PAGE>
BANK OF NEW YORK
By:________________________________
Name:
Title:
<PAGE>
BANK LEUMI TRUST COMPANY
OF NEW YORK
By: /s/ Joung Hee Hong
----------------------------------
Name: Joung Hee Hong
Title: Vice President
<PAGE>
ORIX USA CORPORATION
By: /s/ Hiroyuki Miyauchi
----------------------------------
Name: Hiroyuki Miyauchi
Title: Executive Vice President
<PAGE>
SCHEDULE I
DISCLOSURE SCHEDULE
ITEM 6.7 Litigation.
Description of Proceeding Action or Claim Sought
ITEM 6.8 Existing Subsidiaries.
ITEM 6.11 Employee Benefit Plans.
ITEM 6.12 Environmental Matters.
ITEM 7.1.12 Mortgaged Properties.
ITEM 7.2.5(a) Existing Investments.
<PAGE>
<TABLE>
SCHEDULE II
LENDERS' PERCENTAGES
<CAPTION>
Percentage Dollar Percentage
Allocation of Allocation of Allocation of Dollar Allocation
Revolving Loans Revolving Loans Term-A Loans of Term-A Loans TOTAL
--------------- --------------- ------------ --------------- -----
<S> <C> <C> <C> <C> <C>
Bank Leumi Trust Co. of NY 5.56% $1,666,666.67 5.72% $1,630,901.29 $3,297,568
Bank of America NT&SA 11.56% $3,466,949.95 3.22% $918,602.46 $4,385,553
Bank of New York (Euro) 15.56% $4,666,666.67 15.56% $4,433,333.33 $9,100,000
City National Bank 11.11% $3,333,333.33 11.11% $3,166,666.67 $6,500,000
Comerica Bank 11.11% $3,333,333.33 11.11% $3,166,666.67 $6,500,000
DLJ Capital Funding Corp. 5.56% $1,666,666.58 5.72% $1,630,901.31 $3,297,568
LaSalle National Bank 16.67% $5,000,000.00 16.67% $4,750,000.00 $9,750,000
NationsBank, NA 17.33% $5,199,716.79 17.00% $4,844,594.94 $10,044,312
Orix USA Corporation 0% $0.00 8.33% $2,375,000.00 $2,375,000
VanKampen American Capital 5.56% $1,666,666.67 5.56% $1,583,333.32 $3,250,000
<PAGE>
TOTAL 100% $30,000,000.00 100% $28,500,000.00 $58,500,002
</TABLE>
I-3
<PAGE>
SCHEDULE III
Page 1 of 2
LENDERS' NOTICE INFORMATION
---------------------------
DLJ CAPITAL FUNDING, INC.
Lending Office:
- ---------------
525 Washington Blvd.
Jersey City, New Jersey 07310
Contact: Ed Vowinkel
Facsimile: (201) 610-1965
BANK OF AMERICA NT&SA
Lending Office:
- ---------------
231 South LaSalle Street
Chicago, Illinois 60697
Contact: Florence Anderson
Facsimile: (312) 828-3864
CITY NATIONAL BANK
Lending Office:
- ---------------
City National Bank
831 S. Douglas St., Suite 100
El Segundo, California 90245
Contact: Ana Ibrahim
Facsimile: (310) 297-8171
COMERICA BANK
Lending Office:
- ---------------
Comerica Bank
500 Woodward Ave, MC 3269
Detroit, Michigan 48226
Contact: Beverly Jones
Facsimile: (313) 222-3351
FLEET BANK, N.A.
Lending Office:
- ---------------
Fleet Bank, N.A.
1133 6th Avenue
New York, New York 10017
Contact: Brian Brady
<PAGE>
Facsimile: (212) 703-1570
LASALLE NATIONAL BANK
Lending Office:
- ---------------
LaSalle National Bank
135 South LaSalle Street, Suite 307
Chicago, Illinois 60603
Contact: Mary Junkrowski
Facsimile: (312) 606-8423
THE ROYAL BANK OF SCOTLAND, PLC
Lending Office:
- ---------------
The Royal Bank of Scotland, PLC
Wall Street Plaza
88 Pine Street, 26th Floor
New York, New York 10005
Contact: Helaine Griffin
Facsimile: (212) 480-0791
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
Lending Offices:
- ----------------
Van Kampen American Capital
One Parkview Plaza
Oakbrook Terrace, Illinois 60191
Contact: Brian Murphy
Facsimile: (708) 684-8740
State Street Bank & Trust
Corporate Trust Department
P.O. Box 778
Boston, Massachusetts 02103
Contact: Laura Magazu
Facsimile: (617) 664-5366
ADDITIONAL TERM-B LOAN COMMITMENT ADDENDUM
March 9, 2000
DLJ Capital Funding, Inc.,
as Syndication Agent
277 Park Avenue
New York, New York 10172
-and-
Bank of America N.A.,
as Administrative Agent
100 North Tyron Street
NC1-007-13-06
Charlotte, North Carolina 28255
BRAND SERVICES, INC.
--------------------
Gentlemen and Ladies:
This Additional Term-B Loan Commitment Addendum is delivered to you
pursuant to Section 5.3.3 of the Amended and Restated Credit Agreement, dated as
of March 17, 1999 (as amended, supplemented, amended and restated or otherwise
modified from time to time, the "Credit Agreement"), among Brand Services, Inc.
(formerly known as "Brand Scaffold Services, Inc."), a Delaware corporation (the
"Borrower"), various financial institutions as are, or may from time to time
become, parties thereto (collectively, the "Lenders"), DLJ Capital Funding,
Inc., as syndication agent (the "Syndication Agent"), and Bank of America N.A.
(formerly known as Bank of America National Trust and Savings Association), as
issuer (the "Issuer"), swing line lender (the "Swing Line Lender"), and as
administrative agent (the "Administrative Agent") for the Lenders. Unless
otherwise defined herein or the context otherwise requires, terms used herein
have the meanings provided in the Credit Agreement.
The Borrower hereby requests, and each Lender signatory hereto hereby
severally (in proportion to its Percentage of Additional Term-B Loans as set
forth in Schedule II hereto) commits to make to the Borrower, on March 15, 2000
(the "Delayed Draw Date"), Additional Term-B Loans in the aggregate principal
amount of $5,000,000 as LIBO Rate Loans which shall accrue
<PAGE>
interest on the unpaid principal amount thereof and with amortization
installments thereunder and a Stated Maturity Date therefor as set forth on
Schedule I hereto. After giving effect to the Borrowing of Additional Term-B
Loans on and as of the Delayed Draw Date, each Lender's Percentage for the
purposes of the Credit Agreement will be as set forth opposite such Lender's
name on Schedule II hereto.
The parties hereto hereby agree that the Additional Term-B Loans
referred to herein constitute Additional Term-B Loans referred to in the Credit
Agreement and shall be subject to, and governed by, and each party hereto agrees
to be bound by, the Credit Agreement with respect to the Additional Term-B Loans
in all respects, in each case as if such party were a signatory to the Credit
Agreement in its respective capacity.
This Additional Term-B Loan Commitment Addendum shall be deemed to
constitute the Borrowing Request required to be delivered by the Borrower to the
Administrative Agent pursuant to Section 2.3.1 of the Credit Agreement in
connection with the Borrowing of Additional Term-B Loans.
The Borrower hereby acknowledges that, pursuant to Section 5.2.2 of the
Credit Agreement, each of the delivery of this Additional Term-B Loan Commitment
Addendum and the acceptance by the Borrower of the proceeds of the Additional
Term-B Loans requested hereby constitutes a representation and warranty by the
Borrower that, on the Delayed Draw Date, and before and after giving effect to
the Borrowing of Additional Term-B Loan requested hereby and to the application
of the proceeds therefrom, all statements set forth in clauses (a) and (c) of
Section 5.2.1 of the Credit Agreement are true and correct in all material
respects.
The Borrower agrees that if prior to the time of the Borrowing of
Additional Term-B Loans requested hereby, any matter certified to herein by it
will not be true and correct in all material respects at such time as if then
made, it will immediately so notify the Administrative Agent. Except to the
extent, if any, that prior to the time of the Borrowing of Additional Term-B
Loans requested hereby, the Administrative Agent shall receive written notice to
the contrary from the Borrower, each matter certified to herein shall be deemed
once again to be certified as true and correct in all material respects at the
date of such Borrowing as if then made.
The Borrower hereby requests that the proceeds of the Borrowing of
Additional Term-B Loans be delivered to the account of the Borrower referenced
in wire instructions previously delivered by the Borrower to the Administrative
Agent.
-2-
<PAGE>
This Additional Term-B Loan Commitment Addendum may be executed in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which when taken together shall constitute
one and the same agreement.
THIS ADDITIONAL TERM-B LOAN COMMITMENT ADDENDUM SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
-3-
<PAGE>
In WITNESS WHEREOF, the parties hereto have caused this Additional
Term-B Loan Commitment Addendum to be executed and delivered, and the
certification and warranties contained herein to be made, by their respective
duly Authorized Officers.
BRAND SERVICES, INC.
(formerly known as
"Brand Scaffold Services, Inc.")
By:
------------------------------
Name:
Title:
DLJ CAPITAL FUNDING, INC.,
as Lender
By:
------------------------------
Name:
Title:
Acknowledged this ___ day of
March, 2000
DLJ CAPITAL FUNDING, INC.,
as Syndication Agent
By:
------------------------------
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
as Administrative Agent
By:
------------------------------
Name:
Title:
-4-
<PAGE>
SCHEDULE I
I. TERM-B LOAN COMMITMENT AMOUNT:
-----------------------------
$5,000,000
II. INTEREST RATE:
-------------
The Borrower shall pay interest on the unpaid principal amount of
Additional Term-B Loans in accordance with Section 3.2 of the Credit
Agreement. The Applicable Margin with respect to the unpaid principal
amount of each Additional Term-B Loan maintained as a (i) Base Rate Loan,
shall be 2.75% per annum and (ii) LIBO Rate Loan shall be 3.75% per
annum.
III. AMORTIZATION:
------------
On the Stated Maturity Date for Additional Term-B Loans set forth below,
and on each Quarterly Payment Date set forth below or occurring during
any period set forth below, the Borrower shall make a scheduled repayment
of the aggregate outstanding principal amount, if any, of all Additional
Term- B Loans in an amount equal to the amount set forth below opposite
the Stated Maturity Date or such Quarterly Payment Date or period, as
applicable (as such amounts may have otherwise been reduced pursuant to
the Credit Agreement):
Additional Term-B Scheduled
Quarternly Payment Date Principal Repayment
----------------------- -------------------
March 31, 2000 $12,500
June 30, 2000 $12,500
September 30, 2000 $12,500
December 31, 2000 $12,500
March 31, 2001 $12,500
June 30, 2001 $12,500
September 30, 2001 $12,500
December 31, 2001 $12,500
March 31, 2002 $12,500
June 30, 2002 $12,500
September 30, 2002 $12,500
December 31, 2002 $12,500
-5-
<PAGE>
March 31, 2003 $1,616,666.66
June 30, 2003 $1,616,666.66
September 30, 2003 $1,616,666.68
TOTAL: USD $5,000,000
IV. STATED MATURITY DATE:
--------------------
September 30, 2003
V. TERM-B LOAN COMMITMENT TERMINATION DATE:
---------------------------------------
March 15, 2000
-6-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
LENDERS' PERCENTAGES
--------------------
(table continued)
Percentage
Percentage Allocation
Allocation Dollar Percentage of
of Allocation of Allocation Dollar Additional
Revolving Revolving of Term-A Allocation of Term-B
Loans Loans Loans Term-A Loans Loans
----- ----- ----- ------------ -----
<S> <C> <C> <C> <C> <C>
Bank Leumi Trust Co. of NY 5.6% $1,666,667 5.7% $1,344,778 0%
Bank of America N.A. 17.3% $5,199,717 17.0% $3,994,666 0%
Bank of America N.A. 11.6% $3,466,950 3.2% $757,444 0%
City National Bank 11.1% $3,333,333 11.1% $2,611,111 0%
Comerica Bank 11.1% $3,333,333 11.1% $2,611,111 0%
DLJ Capital Funding, Inc. 5.6% $1,666,667 5.7% $1,344,778 100%
LaSalle National Bank 16.7% $5,000,000 16.7% $3,916,667 0%
The Provident Bank 15.6% $4,666,667 15.6% $3,655,556 0%
Orix USA Corporation 0% $0 8.3% $1,958,333 0%
VanKampen America Capital 5.6% $1,666,667 5.6% $1,305,556 0%
TOTAL 100% $30,000,000.00 100% $23,500,000.00 100%
(table continued)
SCHEDULE II
LENDERS' PERCENTAGES
--------------------
Dollar
Allocation of
Additional
Term-B Loans TOTAL
------------ -----
Bank Leumi Trust Co. of NY $0 $3,011,445
Bank of America N.A. $0 $9,194,383
Bank of America N.A. $0 $4,224,394
City National Bank $0 $5,944,445
Comerica Bank $0 $5,944,445
DLJ Capital Funding, Inc. $5,000,000 $8,011,445
LaSalle National Bank $0 $8,916,667
The Provident Bank $0 $8,322,223
Orix USA Corporation $0 $1,958,333
VanKampen America Capital $0 $2,972,222
TOTAL $5,000,000.00 $58,500,000.00
</TABLE>
<TABLE>
EXHIBIT 12
BRAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
----------------------------------------------
RATIO OF EARNINGS TO FIXED CHARGES CALCULATION
----------------------------------------------
(In thousands except ratio amounts)
<CAPTION>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
----------- ----------- -----------
1999 1998 1997
----- ----- ----
<S> <C> <C> <C>
EARNINGS:
Pretax income (loss) $ (1,863) $ 584 $ (5,341)
Fixed charges 23,833 23,008 20,038
Accretion of preferred stock dividends (5,497) (4,767) (4,172)
-------- -------- --------
Earnings 16,473 18,825 10,525
-------- -------- --------
FIXED CHARGES:
Interest expense 17,758 17,728 15,422
Interest portion of rental expense 578 513 444
Accretion of preferred stock dividends 5,497 4,767 4,172
-------- -------- --------
Total fixed charges $ 23,833 $ 23,008 $ 20,038
======== ======== ========
Ratio of earnings to fixed charges and
preferred stock dividends .7 .8 .5
</TABLE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independant public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statment.
/s/ Arthur Andersen LLP
- -----------------------
ARTHUR ANDERSEN LLP
St. Louis, Missouri,
April 13, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001062742
<NAME> Brand Scaffold Services, Inc.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 244,000
<SECURITIES> 0
<RECEIVABLES> 37,539,000
<ALLOWANCES> 770,000
<INVENTORY> 0
<CURRENT-ASSETS> 42,795,000
<PP&E> 206,971,000
<DEPRECIATION> 45,118,000
<TOTAL-ASSETS> 210,872,000
<CURRENT-LIABILITIES> 37,243,076
<BONDS> 150,999,000
41,404,000
0
<COMMON> 0
<OTHER-SE> (20,968,181)
<TOTAL-LIABILITY-AND-EQUITY> 210,872,000
<SALES> 0
<TOTAL-REVENUES> 218,916,000
<CGS> 0
<TOTAL-COSTS> 171,630,000
<OTHER-EXPENSES> 31,550,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,599,000
<INCOME-PRETAX> (1,863,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,863,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,863,000)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
